We began the series by explaining what a rating is as well as the methodologies used to derive a rating. This article will be one of two parts explaining the terms used in ratings language. While each credit rating agency (CRA) has definitions that may pertain specifically to its rating scale, there are many definitions that are universal and can be applied to the spectrum of ratings assigned by a CRA. This piece focuses on definitions used by Caribbean Information and Credit Rating Services Limited (CariCRIS).
Issuer versus Issue Ratings
At CariCRIS, we provide both issuer (or corporate) credit ratings as well as issue ratings:
- Issuer or Corporate Credit Ratings: This rating is an opinion on a company’s ability and willingness to meet all its debt obligations fully and on time. It involves an overall assessment of the corporate entity’s financial health.
- Issue Ratings: These are assigned to particular fixed-income instruments and assesses the relative ability and willingness to meet payments due on this instrument in full and on time. Essentially, it measures the probability of default on debt issued by an entity.
Regional Scale versus National Scale Ratings
CariCRIS assigns both regional and national scale ratings:
- Regional Scale Ratings: These ratings, prefixed with ‘Cari’, provide an opinion on the creditworthiness of an entity relative to other entities in a defined region.
- National Scale Ratings: These ratings provide an opinion on the creditworthiness of an entity relative to other entities within a specific nation, using rating symbols or a prefix applicable to its respective national scale (e.g., ‘bb‘ for Barbados, ‘jm‘ for Jamaica, and ‘tt‘ for Trinidad and Tobago).
CariCRIS’ Rating Scale
CariCRIS ratings range from CariAAA to CariD on the Regional Scale, and from ***AAA to D on the National Scale. (*** indicates a prefix for a country, for eg bb (Barbados), jm (Jamaica), or tt (Trinidad and Tobago)). Each of the ratings from CariAAA to CariD is accompanied by a descriptor which serves as an immediate translation to a clear and succinct opinion of the corporate or instrument assessed.
The following is a definition of each CariCRIS rating:
- CariAAA: The highest level of creditworthiness relative to others in the Caribbean.
- CariAA: High level of creditworthiness relative to others in the Caribbean.
- CariA: Good level of creditworthiness relative to others in the Caribbean.
- CariBBB: Adequate level of creditworthiness relative to others in the Caribbean.
- CariBB: Below average level of creditworthiness relative to others in the Caribbean.
- CariB: Weak level of creditworthiness relative to others in the Caribbean.
- CariC: Poor level of creditworthiness relative to others in the Caribbean.
- CariD: The obligor is in default.
These definitions also apply to national scale ratings with the difference being that the creditworthiness of the issue/issuer is adjudged in relation to others in a particular jurisdiction.
CariCRIS considers BBB and above as investment grade.
Stay tuned for Part 2 of this article!
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