While the Standard & Poor’s (S&P) analysts create the ratings, they are also quite honest in what they do and what it means, calling its credit ratings “an informed opinion…”
Burnett County earned a rating of ‘AA,’ which is very, very good. For financial firms to even consider investing in or buying county bonds, they must score an ‘Investment Grade’ score or higher, which is above a ‘BBB-‘ or higher. Otherwise the firm, county, municipal body, state or even nation is considered ‘speculative’ if below that ‘BBB-‘. That rating can be due to a variety of factors, including debt, ability to pay or stability of government and financial systems.
To achieve a rating, S&P is contracted, and does a number of pre-investigations before they dig in. It does cost the county to get an S&P rating, but the potential benefits could amount to much, much more, as the broad interest in their bond sale and the subsequent 1.812% interest rate offer proved.
As part of their research, S&P looks at annual reports, current standings with contractors, vendors and others, past financial presentations and reports, press releases, news reports, growth and losses in population and even articles about the county. They also do a number of interviews with administration and people involved in the county finances as they make an assessment and ultimately issue a rating.
“Using these resources, the analysts assess the company’s financial condition, operating performance, and policies. Most importantly, they form an opinion about the company’s risk management strategies,” S&P noted.
For comparisons, Burnett County’s ‘AA’ rating is on par with a few big players, such as France, Belgium, South Korea, Taiwan, The UAE, and even the United Kingdom, pre-Brexit.
Only a few large government bodies or nations have achieved a rare ‘AAA’ rating: Australia, Denmark, Germany, Lichtenstein, Switzerland, Singapore, Canada, Sweden, Luxembourg, the Netherlands and Norway. Even the United States doesn’t have an S&P ‘AAA’ rating anymore, but now comes in just below at AA+.
Some might remember that the stock markets did a tumble when S&P downgraded the US from a ‘AAA’ to an ‘AA+’ a decade ago, in part due to the 2008 financial recession, and in fact, S&P was assigned some of the blame for that recession, originally, by rating many of the overleveraged financial institutions far too high, many of which later defaulted, in part because they were being paid to issue ratings.
S&P was later cleared somewhat from that allegation when Congressional hearings suggested that continued, unchecked deregulation of the markets were the deepest cause.