The Pakistan Credit Rating Agency Limited
POLICY FOR WITHDRAWAL AND
SUSPENSON OF RATINGS
RATING POLICY Page 1 of 3
December 2018 www.pacra.com
1 INTRODUCTION Capitalized terms have the meaning set forth in “Defined Terms”
1.1 A Withdrawn Rating means that a previously issued Rating has been
withdrawn and no longer outstanding in PACRA’s universe. A Rating is withdrawn
on: a) termination of Rating Agreement, b) cessation of underlying entity, c) the debt
instrument is redeemed, d) the Rating remains suspended for six months, or e) the
entity/Issuer defaults.
1.2 Suspension implies that it is not possible to update a Rating due to lack of
requisite information. Rating should be resumed in foreseeable future. However, if this
does not happen within six (6) months, the Rating should be considered withdrawn.
2 WITHDRAWAL
OF RATING
2.1 Request to withdraw: PACRA withdraws a Rating at the request of a Client.
2.2 Reorganization: When an entity ceases to exist as a result of a merger /
acquisition:
The Ratings of such entity’s instruments, if any, are reviewed and updated with
reference to the terms and conditions under which these obligations are now
assumed by the entity emerging after the completion of reorganization
2.3 Instrument not outstanding: The rating on an instrument is withdrawn when
the instrument is not outstanding. This includes:
i when an instrument matures
ii when an instrument is called / prepaid (repaid before the maturity date)
iii when a Preliminary Rating is released but the instrument is ultimately not
issued
2.4 Protracted Suspension: Suspension entails that it is not possible for PACRA to
update a Rating. During the time, a rating stands suspended; PACRA expands all its
resources to reinstate the rating. However, a rating suspended for more than six-
months shall be considered Withdrawn and no separate Press Release shall be made to
this effect.
2.5 Default: PACRA considers default an “all consuming” state for the Rating
which stands Withdrawn at the time of this event. Any subsequent rating review is
considered an Initial Rating,
2.6 Conflict of Interest: PACRA immediately withdraws a Rating if it considers
that maintaining and monitoring such Rating would expose PACRA to a Potential
Conflict of Interest situation.
3 SUSPENSION OF
RATING
3.1 PACRA suspends a rating when the rated entity either doesn’t provide
information requested by PACRA or provides information that PACRA doesn’t
consider sufficient and PACRA cannot otherwise obtain the requested information
through public channels.
4 PRE-REQUISITES 4.1 PACRA doesn’t forbear or refrain from taking a Rating Action based on the
potential effect (such as a Downgrade or the Client withdrawing from PACRA).
The Pakistan Credit Rating Agency Limited
POLICY FOR WITHDRAWAL AND
SUSPENSON OF RATINGS
RATING POLICY Page 2 of 3
December 2018 www.pacra.com
& PROCESS PACRA may withdraw or suspend a rating at any time in its sole discretion subject to
the following pre-requisites and process:
PACRA keeps its opinions current at all time (exceptions are Point-in-time
ratings such as Security Gradings, Mutual Fund Star Rankings, Stability
Ratings, and Broker Management Ratings). This enables PACRA to review a
Rating at any time if circumstances demand so
The decision to withdraw or suspend a rating is taken by PACRA RC.
However, if the Rating is being Withdrawn at Ratee’s formal request or the
underlying instrument has been redeemed as per its term, RC is not required to
be convened.
When PACRA withdraws or suspends a rating, it makes the withdrawal
announcement via a separate Press Release except in the case of (2.4) and (2.5)
above
5 TASKS 5.1 The Press Release for withdrawn and suspended Ratings must contain the
following specific information content pertaining to such publication as specified in
Regulation Chapter III | 17-(e):
Date on which the rating was last updated or reviewed
The reason the rating is no longer monitored
The fact that the rating is no longer being updated
6 POLICY
ADMINISTRATION
6.1 Interpretation: Competent Authority is responsible for interpreting and
applying the Policy to specific situations when questions arise. Competent Authority is
designated on a case-to-case basis based on relevant competency.
6.2 Review: This Policy is subject to review as follows:
Reviewer Scope Frequency Regulation
Competent
Authority
Appropriateness
& sufficiency Annual Chapter III | 11-B-(k)
Internal Audit Actual vs. Policy Annual Chapter III | 11-B-(l)
Expert Comprehensive
Every
three (3)
years
Chapter III | 11-A-(b)
6.3 Policy Approval: This Policy is required to be approved by the board of
directors.
6.4 Investigations of Suspected Violations: All reported violations shall be
promptly investigated and treated confidentially to the extent reasonably possible.
