Issue credit ratings are based, in varying degrees, on the following considerations:
1. Likelihood of payment - capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation;
2. Nature of and provision of the obligation;
3. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganisation, or other arrangement under the laws of bankruptcy and other laws affecting creditors’ rights.
The issue rating definitions are expressed terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above (Such differentiation applies when an entity has both senior and subordinated obligations, secured and unsecured obligations.) Accordingly, in the case of junior debt, the rating may not conform exactly with the category definition.
