emmaThe MSRB’s EMMA website now provides credit ratings from Kroll Bond Rating Agency in addition to S&P’s and Fitch. But for healthcare investors, relying on EMMA for rating information is still a hit-or-miss proposition.

Started in 2010, Kroll currently rates 155 state and local government bond issues and plans on entering the healthcare sector in the next year or so. Kroll’s plans represent a positive development for hospitals, but for investors looking to make better decisions about which healthcare bonds to buy, several challenges remain.

The first challenge is that Moody’s is not providing its ratings to EMMA. This is a problem because Moody’s owns close to 40% of the market for healthcare ratings, and while Fitch and S&P’s cover some of the same bonds Moody’s rates, they may be rated differently (split ratings).


The second challenge is EMMA does not show rating outlooks; only the actual rating, e.g. “BBB-“. Rating outlooks are leading indicators of rating changes. Without knowledge of an outlook, a hospital with a BBB-/Negative outlook–potentially on the brink of losing its investment grade rating– looks the same to an investor as a BBB-/Positive outlook that is about to be upgraded.

Below: Sample EMMA continuing disclosure section showing letter ratings.

The third challenge is that rating reports are not on EMMA except in rare instances where voluntarily posted by borrowers. Investors must go on each rating agency’s website to search and retrieve reports. Fitch provides its full reports for free, but S&P’s and Moody’s require a paid subscription.

We expect that at some point in the future, EMMA will provide rating outlooks along with a link to the reports on each agency’s website. Convincing Moody to post anything on EMMA would also be a big win for the MSRB.

The additional information should benefit hospitals and other municipal borrowers by making bonds more liquid and lowering the cost of funds for borrowers.

Until then, bond rating information on EMMA is still work in progress.