Definitions of Long-Term Security Ratings
Aaa/ AAA - Aaa-rated bonds are considered to be the best quality. They incur the least degree of investment risk and are normally called gilt-edged. Their interest payments are protected by a large margin or by an exceptionally stable margin and their principal is secure. While there may be changes in the various protective elements, it is very unlikely that any changes as can be visualized will impair the fundamentally strong position of such securities.
Aa/ AA - Aa-rated bonds are considered to be of high quality by any standard. Together with the Aaa group, they comprise what is generally known as high-grade securities. Their rating is lower than the best securities because their margins of protection may not be as large as those of the Aaa securities, or the fluctuation of the protective elements may be wider, or other elements may also be present indicating that the long-term risk may be greater than the Aaa securities.
A - A-rated securities have many favorable investment attributes and are considered as upper-medium-grade obligations. Security factors for principal and interest are considered adequate, but there may be certain elements present that suggest susceptibility to a negative impact some time in the future.
Baa/ BBB - Baa-rated securities are considered medium-grade obligations (that is, neither highly protected nor poorly secured). Interest payments and principal security seem to be adequate at present but certain protective elements may not be enough or may be characteristically unreliable over a longer period. These securities do not have outstanding investment characteristics and, in fact, also have some speculative characteristics.
Ba/ BB - Ba-rated securities have speculative elements; their future cannot be considered very secure. Often the protection of interest and principal payments can be moderate and are, therefore, not well safeguarded in the good and bad times in the future. Uncertainty of position characterizes securities in this category.
B - B-rated securities are generally undesirable for investment. It is not very likely that interest or principal will be paid, or other terms of the contract will be kept over longer periods.
Caa/ CCC - Caa-rated securities are in a weak position. Such securities may be in default or there may be elements of danger relating to interest or principal.
Ca/ CC - Ca-rated securities represent highly speculative bonds. Generally such bonds are in default or demonstrate other marked shortcomings.
C -C-rated securities are the lowest rated class of bonds, and can only be regarded as having extremely poor prospects of ever reaching real investment standing.
Note: Numerical modifiers 1, 2, and 3, or signs of each generic classification category, from Aa to Caa. The modifier indicates the obligation is at the highest, medium, or lowest range of the category, that they apply to the banks’ senior obligations, to the senior policies, and to the insurer obligation claims, with original due dates of more than one year. The obligations that depend on support mechanisms, such as letters of credit or bonds of indemnity, are excluded unless explicitly classified.
|
 |
RSS Central
