New York, August 26, 2022 – Moody’s Investors Service has assigned an Aa3 rating to the City of Carroll, IA’s US$5.4 million Local Optional Sales and Service Tax Bonds, Series 2022A. Moody’s maintains an Aa3 rating on the city’s outstanding debt with unlimited tax obligations (GOULT). After this issuance, the city will have $10.1 million in GOULT debt, $9.2 million of which is rated by Moody’s.
The Aa3 rating reflects the city’s modest, growing tax base in northwest Iowa (Aaa stable), with average wealth and income levels. The rating also takes into account the city’s healthy financial position with strong reserve levels and great flexibility to raise revenue. The rating also includes the city’s modest debt load with high fixed costs and moderate pension liabilities.
Moody’s does not normally assign outlooks to local authorities with this amount of debt.
FACTORS THAT CAN LEAD TO AN IMPROVEMENT OF THE RATING
– Significant economic activity that leads to the growth of the tax base and improvement of residents’ income
FACTORS THAT MAY LEAD TO A RATING REDUCTION
– Material declines in financial reserves
– Erosion of the tax base or weakening of demographic trends
– Material growth of city debt or pension burden
The Series 2022A bonds are expected to be initially paid from the city’s local sales, service and use tax (LOSST), however the bonds are ultimately backed by the city’s general obligation lien and payable from a dedicated property tax, unlimited in rate or amount, to pay debt servicing. The City will dedicate 75% of annual LOSST revenue to bond debt service, which equates to approximately $1.4 million (based on 2021 collections). The estimated maximum debt service for the bonds is approximately $407,000, which would result in 3.5x coverage. The city is required to charge a debt service fee if LOSST revenues are insufficient to pay for debt service, one year before the next debt payment.
Series 2022A bonds will finance the expansion and renovation of the city’s recreation center.
Carroll, IA is located in northwest Iowa (Aaa stable) and is the county seat of Carroll County. The city provides public safety (police and fire), recreation, public works, sewer (collection and treatment) and water (treatment and distribution), and general government services to more than 9,800 residents.
The main methodology used in this rating was the US General Local Government Debt published in January 2021 and available at https://ratings.moodys.com/api/rmc-documents/70015. Alternatively, see the Ratings Methodology page at https://ratings.moodys.com for a copy of this methodology.
For further specification of Moody’s key rating assumptions and sensitivity analysis, see the Methodological Assumptions and Assumption Sensitivity sections of the disclosure form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.
For ratings issued for a program, series, category/class of debt or security, this release provides certain regulatory disclosures regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to the program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practice. For ratings issued to a supporter, this release provides certain regulatory disclosures regarding the credit rating action of the supporter and with respect to each individual credit rating action for securities that derive their credit ratings from the credit rating of the supporter. For interim ratings, this release provides certain regulatory disclosures with respect to the assigned interim rating and with respect to the final rating that may be assigned after the final issuance of the debt, in each case where the structure and terms of the transaction have not changed prior to the assignment of the final rating in a manner that would affect to the rating. For additional information, see the issuer/agreement page for the relevant issuer at https://ratings.moodys.com.
The regulatory announcements contained in this press release relate to the credit rating and, if applicable, the related rating or rating.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.
Please visit https://ratings.moodys.com for all updates on changes related to Moody’s lead rating analyst and issuing legal entity.
Please see the Issuer/Agreement page at https://ratings.moodys.com for additional regulatory announcements for each credit rating.
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How are Moody’s and S&P different in rating bonds?
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What is S & P credit rating system?
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Why is S&P called Standard and Poor?
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Is Moody rated corporate bonds?
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What are A rated corporate bonds?
Moody’s Investors Service provides international financial research on bonds issued by commercial and government entities. Moody’s, along with Standard & Poor’s and Fitch Group, is considered one of the big three rating agencies. It is also listed on the Fortune 500 list for 2021.
What is a moody bond?
Aa2 is the third highest long-term credit rating assigned by Moody’s rating agency to fixed income securities, such as bonds, that are of high quality with very low credit risk.
How is the rating of a bond determined?
Is Aa2 a good bond rating? A credit rating is an assessment of a borrower’s creditworthiness – in general or with respect to a specific debt or financial obligation. Aa2 is the third highest long-term credit rating that Moody’s assigns to fixed income securities that are of high quality and very low credit risk.
What is the difference between investment grade and speculative grade bonds?
In the Moody’s Investors Service rating system, securities are assigned a rating from Aaa to C, with Aaa being the highest quality and C the lowest quality.
What are investment and speculative grade ratings?
1 is the best possible rating while 5 is the worst. grades 1 and 2 are given to financial institutions that are in the best fundamental condition. institutions with a rating of 3 may have issues that are cause for concern. 4 or 5 indicates serious problems that require immediate action or close monitoring2.
What is an aa3 bond rating?
