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Investments glossary

Notching

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JACK NICHOLSON: My point of view, while extremely cogent, is unpopular. LOS ANGELES TIMES: Which is? JACK NICHOLSON: That the repressive nature of the legalities vis-a-vis drugs are destroying the legal system and corrupting the police system. LOS ANGELES TIMES: Let\'s talk about acting for a minute.

— Jack Nicholson

Notching is the practice by credit rating agencies to give different credit ratings to the particular obligations or debts of a single issuing entity or closely related entities. Rating distinctions among obligations are made based on differences on their security or priority of claim. With varying degrees of losses in the event of default, obligations are subject to being notched higher or lower. Therefore while company A may have an overall credit rating of ‘AA’, its rating on its junior debt may be ‘A’.


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