# Highest Rating > Highest Rating means the highest possible rating from Moody's (P-1 or Aaa) or S&P (A-1+ or AAA) that won't cause a Ratings Event. **Term:** Highest Rating **Last updated:** 2026-07-29 ## Definition ## What Highest Rating Means in a Contract Highest Rating is a defined term used to set a benchmark of creditworthiness that a counterparty, guarantor, or financial instrument must maintain. It is anchored to the top-tier rating categories issued by the major credit rating agencies, specifically Moody's (P-1 for short-term debt or Aaa for long-term debt) and Standard & Poor's, referred to as S&P (A-1+ for short-term debt or AAA for long-term debt). When a contract references Highest Rating, it is establishing a ceiling or reference point against which actual ratings are measured. The practical function of this term is to link a party's ongoing financial standing to specific contractual consequences. If the party in question falls below the Highest Rating, or drops by a specified number of notches from it, this can trigger what is commonly called a Ratings Event. That event, in turn, often activates other clauses, such as requirements to post additional collateral, obtain a guarantee, or in some cases allow the counterparty to terminate the agreement. In this way, Highest Rating functions less as a standalone concept and more as the reference point for a chain of contractual triggers. This term is especially common in agreements where counterparty credit risk is a central concern, such as those found in the