# Rating Methodologies > A Claude skill from brainbytes-dev/everything-claude-finance. - **Type:** Skill - **Install:** `agentstack add skill-brainbytes-dev-everything-claude-finance-rating-methodologies` - **Verified:** Yes — security-reviewed for prompt injection and unsafe behavior - **Seller:** [brainbytes-dev](https://agentstack.voostack.com/s/brainbytes-dev) - **Installs:** 0 - **Category:** [Agent Skills](https://agentstack.voostack.com/c/agent-skills) - **Latest version:** 0.1.0 - **License:** MIT - **Upstream author:** [brainbytes-dev](https://github.com/brainbytes-dev) - **Source:** https://github.com/brainbytes-dev/everything-claude-finance/tree/main/skills/credit/rating-methodologies ## Install ```sh agentstack add skill-brainbytes-dev-everything-claude-finance-rating-methodologies ``` Requires the [AgentStack CLI](https://agentstack.voostack.com/docs/cli). Works with Claude Code, Cursor, and any MCP-compatible agent. ## About # rating-methodologies Credit rating methodologies — S&P, Moody's, Fitch approaches. ## When to Activate - Assessing a company's likely credit rating or rating trajectory - Preparing for a rating agency engagement or annual review - Understanding the impact of a transaction (M&A, debt issuance, recap) on credit ratings - Analyzing the difference between ratings from multiple agencies (split ratings) - Evaluating subordination and structural considerations for instrument-level ratings (notching) - Benchmarking financial ratios against rating category medians - Advising on actions to achieve or maintain a target rating ## Core Concepts ### Rating Scales **Investment Grade vs. High Yield:** ``` Quality S&P Moody's Fitch Category Highest AAA Aaa AAA Investment Grade High AA+/AA/AA- Aa1/Aa2/Aa3 AA+/AA/AA- Investment Grade Upper Medium A+/A/A- A1/A2/A3 A+/A/A- Investment Grade Medium BBB+/BBB/BBB- Baa1/Baa2/Baa3 BBB+/BBB/BBB- Investment Grade ---threshold--- Speculative BB+/BB/BB- Ba1/Ba2/Ba3 BB+/BB/BB- High Yield Highly Spec. B+/B/B- B1/B2/B3 B+/B/B- High Yield Substantial CCC+/CCC Caa1/Caa2 CCC High Yield Default D/SD Ca/C D/RD Default ``` - The BBB-/Baa3 to BB+/Ba1 boundary is the critical threshold — crossing it (fallen angel) triggers forced selling by investment-grade-only mandates - Modifiers (+/-, 1/2/3) indicate relative standing within a category ### S&P Methodology S&P's corporate rating framework combines business risk and financial risk: **Business Risk Profile (BRP):** 1. **Industry risk**: Cyclicality, competitive dynamics, regulatory environment, growth prospects (scored 1-6) 2. **Country risk**: Sovereign rating, economic stability, institutional framework 3. **Competitive position**: Market share, scale, diversification, operating efficiency, profitability BRP scale: Excellent, Strong, Satisfactory, Fair, Weak, Vulnerable **Financial Risk Profile (FRP):** - Core ratios: FFO/Debt, Debt/EBITDA, FFO/Interest, FOCF/Debt - S&P adjusts reported figures for operating leases, pensions, hybrid instruments, receivables securitization - FRP scale: Minimal, Modest, Intermediate, Significant, Aggressive, Highly Leveraged **Anchor rating**: Combination of BRP and FRP on a matrix produces the anchor (starting point) **Modifiers** (each can adjust up/down 1-2 notches): - Diversification/portfolio effect - Capital structure (debt maturity, currency, interest rate mix) - Financial policy (management's stated leverage target, track record) - Liquidity (adequate, strong, exceptional — or less than adequate) - Management and governance - Comparable rating analysis (final calibration versus peers) **Group/parent influence**: Subsidiary ratings adjusted for group credit profile, strategic importance, and support likelihood ### Moody's Methodology Moody's uses industry-specific scorecards