KBRA Affirms the Rating Assigned to a Senior Secured Subscription Facility to Five Arrows Debt Partners III Holding
3 Sep 2026 | Dublin
KBRA Europe (KBRA) affirms the rating assigned to a senior secured subscription facility (the “Facility”) to Five Arrows Debt Partners III Holding (“FADP III” or the “Fund”). The Outlook is Stable. The rating was requested by ING Bank N.V., London Branch (“ING”) as a sole Lender in the transaction. Neither Five Arrows Managers S.A. (“Five Arrows” or the “Manager”) nor any of its associates has requested this report or the rating, and this report has not been prepared for or approved by any of them.
The Facility was amended in December 2025. As part of the amendment, the maturity date of the Facility was extended from December 2025 to December 2026, with further extensions subject to Lender’s discretion. Furthermore, the Facility’s size was reduced from €75.0 million to €50.0 million. The Facility may be used to bridge acquisition costs, management fees, partnership expenses and financing costs, refinance existing loans, and fund other permitted purposes.
The rating reflects the credit quality and diversification of the limited partner (LP) base, the deployment of the Fund through capital calls, and the Manager's track record. The credit quality and diversification of the LP base remain broadly consistent with the previous surveillance, with the majority of LPs evaluated to be equivalent to investment grade credit quality. As of March 2026, approximately 86.1% of LP commitments had been called, compared with 84.5% at the previous surveillance. KBRA views the combination of these factors as supporting the continued willingness and ability of investors to meet future capital calls for repayment. The rating also reflects KBRA's assessment of Five Arrows that operates as the alternative assets arm of Rothschild & Co ("Rothschild"), with investment teams and strategies across corporate private equity, direct lending, credit management and multi-strategy investments. The platform benefits from Rothschild's broader institutional resources and global network, including access to the group’s sector expertise and market intelligence, while maintaining dedicated investment teams and processes across its respective strategies.
FADP III is a 2021 vintage fund managed by Five Arrows and represents the third vintage of its direct lending strategy that provides customised financing solutions to European mid-market companies across the debt capital structure, ranging from senior-secured unitranche loans to junior instruments such as second lien, mezzanine and PIK facilities, as well as preferred equity structures.
Founded in 2008, Five Arrows is the alternative assets platform of Rothschild. As of June 2026, the Manager employed approximately 320 professionals across offices in Los Angeles, London, Paris, Luxembourg, New York, and San Francisco and managed approximately €33 billion of assets across corporate private equity, direct lending, credit management, and multi-strategy investments, primarily in the European and North American middle markets.
Key Credit Considerations
Investment fund ratings are based on quantitative and qualitative factors. The five key quantitative determinants are as follows:
- In the Asset Quality determinant, KBRA generally measures the quality of the collateral based on a weighted average scoring. For Subscription Facilities (“Sublines”), this includes an assessment using a matrix-based approach that reflects the creditworthiness of the Fund’s LP base.
- The Asset Coverage determinant measures the relative sufficiency of the pledged collateral value to repay the principal amount of the rated debt. For Sublines, this includes an evaluation of the covenants included in the Facility linked to uncalled committed capital (UCC) and net asset value (NAV) of the Fund, and/or advance rates applied to the UCC.
- The Liquidity determinant reflects KBRA’s assessment of the relative price discount that the underlying collateral may incur if the assets are subject to conversion into cash in order to meet scheduled or accelerated debt service requirements. Under the Liquidity determinant, KBRA considers three factors (type, complexity and price discovery / transparency) and scores these factors individually on a scale of zero to two, with two being the most liquid.
- In the Duration determinant, KBRA examines the tenor profile of the pledged collateral relative to the rated debt, and the associated vulnerability to changes in price of collateral over time.
- When appropriate, KBRA will perform a cash flow analysis in order to test the transaction’s ability to meet its rated interest and principal payment obligations under various economic, financial, and market scenarios. This is not applicable to Subscription Facilities, as LP capital calls typically occur on a non-periodic basis and the primary source of repayment for Sublines is the Fund’s UCC so once a capital call is issued, the LP is typically required to meet the capital call within a short window. Therefore, repayment capacity is analysed in the context of the prior rating determinants.
The above quantitative determinants produce a quantitative rating outcome. In addition to the above quantitative determinants, KBRA’s analysis considers a variety of qualitative factors, which can lead to upward or downward adjustments in the final rating outcome and these are assessed in the context of: (i) Manager Review; (ii) Legal Review, and (iii) Other Factors including alignment of interests, incentives to fund future capital calls and diversification within the LP base.
Rating Sensitivities
It should be noted that many aspects, including but not limited to, the rating sensitivities listed below, macroeconomic factors, market conditions, competitive landscape, and a fund manager’s investment acumen can impact the performance of the fund and influence KBRA’s rating decisions. If performance of the transaction differs meaningfully from the expected levels, KBRA may consider making a rating change.
Decline in LP Credit Quality
A decline in the credit quality of the Fund’s LPs as a result of: (i) deterioration in the credit quality of underlying LPs; (ii) transfer of interests to LPs of lower credit quality characteristics; (iii) inclusion of LPs with weak credit quality characteristics; and (iv) weaker than expected LP diversification, may result in negative rating changes.
Improvement in LP Credit Quality
An overall higher credit quality of the Fund’s LPs as a result of: (i) improvement in the credit quality of underlying LPs; (ii) transfer of interests to LPs with better credit characteristics; (iii) inclusion of LPs with strong credit quality characteristics; and (iv) stronger than expected LP diversification, may result in positive rating changes.
Underperformance of Fund Assets or Investments
A decrease in the Fund’s NAV due to underperformance of the Fund’s underlying assets or investments may jeopardise debt repayment as the deterioration of the Fund may, for example, elicit hesitation of the Fund’s LPs to fund their respective capital calls regardless of their contractual obligations to do so and the underlying LPs’ security and protections to the Lender.
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