medium · Corporate Credit Analysis ratings

What is the 'Issuer-Level PD Floor' in the context of notching?

1. The fact that probability of default always tends to increase as a company ages toward the later, mature end of its industry cycle.
2. The rule stating that a corporate bond issue can virtually never be rated higher than the sovereign credit rating of its home government by policy.
3. The minimum level of free cash flow generation the credit agreement requires a borrower to maintain in order to avoid an automatic downgrade.
4. The principle that an instrument's rating is ultimately limited by the issuer's default probability, regardless of how high its recovery may be.

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