Ba1/BB+

What Are Ba1/BB+?

Ba1/BB+ are rating designations by Moody's Investor Service and S&P Global Ratings, respectively, for a credit issue or an issuer of credit that signify higher degrees of default risk on the agencies' rating spectrums. Ba1/BB+ sits just below investment-grade ratings.

Moody's Investor Service and S&P Global Ratings assign ratings to bonds, preferred stock, and government entities. The ratings reflect the assessed risk of the security and how likely the borrower is to make interest payments.

How Ba1/BB+ Works

Bond investors seek to gauge the risk of a bond investment before making a purchase. The primary way that bond investors can understand the risk of a bond issued by a company, known as corporate debt, is to check the debt rating of the debt issuance and the corporation.

Three primary rating agencies are used by investors to ascertain the riskiness of an investment. These are Moody's, S&P, and Fitch. These rating agencies assign ratings that come with a pre-established definition as well as an analysis of the rating.

The Ba1/BB+ rating, as well as all others set by Moody's and S&P, have descriptive guidelines. Ratings apply to both the credit instrument that is issued and the issuer of the credit instrument. 

The Function of Ratings

When a company wants to issue a bond to raise money for one of many purposes, usually to finance growth, it typically seeks out the services of the rating agencies to designate their credit opinions on the bond issue and on the issuer itself.

The ratings will assist in the price discovery process of the bond when it is marketed to investors. A Ba1/BB+ rating is below investment grade, or sometimes referred to as high-yield or junk; therefore, the yield on the bond should be higher than on an investment-grade security to compensate for the greater risk of payment default that the bond investor is taking on.

The issue and the issuer usually have the same rating, but they could be different if, for example, the issue is enhanced with additional credit protection for investors (the bond may have a higher rating), or if the structure of the issue is such that weaker credit protection exists, in which case the bond could be a Ba2/BB instead of Ba1/BB+.

The rating agencies also assign credit ratings to sovereign debt, assessing the default risk of a nation. The ratings of nations are impacted by their economic profile, their exchange rate, inflation, and their political climate. Investors considering investing in the government bonds of a specific nation can use these ratings to determine whether the outlook is stable in that country, which would strengthen its ability to make good on its debt obligations.