KBRA Affirms and Subsequently Withdraws the Rating Assigned to BNP Paribas' Participation in a Subscription Facility to Lone Star Fund XII, L.P.

KBRA UK (KBRA) affirms and subsequently withdraws the rating assigned to BNP Paribas' ("BNPP") $83.2 million commitment in a $834.9 million subscription Tranche A facility (the "Facility") to Lone Star Fund XII, L.P. ("LSF XII", the "Borrower", or the "Fund"). The rating and withdrawal were requested by BNPP as a participating lender in the transaction. The rating action reflects the stable credit quality of the limited partner (LP) base and stable performance of the Fund since previous surveillance.

The Facility was amended in August 2026, reducing the size of Tranche A from $2,006.0 million to $1,255.0 million and extending its maturity from August 2026 to August 2027, with further extensions subject to Borrower's discretion. BNPP’s commitment decreased from $179.1 million to $125.0 million. In September 2026, the Facility was further reduced to $834.9 million, with BNPP’s commitment decreasing pro rata to $83.2 million. The Facility also includes an additional tranche, Tranche B, which is subordinated to Tranche A and can only be drawn once Tranche A has been fully drawn. As of September 2026, Tranche B was reduced from $372.0 million to $248.1 million .

LSF XII is the twelfth vintage fund in Lone Star Global Acquisitions' ("LSGA" or the "Firm") buyout strategy, predominantly targeting opportunistic investments in financial and other investment assets, including single-family residential debt and corporate and consumer debt products across North America, Europe and Asia Pacific. LSGA is a private equity firm that has raised approximately $96.0 billion in aggregate capital commitments as of September 2026. The Firm has approximately 86 employees and a global footprint with 12 international offices across North America, Europe and Asia, investing globally, across private equity, credit and real estate, often targeting distressed and mispriced assets.

Key Credit Considerations

Financial Covenants and Structural Features: The primary collateral and source of repayment for the Facility is the uncalled committed capital (UCC) of the Fund from its underlying limited partners (LP). The Available Commitment under Tranche A Facility is defined as the lesser of (i) the Tranche A Facility Maximum Commitment and (ii) the Tranche A Facility Borrowing Base, minus in each case a Foreign Exchange Reserve Amount (equivalent to 5.0%) where a letter of credit is not drawn in USD. The Borrowing Base under the Facility is determined by the applicable advance rate applied to the UCC of LPs based on their classification. This results in Included LPs at a 90% advance rate, Designated LPs at a 65.0% advance rate and Ineligible LPs at a 0.0% advance rate. There are also Concentration Limits which limit the maximum debt reliance on individual investor or investor type. As of August 2026, the Fund has raised approximately $5,317.9 million commitments, of which $1,809.1 million remains uncalled. The Borrowing Base availability derived from this advance rate mechanism is approximately $1.3 billion, after factoring in concentration haircuts, resulting in effective advance rate of 69.4%, unchanged since previous surveillance.

Alignment of Interests: A failure to fulfil a capital call can result in the defaulting LPs losing rights to distributions from the Fund and restrictions from investing in future private capital opportunities. Furthermore, in the event an LP defaults with respect to their obligation to meet capital contributions, the defaulting LP is subject to the application of various default provisions. Such provisions include but are not limited to (i) suspension of consent and voting rights; (ii) offering whole or part of the defaulting LPs’ interest; and (iii) suspending distributions to the defaulting LPs. These provisions are strong incentives for LPs to meet capital calls.

Credit Quality of LP Commitments: KBRA's assessment of the credit quality of the LPs comprising the Fund was evaluated using (i) for rated entities, the ratings assigned to the relevant investor or parent entity by KBRA or where a KBRA rating is not available, the public rating assigned by another rating agency and (ii) for unrated entities, KBRA's evaluation of the relevant investor's credit quality. Overall, 85.0% of the total commitments and 86.4% of Eligible LP commitments have been evaluated to be equivalent to investment grade credit quality, unchanged since previous surveillance.

Diversification of LP Commitments: The diversification of the LPs’ commitments is determined utilising an adjusted Herfindahl-Hirschman Index (“adjusted HHI”). The Fund had received commitments from 85 LPs, of which 48 were recognised as Eligible LPs. The adjusted HHI remained unchanged since previous surveillance at 16.8 for total LPs and 14.5 for Eligible LPs, indicating a moderately concentrated LP base.

Additional Claim to Distributions/Illiquid Assets: To the extent that some or all of the LPs default on their obligation to fulfil capital calls and repay the Facility, the Lender may have recourse to other assets of the Fund (as an unsecured creditor of the Fund). While this is credit positive and offers a secondary repayment source for this Facility, the assets of the Fund consist of opportunistic investments in financial and other investment assets which KBRA views as complex and illiquid relative to other asset classes and there is no certainty with regards to the ability of the Fund to sell and realise sufficient value from these assets.

Quantitative Rating Determinants

Asset Quality: KBRA determined the asset quality based on the blended quality of the LPs’ credit quality and the equity risk of the distributions. This blended approach to derive the weighted average asset quality reflects the idiosyncratic nature of LP capital commitments and distributions to the Fund’s LPs, as well as the primarily investment grade LP base and the exposure to equity. Offsetting this asset quality determination is the asset base which would support the repayment of the Facility, as discussed in the asset coverage determinant.

Asset Coverage: Asset coverage is calculated assuming the maximum permitted Facility draw to remain in compliance with the covenants set forth in the Facility Agreement. There are different advance rates for types of investors as well as concentration limits that restrict the maximum amount of debt reliance per investor. KBRA has assumed the maximum amount is drawn and invested into the Fund, resulting in potential asset coverage equal to the minimum uncalled capital coverage as determined by the advance rate, plus the assumed maximum full draw on the Facility. Under these assumptions, the asset coverage is 241.8%. This is relatively in line with the prior surveillance.

Liquidity: As the Fund makes investments, the principal source of collateral value and debt service shifts from the UCC (which is considered more liquid, with known contractual value and short time to fund) earlier in the Fund’s life to a greater reliance on the investment value of assets in the Fund itself (considered less liquid, with limited price transparency, greater complexity and uncertain realisation timing).

Duration: Duration has been determined based upon the remaining term of Facility, maturing in August 2027, subject to extensions.

Cash Flow Analysis: The primary source of repayment for subscription facilities consists of LP pledges to pay commitment amounts; the Lender is paid only when the LPs remit their payments. In any case, should an LP fail to pay, the Limited Partnership Agreement places the burden of payment on the remaining LPs on a pro rata basis. Therefore, KBRA analyses repayment capacity in the context of the quantitative determinants described above.

Qualitative Factors

Manager Review: Established in 1995, LSGA is a private equity firm that has approximately 86 employees across 12 international offices across North America, Europe and Asia. As of September 2026, LSGA has raised 26 funds with aggregate capital commitments totalling approximately $96 billion.

Other Qualitative Factors: There have been no changes since previous surveillance.

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Methodology