Portugal back to hear from DBRS, the only agency that gives you rating above “junk”. Why calculations this gives a different result from the others? Or will not be a matter of calculations?
DBRS is a small agency of rating Canadian trying to bite his heels to three major ( Moody’s, S & P and Fitch), estimated 95% control of the credit rating market. For the rest of the market, the importance of DBRS is still small, but for Portugal this is the decisive agency that has the key to avoid a new financial rescue because it opens the door for public debt purchases the European Central Bank (ECB), which have brought down interest rates in the market. Who is the DBRS , the agency that holds the country (and banks) on the ECB and Friday back to assess Portugal ? And above all, why their calculations give a different result from other agencies? Or will not be a matter of calculations?
Much has been written in recent months about the DBRS. Especially since the parliamentary post-election weeks in October when, in an interview with the Observer, the agency’s analysts proved surprised by the negotiations led by the Socialist Party that would lead to the government falling Passos Coelho and the formation of a socialist government supported us leftmost parties. sounded alarms in DBRS (as well as the other three agencies), which before the election believed that the lack of majority, would the formation of a central block led by PSD or PS, depending on who came out winner . DBRS spoke of a possible “unstable coalition” left, “uncertainty about economic policy” and, above all, high risk of a “confrontation with creditors” Europeans.
In January, during the tough negotiations on the first budgetary plans Portugal, DBRS would even say with all the letters, which admitted cutting the rating of Portugal, before the iron arm that stemmed for those days. It was then that the interest debt reached levels not seen long – 4.5% at 10 years. The explanation was simple: lose that rating garbage meant that all four agencies recognized by the ECB would consider high risk debt investment Portuguese. What, in practice, as what counts for the ECB is best rating available meant that Portugal would need a emergency regime ( waiver ) so that the banks were able to continue to deliver Portuguese debt as collateral at the ECB to fund and, on the other hand, that the ECB continued to buy national debt in its unprecedented monetary expansion plan – bazooka . This waiver would only come, however, in exchange for a new adjustment program, ie a new rescue.
the ECB, led by Mario Draghi, uses the best rating available from S & P, Moody’s, Fitch and DBRS. The rating above junk DBRS is the only worth Portugal. And so should continue to be in the near future. (Photo: PATRICK HERTZOG / AFP / Getty Images)
This is the scenario. This is the importance of DBRS for Portugal at a time when other agencies do not give any signs of being able to take Portugal’s junk in the coming time. It is for this reason that the DBRS decides on the credit rating of Portugal is decisive for the near future of the country. A new evaluation is scheduled for this Friday, April 29, and no one is expecting any change – or rating or even, call future perspective ( outlook ), which is stable but could be or . Suffice it perspective fall negative to unleash one very negative reaction in the financial markets, experts say. The State immediately would pay more to finance, and these costs quickly would spread to banks, companies and families.
“What we believe is that, given the behavior of DBRS and the evolution of the foundations of Portuguese economy in recent times, the notation that exists today has been awarded under conditions which, however, they found an improvement. Therefore, we consider that, if based on the evolution of arguments, the likelihood is that there is not a drop “. The statement, recent, is Cristina Casalinho , president of the organization that manages the Portuguese public debt. – IGCP
The tranquility of Cristina Casalinho not clash with what is the expectation of analysts in anticipation of Friday. The analysis team of European bonds Rabobank do not see a higher probability than 30% of the Outlook go down – and, says the Dutch bank, not occur to no one at this time, there can be an effective cut of rating . The idea that the rating is safe, at least for now, has been fueled by a recent interview given to the Observer by the maximum responsible for ratings sovereigns of DBRS, Fergus McCormick .
Yes, we are less concerned. Things seem to be going well. We have not seen significant political deviations or serious differences with the European Commission and the ECB. There is a state budget approved for this year that meets the requirements of the European Commission, at least for now. And generally, investor confidence improved somewhat.
Fergus McCormick, told the Observer.
To form your opinion – that is, your rating – DBRS introduces the excel the same data on the accumulated debt ratio, historical average growth rates and growth forecasts and inflation. These and other variables are introduced into the analysis model used by DBRS and the other agencies, with differences that are to be slight. What helps to explain why there are different opinions among agencies, and have slightly different models, is that the qualitative analysis can give more or less weight to the fact that, for example, a country like Portugal belong to the euro zone.
the interview Fergus McCormick allowed better understand why the DBRS gives Portugal a rating better than the other agencies. Largely, this is a rating attributed not only to Portugal but, to some extent, the whole of the single currency project and support mechanisms finance that exist.
“ we attach significant value to this support “, said Fergus McCormick. “The fact that Portugal or another country belonging to the euro zone does not mean that, by itself, has a better credit. But it means that if a country resort to an interim program or a full bailout is necessary or even to many lines of liquidity and financial support available, it makes it easier for the country’s refinancing and becomes a default (default) less likely “he said.
in other words, the rating assigned to Portugal is also a judgment on the political will that exists in the whole euro area so that it does not dismember. DBRS has therefore a greater faith than other agencies that, in the end, the euro area will remain intact and that, even if it is necessary to relieve the debt of countries that not imply losses for private investors -. that is, those for whom DBRS address its recommendations
“An involvement of private investors in a debt restructuring will not, in our view, more than a last resort option. Whether in Portugal or anywhere else. we have seen one private sector involvement in Greece and also in Cyprus. But Portugal would be a different case because it is a bigger country and because, given the instability and nervousness in the markets (and weak growth prospects in the world), the idea the involvement of private investors now could easily lead to a contagion across Europe “
Fergus McCormick, told the Observer.
