JCR considers modifying "Types of Credit Ratings and Definitions of Rating Symbols"

Jul. 05, 2012

Japan Credit Rating Agency, Ltd. (JCR) is considering modifying the descriptions of "Types of Credit Ratings and Definitions of Rating Symbols" and discloses the proposal under consideration. After finalizing, JCR will publicize the final version and the expected effective date. JCR expects that it will take one to two months to finalize and enact the modification. These modifications have no impact on any individual credit ratings directly.
Material changes under consideration are described below:

1. Modifying the definition of "D" and adding "LD (Limited Default)"
Under the current definition, JCR does not assign "D" rating to the long-term senior debts which is under "a condition where creditors who accepted debt forgiveness, debt equity swap, etc. for the purpose of relief of an obligor cannot receive interest and principal payments as agreed initially," while it acknowledges that it is considered to be an event of default. However, JCR acknowledges that it shall address the needs for describing more details of debtors' creditworthiness, considering the fact that obligors' responses, under the circumstances that their abilities to pay their debts are damaged, have diversified. For this reason, JCR is considering modifications of the definition of "D" as follows: "JCR judges that all of the financial obligations are in default in effect." Together with the aforementioned modification, JCR will add a new rating symbol, "LD," which indicates "JCR judges that while an obligor does not honor part of its financial obligations as agreed, it honors its all other financial obligations as agreed."

2. Segmentation of Types of Credit Ratings
JCR classifies its credit ratings into "Long-Term Rating" and "Short-Term Rating" and defines rating symbols by each category. In addition to it, JCR is adding sub category of "Issuer Rating" and "Issue Rating" in each category.

3. Renaming of "Long-term Senior Debts Rating" and "Short-term Senior Debts Rating"
JCR is considering renaming "Long-term Senior Debts Rating" and "Short-term Senior Debts Rating" to "Long-term Issuer Rating" and "Short-term Issuer Rating" respectively for the purpose of clarifying the meaning of each rating assigned.
Even if the renaming is put into effect, the meanings of these two types of ratings are the same as those before the renaming. JCR will not change the name of ratings which has been already publicized but will apply renewed names to ratings that will be assigned after the renaming being effective.


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