Johannesburg, 11 Sep 2013 – Global Credit Ratings has today assigned Industrial and Commercial Development Corporation (ICDC) initial national scale issuer ratings of BBB-(KE) and A3(KE) in the long term and short term respectively; with the outlook accorded as Stable. The rating(s) are valid until 9/2014.
Global Credit Ratings has accorded the above credit rating(s) on Industrial and Commercial Development Corporation (ICDC) based on the following key criteria:
The ratings draw significant strength from the corporation’s position as a state agency, despite the plans being underway to detach and operate as a standalone, fully fledged corporate institution; hereon, government is expected to convert part of its grant funding into participatory units, and will thus retain an interest in the businesses financial affairs and operations (on-going ‘shareholder’ support is seen as highly probable). Further, it is expected that the move towards a regulated environment will be instrumental in addressing the current corporate governance and functional shortcomings; also, the introduction of prudential standards and guidelines should serve as foundation for a more universal operating model, making results comparable across like businesses.
On a simulated basis (considering its current guise as a ‘no-share’ company), the corporation continues to build capital at a rate in excess of what is being consumed for organic growth; hence, the corporation’s capital pool is considered suitable for the level of (disclosed) business risk assumed.
Activity within the loan book is obscured by a significant legacy portfolio, with practically the entire pool in arrears and classified as impaired; though split data was requested, at the time of writing this report, none was provided by management, whilst attempts to strip out and isolate current performance did not produce any logical results.
Reflecting the struggles of both the local business and economic environs, the corporation posted a mixed set of results, curving up and down along each of the main income/revenue reporting lines. However, though the year-end turnout is well below expectations, the corporation’s long-term trend remained within acceptable parameters.
Positive movement/s: The vacillation in the company’s income and operational business structure invariably increases the error margin on all forward looking scenarios, offsetting any upgrade.
Negative movement/s: The ratings will be sensitive to a slide in asset quality, long-term earnings and/or a decline in capital levels.
|Sector Head: Financial Institution Ratings|
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The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
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GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
Industrial and Commercial Development Corporation (ICDC) participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to Industrial and Commercial Development Corporation (ICDC) with no contestation of the rating.
The information received from Industrial and Commercial Development Corporation (ICDC) and other reliable third parties to accord the credit rating included the latest available audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, most recent year to date management accounts, corporate governance and enterprise risk framework, reserving methodologies, capital management policy, Industry comparative data and regulatory framework and a breakdown of facilities available and related counterparties.