AMA: Big 3 Ratings Agency

distressedAF's picture
Rank: Monkey | 37

Hi all,

After a while of lurking on this website I thought I'd give back to WSO and answer any questions about the big 3 ratings agencys.

There was a thread from 2013 which was similar but thought i'd give some fresh thoughts as it has been 6 years since. I have just started work at a LevFin BB so I cannot echo enough that a ratings agency is a legitimate pathway to high finance if you put in the effort. Have some other colleagues who have also moved to buyside debt shops and other LevFin roles from the RA's.

Ask away! Culture, hours, exits, pay, etc

Comments (9)

Sep 9, 2019

From what I understand it is more like the Big 1...

    • 1
Sep 28, 2019

Who would that be?


Sep 9, 2019

Surely you were helped by the fact that literally everyone is leaving levfin.

Why don't you explain what you did there and how that helps you in your current role

    • 1
  • Associate 2 in CorpDev
Sep 28, 2019

Why is everyone leaving LF?

Sep 9, 2019

A few questions:
1) Comp / Career progession with RAs
2) High level day to day (ie are you updating models all day or having more qualitative on an
issuer's business model / go forward dynamics on an industry?)
3) High level overview of the discussions on assigning a credit rating after a RAP presentation (general themes / hot topic issues)
4) Exits / thoughts on RA as career.... would imagine the comp to work / life balance is fairly solid but intellectual stimulation may be lacking

Sep 10, 2019

1) Comp: is much lower than the street, any comparable role front/middle office at a bank would pay more. This is the main downside of CRA's. The career progression is solid, it is quite simple to move up through the levels of associate to lead analyst, just about putting the time in.

2) Day to day: will be building out projection models using your own/analyst assumptions, updating credit opinions, putting together all aspects of the rating committee. The most valuable part of the job is the high level of communication/face time with management teams as a junior level employee. In constant contact with C-level individuals and join in issuer meetings with the deal teams.

4) The exits are relatively quite good. Have seen many friends make the jump to IB industry teams, and high-yield credit analyst positions at top banks, also ratings advisory for IB is typical but not ideal as this is where you will get pigeonholed. Obviously you aren't going PE or HF though.

Thoughts: the CRA's give you an opportunity to get your foot in the door of finance early on in your career, you need to have the drive to make moves from there. The comp is low but the work-life balance is unbeatable, most individuals are 9-5/6, no weekends. Great place to begin or end a career, not recommended for peak earning years.

    • 3
Sep 9, 2019

Thanks for doing this!

1) How does the placement process generally work for groups/products and how easy is it to move around if the area you're interested in has an opening?

2) How long should you wait before looking for exits and is it possible to stay too long, I've heard after a while you could get branded as a 'ratings guy'?

3) Any tips for making the most of your possible exit ops and have you seen people move into something that isn't directly linked to what they were covering while at a CRA?

4) Biggest takeaways from the time you spent at a CRA and any advice on making the most of the training and early-career experience?

5) Any tips for the recruiting process or resources you found useful?

Sorry for so many questions but I have recently become interested in working at a CRA and my school doesn't have a large network so I don't know much about it. Thanks again.

Most Helpful
Oct 1, 2019

Hey mate,

Sorry I couldn't get to this earlier but here's my thoughts on below:

1) Comp - below market to investment banks. Bonus is a small portion of your salary. Career Progression - I can say for sure that the Big 3 corporate structure is very flat & you'll have incumbents in the higher roles. This will not allow for much upwards mobility, so you'll either have to wait for a position to open or jump ship to another RA/LevFin team after doing a few years at a RA. Couldn't recommend it more as a springboard for learning though - you get exposure to upper management across your portfolio and get a glimpse as to how the financial services industry works, especially on the debt side.

2) Combination of both - you're actively monitoring your portfolio, updating credit opinions and rating new entities. I personally have found that working in the high yield divisions of the RA is more relevant to exit so aim to work there if you manage to get the opportunity. Investment Grade credits are also good but I feel as if the experience you get with them isn't as great as high yield (exposure to LBO's)

3) General credit themes to the business - the RA's look at credit from a fundamental credit perspective. Sensitivity analysis, cash flow modelling etc all included. Good way to improve analytical and writing skills

4) Exits
This is a good one - for RA's, you're right. Work life balance is solid & after a while the learning curve flattens (fairly quickly). When you find this happening I think it's a good time to start looking for an exit.
I know people who have exited to LevFin BB's, Direct Lending shops (particularly in the high yield/acquisition finance), a credit hedge fund, some mid-market PE shops, Equity Research (most logical next step).

If you're a PE monkey like the rest of this forum, would recommend trying for a LevFin BB -> PE, alternatively you can go to LevFinBB or a Direct Lending (high yield) role and leverage your experience for a mezzanine/distressed debt fund.

It really depends on how much you apply yourself at the RA's because they provide a great way to get exposure to large market transactions that you wouldn't otherwise get exposure to if you weren't directly involved in the underwrite/financing of.

Hopefully this gives you a bit of color

    • 3
Oct 6, 2019