KANGAROO BONDS
Australian dollar-denominated bonds issued within Australia by a foreign firm.
KEEFE’S DOMESTIC AND FOREIGN BANK RATINGS
Keefe BankWatch ratings are based upon a quantitative analysis of all segments of the organization including, where applicable, holding company, member banks or associations, and other subsidiaries. Keefe BankWatch assigns only one rating to each company, based on consolidated financials. While the ratings are intended to be equally applicable to all operating entities of the organization, there may, in certain cases, be more liquidity and/or credit risk associated with doing business with one segment of the company versus another (i.e., holding company vs. bank). It should be further understood that Keefe BankWatch ratings are not merely an assessment of the likelihood of receiving payment of principal and interest on a timely basis. The ratings incorporate Keefe’s opinion as to the vulnerability of the company to adverse developments which may impact the market’s perception of the company, thereby affecting the marketability of its securities.
Keefe BankWatch ratings do not constitute recommendations to buy or sell securities of any of these companies. Further, Keefe BankWatch does not suggest specific investment criteria for individual clients. In those instances where disclosure, in its opinion, is either incomplete and/or untimely, a qualified rating (QR) is assigned to the institution. These ratings are derived exclusively from a quantitative analysis of publicly available information. Qualitative judgments have not been incorporated.
Generally, banks with assets of less than $500 million are assigned a numerical “score” based exclusively on a statistical model developed by BankWatch. These scores, which are compiled from regulatory reports, represent a performance evaluation of each company relative to a nationwide composite of similar sized banks. The score indicates the bank’s percentile ranking (e.g., a score of 75 suggests that the company has outperformed 75% of its peer group). If a bank of this size is associated with a holding company that is not rated by BankWatch, an asterisk (*) may appear before the holding company name. This indicates that the analysis (score) on that company has been done on a bank only basis and is not reflective of the consolidated company’s financial performance.
A Company possesses an exceptionally strong balance sheet and earnings record, translating into an excellent reputation and unquestioned access to its natural money markets. If weakness or vulnerability exist in any aspect of the company’s business, it is entirely mitigated by the strengths of the organization. A/B Company is financially very solid with a favorable track record and no readily apparent weaknesses. Its overall risk profile, while low, is not quite as favorable as for companies in the highest rating category. B A strong company with a solid financial record and well received by its natural money markets. Some minor weaknesses may exist, but any deviation from the company’s historical performance levels should be both limited and short-lived. The likelihood of a problem developing is small, yet slightly greater than for a higher-rated company. B/C Company is clearly viewed as good credit. While some shortcomings are apparent, they are not serious and/or are quite manageable in the short term.
C Company is inherently a sound credit with no serious deficiencies, but financials reveal at least one fundamental area of concern that prevents a higher rating. The company may recently have experienced a period of difficulty, but those pressures should not be long term in nature. The company’s ability to absorb a surprise, however, is less than that for organizations with better operating records.
C/D While still considered an acceptable credit, the company has some meaningful deficiencies. Its ability to deal with further deterioration is less than that for better-rated companies.
D The company’s financials suggest obvious weaknesseses, most likely created by asset quality considerations and/or a poorly structured balance sheet. A meaningful level of uncertainty and vulnerability exists going forward. The ability to address further unexpected problems must be questioned.
D/E The company has areas of major weaknesses which may include funding/liquidity difficulties. A high degree of uncertainty exists as to the company’s ability to absorb incremental problems.
E Very serious problems exist for the company, creating doubt as to its continued viability without some form of outside assistance—regulatory or otherwise.
A. Qualified Rating Characteristics
QR-A Exceptionally strong company as evidenced by its recent financial statements and its historical record.
QR-B Statistically a very sound institution. Financials reveal no abnormal lending or funding practices, while profitability, capital adequacy, and asset quality indicators consistently rank above peer group standards.
QR-C Statistical credentials should be viewed as average relative to peer group norms. A sound credit with one or more concerns preventing a higher rating.
QR-D The company’s financial performance has typically fallen below average parameters established by its peers. Existing earnings weakness, exposure to margin contraction, asset quality concerns, and/or aggressive management of loan growth raise serious questions.
QR-E Several problems of a serious nature exist. Key financial indicators and/or abnormal growth patterns suggest significant uncertainty over the near term. The institution may well be under special regulatory supervision, and its continued viability with outside assistance may be at issue.
B. Country Rating
An assessment of the overall political and economic stability of a country in which a bank is domiciled.
I. An industrialized country with a long history of political stability complemented by an overall sound financial condition. The country must have demonstrated the ability to access capital markets throughout the world on favorable terms.
II. An industrialized country which has had a history of political and economic stability but is experiencing some current political unrest or significant economic difficulties. It enjoys continued ability to access capital markets worldwide but at increasingly higher margins. In the short run, the risk of default is minimal.
III. An industrialized or developing country with a wealth of resources, which may have difficulty servicing its external debt as a result of political and/or economic problems. Although it has access to capial markets worldwide, this cannot be assured in the future.
IV. A developing country which is currently facing extreme difficulty in raising external capital at all maturity levels. V. A country which has defaulted on its external debt payments or which is in a position where a default is highly probable.
KNOCKOUT OPTION
Also known as barrier option, a knockout option is an option that is canceled (i.e., knocked out) if the exchange rate crosses, even momentarily, a predefined level called the outstrike. If the exchange rate breaks this barrier, the holder cannot exercise this option, even though it ends up in-the-money. This type of option is obviously less expensive than the standard option because of this risk of early termination.
KORUNA
Monetary unit of Czechoslovakia.
KRONA
Monetary unit of Iceland and Sweden. KRONE
Monetary unit of Denmark and Norway. KWACHA
Monetary unit of Angola. KYAT
Monetary unit of Burma.
