Kroll Bond Rating Agency
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| Kroll Bond Rating Agency | |
|---|---|
| Name | Kroll Bond Rating Agency |
| Type | Division |
| Founded | 2010 |
| Headquarters | New York City |
| Industry | Financial services |
| Products | Credit ratings, research, analytics |
| Parent | Kroll (part of Duff & Phelps) |
Kroll Bond Rating Agency is a credit rating agency established in 2010 to provide independent ratings for structured finance, municipal finance, corporate debt, and asset-backed securities. Founded amid responses to the 2008 financial crisis and regulatory reform debates such as the Dodd–Frank Wall Street Reform and Consumer Protection Act, it positioned itself as an alternative to the major NRSROs like Moody's Investors Service, Standard & Poor's, and Fitch Ratings. The agency has engaged with market participants across United States debt market sectors and interacted with regulatory bodies including the Securities and Exchange Commission and state-level regulators.
History
Kroll Bond Rating Agency was created following acquisitions and reorganizations involving Duff & Phelps leadership and investment by private equity firms such as Aurum Capital Partners and The Carlyle Group affiliates that restructured rating operations in the aftermath of public scrutiny of credit rating agencies linked to the subprime mortgage crisis. Early milestones included entry into structured finance ratings for residential mortgage-backed security transactions and registration with the Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization, positioning it alongside DBRS Morningstar and Kroll Insight. Leadership changes involved executives formerly associated with Moody's Investors Service, Fitch Ratings, and Standard & Poor's moving to or from the firm. Strategic partnerships and acquisitions connected the firm to broader Duff & Phelps advisory services and the corporate network of Kroll, Inc..
Services and Methodology
The agency offers ratings for asset classes such as residential mortgage-backed securities, commercial mortgage-backed securities, collateralized loan obligations, municipal bonds, and corporate debt issued by entities including Municipal Bond Insurance Association-insured issuers and multinational corporates domiciled in jurisdictions like United States and United Kingdom. Methodologies published by the agency draw on cash-flow modeling techniques similar to those used at Moody's Analytics, S&P Global Market Intelligence, and Fitch Solutions. Analytical tools include scenario analysis, stress testing using inputs comparable to models from Bloomberg L.P., S&P Capital IQ, and internal surveillance processes informed by data from Federal Reserve Bank publications and reports by Office of the Comptroller of the Currency. The firm issues surveillance reports, pre-sale commentary, and detailed rating committees that cite precedents from landmark structured finance deals such as early MBS and CLO transactions evaluated by other NRSROs.
Organizational Structure and Ownership
As part of a corporate group, the agency has corporate ties to Duff & Phelps and legacy connections to Kroll, Inc. executive management. Governance structures include a board of directors and compliance officers who interact with external auditors such as PricewaterhouseCoopers or Ernst & Young in financial reporting cycles. Senior analytic teams have been staffed by professionals formerly employed at Moody's Investors Service, Standard & Poor's, Fitch Ratings, and DBRS Morningstar, and collaborate with legal counsel experienced before tribunals like Financial Industry Regulatory Authority proceedings. Ownership arrangements have shifted with private equity investment and consolidation trends tracking the broader financial services sector and cross-border mergers similar to transactions involving Morningstar, Inc. and Morningstar Credit Ratings.
Market Position and Ratings Coverage
The agency competes in spheres dominated by Moody's Investors Service, Standard & Poor's, and Fitch Ratings by targeting deal sponsors, trustee banks such as U.S. Bank National Association, and issuers seeking alternative credentialing for asset-backed securities and municipal finance issues. Coverage includes ratings on small- and mid-market issuers alongside major supranationals and sovereign-related entities assessed by S&P Global Ratings or Moody's Analytics. The firm's presence in market segments like commercial mortgage-backed securities and collateralized loan obligations reflects effort to capture tranche-level mandates where boutique analytic approaches can compete with the scale of incumbent NRSROs. Performance metrics compare issuance volume against reports compiled by Dealogic and Refinitiv.
Controversies and Criticisms
Critics have compared the agency’s performance and analytic rigor to larger incumbents such as Moody's Investors Service and Standard & Poor's, particularly regarding ratings assigned to structured products during the post-2008 litigation climate involving parties like Lehman Brothers and insurers such as MBIA, Inc.. Commentators from publications associated with media companies like The Wall Street Journal and The New York Times have scrutinized potential conflicts of interest inherent in the issuer-pays model, an issue also raised in Congressional hearings led by members of United States Congress and oversight from the Securities and Exchange Commission. Academic analyses in journals cited by faculty from institutions such as Harvard University, Columbia University, and University of Pennsylvania have debated the predictive validity of certain rating methodologies.
Regulatory and Legal Issues
The agency’s registration as an NRSRO required compliance with rules promulgated by the Securities and Exchange Commission under mandates influenced by the Dodd–Frank Wall Street Reform and Consumer Protection Act. Regulatory examinations probe compliance with internal controls, recordkeeping rules, and disclosure obligations analogous to enforcement actions previously brought against Moody's Investors Service and Standard & Poor's by the Department of Justice and New York Attorney General offices. Litigation in state and federal courts has touched on alleged misrepresentations in ratings of securitizations, echoing prior cases involving Bank of America, Countrywide Financial Corporation, and Goldman Sachs. The firm has participated in rulemaking consultations with the Public Company Accounting Oversight Board and industry associations such as the International Organization of Securities Commissions.
Notable Ratings and Impact on Markets
The firm has assigned ratings on high-profile securitizations and municipal offerings that influenced transactions arranged by investment banks such as J.P. Morgan Chase, Citigroup, and Bank of America Merrill Lynch. Ratings on CLO tranches and CMBS pools affected pricing, tranche spreads, and investor due diligence practices in secondary markets monitored by ICE Data Services and Tradeweb. Market reactions to upgrades and downgrades by the agency have been observed in yield movements tracked by indices maintained by S&P Dow Jones Indices and analytics from Bloomberg L.P., with notable impacts on issuers’ cost of capital and trustee structuring handled by firms like Wilmington Trust and BNY Mellon.