Start here Ratings sheet
Inputs for synthetic rating estimation
Please read the special cases worksheet (see below) before you use this spreadsheet.
Before you use this spreadsheet, make sure that the iteration box (under calculation options in excel) is checked.
Enter the type of firm = 2 (Enter 1 if large manufacturing firm, 2 if smaller or riskier firm, 3 if financial service
Do you have any operating lease or rental commitments? No
Enter current Earnings before interest and taxes (EBIT) = ₹ 14,325.00
Enter current interest expenses = ₹ 334.00
Enter current long term government bond rate = 6.88%
Output
Interest coverage ratio = 42.89
Estimated Bond Rating = Aaa/AAA Note: If you get REF! All over the place
Estimated Default Spread = 0.59% to No, and then reset it to Yes. It shou
Estimated Cost of Debt = 7.47%
If you want to update the spreads listed below, please visit [Link]
For large non-financial service firms For financial service firms (default spreads a
If interest coverage ratio is If long term interest coverage ratio is
> ≤ to Rating is Spread is greater than
-100000 0.199999 D2/D 20.00% -100000
0.2 0.649999 C2/C 17.00% 0.05
0.65 0.799999 Ca2/CC 11.78% 0.1
0.8 1.249999 Caa/CCC 8.51% 0.2
1.25 1.499999 B3/B- 5.24% 0.3
1.5 1.749999 B2/B 3.61% 0.4
1.75 1.999999 B1/B+ 3.14% 0.5
2 2.2499999 Ba2/BB 2.21% 0.6
2.25 2.49999 Ba1/BB+ 1.74% 0.75
2.5 2.999999 Baa2/BBB 1.47% 0.9
3 4.249999 A3/A- 1.21% 1.2
4.25 5.499999 A2/A 1.07% 1.5
5.5 6.499999 A1/A+ 0.92% 2
6.5 8.499999 Aa2/AA 0.70% 2.5
8.50 100000 Aaa/AAA 0.59% 3
For smaller and riskier firms
If interest coverage ratio is
greater than ≤ to Rating is Spread is
-100000 0.499999 D2/D 20.00%
0.5 0.799999 C2/C 17.00%
0.8 1.249999 Ca2/CC 11.78%
1.25 1.499999 Caa/CCC 8.51%
1.5 1.999999 B3/B- 5.24%
2 2.499999 B2/B 3.61%
Page 1
Start here Ratings sheet
2.5 2.999999 B1/B+ 3.14%
3 3.499999 Ba2/BB 2.21%
3.5 3.9999999 Ba1/BB+ 1.74%
4 4.499999 Baa2/BBB 1.47%
4.5 5.999999 A3/A- 1.21%
6 7.499999 A2/A 1.07%
7.5 9.499999 A1/A+ 0.92%
9.5 12.499999 Aa2/AA 0.70%
12.5 100000 Aaa/AAA 0.59%
Page 2
Start here Ratings sheet
se this spreadsheet.
ulation options in excel) is checked.
smaller or riskier firm, 3 if financial service firm) Small: <$5 billion
Yes or No
(Add back only long term interest expense for financial firms)
(Use only long term interest expense for financial firms)
te: If you get REF! All over the place, set the operating lease commitment question in cell F5
No, and then reset it to Yes. It should work.
financial service firms (default spreads are slighty different)
ng term interest coverage ratio is
≤ to Rating is Spread is
0.049999 D2/D 20.00%
0.099999 C2/C 17.00%
0.199999 Ca2/CC 11.78%
0.299999 Caa/CCC 8.51%
0.399999 B3/B- 5.24%
0.499999 B2/B 3.61%
0.599999 B1/B+ 3.14%
0.749999 Ba2/BB 2.21%
0.899999 Ba1/BB+ 1.74%
1.199999 Baa2/BBB 1.47%
1.49999 A3/A- 1.21%
1.99999 A2/A 1.07%
2.49999 A1/A+ 0.92%
2.99999 Aa2/AA 0.70%
100000 Aaa/AAA 0.59%
Page 3
Start here Ratings sheet
Yes 1
No 2
3
Page 4
Operating Leases
Operating lease inputs
Operating lease expense in current year = $ 25.00
Operating Lease Commitments (From footnote to financials)
Year Commitment ! Year 1 is next year, ….
1 $ 24.00
2 $ 22.00
3 $ 22.00
4 $ 21.00
5 $ 20.00
6 and beyond $ 111.00
Pre-tax Cost of Debt = 7.47% ! If you do not have a cost of debt, use the attached ratings estimator
From the current financial statements, enter the following
Reported Operating Income (EBIT) = $ 14,325.00 ! This is the EBIT reported in the current income statement
Reported Debt = $ 92.97 ! This is the interest-bearing debt reported on the balance sheet
Reported Interest Expenses = $ 334.00
Output
Number of years embedded in yr 6 estimate = 5 ! I use the average lease expense over the first five years
to estimate the number of years of expenses in yr 6
Converting Operating Leases into debt
Year Commitment Present Value
1 $ 24.00 $ 22.33
2 $ 22.00 $ 19.05
3 $ 22.00 $ 17.72
4 $ 21.00 $ 15.74
5 $ 20.00 $ 13.95
6 and beyond $ 22.20 $ 62.70 ! Commitment beyond year 6 converted into an annuity for ten years
Debt Value of leases = $ 151.50
Restated Financials
Operating Income with Operating leases reclassified as debt = $ 14,334.85
Debt with Operating leases reclassified as debt = $ 244.47
Full Operating lease adjustment
Reported Operating income = $14,325.00
+ Current year's operating lease expense $25.00
- Depreciation on leased asset = $15.15
Adjusted Operating Income $14,334.85
Page 5
Operating Leases
e attached ratings estimator
orted in the current income statement
earing debt reported on the balance sheet
se expense over the first five years
r of years of expenses in yr 6
into an annuity for ten years
Page 6
Compatibility Report for [Link]
Run on 12-01-2025 16:30
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Minor loss of fidelity # of
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Version
Excel 97-2003
