NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) has released a provocative analysis of municipal bond defaults. The study is a follow-up to KBRA’s 2011 Municipal default study, “An Analysis of Historical Municipal Bond Defaults, Lessons Learned – The Past as Prologue” dated November 14, 2011.
Kroll Bond Rating Agency’s updated municipal default study envisions an entirely new landscape emerging from the financial crisis. Although KBRA does not expect widespread and systemic defaults, KBRA does expect a higher default rate with substantially lower recoveries over the medium term. KBRA believes that these defaults will be idiosyncratic and harder to predict. KBRA’s new default study highlights the paradigm shift in municipal credit. Municipal credit analysis must now incorporate more due diligence and a forward looking view.
Since the original report from 2011, there have been significant developments in the municipal credit markets including a number of high profile municipalities which have defaulted and several Chapter 9 bankruptcy protections. KBRA believes that debt of municipal issuers, and in particular the general government sectors, will likely experience somewhat higher default rates in the near-to-medium term than experienced in the recent past. It is KBRA’s view that the decision to default or pursue bankruptcy represents a basic change in the relationship between an issuer and the credit markets and that this change of attitude toward payment of debt represents the greatest risk to the stability of the municipal credit markets.
About Kroll Bond Rating Agency
KBRA was established in 2010 by Jules Kroll to restore trust in credit ratings by creating new standards for assessing risk and by offering accurate, clear and transparent ratings. KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).