KBRA Affirms Rating to the Capital Call Facility Provided by ABN AMRO Bank N.V. to GCF IV Holding C.V.
9 Oct 2025 | Dublin
KBRA Europe (KBRA) affirms the A rating ABN AMRO's Capital Call Facility (the "Facility") to GCF IV Holding C.V., an investment vehicle owned by Avedon Growth Capital Fund IV C.V. and Avedon Growth Capital Fund IV Coöperatief U.A. (together, “Fund IV” or the "Fund”). The Outlook is Stable. On 31 January 2025, KBRA assigned an A rating to the Facility. The rating was requested by ABN as the sole lender in the transaction. Neither Avedon Growth Capital Fund IV C.V. 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 is a bilateral revolving capital call facility with a current commitment amount of €100 million. The Facility matures in August 2026, with the option of extensions at Lender's discretion. The Facility can be used for financing new and follow-on investments, payment of fees and expenses relating to investments, general management of fund and the Facility. The Lender benefits from a market standard full security package including: (i) pledge over capital call rights; and (ii) pledge over bank accounts into which capital call proceeds are paid. In addition, the Lender can also request to create security over the Fund’s receivables following an Event of Default which is continuing beyond ten business days.
The Fund is the fourth vintage of Avedon Capital Partners B.V. (“Avedon” or the “Firm”), focusing on growth capital opportunities as a lead investor in low and mid-market companies with an enterprise value of €25-150 million in the Benelux and DACH region. The Fund’s equity investment range between €20m-€120 million, with flexibility to deploy higher amounts. The Fund’s final close occurred in July 2021, having received approximately €612 million of commitments from 58 investors.
Key Credit Considerations
Financial Covenants and Structural Features: The primary collateral and source of repayment for the Facility is the uncalled committed capital (UCC) of the Fund from the underlying LPs. The Facility is subject to a Coverage Ratio, defined as the UCC of Eligible LPs divided by the Fund’s total financial indebtedness, which must be at least 1.60x. A breach of this Coverage Ratio would trigger an immediate Event of Default. The Lender also has security over the rights of the general partner (GP) or Manager to issue capital calls further to a continuing Event of Default. As of the most recent Compliance Certificate, provided for June 2025, the Fund is in compliance with this financial covenant.
Alignment of Interests: A failure to fulfil a capital call can result in the Defaulting LP losing rights to distributions from the Fund and restrictions from investing in future private capital opportunities. Furthermore, in the event an LP defaults with respect to their obligation to meet capital contributions, the Defaulting LP is subject to the application of various default provisions. Such provisions include but are not limited to i) suspension of distributions to the Defaulting LP; ii) selling whole or part of the Defaulting LP’s interest and iii) causing the income and capital accounts of the Defaulting LP to be forfeited. These provisions are strong incentives for LPs to meet capital calls.
Credit Quality of LP Commitments: KBRA assessed the credit quality of the LPs comprising the Fund as of July 2025. KBRA’s assessment of the credit quality of the LPs was evaluated using (i) for rated entities (approximately 45.1% of commitments), the ratings assigned to the relevant LP or parent entity by KBRA or where a KBRA rating is not available, the public rating assigned by another rating agency and (ii) for unrated entities, KBRA’s evaluation of the relevant LP’s credit quality. Overall, 64.0% of the Total Fund Commitments and 79.1% of the Eligible LP Commitments have been evaluated to be equivalent to investment grade credit quality. Overall, the credit quality of the LP base remains broadly consistent with the LP base evaluated at issuance of the rating in January 2025.
Diversification of LP Commitments: The diversification of the LPs’ commitments is determined utilising an adjusted Herfindahl-Hirschman Index (“adjusted HHI”). As of July 2025, the Fund had received commitments from 58 LPs which includes 43 Eligible LPs. The adjusted HHI is 26.4 for overall LPs and 19.0 for the Eligible LPs, which represents a relatively diverse LP base. The adjusted HHI for total LPs and Eligible LPs is in line with the adjusted HHI as at rating issuance.
Dutch Law Considerations: Pursuant to Dutch law, a claim is required to be existing at the time of insolvency to prevent it from falling within the bankruptcy estate of the Fund. A pledge over the capital commitments may either be structured as a disclosed pledge, meaning that the LPs receive notice at the time of creation of the pledge, or else an undisclosed pledge, meaning that the LPs are notified at the time of enforcement along with the delivery of the capital call by the Lender(s). Whether or not the LPs have been notified determines whether a claim is existing but conditionally payable upon receipt of a capital call (in the first instance), or a future claim whose existence is conditional on notice and delivery of a capital call (in the second instance). Where undisclosed, if not called prior to insolvency, the claim upon the LPs may therefore fall within the bankruptcy estate of the Fund. The Facility benefits from a disclosed pledge (in addition to an undisclosed pledge) over the capital commitments which mitigates some of the uncertainty around insolvency risks on the enforcement of collateral.
Additional Claim to Distributions / Illiquid Assets: To the extent that some or all of the Fund’s LPs default on their obligation to fulfil capital calls and repay the Facility, the Lender may have recourse to other assets of the Fund, including additional protections and ability for the Lender to create security over the Fund’s receivables during a continuing event of default under the Facility. While this is credit positive and offers a secondary repayment source for this Facility, the assets of the Fund consist of private equity investments which KBRA views as complex and illiquid relative to other asset classes and there is no certainty with regards to the ability of the Fund to sell and realise sufficient value from these assets.
Rating Sensitivities
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 interest(s) to LP(s) of lower credit quality characteristics; (iii) inclusion of LP(s) with weak credit quality characteristics; and (iv) weaker than expected LP diversification, may result in negative rating changes.
Increase 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 interest(s) to LP(s) with better credit characteristics; (iii) inclusion of LP(s) with strong credit quality characteristics; and (iv) stronger than expected LP diversification, may result in positive rating changes.
Underperformance of Fund Manager: A decrease in the Fund’s NAV due to underperformance of the Fund’s underlying 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.
To access ratings and relevant documents, click here.
Click here to view the report.