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KBRA Affirms All Ratings for Nassau CFO 2022 LLC

3 Oct 2025   |   New York

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KBRA affirms the outstanding ratings on the Liquidity Loan Facility (the “Liquidity Facility”), Class A Debt, Class B Debt, and Class C Debt (collectively, the “Rated Debt”) issued by Nassau CFO 2022 LLC. The affirmation is based on KBRA’s analysis of transaction performance to date.

Over the past surveillance period, all interest obligations on both the Liquidity Facility and the Rated Debt have been paid in a timely manner. While distributions have been delayed relative to issuance expectations and LTVs for Class A and Class B have increased since the prior surveillance, they remain below both issuance LTVs and their respective triggers. In addition, the portfolio’s adjusted NAV exceeds the Issuer’s issuance expectations and continues to demonstrate positive intrinsic NAV growth after accounting for capital calls and distributions. These factors remain supportive of the outstanding ratings.

Key Credit Considerations

  • Asset Coverage and Credit Enhancement: The asset coverage for the Class A Debt, Class B Debt and Class C Debt is approximately 207.7% (48.1% LTV), 159.8% (62.6% LTV), and 148.4% (67.4% LTV), respectively. Assuming a full draw on the Liquidity Facility, the asset coverage is approximately 1,063.8%, equivalent to an LTV of 9.4% relative to the adjusted NAV as of July 31, 2025.
  • Transaction Structure and Key Protective Features
    • Interest Reserve Account: At issuance, approximately $26.9 million of the Transaction proceeds were deposited into a Reserve Account, with a targeted ongoing aggregate balance of (i) six months of interest due on the Class A Debt and Class B Debt and (ii) one year of ongoing fixed fees. Proceeds in the Reserve Account can be invested in certain eligible investments. The account can be drawn to cover distribution shortfalls in order to meet ongoing expenses and accrued and unpaid interest on a timely basis. As of August 15, 2025, the Interest Reserve Account is fully funded in the amount of $26.9 million.
    • Liquid Assets Account: At issuance, approximately $82.7 million of the Transaction proceeds were deposited in the Liquid Assets Account. The initial balance of the Liquid Assets Account was the result of excess cash raised by the issuance of the Rated Debt. The Liquid Assets Account was used to meet capital calls from the underlying portfolio as intended. The current balance of the Liquid Assets Account is zero.
    • Amortization Profile: During years 1-3 of the transaction, amounts on deposit within the Payment Account are utilized to first maintain the LTV on the Class A Debt, Class B Debt, and Class C Debt of 50%, 65%, and 70%, respectively, prior to any permitted distributions to the holders of the Subordinated Notes. Beginning in November 2025 through August 2027 (the “Controlled Amortization Period”), an additional 50%, 15%, and 5% of excess proceeds in the Payment Account following the payment of Class A Debt interest, Class B Debt interest, and Class C Debt interest respectively and LTV-driven principal payments will be used to pay down the Rated Debt balances on a pro rata basis further. Beginning no later than November 2027 (the “Clean-Up Amortization Period”), all excess cash is used to repay the Rated Debt sequentially until fully repaid. There can be no further distributions to the holders of the Subordinated Notes until all classes of Rated Debt have been paid in full. In KBRA’s view, the above repayment is protective to the Rated Debt by minimizing distributions to the holders of the Subordinated Notes to the extent the collateral experiences material devaluations.
    • Lender Credit Quality: The Liquidity Facility lender (the “Lender”) must maintain a short-term rating of at least ‘A-2’ and a long-term rating of at least ‘BBB’ or equivalent. In the event a Lender’s rating falls below the ratings criteria, such Lender will be deemed a “Downgraded Lender.” A Downgraded Lender is required to assign its position to a qualified replacement Lender within 30 days of it becoming a Downgraded Lender. Additionally, no Lender is permitted to assign its loans or commitment under the Liquidity Facility without the prior written consent of the Issuer and the Manager unless a payment or bankruptcy Event of Default has occurred. As of August 2025, the ratings on the Liquidity Facility Lender are in compliance.
  • Portfolio Diversification: The collateral is diverse by general partner (“GP”) exposure, strategy, vintage, and asset concentration. As of July 31, 2025, the portfolio consisted of 52 LP interests managed by 35 unique GPs across more than six investment strategies and 12 annual vintages, with adjusted NAV Herfindahl-Hirschman Index (“HERF”) calculations of 30.4 by LP interest and 15.3 by GP concentration. The largest GP and LP by exposure are both approximately 8.7%. The number of LP and unique GPs in the underlying portfolio has remained unchanged since issuance. The LP NAV HERF calculation was 31.9 at issuance and 31.1 as of last year’s surveillance. The GP NAV HERF calculation was 24 at issuance and 22.1 as of last year’s surveillance.
  • Vulnerability to Uncertain Cash Flow: The payment of ultimate interest and ultimate principal on the Rated Debt depends heavily on realizations from private assets, which, as alternative investments, do not generate cash flow on a fixed schedule nor in predetermined amounts. This is partially mitigated by the Reserve Account, Liquidity Facility, and Preferred Investor contributions. Further, approximately 40% of the Adjusted NAV represents interests in private credit strategies, unchanged since issuance, which carry a relatively more predictable realization profile when compared to private equity strategies.
  • Issuer Overcommitment Exposes Investors to Liquidity Risk: As of July 31, 2025, the Issuer has unfunded commitments of $91 million and there is available liquidity in the form of the $50 million Liquidity Facility, resulting in a potential commitment shortfall of approximately $41 million. Transaction investors bear the risk of these additional capital calls and thus rely either on (i) the timely and stable distribution of collateral cash flows or (ii) the Preferred Contributions from Nassau Life Insurance Company (“NNY”), PHL Variable Insurance Company (“PHL”), Nassau Life and Annuity Company (“NLA”), and The Nassau Companies (“NC” and collectively, the “Nassau Investors”) to meet any funding requirements in excess of the available liquidity at closing. As of May 20, 2024, PHL entered rehabilitation proceedings in the Connecticut Superior Court. PHL’s Rehabilitation process may inhibit their ability to provide Preferred Contributions. At issuance, KBRA's cash flow scenarios did not give credit to Preferred Contributions and expects all capital calls to be fulfilled by distributions from the underlying collateral, the Liquid Assets, or the Liquidity Facility. KBRA notes that the Liquid Assets were used to meet capital calls and have been depleted as intended. KBRA will continue to monitor PHL but does not expect the Issuer to request Preferred Contributions.
  • Quality of Underlying Assets: The collateral consists of passive, illiquid investments in private capital funds which are considered to carry uncertain value due to their complexity and illiquidity. Mitigating this is (i) the quality and track record of the third-party GPs managing these funds, ranging from 5 to 50+ years with performance generally in the first or second quartile and (ii) the vintage diversification of the collateral across 12 years, which creates a more predictable realization profile and reduces valuation-related performance volatility.
  • Exposure to NAI as Manager, and the Nassau Investors as Retention Provider and Preferred Investor: Strong alignment of interests is evidenced by the fact that “NAI” serves as Transaction’s investment manager and the Nassau Investors as Risk Retention Holder and Preferred Investor. Post-closing, the NAI’s portfolio management team continues to monitor and manage the collateral. NAI’s portfolio management team has a 10+ year track record of alternatives investing with broad and diverse LP and GP relationships and demonstrated capital markets access. In addition, Nassau Investors will serve as Preferred Investor with the ability to provide liquidity to the structure to meet capital calls and other funding obligations. In KBRA’s view, NAI’s credit quality is sufficient in regard to the ratings assigned and in consideration of its role for this transaction.

