Double Assurance: Why a Second or Third Rating is Gaining Traction Among Some Capital Markets Issuers

Published: July 09, 2025

While some European bond market issuers are content to pay a market premium for remaining unrated, the conversation surrounding the value of obtaining a second – or even third – credit rating is gaining momentum. At the heart of this debate lies a central question: is it worth the additional cost to the issuer? In this second back-to-basics look at ratings, Matt Palmer, Senior Director, Fitch Ratings, explores the options.

Recent years have seen a marked shift in the ratings approach of Western European corporates. Since 2019, around 80% of Euro-denominated benchmark bond issuance has involved more than one rating, with two ratings now the dominant standard. This trend is not confined to established issuers; debut names such as DCC, El Corte Inglés, Ipsos, Kingspan, South West Water, and Wise have all chosen to launch with two ratings.

Why are so many issuers making this move? In a market where investors are tasked with monitoring an ever-expanding universe of credits, information is king. A single rating offers a perspective, but a second rating can help to double the insight, providing a further independent assessment. This extra layer is not just psychological; it can help underpin greater market confidence in credit quality, especially in times of uncertainty or during complex corporate events such as mergers and acquisitions.

Stability, perspective, and defensive value

The benefits of a second or third rating are multiple. While rating agencies often react similarly to major developments, their interpretations can diverge significantly at critical junctures. The case of BHP’s divestment of its US oil business is illustrative: Moody’s and Fitch viewed the event as credit-neutral, while S&P downgraded the rating. In such cases, having multiple ratings can offer the issuer a buffer, helping to mitigate the market impact of a single agency’s view.

For issuers who have long operated with a single rating, introducing a second perspective can help refresh the market’s understanding of their current credit profile. Over time, a sole agency’s view may become anchored in legacy positions, potentially missing improvements or shifts in strategy. A new rating agency could provide a fresher, forward-looking assessment, which is particularly valuable in the mid-tier rating bands, such as BBB and BBB-. Here, an additional agency with a more informed outlook could help to tighten spreads and reassure investors of credit stability, as was notably seen during the Covid-19 pandemic.

Basis points matter

Capital markets are nothing if not data-driven, and the numbers support the case for multiple ratings. Historically, single-rated issuers pay an average premium of 58 basis points (bps) over their multi-rated peers. More strikingly, those with two ratings typically enjoy spreads that are a further 25bps tighter than single-rated issuers – a benefit that has persisted annually over the past decade, regardless of market conditions.

This consistent pricing advantage is not always immediately obvious. For new issuers, spreads are often set with reference to the robust secondary curves of frequent, multi-rated peers. By securing two ratings, debut issuers are better positioned to match these benchmarks, minimising the rarity premium typically demanded by investors. Over time, the secondary market also tends to reward issuers whose credit quality is assessed by more than one agency, resulting in spread compression and improved pricing for subsequent transactions.

A compelling example is Autoliv, which transitioned from a single BBB rating by S&P to being rated BBB+/Baa1 by Fitch and Moody’s. The market impact was clear: Autoliv’s bonds, once trading 40bps wider than similarly rated peers, tightened to within 10bps, outperforming even the expected benefit of a one-notch upgrade.

Gateway to the US dollar market

While much of the issuer discussion is about value, there is one market where a second rating is a hard requirement: the US Dollar public bond market. Whether issuing under the Securities and Exchange Commission (SEC) or Rule 144A, two ratings are necessary for access to this deep and liquid pool of capital. In fact, the largest and most frequent US issuers typically maintain three ratings, helping provide further insulation against the impact of any single agency’s view.

This is not just a technicality; investors in the US, particularly insurance companies, rely on ratings for regulatory capital purposes. Index eligibility is also dependent on ratings, with methodologies using the lower of two or the median of three. Securing a second or third rating not only opens the door to the US market but helps lead to smoother execution and broader investor participation.

History shows that issuers eyeing US expansion or anticipating major corporate events such as acquisitions would be well-served to secure additional ratings in advance. As discussed earlier, building a track record with multiple agencies can help reduce reliance on a single viewpoint at critical moments, further smoothing the path for future transactions.

A broader audience

It’s a misconception that credit ratings matter only for debt investors or that limited issuance volume diminishes their value. The transparency provided by ratings and the insights of agencies serves a wide spectrum of stakeholders.

Equity investors, banks, development agencies, and the financial media regularly use agency reports and commentary to help inform their views. The breadth of agency engagement – through reports, webinars, and direct analyst access – underscores the role ratings play in shaping market perception.

Take off the blinkers

The world of debt capital markets is evolving. Where once a single rating sufficed, today’s market environment rewards those who offer investors more information and greater transparency. For issuers, the value of a second or third rating is increasingly clear: it can lead to tighter spreads, smoother execution, and broader market access.

In a world where confidence is the ultimate currency, the prospect of double or triple assurance is proving to be worth every basis point.