Press Release|Funds
KBRA Affirms the Revenue Notes Class A-2 Issued by DigitalBridge Issuer, LLC and DigitalBridge Co-Issuer, LLC
18 Jul 2025 | New York
KBRA affirms the outstanding rating assigned to the Revenue Notes Class A-2 of the Secured Fund Fee Revenue Notes, Series 2021-1 (the “Notes”) issued by DigitalBridge Issuer, LLC (in such capacity, the “Issuer”) and DigitalBridge Co-Issuer, LLC (in such capacity, the “Co-Issuer” and together, the “Issuers”). In addition, KBRA has assigned a Stable outlook to the Revenue Notes Class A-2.
As of March 2025, DigitalBridge has $99.6 billion of assets under management, up 24.3% year-over-year and fee-earning equity under management has increased to $37.3 billion, up 14.8% year-over-year. These trends were driven by new capital formation through continuing commitments to the latest DigitalBridge Partner Series fund and the firm’s second credit strategy.
DigitalBridge Group, Inc. is a global digital infrastructure asset manager with a focus on identifying and capitalizing on key secular trends in digital real estate. The Firm has built a portfolio of more than 30 digital portfolio companies in digital infrastructure assets including macro cell towers, small cells networks, fiber networks, data centers and edge infrastructure. DigitalBridge has an established track record of 25+ years’ investing, having previously managed industrial, healthcare and hospitality holdings, and operating a retail investment management business.
Key Credit Considerations
- Asset Coverage: The transaction is governed by a maximum permitted Loan-to-Value (LTV) ratio of 35.0%, equivalent to an asset coverage of 285.7%. The value of the collateral securing the Notes is calculated based on the discounted present value of DigitalBridge’s management fees and the book value of its balance sheet investments, adjusted for accumulated depreciation. As of May 2025, the LTV and asset coverage ratios were 9.2% and 1087.0%, respectively. This represents an improvement from the 2024 surveillance when the LTV and asset coverage on the Revenue Notes Class A-2 were 9.6% and 1041.7%, respectively. At issuance, those metrics were 17.3% and 578.0%. On a pro forma basis, assuming a full draw of the VFN Class A-1, the LTV would increase to 18.3%, equivalent to an asset coverage of 545.3%. The Trustee is responsible for calculating the portfolio valuation on an ongoing basis.
- Sensitivity to Portfolio Valuation: The 35% LTV threshold is monitored against an ongoing valuation of the borrowing base. While reliance on periodic valuations introduces degree of uncertainty, this risk is partially mitigated by the transaction’s defined valuation guidelines. Under these guidelines, management fees are valued using a discounted cash flow approach based on reported earnings, while balance sheet investments are assessed at undepreciated book value, subject to write-downs, where applicable. Since the transaction’s closing, the LTV has consistently remained below the 35% threshold.
- Asset Valuation Methodology: The valuation methodology for determining collateral value and management fees is determined as follows:
- Management Fees: Management fees are valued on a quarterly basis by calculating the Annualized Recurring Fees (ARF). This is determined by adjusting the value of the prior 12 months of fees for additional increases or decreases to capital commitments. The value of these fees net of expenses through the legal final maturity date (Sep-2051) is discounted back to a net present value using an annualized discount rate of 5.0%.
- Digital Balance Sheet Investments: With the exception of Digital Other Investments, the transaction’s non-fee collateral is valued using a book value approach calculated in accordance with Generally Accepted Accounting Principles (GAAP) and adjusted for accumulated depreciation. The value of these assets will be consistent with the reporting of asset value in connection with any of DigitalBridge’s underlying funds or remaining balance sheet investments.
- Digital Balance Sheet Collateral Contribution and Restrictions: DigitalBridge and its subsidiaries may contribute to or substitute the equity interests of additional wholly owned subsidiaries to the Issuer, subject to the satisfaction of specified conditions under the transaction. These assets could include GP co-investments and other balance sheet entities which could introduce a risk of an unknown or adverse selection of assets. This risk is mitigated by the transaction’s excess concentration test which requires the value associated with the management fee collateral to represent at least 60% of the borrowing base value. This limits the probability of non-management fee collateral inflating the borrowing base or masking potential underperformance in fee collections. As of Q2 2025, balance sheet investments represent ~31% of the collateral.
