Russian ACRA acquires European Rating Agency

ACRA
ACRA

Analytical Credit Rating Agency (ACRA) has acquired the Slovak European Rating Agency (ERA). The deal was closed on April 20, said on Tuesday, the General Director of ACRA Ekaterina Trofimova (without disclosing its amount.)

ACRE bought the Agency from Emil Hubinak, Chairman of the Board of Directors of ERA. The Slovak Agency was established in 2001 and is included in the EU register of rating agencies and can assign credit ratings for regulatory purposes.

It is small: according to the European securities and markets organization (ESMA) for 2017, ERA occupies less than 0.01% of the rating market in Europe. More than 90% – agencies of the big three: S&P (46.3%), Moody’s (31.3%) and Fitch (15.7%).

“We pass ERA to a reliable partner. I am sure that the cooperation with the ACRA will help ERA to fulfill its mission and reach new heights,” said Emil Hubinak, whose words are in the press release ACRE.

ERA has a European license, and its scale is included in the mapping (the system of compliance of rating scales of different agencies) ESMA, explained Trofimova. Thanks to the deal, the Russian Agency also receives an international scale: now it belongs to the ACRA group.

“ACRA will deal exclusively with the national scale, ERA – international”, – explained Trofimova. At the same time, the Agency wants to ensure that ERA ratings as an international Agency can be used for regulatory purposes in Russia (for ratings of foreign issuers), Trofimova stressed.

“The deal is largely dictated by the desire of ACRA to develop in the international markets. Our opportunities in the classical rating business in Russia are limited due to market consolidation, small GDP growth and merger of issuers in the market, she explains. “The EU is working to reduce its dependence on the big three by working with small agencies, which is a point of growth for us.”

According to Trofimova, the ERA Board of Directors will be headed by Thomas Missong, President of the European Association of Credit Rating Agencies (EACRA), a member of the ACRA Board of Directors.

Another Russian rating Agency, Expert RA, does not yet see the need to enter the international market. Demand in the domestic market is growing, its capabilities have not been exhausted yet, says the Agency’s CEO Sergey Tishchenko: together with regulatory changes, the number of clients and the list of financial instruments that require rating are increasing. “We look at foreign markets, but we do not see the opportunity to work on them with an acceptable profitability. If you buy a foreign company, then, according to our estimates, it will be unprofitable for three years,” he says.

Customers are likely to go to the “big three”, which means the probability that such a subsidiary of a foreign Agency is able to quickly develop a customer base is quite low.”We see a point of growth rather in partnership with foreign companies and attracting customers from the CIS countries – who want to enter the Russian capital market,” adds Tishchenko.

In the next 1.5-2 years, the ACRA will require additional investments in the Slovak unit. It is of the order of 100 000-150 000 Euro, predicts Trofimova. Due to the pre-selling ERA lost the support of some methodology and left only two public ratings, said Trofimova. ACRE will be to “reviving” their sovereign methodology in the near future. The ERA plans for the first year – to release 10-20 ratings, she added: “Now we are negotiating with the customers.”

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