Debt Rating
Long-term Debt Rating
Long-term debts are debts with a maturity of longer than one year, including enterprise bonds, convertible company bonds, junior bonds, long-term loans, etc. Long-term debt rating reflects the timely and adequate debt repayment ability covering both principal and interest as well as its relative degree of risk. It is an evaluation on the possibility of long-term debt contract breach and the seriousness degree of breach damages. The rating result is directly subject to characteristics of debt, related terms and articles as well as protection measures involved. The grade definitions of long-term debt rating are listed as follows:
Grade |
Definition |
AAA |
The highest credit quality of debt. It has impeccable and reliable guaranty for the principal and interest repayment. Although the debt protection factors may change, they will not impair the fairly stable credit worthiness. This grade has extremely low default risk.
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AA |
Very high credit quality. It is a lower grade than AAA due to its relatively higher long-term risk. This grade has very low default risk.
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A |
Relatively high credit quality. The protection on principal and interest repayment is sufficient, however, some factors may exist and cause disadvantages in the future. This grade has relatively low default risk.
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BBB |
Medium credit quality. In normal conditions the protection is strong enough to pay principal and interest, whereas uncertainties of credit quality will exist under adverse circumstances. This grade has medium default risk.
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BB |
Very common credit quality. Protection of this grade on principal and interest repayment is insufficient, uncertainties of credit quality is an obvious characteristic of the debt of this grade.
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B |
Relatively poor credit quality. Lack of sound investment features is common, protection of this grade on principal and interest repayment is insufficient in a long-term view. This grade has relatively high default risk.
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CCC |
Very poor credit quality. Some practical risks exist and affect the repayment of principal and interest. This grade has very high default risk.
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CC |
Seriously poor credit quality. Contract is often breached or there exist distinct drawbacks. This grade has seriously high default risk.
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C |
Lowest credit quality. Debts are commonly unable to pay back, and large loss is often caused due to the default.
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Notes: Grade BBB and above are safe levels for investment, grades lower than BB are speculating levels; Each credit grade can be adjusted within a small range by using ¡°+¡±or ¡°-¡± to express it relatively higher or lower than corresponding grade in credit quality, however, ¡°AAA+¡± and¡°C-¡±are exceptional. |
Short-term Debt Rating
Short-term debt refers to the debt with repaying term of one year or less. The short-term debt rating is a judgment on enterprise¡¯s ability of paying off given debts on time. The rating result is directly subject to distinctiveness of short-term debts, related terms and articles as well as protection measures involved. The grade definitions of short-term debt rating are listed as follows:
Grade |
Definition |
A-1 |
Very strong ability of principal and interest repayment, security is highly guaranteed.
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A-2 |
Relatively strong ability of principal and interest repayment, security is relatively high.
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A-3 |
Common ability of principal and interest repayment, security can be easily affected by changes of unfavorable environmental conditions, default risks exist to a certain extent.
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B |
Relatively poor ability of principal and interest repayment, default risks are relatively high.
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C |
Very poor ability of principal and interest repayment, default risks are very high.
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D |
Inability to repay the principal and interest.
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Notes: No slight adjustments are defined for credit grades of the short-term debt rating.
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Enterprise Credit Rating
The enterprise credit rating reflects enterprise¡¯s ability of non-guarantee debts repayment and contract obligation fulfillment. With clients oriented towards all kinds of industrial and commercial enterprises, as well as financial institutions in banking, insurance, securities and guarantee industries, the enterprise credit rating primarily provides investors and business partners with judgment opinions about the comprehensive credit level of the enterprise, other than its ability to repay special debt. The grade definitions of enterprise credit rating are listed as follows:
Grade |
Definition |
AAA |
Enterprise of this grade is able to provide the best protection for its debt repayment. Despite the debt protection factors may change, they will not impair the fairly stable credit worthiness.
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AA |
Enterprise of this grade is able to provide better protection for its debt repayment. The grade is lower than AAA due to its higher long-term risk.
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A |
Enterprise of this grade is able to provide good protection for its debt repayment. However, in a long-term view there may exist some unfavorable factors affecting the enterprise.
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BBB |
Enterprise of this grade is able to provide sufficient protection for its debt repayment in normal conditions. However, under unfavorable operation circumstances, uncertainties of protection for debt will exist and may greatly affect the enterprise.
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BB |
Enterprise of this grade provides insufficient protection for its debt repayment, and faces relatively large uncertainties in development.
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B |
Enterprise of this grade provides unstable protection for its debt repayment, in a long-term view its debt repayment ability is weak at higher risk despite it may satisfy the debt repayment currently.
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CCC |
Enterprise of this grade provides relatively poor protection for its debt repayment and there exist some practical default factors.
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CC |
Enterprise of this grade provides seriously poor protection for its debt repayment and default often takes place.
