Morningstar Begins Publishing Credit Ratings, Initially Covering 100 Public Companies
December 02 2009 - 8:59AM
PR Newswire (US)
CHICAGO, Dec. 2 /PRNewswire-FirstCall/ -- Morningstar, Inc.
(NASDAQ: MORN), a leading provider of independent investment
research, today began publishing credit ratings for approximately
100 of the largest U.S. companies. During the next year,
Morningstar plans to produce credit ratings for up to 1,000
companies currently covered by its equity analyst team. The ratings
are available for free at Morningstar.com, the company's investment
Web site. Forecasts and scores underlying the ratings are available
to Morningstar's institutional equity research clients. "Investors
benefit when they have access to multiple perspectives on an
investment," said Catherine Odelbo, president of equity research
for Morningstar, Inc. "Credit ratings are a natural extension of
the equity research we've been producing for the past decade. We
believe we have a unique viewpoint to offer on company default risk
that leverages our cash-flow modeling expertise, proprietary
measures like Economic Moat, and in-depth knowledge of the
companies and industries we cover." Morningstar has been producing
equity research since 1998 and draws on this experience to bring a
distinct perspective to debt ratings. Morningstar's equity analysts
produce detailed five-year forecasts of cash flows to evaluate
stocks. They then compare those forecasts with liabilities coming
due to provide insight into companies' creditworthiness. Another
distinction of Morningstar's credit rating methodology is its
emphasis on an Economic Moat(TM) calculation of competitive
advantage when evaluating both a company's financial prospects and
its business risk. Morningstar's credit rating is based on four key
quantitative and qualitative factors: -- Business Risk--an
evaluation of industry and company risk factors, including
Morningstar's proprietary Economic Moat and Uncertainty Rating.
Economic Moat is a measurement of a company's competitive advantage
and the Uncertainty Rating measures the predictability of future
cash flows. -- Cash-Flow Cushion(TM)--a proprietary,
forward-looking ratio that measures Morningstar analysts' forecasts
of future cash flows against firms' financial obligations. --
Solvency Score(TM)--a proprietary scoring system that measures a
firm's financial leverage, liquidity, interest coverage, and
profitability to determine its financial health relative to other
firms. -- Distance to Default--a quantitative model that estimates
the probability of a firm falling into financial distress based on
the market value and volatility of its assets. Morningstar's credit
committee reviews all ratings initiations and proposed changes. The
committee, which includes Morningstar's director of stock research,
sector specialists, and senior members of its research team,
evaluates each rating factor with an emphasis on cash-flow,
financing, and business-risk assumptions. Morningstar assigns
scores for each key factor and issues one of the following overall
ratings to each company: AAA (extremely low default risk) B (high
default risk) AA (very low default risk) CCC (currently very high
default risk) A (low default risk) CC (currently extreme default
risk) BBB (moderate default risk) C (imminent payment default) BB
(above average default risk) D (payment default) As of Sept. 30,
2009, Morningstar had more than 100 equity analysts around the
globe with approximately 2,000 companies under coverage.
Institutional investors and portfolio managers can access
Morningstar analysts' equity and credit valuation models and engage
directly with the entire analyst staff through Morningstar®
Institutional Equity Research Services(SM). For additional
information about Morningstar's credit rating methodology, please
visit http://global.morningstar.com/CreditRatings. About
Morningstar, Inc. Morningstar, Inc. is a leading provider of
independent investment research in North America, Europe,
Australia, and Asia. The company offers an extensive line of
Internet, software, and print-based products and services for
individuals, financial advisors, and institutions. Morningstar
provides data on more than 325,000 investment offerings, including
stocks, mutual funds, and similar vehicles, along with real-time
global market data on more than 4 million equities, indexes,
futures, options, commodities, and precious metals, in addition to
foreign exchange and Treasury markets. The company has operations
in 20 countries and minority ownership positions in companies based
in two other countries. ©2009 Morningstar, Inc. All rights
reserved. MORN-C Media Contact: Alexa Auerbach, 312-696-6481 or
Margaret Kirch Cohen, 312-696-6383 or DATASOURCE: Morningstar, Inc.
CONTACT: Alexa Auerbach, +1-312-696-6481, , or Margaret Kirch
Cohen, +1-312-696-6383, , both of Morningstar, Inc. Web Site:
http://www.morningstar.com/
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