Aswath Damodaran 328
The Ratings Table
Interest Coverage
Ratio
Ratin
g
Typical default
spread
Market interest rate
on debt
> 8. 5 AAA 0. 35 % 4. 35 %
6. 50 - 6. 50 AA 0. 50 % 4. 50 %
5. 50 – 6. 50 A+ 0. 70 % 4. 70 %
4. 25 – 5. 50 A 0. 85 % 4. 85 %
3. 00 – 4. 25 A- 1. 00 % 5. 00 %
2. 50 – 3. 00 BBB 1. 50 % 5. 50 %
2. 05 - 2. 50 BB+ 2. 00 % 6. 00 %
1. 90 – 2. 00 BB 2. 50 % 6. 50 %
1. 75 – 1. 90 B+ 3. 25 % 7. 25 %
1. 50 - 1. 75 B 4. 00 % 8. 00 %
1. 25 – 1. 50 B- 6. 00 % 10. 00 %
0. 80 – 1. 25 CCC 8. 00 % 12. 00 %
0. 65 – 0. 80 CC 10. 00 % 14. 00 %
0. 20 – 0. 65 C 12. 00 % 16. 00 %
< 0. 20 D 20. 00 % 24. 00 %
This is the look-up table that I used to determine what my rating and cost of
debt would be at a 12.44 interest coverage ratio.
