Structured Finance Rating Scale and Definitions

Analyst Contacts Momin Farooque momin.farooque@pacra.com October 2024 Structured Finance Rating Criteria Scale Structured Finance Ra�ng Structured Finance ra�ng reflects forward-looking opinion on credit worthiness of underlying instrument; more specifically it covers rela�ve ability to honor financial obliga�ons. The primary factor being captured on the ra�ng scale is rela�ve likelihood of default. Scale Long-Term Ra�ng AAA (sf) Highest credit quality. Lowest expecta�on of credit risk. Indicate excep�onally strong capacity for �mely payment of financial commitments AA+ (sf) AA (sf) AA- (sf) Very high credit quality. Very low expecta�on of credit risk. Indicate very strong capacity for �mely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A+ (sf) A (sf) A- (sf) High credit quality. Low expecta�on of credit risk. The capacity for �mely payment of financial commitments is considered strong. This capacity may, nevertheless, be vulnerable to changes in circumstances or in economic condi�ons. BBB+ (sf) BBB (sf) BBB- (sf) Good credit quality. Currently a low expecta�on of credit risk. The capacity for �mely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic condi�ons are more likely to impair this capacity. BB+ (sf) BB (sf) BB- (sf) Moderate risk. Possibility of credit risk developing. There is a possibility of credit risk developing, par�cularly as a result of adverse economic or business changes over �me; however, business or financial alterna�ves may be available to allow financial commitments to be met. B+ (sf) B (sf) B- (sf) High credit risk. A limited margin of safety remains against credit risk. Financial commitments are currently being met; however, capacity for con�nued payment is con�ngent upon a sustained, favorable business and economic environment. CCC (sf) CC (sf) C (sf) Very high credit risk. Substan�al credit risk “CCC” Default is a real possibility. Capacity for mee�ng financial commitments is solely reliant upon sustained, favorable business or economic developments. “CC” Ra�ng indicates that default of some kind appears probable. “C” Ra�ngs signal imminent default. D (sf) Obliga�ons are currently in default. *Where “sf” denotes structured finance Ra�ng Modifiers | Ra�ng Ac�ons Outlook (Stable, Posi�ve, Nega�ve, Developing) Indicates the poten�al and direc�on of a ra�ng over the intermediate term in response to trends in economic and/or fundamental business / financial condi�ons. It is not necessarily a precursor to a ra�ng change. ‘Stable’ outlook means a ra�ng is not likely to change. ‘Posi�ve’ means it may be raised. ‘Nega�ve’ means it may be lowered. Where the trends have conflic�ng elements, the outlook may be described as ‘Developing’. Ra�ng Watch Alerts to the possibility of a ra�ng change subsequent to, or, in an�cipa�on of some material iden�fiable event with indeterminable ra�ng implica�ons. But it does not mean that a ra�ng change is inevitable. A watch should be resolved within foreseeable future, but may con�nue if underlying circumstances are not setled. Ra�ng watch may accompany ra�ng outlook of the respec�ve opinion. Suspension It is not possible to update an opinion due to lack of requisite informa�on. Opinion should be resumed in foreseeable future. However, if this does not happen within six (6) months, the ra�ng should be considered withdrawn. Withdrawn A ra�ng is withdrawn on a) termina�on of ra�ng mandate, b) the debt instrument is redeemed, c) the ra�ng remains suspended for six months, d) the en�ty/issuer defaults., or/and e) PACRA finds it imprac�cal to surveil the opinion due to lack of requisite informa�on. Harmoniza�on A change in ra�ng due to revision in applicable methodology or underlying scale. Surveillance. Surveillance on a publicly disseminated ra�ng opinion is carried out on an ongoing basis �ll it is formally suspended or withdrawn. A comprehensive surveillance of ra�ng opinion is carried out at least once every six months. However, a ra�ng opinion may be reviewed in the intervening period if it is necessitated by any material happening. Ra�ng ac�ons may include "maintain", "upgrade", or "downgrade". Note: This scale is applicable to the following methodology(s): a) Broker En�ty Ra�ng b) Corporate Ra�ng c) Debt Instrument Ra�ng d) Financial Ins�tu�on Ra�ng e) Holding Company Ra�ng f) Independent Power Producer Ra�ng g) Microfinance Ins�tu�on Ra�ng h) Non-Banking Finance Company Disclaimer: PACRA has used due care in prepara�on of this document. Our informa�on has been obtained from sources we consider to be reliable but its accuracy or completeness is not guaranteed. PACRA shall owe no liability whatsoever to any loss or damage caused by or resul�ng from any error in such informa�on. Contents of PACRA documents may be used, with due care and in the right context, with credit to PACRA. Our reports and ra�ngs cons�tute opinions, not recommenda�ons to buy or to sell