Cole Simons: Who Is Kroll Bond Rating Agency?

October 20, 2021 | 7 Comments

[Updated] “It costs the Government a lot of money to obtain an international credit rating” and “what made KBRA so attractive to the PLP Government that it would spend even more money for its rating,” Opposition Leader Cole Simons said.

Mr Simons, who is also the Shadow Finance Minister, said, “Last week the Minister of Finance showcased the results of a recent credit rating review of our Government’s outstanding bonds and debt, the state of Bermuda’s economy and her credit worthiness.

“The results appeared to be very positive, which, for all intents and purposes, is a very good thing. But the question floating around Bermuda’s financial community is, who is Kroll Bond Rating Agency [KBRA]? Where did it come from?

“An industry search of the KBRA indicates it is not in the top five global credit rating agencies – it’s a relative unknown.

“It’s common knowledge that Bermuda has used Standard and Poors, Moody’s, and Fitch for most of the past 20 years. Their credentials are impeccable, and their services have stood the test of time.

“Standard & Poor’s is the oldest. It traces its history back to 1860 when financial analyst Henry Poor wrote a history of the finances of railroads and canals in the US, as a guide for investors.

“Moody’s was started in 1909 by John Moody, who published an analysis of the tangled and uncertain world of railway finances, grading the value of its stocks and bonds. John Fitch set up his company in 1913.

“There are hosts of other ratings agencies, but S&P, Moody’s and Fitch have about 95% of the global market with S&P and Moody’s having about 40% each, while Fitch has around 15%.

“The US Securities and Exchange Commission acknowledged the three as “Nationally Recognized Statistical Organizations” and so from a rating agency perspective, they are considered the gold standard.

“From the research that I have gathered, KBRA entered the international credit rating arena in 2010, after the last economic crisis, and is still finding its way as a relatively newly minted agency, as compared to S&P, Moody’s and Fitch.

“Bermuda is a top tier business jurisdiction, itself the gold standard for the delivery of offshore financial services. So why are we deviating from our long relationship with the gold standard of international credit rating agencies; agencies that are intimately familiar with Bermuda’s unique economic model.

“It is a well-known fact that, for the most part, the top tier rating agencies’ analysis and rating is retrospective, i.e. relying on factual data, financial governance, credit administration and established trends.

“Comments regarding the future are based on those facts and trends. The Minister of Finance’s recent credit rating statement spoke to KBRA’s favourable forward-looking assessment of Bermuda’s emerging and developing industries, in particular, our emerging fintech and digital commerce industries. It is hardly likely that there is sufficient historical data available for such an assessment to be realistic, or up to S&P’s and Moody’s standards.

“It costs the Government a lot of money to obtain an international credit rating – but such is the price of credibility. S&P and Moody’s already provide that for us. What made KBRA so attractive to the PLP Government that it would say pend even more money for its rating.

“There is more to this credit assessment than meets the eye. Could it be that KBRA was the only credit rating agency who was willing to help the Government showcase its fintech and digital commerce industries?

“Stay tuned. There is more to this appointment and we await the details.”

Update Oct 29, 10.00am: MP Jache Adams said, “Last week, the Opposition Leader and Shadow Finance Minister, Cole Simons released a statement in response to Kroll Bond Rating Agency’s [‘KBRA’] recent credit review of the Bermuda Government. The statement was yet another failed attempt by the OBA to continue their false narrative of this Government’s fiscal prudence and a further demonstration of Mr. Simons’ lack of information.

“In the Opposition Leader’s statement, he questioned the Government’s motive for ‘spending more money’ for the KBRA rating which is interesting considering the KBRA review was unsolicited and not paid for by the Government! If Mr. Simons had simply asked prior to issuing the statement, he would have perhaps avoided the embarrassment of issuing such inaccurate remarks.

“Further, in his comments, the Opposition Leader attempts to discredit the ratings agency by stating they were relatively unknown and were not in the top five global credit rating agencies. While the KBRA’s credentials speak for themselves, it begs the question of whether the Opposition Leader is aware that his employer, Butterfield Bank, highlight their KBRA ratings on their website. So, when he publicly asks ‘who is Kroll Bond Rating Agency’ it is unclear who Mr. Simons is asking: the Government or his employer?

“It is also worth noting, for the Opposition Leader’s benefit, that the international business community, including the Association of Bermuda Insurers and Reinsurers [ABIR], publicly welcomed the KBRA ratings as an affirmation of Bermuda’s continued sound fiscal stewardship under the PLP Government. As such, it is disappointing to see, despite the support of our international business community, the opposition attempt to belittle the agency, its team, and their review – because it doesn’t match up with their doom and gloom agenda.

“Mr. Simons’ latest statement acts as another reminder of how the OBA’s sole aim is to attack, undermine, and criticize any independent analysis that highlights the positive work of the Government, particularly if it does not agree with their own. One would think the One Bermuda Alliance would show a bit of humility with matters concerning our economy considering taxpayers witnessed Bermuda’s debt double and experienced multiple debt downgrades during their time in office. The OBA’s poor choices are still costing taxpayers where recently the Government paid over $20 million to Skyport as a result of the OBA’s bad airport deal and was forced to raise the debt ceiling and spend $175 million as a result of the ill advised Government Guarantee at Morgan’s Point which was agreed by the OBA Government.

“This Government is executing an Economic Recovery Plan designed to get Bermuda back to a balanced budget within 3 years. The plan includes initiatives to diversify our economy, create new Bermudian jobs, reduce the cost of living and cost of doing business, and enhance our crumbling infrastructure. This plan, along with the Government’s commitment to sound fiscal management, was independently evaluated and affirmed by KBRA, and other rating agencies, and as a Government we are pleased with their assessment and will not be deterred by the OBA’s constant false attacks which are not constructive.”

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Comments (7)

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  1. Smh says:

    This is a silly critique when it has long been established that ALL the credit rating agencies have accepted premium prices to “embellish” their ratings. The entire thing is a scam, attacking Kroll while trying to paint Moodys and S&P as some sort of authoritative source just demonstrates how naive and out of touch the opposition really are. Where are the REAL business leaders please ????

  2. JAWS says:

    Who is this CLOWN? Oh never mind just the ubp again.

  3. Patricia says:

    Enlightening. I was wondering who they were.

  4. kevin says:

    plp supporters cant stand to be questioned but thats typical from top to the bottom ..when you have clowns in charge your bound to have a circus
    welcome to the plp bermuda you now live in

  5. Very sucpicious says:

    Why is the PLP playing these Mickey Mouse Games. shameful. I am embarrased.

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