Within the non-investment grade category, companies and entities with a BB rating are considered less risky than those with a low B rating. B3/B- ratings indicate a higher risk of default and a higher risk to investors or policyholders.
A withdrawn rating means that a previously issued credit rating for an obligation or a rated entity has been withdrawn. MIS uses the symbol âWRâ to denote a withdrawn rating.
Which is a better rating on a bond AAA or BBB?
How the rating scale works. The S&P credit rating is a letter grade. The best is “AAA”, which means that there is a high probability that the borrower will repay his debt. The worst is “D”, which means the issuer has already missed.
Is a BBB bond rating good?
On S&P Global Ratings’ long-term rating scale, regulators and market participants generally consider issuers and debt issues rated ‘BBB-‘ or higher to be “investment grade,” while those rated below ‘BBB-‘ are generally considered ” speculative assessment”.
What is the difference between AAA and BBB bonds?
Ba2/BB Issue Rating For Moody’s, an issue rated Ba2 is considered speculative and subject to significant credit risk. Modifier ‘2’ indicates that the obligation is ranked in the middle of its generic rating category – one notch below Ba1 and one notch above Ba3. 1.
How do bond credit ratings work?
It indicates the adequate capacity for timely payment of financial obligations in relation to other issuers or obligations in the same country or monetary union. B. Indicates the uncertain ability to pay financial obligations on time in relation to other issuers or obligations in the same country or monetary union.
Is a AAA bond rating good?
Moody’s assigns its B3 rating to ‘obligations that are considered speculative and subject to high credit risk’.1 Entities that receive this rating may face financial instability or have inadequate cash reserves in relation to their business needs, debts or other financial obligations. .
What does a bond rating tell you?
The empirical results of Moody’s ratings and the Moody’s bond rating process are predictions of relative creditworthiness, which can be defined as the relative expected loss rate. Expected loss rates are in turn the product of expected default rates and expected default loss severity rates.
What is meant by bond rating examples?
What are Moody’s bond ratings based on? Moody’s long-term debt ratings are opinions about the relative credit risk of fixed-income obligations with original maturities of one year or more. They deal with the possibility that a financial obligation will not be honored as promised.
How do I read my Moody’s credit rating?
Moody’s, Standard & Poor’s and Fitch add an indicator to their ratings to show the ranking of bonds within a category. Moody’s uses a numerical indicator. For example, A1 is better than A2 (but still not as good as Aa3). Standard & Poor’s and Fitch use the plus or minus indicator.
Standard & Poor’s is one of the largest credit rating agencies, assigning letter grades to companies and countries and the debt they issue on a scale from AAA to D, indicating their degree of investment risk. The popular S&P 500 index is perhaps the best-known product of Standard & Poor’s.
How do you read a Moody’s rating?
The origins of Standard & Poor’s can be traced back to 1923, with 233 companies as an indicator or stock market index. The company first began as Standard Statistics Co., but when it merged with Poors Publishing in 1941, it became Standard & Poor’s.
What does a Baa1 Moody’s rating mean?
Basic information. Moody’s Seasoned Aaa Corporate Bond Yield measures the yield on corporate bonds that have an Aaa rating. Corporate bonds are rated based on their probability of default, the health of the corporation’s debt structure, as well as the overall health of the economy.
What do the Moody’s ratings mean?
Corporate bonds are rated by services such as Standard & Poor’s, Moody’s and Fitch, which calculate the risk inherent in each individual bond. The most reliable (least risky) bonds are rated triple A (AAA). High-rated corporate bonds represent a reliable source of income for the portfolio.
How does Moody’s credit rating work?
Moody’s Bond Ratings are intended to characterize the risk of holding bonds. These ratings, or risk assessments, partly determine the interest the issuer must pay to attract bond buyers. Ratings are expressed as a series of letters and numbers.
How does Moody’s rating work?
The rating takes into account the financial strength of the bond issuer or its ability to pay the bond principal and interest on time. Moody’s, Standard and Poor’s, Fitch Ratings and DBRS are some of the most internationally known bond rating agencies.
What is Moody’s rating factor?
Bonds rated BBB- (by Standard & Poor’s and Fitch) or Baa3 (by Moody’s) or better are considered “investment-grade”. Bonds with a lower rating are considered “speculative” and are often referred to as “high yield” or “junk”.
How do you read a credit rating?
Investment grade categories indicate relatively low to moderate credit risk, while ratings in speculative categories signal either a higher level of credit risk or that default has already occurred. Fitch may also detect issues with a rated issuer that are not and have not been rated.
What is the difference between credit rating and credit score?
A-/A3 are medium investment credit ratings offered by Moody’s and Standard & The poor. Both ratings mean that the issuer has financial support and certain cash reserves with a low risk of default. A-/A3 is the seventh highest rating a debt issuer can receive and is four notches above the junk bond threshold.
