KBRA Publishes and Affirms Ratings on HG Vora Opportunistic Capital Fund III B Rated Feeder LP

KBRA affirms its rating, removes the Watch Upgrade status, and maintains its Stable Outlook on the senior unsecured Class A Notes (Class A Notes), the senior unsecured Class B Notes (Class B Notes), and affirms its ratings and maintains its Stable Outlook on the senior unsecured Class C Notes (Class C Notes, and together with the Class A Notes and Class B Notes, the Notes) issued by HG Vora Opportunistic Capital Fund III B Rated Feeder LP (the Issuer, or the Rated Feeder). The affirmation reflects stable performance of the underlying investment portfolio, sufficient credit enhancement, and adjustments to the quantitative determinant weightings following the publication of KBRA’s updated methodology on March 12, 2026, which provides additional transparency into determinant matrix weights and updates cash flow weightings for feeder and NAV facilities with predominantly direct lending exposure. However, given the meaningful allocation to non-cash pay direct lending exposures, KBRA applied the same determinants weightings utilized at issuance. On 6 October 2025, KBRA assigned A-, BBB-, and BB- to the Class A, B, and C Notes respectively, on an unpublished basis. KBRA’s rating addresses the ultimate payment of interest and ultimate payment of principal by the legal final maturity date of the Facility. This published report is based on the information made available by the Issuer as of December 2025, unless noted otherwise.

Key Credit Considerations

Asset Coverage

The Class A Notes, Class B Notes, Class C Notes, and LP Interests will be drawn on a pro rata basis at a ratio of 20.0%, 25.0%, 30.0%, and 25.0%, respectively as the Master Funds issue capital calls to make investments. The Master Funds anticipate utilizing permanent leverage through credit facilities (Credit Facilities) at a target maximum of 0.40x (Credit Facilities LTV of 28.6%), though as of March 2026 the facility is not in place. With the leverage of the credit facility in place, this results in the Class A Notes having an LTV/Asset Coverage of 42.9%/233.3%, the Class B Notes as having an LTV/Asset coverage of 60.7%/164.7%, and the Class C Notes as having an LTV/Asset Coverage of 82.1%/121.7%. As of March 31, 2026, the current LTV’s and asset coverage is 19.8%/505.8%, 44.6%/224.2%, and 74.6%/134.0% for the Class A, Class B, and Class C notes, respectively.

Transaction Structure

The transaction benefits from structural credit protections that support the assigned ratings, including initial overcollateralization and subordination across the capital structure, projected excess spread available to absorb losses and performance triggers.

Cash Flow Priority
The transaction utilizes a sequential priority of payments. During the Commitment Period, interest on the Notes is paid sequentially. Following the end of the Commitment Period, all available principal and excess interest proceeds, after paying fees and interest, are applied sequentially to amortize the Notes.

Excess Spread 

Excess spread has declined relative to issuance expectations, with the current portfolio generating SOFR + 6.88% compared to SOFR + 7.63% at issuance; however, it remains adequate to cover the Notes. The decline is primarily attributable to a lower allocation to higher-spread distressed credit exposures, as the ramping portfolio currently exhibits stronger credit quality than initially assumed. As the portfolio continues to ramp, distressed credit exposures are expected to increase, and portfolio construction is expected to migrate closer to issuance assumptions.

Amortization of Notes

Post commitment period, after the Class A Notes, Class B Notes, and Class C Notes accrued and unpaid interest are paid, all proceeds will be used to pay down the Notes in sequential order until the most senior note is paid in full. Additionally, no proceeds will be distributed to the LP Interests post the commitment period until the Notes have been paid in full.

Subordination to Bank Facility 

The Master Funds are anticipated to utilize leverage in the form of Credit Facilities with a maximum leverage of 0.40x. Distributions to Class A Notes, Class B Notes, and Class C Notes will be subordinate to obligations due and payable under these Credit Facilities. In stress scenarios that reduce the Master Funds’ distributions, distributions to the Noteholders could be pressured as cash flows are first used to service the Credit Facilities.

Concentration Risk

The Master Funds employ a concentrated investment strategy, which can increase the risk of meaningful losses if one or more large positions underperform due to reduced diversification across obligors and sectors. Structural limits are in place to mitigate this concentration risk. Specifically, the top five positions are collectively limited to no more than 35% of total Master Funds’ capital, and exposure to any single position is capped at 10%. These concentration limitations become effective once the portfolio reaches 75% deployment. These constraints are designed to reduce the risk of outsized losses stemming from idiosyncratic underperformance, thereby enhancing credit protection for Noteholders.

Distressed Investment Exposure 

The Master Funds’ strategy includes allocations to distressed credit, which carries heightened risk due to potential delays in realization and uncertain recovery outcomes. To mitigate this risk, exposure to distressed investments is capped at 7.5% of the portfolio, limiting the impact.

Manager Experience and Track Record

Founded in 2009 and based in New York, HG Vora invests in performing credit, stressed/distressed assets, and equities, using both long and short strategies. HG Vora incorporates fundamental analysis and leverages its industry experience to find undervalued securities. The Firm focuses on an event-driven and value-oriented strategy investing across the capital structure. As of March 31, 2025, the Firm manages over $5 billion of assets under management and operates a team of 39 professionals consisting of 15 investment professionals and 24 non-investment professionals.

Rating Sensitivities

Asset Coverage

A significant de-levering of the Note balance and/or a trend of Fund performance that exceeds current expectations may result in a positive rating change.

Underperformance of Fund Collateral

A deterioration in Fund performance that changes KBRA’s view of the strength of the transaction cash flows may lead to a downward rating revision. KBRA may additionally consider a downward rating revision if the diversity of underlying assets were to change or if the portfolio were to become concentrated in more volatile asset classes.

Final Portfolio Composition Dependent on Successful Ramp-Up

In the event the final portfolio does not reflect a similar size, diversity, yield, and credit profile as assumed, KBRA’s view of the asset quality of the underlying loans may change, which may impact the ratings assigned to the Notes.

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Methodology