NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases a comment on the Key Factors Considered in Analyzing Whole Business Securitization Candidates.
Whole business securitizations (WBS) are securitizations backed by most, if not all, of the revenue generating assets of a company. A typical WBS relies on the continued operation of the pledged assets through various economic cycles in order to service the securitized debt. Typically, a strong WBS candidate can demonstrate that their underlying assets have a higher likelihood to continue to generate cash flows even during periods of economic stress or in the event of a bankruptcy of the manager. If the ability to service the debt in a downturn is likely, and further supported by asset and cash flow isolation/separation of the securitization structure, a WBS may benefit from additional ratings elevation above a senior secured corporate credit rating. Kroll Bond Rating Agency (KBRA) believes that if the ultimate outcome of a company’s bankruptcy is liquidation, then the potential elevation beyond the company’s senior secured corporate credit rating afforded by a WBS structure will likely be limited.
Most companies issuing in the WBS market have historically been large franchise restaurant concepts, but over the years the sector has evolved to include non-restaurant franchise concepts and non-franchised companies with predictable cash flows. KBRA considers several key factors when analyzing a WBS and the related company’s likelihood to continue to manage the operations to generate cash flows for debt service, including (i) the strength, durability and operational complexity of the underlying business, (ii) the quality of the pledged collateral and related cash flows, and (iii) various structural features utilized in WBS transactions.
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.