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KBRA Affirms the Ratings on the Senior Notes for NPC SIP 2024-1 Ltd.

21 Nov 2025   |   New York

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KBRA affirms the ratings on the Senior Notes issued by NPC SIP 2024-1 Ltd. (the "Issuer"). The Outlook on the ratings is Stable.

Since issuance, the performance of the transaction remains stable, with a slight increase to LTV due to a decrease in NAV depreciation with a portion of the Liquid Assets being used to service interest on the Senior Notes. Deployment into Private Assets has been delayed compared to issuance expectations. However distributions and interest income received have been in line with initial expectations, and the performance of the Private Assets has been stable. KBRA notes that further delays to Private Assets deployment may result in an increased usage of Liquid Assets to fulfill timely interest obligations on the Senior Notes. KBRA will continue to monitor the Issuer’s deployment into Private Assets over the coming year.

The underlying Private Assets are funds managed by Churchill and Arcmont. Churchill was founded in 2015 and has over $56 billion in committed capital and provides a full array of solutions across the capital structure, including senior lending, junior capital, equity co-investments, and private equity fund commitments & secondaries. Arcmont was founded in 2011 and is a European private credit platform with €38 billion raised since inception, and proven track records across direct lending, senior loans, and capital solutions/specialist lending.

Key Credit Considerations

  • Asset Coverage: As of September 2025, the Senior Notes have an LTV/asset coverage of 91.9%/108.8%. During the early years of the transaction, KBRA expects that, by design, asset coverage will not improve materially as draws on Liquid Assets to cover interest will exceed investment returns. This trend is expected to revert as the Principal Assets accrete in value through the accrual of interest and investments into Private Assets generate net returns, leading to an increase in asset coverage above the initial level. KBRA's analysis of transaction asset coverage emphasizes the ability of cash flows to meet interest obligations, given the defeasance of the principal balance through the use of zero-coupon U.S. Treasuries matched to the maturity of the Senior Notes. Based on KBRA’s evaluation of underlying cashflow scenarios, if the performance of the Private Assets were to decline to a median level of performance, the minimum Interest Coverage on the Senior Notes is estimated to be greater than 2.27x. Thus, KBRA’s asset coverage score reflects this strong interest coverage.
  • Transaction Long Duration Nature: This transaction will have a final legal maturity of 2054. The long duration nature of this vehicle will inherently carry unique risks due to the unpredictability of future macroeconomic events, performance of various investment strategies, and the manager’s ability to provide sufficient returns over a 30-year period. To address these risks, various stress scenarios were evaluated to assess the strength of the structure over this extended time horizon.
  • 100% of Principal Covered by USTs: Highly rated zero-coupon bonds, backed by the long-term credit quality of the United States of America, will accrue to the principal amount of the Senior Notes due at the legal final maturity date. KBRA affirmed the United States of America’s long-term issuer rating of ‘AAA’/Stable on March 21, 2025. KBRA notes, however, that the remaining pools of Liquid and Private Assets constitute the sole source of interest repayment and must earn sufficient returns over the entire life of the Senior Notes to service its interest obligations.
  • Transaction Structure: The transaction includes a number of key structural features, further described below:
    • Cash Flow Priority: All available distributions are applied to the structure’s repayment sequence of: Taxes/Government Fees, Liquidity Facility Fees, Expenses, & Interest, Liquidity Facility Principal, Senior Notes Interest, Senior Notes Principal if any Amortization Events are in effect, Reserve Account, any remaining unpaid Fees & Expenses, Subordinated Notes.
    • LTV Tests: Noteholders benefit from two Loan-To-Value (“LTV”) Ratio Tests, which when breached, will prohibit distributions to Subordinated Notes.
      • Adjusted LTV Test: This test will be satisfied on any date of determination if the ratio (expressed as a percentage) calculated as (i) the difference of (x) the outstanding principal amount of the Senior Notes less (y) the Principal Assets NAV divided by (ii) the difference of (x) the Portfolio NAV less (y) the Principal Assets NAV is less than or equal to 75%.
      • Nominal LTV Test: This test will be satisfied on any date of determination if the ratio (expressed as a percentage) calculated as (i) the outstanding principal amount of the Senior Notes divided by (ii) the Portfolio NAV is less than or equal to the Nominal LTV Test threshold value for that respective year.
    • Interest Coverage Ratio: Distributions to the Subordinated Noteholders shall not be permitted if the Interest Coverage Ratio has been below 225% for more than 180 consecutive days. In addition, if the Interest Coverage Ratio has been lower than 100% for more than 180 consecutive days, then an Amortization Event will occur.
    • IRR Performance Covenant: Beginning any time after 2030, an Amortization Event will be deemed to occur on any payment date following the application of all amounts pursuant to the Priority of Payments, if the Internal Rate of Return (“IRR”) on the Private Assets falls below specified thresholds. Specifically, an Amortization Event is triggered if the IRR is less than (a) 0%, if the payment date occurs before the end of the 5th anniversary of the Closing Date, (b) 8.5%, if the Payment Date occurs after the 5th anniversary of the Closing Date but prior to the 10th anniversary of the Closing Date, or (c) 10.5%, if the Payment Date occurs after the 10th anniversary of the Closing Date.
    • Amortization Event: An event that is deemed to have occurred and be continuing if the IRR Performance Covenant is in breach or the Interest Coverage Ratio (defined below) has been lower than 100% for more than 180 consecutive calendar days. Upon the occurrence of the Amortization Event, majority of Noteholders may direct the Issuer, subject to satisfaction of the Rating Condition (Rating Action Confirmation), to repay the Senior Notes using all remaining readily available funds after distributions made pursuant to clauses (i) through (v) of the Ordinary Priority of Payments further described in this report. Funds will be generated first through cash (excluding the Liquidity Reserve), second, liquidating Liquid Assets and transfer all remaining funds in the Reserve Account (including the Liquidity Reserve), and third, liquidate or sell the Principal Assets and each Private Asset where the current NAV of Asset HoldCo’s position is higher than the total capital invested by Asset HoldCo in that Private Asset.
