KBRA Affirms and Subsequently Withdraws the Rating Assigned to BNP Paribas' Participation in a Subscription Tranche A Facility to Lone Star Fund XI, L.P.

KBRA UK (KBRA) affirms and subsequently withdraws the A rating assigned to BNP Paribas' ("BNPP") $32.1 million commitment in a $289.0 million subscription Tranche A facility (the “Facility”) to Lone Star Fund XI, L.P. (the “Borrower” or the “Fund”). The Facility matures in April 2026. In January 2025, the Facility stood at $397.0 million; then was reduced to $350.3 million in April 2025, at which time BNPP’s commitment declined proportionally to $38.8 million, and was further downsized in August 2025 to $289.0 million, with BNPP’s commitment decreasing to $32.1 million. The Fund pursues the same core strategy as its predecessor funds. It follows an opportunistic approach across a variety of investment assets but primarily in single-family residential, corporate debt, consumer debt and investments in operating and financial service companies. These investments are generally targeted in North America, Europe, Asia Pacific, and Latin America. The rating action reflects the credit quality of the limited partner (LP) base and stable performance of the Fund since the previous surveillance.

Key Credit Considerations

Financial Covenants and Structural Features: The availability under the Tranche A Facility is determined by the applicable advance rate applied to the Uncalled Capital Commitments of Limited Partners (“LPs”) based on their classification. The Available Commitment under Tranche A is defined as the lesser of (i) the Tranche A Maximum Commitment and (ii) the Tranche A Borrowing Base, minus in each case a Foreign Exchange Reserve Amount (equivalent to 5%) where a letter of credit is not drawn in USD. The Fund has raised approximately $8.1 billion commitments, and as of September 2025 approximately $441.8 million of total commitments remains uncalled.

The Facility has advance rates determined by investor type, with Included and Special Included Investors at a 90% advance rate, Designated and Sovereign Designated at either 80% or 65% advance rate, and Excluded at a 0% advance rate. There are also Concentration Limits which limit the maximum debt reliance per individual investor or investor type. The combination of these features results in a maximum effective advance rate of 65.5%. At issuance, the Tranche A effective advance rate was 60.8%. The advance rate has slightly increased following reclassification of some LPs within the Borrowing Base. The Facility also permits an ‘Excluded Investor Credit Facility’ to be secured by any LP commitments that are excluded from the Facility borrowing base (subject to approval by the Agent and the Lenders). At present, there is no Excluded Investor Credit Facility in place.

Alignment of Interests: A failure to fulfil a capital call can result in the defaulting limited partner (“LP”) losing rights to distributions from the Fund and restrictions from investing in future private capital opportunities. Furthermore, in the event an LP defaults with respect to their obligation to meet capital contributions, the defaulting LP is subject to the application of various default provisions. Such provisions include but are not limited to (i) declaration of defaulting LP’s drawable commitments due and payable; (ii) suspension of distributions to defaulting LP; (iii) forfeiting the defaulting LP’s interest in the Fund; and (iv) selling all or any part of the defaulting LP’s interest. All of these provisions are strong incentives for LPs to meet capital calls.

Credit Quality of LP Commitments: KBRA’s assessment of the credit quality of the LPs was evaluated using (i) for rated entities (approximately 49.7% of commitments), the ratings assigned to the relevant LP or parent entity by KBRA or where a KBRA rating is not available, the public rating assigned by another rating agency and (ii) for unrated entities, KBRA's evaluation of the relevant LP’s credit quality. Overall, 70.9% of the Total Fund Commitments have been evaluated to be equivalent to investment grade credit quality, compared to 78.0% at the prior surveillance.

Diversification of LP Commitments: The diversification of the LPs’ commitments is measured using an adjusted Herfindahl-Hirschman Index (“adjusted HHI”). The Fund has received commitments from 141 investors, resulting in an adjusted HHI of 36.0, which indicates a relatively diverse LP base. This compares to an adjusted HHI of 32.7 at the prior surveillance.

Quantitative Rating Determinants

Asset Quality: KBRA determined the asset quality based on the blended quality of the LPs’ credit quality and the equity risk of the distributions. This blended approach to derive the weighted average asset quality reflects the idiosyncratic nature of LP capital commitments and distributions to the Fund’s LPs, as well as the primarily investment grade LP base and the exposure to equity. Offsetting this asset quality determination is the asset base which would support the repayment of the Facility, as discussed in the asset coverage determinant.

Asset Coverage: Asset coverage is calculated assuming the maximum permitted Facility draw to remain in compliance with the covenants set forth in the Facility Agreement. There are different advance rates for types of investors as well as concentration limits that restrict the maximum amount of debt reliance per investor. KBRA has assumed the maximum amount is drawn and invested into the Fund, resulting in potential asset coverage equal to the minimum uncalled capital coverage as determined by the advance rate, plus the assumed maximum full draw on the Facility. Under these assumptions, the asset coverage is 252.7% and the Loan-to-Value ratio is approximately 39.6%, where the value is calculated as the sum of the drawn amount under the Facility plus uncalled capital. This is relatively in line with the prior surveillance.

Liquidity: As the Fund makes investments, the principal source of collateral value and debt service shifts from the remaining capital commitments (which is considered more liquid, with known contractual value and short time to fund) earlier in the Fund’s life to a greater reliance on the investment value of assets in the Fund itself (considered less liquid, with limited price transparency, greater complexity and uncertain realisation timing).

Duration: Duration has been determined based upon the remaining term of the Facility, maturing in April 2026, subject to extensions.

Cash Flow Analysis: The primary source of repayment for subscription facilities consists of LP pledges to pay commitment amounts; the Lender is paid only when the LPs remit their payments. In any case, should an LP fail to pay, the Limited Partnership Agreement places the burden of payment on the remaining LPs on a pro rata basis. Therefore, KBRA analyses repayment capacity in the context of the quantitative determinants described above.

Qualitative Factors

Manager Review: Established in 1995, Lone Star is a private equity firm that has organized 25 funds with aggregate capital commitments totaling approximately $95 billion as of August 2025. Lone Star has a global footprint with 11 international offices across North America, Europe and Asia. Lone Star funds invest globally, across private equity, credit, and real estate, often targeting distressed situations or assets under stress. As of June 2025 Lone Star funds hold 89 investments in Credit, 443 investments in Real Estate and 58 investments in Private Equity.

Other Qualitative Factors: There have not been any changes since the prior surveillance.

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Methodologies