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US Securitization Awards: Rating Agency of the Year – Kroll Bond Rating Agency

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The firm's culture of intellectual curiosity is a key driver of its innovation and leading analysis across ABS markets

For the second year running, Kroll Bond Rating Agency (KBRA) demonstrated it has no equal when it comes to providing cutting-edge insight and analysis across all areas of the securitization market. The breadth, depth, and consistency of its content during yet another tumultuous year for the market made it once again the worthy winner of Securitization Rating Agency of the Year.

 “We're both humbled and honoured to receive the award again,” says Eric Thompson, global head of structured finance ratings. KBRA refuses to rest on its laurels despite its clear dominance across multiple securitization segments. The agency ranks first on league tables for consumer loan, solar, tax-lien, and small-business ABS. Furthermore, no agency worked on more RMBS in the first half of 2022.

Distinguishing factors have helped propel KBRA to the forefront of the securitization space, and Thompson points to culture. “Intellectual curiosity has been a cornerstone for us since the company’s founding,” he says. The culture of curiosity has driven KBRA’s innovation across all structured finance market segments. One of the areas where this is most evident is commercial ABS, where the agency is particularly strong in esoterics, which are among the two dozen sub-asset classes it rates in the sector.

You can have the best culture, processes, and methodology, bar none. But you absolutely have to keep listening to the market
Eric Thompson, global head of structured finance ratings
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“We continue to have an innovative spirit; coupled with a collaborative work environment, this has definitely given us an edge,” says Thompson. Many members of the structured finance leadership team have been with KBRA since its early days, helping maintain the agency’s culture as it has grown over the years.

The firm’s rigorous analysis and timely reports, as well as the accessibility of its analysts, are the bedrock upon which KBRA has built a reputation across its new issue ratings and surveillance efforts. “That’s something that has really resonated with market constituents,” says Thompson.

The speed with which KBRA can react to market events to produce crucial analysis and commentary is particularly impressive. Aviation serves as a perfect example. Issuance in that sector has been subdued, but the outbreak of Russia’s war against Ukraine raised serious performance questions.

“The market was receptive to how quickly we were able to publish on exposure to Russia-Ukraine, and how we thought about that event in terms of rating Watch Placements and resolutions,” says Thompson. This isn’t surprising given the firm’s focus on providing high quality credit opinions and analysis throughout the life of a transaction. “Surveillance was important to our founders and it's in our DNA,” says Thompson.

Part of the market’s recognition of KBRA’s win in 2021 was the agency’s exemplary ability to deliver forward-looking analysis, which was vital during a pandemic that presented a unique set of market challenges.

That continues to be important given inflationary pressures that have prompted a series of rate hikes. “As we did in the early days of COVID, we take a pragmatic, practical approach to credit and consider not just historical performance, but expected performance,” says Thompson, who early in his career saw agencies struggle in this regard. “This means discounting positive performance that occurred in many asset classes owing to government stimulus, particularly consumer asset classes, and incorporating future credit degradation that may occur because of prevailing economic headwinds.”

Part of what informs KBRA’s keen foresight is its aforementioned emphasis on surveillance, as well as research. In addition to topical, thought-provoking commentary on a range of asset classes, KBRA publishes monthly performance indices for consumer ABS including auto, unsecured loans, and solar. The agency also publishes RMBS indices and introduced an equipment loan index last year.

Another constant in KBRA’s approach is its dedication to market engagement. “You can have the best culture, processes, and methodology, bar none,” says Thompson. “But you absolutely have to keep listening to the market.” KBRA is listening diligently - always assessing how to best improve its services. Over the last two years, the agency has held well over 1,000 touch points with investors across face-to-face meetings, roundtables, and online calls. “We continue to be independent and objective,” says Thompson. “But we seek out and listen to marketplace feedback and that’s been an important factor in our success.”