Rating scale of the EuroRating credit rating agency

The credit risk expressed through credit ratings assigned by EuroRating is defined based on a 20-grade scale, which is analogical to the traditional rating scale generally applied by internetional credit rating agencies. This ensures comparability of credit ratings and allows users to use ratings issued by several different credit rating agencies.

Description of credit risk relating to individual classes of ratings assigned by EuroRating credit rating agency:

Group Rating Description of credit risk

Poziom inwestycyjny

AAA Negligible credit risk. Highest level of financial credibility. Rating assigned exclusively where an entity has extremely strong capability to meet financial commitments.
  AA+ Very low credit risk. Very high level of financial credibility. Very strong capability to meet financial commitments. Low susceptibility to adverse economic conditions.
  AA
  AA-
   A+ Low credit risk. High financial credibility and capability to meet financial commitments. Average resistance to long-term unfavourable economic conditions.
   A
   A-
 BBB+ Moderate credit risk. Good financial credibility and adequate capability to meet financial commitments in the long term. Increased susceptibility to long-term adverse economic conditions.
 BBB
 BBB-

Poziom inwestycyjny

  BB+ Increased credit risk. Relatively lower financial credibility. Adequate capability to meet financial commitments under average or favourable economic conditions. High or medium level of debt recovery in case of a default.
  BB
  BB-
  B+ High credit risk. Capability of meeting financial commitments largely conditioned on favourable external conditions. Medium or low level of debt recovery in case of a default.
  B
  B-
  CCC Very high credit risk. Very low capability to meet financial commitments even under favourable economic conditions. Low or very low level of debt recovery in case of a default.
  CC
  C
  D Extremely high credit risk. Complete lack of capability to meet financial commitments. Without additional external suport the level of debt recovery is very low or close to zero.

Additional explanations concerning credit ratings issued by EuroRating:

EuroRating applies one transparent rating scale for all types of rated entities, without an additional division into national and international ratings or short-term and long-term ratings.

Upon analysing the credit risk of rated entities, the agency takes accounts of the macroeconomic environment risk (including current and foreseen general economic situation, the balance of the state budget and the country debt, as well as the applied economic policy), and takes into account the sensitivity of the rated entity to currency exchange rate fluctuations. Credit ratings assigned by EuroRating cover factors relating to the general risk of the country (or countries) and the currency risk – therefore, thy are fully comparable with international credit ratings of other international agencies.

Since the financial situation of individual companies and financial institutions can be better than the general situation of the country and the state budget, and in addition due to the fact that the process of analysing of the credit risk relating to the given rated entity takes into account country and currency risks, the possible upper level of a credit rating for a given rated entity is not automatically limited by assessments of the credit risk relating to the country debt.

Type of assessed risk

Credit ratings issued by EuroRating constitute synthetic credit risk assessments concerning individually analysed entities. This risk is defined by EuroRating in terms of absolute categories – the level of ratings for individual entities does not depend on ratings of other entities. Therefore, EuroRating’s credit ratings are not comparative rankings but are assessments assigned to the constant risk scale.

Ratings issued by EuroRating constitute the total estimated risk of loss (i.e. ultimate loss of entire or part of a receivable along with interest) by creditors of the analysed entity as a result of a default. Therefore, ratings issued by EuroRating represent the combination of a probability of default (PD) of the analysed entity and the estimated level of the ultimate loss of receivables by its creditors in case of actual occurrence of default (Loss Given Default - LGD).

Time perspective of the credit risk assessment

Credit ratings issued by EuroRating are long-term ratings – they define the financial reliability and the credit risk of the rated entity within a perspective of up to three subsequent years (i.e. up to 36 subsequent months).

Rating category and „+” or „–” modifiers

During the assessment of the credit risk level, the most important is the rating's classification in the given main category: AAA, AA, A, BBB, BB, B, CCC, or D. The modifiers "+" or "–" have supporting nature and are added to more precisely define risk differences within the rating category (they indicate that the credit quality of a particular rated entity is slightly better or worse than the typical quality for the rating category).

Rating outlook

To the current credit ratings there is assigned an outlook: "positive", "stable" or "negative". The rating outlook defines the most probable, according to the agency, direction of the change of the rating level within a time horizon of the subsequent 12 months. However it does not mean that the rating will (or will not) change in the nearest future and that this will definitely be a change in the direction indicated by the current rating outlook.

Rating for the issuer / rating for the issue

Unless clearly indicated in an additional description, credit ratings issued by EuroRating constitute general ratings for the issuer (they relate to all unsecured and unsubordinated debt or debt-like liabilities). Any possible other ratings issued for the same entity may concern its liabilities characterized by a different profile of risk for creditors (e.g. in case of issue of secured or subordinated bonds). Such ratings have additional designations indicating the types of liabilities covered by such credit assessments.

(sd) / (d)

Designations "(sd)" (selective default) or "(d)" (default) are added to ratings assigned to entities, which have lost financial liquidity, and have partially "(sd)" or completely "(d)" stopped paying due liabilities towards their creditors, and/or which should be treated as defaulted. These designations are added immediately after the rating symbol and are put in brackets (to distinguish from the rating level designation).

See the definition of default applied by EuroRating »

It should be noted that since credit ratings issued by EuroRating reflect not only the probability of a default of the rated entity but the total risk of a loss by its creditors (see: "Type of assessed risk"), a default of the analysed entity and (partial or complete) stop of payments does not have to result in an automatic downgrade of the credit rating to the lowest “D” level (the rating may still remain in one of the higher categories). In each such case, however, "(sd)" or "(d)" designation is added to the rating – depending on the nature and scope of the default in payment of due liabilities.

ip

Ratings marked "ip" are unsolicited ratings, based on publicly available information. Such ratings are assigned by EuroRating in reply to information needs of market participants and to provide investors with a comparable rating database for solicited ratings issued by EuroRating.


Suspended rating

EuroRating may suspend publication of a rating for the given entity for some period, and this may occur e.g. if the rated entity fails to provide the agency with current financial statements or with other information required by the agency, which are necessary to carry out current updates of the assigned rating.

Withdrawn rating

The assigned credit rating may be withdrawn if the agency finds that it does not have sufficient information to reliably asses the credit risk of the given entity or if agreement for credit risk assessment services concluded between the agency and the rated entity expires. In case of unsolicited ratings, the rating may be withdrawn also if EuroRating decides that the rated entity no longer constitute an entity of special interest to the market and the level of reference for ratings assigned to other rated entities.

Public / non-public / private rating

Ratings issued by EuroRating usually have the status of public ratings i.e. they are published in a manner allowing access without limitations for all interested persons (concerns in particular publications of ratings on the agency's website). Information about public ratings may also be made available via the media and external information providers.

Non-public ratings are ratings with access limited to a defined group of users. These limitations may result e.g. from the fact of EuroRating distributing certain ratings through subscription, assigning a rating for an entity carrying out a private issue of bonds, or conditions of agreements concluded with rated entities or third parties.

Private ratings are provided only to the rated entity and/or to a defined very narrow group of recipients and may not be published or disclosed to an unlimited group of users.

The rating status may change from "private" or “non-public” to "public" (or otherwise) if EuroRating changes the manner of publishing individual ratings.