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Jan 23, 2012, 02.49 PM IST | Source: Moneycontrol.com

Credit Ratings of Debt instruments

Rating organisations evaluate the credit worthiness of an issuer with respect to debt instruments or its general ability to pay back debt over the specified period of time. The rating is given as an alphanumeric code that represents a graded structure or creditworthiness. Credit Ratings of Debt instruments

Credit Ratings of Debt instruments
What is a credit rating?

Rating organisations evaluate the credit worthiness of an issuer with respect to debt instruments or its general ability to pay back debt over the specified period of time. The rating is given as an alphanumeric code that represents a graded structure or creditworthiness.

Credit Ratings of Debt instruments

Below are the details of credit ratings attached to Debt securities by various credit rating agencies.

CRISIL Credit Rating scale for Long-Term Instruments

 

 

Symbols Rating Definition
CRISIL AAA (Highest Safety)
Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
CRISIL AA (High Safety)
Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
CRISIL A (Adequate Safety)
Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk
CRISIL BBB (Moderate Safety)
Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
CRISIL BB (Moderate Risk)
Instruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations.
CRISIL B (High Risk)
Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations.
CRISIL C (Very High Risk)
Instruments with this rating are considered to have very high risk of default regarding timely servicing of financial obligations.
CRISIL D Default
Instruments with this rating are in default or are expected to be in default soon.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

1) CRISIL may apply '+' (plus) or '-' (minus) signs for ratings from 'CRISIL AA' to 'CRISIL C' to reflect comparative standing within the category.

2) CRISIL may assign rating outlooks for ratings from 'CRISIL AAA' to 'CRISIL B'. Ratings on Rating Watch will not carry outlooks. A rating outlook indicates the direction in which a rating may move over a medium-term horizon of one to two years. A rating outlook can be 'Positive', 'Stable', or 'Negative'. A 'Positive' or 'Negative' rating outlook is not necessarily a precursor of a rating change.

3) A suffix of 'r' indicates investments carrying non-credit risk.

The 'r' suffix indicates that payments on the rated instrument have significant risks other than credit risk. The terms of the instrument specify that the payments to investors will not be fixed, and could be linked to one or more external variables such as commodity prices, equity indices, or foreign exchange rates. This could result in variability in payments, including possible material loss of principal, because of adverse movement in value of the external variables. The risk of such adverse movement in price/value is not addressed by the rating.

4) CRISIL may assign a rating of 'NM' (Not Meaningful) to instruments that have factors present in them, which render the outstanding rating meaningless. These include reorganisation or liquidation of the issuer, the obligation being under dispute in a court of law or before a statutory authority.

5) A prefix of 'PP-MLD' indicates that the instrument is a principal-protected market-linked debenture. The terms of such instruments indicate that while the issuer promises to pay back the face value/principal of the instrument, the coupon rates of these instruments will not be fixed, and could be linked to one or more external variables such as commodity prices, equity share prices, indices, or foreign exchange rates.

 

CRISIL Credit Rating scale for Fixed Deposits

Symbols Rating Definition
FAAA ("F Triple A") (Highest Safety)
This rating indicates that the degree of safety regarding timely payment of interest and principal is very strong.
FAA ("F Double A") (High Safety)
This rating indicates that the degree of safety regarding timely payment of interest and principal is strong. However, the relative degree of safety is not as high as for fixed deposits with 'FAAA' ratings.
FA  (Adequate Safety)
This rating indicates that the degree of safety regarding timely payment of interest and principal is satisfactory. Changes in circumstances can affect such issues more than those in the higher rated categories.
FB (Inadequate Safety)
This rating indicates inadequate safety of timely payment of interest and principal. Such issues are less susceptible to default than fixed deposits rated below this category, but the uncertainties that the issuer faces could lead to inadequate capacity to make timely interest and principal payments.
FC (High Risk)
This rating indicates that the degree of safety regarding timely payment of interest and principal is doubtful. Such issues have factors present that make them vulnerable to default; adverse business or economic conditions would lead to lack of ability or willingness to pay interest or principal.
FD (Default)
This rating indicates that the fixed deposits are either in default or are expected to be in default upon maturity.
NM (Not Meaningful)
Instruments rated 'NM' have factors present in them, which render the outstanding rating meaningless. These include reorganisation or liquidation of the issuer, and the obligation being under dispute in a court of law or before a statutory authority.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

1) CRISIL may apply '+' (plus) or '-' (minus) signs for ratings from FAA to FC to indicate the relative position within the rating category.