What is credit rating A1+?
What is a good credit rating for bonds? Investors typically group bond ratings into 2 main categories: Investment grade refers to bonds rated Baa3/BBB- or better. High yield (also called “non-investment grade” or “junk” bonds) refers to bonds rated Ba1/BB and below.
How do Moody’s make money?
A bond rating is a letter-based credit scoring scheme used to assess the quality and creditworthiness of a bond. Investment grade bonds rated âAAAâ through âBBBâ by Standard & Poor’s and Aaa through Baa3 by Moody’s. Junk bonds have lower ratings.
Bonds rated BBB- (by Standard & Poor’s and Fitch) or Baa3 (by Moody’s) or better are considered “investment-grade”. Bonds with a lower rating are considered “speculative” and are often referred to as “high yield” or “junk”.
How does credit rating agency make money?
Investment grade bonds rated âAAAâ through âBBBâ by Standard & Poor’s and Aaa through Baa3 by Moody’s. Junk bonds have lower ratings. The higher the bond rating, the lower the interest rate it will carry, in addition to everything else.
What is the primary responsibility of a credit rating agency?
A bond rating is a rating assigned to a bond by a rating service that indicates its credit quality. The rating takes into account the financial strength of the bond issuer or its ability to pay the bond principal and interest on time.
What are the benefits of credit rating agencies?
AAA is the highest possible rating that can be assigned to an issuer’s bonds by any of the major credit rating agencies. AAA-rated bonds have a high degree of creditworthiness because their issuers can easily meet financial obligations and have the lowest risk of default.
- Bond rating is a way of measuring the bond’s creditworthiness, which corresponds to the cost of borrowing for the issuer. These ratings typically assign a letter grade to bonds that indicates their credit quality.
- Rating mechanism For example, if S&P and Fitch’s bond rating for a particular debt security is BBB-, and Moody’s bond rating for the same is Baa3, the bond is an investment grade bond that involves lower risk. On the contrary, if it is rated lower on the respective scales, it becomes a non-investment grade bond.
- Moody’s credit rating To each of its ratings from Aa to Caa, Moody’s adds the numerical modifiers 1, 2 and 3; the lower the number, the higher the grade. Aaa, Ca and C are not modified in this way.
- What does aa3 credit rating mean? A-/A3 are medium investment credit ratings offered by Moody’s and Standard & Poor’s. Both ratings mean that the issuer has financial support and certain cash reserves with a low risk of default. A-/A3 is the seventh highest rating a debt issuer can receive and is four notches above the junk bond threshold.
- Such ratings reflect both the probability of default and any financial losses incurred in the event of default. Aaa Aa Obligations rated Aaa are rated as the highest quality, with minimal risk. Obligations rated Aa are rated high quality and subject to very low credit risk. to low credit risk.
- Baa1. Eighth highest rating in Moody’s rating of long-term corporate liabilities. Obligations rated Baa1 are subject to moderate credit risk. They are considered intermediate and as such may have certain speculative characteristics.
- Moody’s long-term ratings are opinions on the relative credit risk of financial obligations with original maturities of one year or more. They deal with the possibility that a financial obligation will not be honored as promised.
- Moody’s long-term ratings are opinions on the relative credit risk of financial obligations with original maturities of one year or more. They deal with the possibility that a financial obligation will not be honored as promised.
How does Moody’s work?
According to Moody’s, the purpose of its ratings is “to provide investors with a simple grading system by which to assess the future relative creditworthiness of securities.” To each of its ratings from Aa to Caa, Moody’s adds the numerical modifiers 1, 2 and 3; the lower the number, the higher the grade.
What does Moody’s do?
Moody’s Investors Service WARF The weighted average rating factor as calculated by Moody’s is independent of trustee and collateral manager calculations and is a numerical representation of the portfolio’s credit risk.
How does Moodys ratings work?
Fitch’s credit rating scale for issuers and issues is expressed using the categories ‘AAA’ to ‘BBB’ (investment grade) and ‘BB’ to ‘D’ (speculative grade) with an additional /- for AA to CCC levels that show the relative differences between probabilities non-payment or recovery for problems.
How does Moody’s Analytics make money?
Credit ratings are expressed in letter grades and are used for businesses and governments. Credit scores are numbers used for individuals and some small businesses. An individual’s credit score is based on information from the three major credit reporting agencies, and scores range from 300 to 850.
How does Moody’s make money?
A / A1 are credit ratings created by rating agencies S&P and Moody’s. Both A and A1 fall in the middle of the investment grade category, indicating some but low credit risk. Investors use credit ratings to assess the creditworthiness of issuers, with better credit ratings corresponding to lower interest rates.
Is Moody’s Analytics free?
Moody’s makes money by issuing credit ratings for debt securities. If you’ve ever bought a bond (excluding risk-free US Treasuries), it was most likely rated by Moody’s.