> KBRA is tasked with producing a rating. Insufficient information won't stop that task.

Rating agencies will absolutely refuse to rate if provided insufficient information.

No, the title is poorly phrased, I think you misunderstood.

All ratings agencies have their own scales, but broadly all ratings fall into one of two overarching categories, investment grade vs. junk.

The article explains that the rating ANT received was the highest within the junk range. So “highest junk rating” means within the junk category, it’s in the best sub-area. In other words, it’s just scratching below the investment grade rating.

This is important for institutional investors who can only buy investment grade, meaning if they can improve even one single grade up, they get access to a lot more debt.

> not changing my overall feeling that credit ratings are junk science

Then you have been misinformed. Rated bonds by and large fail at the rating predicted by the big three [1].

[1] https://www.ft.com/content/d97e1e86-1e90-4c5c-b972-052d43a36...

You can hold both things in your mind and they aren't contradictory. It can be a bad system but it can still be suspicious if someone behaves outside the norm inside it.

Other posts made me understand what it actually measures and why is it meaningful - it tells you if you lend this entity money at the govt bond interest rate, will this entity be able to pay back more or less eventiually?

Obviously a financially rational person wouldn't lend money with worse returns it can get from the government risk-free as that would be charity, hence these are considered 'junk'.

I agree but I think both things can be true . Like in this case.

From the article:

"The rating action, which has not previously been reported, shows Anthropic is close to achieving the investment-grade status that would allow the start-up to lower its borrowing costs and tap a wider pool of institutional investors including life insurance companies and pension funds.

Bankers for Anthropic and rival OpenAI have lobbied the largest rating agencies to grant the AI labs investment-grade ratings once they go public."

Anthropic is planning an IPO and this is information investors would like to have.

The point of the headline isn’t to communicate that their debt is currently rated junk, it’s to communicate that it’s impossible for their rating to improve any further without becoming investment grade.

From the article:

"The rating action, which has not previously been reported, shows Anthropic is close to achieving the investment-grade status that would allow the start-up to lower its borrowing costs and tap a wider pool of institutional investors including life insurance companies and pension funds.

Bankers for Anthropic and rival OpenAI have lobbied the largest rating agencies to grant the AI labs investment-grade ratings once they go public."

It’s a fair point. It’s certainly not good but that doesnt = bad. It could be an artifact of FT deciding to report on a nothingburger.

I’d reserve judgement until i see them report more detailed financials and the big ratings agencies step in with assessment.

> Subprime loans blew up because it was a bunch of opaque securities (mortgages sliced and diced together) that lenders thought were safe, but really weren't

Not quite. They blew up because the opacity meant nobody could verify that their paper was safe. That made them unsaleable. In the end, AAA-rated crisis-era paper all paid out and almost all of them paid out on schedule. But that doesn't help you if you need to fire sell them today.

Put more succinctly, a lot of people assumed that because Treasuries are highly rated and super liquid all highly-rated paper could be counted on to be liquid. Lenders thought the safe paper was liquid. In the end it was just safe.

As long as we aren't creating GPU-backed securities, we should be fine...oh wait https://nvidianews.nvidia.com/news/nvidia-partners-with-apol...

I don’t like that they’re fleecing the corporate bond market after privatizing the majority of their upside. Yes, I wanted them to issue their junk bonds even earlier.

What I really want above all else is for credit rating agencies to not face pressure to rerate them favorably because they’re deemed too big to fail.

Because for a pension fund the exposure will be much smaller if they're an early investor in a 100m Business than being a late investor in 2T business.

Basically when you invest at the peak of the bubble you're going to be hosed.

If they IPO'd earlier, they'd have to show clean books much earlier

Yes, and there must be a reason they went with Kroll instead of someone else. It is possibly a bad reason, and we should by default be skeptical and assume such with the little information we have, until proven otherwise.

Most pensions and life insurers and so on are mandate constrained to investment grade only.

2008 wasn't fund managers deciding all together in unison to buy bad mortgages. It was AAA ratings on diversified MBS that should have been rated much lower giving them cover to load up.

CoreWeave is making the same case for its bonds.

Someone working for a fund and whose job is to INVEST is going to loose their job for NOT buying into the ponzi scheme that is running 20% growth YoY

What's not clear is whether the west can build a separate but equal ecosystem here when VC only funds privatized models, but it was hilarious when some influencer went on and on that Chinese open weight models are unsafe because we don't have access to their training code and data. Serious WTF territory IMO.

Correct hyperscalars are doing fine - as it stands.

The problem is OAI/Anthropic - but if OAI and Anthropic fail the whole thing comes apart. Goog, Meta etc will be fine as they had tremendous cash flow generating operations prior to datacenter offerings w.r.t LLMs.