Debt Instrument Rating

PACRA issues ratings for both short-term and long-term debt instruments. The debt instrument rating takes into account the probability of default on a particular instrument. PACRA uses the credit rating of the issuing entity (referred to as “issuer”) as a baseline for determining the rating of the debt instrument of such entity. It then goes on to incorporate the unique characteristics of the instrument into its analysis. These include, but are not limited to, seniority of the debt instrument relative to other obligations of the issuer, underlying collateral and/or credit enhancements, if any exist. When rating short-term debt instruments, PACRA additionally considers the liquidity and financial flexibility of the issuer. Based on PACRA’s analysis of these factors, the instrument is either notched higher or lower than the issuer’s rating.