WHAT IS BOND RATING?

A measure of the quality and safety of a bond, based on the issuer's financial condition. More specifically, an evaluation from a rating service indicating the likelihood that a debt issuer will be able to meet scheduled interest and principal repayments. Typically, AAA is highest (best), and D is lowest (worst).

On the other hand we can say that, A measure of the likelihood of a bond's default. Credit ratings agencies conduct credit analysis in order to provide bond ratings; the criteria and the ratings themselves may change these from time to time. Bond ratings are important to bond investors as they make investment decisions. For example, if a bond has a low rating and an investor is risk averse, he/she will be unlikely to invest in that bond, as it will lead to an increased possibility that the investor will lose the amount invested.

TOP 10 BOND RATING COMPANIES

1. Moody's Investors Service 2. Standard & Poor 3. Fitch 4. DBRS 5. Japan Credit Rating Agency, Ltd 6. JCR-VIS Credit Rating Co. Ltd. Pakistan 7. Rating and Investment Information Inc, Japan 8. CRISIL, Ltd. India 9. Credit Rating Agency of Bangladesh, Ltd. (CRAB) 10. Credit Rating Information and Services, Ltd. (CRISL)

10 CREDIT RATING COMPANIES & THEIR SYMBOLS

Credit Companies:
IBCA

Moodys

S&P

Fitch

Investment grade:
Best Quality / Extremely Strong / Highest Quality

Aaa
Aa A

AAA
AA A

AAA
AA A

High Quality / Very Strong / Very High Quality Upper Medium Grade / Strong / High Quality

Medium grade / Adequate / Good Quality

Non-investment Grade: Lower Medium Grade / Speculative Less Vulnerable / Speculative

Baa

BBB

BBB

Ba

BB

BB

Low Grade / More Vulnerable / Highly Speculative Poor Quality / Currently Vulnerable / High Default Risk Highly Speculative / Currently HighlyVulnerable / High Default Risk Extremely Poor / Imminent default / High Default Risk In Default / Default

Caa

CCC

CCC

Ca

CC

CC

C C

C D

C D

JCR-VIS Credit Rating Company Limited, Pakistan

Affiliate of Japan Credit Rating Agency, Ltd. INSURER FINANCIAL STRENGTH RATINGS
AAA

Highest capacity to meet policyholder and contract obligations. Risk factors are negligible.
AA+, AA, AA-

Very high capacity to meet policyholder and contract obligations. However, risk is modest, but may vary slightly over time due to business/economic conditions.
A+, A, A-

B+, B, BLow capacity to meet policyholder and contract obligations. Risk factors are capable of fluctuating widely with changes in business/economic conditions.
CCC

Very low capacity to meet policyholder and contract obligations. Risk may be substantial.
CC

High capacity to meet policyholder and contract obligations. Risk factors may vary over time due to business/economic conditions.
BBB+, BBB, BBB-

Weak capacity to meet policyholder and contract obligations. Risk may be high.
C

Adequate capacity to meet policyholder and contract obligations. Risk factors are considered variable over time due to business/economic conditions.
BB+, BB, BB-

Very weak capacity to meet policyholder and contract obligations. Risk may be very high
D

Marginal capacity to meet policyholder and contract obligations. Risk factors may vary widely with changes in business/economic conditions.

Extremely weak capacity to meet policyholder and contract obligations. Risk is extremely high.

R & I, Japan [Issuer Rating]

An Issuer Rating is R&I's opinion on an issuer's general capacity to fulfill its financial obligations and is, in principle, assigned to all issuers. AAA Highest creditworthiness supported by many excellent factors. AA Very high creditworthiness supported by some excellent factors. A High creditworthiness supported by a few excellent factors. Creditworthiness is sufficient, though some factors require attention in times of BBB major environmental changes. Creditworthiness is sufficient for the time being, though some factors require due BB attention in times of environmental changes. B Creditworthiness is questionable and some factors require constant attention. Creditworthiness is highly questionable and a financial obligation 111c of an issuer CCC is likely to default. CC All of the financial obligations of an issuer are likely to default. D R&I believes that all of the financial obligations of an issuer are in default.

