Ba2/BB Credit Ratings: Definitions and Risks (2024)

FAQs

Ba2/BB Credit Ratings: Definitions and Risks? ›

A Ba2/BB rating is below investment-grade or sometimes referred to as high-yield or junk. Thus, the yield on the bond is generally higher than on an investment-grade security to compensate for the greater risk of payment default that the bond investor is taking on.

'BB' ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists that supports the servicing of financial commitments.

Ba2. The second highest rating of speculative grade Moody's Long-term Corporate Obligation Rating. Obligations rated Ba2 are judged to have speculative elements and are subject to substantial credit risk. Rating one notch higher is Ba1. Rating one notch lower is Ba3.

A bond rated BB/Ba2 is just below investment grade and is a somewhat speculative financial instrument. Fitch, Moody's, and Standard & Poor's (S&P) are the Big Three major credit ratings institutions.

'BBB' National Ratings denote a moderate level of default risk relative to other issuers or obligations in the same country or monetary union. 'BB' National Ratings denote an elevated default risk relative to other issuers or obligations in the same country or monetary union.

Ba2/BB are credit ratings just below investment grade, considered more speculative. Ba2 falls above the Ba3 rating and below Ba1, while BB is above BB- and below BB+. Moody's uses the Ba2 rating, while S&P and Fitch use BB.

BB rating means that potential problems may arise from adverse changes in the market, business, or financial conditions. Although the grade shows the issuer is currently able to pay its financial obligations on time, this ability may deteriorate in the future.

A credit score in risk grade BB might still not be enough for a credit facilities application to be approved. The best thing you can do is to improve your credit score as much as you can, and keep it at that highest possible level.

Investment-grade refers to bonds rated Baa3/BBB- or better. High-yield (also referred to as "non-investment-grade" or "junk" bonds) pertains to bonds rated Ba1/BB+ and lower.

“Junk” or “high-yield” bonds are issued by companies with poor credit ratings, meaning that compared with better-rated “investment-grade” bonds, the risk is greater that these companies will default on their interest payments or even go bankrupt and be unable to redeem their bonds when they mature.

Is BB rating better than BBB? ›

Investors should be aware that an agency downgrade of a company's bonds from 'BBB' to 'BB' reclassifies its debt from investment grade to "junk" status. Although this is merely a one-step drop in credit rating, the repercussions can be severe.

The Appeal of Junk Bonds

The answer lies in their potential returns. To attract investors, bonds of all types have to offer interest payments when they borrow money. Investment-grade bonds tend to have much lower interest rates because they pose less of a risk for investors.

Ba3/BB- is a credit rating used by Moody's, S&P, and Fitch for an issued debt instrument (generally a bond) or the issuer of the credit (i.e. company or business) that are below investment grade (i.e. "junk bonds"). Moody's uses the Ba3 rating, while S&P and Fitch use BB-.

As a non-investment grade rating, it signifies an elevated risk of default, placing these bonds within the high-yield or "junk" category. Due to the heightened risk, BB-rated bonds offer higher yields, which may attract investors who are willing to assume more risk for the potential of greater returns.

Junk bonds have a lower credit rating than investment-grade bonds, and therefore have to offer higher interest rates to attract investors. Junk bonds are generally rated BB[+] or lower by Standard & Poor's and Ba[1] or lower by Moody's. The rating indicates the likelihood that the bond issuer will default on the debt.

Is it bad if a business is not BBB accredited? It's not necessarily a red flag if a business is not accredited by the BBB. However, taking steps to get your business accredited shows customers that you are committed to giving them the best experience possible.

Since then BB has issued five core risk management guidelines, namely Asset-Liability Management (2005), Credit Risk Management (2005), Internal Control and Compliance Framework (2005), ICT Security (2010), and Prevention of Money Laundering and Terrorist Financing (2012).

There are six risk grade ratings: low, medium, high, very high, extreme, and catastrophic. Low-risk risks have a low probability of causing a problem but a high potential reward.

Investors typically group bond ratings into 2 major categories: Investment-grade refers to bonds rated Baa3/BBB- or better. High-yield (also referred to as "non-investment-grade" or "junk" bonds) pertains to bonds rated Ba1/BB+ and lower.

There are five grades of risk: high, medium, low, minimal, and no risk. A company rated "high" has the highest level of exposure to potential financial loss. A company rated "low" has the lowest level of exposure to potential financial loss.