The definition of a ‘AA+/Aa1’
AA+/Aa1 ratings are issued long-term bonds the Issuer by Moody’s and S&P and, respectively. The rating of the Issuer determines the creditworthiness of the Issuer. AA+/aa1 takes the second place in the rating of the debt Issuer may obtain. Eight ranking above cut, which separates the debt investment grade high-yield or non-investment grade debt. Rating of AA+/Aa1 means that the Issuer or the carrier has strong financial backing and cash reserves. The default risk for investors and insurers is low.
Breaking down the ‘AA+/Aa1’
AA+/aa1 credit rating is the second top investment rating system credit class. The ratings of Moody’s and s&P from highest to lowest in the investment grade categories AAA/AAA, Aa1/AA+ Aa2/AA Aa3/AA-A1/a+ A2/a A3/a – / Ваа1/BBB+ Ваа2/BBB-and Baa3/BBB-. The ratings assigned by the various rating agencies, are based primarily on the insurer or the creditworthiness of the Issuer. This rating can therefore be interpreted as a measure of the probability of default. However, credit stability and priority of payment are also taken into account in the ranking.
An example of a Rating of AA+/Aa1
For example, ABC Inc. a company that seeks to raise capital through the issuance of long-term debt. They are a company that produces a very popular consumer product industry with high barriers to entry, and they occupy a considerable part of the market. They have abundant free cash flow and balance sheet fundamentals are strong. They have a great record of servicing their debt. Moody’s and s&P have not taken debt AA+/Aa1.