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

NEW YORK--(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 The ratings universe used in this study includes both published and unpublished long-term credit ratings (LTCR) assigned across all geographical regions, which are assigned to issuers, transactions, and securities using the same rating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 Meanwhile, 82.6% (109,486) of our ratings were stable and 6.8% (8,943) were withdrawn during the study period—92.2% (8,241) of withdrawn ratings occurred after a full payoff of the debt.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

• KBRA’s Global Rating Stability and Transition Study: 2011-2023
• KBRA’s Global Rating Stability and Transition Study: 2011-2022
• KBRA’s Global Rating Transition Study: 2011-2021
• KBRA’s Global Rating Stability Study: 2011-2021

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.

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