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Moody's
Practical Law Glossary Item 5-382-3634 (Approx. 2 pages)
Glossary
Moody's
Moody's Investors Service is a rating agency that ranks the credit-worthiness of borrowers by rating their debt or other securities using a standardized ratings scale. Moody's ratings cover corporates, financial institutions, sovereigns and sub-sovereigns, municipal and other public finance entities, and the securities and other obligations they issue. Moody's also covers structured finance securities backed by receivables or other financial assets. Moody's Investors services is a subsidiary of Moody's Corporation.
Long-term Ratings. The scale for long-term fixed rate obligations with a maturity of one year or more runs from Aaa to C.
- Investment Grade: Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3 (from highest quality with the lowest level of credit risk to medium-grade with moderate credit risk).
- Non-Investment Grade (also referred to as speculative or "junk"): Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca (speculative; from the least degree of speculation with substantial credit risk to the highest degree of speculation and in or very near default); C (typically in default).
Short-term Ratings. The scale for short-term ratings for securities generally having an original maturity not exceeding thirteen months runs from P-1 to NP.
- Prime: P-1, P-2, P-3 (from superior ability to acceptable ability to repay short-term debt obligations).
- Not Prime: NP (do not fall within any of the prime rating categories).
For a more detailed discussion on the operations and the role of credit rating agencies in financing transactions and offerings of debt securities, see Practice Note, Credit Ratings and Credit Rating Agencies.