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Fitch Ratings

Fitch Ratings Inc.
Company typeSubsidiary
IndustryFinancial services
Founded1914; 110 years ago (1914)
FounderJohn Knowles Fitch
Headquarters
New York City, New York, U.S. and London, England, UK
Key people
  • Paul Taylor (CEO of Fitch Group
  • Ian Linnell (president of Fitch Ratings and Fitch Ratings Inc.
  • Brian Filanowski (president of Fitch Solutions)
  • Tracey Perini (CFO)
RevenueIncrease $1.7 Billion [1]
Number of employees
5,000 (approximate)
ParentHearst Corporation[2]
Websitefitchratings.com

Fitch Ratings Inc. is an American credit rating agency. It is one of the three nationally recognized statistical rating organizations (NRSRO) designated by the U.S. Securities and Exchange Commission and is considered as being one of the "Big Three credit rating agencies",[3] along with Moody's and Standard & Poor's.

History

Fitch Ratings is dual headquartered in New York and London.[4] Hearst owns 100 percent of the company following its acquisition of an additional 20 percent for $2.8 billion on April 12, 2018.[2] Hearst had owned 80 percent of the company after increasing its ownership stake by 30 percent on December 12, 2014, in a transaction valued at $1.965 billion. Hearst's previous equity interest was 80 percent following expansions on an original acquisition of 20 percent interest in 2006.[5][6]

Hearst had jointly owned Fitch with FIMALAC SA, which held 20 percent of the company until the 2018 transaction. Fitch Ratings and Fitch Solutions are part of the Fitch Group.

The firm was founded by John Knowles Fitch on December 24, 1914, in New York City as the Fitch Publishing Company. In 1989, the company was acquired by a group including Robert Van Kampen.[7] In 1997, Fitch was acquired by FIMALAC and was merged with London-based IBCA Limited, a FIMALAC subsidiary.[8] In 2000, Fitch acquired both Chicago-based Duff & Phelps Credit Rating Co. (April)[9] and Thomson Financial BankWatch (December).

Fitch Ratings is the third largest NRSRO rating agency, covering a more limited share of the market than S&P and Moody's, though it has grown with acquisitions and frequently positions itself as a "tie-breaker" when the other two agencies have ratings similar, but not equal, in scale.[10]

In September 2011, Fitch Group announced the sale of Algorithmics (risk analytics software) to IBM for $387 million.[11]

In June 2022, Fitch Group acquired GeoQuant, an AI-driven data and technology company.[12]

Investment scale

Fitch Ratings' long-term credit ratings are assigned on an alphabetic scale from 'AAA' to 'D', first introduced in 1924 and later adopted and licensed by S&P. Like S&P, Fitch also uses intermediate +/− modifiers for each category between AA and CCC (e.g., AA+, AA, AA−, A+, A, A−, BBB+, BBB, BBB−, etc.).

Investment grade

  • AAA: the best quality companies, reliable and stable
  • AA: quality companies, a bit higher risk than AAA
  • A: economic situation can affect finance
  • BBB: medium-class companies, which are satisfactory at the moment

Non-investment grade

  • BB: more prone to changes in the economy
  • B: financial situation varies noticeably
  • CCC: currently vulnerable and dependent on favorable economic conditions to meet its commitments
  • CC: highly vulnerable, very speculative bonds
  • C: highly vulnerable, perhaps in bankruptcy or in arrears, but still continuing to pay out on obligations
  • D: has defaulted on obligations, and Fitch believes that it will generally default on most or all obligations
  • NR: not publicly rated

Short-term credit ratings

Fitch's short-term ratings indicate the potential level of default within a 12-month period.

  • F1+  : best quality grade, indicating exceptionally strong capacity of obligor to meet its financial commitment
  • F1  : best quality grade, indicating strong capacity of obligor to meet its financial commitment
  • F2  : good quality grade with satisfactory capacity of obligor to meet its financial commitment
  • F3  : fair quality grade with adequate capacity of obligor to meet its financial commitment but near term adverse conditions could impact the obligor's commitments
  • B  : of speculative nature and obligor has minimal capacity to meet its commitment and vulnerability to short term adverse changes in financial and economic conditions
  • C  : possibility of default is high and the financial commitment of the obligor are dependent upon sustained, favorable business and economic conditions
  • D  : the obligor is in default as it has failed on its financial commitments.

Fitch Solutions

Launched in 2008, Fitch Solutions offers a range of fixed-income products and professional development services for financial professionals. The firm also distributes Fitch Ratings' proprietary credit ratings, research, financial data, and analytical tools.[citation needed]

Criticism

See also: Credit rating agency § Criticism

The main credit rating agencies, including Fitch, were accused of misrepresenting the risks associated with mortgage-related securities, which included the collateralized debt obligation (CDO) market. There were large losses in the CDO market that occurred despite being assigned top ratings by the CRAs.

For instance, losses on $340.7 million worth of collateralized debt obligations (CDO) issued by Credit Suisse Group added up to about $125 million, despite being rated AAA by Fitch.[13] However, differently from the other agencies, Fitch was warning the market on the constant proportion debt obligations (CPDO) with an early and pre-crisis report highlighting the dangers of CPDOs in 2007.[14]

See also

References

  1. ^ "2011 Fiscal". FIMALAC. Archived from the original on September 27, 2018. Retrieved March 26, 2012.
  2. ^ a b "Fitch Group Becomes a Wholly-Owned Hearst Business". hearst.com. Retrieved April 12, 2018.
  3. ^ Blumenthal, Richard (May 5, 2009). "Three credit rating agencies hold too much of the power". Juneau Empire. Archived from the original on November 1, 2011. Retrieved March 19, 2018.
  4. ^ "Sale of 10% of Fitch Group to Hearst" (PDF). Archived (PDF) from the original on February 20, 2015.
  5. ^ Hufford, Austen (April 12, 2018). "Hearst Takes Full Ownership of Fitch Group". The Wall Street Journal. Archived from the original on August 2, 2023. Retrieved January 6, 2024.
  6. ^ Barr, Alistair (February 9, 2012). "Hearst buys another 10 percent of Fitch for $177 million". Reuters. Retrieved January 6, 2024.
  7. ^ "Investor Group Acquires Fitch Bond Rating Agency". The New York Times. April 21, 1989. Archived from the original on November 22, 2024.
  8. ^ Lavin, Douglas (October 17, 1997). "France's Fimalac Purchases Fitch From Van Kampen". The Wall Street Journal. Archived from the original on June 10, 2024.
  9. ^ Gasparino, Charles (March 8, 2000). "Fitch Acquires Duff & Phelps In Latest Credit-Rating Union". The Wall Street Journal. Archived from the original on June 15, 2024. Retrieved November 9, 2020.
  10. ^ "FACTBOX: List of 10 rating agencies recognized by U.S. SEC". Reuters. June 24, 2009. Retrieved January 5, 2024.
  11. ^ "IBM Buying Algorithmics for $387M". Traders Magazine. September 1, 2011. Retrieved January 5, 2024.
  12. ^ "Fitch Group Acquires GeoQuant". www.themiddlemarket.com. June 22, 2022. Retrieved June 23, 2022.
  13. ^ Tomlinson, Richard; Evans, David (June 1, 2007), "CDOs mask huge subprime losses, abetted by credit rating agencies", International Herald Tribune
  14. ^ Linden, Alexandre; Neugebauer, Matthias; Schiavetta, John; Zelter, Jill; Hardee, Rachel (April 18, 2007), First Generation CPDO: Case Study on Performance and Ratings
Quelle: https://en.wikipedia.org/wiki/Fitch_Group