Credit Rating Scales

MIRA credit ratings provide an opinion on the relative ability of an entity to meet financial obligations. Credit ratings are used by investors as indications of the likelihood of receiving the money owed to them in accordance with the terms on which they invested. The agency’s credit ratings cover the domestic spectrum of corporate, financial institutions and public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets.

Details

The terms “investment grade” and “speculative grade” have established themselves over time as shorthand to describe the categories ‘ AAA’ to ‘BBB’ (investment grade) and ‘BB’ to ‘D’ (speculative grade). The terms “investment grade” and “speculative grade” are market conventions, and do not imply any recommendation or endorsement of a specific security/ instrument for investment purposes. “Investment grade” categories indicate relatively low to moderate credit risk, while ratings in the “speculative” categories either signal a higher level of credit risk or that a default has already occurred.

Credit ratings express risk in relative rank order, which is to say they are ordinal measures of credit risk and are not predictive of a specific frequency of default or loss.

MIRA credit ratings do not directly address any risk other than credit risk. In particular, ratings do not deal with the risk of a market value loss on a rated security/instrument due to changes in interest rates, liquidity and other market considerations. However, in terms of payment obligation on the rated liability, market risk may be considered to the extent that it influences the ability of an issuer to pay upon a commitment. Ratings nonetheless do not reflect market risk to the extent that they influence the size or other conditionality of the obligation to pay upon a commitment (for example, in the case of index-linked bonds).

In the default components of ratings assigned to individual obligations or instruments, the agency typically rates to the likelihood of non-payment or default. In limited cases, MIRA may include additional considerations (i.e. rate to a higher or lower standard than that implied in the obligation’s documentation). In such cases, the agency will make clear the assumptions underlying the agency’s opinion in the accompanying rating commentary.

Rating	Grade	Definition
AAA	Investment grade	Obligations rated AAA are judged to be of the highest quality, subject to the lowest level of credit risk.
АА+		Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
AA
AA-
A+		Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.
A
A-
BBB+		Obligations rated BBB are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.
BBB
BBB-
BB+	Speculative grade	Obligations rated BB are judged to be speculative and are subject to substantial credit risk.
BB
BB-
B+		Obligations rated B are considered speculative and are subject to high credit risk.
B
B-
CCC+		Obligations rated CCC are judged to be speculative of poor standing and are subject to very high credit risk.
CCC
CCC-
CC+		Obligations rated CC are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
CC
CC-
C+		Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.
C
C-
D	Default

National Scale Ratings

National scale ratings are intended primarily for use by domestic investors and are not comparable to globally applicable ratings; rather they address relative credit risk within a given country. An AAA rating on MIRA’s National Scale indicates an issuer or issue with the strongest creditworthiness and the lowest likelihood of credit loss relative to other domestic issuers. National Scale Ratings, therefore, rank domestic issuers relative to each other and not relative to absolute default risks. National ratings isolate systemic risks; they do not address loss expectation associated with systemic events that could affect all issuers, even those that receive the highest ratings on the National Scale.