31 October 2014

Creditsafe responds to BPIF concerns at credit rating downgrades

Creditsafe CEO Cato Syversen has replied to a letter from BPIF in which we voiced concerns at the impact on many UK printing companies of the recent upgrade made to the company's credit ratings model.

Our letter pointed out this move had resulted in many printing companies suffering significant downgrades to their credit ratings - with some going from ‘very low risk' to ‘very high risk. We asked Creditsafe to explain why this widespread shift in companies' assessments has occurred, seeking more background on how the new model operates in practice and why the company considers this tool to be more accurate than its predecessor.

We also asked for details on how Creditsafe's model factors in payment cycles agreed with customers, and whether it might be possible to improve the transparency of the credit reports, so that the cause of a drop in rating might be made clear to the companies affected.

In his reply, Mr Syversen is adamant that there has been no 'blanket' downgrade of ratings for firms operating in this sector and there has been no 'blanket' application of 30 day payment terms in the system. He states that every invoice is tracked against the creditors' agreed payment terms, be they 30, 60, 90 days, or any other period. Trade data experiences are sourced from suppliers' ledger systems and feed into the system directly from a client's accounting software. The data is processed utilising comparable security links to those employed by the banking industry, with payment experience data integrated only as a variable into the ratings algorithm when multiple payment experiences are available.

My Syversen adds that there has been no specific upgrading, or downgrading, of company ratings or limits assigned on the basis of firms being coded as companies in the print industry, stating that "Across all industries, these changes have seen Creditsafe recommend increases in total aggregate trade limits across all categories of company, from small to medium sized enterprises (SMEs) through to major multi-national corporations".