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<br />COMPARISON OF RATINGS* <br />(following the assignment of the City's bond rating on July 14,2009) <br /> <br />Standard & Poor's <br />AAA = Extremely Strong <br />AA+ = Very Strong <br /> <br />[AA = Very Strong] +- (City's new bond rating) <br />AA- = Very Strong <br />A+ = Strong <br /> <br />A = Good (City's old bond rating) --+ <br />A-=Good <br />BBB+ = Good <br />BBB = Adequate <br />BBB- = Adequate <br />BB+ = Marginal <br />BB = Marginal <br />BB- = Marginal <br />B+ = Weak <br />B=Weak <br />B- = Weak <br /> <br />Moodv's <br />Aaa = Exceptional <br />Aal = Excellent <br /> <br />Aa2 = Excellent <br />AaJ = Excellent <br />AI = Good <br /> <br />/A2 = Gooc!j <br />A3 = Good <br />Baal = Adequate <br />Baa2 = Adequate <br />BaaJ = Adequate <br />Bal = Questionable <br />Ba2 = Questionable <br />BaJ = Questionable <br />Bl = Poor <br />B2 = Poor <br />B3 = Poor <br /> <br />* A grade given to bonds that indicates their credit quality. Private independent rating <br />services such as Standard & Poor's, Moody's and Fitch provide these evaluations of a <br />bond issuer's financial strength, or its ability to pay a bond's principal and interest in a <br />timely fashion. Bond ratings are expressed as letters ranging from 'AAA', which is the <br />highest grade, to 'C' ("junk"), which is the lowest grade. Different rating services use the <br />same letter grades, but use various combinations of upper- and lower-case letters to <br />differentiate themselves. <br /> <br />The bond rating is assigned prior to the bond sale. It reflects the agency's judgment of the credit- <br />worthiness of the issuer, and is based on a number of objective and subjective criteria including <br />debt per capita, overlapping debt of other political subdivisions, tax collection experience, tax <br />base, employment levels, and the quality of the primary source of repayment of the bonds. <br /> <br />Obtaining a rating is relatively expensive. The cost is normally recovered in more favorable <br />interest rates on the bonds. In addition, most institutional investors (banks, insurance companies) <br />may not or will not buy unrated bonds. If an issue is relatively small (say, less than $1 million), <br />unrated bonds can be and have been successfully sold, but the market is limited and the <br />purchasing underwriter will offer a price that reflects the additional costs of re-offering the bonds. <br /> <br />Excerpt from the Handbook for Minnesota Cities <br />