KBRA Releases Subscription Facility Global Rating Methodology

KBRA releases its Subscription Facility Global Rating Methodology, which establishes a dedicated framework for assigning and surveilling ratings on Subscription Facilities.

The methodology establishes a standalone analytical framework reflecting the distinct credit characteristics and structural features of Subscription Facilities. The framework provides additional transparency and specificity around KBRA’s assessment of key credit factors, including the quality and diversification of the Limited Partner (LP) base, the structural protections of the facility, and the ongoing incentive for LPs to continue funding capital calls, alongside qualitative considerations relating to the manager, legal and structural features, and other transaction-specific factors.

KBRA has evaluated over 200 Subscription Facilities since 2018 across a broad range of fund strategies, investor compositions, and transaction structures. Through its rating and surveillance experience, KBRA has an expanded dataset that provides additional insight into the key factors influencing the credit performance of Subscription Facilities. This experience has informed the development of a standalone methodology designed to more specifically capture the credit characteristics and structural features of Subscription Facilities and to promote greater transparency in KBRA’s analytical approach.

KBRA expects that fewer than 20% of outstanding Subscription Facility ratings will be affected by this methodology, and the impact is expected to be generally positive and typically within a two-notch range.

Click here to view the methodology.