Question

One of the bond rating agencies ran into controversy when it began rating bonds of some companies without their approval. Many of the companies whose bonds were rated in this manner were upset by this. Why do you think a company would be unhappy to receive a "free" bond rating?

Answer 1

Company should be unhappy to receive free Bond rating because these Bond ratings are issued by not consultation with the companies management and board of directors and they are believed that these free Bond ratings are issued in isolation with the company's fundamental so they are not reflective of the true position of the companies with repayment capabilities because not everything is publicly disclosed, and this will affect the the rating of the bond because it will not be reflecting the true state of the fundamental of the company and the bondholders will be taking wrong decisions based upon those free ratings

Company believes that the every information are not publicly shared so those bond rating agencies must be privately approaching the management in order to gain those information so that they can be aware about the companies through financial position and then they can issue rating to their bonds so issuance of free credit rating is in isolation with the company's fundamentals and they are not reflecting the true position of the company's financial positions of repayment of debt so the companies are not happy about free Bond ratings.