Moody's Investors Service has refined its scale for rating healthcare, higher education and other not-for-profit bonds to reflect sharper distinctions in credit quality.
The decision to expand the rating system was prompted in part by increased volatility in the healthcare and higher education sectors.
Effective Oct. 2, the New York-based rating agency added the numerical modifiers "2" and "3" to its existing letter-rating system. Since 1981, Moody's has used "1" as a modifier, indicating that a rating ranks at the high end of a category. The "2" and "3" denote mid-range and low-end ratings, respectively.
As a result, the number of possible bond ratings increases to 19 from 14, Moody's said.
All new not-for-profit bond financings will carry the new modifiers. Meanwhile, Moody's is reviewing and updating 785 credits previously assigned Aa, A, Baa and B ratings, affecting $45 billion of outstanding debt. The review is expected to be completed in four to six weeks.
Two competing agencies-Standard & Poor's Corp. and Fitch Investors Service-already use "plus" and "minus" modifiers to rate healthcare bonds.