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LOAN GRADES, SCORE AND METRICS EXPLANATION

Loan Grades

Loan grades are set based on both the borrower’s credit profile and the nature of the contract. 'A' grade loans represent the lowest risk while 'E' grade loans are the riskiest.

Grade
A+ A B C D E

Overall Score (for Borrower only)

  • 1 → Extreme – Imminent default/Failure
  • 2 → Very High – Under severe duress
  • 3 → High – likely chance of default
  • 4 → Vulnerable – Weak credit profile
  • 5 → Above Average – Borderline/Marginal
  • 6 → Average – Adequate performance
  • 7 → Below Average – Moderate Risk
  • 8 → Low – Little risk of default
  • 9 → Very Low – Very low risk counter party
  • 10 → Negligible – Risk of default is negligible

Individual Metrics

We use a total of 5 individual metrics that we use to provide additional insight into a borrower’s credit profile.

A) Financial Scale

Assessment of company’s size by turnover, based on last available historical financial statements.

  • Under USD 5m
  • USD 5m to USD 20m
  • USD 20m to USD 50m
  • USD 50m to USD 100m
  • USD 100m+
B) Liquidity

Assessment of the company’s liquidity position, based on last available historical financial statements.

  • Very low - high risk of default
  • Low - clearly vulnerable to any delays in cash inflows
  • Average - can handle ongoing liabilities but could be vulnerable to any unexpected cashflow shocks
  • Above average - adequate to handle normal business requirements with some cushion for cashflow delays
  • High - comfortable position to handle current liabilities and any sudden cashflow shocks
C) Leverage

Assessment of the company’s leverage position using Net Debt / Equity ratio, based on last available financial statements.

  • Very high (>6.0)
  • High (>3.0)
  • Average (1.0-3.0)
  • Low (< 1.0)
  • Very low (< 0.50)
D) Operational Performance

Assessment of the company’s operational performance (in prevailing market conditions) and commercial morality based on market feedback

  • Severely late, default
  • Late, beyond sector norms
  • Delays but within sector norms
  • Usually to terms/good
  • Always to terms or early
E) Management Expertise

Assessment of the management’s depth of experience and track record.

  • Poor track record or no experience
  • Relatively new or below average team, with clear deficiencies in some areas
  • Satisfactory, but with some additional resources needed over time
  • Good, with a mix of veterans and newcomers
  • Strong, with a reputable track record for more than a decade

Please note: Assessment metrics, loan grades and performance guidelines are provided for informational purposes only and they do not constitute investment advice. Such indicators rely heavily on historical financial statements made available to MARLO, and market feedback on the subject company. They should be used as a tool in assessing the subject and are not intended to be definitive judgments of the standing or worth of a company. The information provided should not be used as the sole basis or substitution for due diligence procedures in deciding whether or not engage with the subject company. MARLO cannot guarantee the accuracy of its assessment and undertakes no liability for any investment decisions made on the basis of such assessment.