KBRA Assigns a Debt Rating to Converge Holdings' Senior Unsecured Debt
13 May 2026 | New York
KBRA assigns a BBB- long term credit rating (LTCR) to $50 million of 8.05% senior unsecured notes due April 1, 2031, issued by Converge Holdings LLC on April 23, 2026. The Outlook for the rating is Stable.
Key Credit Considerations
The proceeds from the issuance are earmarked to support the continued growth of its subsidiary, Converge RE II. Lightstone Parent LLC and Converge Holdings’ key subsidiaries, including Converge RE II, are guarantors of the notes. Financial covenants as of the last day of the most recent fiscal quarter include maintenance of financial leverage at or below 30%; minimum net worth of at least $100 million; a debt interest coverage greater than 1.50x; a secured debt incurrence cap of 20% of total indebtedness; dividend payments or other distributions are permitted, including payments to Converge Holdings’ ultimate shareholder, provided no default/event of default is continuing and cumulative distributions from the time of closing are less than 50% of net income over the same period, with no payments to Converge Holdings’ ultimate shareholder if net income is negative other than taxes/administrative expenses. The notes require Converge Holdings to maintain an NRSRO rating on the notes and allow for optional redemption. The notes also require an ongoing reserve of cash and cash equivalents equal to six months of scheduled interest payments.
KBRA believes that financial leverage is manageable and supported by adequate debt service coverage. While the executed documents acknowledge and permit the promissory note and specify that any draws become part of shareholder’s equity, KBRA notes that they do not expressly covenant or state that Converge Holdings can draw on it to pay senior-note interest.
Rating Sensitivities
A positive change in KBRA's issuer rating on Converge Holdings could result in a positive rating action on the LTCR. Conversely a negative change in KBRA's issuer rating on Converge Holdings or a covenant breach resulting in an event of default could result in negative rating action on the LTCR.
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