6.5 Disciplinary Protocol: Compliance with all Codes of Conduct and PACRA
Policies, including this Policy, is a condition for employment. Compliance with the
Codes and PACRA Policies shall be monitored on periodic basis:
Those who come within the bounds of this Policy shall cooperate fully to
provide truthful, accurate information
The Pakistan Credit Rating Agency Limited
POLICY FOR WITHDRAWAL AND
SUSPENSON OF RATINGS
RATING POLICY Page 3 of 3
December 2018 www.pacra.com
The current version of this Policy is available on the website:
www.pacra.com
7 REGULATORY
FRAMEWORK
7.1 PACRA’s compliance to SECP’s regulatory requirements in terms of the
Policy for Withdrawal and Suspension of Ratings is as follows:
PACRA’s Compliance for Policy for Withdrawal and Suspension of Ratings
SECP’s Credit Rating Companies (CRCs) Regulations, 2016
SECP Regulation Code Clause
Regulation Chapter III | 18-(e): if a credit rating company
discontinues monitoring a rating for a rated entity or security it should
either withdraw the rating or disclose such discontinuation to the
public or to its subscribers (depending on the rating company’s
business model) immediately. A publication by the credit rating
company of a rating that is no longer being monitored should indicate
the date the rating was last updated or reviewed, the reason the rating
is no longer monitored, and the fact that the rating is no longer being
updated.
Section 2 and
Section 5
Annexure I: (List of Policies to be developed & disclosed by a
credit rating company / agency: Policy for Withdrawal and
Suspension of Ratings
Policy developed
& disclosed on
website
The Pakistan Credit Rating Agency Limited
ANNEXURE I | WITHDRAWAL AND
SUSPENSION OF RATINGS
ANNEXURE Page 1 of 2
December 2018 www.pacra.com
DEFINED TERMS
Client An entity / issuer, whose rating assignment is to be undertaken, having signed a Rating
Agreement with PACRA
Codes of Conduct Sets of Standards (Do’s & Don’ts) governing day-to-day conduct
Competent Authority A designated authority considered to possess the requisite expertise / knowledge
Conflicts of Interest
(COI)
Conflict of interest (COI): A situation wherein an individual / organization, upholding a position
of trust and fiduciary responsibility, encounters a competing personal / professional interest that has
the potential to make it difficult for such individual / organization to fulfill its position of trust /
fiduciary responsibility objectively and impartially:
i Potential COI: A COI that exists due to inherent aspects in a business model despite
institution of prudent systems and controls to manage such COI
ii Actual COI: A COI that comes into existence as a result of a failure in systems and
controls instituted to manage a potential COI
Default
i Failure of an obligor to make timely payment of principal and/or interest under contractual
terms of any financial obligation
ii A distressed restructuring whereby the restructuring has the effect of allowing the obligor to
avoid a payment default
This definition is uniformly applied both for capital market instruments and bank facilities
Initial rating
The rating assigned by PACRA for the first time
Ratings are also termed “Initial” when a previously:
i Private Rating converts into a Public Rating
ii Preliminary Rating is finalized
iii Withdrawn rating comes back to PACRA with a fresh Mandate
iv Defaulted rating emerges from default and assigned a fresh rating
Issuer Any entity by which a security has been / being issued
Issuing a rating Ratings are issued when PACRA informs a Client of the assigned rating by a Rating Notification
Point-in time Ratings A Rating that is current only at the time of its assignment
Ratee The entity / issuer whose rating is assigned
Rating Committee
(RC)
PACRA Rating Committee (RC) is a forum whereby the rating proposed by the Rating Team
undergoes deliberation culminating in a decision as to what the final rating would be. RC is core to
the finalization of rating opinion. Rating decisions are taken exclusively by the RC and not by any
individual and are completely independent of any influence.
Preliminary Rating The rating assigned to a debt instrument / mutual fund yet to be issued based upon its proposed terms
and conditions
Press Release A standard PACRA communiqué employed for Public Dissemination of Rating Actions
Rating Actions
Typical Rating decisions that PACRA takes in relation to its rating. These are:
i Upgrade: The rating has been raised in the Rating Scale
ii Maintain: The rating has been kept at the same level on the rating scale. Ratings
“Maintain” may also include a continuation of, or change in a Rating Modifier (Outlook,
The Pakistan Credit Rating Agency Limited
ANNEXURE I | WITHDRAWAL AND
SUSPENSION OF RATINGS
ANNEXURE Page 2 of 2
December 2018 www.pacra.com
Rating watch), if it is used
iii Downgrade: The rating has been lowered in the Rating Scale
iv Improved: The performance ranking is higher compared to previous one in the Fund
Performance Ranking Scale
v Declined: The performance ranking is lower compared to previous one in the Fund
Performance Ranking Scale
vi Same: The performance ranking is similar compared to previous one in the Fund
Performance Ranking Scale
vii Withdraw: A rating is withdrawn on: a) termination of rating mandate, b) cessation of
underlying entity, c) the debt instrument is redeemed, d) the rating remains suspended for
six months, or e) the entity/issuer defaults
viii Redeem: Withdrawal on account of redemption of obligations
ix Suspended: It is not possible to update an opinion due to lack of requisite information.
Opinion should be resumed in foreseeable future. However, if this does not happen within
six (6) months, a suspended rating should be considered withdrawn.
x Initial: The rating has been assigned as an “Initial Rating”
xi Preliminary: The rating has been assigned as a “Preliminary Rating”
xii Outlook / Rating Watch: See the definition for Rating Modifiers
xiii Harmonize: Rating action evolving from the process of harmonization. PACRA
defines harmonization as a change in rating due to revision in applicable
methodology or underlying scale.
Rating Notification Informing the Client of assigned rating / Rating Action through a standard PACRA communiqué –
the Rating Notification Letter