Fitch Ratings Inc. is an American
credit rating agency
A credit rating agency (CRA, also called a ratings service) is a company that assigns credit ratings, which rate a debtor's ability to pay back debt by making timely principal and interest payments and the likelihood of Default (finance), default ...
and is one of the "
Big Three credit rating agencies", the other two being
Moody's
Moody's Investors Service, often referred to as Moody's, is the bond credit rating business of Moody's Corporation, representing the company's traditional line of business and its historical name. Moody's Investors Service provides internationa ...
and
Standard & Poor's. It is one of the three
nationally recognized statistical rating organization
A nationally recognized statistical rating organization (NRSRO) is a credit rating agency (CRA) approved by the U.S. Securities and Exchange Commission (SEC) to provide information that financial firms must rely on for certain regulatory purp ...
s (
NRSRO) designated by the
U.S. Securities and Exchange Commission in 1975.551
History
Fitch Ratings is dual headquartered in
New York and
London
London is the capital and List of urban areas in the United Kingdom, largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary dow ...
.
Hearst owns 100 percent of the company following its acquisition of an additional 20 percent for $2.8 billion on April 12, 2018.
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 previous
equity interest was 50 percent following expansions on an original acquisition in 2006.
Hearst had jointly owned Fitch with
FIMALAC SA, 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 by
John Knowles Fitch on December 24, 1914, in New York City as the Fitch Publishing Company. In 1989, the company was acquired by a group including
Robert Van Kampen. In 1997, Fitch was acquired by
FIMALAC and was merged with London-based IBCA Limited, a FIMALAC subsidiary. In 2000 Fitch acquired both Chicago-based
Duff & Phelps
Kroll, LLC, formerly Duff & Phelps LLC, is an American multinational financial consultancy firm based in New York City. It was founded as Duff & Phelps in 1932 by William Duff and George Phelps. Since then, the firm has added more than 30 comp ...
Credit Rating Co. (April) and
Thomson Financial BankWatch (December).
Fitch Ratings is the third largest
NRSRO rating 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.
In September 2011, Fitch Group announced the sale of
Algorithmics
Algorithmics is the systematic study of the design and analysis of algorithms. It is fundamental and one of the oldest fields of computer science. It includes algorithm design, the art of building a procedure which can solve efficiently a specific ...
(risk analytics software) to
IBM for $387 million. The deal closed on October 21, 2011.
In June of 2022, Fitch Group acquired
GeoQuant, a AI-driven data and technology company.
Investment scale
Fitch Ratings' long-term
credit rating
A credit rating is an evaluation of the credit risk of a prospective debtor (an individual, a business, company or a government), predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaulting.
...
s are assigned on an alphabetic scale from 'AAA' to 'D', first introduced in 1924 and later adopted and licensed by
S&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 in
bankruptcy or in
arrears
Arrears (or arrearage) is a legal term for the part of a debt that is overdue after missing one or more required payments. The amount of the arrears is the amount accrued from the date on which the first missed payment was due. The term is usually ...
, but still continuing to pay out on obligations
* D: has
defaulted on obligations, and Fitch believes that it will generally default on most or all obligations
* NR: not publicly rated
Short-term credit ratings
Fitch'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
Launched 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.
Criticism
The main
credit rating agencies
A credit rating agency (CRA, also called a ratings service) is a company that assigns credit ratings, which rate a debtor's ability to pay back debt by making timely principal and interest payments and the likelihood of default. An agency may ra ...
, including Fitch, were accused of misrepresenting the risks associated with mortgage-related securities, which included the CDO market. There were large losses in the
collateralized debt obligation
A collateralized debt obligation (CDO) is a type of structured asset-backed security (ABS). Originally developed as instruments for the corporate debt markets, after 2002 CDOs became vehicles for refinancing mortgage-backed securities (MBS).Le ...
(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 by
Credit Suisse Group added up to about $125 million, despite being rated AAA by Fitch.
However, differently from the other agencies, Fitch has been warning the market on the
constant proportion debt obligations (CPDO) with an early and pre-crisis report highlighting the dangers of CPDO's.
See also
*
FIMALAC
* Kroll Bond Rating Agency
*
List of countries by credit rating
*
Moody's Investors Service
Moody's Investors Service, often referred to as Moody's, is the bond credit rating business of Moody's Corporation, representing the company's traditional line of business and its historical name. Moody's Investors Service provides internationa ...
*
Spread Research
*
Standard and Poor's
S&P Global Ratings (previously Standard & Poor's and informally known as S&P) is an American credit rating agency (CRA) and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities. S&P is cons ...
References
External links
Fitch RatingsFitch SolutionsFitch Learning
{{Authority control
Credit rating agencies
Financial services companies established in 1914
Financial services companies of the United States
Companies based in New York City
Financial services companies based in New York City
1914 establishments in New York City