Kroll Bond Rating Agency now has a new majority owner, as the credit ratings agency announced Tuesday that one of its minority investors, private-equity firm Wharf Street, acquired a majority stake in the firm.
According to a report from the Wall Street Journal, Wharf Street valued KBRA at more than $300 million and now owns approximately 90% of the credit ratings agency.
Jules Kroll founded KBRA in 2010, and Kroll remained the firm’s largest shareholder and chief executive officer until the acquisition by Wharf Street.
Under the terms of the deal, Kroll will remain on as KBRA’s CEO and the deal will provide KBRA with “permanent capital” that will allow the agency to expand and grow beyond its rating work in structured finance, public finance, and financial institution areas.
According to a release from KBRA, the funds will be used to accelerate the firm’s growth within the corporate finance markets. KBRA also plans to expand internationally.
“Since KBRA’s launch five years ago in August of 2010, the firm has grown significantly, publishing over 600 ratings with over $400 billion in issuance,” Kroll said in a statement. “This recapitalization of the business will allow the firm to continue to grow as a global rating agency.”
Jim Nadler, KRBA’s president and chief operating officer, said that the acquisition and injection of capital will allow the company to continue in its progress
“KBRA, which is known for its thorough research and due diligence will continue to expand these efforts along with providing the transparency, innovation and responsiveness that investors have come to rely on,” Nadler said.
The KBRA acquisition marks the second time in less than a year that a private equity firm acquired a credit rating agency.
Last year, DBRS, the fourth-largest global credit agency, was acquired by global alternative asset manager The Carlyle Group (CG) and Warburg Pincus, a global private equity firm, in partnership with a group of Canadian-based individual investors including DBRS’ founder, Walter Schroeder, and DBRS management.
DBRS’ acquisition was also seen by the company as a pathway to expansion.
“I am delighted to partner with such high quality and internationally known investment houses as Warburg Pincus and Carlyle,” Schroeder said.
“While our Canadian franchise and culture will continue to be at the core of DBRS’ operations, the breadth and depth of both Warburg Pincus and Carlyle’s international presence will be invaluable to DBRS as it seeks to capitalize upon its growing platforms in the United States and Europe,” Schroeder added.
The Wall Street Journal report notes that the industry’s three biggest credit rating agencies, Standard & Poor’s Ratings Services, Moody’s Investors Service and Fitch Ratings, still issue around 95% of all credit ratings globally, which is a total unchanged since the financial crisis.
But with private equity firms now backing KBRA and DBRS, that gap may soon shrink.
