We recommend rating the consolidated parent entity in most cases. This is because these financial statements typically give the most accurate picture of the overall situation.
In most cases, it is reasonable to assume explicit support in the event of a subsidiary experiencing financial distress. If this is not the case, or if it is a complex case (such as a parent that is a private equity investor or a holding company), parent level ratings become less reliable.
When can I rate the subsidiary?
- Where a company is an independent operator and you can obtain full financial statements, this rating will likely be reliable. This is often the case where the parent is a private equity firm but can happen in other cases as well.
When should I never rate the subsidiary?
- Where a company is a regional division of a larger legal structure, we do not recommend relying on these financial statements.
Reach out to your Client Services Manager with any further questions, or to discuss the best route for your particular counterparty.