Home

KBRA Releases Research – KBRA’s Global Rating Stability and Transition Study: 2011-2024

via Business Wire

KBRA releases a report examining the stability and transition patterns of our ratings over 1-year, 3-year, 5-year, and lifetime time horizons between 2011 and 2024. The ratings universe used in this study includes both published and unpublished long-term credit ratings (LTCR) assigned across all geographical regions, which are assigned to issuers, transactions, and securities using the same rating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, more than 99.4% of KBRA-rated securities initially assigned a AAA maintained that rating over a 1-year, 3-year, 5-year, and lifetime window.
  • Regardless of the observation window, IG rated securities exhibited stability ratios of at least 95.1%, with high investment-grade (high-IG) rated securities (A- and higher) having a stability ratio of over 97.4%. Meanwhile, non-IG securities were stable 90.2% of the time over a 1-year window, 82.4% over a 3-year window, 72.4% over a 5-year window, and 87.9% 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-.
  • Since our prior study, ratings generally remained stable, as evidenced by stability ratios that changed less than 1%. Over a 1-year, 3-year, and 5-year time horizon, ratings stability changed -0.2%, -0.2%, and -0.7%, respectively, while the lifetime ratings stability moved -0.7%. The modest declines were driven by structured finance (SF), particularly among non-IG ratings; corporate, financial, and government (CFG) ratings exhibited improvement in each of the respective windows.
  • Based on KBRA’s aggregate 1-year transition analysis, 8.5% (11,227) of KBRA ratings transitioned to a higher rating between 2011 and 2024, while 2.2% (2,872) experienced a downward transition. Meanwhile, 82.6% (109,486) of our ratings were stable and 6.8% (8,943) were withdrawn during the study period—92.2% (8,241) of withdrawn ratings occurred after a full payoff of the debt.
  • Lifetime rating transitions were overwhelmingly positive as upgrades outpaced downgrades by approximately 3.75x.
  • Over the lifetime study period, 1.7% (657/39,741) of all assigned ratings experienced a downward transition to the CCC rating category or lower, where such ratings are deemed to be near default or in default. Of these, 75% were initially assigned non-IG ratings (of B- to BB+ range). Of the 657 ratings that transitioned to CCC+ or below, 67 were lowered to D, which KBRA defines as a security where a default is occurring; this equates to 0.17% of the 39,741 assigned ratings between 2011 and 2024. Notably, 38 of these 67 transitions to D were initially assigned non-IG ratings.

Click here to view the report.

Recent Publications

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

Doc ID: 1009185

Contacts