DBRS has for any other European country the same importance to Portugal. The Portuguese debt is the only one among those scrutinized by the agency no longer has any above garbage. But all this mean that the DBRS tends to be more tolerant to risk? ? Is it more DBRS is easier to convince
Probably the answer is not – because, going back a few years, DBRS had, before the crisis, an rating well below to Portugal than the other agencies. According to the history of the Bloomberg , when Fitch, for example, also assigned a rating high AA to Portugal in 2010, DBRS already only gave an a to Portugal – and a sign less ahead. This rating A – was at that time, three levels below the rating Fitch and two levels below Moody’s
<. h2> DBRS began as the most pessimistic to Portugal. Today is the opposite
Fergus McCormick explained that, compared to other agencies, DBRS tends to have a approach more stable, more constant , the ratings . “We are less likely to climb the ratings and less likely to go down them. We seek to expunge our analysis of the effects of the economic cycle – and when there are, indeed, structural changes, we try to make certain that we know these changes clearly and we anticipate their consequences, “said the head of DBRS
<. div id = "attachment_1424008" class = "wp-caption aligncenter" readability = "10"> 
Fergus McCormick, responsible maximum of ratings sovereigns he explained that DBRS has less prone to sudden changes in credit ratings. (Photo: DBRS)
Ratings through the cycles. This is the title of a report that is a self-portrait that the agency DBRS did in September. “DBRS focuses on structural changes in the quality of policies and debt sustainability in the context of credit fundamentals of issuers [debt], and look for avoid hasty reactions to you climb and descend the normal economic cycles, “writes the agency in the document. The ratings tend to be more stable and predictable, “because we believe that this is what investors prefer,” says the agency. Courts at various levels of a seated, are rare and must be well justified with sudden changes of policy or the circumstances.
Avoid “hasty reactions”. DBRS “messes up” less than other agencies
Among the European countries covered by DBRS, are much less numerous changes of rating than the S & P, in Moody’s and Fitch. Source: DBRS
DBRS was founded in 1976 in Canada and today is a global agency with offices in Toronto, New York, Chicago and London. At the end of last year it had 568 employees, divided between Canada, USA and London.
Currently, the two largest shareholders of the parent agency of rating are the Carlyle Group and financial Warburg Pincus LLC, each of these with 46.9% of the capital. The Carlyle Group is an investment company ( private equity ) US that, according to the criteria of PEI 300 is the world’s largest. It is investing in companies like Altice, who bought the Portugal Telecom, Getty Images and Dealogic.
The founder of Dominion Bond Rating Service was Walter Schroeder , which still holds the position of chairman , ie chairman of the Board of Directors. With the reputation of the great agencies shaken by the financial crisis, DBRS grew and was sold in 2014 for more than $ 500 million. Turning to rely on the resources of the two new investors, the company launched a global expansion in Europe received a boost when the agency became the fourth recognized by the ECB in addition to three great .
“the recognition of the ECB is very important to us. We are delighted to meet the criteria, “he said in a telephone conversation with the Observer, from London, Detlef Scholz , director of DBRS for the European market that was recruited to rival Moody’s. The official, who said the expansion plans of DBRS in Europe, stressed that the company “ has a great fondness for Iberia “, as it was in Spain, Portugal and Italy, the company began activity in Europe. Today have ratings to sovereigns and companies in Germany, Netherlands and the UK, limited for now, the ratings of banks, countries and securitisations. The company has not yet entered the European market of corporate debt or so-called sub-sovereign , as debt municipal councils.
the founder of the Dominion Bond Rating Service was Walter Schroeder, who still holds the position of chairman, or president of the Board of Directors. With the reputation of the great agencies shaken by the financial crisis, DBRS grew and was sold in 2014 for more than $ 500 million.
Despite the recognition by the ECB – which is worth a lot – the market ratings still dominated by three major : S & ; P, Moody’s and Fitch. And it owes much to the fact that the main bond indices followed by investors, such as iBoxx, just accept the ratings those three. “ Enter the market is not easy “, said an analyst of markets in London to the Observer, but “DBRS has grown to the ECB’s ride and this can be a good launching pad – and of course, to you, Portuguese, is absolutely crucial . “
it may be considered that, at this time, the DBRS is even more important than the other agencies . Any cut rating that three major can announce will not have great impact, because the ratings already junk and therefore there is not much more indices of which the Portuguese debt may be expelled. Still, if other agencies come to cut the rating Portugal to further negative levels, it can create more pressure on the DBRS and turn to her, even more, the spotlight on what concerns Portugal. Or is it not so
Here is the answer Fergus McCormick : “We are aware of the movements of ratings other agencies, but form the our own opinion. Pressure? No. Frankly, no. “
No comments:
Post a Comment