Rating Agencies Can Help Iranian Firms Tap Into Global Markets

EghtesadOnline: Having entered a new era after the lifting of most sanctions in early 2016, Iran has aptly understood the importance of making endeavors for modernizing its financial and corporate sectors.

News ID: ۷۸۲۴۰۲

22 April 2018

One such endeavor, the lack of which has been recognized by regulators and the private sector alike, is encouraging international credit rating agencies to establish a permanent presence in Iran and help local entities compete on the regional and global scale.

On Saturday, Capital Intelligence, a more familiar name among Iranian firms and policymakers, participated in a gathering hosted by the Center of Investment and Consultancy Services affiliated with the Tehran Chamber of Commerce, Industry, Mines and Agriculture–an entity that has been at the forefront of the business community's efforts to introduce Iran's potentials to foreigners.

The event, which was aimed at promoting access to international capital markets and facilitating credit ratings to achieve this goal, was attended by CI analysts, independent experts and the financial industry's players, Financial Tribune reported.

CI's activities are particularly significant, as it is the only global financial firm having an active presence in Iran since past 12 years. The firm's ratings have ranged from municipal bonds to banks and insurance companies, as well as sovereign ratings for the country.

"The real goal of the event was to familiarize business people with services that a ratings agency can provide and to present a clear picture about the prerequisites of tapping into global capital markets," Sara Haqiqivand, the head of CI's department for market development, told Financial Tribune.

According to the CI official, aside from the firm's international ratings for Iran, CI has also set up CIPRA (Capital Intelligence Persia Rating Agency)–a joint venture ratings firm that will act as a domestic player in the industry.

"CIPRA has received the preliminary permit from the Security and Exchange Organization," she said.

Other goals pursued by CI in Iran, according to Haqiqivand, are to help expand capital markets, promote transparency and ease Iranian businesses' access to international markets and ultimately replace the need for bank guarantees that would reduce the cost of finance.

Optimism

"Honestly, I'm extremely optimistic for the next two to three year that we will see the development of rating culture in the country, which is of great importance for the Iranian capital market and for Iranian issuers. And it's a very good basis to have access to international markets if the times are getting better on the political side," Horst Bertram, business development director at CI, told Financial Tribune on the sidelines of the event.

The CI official added that he was also confident because his firm has been active in the country for 12 years, so this experience of analysts is a good starting point to develop a local rating agency.

Bertram noted that ratings assigned by a local ratings agency like CI, after it ties up with a partner, will help firms make their presence felt in the market.

"However, I want to highlight the fact that rating is an opinion about the future and we are not an additional auditor … But in the end, we form our opinion in a group of independent analysts and it should be a good indicator of the rating of an Iranian issuer," he said.

In a presentation, Yesenn El-Radhi,  a senior credit analyst for sovereigns at CI Ratings, said the rise in external tensions since the election of US President Donald Trump , corruption weighing on institutional strength and limited disclosure of economic data are the main political and institutional risks facing Iran.