KBRA Affirms and Subsequently Withdraws the Rating of a Subscription Facility to BNP Paribas European Junior Infra Debt Fund II
9 Dec 2025 | London
KBRA UK (KBRA) affirms and subsequently withdraws the A+ rating assigned to a subscription facility to BNP Paribas European Junior Infra Debt Fund II (the “Fund” or the “Borrower”). The Facility is a €50.0 million subscription facility provided by BNP Paribas. The Facility's maturity is August 2026, subject to three additional one-year extension options at the Lender’s discretion. The Fund is the second vintage fund in BNP Paribas Asset Management Europe's junior infrastructure debt strategy and is yet to have its final close. The Fund will follow the investment strategy of its predecessor fund, focused on making debt investments for primarily brownfield infrastructure projects across renewable energy, energy storage, other transition energy, public transport, utilities, broad telecom and social infrastructure segments. The rating action reflects the stable credit quality of the limited partner ("LP") base and stable Fund performance since rating issuance.
Key Credit Considerations
Financial Covenants and Structural Features: The primary collateral and source of repayment for the Facility is the uncalled capital commitments (“UCC”) of the Fund from the underlying LPs. The Fund is required to maintain a minimum coverage level of UCC from Qualifying LPs in an amount equal to or greater than 1.50x of the aggregate amount of all Fund's Financial Indebtedness on an ongoing basis, stepping down to 1.35x once (i) 50% of capital commitments have been called, (ii) the Fund's final close has occurred and (iii) the ratio of net asset value ("NAV") and total Qualifying LP's UCC against the Fund's Financial Indebtedness is greater than 3.00x. A failure to remedy a breach of these covenants within five business days will result in an event of default under the terms of the Facility Agreement. The Lender also has security over the right of the GP to issue capital calls following a continuing event of default.
Alignment of Interests: A failure to fulfil a capital call can result in the Defaulting 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) cancelling all or part of the Defaulting LP’s available commitment; (ii) selling or assigning the Defaulting LP’s interest; and (iii) suspending rights to distributions to the Defaulting LPs. These provisions are strong incentives for LPs to meet capital calls.
Credit Quality of LP Commitments: KBRA assessed the credit quality of the LPs comprising the Fund as of June 2025. KBRA’s assessment of the credit quality of the LPs was evaluated using (i) for rated entities (approximately 94.6% 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, 100.0% of the Total Fund Commitments have been evaluated to be equivalent to investment grade credit quality, in line with issuance.
Diversification of LP Commitments: The diversification of the LPs’ commitments is determined utilising an adjusted Herfindahl-Hirschman Index (“adjusted HHI”). As of June 2025, the Fund had received commitments from six LPs which are all Qualifying LPs. The adjusted HHI is 4.6 which represents a highly concentrated LP base, in line with issuance. Given the Fund is still fundraising, it is expected the LP base will be further diversified following subsequent closings.
Additional Claim to Distributions / Illiquid Assets: To the extent that some or all of the LPs default on their obligation to fulfil capital calls and repay the Facility, the Lender may have recourse to other assets of the Fund (as an unsecured creditor of the Fund). While this is credit positive and offers a secondary repayment source for this Facility, the assets of the Fund consist of debt investments for primarily brownfield infrastructure projects which KBRA views as illiquid and complex relative to other asset classes.
Rating Sensitivities
Decline in LP Credit Quality: A decline in the credit quality of the Fund’s LPs as a result of: (i) deterioration in the credit quality of underlying LPs; (ii) transfer of interests to LPs of lower credit quality characteristics; (iii) inclusion of LPs with weak credit quality characteristics; and (iv) weaker than expected LP diversification, may result in negative rating changes.
Improvement in LP Credit Quality: An overall higher credit quality of the Fund’s LPs as a result of: (i) improvement in the credit quality of underlying LPs; (ii) transfer of interests to LPs with better credit characteristics; (iii) inclusion of LPs with strong credit quality characteristics; and (iv) stronger than expected LP diversification, may result in positive rating changes.
Underperformance of Fund Assets or Investments: A decrease in the Fund’s NAV due to underperformance of the Fund’s underlying investments may jeopardise debt repayment as the deterioration of the Fund may, for example, elicit hesitation of the Fund’s LPs to fund their respective capital calls regardless of their contractual obligations to do so and the underlying LPs’ security and protections to the Lender.
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 Facility covenants. At the current commitment level, the Facility requires Financial Indebtedness to be covered by at least 1.50x in Qualifying LPs' UCC. This requirement steps down to 1.35x once 50% of commitments have been called, the Fund's final close has occurred and the ratio of the NAV and total Qualifying LP's UCC against the Fund's Financial Indebtedness is greater than 3.00x. For the purposes of its analysis, KBRA has applied the 1.50x threshold resulting in a minimum total asset coverage of 250.0%, in line with issuance.
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 August 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 LPA 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: BNP Paribas Asset Management Europe is BNP Paribas’ asset management arm, with approximately €715 billion of assets under management as of September 2025. The Firm is ranked as the second largest asset manager in the European Union on a combined basis across BNP Paribas Asset Management Europe, AXA Investment Management, BNP Paribas Real Estate Investment Management and BNP Paribas Cardif. It employs over 3,300 employees in more than 30 countries and serves individual, corporate and institutional clients in 67 countries across Europe and Asia Pacific. The Firm has offerings across five capabilities: High Conviction Active Strategies, Emerging Markets, Private Assets, Systematic, Quantitative & Index, and Liquidity Solutions.
Other Qualitative Factors: There have not been any changes since rating issuance.
To access ratings and relevant documents, click here.