Securitization Rating Agency of the Year — Kroll Bond Rating Agency
Kroll Bond Rating Agency (KBRA) has always had a culture of intellectual curiosity. Since its foundation in 2011, the search for new challenges and frontiers has led the firm to all corners of securitization. From areas as disparate as single-family rental and commercial real estate NPLs to marketplace lending and solar. Now celebrating its 10th anniversary, the firm is active across a wide array of structured finance areas, including ABS consumer lending, CMBS, MBS, and CLOs, as well as esoterics such as aviation, and whole business securitizations.
Given its spirit of innovation, it is no surprise that KBRA is particularly strong in esoterics. The company has also issued a swathe of ratings in areas including media rights syndication, insurance related ABS, residential mortgage serving rights, and reverse mortgages. But the rating agency was founded with a much broader goal in mind.
“When we all came to KBRA, we wanted to draw on our collective experience over the years to address market feedback on what a better agency would do,” says Eric Thompson, global head of structured finance ratings. “One of the great things about the leadership team is that around half of them have been with the firm since the start in 2011, and they continue to carry that culture throughout the firm.”
The leadership team now comprises eight individuals with decades of collective experience across investment banking and capital markets. But the aspiration to continually improve on what a rating agency can provide investors remains key. This spans the foundational elements of KBRA’s methodologies, timeliness of pre-sale reports, depth of content and - crucially during the pandemic - surveillance. Thompson says KBRA has always used surveillance as a feedback loop for ratings. But the firm also uses it to provide the market with valuable information and insight even when there is no underlying rating action. Going into the 2020 pandemic, KBRA already had a clear focus on how to provide surveillance in turbulent times.
“That’s when the market really counts on credit rating agencies to step up,” he says. “In 2020, more than our new issue ratings, it was frankly our surveillance efforts across all of our asset classes that stood out.”
With whole sections of the economy under threat and huge volatility in the capital markets investors turned to rating agencies like KBRA to help them navigate the unprecedented shock. The numbers show how well the firm responded to investors’ needs. Since the start of the pandemic, Thompson estimates that KBRA has published close to 170 research reports on top of almost 670 surveillance reports and over 190 new issue reports. Not only was the rating agency there for investors every step of the way, but the underlying ratings held up well.
“By and large our processes bore fruit because our ratings were largely stable,” he says. “The sole exception were certain areas that were adversely or overwhelmingly impacted by the pandemic.”
In 2020 alone the firm had over 600 investor meetings, roundtables, calls and one-on-one meetings to walk customers through new issues and research reports. There were regular monthly webinars open to non-clients that drew strong audiences eager for insight. But KBRA’s interaction with investors is very much a dialogue. The firm has been using investor requests and concerns to inform how it interacts with the market for years in an approach Thompson sums up as “don’t stop listening.”
What makes the agency special, he says, is that it actively considers feedback to see how KBRA can act on it. Often this has given rise to new services, publications, and indices. A request to rate legacy CMBS deals back in 2013, for example, resulted in the launch of a successful subscription surveillance service, the KBRA Credit Profile (KCP). KCP has evolved to provide information and analysis for over 1,000 deals a month for wide variety of market constituents. Amid the pandemic, investors asked for sector overviews, prompting KBRA to put out research pieces on a number of sectors, including solar and marketplace lending. There were also requests for indices on auto ABS, RMBS and most recently equipment securitizations – and KBRA delivered. This is an agency committed to interaction with the market and not willing to simply rely on its internal expertise.
“We’ve always felt it’s important not to rest on our laurels and really engage with the market on fresh trends,” Thompson says. “It’s the totality of what we produce that counts, and in 2020 that’s where we proved our mettle.” GC