Brazil's Top Business Performer: Most Profitable Company

 Sov investment grade, fam

The most lit mode of risk calculated by risk agencies is the sovereign risk that aims to flex on the debt paying capacity of a country. Agencies be classifying countries' paying capacity and giving them a lit score, which gets put in a grade. Govs struggling to keep their promises might get scores in the spec grade, while countries that can pay up get scores in the investment grade. This grade division is like, super important cuz according to Vieira (2008, p.3), "there are pension funds in many countries, especially Asia and Europe, which may only apply in markets that already count on the investment grade, ya know?"There's like no set formula to figure out how likely a government is to not follow the rules, but the sovereign credit rating is like super important and has a big impact on the financial market. Cantor and Packer (2005, p.38), spill the tea on why this is so important: Sovereign ratings are like, super crucial, not just 'cause big players in the global money game are governments, but also 'cause their announcements impact the ratings given to borrowers from the same country, ya know?

When spilling the tea on a change in any score in sovereign rating, risk agencies spill, even if just a lil bit, about the reason for that upgrade. OMG, like Gomes (2008) says, the diff between the rating of sovereign credit or sovereign risk and the country-risk is all about how the bond yields of a country compare to the risk-free rate. They're split into investment grade and speculative grade. The sickest flex a company can get is Aaa (for Moody's) or AAA (for Standard & Poor's and Fitch, cuz they all use the same symbols). On the flip side, the absolute worst is C (Moody's) or D (Standard & Poor's and Fitch). Figure 1 flexes the risk scale used by companies. So many mechanisms that try to flex on those info asymmetries have been hella developed, fam. First, private companies were like, totally created (Credit Rating Agencies) with the specific goal to provide lit indicators of the risks of a whole bunch of debt instruments (credit risks classifications) of businesses and, later, of countries, which were like trying to get resources in financial markets (Lyon, 2009).

OMG, its development was like lit af since the 70's, with the whole financial internationalization and securitization of debts and stuff. 

It's like, all about that securitization of credit assets (asset backed securities) and the Basiléia II agreements, you know? Flexin' that credit game and rockin' with Basiléia II, ya feel me? OMG, they straight up flexed on those agencies to peep the bank credit risks. So fire The flex of scoring that investment grade by international rating agencies is still a major flex for corps or countries, cuz once you're classified as investment grade, you can get credit at way lower costs (Prates, Farhi, 2009). they don't have, like, an indicator that can give, like, a vibe of credibility for the investment. The title of "good payer" is like, totally given to companies and countries when they have that investment grade, ya know? The name is like a flex that shows it's super chill and there's like zero chance of breaking the rules. Companies or countries, once they get that investment grade, can flex better street cred in the market, ya know? Specialized companies that flex worldwide admit this classification; the three risk classification agencies with mad visibility are Standard & Poor’s Service, Moody’s Investors Service and Fitch Ratings (Ferreira, 2010). These companies be out here flexin' their risk classification service, giving a rating to a specific debtor, ya know? A rating, like Hill (2004) says, is basically the certifying agency's opinion on quality, especially credit liquidity. They're trying to predict the chances of future default, or not paying off financial obligations. So, like, rating doesn't really mean anything when it comes to buying, selling, or taking care of stuff.

The rating activities have been developed by many agencies, fam.

 

1909, when John Moody founded the first agency, the Moody's Investors Service. Yeet! Later were found the Standard & Poor's in 1916 and the Fitch in 1924 (Hill, 2004). The ratings are like, split into sovereign and corporate investment grades, ya know? Agencies practically use the same system of equivalent letters and signals. Thus, the best classification a country may obtain is Aaa (Moody’s) or AAA (Standard & Poor’s), which conceptually mean “extremely strong capacity of meeting financial commitments”. In the opposite edge, a bond classified as “C”, for Standard & Poor’s or Moody’s, has a very high risk of not being paid. The “D” classification is assigned by Fitch Ratings and by Standard & Poor’s regarding default. It is admitted that the market does not create a consensus around companies that might become investment grade and also does not declare this expectation such as in the assessment of countries. However, since the analysis is done case by case, an observation of the company’s characteristics may indicate whether the company is on track for that and serves as a warning to the investor market. The investor must be aware to the credit quality of the company regarding its local currency, as well as the international markets juncture. Carvalho (2008) explains that specialist state that this is the first analysis to be done because the company may have different scores in local and foreign currency and the investment grade in local currency is needed before receiving it in foreign currency. Furthermore, it is imperative to evaluate how the transparency of this corporation in the market is presented and if it has conditions of honoring the commitments, local and international.