Downgrade

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Downgrade

A negative change in ratings for a stock, or other rated security.

Downgrade

A change in the rating of a bond or other security in a downward direction. For example, a bond that had previously been rated AAA may be downgraded to AA. Downgrades are considered detrimental because they mean the ratings agency believes that the issuer of the security is less likely to be able to fulfill its obligations, such as coupon payments. A downgrade increases the cost of funds for the issuer because investors expect a higher return in exchange for the increased risk on the security. See also: Upgrade.
References in periodicals archive ?
The following debt ratings have been downgraded and remain under review with negative implications:
Class C-1 downgraded to 'BB' from 'BBB' and is on Rating Watch Negative
Class IIA-4c downgraded to 'AA' from 'AAA' placed on Rating Watch Negative;
Class B-4 downgraded to 'B' from 'BBB' and placed on Rating Watch Negative;
Class B-1 downgraded to 'C/DR5' from 'BB', and removed from Rating Watch Negative;
Class B-4 downgraded to 'C/DR5' from 'B', removed from Rating Watch Negative.
The following ratings have been downgraded and remain on Rating Watch Evolving:
Credits taken off RWN in fourth quarter include State of New Jersey cigarette tax revenue bonds (affirmed following favorable legislative and administrative actions); Susquehanna Area Regional Airport Authority revenue bonds (senior bonds downgraded following the management's decision to circumvent the flow of funds under the master indenture; both senior and subordinate lien interest payments were made from draws on the debt service reserve fund, thereby calling into question the additional protection accorded to senior lien bondholders); and Detroit School District general obligation bonds (removed from RWN in conjunction with the underlying rating downgrade).
Class B-2 downgraded from 'BBB-' to 'C' and assigned a DR rating of 'DR5';
5% US$115 million senior convertible notes downgraded to 'BB-' from 'BB+;
Fitch downgraded Scottish Re's IFS rating to 'BBB+' from 'A-' on August 1, 2006.