AAA Rated: Unscrambling the Bond Market


BRASS Program, ALA Annual Conference, July 8, 1996

Presentation Outline

Steven Lubetkin

Definition of A Rating
A Current Assessment of the Creditworthiness of an Obligor with Respect to a Specific Obligation

  • Likelihood of Default -
    Capacity & Willingness of the Obligor as to the Timely Payment of Interest & Repayment of Principal in Accordance with the Terms of the Obligation
  • Nature & Provisions of the Obligation
  • Protection Afforded in Bankruptcy

How Did Ratings Start?

  • Henry Varnum Poor - "Investor's Right to Know"
  • John Moody
  • Poor's Publishing
  • Standard Statistical Bureau (1941)
  • Newer Entrants

Newer entrants: Fitch, Duff & Phelps, IBCA, Canadian companies
Emerging markets - CRISIL, TRIS, CAVAL

What's an NRSRO?

  • Nationally Recognized Statistical Rating Organization
  • Six in the United States
    • Standard & Poor's
    • Moody's
    • Duff & Phelps
    • IBCA
    • Fitch
    • Thomson BankWatch (Banks Only)

What Do Rating Agencies Do?

  • Analyze Creditworthiness
  • Give Opinions

The Rating Process

  • Rating Request
  • Issuer Meeting
  • Rating Committee Meeting
  • Notification --> May Appeal (process begins again at Issuer Meeting above)
  • Dissemination
  • Surveillance

Rating Definitions
Capacity to Pay Interest & Principal is:

BBB Adequate
BBB- Speculative-Grade
BB+, BB Least Speculative
BB-, B+, B Speculative
B-, CCC, CC Highly Speculative
C, D Non-Paying Income Bonds In Default

Standard & Poor's Rating Symbols

Investment Grades

Speculative Grades


Ratings from "AA " to "CCC"May be Modified by Plus (+) or Minus (-) Signs

New Rating Services

  • Counterparty Ratings
  • Corporate Credit Assessments
  • Private Placement Ratings
  • Project Finance
  • 'r' Subscript
  • Managed Fund Risk Ratings
  • Bank Loan Ratings
  • Derivative Product Companies
  • Municipal Disclosure
  • Claims-Paying Ability Ratings

bullet AAA Rated: Unscrambling the Bond Market
BRASS Program, ALA Annual Conference, July 8, 1996

Disclaimer: This publication has been placed on the web for the convenience of BRASS members. Information and links will not be updated. Posted 8 April 1997.