Hello All,
The issuer rating is supposedly applicable to senior unsecured debt. I have been able to verify such information on Moody’s website for example. Why are some senior unsecured bonds rated with an issue rating then, while here are cases where there is only an issuer rating and no issue rating… why bother?
I have also seen mention of “senior unsecured rating” as if its different from issuer rating.
Anyone? Thanks
Issuer rating is not the same as senior unsecured debt rating. Issuer rating applies to the issuer themselves as a whole and is sort of “across all debt”. Issue rating is specific to that issue of debt. Senior unsecured is generalized to all unsecured debt (most traded debt, particularly in investment grade) and is typically the same as the issue rating for each unsecured issue. Where you run into differences is typically when the company has issued secured debt, either publicly through fixed secured (such as secured by receivables or for airlines EETC’s which are secured by specific aircraft, etc). Another instance typical in high yield or post M&A are for bank lines such as revolvers that may be secured. In these cases, the secured would be notched up if the amount of secured debt changes the recovery profile materially in a default and likely the unsecured would be notched down, sometimes multiple notches in both cases if it’s substantial enough. Also, the ratings available for issuers will vary from issuer to issuer based partly on things like the size of the company, frequency in the market and what sales relationship they have with the ratings firm.