KBRA Affirms and Subsequently Withdraws the Rating of a Subscription Facility to CVC Credit Partners Private Credit 2023-1 SCSp
16 Sep 2025 | London
KBRA UK (KBRA) affirms and subsequently withdraws the AA- rating to a subscription facility to CVC Credit Partners Private Credit 2023-1 SCSp (the “Fund” or the “Borrower”). The Facility is a €75.0 million revolving credit facility provided by BNP Paribas. The Facility maturity is December 2025, subject to three one-year extension options at the Lender’s discretion. The Borrower has been established by CVC as a separately managed account for a single investor. The investor is a wholly owned and controlled investment vehicle of a highly rated institutional investor, which ranks among the largest asset managers in Canada. The Facility is secured by a €250.0 million commitment from the LP, which is deployed by the Fund to co-invest alongside CVC Credit Partners European Direct Lending Fund IV, the fourth vintage of CVC’s direct lending strategy focused on privately negotiated secured loans to European mid-market companies. The rating action reflects the stable credit quality of the LP and stable Fund performance since rating issuance.
Key Credit Considerations
Financial Covenants and Structural Features: The primary collateral and source of repayment for the Facilities is the uncalled capital commitments (“UCC”) of the Fund from the underlying limited partners (“LPs”). The minimum Coverage Ratio must not exceed 1.50x until 50% of the commitments are called and will step down to a minimum Coverage Ratio 1.20x thereafter, provided there is compliance with the NAV ratio. The NAV ratio requires the aggregate value of the investments plus cash to the aggregate amount of all financial indebtedness to be at least 1.50x.
Alignment of Interests: A failure to fulfil a capital call can result in the Defaulting LP 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) cancelling all or part of the Defaulting LP’s available commitment; (ii) selling or assigning the Defaulting LP’s interest; and (iii) suspending rights to distributions to the Defaulting LPs. These provisions are strong incentives for LPs to meet capital calls.
Credit Quality of LP Commitments: KBRA assessed the credit quality of the LPs comprising the Fund. KBRA’s assessment of the credit quality of the LPs was evaluated using (i) for rated entities, the ratings assigned to the relevant LP 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 LP’s credit quality. Overall, 100.0% of the Fund’s commitments have been evaluated to be equivalent to investment grade credit quality, in line with issuance of the rating.
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 one LP. The adjusted HHI is 1.7, which represents a highly concentrated LP base, in line with issuance of the rating.
Investor Letter: The ultimate LP parent and the LP provided an Investor Letter to the Lender, with consents, acknowledgements and undertakings which cannot be amended or waived, unless through written agreement, until the Facility is repaid in full and terminated.
Rating Sensitivities
Decline in LP Credit Quality: A decline in the credit quality of the Fund’s LPs as a result of: (i) deterioration in the credit quality of underlying LPs; (ii) transfer of interests to LPs of lower credit quality characteristics; (iii) inclusion of LPs with weak credit quality characteristics; and (iv) weaker than expected LP diversification, may result in negative rating changes.
Improvement in LP Credit Quality: An overall higher credit quality of the Fund’s LPs as a result of: (i) improvement in the credit quality of underlying LPs; (ii) transfer of interests to LPs with better credit characteristics; (iii) inclusion of LPs with strong credit quality characteristics; and (iv) stronger than expected LP diversification, may result in positive rating changes.
Underperformance of Fund Investments: A decrease in the Fund’s NAV due to underperformance of the Fund’s underlying investments may jeopardise debt repayment as the deterioration of the Fund may, for example, elicit hesitation of the Fund’s LPs to fund their respective capital calls regardless of their contractual obligations to do so and the underlying LPs’ security and protections to the Lender.
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, in compliance with the covenants of the Facility Agreement. At the current commitment level, the Facility requires indebtedness to be covered by at least 1.50x in uncalled commitments. This requirement steps down to 1.20x once 50% of commitments have been called, subject to compliance with the NAV ratio. For the purposes of its analysis, KBRA has applied the 1.50x threshold, resulting in a minimum total asset coverage of 250.0%.
Liquidity: As the Fund makes investments, the principal source of collateral value and debt service shifts from the remaining capital commitments (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 the Facility, maturing in December 2025, 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 LPA 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 1981, CVC Capital Partners is an alternative investment manager with seven strategies in private equity, secondaries, credit and infrastructure. As of 31 March 2025, the Firm has approximately €202 billion of assets under management and operates from 30 global offices across Europe, the Americas and the Asia Pacific regions. CVC's private equity platform manages €119 billion of assets and comprises four strategies: Europe/Americas, Asia, Strategic Opportunities and Growth.
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