Definition of Ba2 / BB

What is Ba2 / BB?

Ba2 / BB are rating designations used by major credit rating agencies for a credit issue or issuer that signify higher degrees of default risk in their rating spectra. Moody’s Investors Service uses Ba2, while S&P Global Ratings and Fitch Ratings use BB.

Ba2 / BB are ratings below investment grade, but they are the second highest rating in the non-investment grade group (junk or high yield).

Key takeaways

  • Ba2 / BB are credit ratings just below investment grade, considered more speculative.
  • Ba2 falls above the Ba3 rating and below Ba1, while BB is above BB- and below BB +.
  • Moody’s uses the Ba2 rating, while S&P and Fitch use BB.
  • Companies often seek the services of a credit rating agency to rate new issues to help with transparency and price discovery for investors.

Understanding Ba2 / BB

The Ba2 / BB rating, as well as all other ratings set by the agencies, have descriptive guidelines. The ratings apply to both the credit instrument being issued and the issuer of the credit instrument.

Ba2 / BB rating for an issue

For Moody’s, an issue rated Ba2 is considered speculative and is subject to substantial credit risk. The modifier ‘2’ indicates that the obligation is in the middle of its generic rating category, one notch below Ba1 and one notch above Ba3.

For S&P, an issue rated BB is considered to have “significant speculative characteristics” and “while such obligations are likely to have some quality and protection characteristics, these may be offset by large uncertainties or significant exposures to adverse conditions.” The BB rating for S&P is one notch below BB + and one notch above BB-.

Fitch notes that its BB rating means that the issue is susceptible to changes in business or the economy. Fitch’s rating system follows that of S&P, where BB is one notch below BB + and one notch above BB-.

Ba2 / BB rating for an issuer

For Moody’s, issuers rated Ba2 are considered speculative and are “subject to substantial risk of default on certain senior operating obligations and other contractual commitments.”

Although considered non-investment grade, the Ba2 / BB rating is the second highest rating in the speculative class, behind only Ba1 / BB +.

For S&P bond rating agencies, a rated obligor Bed and breakfast it faces “significant ongoing uncertainties and exposure to adverse business, financial or economic conditions, which could lead to the debtor’s inadequate ability to meet its financial commitments.” Fitch’s system says BB’s ratings show that there is a risk of default, especially if a business or economic conditions change, but the business has the flexibility to meet its current obligations.

Credit ratings
Aaa AAA principal
Aa1 AA +
Aa2 AA High grade
Aa3 AA –
A1 A +
A2 TO Medium-high grade
A3 TO-
Baa1 BBB +
Baa2 BBB Medium-low grade
Baa3 BBB –
Ba1 BB + Trash
Ba2 Bed and breakfast Grade without investment
B1 B +
B2 B Very speculative
B3 B-
Caa CCC Extremely speculative
C D Default / Recovery
Credit ratings

Special Considerations

When a company wishes to issue a bond to raise money for any of many purposes, it generally seeks the services of the rating agencies to designate its credit opinions on the bond issue and the issuer itself. The ratings will aid in the bond’s price discovery process when it is traded to investors.

A Ba2 / BB rating is below investment grade or is sometimes referred to as high yield or junk. Therefore, the bond’s yield is generally higher than that of an investment grade security to offset the increased risk of default that the bond investor is assuming.

The issue and the issuer are typically rated the same, but could be different if, for example, the issue is enhanced with additional credit protection for investors. The bond can be rated Ba1 / BB +, a higher level, and the issuer will remain at Ba2 / BB.

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Mark Holland

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