Amid recent market volatility, this report presents data and observations that KBRA believes help frame the risks artificial intelligence (AI) may pose to the direct lending landscape.
The analysis focuses on underlying middle market (MM) borrowers whose loans are held in MM collateralized loan obligations (CLO), business development companies (BDC), rated feeder notes into direct lending funds, and recurring revenue loan (RRL) asset-backed securities (ABS). Unlike research that relies on “as reported” sector classifications and debt totals, this report leverages KBRA’s access to years of financial statements, lender investment memoranda, and credit agreements for more than 2,400 sponsor-backed MM companies in its assessment portfolio. This proprietary dataset enables KBRA to determine industry classifications, financial performance, and debt levels with greater precision.
Even with this level of precision, the software sector remains highly heterogeneous, making broad,…