    • Liquidity Reserve Account: At closing, $7.32 million were deposited in the Liquidity Reserve Account, with a requirement to maintain an ongoing balance of at least 2% of the outstanding principal amount of the Senior Notes. As of September 2025, there is approximately $12.87 million in the reserve. The Reserve is intended to be used to cover the interest payments on the Senior Notes, capital calls in connection with the Private Assets and certain other administrative expenses. To the extent this reserve is drawn, it must be replenished before any distributions can be made to the Subordinated Noteholders. In the scenarios where any wind-down is triggered/requested, this amount can be liquidated for purposes of satisfying the repayment of the Notes subject to the wind-down conditions.
    • Restricted Distributions to the Subordinated Noteholders: Distributions are permitted to the Subordinated Noteholders only after the following conditions are satisfied:
      • Both the Adjusted and Nominal LTV Tests are in compliance.
      • The amount of distribution made to the Subordinated Notes does not exceed the Annualized Distribution Cap.
      • The Interest Coverage Ratio has not been less than 225% for more than 180 consecutive days.
      • Annualized Distribution Cap: Subject to a 15% cap of the initial notional amount of the Subordinated Notes as of the closing date which will step up to 20% from the 16th anniversary of the closing date to the extent the NAV exceeds 150% of the outstanding balance of the Senior Notes.
    • Delayed Draw on Subordinated Notes: At closing, the Rated Debt was fully drawn but only 50% of the Subordinated Notes will be drawn. The remaining 50% of the Subordinated Notes will be drawn no later than one year after closing. This mechanism raises a funding risk which is mitigated by the fact that Teachers Insurance and Annuity Association of America (“TIAA”) will retain the entire equity tranche. TIAA carries public Insurer Financial Strength (“FSR”) Ratings of at least ‘AA+’ from several NRSRO’s. In KBRA’s view, TIAA’s credit quality is in line with the ratings assigned and in consideration of its role for this transaction. Furthermore, TIAA will be meaningfully further aligned through commitments to the underlying strategies that the Co-Issuers will invest in.
    • Liquidity Facility: The structure benefits from a Liquidity Facility sized up to $75 million. The Facility will have an initial tenor of three years, with automatic 1-year extensions at the lender’s discretion. Permitted uses of Liquidity Facility borrowings include financing accrued taxes and/or governmental fees, unfunded commitments, and interest payments on the Senior Notes. It is expected the Facility will be extended at maturity, however to the extent the Lender does not extend, the liquidity support may no longer be available beyond the initial term. The issuer would then have a two-year period to address this potential shortfall, exploring options to either replace or restructure the facility to maintain sufficient liquidity and ensure the stability of the transaction.
  • Vulnerability to Uncertain Cash Flow: While the initial pool of Liquid Assets provides reliable debt service coverage in the early years of the transaction, as capital is deployed into the Private Assets investment strategies, the payment of timely interest on the Senior Notes in the later stages of the transaction relies predominantly on realizations generated through private equity collateral which does not generate cashflow on a fixed schedule nor in predetermined amounts. However, this risk is partially mitigated through allocations to private credit strategies which provide a cash yield, a dedicated Liquidity Reserve Account, and the Liquidity Facility.
  • Mitigating Liquidity Issues Related to Future Commitments: This long-term transaction, spanning a 25-year investment period, faces the challenge of managing liquidity amid uncertain cashflow timings and market volatilities associated with private assets. The Issuer addresses these concerns by utilizing separately managed accounts (SMAs) or funds of one, each tailored to a specific investment strategy. This structure allows for direct control over asset selection and timing, which is essential for maintaining sufficient liquidity to meet long-term obligations. By leveraging SMAs or funds of one, the Issuer can dynamically adjust investment approaches in response to evolving market conditions, helping mitigate liquidity risks. The Issuer is also expected to reserve at least 1.0x of uncalled LP commitments from the third-party funds.
  • Blind Pool of Private Assets Collateral: Since the funds in the Private Assets pool are still in their investment period and there will be ongoing investments made due to the recycling of returns, the complete composition of the individual underlying investments is unknown. The Collateral Manager has provided strategy allocation and performance estimates to KBRA; however, the ultimate allocation across funds as well as the investments in each investment vehicle may differ significantly from Churchill’s projections. This uncertainty is especially heightened given the long-term investment period (25 years) of the transaction. KBRA evaluated a range of cash flow scenarios, which incorporate potential variability in fund performance outcomes.
  • Manager Review and Track Record: Nuveen Private Capital is comprised of U.S. and European asset managers Churchill and Arcmont. Nuveen Private Capital is a majority-owned affiliate of Nuveen, the asset management division of TIAA, a pension fund with a 125-year history and over $1.2 trillion in assets under management. Churchill and Arcmont are capital providers for private equity owned middle market companies. TIAA is one of the largest global private debt investor and Fortune 100 company providing financial solutions to clients since 1918 and serving over 12,000 institutions. Churchill was founded in 2015 and has over $56 billion in committed capital and provides a full array of solutions across the capital structure, including senior lending, junior capital, equity co-investments, and private equity fund commitments & secondaries. Arcmont was founded in 2011 and is a European private credit platform with €38 billion raised since inception, and proven track records across direct lending, senior loans, and capital solutions/specialist lending. In March 2023, Nuveen completed the acquisition of a controlling interest in Arcmont. Given the European focus of Arcmont, Nuveen views the acquisition of Arcmont as a complementary exposure to Churchill’s North American geographic focus.

