Short- and long-term Issuer Default Ratings (IDRs) may be assigned to entities for certain sectors, including Corporate, Financial Institution and Sovereign entities, which reflect the ability of an entity to meet financial commitments on a timely basis. Similar to other ratings, these are drawn from the International Long-term and Short-term ratings scales and are identified as IDRs.
A short-term Issuer Default Rating (SIDR) is based on the liquidity profile of the rated entity and relates to the ongoing capacity to meet financial obligations with a relatively short time horizon (less than 13 months, except for public finance where short-term ratings may be assigned up to a three year horizon, in line with industry standards).
The long-term IDR is assigned to issuers and counterparties, reflecting their ability to meet all of their most senior financial obligations on a timely basis over the term of the obligation. The long-term IDR, therefore, is effectively a benchmark probability of default rating.
The IDRs of an issuer who has defaulted on some or all material financial obligations will be rated 'RD' or 'D,' respectively. Default status is not prospective and is determined following expiration of any applicable grace period under the defaulted obligation's governing documents.
Note: Securities in an issuer's capital structure may be rated higher, lower or the same as the long-term IDR on the basis of their recovery prospects, as well as differences in willingness to pay. Structured finance securities generally are not assigned IDRs, but each security is rated on the basis of various stress scenarios in combination with relative seniority, prioritization of cash flows and other structural mechanisms.
