Standard & Poor

Standard & Poor's

The Standard & Poor's rating scale is as follows, from excellent to poor: AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, BB+, BB, BB-, B+, B, B-, CCC+, CCC, CCC-, CC, C, D. Anything lower than a BBB- rating is considered a speculative or junk bond.

Investment Grade

	AAA : the best quality borrowers, reliable and stable (many of them governments)
	AA : quality borrowers, a bit higher risk than AAA
	A : economic situation can affect finance
	BBB : medium class borrowers, which are satisfactory at the moment

Non-Investment Grade (also known as junk bonds)

	BB : more prone to changes in the economy
	B : financial situation varies noticeably
	CCC : currently vulnerable and dependent on favorable economic conditions to meet its commitments
	CC : highly vulnerable, very speculative bonds
	C : highly vulnerable, perhaps in bankruptcy or in arrears but still continuing to pay out on obligations
	CI : past due on interest
	R : under regulatory supervision due to its financial situation
	SD : has selectively defaulted on some obligations
	D : has defaulted on obligations and S&P believes that it will generally default on most or all obligations
	NR : not rated

[edit] Short-term issue credit ratings

S&P rates specific issues on a scale from A-1 to D. Within the A-1 category it can be designated with a plus sign (+). This indicates that the issuer's commitment to meet its obligation is very strong. Country risk and currency of repayment of the obligor to meet the issue obligation are factored into the credit analysis and reflected in the issue rating.

	A-1 : obligor's capacity to meet its financial commitment on the obligation is strong
	A-2 : is susceptible to adverse economic conditions however the obligor's capacity to meet its financial commitment on the obligation is satisfactory
	A-3 : adverse economic conditions are likely to weaken the obligor's capacity to meet its financial commitment on the obligation
	B : has significant speculative characteristics. The obligor currently has the capacity to meet its financial obligation but faces major ongoing uncertainties that could impact its financial commitment on the obligation
	C : currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation

D : is in payment default. Obligation not made on due date and grace period may not have expired. The rating is also used upon the filing of a bankruptcy petition.

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Moody's ratings

The Moody's rating system is similar in concept but the naming is a little different. It is as follows, from excellent to poor: Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3, Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, C.

Long-term obligation ratings

Investment grade

Aaa

Moody judges obligations rated Aaa to be the highest quality, with the "smallest degree of risk".

Aa1, Aa2, Aa3

Moody judges obligations rated Aa to be high quality, with "very low credit risk", but "their susceptibility to long-term risks appears somewhat greater".

A1, A2, A3

Moody judges obligations rated A as "upper-medium grade", subject to "low credit risk", but that have elements "present that suggest a susceptibility to impairment over the long term".

Baa1, Baa2, Baa3

Moody judges obligations rated Baa to be "moderate credit risk". They are considered medium-grade and as such "protective elements may be lacking or may be characteristically unreliable".

Speculative grade (Also known as High Yield or 'Junk')

Ba1, Ba2, Ba3

Moody judges obligations rated Ba to have "questionable credit quality."

B1, B2, B3

Moody judges obligations rated B as speculative and "subject to high credit risk", and have "generally poor credit quality."

Caa1, Caa2, Caa3

Moody judges obligations rated Caa as of "poor standing and are subject to very high credit risk", and have "extremely poor credit quality. Such banks may be in default..."

Moody judges obligations rated Ca as "highly speculative" and are "usually in default on their deposit obligations".

Moody judges obligations rated C as "the lowest rated class of bonds and are typically in default," and "potential recovery values are low".

Special

WR Withdrawn Rating

NR Not Rated

P Provisional

Short-term taxable ratings

P-1 Moody judges Prime-1 rated issuers as having "a superior ability to repay short-term debt obligations".

P-2 Moody judges Prime-2 issuers as having "a strong ability to repay short-term debt obligations".

P-3 Moody judges Prime-3 rated issuers as having "an acceptable ability to repay short-term obligations".

NP Moody considers "Not Prime" rated issuers as not falling "within any of the Prime rating categories".

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A.M. Best

A.M. Best rates from excellent to poor in the following manner: A++, A+, A, A-, B++, B+, B, B-, C++, C+, C, C-, D, E, F, and S.

The ratings scale includes six "Secure" ratings:

	A++, A+ (Superior)
	A, A- (Excellent)
	B++, B+ (Good)

The scale also includes ten ratings for companies deemed "Vulnerable":

	B, B- (Fair)
	C++, C+ (Marginal)
	C, C- (Weak)
	D (Poor)
	E (Under Regulatory Supervision)
	F (In Liquidation)
	S (Rating Suspended)

A.M. Best also assigns five Not Rated Categories (NR) to insurers that the company may, nonetheless, follow and report on in other respects:

	NR-1: Insufficient Data
	NR-2: Insufficient Size and/or Operating Experience
	NR-3: Rating Procedure Inapplicable
	NR-4: Company Request
	NR-5: Not Formally Followed