Professional investors pay a good deal of attention to credit ratings. That’s because those ratings, typically issued by companies such as DBRS, Fitch and Standard and Poor’s, help them assess the price of a security. Brad Meiers, a corporate debt specialist, told Financial Pipeline co-editor Romina Maurino that the ratings provide a better idea of what the investor is getting into.
BM: The (ratings) give you a fundamental picture of what the company does, what the company’s balance sheet looks like, which is more important to bond investors than equity investors. They tell you what is their ability to pay off that debt, number one, service it and number two, the ability to pay off that debt. Those are the fundamental things and then they assign letter scores to investment grade issuers like letter A, BBB and anything else higher and everything else is not investment grades. It gives you a bit of an idea/road map of what you’re getting yourself into.