KBRA Releases Research – Private Credit: First-Quarter 2024 Middle Market Borrower Surveillance Compendium
May 07 2024 - 12:59PM
Business Wire
KBRA releases a new quarterly Private Credit Middle Market
Borrower Surveillance Compendium to report statistics related to
its surveillance of private credit assessments. The full impact of
higher base rate interest costs has arrived, and with it, credit
migration. This inaugural quarterly compendium provides statistics
related to KBRA’s surveillance of 462 middle market corporate
credit assessments in Q4 2023 and 450 assessments in Q1 2024. We
also provide data on the 127 new assessments in Q1 2024. KBRA
monitors these credit assessments as part of our surveillance of
hundreds of KBRA-rated private credit feeder note, collateralized
loan obligations (CLO), and private credit NAV/leverage facility
transactions.
These surveillance assessments provide a window into the
building pressures for some MM borrowers as they navigate through
the current period of higher rates, weaker equity valuations, and
slower mergers and acquisitions (M&A) activity.
Key Takeaways
- Defaults are rising but remain muted, with only eight payment
defaults out of 462 reviewed assessments in Q4 2023, and eight
payment defaults out of 450 reviews in Q1 2024.
- Downward credit migration is occurring as some companies
struggle with higher interest rates and other liquidity pressures.
In Q1 2024, 21% of reviewed estimates migrated lower versus 13% in
Q4 2023.
- Acute pressures in some portions of the Health Care Services
and Technology sector account for some of this downward migration
with entities from this sector accounting for 23 out of 95 lowered
assessments in Q1 2024.
- The Software sector’s relative resilience is evidenced by its
smaller relative percentage of downward assessment actions despite
representing a slightly outsized proportion of the quarter’s
surveillance portfolio.
- There were more upgrades than downgrades of assessments that
began as ccc+ scores in both quarters. This reflects the presence
of many companies growing into their levered capital structures,
particularly in the Software sector.
Report includes key data such as:
- Q4 2023 and Q1 2024 Surveillance Portfolio Profile
- Q1 2024 Surveillance Assessment Actions Distribution
- Q4 2023 and Q1 2024 Surveillance Assessment Scores by
Sector
- Q4 2023 and Q1 2024 Surveillance Assessment Defaults
- Q4 2023 and Q1 2024 Surveillance Assessment Transition
Severity
- Q4 2023 and Q1 2024 New Assessment Scores by Sector
Click here to view the report.
Related Publications
- Private Credit: Well Positioned to Navigate the Looming
Storm
- Private Credit: 12% Is Not Affordable for Many Borrowers
- Private Credit: Middle Market Stress? Another 50 Basis
Points?
- Private Credit: 2024 Maturity Wall Is a Myth
- Private Credit: 12% is Here—First Look at Interest Coverage and
Liquidity for Middle Market Borrowers by Sector
About KBRA
KBRA is a full-service credit rating agency registered in the
U.S., the EU, and the UK, and is designated to provide structured
finance ratings in Canada. KBRA’s ratings can be used by investors
for regulatory capital purposes in multiple jurisdictions.
Doc ID: 1004221
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Shane Olaleye, Managing Director +1 646-731-2432
shane.olaleye@kbra.com
Andrew Giudici, Global Head of Corporate, Project, and
Infrastructure Finance +1 646-731-2372 andrew.giudici@kbra.com
William Cox, SMD, Global Head of Corporate, Financial and
Government Ratings +1 646-731-2472 william.cox@kbra.com
Media Contact
Adam Tempkin, Director of Communications +1 646-731-1347
adam.tempkin@kbra.com
Business Development Contact
Jason Lilien, Senior Managing Director +1 646-731-2442
jason.lilien@kbra.com