Rating Sensitivities

  • Significant Underperformance of Fund Collateral: Significant deterioration in portfolio valuation or a trend of collateral cash flows that are notably lower than current forecasted performance.
  • Timing of Capital Calls and Distributions: Significant adverse movement in either the capital calls or distributions attributed to the Private Assets compared to expectations.
  • Performance of Aggregate Investments: Severe underperformance in the Private Assets that are exceedingly lower than the Issuer’s expected levels.
  • Liquid Assets Utilized to Pay Interest: A higher-than-expected amount of Liquid Assets used to pay interest instead of being deployed into Private Assets could generate additional performance pressure for the Private Assets investments.
  • Liquidity Facility Use: If the Liquidity Facility is drawn on frequently and/or remains outstanding for extended periods of time.
  • Asset Coverage: Significant de-leveraging from the repayment of the Rated Debt will decrease LTV.

To access ratings and relevant documents, click here.

Click here to view the report.

Related Publication

Methodologies

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

This credit rating is endorsed by Kroll Bond Rating Agency Europe Limited for use in the European Union and by Kroll Bond Rating Agency UK Limited for use in the UK. Information on a credit rating’s endorsement status is available on its rating page at KBRA.com.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

The Manager is, or has a relationship with, one or more of KBRA Europe/KBRA UK shareholders that is required to be disclosed under applicable credit rating agency regulation in the EU and/or the UK. Please review KBRA’s shareholder disclosures, which are updated periodically.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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