Credit ratings are a clear reflection of the creditworthiness of corporate or government obligations, such as bonds. Credit ratings are published by credit rating agencies and are used by professional investors to assess the likelihood of meeting obligations, namely the repayment of debt. The main sources of credit ratings are three companies: Fitch Ratings, Moody's and Standard & Poor's. Let's look at the classification of credit ratings in Tables 1 and 2.

Table 1 shows the classification and deciphering of investment grade credit ratings.

Characteristics of the debt and the issuer	Rating
	S&P	Moody's	Fitch Ratings
Highest quality	AAA	Aaa	AAA
High quality	AA+	Aa1	AA+
	AA-	Aa2	AA
	AA-	Aa3	AA-
Strong payment capacity	A+	A1	A+
	A	A2	A
	A-	A3	A-
Adequate payment capacity	BBB+	Baa1	BBB+
	BBB	Baa2	BBB+
	BBB-	Baa3	BBB-

Table 1 - Investment grade credit ratings

So, a bond has an investment grade credit rating if its credit rating is BBB- (Fitch and S&P) or higher, or Baa3 or higher (Moody's). As a rule, bonds that the rating agency considers sufficiently reliable to meet its obligations have such a rating.

Table 2 shows the credit ratings and their characteristics below investment grade.

Characteristics of the debt and the issuer	Rating
	S&P	Moody's	Fitch Ratings
Likely to fulfil obligations, ongoing uncertainty	BB+	Ba1	BB+
	BB	Ba2	BB
	BB-	Bb3	BB-
High credit risk	B+	B1	B+
	B	B2	B
	B-	B3	B-
Very high credit risk	CCC+	Caa1	CCC+
	CCC	Caa2	CCC
	CCC-	Caa3	CCC-
Near defualt with possibility of recovery	CC	Ca	CC
			C
Default	SD	C	DDD
	D		DD
			D

Table 2 - Credit ratings below investment (non-investment) grade and their characteristics

Defaulthe main factors influencing the credit rating are risks, such as country risk, sector risk, and competitive position, in addition, the decision to assign a credit rating is influenced by cash flows, financial leverage, capital structure, financial policy, liquidity, management competence level, diversification, credit rating benchmarking, as well as the influence of stackholders, etc.

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A downgrade of a company's investment rating may occur against the backdrop of a decline in its financial position, but this, perhaps at first glance, negative event does not mean that the company has no prospects for the future, and it often happens that a credit rating downgrade is temporary, short-term.

By Andrew Mitchell