Jurisdiction(s):
United Kingdom

Key definition

Credit rating definition

What does Credit rating mean? In legal practice, a credit rating is an independent opinion of creditworthiness, given as an issuer credit rating or an issue-specific rating, typically expressed on a scale (for example AAA–D), distinguishing investment-grade from sub-investment-grade risk, and often with outlook/watch status. It is used to assess investment risk, pricing and eligibility in transactions and regulation. The term is broadly descriptive across finance and capital markets, but is defined for regulatory purposes in the Credit Rating Agencies Regulation (EU) No 1060/2009 (as retained in the UK) as an opinion of creditworthiness issued using an established ranking system. In the UK,...

Legal and market consequences of credit rating downgrades: outlooks, watch-lists, financing costs, CLO trigger interpretation, and impacts on SIVs and sovereign debt

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

Ratings outlooks and watch-lists

Among the leading Credit rating agencies (CRAs) are Moody’s Investors, Standard & Poor’s (S&P) and Fitch Ratings, which carry out periodic reviews of assigned ratings. They also publish rating outlooks—opinions on the likely direction of a rating over the medium term (typically the next 6 to 24 months)—which may be:

positive
negative
stable
developing or evolving

An outlook usually explains the rationale and the possible scale of any change; in most cases, outlooks are stable. If an issuer’s credit profile is weakening and a payment default is anticipated, it may be moved to a negative outlook or placed on negative watch to signal that a Downgrade could follow. Receiving a negative outlook or being added to a watch-list is not, in itself, a rating action, but it can foreshadow one.

Watch-lists indicate that a rating is under review for a potential short‑term change (usually within 90 days), specifically:

a possible upgrade
a possible downgrade
where the direction is uncertain

The watch phase is typically used to gather further information...

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Web page updated on 21/05/2026

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