Credit Ratings Methodology

CREDIT RATING PROCESS .

Credit Ratings Methodology Business Risk Profile Analysis Financial Risk Profile Analysis .

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‡ ‡ ‡ ‡ Validation of ³Company Position´ Trends Quality of Earnings & Analytical adjustments Peer Group Comparisons Country Risk ‡ ‡ ‡ ‡ Political Economic Industry ± Specific factors Foreign exchange Profitability / Peer Group Comparisons Business Risk ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Industry Factors ‡ ‡ ‡ ‡ ‡ ‡ Competitive Factors Market position Keys to Success Size Diversification Management Company Position Industry Trends Industry Structure Market Size Growth Potential Cyclicality Bases of Competition Changing Technology Operating Risk Regulatory Environment .

‡ ‡ ‡ ‡ Operating sources & uses Of liquidity Other potential calls on Liquidity Debt Characteristics Bank credit facilities Accounting ‡ ‡ ‡ Accounting Regime Reporting & Disclosure Analytical adjustments Liquidity / Short-term Factors Financial Risk ‡ ‡ ‡ ‡ ‡ ‡ ‡ Governance Risk ‡ ‡ ‡ ‡ Focus on debt service capability Analytical distinctions with profitability Cash flow measures / ratios Cash Flow Adequacy Ownership Board of directors Management practices Financial Strategy Risk Tolerance Accounting Practices Internal controls .

e.BUSINESS RISK/FINANCIAL RISK MATRIX Risk Profile Minimal Moderate Intermediate Aggressive Highly Leveraged Excellent Strong Satisfactory Weak Vulnerable AAA AA A BBB BB AA A BBB+ BBBB+ A ABBB BB+ B+ BBB BBBBB+ BBB BB BBB+ B B- # The matrix does not apply to the lowest rungs of credit spectrum i. µCCC¶ category and below Note: The above grid is only an indicative framework to guide an Analyst in determining the rating. .