Credit rating agency

the credit rating announcement does not give any undisclosed information to the investors or the market. It only attempts to homogenize the investor’s belief. According to Adelson (2012) credit rating plays a vital role in providing an independent opinion about the creditworthiness of the issuer and bridging the gap between lenders and borrowers. Lazarescu (2003) says standardising the value judgement in relation to borrowers in the current scenario of globalisation is contributed by credit rating

services are provided on credit and debt is granted to organisations and governments by lenders in different parts of the world. The providers of credit facilities, also known as investors, require a certain level of comfort that the security issuer will be able to repay the debt. Investors must analyse the risk associated with the globalisation in the investment market, coupled with diversification in the types and quantities of securities issued. Credit rating agencies provide these investors with

1.1 History of Credit Rating Agencies Credit rating agencies (CRAs) have been playing a significant role in financial markets around the world since the beginning of the twentieth century. The industry of credit rating originated when John Moody, a Wall Street analyst and the institutor of one of the biggest CRAs in present day, introduced a system of credit rating for railroad bonds by publishing “Moody’s Manual of Industrial and Miscellaneous Securities” in 1909. Until today, there are now

services are provided on credit and debt is granted to organisations and governments by lenders in different parts of the world. The providers of credit facilities, also known as investors, require a certain level of comfort that the security issuer will be able to repay the debt. Investors must analyse the risk associated with the globalisation in the investment market, coupled with diversification in the types and quantities of securities issued. Credit rating agencies provide these investors with

Credit Rating Agencies (CRAs) have also been blamed for their role in promoting risk taking behaviour. The Basel II Accord (2004) also gave CRAs a major role to play in financial markets. The complexity of MBSs and CDOs increased overtime, making it difficult for the agencies to assess their risk accurately. They underestimated the complexity of these mortgages and were slow in downgrading the ratings during bad times, so that their ratings misled the market participants. Overtime, various institutions

and banks such as, Lehman Brothers, Merill Lynch, Wells Fargo, Goldman Sachs, AIG, Royal Bank of Scotland, Fannie Mae and Freddie Mac. The “Big Three” credit rating agencies, Standard & Poor’s, Moody’s, and Fitch Ratings, were at the helm of the financial crisis of 2008 because they were all found of wrongly assigning triple- A securities ratings to mortgages and debt assets that were way below “investment grade” level, which greatly contributed to the growing financial crisis. The ensuing result

package loans for credit agencies like Moody’s or Standard and Poor’s to more easily assign it the coveted “triple A rating”. The problem with these CDOs was that they housed hundreds and thousands of loans of varying credit ratings. By throwing in horribly rated B loans with a few triple A loans banks and insurance companies were able to insure and distribute mortgage loans to customers that were not able to normally receive a loan with a triple A credit rating. A triple A credit rating is essentially

Structured asset securitization is the process through which various types of non-liquid assets such as residential mortgages, account receivables, auto loans and credit card debt obligations are sold to a special purpose vehicle (“SPV”), which uses the pool of assets as collateral for the issuance of securities to investors (Fabozzi, 2013). During an asset securitization issue, one of the central elements is that repayment depends primarily on the principal and interest cash flows from SPV’s underlying

issue has arisen? Clearly explain the ethical dilemma faced by the involved parties Lehman brothers started increasing their sales on subprime mortgages. A subprime mortgage is given to households with a low credit rate for their houses. As the subprime mortgage was targeted to those with a low credit rate, the rate of return was high. Also, as the return was high, the following risk was also high. Lehman brothers has had growth of their business as their priority, where they continued with aggressive

Narrative for the Timken Company Valuation of Acquisition of Torrington The first step in completing this case study was to determine what hypothesis needed to be tested. We came up with the following six questions that needed to be answered in our research and calculations: 1. What synergies, if any, can the Timken Company expect through its acquisition of Torrington? What are the risks? 2. What is the value of Torrington including the expected synergies of its acquisition by the Timken Company