Members of NeuGroup for Capital Markets praise Fitch analysts and a ‘ratings-through-the-cycle’ approach.
For decades, Fitch Ratings has been the third ratings agency—behind Moody’s and Standard & Poor’s—used by Fortune 500 corporates that want to ensure they maintain the two investment-grade ratings necessary to remain in the Bloomberg Barclays Bond Index. That may be changing.
- At a recent meeting of NeuGroup for Capital Markets, members said they have been impressed with Fitch’s analysis over the past few years, and especially during the pandemic.
- Members also discussed how to approach credit analysts whose views about the company may be at odds with treasury’s.
More thoughtful. “They’ve really come a long way,” said one member whose company holds a Moody’s rating two notches above S&P’s, with Fitch in the middle, adding that S&P seems to be very numbers-focused post-financial crisis and during the pandemic.
- “We felt that Fitch and Moody’s, from an issuer’s perspective, are taking more of a ratings-through-the-cycle approach,” the member said. “We think Fitch has been very thoughtful and we’ve been impressed by the analyst who has covered the company for a long time and the level of thought he’s put into our dialogue.”
Unsolicited but welcome. Another member said Fitch has rated his company on an unsolicited basis for more than a decade, but treasury treats the analyst no differently than those from other agencies.
- “Same quarterly check-ins, annual business review and access to management,” the executive said.
- One reason: The company wants to influence the narrative about itself to make sure it’s accurate and that “Fitch is not putting out stuff we don’t agree with.”
- He added that Fitch has winnowed the list of companies it rates on an unsolicited basis over the years as its credibility has risen and more companies decide to pay.
- “They have a good shop from what we’ve seen,” he said. “Our analyst there has been great—a very thoughtful, former sell-side analyst.”
Mixing industries. One member, whose company had acquired a business in a different industry, said the company’s longtime analyst at Fitch made a negative adjustment to EBITDA without fully understanding the new business.
- The member, armed with advice from fellow NeuGroup members and his bankers as well as equity and debt research, was able to persuade the analyst—and the analyst’s boss—to check with a credit analyst covering the add-on industry about how best to gauge the EBITDA impact.
- “Fortunately, we won that, because of the workaround—getting help from our friends here and our banks,” he said.
- Another member suggested making sure that annual meetings with the rating agencies include an analyst covering an acquired company’s industry. “Just to make sure you’re not telling your story multiple times and nothing is lost in translation,” she said.