Private Credit: U.S. Corporate Synthetic Risk Transfer Poised to Attach

KBRA has rated synthetic risk transfer (SRT) transactions referencing portfolios of various asset types, including corporate debt exposures. The use of SRTs for risk management and capital relief is expected to increase in anticipation of Basel 3 implementation. In addition, our rating activity and dialogue with market participants regarding private credit SRTs has expanded as the private credit universe continues to grow and evolve. Although synthetic pooled corporate risk transfer is not a new or intrinsically complicated concept, corporate SRTs are often highly customized in practice. This can introduce specific layers of nuance and complexity that must be considered on a deal-by-deal basis. In this KBRA report, we provide an overview of corporate SRT structures, payment mechanics, and unique risks that arise when analyzing these transactions through the lens of our Structured Credit Methodology.

Key Takeaways