Canadian Preferred Shares, and the issuers of these securities, are being rated by two independent credit rating agencies. A credit rating is an evaluation of the credit risk of the issuer or the security, predicting the ability of the issuer to pay back the debt and the likelihood of the debtor defaulting. The credit rating is an evaluation by a Credit Rating Agency of the Preferred Share’s Issuer by the Credit Rating Agency’s analysts.
Credit Score is the rating/evaluation of an issuer’s credit worthiness as rated by the credit reporting agency. Credit ratings are forward-looking opinions about credit risk. They reflect the credit worthiness of an issuer or security based on quantitative and qualitative analysis by the Credit Rating Agency, in accordance with applicable methodologies and criteria. They provide opinions on relative measures of risk. Ratings meant to predict any specific default probability and are not based on expectations.
Rating agencies use rating symbols (ie AA, Pfd-1(High)) as a concise method of expressing an opinion to the market, but there are a limited number of rating categories for the possible slight risk differentials that exist across the rating spectrum. Credit ratings in the same category are not necessarily of exactly the same quality. An Issuer Rating, reflects the credit agency’s assessment of that issuer’s likelihood of default.
The following table lists the credit rating symbols for DBRS, S&P and S&P Global with a description of each rating.
Credit Rating Symbols / Codes
| DBRS | S&P | S&P Global | Rating Description |
| Pfd-1(High) Pfd-1 Pfd-1(Low) |
P-1(High) P-1 P-1(Low) |
AA AA-, A+ A, A- |
 Superior: High quality security with minimal credit risk. This rating is backed by strong earnings and balance sheet. Pfd-1 securities generally correspond with companies whose senior bonds are rated in the AAA or AA categories. |
| Pfd-2(High) Pfd-2 Pfd-2(Low) |
P-2(High) P-2 P-2(Low) |
BBB+ BBB BBB- |
Satisfactory: Upper-medium grade and comes with moderate credit risk. There is substantial protection of dividend and principal, but earnings, balance sheet and coverage ratios are not as strong as Pfd-1 rated companies. Generally, Pfd-2 ratings correspond with companies whose senior bonds are rated in the “A” category |
| Pfd-3(High) Pfd-3 Pfd-3(Low) |
P-3(High) P-3 P-3(Low) |
BB+ BB BB- |
Adequate: Medium credit quality while protection of dividends and principal is still considered. Comes with moderate credit risk. There may be speculative characteristics. Not investment grade |
| Pfd-4(High) Pfd-4 Pfd-4(Low) |
P-4(High) P-4 P-4(Low) |
B+ B B- |
Speculative: Substantial credit risk, and are speculative in nature. The protection of dividend and principal is uncertain, but especially so during times of economic adversity. Companies with preferred shares rated Pfd-4 generally coincide with entities that have senior bond ratings ranging from the lower end of the BBB category through the BB category.
Not investment grade. |
Canadian Preferred Shares – Mission
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