2009 Annual Report and Financial Statements - UBA Plc

Shareholder information (continued)
The use of credit ratings defi nes their function: “investment grade” ratings (International Long-term, ‘AAA’ to ‘BBB-’; Short-term, ‘F1’ to ‘F3’ ) indicate
relatively low to moderate credit risk, while those in the “speculative” or “non investment grade” categories (International Long-term, ‘BB+’ to ‘D’;
Short-term, ‘B’ to ‘D’) signal either a higher level of credit risk or that a default has already occurred. Credit ratings express risk in relative rank order,
which is to say they are ordinal measures of credit risk and are not predictive of a specifi c frequency of default or loss.
International credit ratings
International credit ratings assess the capacity to meet foreign currency or local currency commitments. Both “foreign currency” and “local
currency” ratings are internationally comparable assessments. The local currency rating measures the likelihood of repayment in the currency
of the jurisdiction in which the issuer is domiciled and hence does not take account of the possibility that it will not be possible to convert local
currency into foreign currency or make transfers between sovereign jurisdictions.
National credit ratings
In certain markets, Fitch provides National Ratings, which are an assessment of credit quality relative to the rating of the “best” credit risk in a
country. This “best” risk will normally, although not always, be assigned to all fi nancial commitments issued or guaranteed by the sovereign state.
For particular countries, Fitch Ratings also assigns National Insurance Financial Strength Ratings, using a scale unique to such ratings. National
Ratings are not intended to be internationally comparable and are denoted by a special identifi er for the country concerned.
Country ceiling ratings
Country ceiling ratings are assigned internationally and refl ect Fitch’s judgment regarding the risk of capital and exchange controls being
imposed by the sovereign authorities that would prevent or materially impede the private sector’s ability to convert local currency into foreign
currency and transfer to non-resident creditors transfer and convertibility (T&C) risk. Given the close correlation between sovereign credit and
T&C risks, where the country ceiling is above the sovereign rating, ratings at the country ceiling may exhibit a greater degree of volatility than
would normally be associated with ratings at that level.
GCR’s rating symbols and defi nitions
Short-term debt rating
A short-term debt rating rates an organisation’s general unsecured creditworthiness over the short term (i.e. over a 12 month period). Such a
rating provides an indication of the probability of default on any unsecured short-term debt obligations, including commercial paper, bank
borrowings, bankers’ acceptances and negotiable certifi cates of deposit.
A1+ Highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or access to alternative sources of
funds is outstanding, and safety is just below that of risk-free treasury bills.
Long-term debt rating
A long-term debt rating rates the probability of default on specifi c long-term debt instruments over the life of the issue. It is possible that
diff erent issues by a single issuer could be accorded diff erent credit ratings, depending on the underlying characteristics of each issue (e.g. is it
a senior or a subordinated debt instrument, is it secured or unsecured and, if secured, what is the nature of the security).
AA+ Very high credit quality. Protection factors are very strong. Adverse changes in business, economic or fi nancial conditions would increase
investment risk although not signifi cantly.
Annual Report 2009 121
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