When Should a Company Consider Changing Its Rating Agency?

There are several legitimate, well-recognised circumstances under which reviewing or changing a rating agency relationship makes practical sense — though the decision should generally be driven by a clear, substantive rationale rather than a reaction to any single unfavourable rating outcome.

Legitimate Reasons to Consider a Change

•      The company's business has evolved into a sector or scale where a different agency demonstrably has deeper, more relevant expertise than the incumbent

•      The company is entering a new market — bond issuance, for instance, after previously relying only on bank facilities — where a different agency carries stronger recognition with the specific new investor base

•      Persistent, documented service issues with the incumbent agency — repeated delays, unresponsive communication, administrative errors — that have not improved despite being raised directly

•      A desire to consolidate multiple existing ratings under a single agency for administrative simplicity, or conversely, to diversify across agencies to broaden market reach

•      A genuine, well-founded concern about the quality or rigour of the incumbent agency's analysis, distinct from simple disagreement with a specific rating outcome

Why a Single Unfavourable Rating Is Generally Not, on Its Own, a Good Reason

It is worth being direct about a common but generally unproductive motivation: switching agencies specifically because a particular review resulted in a downgrade, a negative outlook, or a rating lower than hoped for. As covered in detail elsewhere in this pillar, rating agencies apply broadly similar analytical frameworks under a shared regulatory umbrella, and a genuine credit concern identified by one agency is likely to be identified by another agency conducting an equally rigorous, independent assessment as well.

A switch made specifically in response to an unfavourable outcome, without addressing the underlying issue the outcome reflected, risks simply repeating the same result with a new agency — while also potentially raising the perception concern discussed in the companion article on changing agencies, where an unexplained switch following a downgrade can itself become a point of scrutiny for lenders and investors.

A More Productive Response to an Unfavourable Rating

Rather than switching agencies, a company facing an unfavourable rating outcome is generally far better served by engaging directly and substantively with the specific factors the rationale identified — the sensitivities, weaknesses, and specific metrics the agency has flagged — following the improvement and downgrade-response guidance covered extensively elsewhere in this content series, since this addresses the actual underlying issue rather than simply changing which agency is observing it.

Timing Considerations When a Change Is Genuinely Warranted

Where a change is genuinely warranted for legitimate reasons, timing matters. Initiating a switch during a period of stable, unremarkable performance — rather than immediately following a rating action — generally avoids the perception issue discussed above, and gives the new agency a cleaner, less time-pressured basis on which to conduct its independent assessment. Companies planning a switch are generally well advised to plan the transition around a natural juncture, such as the maturity or refinancing of the specific rated instrument, rather than mid-cycle.

A Practical Checklist Before Deciding to Switch

•      Has the specific concern with the incumbent agency been raised directly with them, and has there been a genuine opportunity to resolve it?

•      Is the motivation for switching clearly separable from disagreement with a specific rating outcome?

•      Has the company assessed whether the underlying issue behind any unfavourable rating has actually been addressed, regardless of which agency observes it going forward?

•      Has the transition been planned around a sensible timing juncture, with lender consent considerations addressed?

•      Has the company considered whether adding a second agency, rather than fully switching, might better serve its underlying objective?

Talk to FinMen Advisors — for help preparing for a rating exercise, write to marketing@finmen.in or call +91 77387 14680.

Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial, credit, investment, or legal advice. Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies (such as CRISIL, ICRA, CARE Ratings, India Ratings, Brickwork, Acuite, and Infomerics) based on their own methodologies, policies, and the information available to them at the time of assessment. FinMen Advisors provides preparatory and advisory support to companies undergoing a rating exercise and does not issue, influence, or guarantee any rating outcome. Readers should exercise independent judgement and consult qualified professionals before making business or financial decisions.