Use the excel spreadsheet that accompanies this table if you want to estimate the rating for your firm.
For large manufacturing firms | For financial service firms | ||||||||
If interest coverage ratio is | If long term interest coverage ratio is | ||||||||
> | < | Rating is | Spread is | > | < | Rating is | Spread is | Operating Income Decline | |
-100000 | 0.199999 | D | 10.00% | -100000 | 0.049999 | D | 10.00% | -50.00% | |
0.2 | 0.649999 | C | 7.50% | 0.05 | 0.099999 | C | 7.50% | -40.00% | |
0.65 | 0.799999 | CC | 6.00% | 0.1 | 0.199999 | CC | 6.00% | -40.00% | |
0.8 | 1.249999 | CCC | 5.00% | 0.2 | 0.299999 | CCC | 5.00% | -40.00% | |
1.25 | 1.499999 | B- | 4.25% | 0.3 | 0.399999 | B- | 4.25% | -25.00% | |
1.5 | 1.749999 | B | 3.25% | 0.4 | 0.499999 | B | 3.25% | -20.00% | |
1.75 | 1.999999 | B+ | 2.50% | 0.5 | 0.599999 | B+ | 2.50% | -20.00% | |
2 | 2.499999 | BB | 2.00% | 0.6 | 0.799999 | BB | 2.00% | -20.00% | |
2.5 | 2.999999 | BBB | 1.50% | 0.8 | 0.999999 | BBB | 1.50% | -20.00% | |
3 | 4.249999 | A- | 1.25% | 1 | 1.49999 | A- | 1.25% | -17.50% | |
4.25 | 5.499999 | A | 1.00% | 1.5 | 1.99999 | A | 1.00% | -15.00% | |
5.5 | 6.499999 | A+ | 0.80% | 2 | 2.49999 | A+ | 0.80% | -10.00% | |
6.5 | 8.499999 | AA | 0.50% | 2.5 | 2.99999 | AA | 0.50% | -5.00% | |
8.50 | 100000 | AAA | 0.20% | 3 | 100000 | AAA | 0.20% | 0.00% | |
For smaller and riskier firms | |||||||||
If interest coverage ratio is | |||||||||
greater than | Less than | Rating is | Spread is | ||||||
-100000 | 0.499999 | D | 10.00% | ||||||
0.5 | 0.799999 | C | 7.50% | ||||||
0.8 | 1.249999 | CC | 6.00% | ||||||
1.25 | 1.499999 | CCC | 5.00% | ||||||
1.5 | 1.999999 | B- | 4.25% | ||||||
2 | 2.499999 | B | 3.25% | ||||||
2.5 | 2.999999 | B+ | 2.50% | ||||||
3 | 3.499999 | BB | 2.00% | ||||||
3.5 | 4.499999 | BBB | 1.50% | ||||||
4.5 | 5.999999 | A- | 1.25% | ||||||
6 | 7.499999 | A | 1.00% | ||||||
7.5 | 9.499999 | A+ | 0.80% | ||||||
9.5 | 12.499999 | AA | 0.50% | ||||||
12.5 | 100000 | AAA | 0.20% |
Last Update: 2/3/98
Name: Aswath Damodaran