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HMRC internal manual

International Manual

Thin capitalisation: practical guidance: loan pricing and the use of credit ratings: investment grade and non-investment grade credit ratings

Range of credit ratings

As is evident from the table below, the credit ratings of two of the ratings agencies have a wide range. The rating agencies distinguish between investment grade and non-investment grade ratings.

Standard and Poor’s ##### Moody’s  
     
Investment Grade (Prime)    
AAA    
(Superior) Aaa
(Exceptional) The highest debt rating assigned.  The borrower’s capacity to repay debt is extremely strong under a variety of economic conditions.    
  AA+ Aa1  
  AA    
(Excellent) Aa2
  The capacity of the borrower to repay debt is very strong under a variety of economic conditions.    
  AA- Aa3  
  A+ A1  
  A    
(Good) A2 The borrower has strong capacity to repay debt but is susceptible to adverse effects of changes in circumstances and economic operations.  
  A- A3  
  BBB+ Baa1  
  BBB    
(Adequate) Baa2 The borrower has adequate capacity to repay debt but adverse economic conditions or circumstances are likely to lead to risk of default.  
  BBB- Baa3  
  Non-Investment grade (non-prime or speculative grade; also “junk bonds”)    
  BB+ Ba1 Regarded as predominantly speculative, BB+ being the least speculative and C the most.
  BB    
(May be adequate) Ba2    
  BB- Ba3  
  B+ B1  
  B    
(Vulnerable) B2    
  B- B3  
  CCC    
(Extremely vulnerable) Caa    
  CC Ca  
  C C  
  D   In default or with payments in arrears.
  NR    
(Not rated: S&P has not been requested to rate the borrower’s capacity to meet obligations.)