By Yali N’Diaye

WASHINGTON (MNI) – Having recently invited itself to the municipal
bond table, Kroll Bond Ratings is contemplating the bigger
responsibility of assessing sovereign credits “in the future,” President
and Chief Operating Officer James Nadler told MNI.

“It is a huge responsibility to rate sovereigns,” Nadler said.

However, he pointed out that “The incumbent rating agencies have
been more of a lagging indicator which is of no help to investors.”

That might leave some space for Kroll Bond Ratings.

So, “We are exploring the idea of rating sovereigns in the future
but will not unless we are comfortable that we can add value for
investors,” he said.

The rating agency has boosted its efforts to expand in size,
sectors covered, as well as geographically.

“Our plan is to be a full-service global rating agency,” Nadler
said. “So we are looking at every opportunity to expand through
acquisitions.”

Jules Kroll, the agency’s chairman and CEO, is no stranger to such
strategies.

Nadler pointed out that in his past experience at Kroll
Investigations, Kroll made 26 acquisitions from the time he started the
company in 1972 until 2004, when he sold his company to Marsh &
McLennan.

Earlier this week, Kroll has indicated his acquisitions would be
international.

Asked to specify, Nadler told MNI, “Currently, Kroll is more
focused on Europe to move into over the next year but plans to expand
into other locations including Asia in the near future.”

But to become “full-service,” the agency also needs to widen its
presence across sectors.

On that front, Kroll Bond Ratings made its entrance in the
municipal bond space at the end of March, with a double-A assigned to
the long-term general obligation debt of the State of Connecticut, the
wealthiest state in the nation.

“You will see more public finance rating over the summer,” Nadler
later told MNI.

Jules Kroll has also indicated he plans on rating bond insurers, a
natural development when looking at the municipal bond sector, where
issuers routinely relied on monolines to enhance their credit profile to
borrow cheaper on the market.

That, however, was before a wave of downgrades of bond insurers
during the financial crisis took away the very reason — triple-A
ratings — monolines were used by municipal issuers.

As of now, in addition to public finance, Kroll Bond Ratings is
present in Structured Finance where the big rating agencies have mostly
failed as revealed by the financial crisis.

“We believe this will continue to be a fast growing market for
Kroll,” Nadler told MNI. “We are looking to expand into the ABS space as
well and currently have methodologies available on Auto Loan ABS and
Leasing Containers.”

The firm has rated 11 commercial mortgage-backed securities
transactions, 2 residential MBS transactions, and has 1 Public Finance
rating outstanding on the State of Connecticut.

The chairman has also publicly said he plans on rating corporates
this year, first focusing on financial issuers.

“One need to look no further than the financial crisis to see that
new thinking is needed in terms of the analysis and rating of today’s
complex financial institutions,” Nadler told MNI when asked to explain
the decision.

** MNI Washington Bureau: 202-371-2121 **

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