CREDIT RATING


CREDIT RATING


Credit rating is a comment on the relative likelihood of default of a debt instrument in comparison to other rated instruments. In other words, a rating indicates the probability of default of the rated instrument and therefore provides a benchmark for measuring and pricing credit risk. A credit rating compresses an enormous amount of diverse information into a single rating symbol.

RATING SCALE AND DEFINITIONS

Infomerics assigns credit ratings under the following five categories:

Rating categoriesDefinition
Long TermThe term ‘long term instruments’ includes bonds, debentures, other debt securities, bank loans and other fund-based facilities with an original maturity of more than one year. Long term ratings are assigned on a 20 point scale from ‘IVR AAA’ to ‘IVR D’
Short termThe term ‘short term instruments’ refers to commercial paper, short term debentures, certificates of deposit, inter-corporate deposits, working capital borrowings, and other fund based and non-fund based facilities with an original maturity of one year or less. Short term ratings are assigned on a 9 point scale from ‘IVR A1’ to ‘IVR A4’ and ‘IVR D’ denoting default.
Structured finance ratingsInfomerics assigns ratings to long term and short term structured finance instruments by using a suffix ‘SO’. Instruments with an original maturity of more than one year are rated on long term scale whereas instruments with an original maturity of one year or less are rated on short term scale. The structured finance rating categories range from ‘IVR AAA (SO)’ to ‘IVR D (SO)’ on the long term scale and ‘IVR A1 SO’ to ‘IVR A4 (SO)’ on the short term rating scale
Fixed Deposit (FD)Infomerics assigns ratings to the FD programmes of corporates, banks and financial institutions with the prefix, ‘F’.
Issuer credit ratingsInfomerics assigns corporate credit ratings to issuers on a scale ranging from ‘IVR AAA (Is)’ to ‘IVR D (Is)’.



RATING SCALE AND DEFINITIONS
INFOMERICS may apply ‘+’ (plus) or ‘-‘ (minus) signs for ratings assigned ‘IVR AA’ to ‘IVR C’ to indicate their relative standing within the category. INFOMERICS may apply ‘+’ (plus) sign for ratings from ‘IVR A1’ TO ‘IVR A4’ to reflect comparative standing within the category. INFOMERICS may differentiate a debt instrument rating by a prefix to the rating assigned. For Structured Obligations, INFOMERICS assigns suffix ‘(SO)’ to the rating symbol. The rating suffixed by the letters (SO), indicates presence of a credit enhancement which has been factored into the rating.