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Sp Credit Rating

Standard & Poors (S&P) is a division of the McGraw-Hill publishing company that provides financial research and in-depth analysis on stocks and bonds offered in some of the world's best-known markets. S&P is not only involved with stock market indexes like the S&P 500 on the New York Stock Exchange and Canada's S&P/TSX index, but the S&P credit rating is one of the most important credit rating systems in the world.

The S&P credit rating system issues ratings for the debt of both public and private corporations. Its influence is substantial; it is recognized by the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization. The S&P credit rating can be either a short-term or long-term rating.

S&P credit ratings for the long term are judged on a scale from AAA to D. There are a large number of intermediate ratings at each level between AA and CCC. In addition to the ratings, S&P can offer a "credit watch" that can serve as a boost or a burden to a borrower. If S&P changes the credit rating upward (an upgrade), it is a great positive; a downgrade means S&P is worried about the borrower's situation. It can also issue a neutral rating.

Borrowers with a rating of AAA are the highest quality borrowers and can get better rates of return on bonds they issue or better interest rates on loans. A AA rating is also highly regarded, with an A rating also more than accepted. A BBB rating is considered medium class, or satisfactory. BB to CCC ratings are considered non-investment grade (or "junk bonds"); anything lower indicates the borrower in question is in severe financial trouble.

Short-term credit ratings for issuers are established on a scale from A-1 to D. An A-1 rating means the issue has a strong ability to meet its financial commitment; an A-2 or A-3 rating means the issuer can meet its commitments, but economic conditions could weaken it. A B rating means the issuer can meet its obligations but could face problems in the near future; a C or D rating means the issuer is in trouble.

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Definition of the Day Investing Glossary - A

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