Private credit lenders have suffered relatively few losses from lending to high-growth software companies. However, as the strategy matures and underwriting standards evolve, KBRA sought to understand if the relatively low loss rate is sustainable.
Between 2023 and Q1 2025, KBRA assessed 189 companies with loan covenants originally structured around annual recurring revenue (ARR), referred to as recurring revenue loans (RRL). By analyzing these companies’ credit agreements, investment memos, financial statements, and public disclosures, we found 31% already had positive credit outcomes such as scaling their operations enough to become EBITDA margin rich, fully repaying their loan, cutting their cost of debt, completing an initial public offering (IPO), or being acquired. Conversely, 7% had the opposite experience, with negative credit outcomes like defaulting on a payment, restructuring their loan, requiring a period of forbearance, or material credit amendments due to…