Bond Credit Rating And Risk Analysis
Bond Credit Rating
Bond credit rating refers to a credit rating carried out on the negotiable bond issued by enterprises or economic entities. Most bond credit ratings are enterprise bond credit ratings, which asses the capability and reliability of a specific bond to pay principal and interest back, indicating the credit rating of this specific bond, which is issued by enterprises with independent corporate capacity. This kind of credit rating is aimed at providing information service for investors who buy bonds and engage in the bond transfer activities on bond market. The government bond and financial bond, which are respectively issued by state finance and state, are not covered by credit rating as they are guaranteed by the government. Other negotiable bonds issued by local government or financial agency otherwise state bank must be rated.
Rating Standard
The entity credit rating symbol system applies to the credit rating of corporate entity, which include ratings of non-financial enterprise entity as well as financial institutions, it is specially used for the credit risk evaluation and analysis on a specific project issued on the market. Entity credit rating refers to an evaluation on the default risk of an entity, which mainly evaluates the debt repaying capability and the future operation risk of an entity. The rating is classified into three levels and nine degrees, and respectively represented by symbols AAA, AA, A, BBB, BB, B, CCC, CC, C, each degree can be slightly modified by adding a “+” or “-” to symbolize a higher or lower degree on this level, the implication of all symbols is as follows:
Symbol   Implication
AAA extremely strong capability to repay debts, barely impacted by bad economic situation, extremely low default risk.
AA very strong capability to repay debts, not vulnerable to economic situation, very low default risk.
A strong capability to repay debts, vulnerable to economic situation, low default risk.
BBB moderate capability to repay debts, can be seriously impacted by bad economic situation, moderate default risk.
BB weak capability to repay debts, can be very seriously impacted by bad economic situation, high default risk.
B capability to repay debts is largely dependent on favorable economic situation, very high default risk.
CCC capability to repay debts is extremely dependent on favorable economic situation, extremely high default risk.
CC receive little protection in case of bankruptcy or restructuring, capability to repay debts cannot be guaranteed.
C barely can repay debts.
Rating Agency
Rating agency plays a vital role as an intermediary (independent the third party) on the capital market, they make objective, fair, prudent and responsible ratings.
Rating agency employs expertise to collect, sort, analyze and provide the financial and credit status, enterprise reservation or personal credibility of various economic entities, such as records of vicious debts, bankruptcy proceedings, obligation defaults, unable to execute court verdict and so on. This credit rating behavior gradually contributes to the appearance of supervisory mechanisms that target at economic entities and individual credibility.