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Local rating agency says admitted to regional association

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RAC bestowed its best khAAA rating to Royal Railway Plc’s $24 million bond. Heng Chivoan

Local rating agency says admitted to regional association

Rating Agency of (Cambodia) Plc (RAC) has announced that it was approved for membership in the Association of Credit Rating Agencies in Asia (ACRAA), which would position the locally-owned firm as a major player in the development of the Kingdom’s financial sector and capital market.

RAC was established in February 2022 as a joint venture between Royal Group of Companies Ltd (RGC) and the 3E-Fii Group, through 3E-Fii Capital Co Ltd.

Sixteen months later “on June 26th, 2023, the board of the [ACRAA] approved [our] application for membership”, RAC said in a statement dated July 5.

The statement noted that the Asian Development Bank (ADB) helped to establish the ACRAA in the Philippines’ Metro Manila area in 2001. Citing the ADB, it described the association’s primary goal as to “bring domestic credit rating agencies in a regional cooperative effort”.

“Its objective is ‘to promote the adoption of best practices and common standards throughout Asia, as well as to promote development of capital markets in Asia and cross-border investment throughout the region’. Currently, ACRAA has 28 members from 13 countries.

“By joining its regional peers, RAC will benefit from the exchange of information, experience and skills. By improving the quality of market information from issuers to investors conveyed through its credit rating, RAC will contribute to the expansion of the Cambodian capital markets and the development of the Cambodian economy,” it said.

RAC was incorporated on February 16, 2022 and granted a credit rating agency licence by the Securities and Exchange Regulator of Cambodia (SERC) on July 12 of the same year. The company claims that it is the first to receive such an accreditation from the SERC.

RAC executive director Sisowath Chakara told The Post on July 11 that the firm would gain regional recognition by joining the ACRAA, as well as access to current information from fellow members that could better equip it to promote development in Cambodia’s financial and securities sectors.

“It [ACRAA membership] is important for two reasons – first, it is recognition that the processes we put in place … are equivalent to those put in place by our regional peers”, such as those pertaining to rating methodologies and a code of conduct, he said.

“Second, it will make it easier to share data, information and expertise. The other members of ACRAA have been in business for longer than RAC, so we can benefit from their experiences.

“RAC needs to work with its ACRAA peers to keep improving our work, gain more experience and build our reputation. In this way, investors in the region and even internationally will gain confidence in RAC credit ratings,” he added.

“They will be more willing to invest in the bonds of Cambodian companies.”

In an interview with The Post on July 18, 2022, six days after RAC was granted the credit rating agency licence, SERC director-general Sou Socheat hailed the company as a game changer for the financial sector and capital market.

“When our local companies, such as banks or corporate bond issuers, require credit ratings on their business operation, they would normally seek foreign firms.

“However, we have a local company that is credible enough to provide ratings. The firm need not only limit itself to the securities market but can also expand to the financial industry,” he said.

RAC’s Chakara declined to name any of his company’s credit-rating customers, save for RGC subsidiary Royal Railway Plc – whose $24 million bond listed on the Cambodia Securities Exchange (CSX) was given the best khAAA rating, although the issuer was given a “high risk” khCCC rating albeit with “Stable” outlook.

“We did two other credit ratings but they remain private so we cannot disclose the names. We have signed two more credit rating contracts and we are currently working on them. Finally, we have discussions to sign two other potential contracts,” he said.

RAC’s ratings from lowest to highest risk are as follows: khAAA and khAA as “very low risk”, khA and khBBB as “low risk”, khBB and khB as “moderate risk”, khCCC and khCC as “high risk”, and khC and khD as “very high risk”.

The Ministry of Commerce’s business registry names four officers for RAC, all listed with Phnom Penh addresses. They are “Sisowath Chakara”, “Cheang Dane”, “Thai Tola” and “Kith Meng”, with Meng, who is also the chairman of RGC, being the highest ranked.


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