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Rating Scales


Kroll Bond Rating Agency (KBRA) assigns credit ratings to issuers and their obligations.


Kroll Bond Rating Agency (KBRA) assigns credit ratings to issuers and their obligations using the same rating scale. In either case, KBRA's credit ratings are intended to reflect both the probability of default and severity of loss in the event of default, with greater emphasis on probability of default at higher rating categories. For obligations, the determination of expected loss severity is, among other things, a function of the seniority of the claim. Generally speaking, issuer-level ratings assume a loss severity consistent with a senior unsecured claim. KBRA appends an (sf) indicator to ratings assigned to structured finance obligations.

AAA Determined to have almost no risk of loss due to credit-related events. Assigned only to the very highest quality obligors and obligations able to survive extremely challenging economic events.
AA Determined to have minimal risk of loss due to credit-related events. Such obligors and obligations are deemed very high quality.
A Determined to be of high quality with a small risk of loss due to credit-related events. Issuers and obligations in this category are expected to weather difficult times with low credit losses.
BBB Determined to be of medium quality with some risk of loss due to credit-related events. Such issuers and obligations may experience credit losses during stress environments.
BB Determined to be of low quality with moderate risk of loss due to credit-related events. Such issuers and obligations have fundamental weaknesses that create moderate credit risk.
B Determined to be of very low quality with high risk of loss due to credit-related events. These issuers and obligations contain many fundamental shortcomings that create significant credit risk.
CCC Determined to be at substantial risk of loss due to credit-related events, or currently in default with high recovery expectations.
CC Determined to be near default or in default with average recovery expectations.
C Determined to be near default or in default with low recovery expectations.
D KBRA defines default as occurring if:
  1. There is a missed interest or principal payment on a rated obligation which is unlikely to be recovered.
  2. The rated entity files for protection from creditors, is placed into receivership or is closed by regulators such that a missed payment is likely to result.
  3. The rated entity seeks and completes a distressed exchange, where existing rated obligations are replaced by new obligations with a diminished economic value.

KBRA may append - or + modifiers to ratings in categories AA through CCC to indicate, respectively, upper and lower risk levels within the broader category.

Kroll Bond Rating Agency's short-term ratings indicate an ability to meet obligations that typically have maturities of thirteen months or less when issued by corporate entities, financial institutions, and in connection with structured finance transactions. When applied to municipal obligations, KBRA's short-term ratings typically indicate an ability to meet obligations of three years or less. Short-term ratings may be assigned to both issuers and to specific obligations. As compared to long-term ratings, greater emphasis is placed on an obligor's liquidity profile and access to funding. KBRA appends an (sf) indicator to ratings assigned to structured finance obligations.

K1 Very strong ability to meet short-term obligations.
K2 Strong ability to meet short-term obligations.
K3 Adequate ability to meet short-term obligations.
B Questionable ability to meet short-term obligations.
C Little ability to meet short-term obligations.
D KBRA defines default as occurring if:
  1. There is a missed interest or principal payment on a rated obligation which is unlikely to be recovered.
  2. The rated entity files for protection from creditors, is placed into receivership or is closed by regulators such that a missed payment is likely to result.
  3. The rated entity seeks and completes a distressed exchange, where existing rated obligations are replaced by new obligations with a diminished economic value.

KBRA may append a + modifier to ratings in the K1 category to indicate exceptional ability to meet short-term obligations.

With exceptions for certain issuers and sectors, the following correspondence between KBRA's short- and long-term ratings generally holds:

AAA K1+
AA+
AA
AA-
A+ K1
A
A- K2
BBB+
BBB K3
BBB-
BB+ B
BB
BB-
B+
B
B-
CCC+ C
CCC
CCC-
CC
C
D D

The Kroll Bond Rating Agency (KBRA) insurance financial strength rating (IFSR) applies only to insurance operating companies. The IFSR is a measure of the overall financial condition of an insurance operating company with respect to its ability to meet its policyholder obligations. The ratings assigned to insurance holding companies and their obligations are reflected on KBRA's long-term credit scale.

