Default Risk. Default risk can be thought of the intersection of business and financial risk. Business risk assesses a variety of factors: country risk, economic, institutional, governance, legal, financial system, industry risk, industry specific growth trends, market structure and competition, industry cyclicality, company specific risk, competitive position, competitive advantages, scale, scope and diversity, operating efficiency, profitability, market position, market share, consistency, asset flexibility. Also intangibles such as management, accessibility, trust, accountability, transparency, track record. The financial risk is the quantitative and qualitative assessment of the ways the borrower can service and repay the loan, namely the cash flows and to a lesser extent the earnings, as well as the asset quality. The issuer credit rating is the quantification of those two risks. The issuer credit ratings are signed by rating agencies, such as Standard and Poor's, Moody's or Fitch, but they're also developed internally at the individual banks, often with some dialogue with the rating agencies. The ratings stretch from AAA, or A double A for Moody's, to as low as C, although those are barely credit worthy and about to default. Here we see a matrix of varying business and financial risk with the resulting ratings. BBB-, or Baa3, are the lowest investment grade ratings. Anything below this, BB+ or Ba1, are the beginning of the sub-investment grade credits. These are the credits that start to show highest risk of default. This designation of investment, or sub-investment grade, matters because of the likelihood of default for each category. The rating quantifies the risk because as we see here, it is very unlikely for A rated companies or above to ever default. BBB companies have had some issues sporadically in the past, and in the later years of the bull run, post 2008 crash, BBB credits are again pushing the envelope, but it is the sub-investment grade credits at BB and under, where the default rates become meaningful. Interestingly enough, as we will see in later sections, most of the investment grade borrowing is not done via traditional loans from banks. As a result, banks often find themselves in the market of lending to sub-investment grade credits. This takes sharp analysis and savvy structuring in order to protect bank capital.