Hayleys-Fitch rumpus over rating continues

Thursday, 5 January 2012 00:00 - - {{hitsCtrl.values.hits}}

The rumpus between Hayleys Plc and Fitch over the rating controversy appears to be raging, with allegations of breach of agreements on the part of the latter.

The developments follow Fitch downgrading Hayleys Plc’s national long term rating to A+ from AA- recently. This saw Hayleys, a highly-respected diversified blue chip, perturbed, thereby demanding rating rationale and the revealing of the manual with which Fitch bases its evaluation. In short, Hayleys had wanted greater transparency.

Fitch had responded to this request with what appears to be a standard, all-size-fit explanation, though being not specific with regard to the individual case of Hayleys.

However, what is likely to cause further discord is Hayleys describing Fitch’s rating release as “impugned” and wanting the agency to accommodate clarification on Hayleys’ part of some issues flagged off by Fitch. Despite Hayleys notifying that Fitch shouldn’t release the rating report without prior approval of Chairman and CEO (Mohan Pandithage), this had been done.

Fitch on its part has been maintaining that it does not require approval from Hayleys for the release of the press statement and the release was shared in advance with the company as a courtesy.

This had ruffled Hayleys in addition to straining ties, with fingers pointed at breaching of formal principal and supplementary agreements between the two parties. Among allegations include Fitch sending undated letters in connection, going beyond scope and call for highest degree of adherence to due and proper procedure with warranted due diligence from a professional firm such as Fitch. Hayleys had viewed some actions by Fitch as unethical, reckless and hasty and questionable as well.

However, on its part Fitch has explained that in issuing and maintaining ratings, it relies on factual information from issuers and underwriters as well as other credible independent and third party sources. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology and obtains reasonable verification from independent sources.

Fitch also maintained that it continuously improves its rating criteria and methodologies and periodically updates the descriptions on its website of its criteria and methodologies. Each rating action commentary provides information about the criteria and methodology used to arrive at the stated rating, which may differ from the general criteria and methodology for the applicable security type posted on the website at a given time. For this reason Fitch advices stakeholders to consult the applicable rating action commentary for the most accurate information on the basis of any given rating.

“Ratings are not a recommendation or suggestion, directly or indirectly” to any party to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer. Ratings may be raised, lowered, withdrawn or placed on rating watch due to changes in, additions to, accuracy of or the inadequacy of information or for any other reason Fitch deems sufficient.