Fitch Ratings Inc.is an Americancredit rating agency.It is one of the threenationally recognized statistical rating organizations(NRSRO) designated by theU.S. Securities and Exchange Commissionand is considered as being one of the "Big Three credit rating agencies",[3]along withMoody'sandStandard & Poor's.
 | |
| Company type | Subsidiary |
|---|---|
| Industry | Financial services |
| Founded | 1914 |
| Founder | John Knowles Fitch |
| Headquarters | |
Key people | |
| Revenue |  $1.7 Billion[1] |
Number of employees | 5,000 (approximate) |
| Parent | Hearst Corporation[2] |
| Website | fitchratings |
History
editFitch Ratings is dual headquartered inNew YorkandLondon.[4]Hearstowns 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 previousequity interestwas 80 percent following expansions on an original acquisition of 20 percent interest in 2006.[5][6]
Hearst had jointly owned Fitch withFIMALACSA, 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 byJohn Knowles Fitchon December 24, 1914, inNew York Cityas the Fitch Publishing Company. In 1989, the company was acquired by a group includingRobert Van Kampen.[7]In 1997, Fitch was acquired byFIMALACand was merged with London-based IBCA Limited, a FIMALAC subsidiary.[8]In 2000, Fitch acquired both Chicago-basedDuff & PhelpsCredit Rating Co. (April)[9]andThomson FinancialBankWatch (December).
Fitch Ratings is the third largestNRSROrating 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 ofAlgorithmics(risk analytics software) toIBMfor $387 million.[11]
In June 2022, Fitch Group acquiredGeoQuant,anAI-driven data and technology company.[12]
Investment scale
editFitch Ratings' long-termcredit ratingsare assigned on an Alpha betic scale from 'AAA' to 'D', first introduced in 1924 and later adopted and licensed byS&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 inbankruptcyor inarrears,but still continuing to pay out on obligations
- D:hasdefaultedon obligations, and Fitch believes that it will generally default on most or all obligations
- NR:not publicly rated
Short-term credit ratings
editFitch'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
editLaunched 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
editThe maincredit rating agencies,including Fitch, were accused of misrepresenting the risks associated with mortgage-related securities, which included thecollateralized 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 byCredit Suisse Groupadded up to about $125 million, despite being rated AAA by Fitch.[13] However, differently from the other agencies, Fitch was warning the market on theconstant proportion debt obligations(CPDO) with an early and pre-crisis report highlighting the dangers of CPDOs in 2007.[14]
See also
edit- FIMALAC
- Kroll Bond Rating Agency
- List of countries by credit rating
- Moody's Investors Service
- Spread Research
- Standard and Poor's
References
edit- ^"2011 Fiscal".FIMALAC. Archived fromthe originalon September 27, 2018.RetrievedMarch 26,2012.
- ^ab"Fitch Group Becomes a Wholly-Owned Hearst Business".hearst.RetrievedApril 12,2018.
- ^Blumenthal, Richard (May 5, 2009)."Three credit rating agencies hold too much of the power".Juneau Empire.Archived fromthe originalon November 1, 2011.RetrievedMarch 19,2018.
- ^"Sale of 10% of Fitch Group to Hearst"(PDF).Archived(PDF)from the original on February 20, 2015.
- ^Hufford, Austen (April 12, 2018)."Hearst Takes Full Ownership of Fitch Group".The Wall Street Journal.Archived fromthe originalon August 2, 2023.RetrievedJanuary 6,2024.
- ^Barr, Alistair (February 9, 2012)."Hearst buys another 10 percent of Fitch for $177 million".Reuters.RetrievedJanuary 6,2024.
- ^"Investor Group Acquires Fitch Bond Rating Agency".The New York Times.April 21, 1989. Archived fromthe originalon November 22, 2024.
- ^Lavin, Douglas (October 17, 1997)."France's Fimalac Purchases Fitch From Van Kampen".The Wall Street Journal.Archived fromthe originalon June 10, 2024.
- ^Gasparino, Charles (March 8, 2000)."Fitch Acquires Duff & Phelps In Latest Credit-Rating Union".The Wall Street Journal.Archived fromthe originalon June 15, 2024.RetrievedNovember 9,2020.
- ^"FACTBOX: List of 10 rating agencies recognized by U.S. SEC".Reuters. June 24, 2009.RetrievedJanuary 5,2024.
- ^"IBM Buying Algorithmics for $387M".Traders Magazine.September 1, 2011.RetrievedJanuary 5,2024.
- ^"Fitch Group Acquires GeoQuant".themiddlemarket.June 22, 2022.RetrievedJune 23,2022.
- ^Tomlinson, Richard; Evans, David (June 1, 2007),"CDOs mask huge subprime losses, abetted by credit rating agencies",International Herald Tribune
- ^Linden, Alexandre; Neugebauer, Matthias; Schiavetta, John; Zelter, Jill; Hardee, Rachel (April 18, 2007),First Generation CPDO: Case Study on Performance and Ratings