Finance Glossary
Rating
What is a rating?
A rating is a financial assessment that measures the creditworthiness of a borrower (Company or State). It is expressed through grades that measure the risk of default of an issuer. These grades are assigned by rating agencies such as Moody's, Standard & Poor’s, or Fitch Ratings.
The quality of the obtained rating determines the interest rate level at which an issuer will borrow: a good rating allows for low rates, while a poor rating results in a high rate due to the significant risk presented by the issuer.
Standard & Poor’s rating scale for long-term bonds:
High quality: from AAA to AA-
Medium quality: from A+ to BBB-
Speculative: from BB+ to B-
High risk: from CCC+ to C
Default: D
This rating scale ranges from the lowest rating D, which corresponds to a situation of payment default (or bankruptcy), to AAA, which corresponds to the best possible creditworthiness. Categories below BBB- (excluded) are considered speculative (High Yield) by the market and indicate a high risk of issuer insolvency, whereas issuers rated from AAA to BBB- are classified as "Investment grade" and correspond to a low risk level.