S&P - Public Finance Criteria (2007). - The Global Clearinghouse

Introduction To Public Finance Criteriaor changing circumstances are more likely to leadto a weakened capacity of the obligor to meet itsfinancial commitment on the obligation.BB, B, CCC, CC, and CObligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’are regarded as having significant speculative characteristics.‘BB’ indicates the least degree of speculationand ‘C’ the highest. While such obligations willlikely have some quality and protective characteristics,these may be outweighed by large uncertaintiesor major exposures to adverse conditions.BBAn obligation rated ‘BB’ is less vulnerable to nonpaymentthan other speculative issues. However,it faces major ongoing uncertainties or exposureto adverse business, financial, or economic conditions,which could lead to the obligor’s inadequatecapacity to meet its financial commitmenton the obligation.BAn obligation rated ‘B’ is more vulnerable to nonpaymentthan obligations rated ‘BB’, but the obligorcurrently has the capacity to meet its financialcommitment on the obligation. Adverse business,financial, or economic conditions will likely impairthe obligor’s capacity or willingness to meet itsfinancial commitment on the obligation.CCCAn obligation rated ‘CCC’ is currently vulnerableto nonpayment and is dependent upon favorablebusiness, financial, and economic conditions for theobligor to meet its financial commitment on theobligation. In the event of adverse business, financial,or economic conditions, the obligor is not likelyto have the capacity to meet its financialcommitment on the obligation.CCAn obligation rated ‘CC’ is currently highly vulnerableto nonpayment.CThe ‘C’ rating may be used to cover a situationwhere a bankruptcy petition has been filed or similaraction has been taken, but payments on thisobligation are being continued.DAn obligation rated ‘D’ is in payment default. The‘D’ rating category is used when payments on anobligation are not made on the date due even if theapplicable grace period has not expired, unlessStandard & Poor’s believes that such payments willbe made during such grace period. The ‘D’ ratingalso will be used upon the filing of a bankruptcypetition or the taking of a similar action if paymentson an obligation are jeopardized.Plus (+) or minus (-)The ratings from ‘AA’ to ‘CCC’ may be modifiedby the addition of a plus (+) or minus (-) sign toshow relative standing within the major ratingcategories.NRAn issue designated NR is not rated.Short-Term Issue Credit RatingsNotesA Standard & Poor’s U.S. municipal note ratingreflects the liquidity factors and market access risksunique to notes. Notes due in three years or lesswill likely receive a note rating. Notes maturingbeyond three years will most likely receive a longtermdebt rating. The following criteria will be usedin making that assessment:■ Amortization schedule-the larger the final maturityrelative to other maturities, the more likely it willbe treated as a note; and■ Source of payment-the more dependent the issueis on the market for its refinancing, the morelikely it will be treated as a note.Note rating symbols are as follows:SP-1Strong capacity to pay principal and interest. Anissue determined to possess a very strong capacityto pay debt service is given a plus (+) designation.SP-2Satisfactory capacity to pay principal and interest,with some vulnerability to adverse financial andeconomic changes over the term of the notes.SP-3Speculative capacity to pay principal and interest.Commercial PaperA Standard & Poor’s commercial paper rating is acurrent assessment of the likelihood of timely paymentof debt having an original maturity of nomore than 365 days. Ratings are graded into severalcategories, ranging from ‘A’ for the highest-qualityobligations to ‘D’ for the lowest. Thesecategories are as follows:A-1This designation indicates that the degree of safetyregarding timely payment is strong. Those issuesdetermined to possess extremely strong safety characteristicsare denoted with a plus sign (+) designation.www.standardandpoors.com9