Realpoint LLC is a privately held limited liability company that is designated as an Nationally Recognized Statistical Rating Organization (NRSRO) by the United States Securities and Exchange Commission. The company was founded in 2001 and is based in Horsham, Pennsylvania.
See also credit rating agencies.
Realpoint is a nationally recognized credit-rating agency focusing in the structured finance market.
Their mission is to increase market transparency and provide investors with the highest quality ratings and analysis by offering a wide array of securities research, surveillance services, data, and technology solutions. More than 200 clients use Realpoint to identify and evaluate investment opportunities and risk.
Acquired by Morningstar
- Source: Morningstar to Buy Credit Rater Realpoint Wall Street Journal, March 19, 2010
Morningstar Inc., best known for its analysis of mutual funds, said it is acquiring privately held credit-rating firm Realpoint LLC for $52 million in cash and stock to build on its entry into corporate credit ratings.
Morningstar Chairman and Chief Executive Joe Mansueto cited strong demand for "unbiased ratings and research in the structured credit market" as a reason for the deal. "Together, we want to restore credibility to the credit-ratings business and be a positive force in rating structured products," he added.
Entrenched credit-ratings firms came under fire during the financial crisis for how they rated billions of dollars in mortgage-related securities, which turned toxic as the subprime loans that helped fuel the U.S. housing bubble started to default.
Horsham, Pa.-based Realpoint, which rates only commercial mortgage-backed securities, had been looking to expand into rating residential mortgage-backed and consumer loan-backed deals.
"We had been looking for a partner to grow in these areas and had talked to a lot of people," said Rob Dobilas, the company's president and chief executive. He noted that Morningstar seemed to be a good match. "Our culture is very similar, we use innovative technologies and we are a natural fit."
Morningstar announced in December that it was expanding its reach beyond stock-market research by starting to publishing credit ratings for nearly 100 of the largest U.S. companies. It said it planned to produce grades for up to 1,000 firms covered by its equity analyst team.
Chicago-based Morningstar said it expects to complete the deal for Realpoint in the next few months. It will pay $42 million in cash and $10 million in restricted stock.
After the takeover, the Morningstar and Realpoint credit-ratings groups will remain separate, independent business units, although Realpoint will be rebranded under Morningstar this summer. Morningstar said it doesn't expect any layoffs.
Morningstar has about 2,600 employees worldwide; Realpoint has 43.
The merger "takes away any concern people had about our size," Realpoint's Mr. Dobilas said. "It gives us even more credibility."
Realpoint had revenue of about $12 million in 2009. It offers securities ratings, research, surveillance services and data to help institutional investors identify credit risk in commercial mortgage-backed securities. It has more than 225 institutional subscribers, including the majority of money managers who invest in commercial mortgage-backed securities.
A niche player that built its reputation by offering a monthly subscription-based service, Realpoint was designated a Nationally Recognized Statistical Rating Organization in 2008. This designation elevated it into the same league as the industry's three major credit-ratings firms: McGraw-Hill Cos. unit Standard & Poor's Ratings Services, Moody's Corp.'s Moody's Investors Service and Fitch Ratings.
Investors pay Realpoint to monitor bonds. This model is different from that of the bigger agencies, where issuers of bonds pay to have their bonds rated.
In May of last year, Realpoint got a further boost when it was included in the list of five agencies with ratings that are accepted by the Federal Reserve for the CMBS portion of its Term Asset-Backed Securities Loan Facility program. In September, the National Association of Insurance Commissioners approved the boutique agency to rate CMBS. This gave it a role in how billions of dollars in insurance investments are assessed for risk--a role that had traditionally been played only by the larger ratings agencies.
Last month, Morningstar reported a 25% drop in fourth-quarter net profit to $14.4 million on revenue of $122.6 million because of charges on stock-option adjustments. Revenue increased 2.8% after falling in the first three quarters of 2009 in the wake of two clients not renewing contracts.
It said Friday that it would continue to look at potential acquisitions, keeping an eye out for companies that match its mission and culture and will help Morningstar build its investment databases, research capabilities, technical expertise or customer base faster and more cost effectively.
Similar to the dominant agencies.
NRSRO update of registration
Current Executive Officers
- Mr. Robert G. Dobilas (CEO & President)
- Mr. Frank A. Innaurato (Managing Director of Analytical Services)
- Mr. Robert Grenda (Senior Vice President of Private Client Services)
- Mr. Nick Forte (Managing Director of Technology Services
- Joe Petro (Managing Director of Sales & Marketing)
- A. M. Best (U.S.)
- Dominion Bond Rating Service (Canada)
- Egan-Jones Rating Company (U.S.)
- Fitch Ratings (U.S.)
- Japan Credit Rating Agency, Ltd. (Japan)
- LACE Financial Corp. (U.S.)
- Moody's (U.S.)
- Rating and Investment Information, Inc.
- Realpoint LLC (U.S.)
- Standard & Poor's (U.S.)
- Phone 800-299-1665, 267-960-6001
- Fax 267-960-6060
- The first ratings agency to go unsolicited? FT Alphaville, August 23, 2010