How to decipher DBRS's letter grades
AAAThis is the safest bet, the highest credit quality. The capacity for payment of financial obligations is exceptionally high and unlikely to be adversely affected by future events.
Who it applies to:Denmark
Not everybody in Europe is hurting. On Sept. 20, DBRS rated Denmark AAA, a reflection of the country’s “wealthy and diversified economy, strong political institutions and sound macroeconomic policy management.” A deficit that is only 1.9% of GDP, among the lowest rates in the European Union, doesn’t hurt either.
AAThe credit quality of borrowers is deemed “superior” and the capacity to meet obligations is considered high.
Who it applies to:Canada's Big Five banks
DBRS confirmed that each of the Big Five maintained a AA rating this year. The rating noted that the banks are well-funded and firmly ensconced in the relatively low-risk business of Canadian retail banking. However, exposure to unpredictable revenue streams, such as investment banking and trading, keeps them from earning an AAA.
A“Good” credit quality: Countries and companies with this grade have “substantial” capacity for payment of their financial obligations, but may be vulnerable to future events. Negative factors are considered manageable, however.
Who it applies to:Spain, Italy
Two of Europe’s most embattled financial systems have fallen to the bottom rungs of A status, and could slip further if their financial picture doesn’t improve. Spain wasrated A (low) on Aug. 8, while Italy was rated A. Neither is considered to be at a high risk of defaulting, given the likelihood of a bailout from the European Union. (DBRS sometimes attaches “high” or “low” to a grade, signifying a slight difference from the standard rating.)
BBBCredit quality is “adequate” and the capacity for payments is “acceptable,” although the bond issuer may be vulnerable to future events.
Who it applies to:Rogers Communications
On July 26, DBRS rated Rogers a triple-B. Baked into that rating is a positive: Rogers’s market presence in wireless and cable. But Rogers’s debt levels and “the intensifying competitive landscape in both industry segments” make it hard to grow subscriber numbers. Given that Ted Rogers built the company by taking on loads of debt and issuing junk bonds in the 1980s and ’90s, a BBB rating for the firm is a big improvement.
BBCredit quality is “speculative” and “non-investment grade.” DBRS is uncertain of the subject’s capacity to make its payments.
Who it applies to:Fiat
The struggling Italian automaker was rated BB (high) on Sept. 11, given weak performance from its European operations and the “difficult conditions expected to persist for at least the next two years.”
BThis is “highly speculative” credit quality. There is a “high level of uncertainty” about meeting financial obligations.
Who it applies to:E*TRADE Financial Corp.
Last April 23, DBRS rated E*Trade a B (high). The U.S. investment website racked up deep losses between 2007 and 2010, and has only recently shown profits.
CCC/CC/CThese grades are “very highly speculative” in terms of credit quality and “in danger of defaulting on financial obligations.”
Who it applies to:Yellow Media Inc.
Yellow Media’s fall from grace culminated July 23 when its rating was dropped to C (high), one of the lowest grades possible short of a default. The downgrade followed the company’s announced debt restructuring, which is expected to result in a default.
DIn this world, a D is actually an F. It means the issuer has not met one or more of its financial obligations, or it is clear that such payments will not be made in the near future.
Who it applies to:Canwest Media Inc.
In September, 2009, Canwest fell to a D rating, marking its long descent into bankruptcy protection. The company owed $954 million and “indicated that it does not have sufficient liquidity to satisfy any such demands for payment,” DBRS said. The company’s print and TV assets were sold in a court-ordered restructuring.