KBRA Affirms and Subsequently Withdraws the Rating Assigned to BNP Paribas' Participation in a Subscription Facility to the Partnerships Comprising CVC Capital Partners Strategic Opportunities II
1 Dec 2025 | London
KBRA UK (KBRA) affirms and subsequently withdraws the A+ rating assigned to BNP Paribas' €110.0 million participation in a €500.0 million subscription facility (the "Facility") to the partnerships comprising CVC Capital Partners Strategic Opportunities II ("CVC SO II" or the “Fund”). The Facility is an uncommitted, secured subscription facility due to mature in December 2026. The rating action reflects the stable credit quality of the limited partner ("LP") base and stable Fund performance since the last surveillance. The rating and withdrawal were requested by BNP Paribas. Neither CVC nor any of its associates has requested this report or the rating, and this report has not been prepared for or approved by any of them.
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 UCC in an amount equal to or greater than 1.50x of the aggregate amount of all Fund indebtedness on an ongoing basis, stepping down to 1.25x once 50% of capital commitments have been called. Additionally, once 50% of capital commitments have been called, the Fund is required to comply with a net asset value (“NAV”) coverage test, requiring that the value of the Fund’s investments be at least 2.00x of the aggregate amount of all Fund indebtedness. A failure to remedy a breach of these covenants within 20 business days will result in an event of default under the terms of the Facility Agreement. The Lenders also have 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 CVC Capital Partners Strategic Opportunities II L.P. (the "Main Partnership"), which accounts for 95.5% of the total Fund commitments. KBRA’s assessment of the credit quality of the LPs was evaluated using (i) for rated entities (approximately 85.8% of Main Partnership's 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, 95.5% of the main Partnership's commitments have been evaluated to be equivalent to investment grade credit quality, which is consistent with the LP base at previous surveillance.
Diversification of LP Commitments: The diversification of the LPs’ commitments is determined utilising an adjusted Herfindahl-Hirschman Index (“adjusted HHI”). The Main Partnership had received commitments from 53 LPs with an adjusted HHI of 13.9, which represents a relatively concentrated LP base, in line with the previous surveillance.
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 Lenders 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 private equity investments which KBRA views as complex and illiquid relative to other asset classes and there is no certainty with regards to the ability of the Fund to sell and realise sufficient value from these assets.
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 assets or 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 covenants set forth in the Facility Agreement. At the current commitment level, the Facility requires indebtedness to be covered by at least 1.25x in UCC, and is also subject to compliance with the NAV ratio. In the asset coverage calculation, KBRA includes the UCC plus the Fund's NAV, including drawn amounts under the Facility which are invested into assets as an additional source of asset coverage. This results in a minimum total asset coverage of over 300%, in line with the previous 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 December 2026.
Cash Flow Analysis: The primary source of repayment for subscription facilities consists of LP pledges to pay commitment amounts; the Lenders are 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: Established in 1981, CVC Capital Partners is an alternative investment manager with seven strategies in private equity, secondaries, credit and infrastructure. As of 30 June 2025, the Firm had approximately €200 billion of assets under management and operates from 30 global offices across Europe, the Americas and the Asia Pacific regions. CVC's private equity platform manages €115 billion of assets and comprises four strategies: Europe/Americas, Asia, Strategic Opportunities and Growth.
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