KBRA Affirms the Notes Issued by GCM Grosvenor Diversified Alternatives Issuer LLC
23 Oct 2025 | New York
KBRA affirms the outstanding ratings and outlooks assigned to the Class A Notes, Class B Notes and Class C Notes (collectively, the “Notes”) issued by GCM Grosvenor Diversified Alternatives Issuer LLC (in such capacity, the “Issuer”).
Since last year’s review, transaction performance has been generally positive. Deployment and realization pace have been broadly in line with initial expectations. The outstanding amount of debt is unchanged, with small improvements in the value of underlying collateral contributing to an improvement in overall Loan-To-Value (LTV). As initially planned, the portfolio has been transitioning from money market and liquid products towards a larger weighting in drawdown products. KBRA’s decision to affirm the outstanding ratings on the Notes and maintain a Stable outlook considers all the above factors, as well as GCM Grosvenor’s demonstrated ability to continue deployment into drawdown products of representative quality and characteristics as initially projected.
GCM Grosvenor is a large independent alternative asset manager. Founded in 1971, GCM Grosvenor now has a global presence, with 550 professionals headquartered across nine main global offices. As of June 30, 2025, the Company manages $86 billion of AUM, of which $61 billion is invested in private markets, including private equity, private credit, and infrastructure. GCM Grosvenor has a diverse institutional investor base coupled with a lengthy track record of stable performance and demonstrated capital raising capabilities.
Key Credit Considerations
Asset Coverage
As of June 30, 2025, asset coverage for the Class A Notes is 200.7% (49.8% LTV), the Class B Notes is 154.4% (64.8% LTV) and the Class C Notes is 133.8% (74.7% LTV). This is an improvement in asset coverage when compared to KBRA’s surveillance review in 2024, primarily driven by increases in value of the Liquid Products and Drawdown Products. However, this is still in breach of the maximum LTV ratio test of 70.0% which results in cash trap until the Notes’ LTV has recovered to the maximum level of 70.0%.
Transaction Structure
The transaction considers several key structural features, further described below:
i. LTV Trigger: Investors in the Notes benefit from an LTV Test, which limits the maximum permitted LTV on the Notes to 70.0% on day one of the transaction. This LTV requirement decreases as per the predetermined schedule until 2029 from which point it remains constant at 60.0%. To the extent the aggregate LTV of the Liquidity Facility, the Class A Notes, the Class B Notes, and the Class C Notes exceeds the max permitted LTV, there can be no leakage of distributions to the investors in the subordinated notes. If the above were to occur, any remaining cash will be trapped within the Issuer Account until the LTV trigger has been cured. As of June 30, 2025, the LTV is breaching the max permitted LTV of 70.0%.
ii. Amortization Profile: Beginning in 2027, the Notes are governed by a targeted amortization schedule that will result in full repayment of the Class A Notes in 2030, the Class B Notes in 2031 and the Class C Notes in 2032. To the extent there are insufficient cash proceeds to meet these targeted amortization amounts, unpaid principal can be paid in subsequent periods. Following 2032, principal repayment is accelerated and there can be no leakage to the Subordinated Notes until the Class A Notes, the Class B Notes, and the Class C Notes have been paid in full. As of June 30, 2025, no amortization has occurred.
iii. Money Market Funds Minimum Balance: The Issuer shall not permit the Money Market Funds Balance to drop below $20 million for a period exceeding 15 consecutive business days, at any point in time. This amount is required to be retained in order for the Issuer be able to meet its future obligations, as per the priority of payments. As of June 30, 2025, there is $39.4 million in the Money Markets Funds Balance.
Evolving Portfolio of Private Asset Collateral
Since the funds in the Drawdown Products pool ramp up over time, the ultimate composition of the collateral supporting the repayment of the Notes remains to be determined until the end of the Investment Period (Closing until November 2026). The Investment Manager provided the expected strategy allocation and performance estimates to KBRA; however, the ultimate allocation across funds, as well as the investments in each GCM investment vehicle and the corresponding risk / return profile may differ from projections.
As of the date of this report, the Issuer has 79% of its commitments already funded on a pro forma basis, with the majority of the assets identified. Therefore, the ultimate allocation across funds and the investments in each GCM investment vehicle, along with the corresponding risk/return profile, are not expected to differ significantly from current projections. KBRA evaluated a range of cash flow scenarios, which incorporate potential variability in fund performance outcomes.
Alignment of Interests
GCM or its affiliates will invest directly or indirectly in the same portfolio of Drawdown Funds that serve as collateral in the transaction. In addition, GCM and its affiliates have invested into a meaningful portion of the Subordinated Notes, which further aligns Noteholder outcomes with the Manager.
Uncertain Cash Flow
While the initial pool of Liquid Products and Money Market Funds provides reliable cash flow for debt service in the early years of the transaction, the payment of timely interest and scheduled principal on the Notes in the latter stages of the transaction depends heavily on realizations from Drawdown Products, which, as alternative investments, do not generate cashflow on a fixed schedule nor in predetermined amounts. This risk is partially mitigated in the transaction through ongoing allocations to cash-yielding Money Market Funds, a Money Markets Minimum Balance equal to or greater than $20 million, and access to a liquidity facility. These latter features provide a cushion to cover unanticipated liquidity shortfalls before the Drawdown Products begin to generate positive cashflow. As of June 30, 2025, the Money Market Minimum Balance is satisfied and the Liquidity Facility is undrawn.
Quality of Underlying Assets
While the Money Market Funds and the majority of the Liquid Products are of high quality, the GIP investment (which represents ~15% of the total liquid assets, as of June 30, 2025) and Drawdown Products are considered to have greater price volatility, and, especially in the case of the Drawdown Products, inherent illiquidity, and idiosyncratic risk. On a blended basis over the life of the transaction, KBRA views the expected overall asset quality of the collateral to reflect both the Liquid and Drawdown Products.
Manager Track Record
GCM is a large independent alternative asset manager. Founded in 1971, GCM’s asset management strategy is largely concentrated in separately managed accounts (“SMAs”) for various institutional investors. The Manager has a global presence, with 550 professionals headquartered across nine main global offices. As of June 30, 2025, the Company manages $86 billion of AUM for over 500 institutional clients.
Rating Sensitivities
Continued Underperformance of Fund Collateral
Significant further deterioration in portfolio valuation which further weakens LTV of the Notes.
Deployment and Realization Pace
A slowdown in the pace of deployments and/or realizations that differs meaningfully from GCM’s forecasted expectations and results in a strained liquidity profile.
De-leveraging
Significant de-leveraging of the Notes that decreases LTV by way of Note repayment coupled with stable performance of the Drawdown Products.
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