Credit Ratings and Quality

Credit rating and credit quality are related but not identical. A credit rating is a formal agency opinion about relative credit risk. Credit quality is the broader assessment and can apply to rated or unrated borrowers and obligations.

An issue credit rating applies to a specific bond, note, loan, or other obligation. It can differ from an issuer rating because collateral, guarantees, priority, structural subordination, and instrument terms affect credit risk. A recovery rating focuses more narrowly on relative recovery characteristics after distress or default.

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• business durability, cyclicality, concentration, governance, and financial policy;
• leverage, interest and fixed-charge coverage, cash conversion, and capital spending;
• unrestricted liquidity, committed facilities, maturities, and refinancing access;
• legal issuers, guarantors, asset location, collateral, and claim priority;
• rating agency, scale, methodology, date, outlook, watch, and rationale; and
• downside enterprise value, recovery waterfall, legal process, and timing.

Ratings address credit risk under agency definitions. They do not guarantee repayment or fully measure price, liquidity, duration, currency, call, tax, or suitability risk. This section is educational and is not credit-rating, legal, tax, lending, or investment advice.

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