Rating Sensitivities

  • Significant Underperformance of Fund Collateral: A significant deterioration in portfolio valuation or trend of collateral cash flows that are notably lower than current forecasted performance may result in a negative rating change.
  • Counterparty Exposure: Changes to the credit quality of key counterparties including but not limited to the Sponsor, Liquidity Facility lenders, or Transaction administrators may result in a negative rating change.
  • Funding of Capital Calls: Any delays or failures to meet capital calls on the collateral driven by delays in realizations or exhaustion of the available liquidity may result in a negative rating change.
  • Asset Coverage: A significant de-leveraging of the Rated Debt that decreases LTV coupled with stable and/or performance greater than expectations, may result in a positive rating change.

To access ratings and relevant documents, click here.

Click here to view the report.

Related Publication

Methodologies

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

This credit rating is endorsed by Kroll Bond Rating Agency Europe Limited for use in the European Union and by Kroll Bond Rating Agency UK Limited for use in the UK. Information on a credit rating’s endorsement status is available on its rating page at KBRA.com.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

There are certain issuers, entities or transactions rated by KBRA Europe or KBRA UK that may be or have relationships with Shareholders and/or Shareholder-Related Companies, as that term is defined in KBRA’s Shareholder and Shareholder Related Companies for KBRA Europe and KBRA UK Policy and Procedure. Relevant disclosure information may be found here.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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