CRAB, BANGLADESH

Rating Scale Sensitivity Long Term Notches Banks

LONG-TERM CREDIT RATING
RATING AAA Triple A (Extremely Strong Capacity & Highest Quality) AA1, AA2, AA3* Double A (Very Strong Capacity & Very High Quality) A1, A2, A3 Single A (Strong Capacity & High Quality) BBB1, BBB2, BBB3 Triple B (Adequate Capacity & Medium Quality) DEFINITION Commercial Banks rated 'AAA' has extremely strong capacity to meet its financial commitments. 'AAA' is the highest issuer credit rating assigned by CRAB. AAA is judged to be of the highest quality, with minimal credit risk. Commercial Banks rated 'AA' has very strong capacity to meet its financial commitments. It differs from the highest-rated Commercial Banks only to a small degree. AA is judged to be of very high quality and is subject to very low credit risk. Commercial Banks rated 'A' has strong capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than Commercial Banks in higher-rated categories. A is judged to be of high quality and are subject to low credit risk. Commercial Banks rated 'BBB' has adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the Commercial Banks to meet its financial commitments. BBB is subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics. Commercial Banks rated 'BB' is less vulnerable in the near term than other lower-rated Commercial Banks. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions, which could lead to the Commercial Banks inadequate capacity to meet its financial commitments. BB is judged to have speculative elements and is subject to substantial credit risk. Commercial Banks rated 'B' is more vulnerable than the Commercial Banks rated 'BB', but the Commercial Banks currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the Commercial Banks capacity or willingness to meet its financial commitments. B is considered speculative and weak capacity and is subject to high credit risk. Commercial Banks rated 'CCC' is currently vulnerable, and is dependent upon favorable business, financial, and economic conditions to meet its financial commitments. CCC is judged to be of very weak standing and is subject to very high credit risk. Commercial Banks rated 'CC' is currently highly vulnerable. CC is highly speculative and is likely in, or very near, default, with some prospect of recovery of principal and interest. A 'C' rating is assigned that is currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the 'C' rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument's terms. C is typically in default, with little prospect for recovery of principal or interest. 'D' is in default. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

BB1, BB2, BB3 Double B (Inadequate Capacity & Substantial Credit Risk)

B1, B2, B3 Single B (Weak Capacity & High Credit Risk) CCC1, CCC2, CCC3 Triple C (Very Weak Capacity & Very High Credit Risk) CC Double C (Extremely Weak Capacity & Extremely High Credit Risk)

C Single C (Near to Default)

D (Default)

Financial Institutions

LONG-TERM CREDIT RATING

RATING AAA Triple A (Extremely Strong Capacity & Highest Quality) AA1, AA2, AA3* Double A (Very Strong Capacity & Very High Quality) A1, A2, A3 Single A (Strong Capacity & High Quality) BBB1, BBB2, BBB3 Triple B (Adequate Capacity & Medium Quality)

DEFINITION Financial Institutions rated 'AAA' have extremely strong capacity to meet its financial commitments. 'AAA' is the highest issuer credit rating assigned by CRAB. AAA is judged to be of the highest quality, with minimal credit risk. Financial Institutions rated 'AA' have very strong capacity to meet its financial commitments. It differs from the highest-rated financial institutions only to a small degree. AA is judged to be of very high quality and is subject to very low credit risk. Financial Institutions rated 'A' have strong capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than financial institutions in higher-rated categories. A is judged to be of high quality and are subject to low credit risk. Financial Institutions rated 'BBB' have adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments. BBB is subject to moderate credit risk. They are considered mediumgrade and as such may possess certain speculative characteristics. Financial Institutions rated 'BB' are less vulnerable in the near term than other lower-rated financial institution. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions, which could lead to the obligor's inadequate capacity to meet its financial commitments. BB is judged to have speculative elements and is subject to substantial credit risk. Financial Institutions rated 'B' are more vulnerable than the financial institutions rated 'BB', but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitments. B is considered speculative and weak capacity and is subject to high credit risk. Financial Institutions rated 'CCC' are currently vulnerable, and are dependent upon favorable business, financial, and economic conditions to meet its financial commitments. CCC is judged to be of very weak standing and is subject to very high credit risk. Financial Institutions rated 'CC' are currently highly vulnerable. CC is highly speculative and is likely in, or very near, default, with some prospect of recovery of principal and interest.

BB1, BB2, BB3 Double B (Inadequate Capacity & Substantial Credit Risk)

B1, B2, B3 Single B (Weak Capacity & High Credit Risk) CCC1, CCC2, CCC3 Triple C (Very Weak Capacity & Very High Credit Risk) CC Double B (Extremely Weak Capacity & Extremely High Credit Risk)

A 'C' rating is assigned that is currently highly vulnerable to nonpayment, obligations

C Single C (Near to Default)

that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the 'C' rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been
'D' is in default. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

D (Default)

CRISIL, INDIA

Debenture Rating Symbol

(i) High Investment Grades : AAA: Highest Safety - On timely payment of interest and principal AA: High Safety This symbol shows the minor variation from triple A (ii) Investment Grades : A: Adequate safety. This rating shows the adverse impact arising out of changed circumstances. BBB: Moderate Safety This rating shows the variations caused by changing circumstances weakening the capacity. (iii) Speculative Grades: BB : Inadequate Safety This rating shows the comparative uncertainties faced by the issuer. B: High Risk This shows adverse business or economic conditions affecting the issuer. C: Substantial Risk This rating shows unfavorable circumstances to develop as it can be default. D: Default This rating shows that such debentures are extremely speculative and returns from them can be realized only on reorganization or liquidation.

Rating for Bond Funds : CRISIL rates the bonds and shows the protection capacity in terms of profit or loss o credits. The following are the ratings: AAAf : Very Strong Aaf : Strong Af : Adequate BBBf : Moderate BBf : Inadequate Cf : Defaults