Remember the movie Meet the Parents? Remember how Jack always told Greg that he was watching him, and gave him that stern expression with accompanying hand gesture? Okay, well, in the financial world, being put on “negative watch” is basically the equivalent of Jack telling a company he’s watching its every move. And possibly even giving it the hand gesture.
A “negative watch” means that at least one of the major industrial credit ratings agencies—Fitch’s, Moody’s, Standard & Poor’s—is keeping an eye on a company in order to determine whether or not its credit rating should go down. And 50% of the time, that is exactly what ends up happening.
So what leads an organization to be put on negative watch? Well, maybe they’ve got solvency issues. Maybe they’re underperforming compared to their industry peers. Maybe they’re facing some legal problems that could seriously damage their ability to fulfill their long-term financial debts. Whatever the reason, if a company (or country—they do this to countries too) is placed on negative watch, it means there’s a pretty decent chance their credit rating is going to drop within the next three months.
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Finance: What is Fitch Investors Service...6 Views
Finance a la shmoop what is Fitch investors service? Google, Facebook, Amazon
the big three not least they are this week well for a much longer time Fitch
has been the third leg on the you know stool Moody's supports this leg standard [Fitch, Moody's and S&P shown on a stool]
and poors supports this leg and the big fat guy who sits right here yeah that's
you, you the big fat walletd bond investor who relies on the scores of
rating services in part like these to figure out how much risk premium you
should attach to the bonds you're buying or rather the interest rate rent you
should be charging the issuers for the privilege of renting your money
well distinctively for Fitch's rating service well it's owned mostly by Hurst
yes William Randolph flavored that Hurst you know rosebud [Man whispers rosebud]
yeah well that's William Randolph yeah first big swing and media mogul no other
kind of mogul you know if we lose a million dollars a year we'll have to
shut our doors you know a hundred years yeah that one all right well Fitch's is
a hundred-year-old global firm with feet in london and new york and well pretty
much everywhere people rent money in the form of bonds and after all that time [Fitch's locations appear across the map]
you'd think they could have come up with something a bit more creative than their
bond rating system right here this thing yeah
looks eerily similar to those of Moody's and Standard & Poor's hmm and well had
shmoop owned a bond rating service well we'd have had ratings like this [Shmoop ratings service appears]
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