A guide to municipal bond ratings | NevadaAppeal.com

A guide to municipal bond ratings

William Creekbaum
Special to the Appeal

Standard & Poor’s is one of the most respected rating agencies of municipal bonds in the industry today. That being said, I felt it important to provide S&P’s definition of various grades of municipal bonds.

Investment Grades:

AAA – Highest rating assigned by S&P. Extremely strong capacity to make timely payments.

AA – Differs only a small degree from highest-rated obligations. Very strong capacity to make timely payments.

A – Somewhat more susceptible to the adverse effects of changes in economic conditions. Still strong capacity for timely payments.

BBB – Adequate protection parameters. Adverse economic conditions and changing circumstances may lead to weakened capacity for payments.

Speculative Grades:

BB – Less vulnerable to nonpayment than other speculative issues. Faces major uncertainties and may lead to inadequate capacity to meet payments.

B – Has capacity to make payments, but any adverse conditions would be likely to impair the capacity for timely payments.

CCC – Vulnerable to nonpayment and is dependent upon favorable conditions to make payments.

CC – Currently highly vulnerable to nonpayment.

C – May be used to cover a situation of bankruptcy, but payments are being continued.

D – Payment default. When payments are not made on date due. Also used upon the filing of bankruptcy or the taking of a similar action if payments are jeopardized.

S&P is only one of several major rating services and their opinion or definition of a grade of bond may vary from that of other rating services. For more information, call me at 689-8704 or e-mail William.a.creekbaum@smithbarney.com.

• William Creekbaum, MBA, CFP, a Washoe Valley resident, is senior investment management consultant of SmithBarney, a financial services firm serving Northern Nevada at 6005 Plumas Street, Ste. 200 Reno, NV 89509.