Morningstar Wins Approval to Rate Corporates, Financials

Morningstar Credit Ratings has been approved by the Securities and Exchange Commission to expand its grading capabilities beyond asset-backed securities into corporate debt and financial institutions.

The designations allow Morningstar to enter into areas that may also include assignments on private placements and unsecured-debt from real estate investment trusts, Chief Operating Officer Joe Petro said in a phone interview Monday. The unit entered the bond-grading business in 2010 after its parent Morningstar Inc. acquired Realpoint LLC, and has primarily rated securitized-debt such as bonds backed by commercial mortgages and home loans.

"Our goal is to be a full-service rating agency," Petro said.

David Sekera, a managing director, will oversee new corporate and financial ratings, according to the company. The unit employs 13 analysts based in Chicago, and could double in size in a year’s time if successful, Petro said.

Morningstar has been evaluating corporate securities without an SEC license since 2009 and financial institutions since 2010.

New York-based Morningstar Credit Ratings is one of 10 ratings firms recognized by the SEC. S&P Global Ratings, Moody’s Investors Service and Fitch Ratings are the three largest, controlling wide swaths of the market. Newer challengers have sought to disrupt that stranglehold, in part, by offering assessments to less popular issuers and in smaller markets passed over by the bigger firms.

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