In light of the huge stock market sell off following Standard & Poor’s decision to lower the U.S.’s bond rating from AAA to AA, the question was asked ‘What are governments around here rated?”
So I looked them up, along with major local employers and the large public companies on our Star 60 stock index.
I did not use the S&P ratings. I was unable to find a simple rating for the governments and business on the S&P site. Instead, I used Moody’s, the other largest and most used ratings agency.
Ratings are important. A bond is a loan. An entity sells them to the public to raise money and then has to pay the money back with interest. The higher a bond is rated, the lower the amount of interest the issuer must pay.
The list below is only Moody’s. If a government went to Fitch Ratings or the S&P for a rating and not Moody’s, they won’t be on this list.
AAA is tough to get. None of our local government entities or businesses are rated AAA, which according to Moody’s is organizations whose bonds are of “the highest quality, with the ‘smallest degree of risk.’”
AA is next in line and goes to organizations that present “very low credit risk.”
Moody’s breaks AA up into three levels — AA1, AA2 and AA3. Again, there were no local entities rated AA1.
So our most credit worthy government entities start at AA2:
Rockford Park District, Winnebago County, Kinnikinnick School District, City of Loves Park, Rock Valley College, North Suburban Public Library, Rock River Water Reclamation, Boone County and the University of Illinois.
The AA2 rated businesses are:
Bank of Montreal (Harris Bank parent), General Electric Co. (GE Aerospace) and Wal-Mart Stores Inc.
The AA3 government entities are:
City of Rockford, Rockton School District, Village of Roscoe, Kishwaukee Community College, Byron School District, Rochelle Township High School and Belvidere School District.
Businesses with AA3 ratings:
JPMorgan Chase & Co., PepsiCo Inc., U.S. Bancorp and United Parcel Service.
The next level is A rated bonds, which Moody’s defines as “upper-medium grade” subject to “low credit risk” but do have concerns that “suggest a susceptibility to impairment over the long term.
Again, Moody’s breaks A into A1, A2 and A3.
The A1 governmental agencies:
State of Illinois, Rockford School District, North Boone School District, Durand School District, Highland Community College, Forrestville Valley School District, Rochelle Elementary School District and Dixon School District.
The business or nonprofits rated A1:
Health Care Service Corp. (BCBS of Illinois), Lowe’s Companies Inc., and PACCAR Inc.
No local government agencies were rated A2. Businesses with an A2 rating:
AT&T, Boeing Co., Caterpillar Inc., Deere & Co., Ecolab Inc., McDonald’s Corp., Parker Hannifin Corp., United Technologies Corp. and Walgreen Co.
Governments with A3:
City of Rochelle Electric Enterprise.
Businesses with A3:
Schneider Electric SA, Allstate Corp., MetLife Inc., PNC Financial Services Group, Thermo Fisher Scientific and Verizon.
The lowest level of investment grade bonds are rated BAA and are broken down into BAA1, BAA2 and BAA3. BAA is defined by Moody’s as “moderate credit risk” and the bonds lack “protective elements” or “may be characteristically unreliable.”
None of the local governments were rated BAA 1, 2 or 3.
Businesses with a BAA1 rating:
Associated Banc-Corp, Comcast Corp., Exelon Corp., General Mills, Home Depot, Kohl’s Corp. and Sara Lee Corp.
Businesses with a BAA2 rating:
AmerisourceBergen, Kraft Foods, Kroger Co., Union Pacific Corp. and Valspar Corp.
Businesses with a BAA3 rating:
BorgWarner Inc., Newell Rubbermaid, Reliance Steel & Aluminum and Textron Inc.
The rest of the ratings are “speculative grade” also known as “high yield” or “junk.”
BA is the next level. Businesses with a BA1 grade:
GKN Holdings (GKN Rockford owner), Fiat S.p.A. and SPX Corp.
Businesses with a BA2 grade:
Deluxe Corp., Ford Motor Co. and TreeHouse Foods.
Businesses with a BA3 grade:
Allegiant Travel, Dean Foods and Sears Holdings Corp.
B rated bonds are “subject to high credit risk” and have “generally poor credit quality.”
Businesses rated B1:
Business rated B2:
Chrysler Group LLC and Titan International.
Businesses rated B3:
Bon-Ton Stores Inc.
CAA bonds are subject to “very high credit risk” with extremely poor credit quality.”
CA bonds are “highly speculative” and organizations rated CA” are “usually in default on their deposit obligations.”
C is the lowest of the low. Bonds from entities or businesses with this grade are “typically in default” and “potential recovery values are low.”
In my research, I found just two businesses in the CAA and CA category and none rated C.
NCO Group, which has a large call center in Rockford, was rated CAA1, and GateHouse Media, owner of the Register Star, was rated CA.