Private Credit: Tariffs and Market Volatility Impact on Private Credit Corporates

This report explores the potential impact of escalating trade tensions, tariffs, market volatility, and a possible economic slowdown on leveraged sponsor-backed middle market (MM) borrowers. These borrowers form the foundation of many KBRA-rated funds, business development company (BDC), asset manager, and MM collateralized loan obligation (CLO) debt transactions. Many of these companies—even if not directly affected by tariffs and trade tensions—are exposed to ongoing pressure and uncertainty related to rates, credit spreads, lender terms, valuations, costs, and changing economic conditions.

In our recent MM borrower surveillance compendium, (see Private Credit: Q3 2024 Middle Market Borrower Surveillance Compendium—The End is Near?) we argued that the disruption caused by elevated interest rates had peaked. Most private credit…