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DP Credit Rating is a financial risk model that assesses the default probabilities of companies in Singapore. It is based on the model which takes into account 6 broad categories of risk: Profitability, Capital Structure, Liquidity, Activity, Growth, and Size. It was developed in-house and based on a sample data set selected from our proprietary database. A sample size of 7,000 companies from 14 broad industry sectors has been selected and tested for reliability. The sample results have proven to be representative of the Singapore business community.
The sample data were classified into percentiles to determine the cut-off point for each score factor. The outliers were excluded from the sample set. The sample data were then classified into classes of 10 percentiles. Each class of percentile has a value associated to it. With this, we establish the scale for each score factor.
Each score factor is calibrated on a scale from 1 to 10. The total score arrived at for a company depicts the level of credit worthiness, which is assigned a PD score which then in turn corresponds to an expected DP Credit Rating. The rating table is as follows:
| Grading |
PD Range |
DP
Credit Rating |
Explanation |
Status* |
|---|
| Investment Grade | <=0.10% | DP1 | Extremely strong financial fundamentals with a high incentive and capability to repay obligations. | Premium |
| >0.10% - <=0.20% | DP2 | Strong financial health with above average capability to meet payments. | Premium |
| >0.20% - <=0.30% | DP3+ | Stable financial health with above normal operational environment. General unfavourable factors are not likely to cause distress. | Strong |
| >0.30% - <=0.40% | DP3 | Stable financial health with above normal operational environment. General unfavourable factors are not likely to cause distress. | Strong |
| >0.40% - <=0.60% | DP4+ | Normal overall financial health and operations. Capable of meeting its commitments. May be susceptible to difficulties in the event of drastic changes in economic conditions. | Strong |
| >0.60% - <=0.85% | DP4 | Normal overall financial health and operations. Capable of meeting its commitments. May be susceptible to difficulties in the event of drastic changes in economic conditions. | Strong |
| >0.85% - <=1.00% | DP4- | Normal overall financial health and operations. Capable of meeting its commitments. May be susceptible to difficulties in the event of drastic changes in economic conditions. | Strong |
| High Yield | >1.00% - <=1.55% | DP5+ | Adequate financial capabilities to meet normal commitments. However, adverse changes in economic conditions could lead to doubtfulness in its ability to pay. | Moderate |
| >1.55% - <=2.15% | DP5 | Adequate financial capabilities to meet normal commitments. However, adverse changes in economic conditions could lead to doubtfulness in its ability to pay. | Moderate |
| >2.15% - <=3.00% | DP5- | Adequate financial capabilities to meet normal commitments. However, adverse changes in economic conditions could lead to doubtfulness in its ability to pay. | Moderate |
| >3.00% - <=4.00% | DP6+ | Sufficiently sound financial ability to meet normal obligations. Capabilities in reacting to adverse operating conditions are limited or consider doubtful. | Moderate |
| >4.00% - <=5.45% | DP6 | Sufficiently sound financial ability to meet normal obligations. Capabilities in reacting to adverse operating conditions are limited or consider doubtful. | Moderate |
| >5.45% - <=8.00% | DP6- | Sufficiently sound financial ability to meet normal obligations. Capabilities in reacting to adverse operating conditions are limited or consider doubtful. | Moderate |
| High Risk | >8.00% - <=10.15% | DP7+ | Weakness in financial ability is apparent. Vulnerable to unfavourable changes in the economic and operating environments and is likely to fall into a weakened financial condition. | Monitor |
| >10.15% - <=11.85% | DP7 | Weakness in financial ability is apparent. Vulnerable to unfavourable changes in the economic and operating environments and is likely to fall into a weakened financial condition. | Monitor |
| >11.85% - <=14.00% | DP7- | Weakness in financial ability is apparent. Vulnerable to unfavourable changes in the economic and operating environments and is likely to fall into a weakened financial condition. | Monitor |
| >14.00% - <=16.15% | DP8+ | Apparent weakness in financial health with limited capability to meet its obligations especially in the event of any adverse changes in operating environments. | Monitor |
| >16.15% | DP8 | Apparent weakness in financial health with limited capability to meet its obligations especially in the event of any adverse changes in operating environments. | Monitor |
*DP1 to DP4- is comparable to "Investment Grade" rated securities, and DP5+ to DP6- is comparable to "High Yield" rated securities.
*DP7+ to DP8 is comparable to "High Risk" Grade.
The PD is the probability that a firm will default in a span of one year.
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