2011-06-13
Kroll Bond Rating Agency (KBRA), a nationally recognized statistical rating organization (NRSRO), today released three Commercial Mortgage Backed Securities (CMBS) Criteria publications, which provide detailed insight into the process that KBRA uses to rate Single Borrower CMBS transactions and evaluate CMBS Servicers.
The three publications are the KBRA Property Evaluation Guidelines, the KBRA Single Borrower Rating Methodology and the KBRA Commercial Mortgage Servicer Review Process.
"By providing complete transparency into our approach and processes, we aim to instill trust in the market and to raise the bar on ratings accuracy," said James Nadler, president and chief operating officer of KBRA. "These publications disclose the strong analytical approach that our analysts use to develop unbiased and highly-credible credit ratings - ratings you can trust."
The first publication, KBRA Property Evaluation Guidelines, details the approach KBRA uses to determine its estimate of sustainable net cash flow (KNCF) and value for the individual properties that secure CMBS mortgage loans. These guidelines will form the bedrock of KBRA's CMBS rating methodologies and are designed to account for the non-homogeneous nature of commercial real estate properties, which display unique characteristics that are a function of their specific market and overall quality and tenant mix.
The second publication, KBRA Single Borrower Rating Methodology, describes KBRA's approach to rating CMBS Single Borrower transactions with easy to understand examples that demonstrate the workings of the criteria. The approach leverages KNCF that is derived through the application of their Property Evaluation Guidelines and is the primary determinate that the agency uses to drive Kroll Loan to Value (KLTV) and Kroll Debt Service Coverage (KDSC). KLTV and KDSC are used to derive the amount of proceeds, by rating category, that can be assigned to a given loan - and its related CMBS securities - in a clear, transparent manner.
The third publication, KBRA Commercial Mortgage Servicer Review Process, describes the way KBRA reviews servicers on transactions they rate, or are likely to rate, in the future. The importance of servicing can't be overstated - the most intense collateral and structural analysis can be rendered meaningless if a servicer fails to perform its duties. For this reason, KBRA performs a review to determine if the servicing organization possesses the necessary attributes to satisfy the minimum requirements to meet its contractual obligations and the servicing standard in accordance with industry practices.
To view the publications in their entirety, please visit: http://www.krollbondratings.com/rating_method.php
About Kroll Bond Rating Agency
Kroll Bond Rating Agency, Inc. (www.krollbondratings.com) is registered with the SEC as a nationally recognized statistical rating organization (NRSRO). Kroll Bond Rating Agency was established in 2010 to restore trust in credit ratings. Founded by Jules Kroll, pioneer of the modern investigation, intelligence and corporate security industry, the firm provides accurate and timely ratings for bonds issued by financial institutions and large corporations. Kroll Bond Rating Agency offers a built-in safeguard, namely, the firm is more than 40%-owned by pension funds and foundations. As such, Kroll Bond Rating Agency is accountable directly to investors. Kroll Bond Rating Agency operates from offices in New York and Maryland.
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