DBRS, Inc. (Morningstar DBRS) has assigned a Long-Term Issuer Rating and Long-Term Senior Debt credit rating of BBB (low) to South Street Securities Funding, LLC (SSSF).
Concurrently, Morningstar DBRS assigned a Long-Term Issuer Rating of BBB to South Street Securities, LLC (SSS or the Company). The trend on all ratings is Stable. The Intrinsic Assessment (IA) of SSS is bbb and its Support Assessment is SA3, reflecting that timely support is not expected and resulting in the IA and final rating of SSS being equalized. SSSF is an intermediate holding company whose core asset is its equity investment in SSS. As a result, the credit ratings of SSSF are one-notch lower than SSS to reflect the bankruptcy remote status of SSS per the terms of the Program Agreement as well as structural subordination.
KEY CREDIT RATING CONSIDERATIONS
The credit ratings reflect SSS's market position in the collateralized lending market and its proven ability to navigate multiple economic and interest rate cycles. SSS is an SEC-registered broker-dealer and member of FINRA and SIPC that is led by a senior management team that is well-established in the industry with decades of experience. SSSF has delivered consistent earnings and good EBITDA margins through the great financial crisis, the pandemic, and several interest rate cycles. Through the Program Agreement that includes limits around gross financial leverage (exclusive of netting), SSS has a well-designed risk management framework and system that has resulted in no losses from a counterparty default since inception. Risk exposures across both the repo and TBA books are monitored daily to ensure that the Company maintains access to FICC clearing and funding facilities. SSS also benefits from only lending against the most liquid, highest quality collateral and the relatively short net duration of its book. Ratings are constrained by a franchise that is narrower by product than other broker-dealers and leverage that is slightly elevated to historical levels.
The Stable trend considers Morningstar DBRS expectations that SSS will maintain sound credit fundamentals despite a higher rate environment that will continue to suppress TBA activity but will likely spur higher repo activity.
CREDIT RATING DRIVERS
Improving profitability particularly if stronger earnings support a sustained improvement in leverage metrics
and a strengthening of the franchise evidenced by improved diversity of cashflows while maintaining a sound
risk profile, would result in a credit ratings upgrade.
Conversely, a material deterioration in earnings or a notable and sustained increase in leverage would result
in a credit ratings downgrade.
CREDIT RATING RATIONALE
Franchise Building Block Assessment: Good/Moderate
Founded in 2003 and based in New York, NY, SSS is one of North America's largest non-bank, independent
repo broker-dealers offering collateralized fixed income financing to a large client base comprised of non-bank
mortgage companies, hedge funds, state and municipality investment managers, commercial and regional
banks, and other institutional clients. SSS is a Tier 1 FICC member allowing for the full netting of repo
exposures and sponsoring of other institutions for clearing. In addition, SSS provides interest rate risk hedging
solutions to a broad customer base consisting of non-bank mortgage companies via its 'to be
announced' (TBA) business. SSS also provides services including algorithmic trading, trade management
solutions and capital market solutions to its clients. Their senior management team is well established with
deep industry experience and expertise with all having more than 20 years of industry experience.
Earnings Building Block Assessment: Moderate
Earnings power is acceptable, but with a level of potential revenue volatility due to certain revenues
dependency on transaction volumes. Revenues are reasonably diverse by business segment with the repo
and TBA businesses providing a counterbalance to each business depending on the rate environment. That
said, earnings have been consistent with solid returns. EBTIDA margins have been good underpinned by
improved net fixed income finance margins as well as reasonable cost control.
Risk Building Block Assessment: Good
SSS has a good risk profile supported by a well-designed and effective risk management system that has
proven effective through the GFC, the COVID pandemic, and various interest rate cycles. Over 23 years of
operation, SSSF has not recorded a repo client default. Risk exposures, including liquidity, are monitored daily
to ensure access to FICC clearing and revolving facilities. Interest rate risk is appropriately hedged and
monitored daily while benefiting from the relatively short net duration of the repo book. Operational risk
appears well-managed with cybersecurity controls in place, SOC-1 and SOC-2 reports completed for the
Company's TradeBlazer technology platform, and appropriate disaster recovery plans established.
Funding and Liquidity Building Block Assessment: Moderate
SSSF's funding profile is considered reasonable given its market activities. The Company has issued senior
notes via the private placement market and maintains two revolving credit facilities for intraday trading
liquidity but ends each trading day with no outstanding draws on the facilities. Interest coverage (corporate
debt-to-EBITDA) has been sound reflecting a modest amount corporate debt in the funding stack. Indeed,
funding is considered well-aligned with the asset base.
Capitalization Building Block Assessment: Moderate
As of June 30, 2026, net leverage is elevated but over the last three years SSSF's net leverage has been
acceptable and supportive of the credit ratings especially given the focus on lending only against the highest
quality collateral (US Treasuries and agency and government MBS).
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the
credit analysis.
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical
framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and
Governance Factors in Credit Ratings (July 20, 2026) https://dbrs.morningstar.com/research/485522
Notes:
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is the Global Methodology for Rating Non-Bank Financial Institutions (September
05, 2025) https://dbrs.morningstar.com/research/462007. In addition Morningstar DBRS uses the Morningstar
DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (July 20, 2026)
https://dbrs.morningstar.com/research/485522 in its consideration of ESG factors.
The credit rating methodologies used in the analysis of this transaction can be found at: https://
dbrs.morningstar.com/about/methodologies.
The primary sources of information used for these credit ratings include Morningstar, Inc. and company
documents. Other sources include Company Documents.
Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings
was of satisfactory quality.
The credit rating was not initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management and other relevant internal documents of the
rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.
For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please
refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Policies & Code of
Conduct section of the website: https://dbrs.morningstar.com/regulatory/policies-and-code-of-conduct
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-
month period. Morningstar DBRS's trends and credit ratings are under regular surveillance.
For more information on this credit or on this industry, visit https://dbrs.morningstar.com.
DBRS, Inc.
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Ratings
South Street Securities Funding, LLC
Date Issued Debt Rated Action Rating Trend Attributes
18-Sep-26 Long-Term Issuer Rating Stb US
Date Issued Debt Rated Action Rating Trend Attributes
New
Rating
BBB
(low)
18-Sep-26 Long-Term Senior Debt New
Rating
BBB
(low) Stb US
South Street Securities, LLC
Date Issued Debt Rated Action Rating Trend Attributes
18-Sep-26 Long-Term Issuer Rating New
Rating BBB Stb US
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+(1) 416 597 7364
timothy.obrien@morningstar.com
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