Case study
29 April 2009
Client Spotlight:
China Aviation Oil (Singapore)
Corporation Ltd
“With Moody’s Analytics
suite of PD models, we
are able to achieve
independent assessments
for most of our
counterparties and have
greater confidence in our
credit review process.”
Mr. Wang Chunyan
Chief Financial Officer
China Aviation Oil (Singapore)
Corporation Ltd
Moody’s Analytics spotlighted
products include:
» » RiskCalc – Private firm
Probability of Defaults (PDs)
» » CreditEdge – Public firm PDs
» » EDF Anywhere - Enables
use of multiple country
PD models for private and
public companies
Background
China Aviation Oil (Singapore) Corporation Ltd (CAO) is both the largest purchaser of jet fuel in the Asia
Pacific region and the largest supplier of imported jet fuel to the Chinese civil aviation industry. As such,
CAO has counterparty risk across its supplier and customer base, including Chinese airport operators
and manufacturers. Managing this credit risk is vital to CAO’s business success, as it is for most firms
operating in the energy sector.
The Challenges Facing CAO
As a publicly listed company on the Singapore Exchange (SGX-ST), CAO needs to demonstrate to
regulators and shareholders that it has a robust risk management infrastructure in place. While CAO
already has its own systems and models driven by quantitative and qualitative variables, the company
wanted to enhance its existing framework and introduce an independent risk solution for benchmarking
purposes. Given the complex global nature of CAO’s business dealings and the stakes of each deal, there
is no margin for error.
Evaluating credit risk in a single foreign country is challenging. But as with many global companies, CAO
needed a way to measure customer risk in China, Taiwan, Japan, Korea, Switzerland, the UK, Australia,
the Netherlands, the United States and Singapore. CAO also needed to measure counterparty risk for
both private and public firms in these markets. On the private firm side, default data was scarce and a
database would have taken years to develop. CAO also wanted a way to analyze how each counterparty
stacks up against its peer group - in each country - in terms of credit risk.
The Moody’s Analytics Solution
After considering different options to augment its risk infrastructure, CAO decided on Moody’s Analytics
EDFTM Anywhere, a solution that provides access to a suite of RiskCalcTM country models for private firm
probability of default (PD) analysis, and CreditEdgeTM for public firm PD analysis. The term EDF stands
for Expected Default Frequency and is Moody’s Analytics trademarked measure for PD.
Specifically, CAO now uses the RiskCalc China model for private firm exposures in China, the Emerging
Markets model for exposures in other emerging countries and RiskCalc models for private firm
exposures in Japan, Korea, Singapore, Switzerland, the United Kingdom, Australia, the Netherlands
and the United States. Each RiskCalc model is based on a robust database of local defaults, built in
partnership with major lending institutions in each country. CreditEdge is used in the same countries
for publicly held companies - or for any counterparty that trades on a public exchange.
Mr. Wang Chunyan, CAO’s Chief Financial Officer, says, “Because our business is dynamic in nature,
there is a tremendous need for a highly effective, efficient risk solution and framework. With Moody’s
Analytics suite of PD models, we are able to achieve independent assessments for most of our
counterparties and have greater confidence in our credit review process.”
Case study
29 April 2009
The RiskCalc Network is Comprised of 28 World Class Industry and Country Models
» Americas: USA*, Canada and Mexico country models, plus U.S. Insurance, U.S. Banks and North America Large Firm
» Europe, Middle East and Africa: Austria, France, Netherlands*, Nordic (Denmark, Norway, Sweden, Finland), Portugal, Spain,
UK*, Germany, Belgium, Italy, South Africa, Switzerland*, Russia
»Asia Pacific: Japan*, Korea*, Australia*, Singapore*, China*
»Other: Emerging Markets*
* Models used by China Aviation Oil (Singapore) Corporation Ltd
EDF Anywhere allows CAO to:
» Improve PD measurement accuracy by benchmarking results from their own internal risk analysis against analysis from one of the world’s
foremost credit risk firms
»Accurately measure default risk for private companies in different developed and emerging markets immediately, without having to build a
proprietary default database
» Analyze credit risk for publicly-traded counterparties on any exchange in the world and look at how each firm compares to a group of peers
»Detect credit deterioration early so that analysts can focus on the riskiest exposures
»Choose suppliers with high credit quality and extend the appropriate terms to customers based on credit quality
»Streamline and standardize the way data is collected from financial statements and improve consistency of analysis
The future for CAO and Moody’s Analytics
CAO is a rapidly growing company with aggressive growth plans around acquiring, developing and controlling physical infrastructure and
assets across the supply chain, such as refineries, tank farms and pipelines. They will continue to build RiskCalc and CreditEdge into its risk
framework and use the models to assess infrastructure options and improve CAO’s credit review process.
Corporate Profile: About CAO
Jet fuel supply and trading is CAO’s core business. CAO is the largest purchaser of jet fuel in the Asia Pacific region and the key importer of
jet fuel into the People’s Republic of China, accounting for more than 90% of PRC’s jet fuel import requirements. CAO delivers exceptional
value to its customers through timely deliveries, consistently high quality jet fuel and value-added services. CAO’s jet fuel supply and trading
business model enables the company to have effective operational control and provides flexibility for customers and suppliers. CAO has an
experienced trading team, which actively trades in Asia’s petrochemicals and fuel oil markets.
About Moody’s Analytics
Moody’s Analytics helps capital markets and credit risk management professionals worldwide respond
to an evolving marketplace with confidence. The company offers unique tools and best practices for
measuring and managing risk through expertise and experience in credit analysis, economic research and
financial risk management. By providing leading-edge software, advisory services, and research, including
the proprietary analysis of Moody’s Investors Service, Moody’s Analytics integrates and customizes its
offerings to address specific business challenges.
For further information about Moody’s Analytics please visit us at www.moodysanalytics.com or call:
AMERICAS
+1.212.553.1653
EMEA
+44.20.7772.5454
ASIA-PACIFIC
+85.2.3551.3077
JAPAN
+81.3.5408.4100
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