AAA The insurer's financial condition is extremely strong and there is almost no risk of the entity not meeting its policyholder obligations.
AA The insurer's financial condition is strong and the entity is highly likely to meet its policyholder obligations under severe economic, financial and business conditions.
A The insurer's financial condition is sound and the entity is likely to meet its policyholder obligations under difficult economic, financial and business conditions.
BBB The insurer's financial condition is adequate but may be susceptible to adverse changes in economic, financial and business conditions that could affect the entity's ability to meet its policyholder obligations.
BB The insurer's financial condition is questionable and is susceptible to changes in economic, financial and business conditions that could affect the entity's ability to meet its policyholder obligations.
B The insurer's financial condition is weak and is highly susceptible to changes in economic, financial and business conditions that could affect the entity's ability to meet its policyholder obligations.
CCC The insurer's financial condition is very weak and changes in economic, financial and business conditions are likely to affect the entity's ability to meet its policyholder obligations.
CC The insurer's financial condition is poor and changes in economic, financial and business conditions are highly likely to affect the entity's ability to meet its policyholder obligations.
C The insurer's financial condition is very poor and changes in economic, financial and business conditions will affect the entity's ability to meet its policyholder obligations.
D KBRA defines the default of an insurance operating company as occurring if the rated entity fails to meet its policyholder obligations.
R Due to its financial condition, the insurance operating company is under regulatory supervision.

KBRA may append - or + modifiers to ratings in categories AA through CCC to indicate, respectively, upper and lower risk levels within the broader category.

The KBRA Fund Rating (KFR) applies only to investment funds. A KFR is a forward-looking opinion meant to indicate the quality of a fund’s underlying portfolio as well as the management team’s ability to deploy the fund’s investment strategy. KFRs are not considered to be traditional credit ratings, and are differentiated from long-term credit and issuer ratings by the usage of a distinct ‘kf’ subscript. A KFR does not provide an indication of performance as it relates to returns, as measured versus peers, volatility or yield.

AAAkf The fund portfolio, on a weighted average basis, is comprised of assets of the highest credit quality, and considered to be extremely strong.
AAkf The fund portfolio, on a weighted average basis, is comprised of assets of very high credit quality, and considered to be very strong.
Akf The fund portfolio, on a weighted average basis, is comprised of assets of high credit quality, and considered to be strong.
BBBkf The fund portfolio, on a weighted average basis, is comprised of assets of medium credit quality, and considered to be adequate.
BBkf The fund portfolio, on a weighted average basis, is comprised of assets of low credit quality, and considered to be uncertain.
Bkf The fund portfolio, on a weighted average basis, is comprised of assets of very low credit quality, and considered to be vulnerable.
CCCkf The fund portfolio, on a weighted average basis, is comprised of assets of exceedingly weak credit quality, with high recovery expectations.
CCkf The fund portfolio, on a weighted average basis, is comprised of assets of exceedingly weak credit quality, with average recovery expectations.
Ckf The fund portfolio, on a weighted average basis, is comprised of assets of exceedingly weak credit quality, with low recovery expecations.

KBRA may append plus (+) or minus (-) modifiers to ratings in categories AA through CCC to indicate, respectively, upper and lower risk levels within the broader category.

The Kroll Bond Rating Agency (KBRA) financial strength rating is published as part of the Subscription Rating Service (SRS) and includes financial strength ratings for financial institutions and corporations. The financial strength rating is a measure of the overall financial condition of an institution and its ability to meet its credit obligations.

A An institution in strong financial condition that is well capitalized, liquid and profitable. The entity is highly likely to meet its credit obligations under severe economic, financial and business conditions.
B An institution in sound financial condition that is likely to meet its credit obligations under difficult economic, financial and business conditions.
C An institution with an adequate financial condition but is more susceptible to adverse changes in economic conditions that could affect its ability to meet its credit obligations.
D An institution whose financial condition is judged to be relatively weak and its ability to meet financial obligations could be affected by adverse economic, financial or business conditions.
E An institution that is likely to have financial problems and poor financial ratios. Careful consideration should be made concerning investments in this institution. The institution has a much higher probability of failure than institutions with higher ratings.
NB A new institution which is less than three years old and which is not rated, but its financial data is presented and an "NB" is shown in the rating field.
NT A new savings & loan (S&L) which is less than three years old and which is not rated, but its financial data is presented and an "NT" is shown in its rating field.
NR An atypical bank, bank holding company or S&L, or an institution missing key financial data necessary to derive a rating.

