Methodology Scope
This methodology outlines the broad framework that KBRA uses to notch corporate entities’ obligations from the issuer rating in order to differentiate credit risk among rated obligations of a single enterprise. Notching generally reflects differences in recovery prospects for distinct issues and is primarily driven by differing priority of claims, as well as other factors, including without limitation industry dynamics, capital structure, collateral quality, regulatory matters and differences in bankruptcy laws across jurisdictions. In addition, this methodology outlines, in the Corporate-Linked Obligations section, KBRA’s approach to rating certain debt obligations that are strongly linked to a corporate entity such that the credit quality of the debt obligations is linked to the credit quality of the corporate entity.
KBRA's credit ratings are intended to reflect both the probability of default (PD) and severity of loss in the event of default (LGD), with greater…