Fundamentals have held firm over the last 12 months (LTM) ending March 31, 2026, with several credit quality metrics showing signs of improvement in Q1 2026. That said, March brought another macroeconomic shock, adding to a growing list of disruptions over the past six years, including the global pandemic, monetary tightening, supply chain disruptions, two wars, a regional banking crisis, tariff and artificial intelligence (AI)-related uncertainty, and several energy price shocks.
Across these periods, KBRA has observed direct lenders navigate uncertainty with limited defaults—a trend we expect to continue—while noting that some already weak companies are likely to face additional stress from the most recent disruption. Consistent with our findings on the potential risks AI poses to our portfolio, we find that the impacts from these shocks remain diffuse and well within the risk tolerance of KBRA-rated direct lending vehicles (see
Surveillance Assessment Transitions
In Q1 2026,…
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