The sovereign rating is an assessment of the probability of default in government debt. A
government default is defined by the credit rating agencies as either (i) a missed payment or (ii)
a distressed debt exchange implying a diminished financial obligation by the government. The
credit rating agencies state that they look at a 5-year horizon and evaluate a large number of
economic and political factors, and make qualitative and quantitative assessments, when rating a
sovereign bond.