2) CRISIL may assign rating outlooks for the ratings from 'FAAA' to 'FB'. Ratings on Rating Watch will not carry outlooks. A rating outlook indicates the direction in which a rating may move over a medium-term horizon of one to two years. A rating outlook can be 'Positive', 'Stable', or 'Negative'. A 'Positive' or 'Negative' rating outlook is not necessarily a precursor of a rating change.

3) The contents within parenthesis are a guide to the pronunciation of the rating symbols.

 

CARE Rating of Debt instruments – Long / Medium-term Instruments (NCD/FD/CD/SO/CPS/RPS/L)

 

Symbols Rating Definition
CARE AAA Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
CARE AA Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
CARE A Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.
CARE BBB Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
CARE BB Instruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations.
CARE B Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations.
CARE C Instruments with this rating are considered to have very high risk of default regarding timely servicing of financial obligations.
CARE D Instruments with this rating are in default or are expected to be in default soon.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

Modifiers {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categories CARE AA to CARE C. The modifiers reflect the comparative standing within the category.

 

ICRA’s Long-Term Rating Scale

Long-Term rating Scale: All Bonds, NCDs, and other debt instruments (excluding Public Deposits) with original maturity exceeding one year.

 

Symbols Rating Definition
LAAA / AAA The highest-credit-quality rating assigned by ICRA. The rated instrument carries the lowest credit risk
LAA / AA The high-credit-quality rating assigned by ICRA. The rated instrument carries low credit risk.
LA / A The adequate-credit-quality rating assigned by ICRA. The rated instrument carries average credit risk.
LBBB / BBB The moderate-credit-quality rating assigned by ICRA. The rated instrument carries higher than average credit risk.
LBB / BB The inadequate-credit-quality rating assigned by ICRA. The rated instrument carries high credit risk.
LB / B The risk-prone-credit-quality rating assigned by ICRA. . The rated instrument carries very high credit risk.
LC / C The poor-credit-quality rating assigned by ICRA. The rated instrument has limited prospects of recovery.
LD / D The lowest-credit-quality rating assigned by ICRA. The rated instrument has very low prospects of recovery.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ICRA’s Medium-Term Rating Scale (only for Public Deposits)

 

Symbols Rating Definition
MAAA The highest-credit-quality rating assigned by ICRA. The rated deposits programme carries the lowest credit risk.
MAA The high-credit-quality rating assigned by ICRA. The rated deposits programme carries low credit risk.
MA The adequate-credit-quality rating assigned by ICRA. The rated deposits programme carries average credit risk.
MB The inadequate-credit-quality rating assigned by ICRA. The rated deposits programme carries high credit risk.
MC The risk-prone-credit-quality rating assigned by ICRA. The rated deposits programme carries very high credit risk.
MD The lowest-credit-quality rating assigned by ICRA. The rated instrument has very low prospects of recovery.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

For the rating categories LAA through to LC and MAA through to MC, the sign of + (plus) or – (minus) may be appended to the rating symbols to indicate their relative position within the rating categories concerned.
Thus, the rating of LAA+ and MAA+ are one notch higher than LAA and MAA respectively, while LAA- and MAA- are one notch lower than LAA and MAA respectively.

