A warning by a bond rating firm indicating that a company's credit rating may change after the current review is concluded.
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Notice from a credit rating agency to a bond issuer that a negative factor has arisen in the agency's review of the issuer's credit rating. If the issuer does not take steps to explain or alleviate the factor, the credit watch may be the first step toward a reduction in the issuer's rating. For example, a credit rating agency may discover a dramatic drop in an issuer's liquidity ratio, which increases the likelihood of default on a debt. It would then send a credit watch to the issuer.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
The reevaluation of the credit quality of a firm's debt obligations by a rating agency. Being the object of a credit watch generally indicates the credit quality of a firm's debt has deteriorated and may be downgraded.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.