KBRA may append - or + modifiers to ratings in categories A through C to indicate, respectively, upper and lower risk levels within the broader category.

Bank Financial Strength Ratings Correlation Chart

The chart below provides an illustrative comparison between the ratings scales used by Kroll Bond Rating Agency (KBRA) for Bank Financial Strength Ratings (BFSR) using the methodology applicable to the Subscription Rating Service (SRS): "A Model for Assessing the Financial Strength of U.S. Banks and Savings & Loans," and the issuer ratings for banks and bank holding companies under the methodology entitled the "Global Bank & Bank Holding Company Rating Methodology." Please note that the BFSR is a primarily quantitative rating and does not reflect the other factors that are used when assigning issuer ratings to commercial banks and bank holding companies. For additional information on these factors, please refer to the Global Bank & Bank Holding Company Rating Methodology."

Bank Financial
Strength Rating
Long-Term Rating
KBRA - BFSR KBRA
A+ AAA
A AA+
AA
A- AA-
B+ A+
B A
B- A-
BBB+
C+ BBB
BBB-
C BB+
BB
BB-
C- B+
B
D B-
CCC+
CCC
CCC-
E CC
C
Default/Insolvent D

In addition to Financial Strength ratings, KBRA’s Subscription Rating Service may assign Default Ratings to certain entities. KBRA's Default Ratings are intended to reflect an entity’s risk of default and/or bankruptcy. The use of lower case symbols distinguishes these ratings from KBRA’s Long-Term Credit Ratings, which address both default probability and severity of loss.

aaa Determined to have almost no risk of default or bankruptcy. Assigned only to the very highest quality entities able to survive extremely challenging economic events.
aa Determined to have minimal risk of default or bankruptcy. Such entities are deemed very high quality.
a Determined to be of high quality with a small risk of default or bankruptcy. Entities in this category are expected to survive stress environments.
bbb Determined to be of medium quality with some risk of default or bankruptcy. Such entities may experience difficulties during stress environments.
bb Determined to be of low quality with moderate risk of default or bankruptcy. Such entities have fundamental weaknesses and may be vulnerable.
b Determined to be of very low quality with high risk of default or bankruptcy. These entities contain many fundamental shortcomings.
ccc Determined to be at substantial risk of default or bankruptcy, or currently in default.
cc Determined to be near default or in default.
c Determined to be very near default or in default.
d In default.

KBRA may append - or + modifiers to ratings in categories aa through ccc to indicate, respectively, upper and lower risk levels within the broader category.

Rating Outlook

A KBRA Rating Outlook is an indication of the likely direction of an issuer's rating over the medium term, generally encompassing a horizon not to exceed two years. Where assigned, Rating Outlooks can take on the following four states: Positive (POS), Negative (NEG), Stable (STA) and Developing (DEV).

The Rating Outlook is not necessarily a precursor to a rating change. Ratings may be changed irrespective of the Rating Outlook status. Ratings placed on Watch indicate that the issuer has one or more ratings under review for possible change, and thus override the Outlook designation.

Watch Status

Placement of a KBRA rating on Watch status indicates that there is a meaningful potential for the rating to change in the direction of the Watch indicator. KBRA employs three possible Watch states: Upgrade (UP), Downgrade (DN) and Developing (DEV). KBRA will use reasonable efforts to conclude or update the rating Watch within 90 days of initiation.

Absence of Watch status does not preclude KBRA from changing a rating. Possible reasons for placement on Watch include: issue(r) specific developments, including changes in the actual or expected performance of a structured finance instrument or its underlying collateral, shifting industry patterns, macroeconomic changes or changes in the governing rating methodology.

KBRA appends an (sf) indicator to ratings assigned to structured finance obligations.

NR Not Rated - KBRA has not assigned a rating to the obligation, program or issuer.
WR Withdrawn Rating - KBRA has withdrawn the rating of a previously rated obligation, program or issuer. This rating action may be linked to the full repayment of a security, maturity of an obligation, or some other event.