KBRA Releases Research – KBRA’s Global Rating Stability and Transition Study: 2011-2022

KBRA releases a report examining the stability of KBRA’s ratings and how those ratings transitioned over 1-year, 3-year, 5-year, and lifetime time horizons between 2011 and 2022. The ratings universe used in this study includes both published and unpublished long-term credit ratings (LTCR) assigned across all geographical regions, which are assigned to issuers, transactions, and securities using the same rating scale.

Key Takeaways

• KBRA’s ratings have generally performed in accordance with their definitions, with investment-grade (IG) rated securities (BBB- or higher) exhibiting greater ratings stability than those rated non-investment grade (non-IG). For example, over 99.5% of KBRA-rated securities initially assigned a AAA remained AAA over a 1-year, 3-year, 5-year, and lifetime window.
• Regardless of the observation window, IG rated securities exhibited greater than 96% stability, with high investment grade (high-IG) rated securities (A- and higher) having a stability ratio of over 98%.
• Meanwhile, non-IG securities were stable 91.1% of the time over a 1-year window, 83.8% over a 3-year window, 73.1% over a 5-year window, and 90.9% over the ratings’ lifetime window. The greater “instability” of non-IG ratings relative to IG ratings is to be expected, given the speculative nature of issuers and securities rated below BBB-.
• Lifetime rating transitions were overwhelmingly positive, as upgrades outpaced downgrades by 4.7x. Further, 82.9% of assigned ratings have been stable over their lifetime.

Click here to view the report.

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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