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KBRA Affirms All Ratings for Glendower Capital Secondaries CFO, LLC

11 Jul 2025   |   New York

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KBRA affirms the ratings on the Class A, Class B, and Class C Loans (collectively, the "Rated Debt") issued by Glendower Capital Secondaries CFO, LLC (the "Issuer"). The outlook on these ratings remains Stable. This decision is based on KBRA's assessment of the transaction and investment performance reports.

Since issuance, the performance of the transaction remains stable, with deployment aligning with initial expectations. The LTV on the Rated Debt is lower than the initial advance rate, due to a combination of purchase price discounts and appreciation in value of the underlying LP Interests, which carries a value exceeding the cost associated with the Issuer's capital calls. As of December 31, 2024, the diversification of the collateral by strategy, sector, and general partners remains largely consistent with the original characteristics.

Key Credit Considerations

  • Asset Coverage: At close, the Class A Loans, Class B Loans and Class C Loans were drawn at advance rates of 50%, 15%, and 10%, respectively. This equated to an asset coverage of 200.0% (50.0% LTV), 153.8% (65.0% LTV), and 133.3% (75.0% LTV), respectively. As of December 31, 2024, the asset coverage on the Class A Loans, Class B Loans, and Class C Loans were 239.3% (41.8% LTV), 184.1% (54.3% LTV), and 159.5% (62.7% LTV), respectively.
  • Transaction Structure: The transaction considers a number of key structural features, further described below:
    • Borrower Reserve Account: The Issuer will maintain a Borrower Reserve Account which will be funded from available funds to a target amount equal to:
      • During the Amortization Period and prior to the Class C Repayment Date, the sum of: (i) The greater of: (x) Projected interest expense on the Rated Debt for the following 12-month period or (y) 40.0% multiplied by the remaining unfunded commitments of the Borrower to the Underlying Funds; and (ii) Any additional amount determined by the Manager in its reasonable discretion as being required to meet the Borrower’s capital needs and expenses on the following Payment Date.
    • LTV Trigger and Minimum NAV Test: The structure benefits from an LTV Test, which accelerates cash sweeps to the extent the LTV exceeds 50% for the Class A Loans, 65% for the Class B Loans, or 75% for the Class C Loans. To the extent these LTV triggers are breached, there can be no leakage of distributions to the Subordinated Lenders and all distributions are used to cure the LTV breach by repaying the Rated Debt in sequential order of seniority. At issuance, KBRA noted that given the lower initial LTV (due to the discount on the Portfolio Assets) there is a greater probability of meaningful distributions to Subordinated Lenders as there was significant cushion between the initial LTV and the LTV thresholds. Additionally, the structure includes a Minimum NAV Test which is considered satisfied if the Adjusted NAV is greater than 20% of the aggregate initial commitments of all the Rated Debt and the Subordinated Loans. If the Minimum NAV Test is breached, all distributions are used to repay the Rated Debt in sequential order of priority until either the test is cured or all Rated Debt has been repaid in full. As of December 31, 2024, the LTV Test and Minimum NAV Test were both in compliance. The minimum NAV Test trigger is $23.16 million, the current applicable NAV is $81.70 million.
    • Amortization Profile: During the Amortization Period (which commences on the third Payment Date after the first anniversary of the Closing and ends on the fifth anniversary of the Closing or if the LTV exceeds 87.5%), 60% of the available cash flows are applied to repay the Rated Debt in sequential order. The remaining 40% of cash flows (subject to compliance with the triggers as described above), can be distributed to the Subordinated Lenders. Post the Clean-Up amortization Date (first payment date after the fifth anniversary of the Closing Date), 100% of the available cash flows are applied to the Rated Debt in sequential order or priority. This amortization profile prioritizes repayment of the senior-most class of Rated Debt but also for meaningful distributions (i.e. “leakage”) to the Subordinated Lenders when compared to a pro-rata amortization profile, in which only 25% of cash flows would theoretically be distributed to the Subordinated Lenders. KBRA’s cash flow analysis considers the implications of this repayment profile.
  • Pricing Tied to the Credit Performance: The transaction credit agreement considers a step-up price for the Rated Debt if the rating on either Class A, Class B or Class C Loans declines. If the Class A Loans, Class B Loans, or Class C Loans’ rating were to be downgraded by between one and three rating subcategories, the interest on any future interest accruals would increase by 50 bps until the rating has either been upgraded back to the initial rating or the Rated Debt has been repaid in full. This step-up increases by an additional 50 bps if the outstanding rating on the Class A Loans, Class B Loans, and Class C Loans were to be further downgraded beyond three rating subcategories from their initial rating. KBRA has considered the impact of this pricing increase in its cash flow analysis.
  • Uncertainty on Distribution Size and Timing: The collateral supporting repayment of the Rated Debt does not generate cash flow on a fixed schedule. Investors in secondaries, including CVC Secondary Partners (“CVC SP”), are subject to the amounts and timing of distributions from the GPs managing the funds in which they invest. Unlike the cash flows from traditional fixed income securities, such distributions are not paid in fixed amounts nor on pre-determined dates.
  • Debt Funding Contingent on Asset Performance: At any time during the Availability Period, if the aggregate LTV of the Rated Debt exceeds 87.5%, unfunded commitments from the Rated Debt would be suspended which significantly constrains the Issuer’s ability to meet any required funding obligations. Mitigating this risk are i) the requirements that Subordinated Lenders continue to fund up to their undrawn commitment amount and ii) the transaction’s initial LTV of 54% (after including the applicable discounts on the Portfolio Assets), which means that the Portfolio Assets would need to experience a significant value decline in the one year of the Availability Period. KBRA notes that this decline can occur through a combination of markdowns of existing investments and/or reductions in purchase discounts for future investments.
  • Quality of Underlying Assets: The Portfolio Assets consist of equity interests in portfolios of private equity funds. These investments carry equity-like credit risk given the potential for volatility and uncertainty of performance.
  • Manager Review and Track Record: CVC Secondary Partners (“CVC SP” or the “Firm”) is a private equity firm focused on secondary private markets globally with $18 billion of assets under management. The Firm (formerly known as Glendower Capital) was established in 2017 as a spin-off from Deutsche Asset Management but has been active in secondaries since 2003. Since January 2022, Glendower Capital has been part of CVC Capital Partners having entered into a merger and strategic partnership to enhance combined capabilities and accelerate the development of its platforms. As of January 1, 2025, CVC SP employs ca. 110 professionals and has offices in London and New York. In July 2024, CVC Capital Partners acquired the final 20% stake of Glendower Capital and rebranded it to CVC Secondary Partners. The respective investment strategies, investment committees and fund names of the individual strategies will remain unchanged.

Rating Sensitivities

  • Significant Underperformance of Fund Collateral: Significant deterioration in portfolio valuation or a trend of collateral cash flows that are notably lower than current forecasted performance.
  • Asset Coverage: Significant de-leveraging of the Rated Debt that decreases LTV coupled with stable or better than expected Fund performance.

To access ratings and relevant documents, click here.

Click here to view the report.

Methodologies

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

This credit rating is endorsed by Kroll Bond Rating Agency Europe Limited for use in the European Union and by Kroll Bond Rating Agency UK Limited for use in the UK. Information on a credit rating’s endorsement status is available on its rating page at KBRA.com.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

There are certain issuers, entities or transactions rated by KBRA Europe or KBRA UK that may be or have relationships with Shareholders and/or Shareholder-Related Companies, as that term is defined in KBRA’s Shareholder and Shareholder Related Companies for KBRA Europe and KBRA UK Policy and Procedure. Relevant disclosure information may be found here.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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