combining quantitative and qualitative factors: **Quantitative factors** (typically 60-70% weight): - Scale (revenue) - Profitability (EBITDA margin, operating margin) - Leverage (Debt/EBITDA, FFO/Debt) - Coverage (EBIT/Interest, FFO/Interest) - Cash flow (RCF/Net Debt, FCF/Debt) **Qualitative factors** (typically 30-40% weight): - Business profile (market position, barriers to entry) - Revenue diversity (geographic, product, customer) - Regulatory/event risk - Financial policy (tolerance for leverage, acquisition strategy, shareholder returns) **Grid-indicated rating**: The scorecard output — a starting point subject to further judgment **Adjustments from grid-indicated to actual rating:** - Ownership structure (private equity ownership often weighs negatively — aggressive financial policy assumed) - Event risk (pending M&A, litigation, regulatory action) - Liquidity profile - Structural considerations (priority of claims) ### Key Financial Ratios by Rating Level Approximate medians for non-financial corporates (varies by industry): ``` Metric AAA AA A BBB BB B CCC FFO/Debt >60% 45-60% 30-45% 20-30% 12-20% 5-12% 7.0x FFO/Interest >15x 10-15x 6-10x 4-6x 2.5-4x 1.5-2.5x 30% 20-30% 15-20% 10-15% 5-10% 0-5% 30% ``` ### Notching Table ``` Instrument | Recovery | Notch from ICR | Instrument Rating Senior Secured Term Loan A | 1+ (95%) | +1 | BBB+ Senior Secured Term Loan B | 1 (90%) | +1 | BBB+ Senior Unsecured Notes | 3 (55%) | 0 | BBB Subordinated Notes | 5 (15%) | -2 | BB+ Junior Subordinated / Hybrid | 6 (5%) | -3 | BB ``` ## Quality Gate - [ ] Correct agency methodology identified and applied for the sector - [ ] Financial statements adjusted using agency conventions (leases, pensions, hybrids, off-balance-sheet) - [ ] Key ratios calculated on the agency's definitions and compared to published medians - [ ] Business risk / qualitative factors assessed with supporting evidence - [ ] Grid-indicated or anchor rating derived and modifiers applied with justification - [ ] Notching applied correctly for each instrument based on priority of claims and recovery analysis - [ ] Peer comparison completed against similarly rated companies in the same sector - [ ] Split rating analysis performed if multiple agency ratings differ - [ ] Outlook and CreditWatch status incorporated into the assessment - [ ] Sensitivity analysis models rating impact under at least two scenarios (upside, downside) - [ ] Rating agency engagement timeline tracked (annual review date, expected actions) ## Source & license This open-source skill is cataloged on AgentStack and links to its original source — we do not rehost the code. - **Author:** [brainbytes-dev](https://github.com/brainbytes-dev) - **Source:** [brainbytes-dev/everything-claude-finance](https://github.com/brainbytes-dev/everything-claude-finance) - **License:** MIT Install and usage instructions live in the source repository linked above. ## Pricing - **Free** — Free ## Security capabilities Automated source analysis of v0.1.0 — what this tool can access: - **Network access:** no - **Filesystem access:** no - **Shell / process execution:** no - **Environment & secrets:** no - **Dynamic code execution:** no *"Yes" means the capability is present in the source — more access means more to trust, not that it is unsafe.* ## Versions - **0.1.0** — security scan: passed — Imported from the upstream source. ## Links - Listing page: https://agentstack.voostack.com/l/skill-brainbytes-dev-everything-claude-finance-rating-methodologies - Seller: https://agentstack.voostack.com/s/brainbytes-dev - Browse the marketplace: https://agentstack.voostack.com/browse --- Listed on AgentStack — the marketplace for AI agent skills and MCP servers. Every listing is security-reviewed. Creators keep 70%.