KBRA Upgrades Ratings for Crescent Capital BDC, Inc.

KBRA upgrades the issuer and senior unsecured debt ratings to BBB from BBB- for Crescent Capital BDC, Inc. (NASDAQ: CCAP or "the company"). The Outlook is revised to Stable from Positive.

Key Credit Considerations

The upgraded ratings are supported by the company’s ties to its credit investment platform, Crescent Capital Group LP ("CCG"), which is a large investment management company with ~$46 billion in AUM, $35 billion of which is comprised of private credit AUM, which provides CCAP with the benefit of scale through SEC exemptive relief to co-invest alongside other accounts across the platform. Furthermore, Sun Life Financial Inc. (NYSE: SLF), a CAD $1.5 trillion Canadian life insurance and asset management company, which acquired a 51% interest in the Crescent platform (Crescent Capital Group LP ("CCG" or "the platform") in 2021, plays a valuable role in providing seed capital and investing in the debt of its fund vehicles as well as facilitating Canadian banking relationships. In the case of CCAP, SLF owns about 6% of its publicly traded equity and over $70 million of its senior unsecured debt. The ratings also considers CCAP's long operating history (one of the longest in the sector) with a strong management team that has a sound track record with an average tenure of Crescent’s leadership of 20 years and solid risk management practices.

As of December 31, 2024, CCAP had a well-diversified $1.6 billion investment portfolio comprised predominantly of secured first lien loans, including first-out unitranche loans (89%), increasing substantially from 77% at YE 2020. The investment portfolio consists of 185 portfolio companies across 20 sectors, with median EBITDA of $29 million, and nearly all deals (99%) are sponsor backed. The company focuses on providing loans to the core and lower-middle market where there is less competition and generally to portfolio companies in less cyclical businesses that have solid cash flow, mission critical businesses, and stable operating history. Health Care Equipment & Services (27.3%), Software & Services (21.8%), and Commercial & Professional Services (14.5%) comprise the 3 top sector concentrations.

Further supporting the ratings is the diverse and improved funding mix through strong banking relationships and access to the capital markets. As of December 31, 2024, the company’s liquidity was adequate, with $222.5 million in available bank lines and $39.4 million of cash. The company issued $115 million of notes in February 2025, further increasing liquidity and planning for the 2026 maturity of $296.6 million of unsecured notes. The company had $212.5 million of unfunded commitments, of which, a portion is tied to covenants and transactions and is not expected to be drawn. Gross leverage was 1.19x, within CCAP’s target gross leverage of 1.10x - 1.30x. While the upper range of the company’s target leverage is higher than peers, CCAP intends to remain below 1.3x. Asset coverage was sufficient at 183%, within regulatory asset coverage of 150%, providing an adequate cushion for weaker market conditions.

These credit strengths are counterbalanced by the potential risk related to the company’s illiquid investments, retained earnings constraints as a RIC, and a more uncertain economic environment with high base rates, geopolitical risks, and the potential for increasing non-accruals.

Formed in 2015, Crescent Capital BDC, Inc. is a closed-end publicly traded business development company, regulated under the Investment Company Act of 1940, which, among other things, must distribute to its shareholders at least 90% of the company’s investment company taxable income. CCAP is externally managed by Crescent Cap Advisors, LLC, a subsidiary of CCG. The company’s stock trades on the NASDAQ under the symbol CCAP with a recent market capitalization of ~$636 million. CCG has 230+ investment professionals and is headquartered in Los Angeles, CA with four other offices in the U.S. and London.

Rating Sensitivities

Given the rating upgrade, additional positive momentum is unlikely over the medium term. Rating pressure is possible if a prolonged downturn in the U.S. economy has a material impact on the company’s earnings performance, asset quality, and leverage. An increased focus on riskier investment, along with operating at a higher than targeted leverage, or a significant change in the current management structure coupled with a negative change in strategy, credit monitoring, and/or originations could also pressure the ratings.

To access ratings and relevant documents, click here.

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