Looking after your money

What UDC’s AA credit rating means

Standard & Poor’s is one of the world’s foremost providers of independent credit ratings and investment risk evaluation. UDC Finance has an AA credit rating, considered “investment grade” by Standard & Poor’s.

An AA credit rating denotes a very strong (see below) capacity to meet financial commitments; a rating that’s as strong as the major New Zealand trading banks.

Based on Standard & Poor’s default data from 1981 to 2008*, an issuer with a BB plus credit rating was on average 34 times more likely to default than an issuer with an AA credit rating.

The Standard & Poor’s Rating System

Investment grade

• Extremely strong capacity to meet financial commitments. ‘AAA’ is the highest issuer credit rating assigned by Standard & Poor’s.
• Very strong capacity to meet financial commitments. Differs from the highest-rated organisations only to a small degree.
• Strong capacity to meet financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than organisations in higher-rated categories.
• Adequate capacity to meet financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the organisation to meet its financial commitments

Speculative grade

• Less vulnerable in the short term than other lower-rated obligors. However, major ongoing uncertainties and exposure to adverse business, financial, or economic conditions could lead to the organisation’s inadequate capacity to meet its financial commitments.
• More vulnerable than the organisations rated ‘BB’, but currently with the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the organisation’s capacity or willingness to meet its financial commitments.
• Currently vulnerable or highly vulnerable. Dependent upon favorable business, financial and economic conditions to meet financial commitments.

*Source: “Understanding Standard & Poor’s Rating Definitions”, Standard & Poor’s Ratings Direct, 3 June 2009.

**© by Standard & Poor’s Financial Services LLC Reproduced with permission of Standard & Poor’s.

Standard & Poor’s Ratings Services is a global leader in objective, insightful risk analyses and evaluations of the creditworthiness of issuers world-wide.

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