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U.S. PUBLIC FINANCE

Guidance for Assigning Individual Debt Instrument Ratings
In assigning instrument ratings, we consider all of the analytic elements relevant to the specific debt
issuance and their impact. In this section, we provide guidance on the typical range of notching for common
security types. For each major security type, the guidance for assigning a rating is described by analytic
element and is typically cumulative. However, actual ratings may be different from the guidance where
there is unusual strength or weakness in the legal structure or revenue base, in the relation of an issuer to
the obligation, or in the terms of the debt instruments. Other issuer-specific or instrument-specific
considerations may also be relevant.

The exhibit below illustrates the typical rating range seen between a school district issuer rating and its
instrument ratings.

EXHIBIT 7
Illustrative Example: K-12 Relative Ratings for Typical School District Instruments

Note: GOULT stands for general obligation unlimited tax, GOLT for general obligation limited tax and COPs for certificates of participation.
Source: Moody’s Investors Service

Where a school district is undergoing financial distress, we may widen or narrow the rating differentials
between the issuer rating and the rating of any specific obligations, based on our view of the relative
probabilities of default and relative loss rates upon default.

33 JANUARY 26, 2021 RATING METHODOLOGY: US K–12 PUBLIC SCHOOL DISTRICTS