From local governments to the largest global corporations, our credit ratings, built upon rigorous, transparent methodologies, serve as a global language of credit.

Michael West, President of Moody's Investors Service

THE BIG PICTURE
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What is a credit rating?
Since John Moody devised the first bond ratings more than a century ago, Moody’s rating systems have evolved in response to the increasing depth and breadth of the global capital markets. Much of the innovation in Moody’s rating system is a response to market needs for clarity around the components of credit risk or to demands for finer distinctions in rating classifications.
Understanding credit ratings
As capital markets become increasingly global and interconnected, investors are faced with an extensive and often bewildering choice of investment opportunities. Learn how Moody's ratings and analysis speak to the relative credit risk of debt instruments and securities across industries and asset classes around the globe.
The rating scale
Ratings assigned on Moody’s global long-term and short-term rating scales are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. The following is a ranking (from highest to lowest) of Moody's long-term and short-term categories.
GLOBAL LONG-TERM RATING SCALE
Moody’s long-term ratings are opinions of the relative credit risk of financial obligations with an original maturity of one year or more. They address the possibility that a financial obligation will not be honored as promised. Such ratings use Moody’s Global Scale and reflect both the likelihood of default and any financial loss suffered in the event of default.

Aaa

Obligations rated Aaa are judged to be of the highest quality, with minimal risk

Aa

Obligations rated Aa are judged to be of high quality and are subject to very low credit risk

A

Obligations rated A are considered upper medium-grade and are subject to low credit risk

Baa

Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess speculative characteristics.

Ba

Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk

B

Obligations rated B are considered speculative and are subject to high credit risk

Caa

Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk

Ca

Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery in principal and interest

C

Obligations rated C are the lowest-rated class of bonds and are typically in default, with little prospect for recovery of principal and interest
Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. Themodifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates amid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
global SHORT-term rating scale
Moody's short-term ratings, unlike our long-term ratings, apply to an individual issuer's capacity to repay all short-term obligations rather than to specific short-term borrowing programs.

P-1

Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations

P-2

Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations

P-3

Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations

NP

Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories
Note: Canadian issuers rated P-1 or P-2 have their short-term ratings enhanced by the senior-most long-term rating of the issuer, its guarantor or support-provider.
The rating process
Step 1
The rating process starts
The rating mandate is signed.
The Moody's analytical team is assigned.                                                
Step 2
The issuer shares company information with Moody's
The issuer prepares their company information and presentation for the first meeting with the Moody's analytical team.

Typical materials include:
  • Audited accounts for last 3 years
  • List of main subsidaries and affiliates with contribution to assets, revenue, EBITDA, cash and debt
  • Current and future capital structure with debt maturity schedule
  • Loan documentation and covenants
  • Breakdown of earnings by relevant segments
  • Details on parent support, if any
  • Update on applicable regulation
  • Details on governance
  • Environmental and social indicators, if relevant
  • Business plan and strategic priorities asset class / geographic focus, project developments, major asset sales
  • Management projections for 3-4 years, preferably by segment / region
  • Financial policy: policies on leverage, fixed charge coverage, secured leverage, hedging of interest rate risk
The issuers management team meets with the Moody's analytical team to present the company information and discuss the materials.
Step 3
Moody's Analytical team commences analysis
Typical Timeframe: 2-4 weeks
After the management meeting and subsequent follow-up calls, Moody's analysts prepare materials for consideration by a Moody's rating committee.

This phase may be accelerated in situations with tighter financing schedules, or for structured finance deals.
Step 4
Moody's rating committee meets
Typical Timeframe: 1-3 weeks
The rating committee is a key part of Moody's analytical process, and helps to ensure the integrity and consistency of ratings. It reviews, votes and assigns the rating.

After the rating committee, a post-committee call is held with the issuer to notify and explain the rating prior to its publication.
Step 5
Public ratings are published
Typical Timeframe: 24 hours
The issuer reviews the draft press release. The rating is then delivered through a press release available on moodys.com and newswires (for private or unpublished ratings, nothing is shared publicly).

Press releases typically include the following elements:
  • The name of the rated issuer or instrument
  • A brief summary of the rating action or announcement
  • The rationale for the rating activity
  • Links to further information
  • Contact details for analytical staff
  • Regulatory disclosures