KBRA Affirms All Ratings Assigned to Class A and Class B Notes Issued by Blackstone Diversified Alternatives Issuer L.L.C.; Revises Outlook to Positive
12 Jun 2026 | New York
KBRA affirms the outstanding ratings on the Class A and the Class B Notes issued by Blackstone Diversified Alternatives Issuer L.L.C. Additionally, KBRA has revised the outlook to Positive from Stable. The affirmation is based on KBRA’s analysis of reported transaction performance and investment performance as of the date hereof. The change in Outlook reflects the substantial increase in asset coverage since issuance and the ongoing scheduled amortization of the Notes, which has further supported deleveraging of the transaction.
As of the Q4’2025 Quarterly Report of the Issuer, the asset coverage of the Class A and Class B Notes are approximately 331.1% and 237.5%, respectively, which reflects an increase in asset coverage since KBRA’s last review in calendar year 2025. In addition, the Liquidity Ratio was 1.01x, which is below the required 1.50x threshold to make equity distributions. A failure to maintain these ratios does not constitute an Event of Default, but does place limitations on the Issuer, including restrictions on equity distributions until such time as the Issuer re-establishes compliance with the applicable maintenance ratio requirements.
Over the past year, Blackstone has continued to deploy capital to its Drawdown Products. Through December 31, 2025, the Issuer has committed $777.5 million of capital to Drawdown Products, and of this committed amount, $442.8 million has been deployed. Future performance of the Issuer will largely depend on Blackstone’s continued management of the underlying Liquid Products and Drawdown Products and market performance over the remainder of the transaction. The decision to affirm the ratings and revise the outlook to Positive from Stable was driven by the performance of the underlying investment coupled with the deleveraging of the Class A and the Class B Notes.
Key Credit Considerations
- Asset Coverage: At issuance, the Class A and Class B Notes had asset coverages of approximately 203.0% (49.2% LTV) and 156.1% (64.0% LTV), respectively. As of the December 2025 valuation reports, the asset coverages for the Class A and Class B Notes were approximately 331.1% (30.2% LTV) and 237.5% (42.1% LTV), respectively, primarily driven by decrease in the outstanding amount of the Rated Notes through scheduled amortization.
- Alignment of Interests: Blackstone or its affiliates invests directly or indirectly in the same portfolio of Drawdown Funds that serve as collateral in the transaction.
- Uncertain Cash Flow: While the initial pool of Liquid Products and Money Market Funds provided 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 later stages of the transaction depend heavily on realizations from Drawdown Products, which, as alternative investments, do not generate cash flow 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 of $35.2 million and access to a liquidity facility. These features provide additional liquidity support for potential liquidity shortfalls before the Drawdown Products begin to generate positive cash flow.
- Maintenance Ratios: As of December 31, 2025, the Liquidity Ratio was 1.01x, which is below the required 1.50x threshold to make equity distributions applicable after the fifth anniversary of the Closing Date; as a result, distributions on the Equity Interests are prohibited for so long as the Liquidity Ratio remains below the required threshold. The LTV Ratio remains compliant in accordance with its guidelines. However, if the maintenance LTV ratio were breached, distributions on the Equity Interests would be prohibited for so long as the Loan-to-Value Ratio exceeded 65%. Additionally, the Money Market Fund balance was $77.6 million, or approximately 3.1x the required minimum balance and therefore remains compliant with the Money Market Funds Minimum Balance requirement. A breach of the Money Market Funds Minimum Balance would constitute an Event of Default only if the balance remained below the required minimum for more than 15 consecutive business days.
- Asset Quality of Underlying Collateral: While the Money Market Funds are a source of liquidity, the Liquid Products 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 a blend of Liquid and Drawdown Products.
- Manager: Blackstone (the “Manager” or the “Firm”) was founded in 1985 and is headquartered in New York, with additional offices across 27 locations worldwide. As of December 31, 2025, the Manager employs approximately 5,285 professionals and managed approximately $1.27 trillion in assets under management (AUM), diversified across Credit & Insurance (34.7%), Private Equity (32.7%), Real Estate (25.1%), and Multi-Asset Investing (7.5%). Oversight of the Issuer's investment activities is provided by the Issuer's Investment Manager, Blackstone ISG-II Advisors L.L.C., an affiliate of Blackstone, and the applicable Blackstone Credit & Insurance ("BXCI") platform. BXCI has approximately 815 employees and manages approximately $443.0 billion of Total AUM as of December 2025.
Rating Sensitivities
- Investment Underperformance / Delays in Distributions: Payment of principal on the Notes depends predominantly on distributions from underlying Drawdown Product investments. Significant delays in distributions or poor performance of the underlying funds could affect the ability to meet scheduled amortization payments.
- Asset Coverage: If the structure continues to maintain higher-than-expected NAV due to outperformance, along with deleveraging of the Notes, this would support continued improvement in asset coverage and would be viewed as credit positive.
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