{"id":3492,"date":"2019-09-06T12:00:00","date_gmt":"2019-09-06T12:00:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=3492"},"modified":"2026-03-23T09:15:05","modified_gmt":"2026-03-23T09:15:05","slug":"corporate-issuer-credit-ratings","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/fixed-income\/corporate-issuer-credit-ratings\/","title":{"rendered":"Corporate Issuer Credit Ratings"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Fundamentals of Credit Analysis (2025 Level I CFA\u00ae Exam \u2013 Fixed Income \u2013 Module 6)\",\n  \"description\": \"This video explores the fundamentals of credit analysis in fixed income markets, covering topics such as credit risk, default probability, seniority rankings, rating agency practices, the four Cs of credit analysis, financial ratio evaluation, yield spreads, and considerations for high-yield and government debt issuers.\",\n  \"uploadDate\": \"2022-06-02T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/zSl9z7qQB00\/maxresdefault.jpg\",\n  \"contentUrl\": \"https:\/\/youtu.be\/zSl9z7qQB00\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/zSl9z7qQB00\",\n  \"duration\": \"PT41M06S\",\n  \"publisher\": {\n    \"@type\": \"Organization\",\n    \"name\": \"AnalystPrep\",\n    \"logo\": {\n      \"@type\": \"ImageObject\",\n      \"url\": \"https:\/\/analystprep.com\/wp-content\/uploads\/2023\/01\/analystprep-logo.png\",\n      \"width\": 250,\n      \"height\": 50\n    }\n  }\n}\n<\/script>\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Which of the following rating methodologies only apply to subordinated debt?\",\n    \"text\": \"Which of the following rating methodologies only apply to subordinated debt?\\n\\nA. Notching.\\nB. Issue rating.\\nC. Issuer rating.\",\n    \"answerCount\": 1,\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is C. The issuer\u2019s credit rating applies to the issuer\u2019s overall creditworthiness and usually pertains to senior unsecured debt. It does not apply to subordinated debt.\"\n    }\n  }\n}\n<\/script>\n\n\n\n<iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/zSl9z7qQB00?si=1I9_ckYKb4xDLTt_\" title=\"YouTube video player\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n\n\n<p>The major credit-rating agencies, Moody\u2019s, Standard &amp; Poor\u2019s (S&amp;P), and Fitch Ratings (\u201cFitch\u201d), play an essential role in the credit markets. For a majority of bonds, at least two of the agencies provide ratings.<\/p>\n<p>Credit rating agencies use similar symbol-based ratings to assess the risk of default. There are symbols for investment grade and non-investment grade (\u201cjunk\u201d or \u201chigh-yield\u201d bonds), including low-grade (or speculative-grade) and default.<\/p>\n<h2><strong>Issuer Ratings versus Issue Ratings<\/strong><\/h2>\n<div style=\"text-align: center; margin: 25px 0;\"><a style=\"display: inline-flex; align-items: center; justify-content: center; padding: 10px 18px; border: 2px solid #1a73e8; border-radius: 999px; color: #1a73e8; text-decoration: none; font-weight: 500; background-color: #f5f9ff; white-space: nowrap;\" href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener\"> Compare issuer and issue credit ratings and default risk classifications <\/a><\/div>\n<p>When assessing corporate debt, rating agencies typically provide both an issuer rating (corporate family rating, CFR) and an issue rating (corporate credit rating, CCR).<\/p>\n<p>The issuer\u2019s credit rating addresses the issuer\u2019s overall creditworthiness and usually applies to senior unsecured debt.<\/p>\n<p>Issue rating refers to specific financial obligations and considers ranking in the capital structure such as secured or subordinated. However, cross-default provisions, which refer to events of default such as nonpayment of interest on one bond triggering default on all outstanding debt, may often suggest the same default probability for all issues.<\/p>\n<h2><strong>Notching<\/strong><\/h2>\n<p>A rating adjustment methodology known as \u201cnotching\u201d may assign different credit ratings based on the priority of claims. Thus, with varying degrees of losses in the event of default, obligations are subject to being notched higher or lower.<\/p>\n<p>Rating agencies consider structural subordination, which can arise when a corporation with a holding company structure has debt at both its parent holding company and operating subsidiaries. Debt at the subsidiary level could be serviced before funds are passed (\u201cupstreamed\u201d) to the holding company. Based on such payment priorities, rating agencies often adopt a notching. This process allows credit ratings on issues to be moved up or down from the issuer rating.<\/p>\n<blockquote>\n<h3><strong>Question<\/strong><\/h3>\n<p>Which of the following rating methodologies only apply to subordinated debt?<\/p>\n<ol style=\"list-style-type: upper-alpha;\">\n<li data-tadv-p=\"keep\">Notching.<\/li>\n<li data-tadv-p=\"keep\">Issue rating.<\/li>\n<li data-tadv-p=\"keep\">Issuer rating.<\/li>\n<\/ol>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is <strong>C<\/strong>.<\/p>\n<p>The issuer\u2019s credit rating addresses the issuer\u2019s overall creditworthiness and usually applies to senior unsecured debt.<\/p>\n<p><strong>A is incorrect.<\/strong> Issue rating ranks all other types of debts.<\/p>\n<p><strong>B is incorrect.<\/strong> Notching is a rating adjustment methodology that assigns different credit ratings based on the priority of claim.<\/p>\n<\/blockquote>\n<div class=\"notes_inv\">\n<p><em>\u00a0<\/em><\/p>\n<\/div>\n<p><em>\u00a0<\/em><\/p>\n<div style=\"text-align: center; margin: 40px 0;\"><a style=\"display: inline-flex; align-items: center; justify-content: center; padding: 12px 20px; border-radius: 999px; background-color: #1a73e8; color: #ffffff; text-decoration: none; font-weight: 600;\" href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener\"> Start Free Trial \u2192 <\/a>\n<p style=\"font-size: 15px; margin-top: 12px; color: #555;\">Learn how credit rating agencies assess default risk, distinguish between issuer and issue ratings, and classify bonds as investment grade or high yield in CFA Level I fixed income.<\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>The major credit-rating agencies, Moody\u2019s, Standard &amp; Poor\u2019s (S&amp;P), and Fitch Ratings (\u201cFitch\u201d), play an essential role in the credit markets. For a majority of bonds, at least two of the agencies provide ratings. Credit rating agencies use similar symbol-based&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[9],"tags":[],"class_list":["post-3492","post","type-post","status-publish","format-standard","hentry","category-fixed-income","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Corporate Issuer Credit Ratings | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Credit ratings by Moody\u2019s, S&amp;P, and Fitch assess a corporate issuer&#039;s creditworthiness, guiding investors in understanding default risk and market behavior.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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