1 / 19

Credit Ratings Services Bill

Credit Ratings Services Bill. May 2012. Agenda. Introduction to Futuregrowth Background Summary of key points Registration of Credit Ratings Agencies (“CRA’s”) Key Individual Accountability Hiring/firing of CRA’s Conclusion. 2. Introduction to Futuregrowth. Futuregrowth shareholding.

raoul
Download Presentation

Credit Ratings Services Bill

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Credit Ratings Services Bill May 2012

  2. Agenda • Introduction to Futuregrowth • Background • Summary of key points • Registration of Credit Ratings Agencies (“CRA’s”) • Key Individual Accountability • Hiring/firing of CRA’s • Conclusion 2

  3. Introduction to Futuregrowth

  4. Futuregrowth shareholding 74.7% Black shareholding 18.2% OMES & Trust 25.3% Black shareholding 7.6% 4

  5. What are our specialist areas? FUTUREGROWTH PRODUCTS & SERVICES SPECIALIST FIXED INCOME SRI PRODUCT SUITE • | Core Money Market • | Enhanced Money Market • | Flexible Income • | Inflation Linked Bonds • | Passive Bonds • | Core Bonds • | Yield Enhanced Bonds • | Interest Rate Asset Allocation • | Aggressive Fixed Interest | Infrastructure & Development Bond | Community Property | Development Equity | SRI Balanced | SA Agri-Fund Equity | SA Agri-Fund Debt • As at 30 April 2012 approx. AUM R111.4 billion in assets • Currently SRI Funds of R10.7 billion • 46 staff members 5

  6. Assets under management As at 30 April 2012 SRI Mandates Money MarketMandates Bond Mandates Balanced Mandates 6

  7. Background

  8. All debt is not created equal… Senior Secured …but debt is fragmented, conflicted and non-standard Access to cash flow & assets Bonds get Paid first Senior Unsecured Maturity date: December 2010 Bank loans have less defaults and higher recovery rates Senior Unsecured Maturity date: June 2011 A share is a share is a share… 8

  9. Credit is not going away SA is under-geared… 2010 Median: 109% SA average gearing Average debt: equity of U.S. non-financial companies Source: RMB 9

  10. 60 000 60 000 60 000 60 000 60 000 60 000 60 000 60 000 Bonds in retirement funds • Bonds are used to match long-term liabilities... • but “Bond” & “Credit” now conflated. • The best we can do is get the money back 1m 60 000 60 000 60 000 60 000 60 000 60 000 60 000 60 000 “a bundle of cash flows” 4 year, 12% (paid semi-annually) coupon bond -1m Debt is about fear... Equity is about hope ...fear of repayment... fear of inflation 10

  11. Summary of Futuregrowth Response

  12. The Fiduciary Chain & Credit Ratings Agents Investors/Clients Regulators Fiduciaries Fund Trustees Individuals Consultants/Advisors/Auditors/Lawyers/Actuaries/etc Companies Asset Managers Multi-Managers Credit Rating Agents Not Issuers/Project Sponsors Brokers/Dealers Banks/Merchant Banks 12

  13. Credit Ratings Services Bill Para 5(3) – Registration exemption • “Exemption of applicant whose holding company is registered/approved by foreign regulatory authority from providing some or all of the information ....” • South African implication - 3 out of 4 could be exempt? • Investor concerns: • Duty of care and accountability to local investors • High degree of transparency and comparability needed • Local jurisdiction and regulation (purpose of Bill!)

  14. Credit Ratings Services Bill Key Individual Accountability • Include provisions requiring Key Individual accountability • Includes MD/CEO and analyst • Similar to those required in Asset Management industry • Promotes accountability and transparency • Fiduciary role

  15. Credit Ratings Services Bill Lenders ability to replace CRA • CRA primary role: perform analysis for 3rd party lenders • Gatekeeper for issuers to access public capital... • ... but not fiduciaries & not accountable

  16. Credit Ratings Services Bill Lenders ability to replace CRA • Proposals: • Issuer’s Audit Committee approves hiring/firing/replacement of CRA • Majority lender vote needed to replace a CRA • Implications: • Makes CRA’s more responsive to investor’s concerns • Improves accountability to investors • Includes a layer of governance between issuer management and CRA • Improves CRA’s fiduciary role

  17. Conclusion

  18. Conclusion • Improve CRA fiduciary role • Improves transparency and accountability • Improves SA capital markets

  19. Credit Team Olga Constantatos Andrew Canter Jason Lightfoot Chief Investment Officer (20yrs exp) B Sc, CFA Tel: 021 659 5427 E-mail: acanter@futuregrowth.co.za Credit Process Manager (11yrs exp) B Bus Sci (Hons), PGDA, CA (SA) Tel: 021 659 5428 E-mail: olgac@futuregrowth.co.za Portfolio Manager (14yrs exp) B A, B Comm. (Hons) Tel: 021 659 5462 E-mail: jasonl@futuregrowth.co.za Mei-Chi Liou Paul Semple HemaNatha Portfolio Manager (9yrs exp) M Bus Sci (Economics) Tel: 021 659 5421 E-mail: mliou@futuregrowth.co.za Credit Analyst (13yrs exp) B Com, CAIB Tel: 021 659 5424 E-mail: pauls@futuregrowth.co.za Credit Analyst (3yrs exp) B Com, PGDA, CA Tel: 021 659 5415 E-mail: heman@futuregrowth.co.za 19

More Related