Long-Term Issuer Credit Ratings’ Category Definitions

AAA

An obligor rated ‘AAA’ has extremely strong capacity to meet its financial commitments. ‘AAA’ is the highest issuer credit rating assigned by the rating agency.

AA

An obligor rated ‘AA’ has very strong capacity to meet its financial commitments. It differs from the highest-rated obligors only to a small degree.

A

An obligor rated ‘A’ has strong capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.

BBB

An obligor rated ‘BBB’ has adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments.

BB

An obligor rated ‘BB’ is less vulnerable in the near term than other lower-rated obligors. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitments.

B

An obligor rated ‘B’ is more vulnerable than the obligors rated ‘BB’, but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments.

CCC

An obligor rated ‘CCC’ is currently vulnerable, and is dependent upon favorable business, financial, and economic conditions to meet its financial commitments.

CC

An obligor rated ‘CC’ is currently highly vulnerable. The ‘CC’ rating is used when a default has not yet occurred, but the rating agency expects default to be a virtual certainty, regardless of the anticipated time to default.

R

An obligor rated ‘R’ is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision the regulators may have the power to favor one class of obligations over others or pay some obligations and not others.

SD and D

An obligor rated ‘SD’ (selective default) or ‘D’ is in default on one or more of its financial obligations including rated and unrated financial obligations but excluding hybrid instruments classified as regulatory capital or in non-payment according to terms. An obligor is considered in default unless the rating agency believes that such payments will be made within five business days of the due date in the absence of a stated grace period,or within the earlier of the stated grace period or 30 calendar days. A ‘D’ rating is assigned when the rating agency believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. An ‘SD’ rating is assigned when the rating agency believes that the obligor has selectively defaulted on a specific issue or class of obligations but it will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. An obligor’s rating is lowered to ‘D’ or ‘SD’ if it is conducting a distressed exchange offer. NR An issuer designated ‘NR’ is not rated.

Why are there no legally binding definitions of rating symbols here? Depending on the subject of the rating and the scope of application, different legal framework conditions apply, which also differ in states of different legal systems. Rating scales are the subject of a development that has lasted for more than a century. Rating agencies continue to develop their scales due to new insights, improved analytical techniques and growing or changing market requirements. Therefore, in each individual case, the evidence of a rating is to be examined as to which statement should be made with a rating. Depending on the time, subject and other conditions, rating symbols are to be interpreted differently. Therefore, we recommend detailed advice. Why are rating agencies not mentioned here by name? It is the responsibility of each rating agency to provide its definitions of rating symbols and, if necessary, to update them. It happens that different rating agencies use the same rating symbols, sometimes with comparable but sometimes with different meanings. The definitions offered by rating agencies need to be questioned because in rare cases the wording of the definitions is ambiguous and promises, for example, a certainty of judgment that we at RATING EVIDENCE can not confirm empirically.