Rating trigger is one of several possible covenants in a bond issue agreement or loan agreement. Rating trigger means that the lender (bond buyer) has the right to terminate the bond if the issuer’s rating falls below a certain predefined level. Often, the investment grade rating is the limit below which the rating of one of the major rating agencies (S&P, Fitch, Moody’s) may not fall. However, if this does happen, the investor can return the bond at a certain value. The value is then often the nominal value (100 %).
