KBRA Releases Research – Private Credit: NAVigating the PE Landscape—NAV Loans Still Perform

KBRA releases updated research that examines the resilience of its ratings for net asset value (NAV) loans, which are secured directly or indirectly by the NAV of eligible private equity (PE) assets or interests.

NAV lending has continued to play an important role in supporting the liquidity needs of the PE industry amid higher-for-longer interest rates and a challenging PE exit environment over recent years. Between 2018 and 1H 2024, KBRA assigned ratings ranging from A+ to BBB- to 86 NAV loans, with issuance volume totaling $51 billion. Rated volume has grown considerably since December 2022 when we had assigned ratings to 54 NAV loans with issuance volume totaling $27.5 billion.

This report examines KBRA’s NAV loan portfolio with exposure to PE or secondary funds, with a focus on the key inputs that drive rating outcomes. These include, but are not limited to, the loan-to-value (LTV) ratio, portfolio diversity, modeled cash flow outcomes, and underlying portfolio company leverage. We also examine issuance volume and structural trends, as well as rating performance for the existing portfolio since inception.

Click here to view the report.