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C |
Lowest grade of enterprise credit, enterprise of this grade hardly has any ability to repay the debt and is usually in compulsory debt reorganization procedure, taken over by supervisory and administrative institutions or in liquidation.
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Notes: Grade BBB and above are ¡°safe¡±, whereas grade BB and lower are ¡°weak¡±; Each credit grade can be adjusted within a small range by using ¡°+¡±or ¡°-¡± to express it relatively higher or lower than corresponding grade in credit quality, however, ¡°AAA+¡± and¡°C-¡±are exceptional. |
Preliminary Credit Rating
Preliminary credit rating provides a general judgment on enterprise credit levels, and both the evaluation content and approaches of it are as the same as enterprise credit rating. However, in contrast to the enterprise credit rating, the preliminary credit rating is simplified due to the limitation of information acquiring, and sometimes, the results may even deviate from the facts, reasons for these including: lack of communication with enterprise management during rating process, rating information collected from the public but unable to confirm through the enterprise, or rating results based on too much modeling calculation and lack of specific analysis on the enterprise in order to satisfy the needs for social credit system construction, etc. Therefore, the preliminary credit rating is only adaptive to the meet market needs for a preliminary understanding of enterprise.
Grade definitions of the preliminary credit rating are as the same as the enterprise credit rating, Dagong applies special credit rating symbols and definitions below for the preliminary credit rating so as to distinguish the different depth of the research:
Grade |
Definition |
aaa |
Enterprise of this grade is able to provide the best protection for its debt repayment. Despite the debt protection factors may change, they will not impair the fairly stable credit worthiness.
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aa |
Enterprise of this grade is able to provide better protection for its debt repayment. The grade is lower than aaa due to its higher long-term risk.
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a |
Enterprise of this grade is able to provide good protection for its debt repayment. However, in a long-term view there may exist some unfavorable factors affecting the enterprise.
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bbb |
Enterprise of this grade is able to provide sufficient protection for its debt repayment in normal conditions. However, under unfavorable operation circumstances, uncertainties of protection for debt will exist and may greatly affect the enterprise.
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bb |
Enterprise of this grade provides insufficient protection for its debt repayment, and faces relatively large uncertainties in development.
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b |
Enterprise of this grade provides unstable protection for its debt repayment, in a long-term view its debt repayment ability is weak at higher risk despite it may satisfy the debt repayment currently.
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ccc |
Enterprise of this grade provides relatively poor protection for its debt repayment and there exist some practical default factors.
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cc |
Enterprise of this grade provides seriously poor protection for its debt repayment and default often takes place.
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c |
Lowest grade of enterprise credit, enterprise of this grade hardly has any ability to repay the debt and is usually in compulsory debt reorganization procedure, taken over by supervisory and administrative institutions or in liquidation.
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Notes: Grade bbb and above are ¡°safe¡±, whereas grade bb and lower are ¡°weak¡±; Each credit grade can be adjusted within a small range by using ¡°+¡±or ¡°-¡± to express it relatively higher or lower than corresponding grade in credit quality, however, ¡°aaa+¡± and¡°c-¡±are exceptional.
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Credit Rating for Contract Fulfillment
Credit rating for contract fulfillment provides evaluations on enterprise¡¯s various performances such as the execution and implementation of related laws and regulations, contract fulfillment, organization and management in company behaviors, etc. Different from the ordinary enterprise credit rating, the enterprise contract fulfillment credit rating mainly concerns the past behaviors of enterprise. Credit rating for contract fulfillment is designed to provide the government, business cooperators and other related beneficiaries with information on credit worthiness.
Credit rating for contract fulfillment put an emphasis on the evaluation of enterprise¡¯s credit worthiness through all aspects in economic and social activities, as well as the enterprise¡¯s performance in commitment and contract fulfillment. The enterprise contract fulfillment credit rating is different from the credit rating, and its grade definitions are as follows:
Grade |
Definition |
aaa |
Enterprise of this grade has excellent credit standing. It is able to impeccably fulfill all the contract obligations during the production and/or transaction procedures, and has reputable records for its credit standing.
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aa |
Enterprise of this grade has good credit standing. It is able to better fulfill all the contract obligations during the production and/or transaction procedures. This grade is lower than aaa due to some deficiency in enterprise¡¯s public influence, service and/or products quality.
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a |
Enterprise of this grade has common credit standing. It is able to basically implement related national regulations and policies during the production and/or transaction procedures, and generally fulfill all the contract obligations.
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b |
Enterprise of this grade has poor credit standing. It has discredit behaviors in related national regulations and policies implementation, or more serious default when fulfilling all the contract obligations, which leads to adverse social impact.
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c |
Enterprise of this grade has very poor credit standing. It has serious discredit behaviors in related national regulations and policies implementation, and is unable to fulfill partial or even the whole contract obligations, which leads to adverse social impact and makes the state, organizations and individuals suffer from great economic loss.
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Symbol System of Credit Rating
