Find Corporate Bond Ratings  

      Public and private companies or corporates issue debt obligations to investors, which are known as corporate bonds. Most companies issue corporate bonds to raise the necessary capital or money to expand their businesses, buy new equipment or build better manufacturing units.

      Corporate bonds are like loans which companies take with a promise to return the money on a particular date -- the date of maturity of the bond. Until the date of maturity, the investor receives interest for the principal amount. Interest received from a corporate bond is usually taxable and it has to be declared when you are filing your tax returns.

       Corporate bonds are different from stocks, wherein the bond holder does not have ownership interest in the company that issued the bond.

       There are three major rating companies that rate whether companies issuing bonds can meet their obligations. These ratings give us an idea about the credit worthiness of companies and you can determine how risky investing in these companies will be for you as a bond holder. The top three corporate bond rating agencies are Moody’s, Standard and Poor’s and Fitch IBCA.

      These three rating companies give grades to bonds, including corporate bonds, and the grades help us to get an indication of the companies’ credit quality. Corporate bond ratings allow us to determine the bond issuing companies financial strength and its ability to repay the principal amount and the interest in a timely manner.

      Corporate bond ratings are conveyed through letters which range from AAA to C, where AAA is the highest rating and C the lowest. All rating agencies use the same letters to grade companies but can use a combination of upper case and lower case letters to make themselves stand apart from other rating agencies.

Listed below are bond ratings used by the top three rating agencies:

Moody's

S&P

Fitch

 

Definitions

Aaa

AAA

AAA

 

Prime. Maximum Safety


Aa1

AA+

AA+

 

High Grade High Quality

Aa2

AA

AA

 

 

Aa3

AA-

AA-

 

 


A1

A+

A+

 

Upper Medium Grade

A2

A

A

 

 

 

A3

A-

A-

 

 

 


Baa1

BBB+

BBB+

 

Lower Medium Grade

Baa2

BBB

BBB

 

 

 

Baa3

BBB-

BBB-

 

 

 


Ba1

BB+

BB+

 

Non Investment Grade


Ba2

BB

BB

 

Speculative

Ba3

BB-

BB-

 

 

 


B1

B+

B+

 

Highly Speculative

B2

B

B

 

 

 

B3

B-

B-

 

 

 


Caa1

CCC+

CCC

 

Substantial Risk


Caa2

CCC

-

 

In Poor Standing

Caa3

CCC-

-

 

 

 


Ca

-

-

 

Extremely Speculative


C

-

-

 

May be in Default


-

-

DDD

 

Default

-

-

DD

 

 

 

-

D

D

 

 

 

-

-

-

 

 

 


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       Whenever you decide to invest in corporate bonds, there is certain risk associated with the investment. There is a possibility that you might lose a part of the invested money or the entire amount. However, the equation between risk and return depends on the type of corporate bond you invest in, the issuing company, and the state of the economy. More..

 


 

 

 
   
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