NEW YORK–(BUSINESS WIRE)–#creditratingagency–KBRA assigns a senior unsecured debt rating of BBB- with a Stable Outlook to the senior notes issued by South Street Securities Funding, LLC (“SSSF”) in the amount of $29.5 million that are scheduled to mature on June 1, 2028. The proceeds were used to repay existing senior unsecured debt of $21 million that matured on June 1, 2025, with the balance to be for general corporate purposes, including to provide capital to its wholly owned operating company, South Street Securities, LLC (“SSS”).
SSS is a SEC registered broker-dealer formed in 2001 that specializes in collateralized finance with principal business activities consisting of traditional fixed income repo finance and equity securities lending, along with residential interest rate management activities. SSSF is an intermediate holding company with its most significant asset representing a common equity investment in SSS.
Key Credit Considerations
The ratings for SSS and SSSF remain balanced by the collective experience of the management team and key business line leaders, with noted expertise in developing and managing all aspects of its longstanding repo-oriented finance operation. Risk management practices, including stress tests, address key factors for the collateralized finance business and are underpinned by the LLC program and risk management policy. The ratings for SSSF are inextricably linked to SSS, as the subsidiary represents its principal asset and source of earnings.
Rating Sensitivities
The ratings for SSS would be pressured if profitability deteriorated such that periodic net losses occurred or were likely to occur, or if gross balance sheet leverage (total assets-to-members’ equity) were to increase beyond the current range . The ratings for SSSF are tied to SSS’ rating; therefore, any negative rating pressure at SSS would be most likely transferred to SSSF. In addition, a sustained increase in leverage at SSSF or a weakening of the FCCR ratio could led to a re-evaluation of the parent’s ratings. KBRA anticipates that the parent company double leverage ratio will be maintained in the range of 150%, or lower, a key rating constraint for SSSF.
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Methodologies
Disclosures
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA
Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.
Doc ID: 1009821
Contacts
Analytical Contacts
Shannon Servaes, Managing Director (Lead Analyst)
+1 301-969-3247
shannon.servaes@kbra.com
Jason Szelc, Senior Director
+1 301-969-3174
jason.szelc@kbra.com
Business Development Contact
Justin Fuller, Managing Director
+1 312-680-4163
justin.fuller@kbra.com
