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Launching Morningstar's Captive Finance Credit Ratings

We're adding captive finance issuers to our credit rating universe.

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In late 2009, Morningstar announced the launch of corporate credit ratings, initiating ratings on 100 firms. Then in 2010, we began rating financial institutions including banks and insurance companies. Since then, we've published ratings on more than 700 corporate and financial institution issuers. We are now adding captive finance entities (CFEs) to the roster of issuers for which we provide ratings, with a rating methodology takes into account any potential linkage in creditworthiness between a parent and its captive finance business.

Our system for rating a CFE is similar to our bank methodology: It emphasizes economic moats and competitive analysis, a CFE's ability to generate free cash flow, and the uncertainty surrounding a CFE's future prospects. However, the ties inherent in the relationship between the parent and its finance business play a critical role in rating the credit worthiness of a CFE.

Richard Hilgert does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.