What Is Ba2/BB?
Ba2/BB are rating designations used by the top credit rating agencies for a credit issue or issuer that signify higher degrees of default risk on their rating spectrums. Moody’s Investors Service uses Ba2, while S&P Global Ratings and Fitch Ratings use BB.
Ba2/BB are ratings below investment grade but are the second-highest rating in the non-investment grade (junk or high-yield) bracket.
Key Takeaways
- 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.
- Companies typically seek the services of a credit rating agency for ratings of new issues in order to assist with transparency and price discovery for investors.
Understanding Ba2/BB
The Ba2/BB rating, as well as all other ratings set by the agencies, have descriptive guidelines. Ratings apply to both the credit instrument that is issued and the issuer of the credit instrument.
Ba2/BB Rating for an Issue
For Moody's, an issue rated Ba2 is judged to be speculative and is subject to substantial credit risk. The modifier '2' indicates that the obligation ranks in the middle of its generic rating category —being one notch below Ba1 and one notch above Ba3.
For S&P, an issue rated BB is regarded as having "significant speculative characteristics" and "while such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions." The BB rating for S&P is one notch below BB+ and one notch above BB-.
Fitch notes that its BB rating signifies the issue is susceptible to changes in the business or economy. The Fitch rating system follows the S&P’s, where BB is one notch below BB+ and one above BB-.
Ba2/BB Rating for an Issuer
For Moody's, issuers assessed Ba2 are judged to be speculative and are "subject to a substantial risk of defaulting on certain senior operating obligations and other contractual commitments."
Although considered non-investment grade, the Ba2/BB rating is the second-highest rating in the speculative class—behind only Ba1/BB+.
For S&P bond rating agencies, an obligor rated BB faces "major ongoing uncertainties and exposure to adverse business, financial or economic conditions, which could lead to the obligor's inadequate capacity to meet its financial commitments." The Fitch system says that BB ratings show there is default risk, especially if a business or economic conditions change, but the business does have the flexibility to service its current obligations.
| Credit ratings | ||
|---|---|---|
| MOODY's | S&P | |
| Aaa | AAA | Prime |
| Aa1 | AA + | |
| Aa2 | AA | High-grade |
| Aa3 | AA - | |
| A1 | A + | |
| A2 | A | Upper-medium grade |
| A3 | A- | |
| Baa1 | BBB + | |
| Baa2 | BBB | Lower-medium grade |
| Baa3 | BBB - | |
| Ba1 | BB+ | "Junk" |
| Ba2 | BB | Non-investment grade |
| Ba3 | BB- | |
| B1 | B+ | |
| B2 | B | Highly speculative |
| B3 | B- | |
| Caa | CCC | Extremely Speculative |
| C | D | In Default/Recovery |
Special Considerations
When a company wants to issue a bond to raise money for any one of many purposes, it typically seeks out the services of the rating agencies to designate their credit opinions on the bond issue and the issuer itself. The ratings will assist in the price discovery process of the bond when it is marketed to investors.
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.
The issue and 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 be rated Ba1/BB+, a tier higher, with the issuer remaining at Ba2/BB.
Article Sources
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Moody's. "Rating Scale and Definitions," Accessed May 26, 2021.
S&P Global. "A Credit Rating Is anInformed Opinion." Accessed May 26, 2021.
Fitch Ratings. "About Rating Definitions." Accessed May 26, 2021.
S&P Global. "Standard & Poor's Ratings Definition," Page 15. Accessed May 26, 2021.
S&P Global. "Credit Trends: The Cost of a Notch." Accessed May 26, 2021.
Fitch Ratings. "Ratings Scales." Accessed May 26, 2021.