 

Fitch Long Term Credit Ratings

 

Symbols Rating Definition
AAA(ind) AAA' national ratings denote the highest rating assigned in its national rating scale. This rating is assigned to the "best" credit risk relative to all other issuers or issues in the country.
AA(ind) 'AA' national ratings denote a very strong credit risk relative to other issuers or issues in the country. The credit risk inherent in these financial commitments differs only slightly from the country's highest rated issuers or issues.
A(ind) A' national ratings denote a strong credit risk relative to other issuers or issues in the country. However, changes in circumstances or economic conditions may affect the capacity for timely repayment of these financial commitments to a greater degree than for financial commitments denoted by a higher rated category.
BBB(ind) BBB' national ratings denote an adequate credit risk relative to other issuers or issues in the country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment of these financial commitments than for financial commitments denoted by a higher rated category.
BB(ind) BB' national ratings denote a fairly weak credit risk relative to other issuers or issues in the country. Within the context of the country, payment of these financial commitments is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.
B(ind) B' national ratings denote a significantly weak credit risk relative to other issuers or issues in the country. Financial commitments are currently being met but a limited margin of safety remains and capacity for continued timely payments is contingent upon a sustained, favorable business and economic environment.
C(ind) This category of national ratings denote an extremely weak credit risk relative to other issuers or issues in the country. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments.
D(ind) This category of national ratings are assigned to entities or financial commitments which are currently in default.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

Within a band of rating symbols from ‘AA(ind)’ to ‘B(ind)’, the signs "+" or "-" may be
appended to a rating to denote relative status within the rating category.

 

Brickwork Rating Symbols for Long term debt instruments

 

Symbols Rating Definition
BWR AAA (BWR Triple A)  Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.  
BWR AA
(BWR Double A)
Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
BWR A Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.
BWR BBB (BWR Triple B) Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
BWR BB (BWR Double B) Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations.
BWR B Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations.
BWR C Instruments with this rating are considered to have very high risk of default regarding timely servicing of financial obligations.
BWR D Instruments with this rating are in default or are expected to be in default soon.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

a. Modifier {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categories BWR AA to BWR C to reflect the comparative standing within the category.

b. BWR assigns rating “outlook” for ratings from 'AAA' to 'B'.  The Rating outlook indicates the direction a rating is likely to move over a period of time and may be classified as Positive, Stable or Negative.

c. NS (Not Significant) Rating
 
BWR may assign NS (Not Significant) Rating  when an existing rating  ceases to have any significant relevance for reasons which such as the  issuer undergoing any structural changes or   temporary protection from the regulators/ courts/ bankruptcy laws in BIFR,  etc,

Brickwork Rating Symbols for Fixed Deposit Ratings

Symbols Rating Definition
BWR FAAA (BWR F Triple A) Deposits with this rating are considered to offer the highest degree of safety, in terms of timely servicing of interest & principal
BWR FAA  (BWR F Double A) Deposits with this rating are considered to offer  high degree of safety, in terms of timely servicing of interest & principal
BWR FA  Deposits with this rating are considered to offer adequate degree of safety in terms of timely servicing of interest & principal
BWR FB Deposits with this rating are considered to offer low degree of safety, in terms of timely servicing of interest & principal
BWR FC  Deposits with this rating are considered to offer very low degree of safety, in terms of timely servicing of interest & principal
BWR FD  Deposits with this rating are in default or expected to default on maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

a. Modifier {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categories BWR FAA to BWR FC. The modifiers reflect the comparative standing within the category.

b. NS (Not Significant) Rating
BWR may assign NS (Not Significant) Rating  when an existing rating  ceases to have any significant relevance for reasons which such as the  issuer undergoing any structural changes or temporary protection from the regulators/ courts/bankruptcy laws in BIFR,  etc,

c. BWR assigns rating outlook for Ratings BWR 'FAAA' to 'FB'. The Rating outlook indicates the direction a rating is likely to move over period of time and may be classified as Positive, Stable or Negative.

d. BWR speculative grade ratings are lower than BWR FA.  As such, BWR FB, BWR FC or BWR FD ratings are considered to have speculative characteristics. BWR’s lowest rating category of BWR FD is normally event specific.

 

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