S&P and Moody's Are About to Be Joined by a Nordic Game Changer

(Bloomberg) -- For decades, companies have relied on S&P Global Ratings, Moody’s Investors Service or Fitch Ratings for a verdict on their financial health if they wanted to tap the bond market.

But that domination is being challenged. In the Nordic region, where mortgage issuers have in previous years had a fraught relationship with some of the major ratings companies, a new firm has just won approval to provide corporate credit assessments.

Nordic Credit Ratings (NCR) will be granted a license to operate from Aug. 3, the European Securities and Markets Authority said on Friday.

Gustav Liedgren, the chief executive officer of NCR and a former employee of S&P, says the new rating company is intended to be “complementary to the three major existing rating agencies as we are mainly going to target small and mid-sized issuers which are unrated today.”

The arrival of NCR has the potential to be a game changer for a market in which smaller companies have had to rely on their banks for financing. Now, such firms may find they have a smoother path to the bond market, with all the benefits and risks that entails.

Liedgren says NCR will probably be “most relevant” for issuers with up to 1 billion euros ($1.2 billion) of outstanding debt.

The approval to start providing ratings follows ESMA’s decision earlier in July to fine the biggest Nordic banks for offering credit recommendations in previous years without the proper permission.

The license, granted by the European Free Trade Association, gives NCR the right to do business inside the European Union, of which Sweden, Denmark and Finland are members, and in the EFTA area, of which Norway and Iceland are members. Its headquarters will be in Oslo, and it will have a branch in Stockholm.

Liedgren points out that Norway and Sweden already have relatively large corporate bond markets. He sees potential for more issuance among smaller Danish banks. NCR is also intending to focus on issuers in the Swedish real estate market.

The biggest owners behind the new credit rating firm are Danske Bank A/S, Svenska Handelsbanken AB and DNB ASA, as well as OMX Treasury Euro, numerous pension funds and smaller banks.

“Of course it will take time for us to build a reputation and track record,” Liedgren said. “We are starting from scratch.”

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