- Alignment of Interests: The Notes have a five-year revolving term ending in September 2026 but are intended to be a permanent source of capital for DigitalBridge. This creates a long-term alignment of interests between the Noteholders and DigitalBridge as the Noteholder’s outcomes will be correlated to DigitalBridge’s ability to accurately underwrite and grow its footprint in the digital infrastructure market.
- Reliance on Future Fundraising: Without giving credit to the liquidation values of the balance sheet investments, Noteholders will rely on DigitalBridge to successfully raise future funds that generate management fees at a level consistent with recent demonstrated fundraising. This risk is mitigated by the transaction’s leverage restrictions that would accelerate the repayment of the Notes if fundraising were to decline below certain thresholds. There is further mitigation by the Noteholder’s security interest in the balance sheet investments, which though volatile, can offset declines in DigitalBridge’s assets under management (“AUM”) over time and can be used to de-lever the transaction. As of May 2025, DigitalBridge is on track to meet its 2025 fundraising targets.
- Key Structural Features:
- Interest Reserve Account: Sized to cover one quarter of expected interest payments due on the Notes with full replenishment prior to any payment of principal on the Notes or distributions. As of May 2025, the Interest Reserve Account has a balance of $3.6 million. This account has not been drawn to date.
- LTV Trigger: If the LTV ratio exceeds the maximum permitted threshold of 35.0%, the breach can be remedied either through de-leveraging or by contributing additional eligible assets to the borrowing base. During any period of LTV breach, distributions to the Issuer are prohibited until the trigger is cured. Since the transaction’s closing, the LTV has consistently remained below the maximum threshold.
- Debt Service Coverage Ratio (DSCR) Trigger/Cash Trap: If the DSCR falls below 1.75x, further draws of the VFN are prohibited and 50.0% of all remaining cash following the payment of interest is trapped. If the DSCR falls below 1.50x, 100% of excess cash is trapped and further distributions or draws of the VFN are prohibited until cured. If the DSCR falls below 1.20x, all excess cash is swept to repay the outstanding Notes. Since the transaction’s closing, the DSCR has remained above this minimum threshold and as of May 2025, the DSCR is 14.66x.
- Amortization of the Notes:
- Pre-Anticipated Repayment Date (ARD): Prior to the ARD, all cash flows net of expenses and interest can be distributed to the Issuer, subject to compliance with the LTV ratios and DSCR triggers.
- Post-ARD: Following the ARD, all cash flows net of expenses and interest are used to first fully repay the VFN Class A-1, followed by Revenue Notes Class A-2.
- Manager Track Record: Founded in 1991, DigitalBridge Group, Inc. (“DigitalBridge” or the “Firm”) is a global digital infrastructure asset manager with $99.6 billion of AUM, employing 324 professionals, as of March 31, 2025. The Firm has built a portfolio of 40+ digital portfolio companies in digital infrastructure assets including macro cell towers, small cells networks, fiber networks, data centers and edge infrastructure. DigitalBridge has a 25+ year track record of investing, having previously managed industrial, healthcare and hospitality holdings, and operated a retail investment management business. In Q1 2025, DigitalBridge closed $1.2 billion in new capital commitments. This increase is supported by the continued fundraising efforts of DBP III.
Rating Sensitivities
- Growth in Fee-Paying AUM and Continued Performance Stability: Continued demonstrated growth in fee-paying AUM and stable performance from current and future investments could result in a positive rating change.
- De-Leveraging of Notes: Assuming a stable collateral base and expected performance, a de-leveraging of the Notes and potential borrowing base appreciation could result in a positive rating change.
- Weakened Performance and/or Reductions to Forecasted Fundraising: A deterioration of Fund performance that changes KBRA’s view of the strength of the transaction’s cash flows could result in a negative rating change. KBRA may consider a downward rating revision if the diversity of the underlying sources of management fees were to change without commensurate de-leveraging of the Notes.
- Credit Profile of the Borrower: Given the transaction’s reliance on the long-term viability of the Firm, a decline in the credit quality of DigitalBridge Group, Inc in KBRA’s view, could result in a negative rating change.
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