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KBRA Assigns Ratings to Secured Notes and Liquidity Facility Issued by Alp CFO 2025, L.P.

7 Aug 2025   |   New York

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KBRA assigns ratings to Class A Notes, Class B Notes and Class C Notes (together, the “Secured Notes”) issued by Alp CFO 2025, L.P. (the “Issuer”). The total issuance amount is $1.25 billion, resulting in initial Loan-to-Value ratios of 50%, 65% and 75% for the Class A Notes, Class B Notes, and Class C Notes, respectively. KBRA also assigns a rating to the $250.0 million Liquidity Facility that is extended to the Issuer with an initial LTV of 20% assuming a fully drawn facility.

The net proceeds of the transaction will be initially invested in an asset portfolio consisting of (1) limited partnership interests (“LP Interests”) in several funds detailed in the accompanying report (“Private Assets”) and (2) eligible investments in Liquid Assets. The Liquid Assets and the distributions from the Private Assets are intended to fund capital calls and other fund obligations with respect to the Private Assets, expenses and interest on the Secured Notes and the Liquidity Facility as well as repayment of the Secured Notes and the Liquidity Facility. The Secured Notes and the Liquidity Facility will be secured by the mix of Private Assets and Liquid Assets (the “Assets”), certain contractual rights, securities accounts of the Issuer and distributions received by the Issuer with respect to the Assets.

Established in 2000 as a joint venture between APG and PGGM, AlpInvest has over 267 professionals across six offices globally. As of June 30, 2025, AlpInvest reported $97 billion of AUM, and their parent company, Carlyle, reported $465 billion AUM. AlpInvest is a core part of the Carlyle platform, representing just over 20% of Carlyle's total AUM.

Key Credit Considerations

  • Asset Coverage: The Class A Notes are issued at a Loan-to-Value Ratio (LTV) of 50.0%, the Class B Notes an LTV of 65.0%, and the Class C Notes an LTV of 75.0%. This results in asset coverage at issuance of approximately 200%, 153.8% and 133.3% for the Class A Notes, Class B Notes, and Class C Notes, respectively. For the Liquidity Facility, KBRA assumes a fully drawn facility, resulting in an asset coverage of 500.0%, equivalent to an LTV of 20% at closing.
  • Transaction Structure: The transaction considers several key structural features, further described below:
    • LTV Trigger: Holders of the Secured Notes benefit from an LTV test that restricts distributions to the Subordinated Notes if any of the specified LTV thresholds are breached in any given quarter following the close of the transaction. The LTV is equal to the sum of (i) the principal outstanding amount of the Secured Notes, (ii) outstanding deferred interest on the Secured Notes (iii) the principal outstanding amount under the Liquidity Facility, divided by the Borrowing Base. The Borrowing Base is defined as the sum of (i) all cash on deposit in any account (other than a reserve account for tax distributions), (ii) the NAV of the Private Assets and (iii) the NAV of the Liquid Assets. Over time, the maximum permitted LTV decreases quarterly from 75.0% at the closing of the transaction to 45.0% in year 4 and to 0% after year 6.
    • Amortization Test: While the Secured Notes remain outstanding, the amortization test is satisfied if, as of any payment date, the scheduled principal amount due on the Secured Notes, along with any Deferred Interest, is repaid in accordance with the amortization schedule. Any unpaid amounts would not be considered an event of default but instead would rollover and be paid in the next year. The Class A Notes are targeted to be fully amortized by the end of year 4, the Class B Notes by the end of year 5 and the Class C Notes by the end of year 6. Target Amortization is applied evenly across the quarterly payment dates each year, and is applied sequentially, so that payments must first be made to the senior most note outstanding. The amortization schedule for the Class B Notes is subject to compliance with the amortization schedule of the Class A Notes which is targeted to be fully amortized by 2030. Similarly, the Class C Notes amortization schedule is subject to compliance with the amortization schedules of the Class A Notes and Class B Notes and is targeted to be fully amortized by 2031.
    • Delayed Draw Feature: At closing $625 million of the Notes are expected to be funded and the remaining $625 million will be funded in September 2025. The investors are expected to include insurance companies, Carlyle employees, fund managers and family offices. There are no limitations pertaining to minimum ratings of the Note investors or the concentration of different types of investors. KBRA views the delayed draw risk as partially mitigated by several factors, including the partial funding at closing which creates a financial incentive for investors to fulfill future capital commitments, and the short two-month draw window which limits the duration of the exposure. The remaining draw must also comply with the LTV Test, or 75%, and similarly if the LTV is out of compliance the Issuer will be unable to draw on the notes to fund the second closing. As mitigants to this, KBRA understand that the Private Assets at first closing will be acquired at a discount to NAV and the assets at the second closing will also be acquired at a discount to NAV as per the already executed PSA. This avoids a situation where the assets are transferred below the acquisition cost which would result in a breach of the LTV test. Additionally, the second funding will occur intra-quarter before any new valuation marks are applied to any of the Private Assets, so no markdowns of NAV will affect the LTV.
    • Reserve Account: The Reserve Account will initially be funded on the Closing Date by the Target Balance which is at least 4% of the aggregate outstanding amount of the Secured Notes as long as some Secured Notes remain outstanding. On each Payment Date in accordance with the Priority of Payments, proceeds will be deposited into the Reserve Account to the extent required so that the balance equals the Target Balance. Reserve Account deposits can be used to meet Fund Obligations, invest into Liquid Assets or to meet timely interest and fee payments on the Liquidity Facility and the Secured Notes.
    • Interest Deferral Cap: The Class A Notes and Class B Notes will have a maximum number of interest deferrals of 10 payment dates each, consecutively and non-consecutively. If the Interest Deferral Cap is breached, this would constitute an Event of Default that would, upon declaration by a majority of the controlling class, begin an Acceleration Event.
  • Evolving Portfolio of Private Asset Collateral: The Private Assets funds will be identified at closing. The commitments to certain existing funds will already be substantially funded, providing greater visibility and certainty with respect to the underlying collateral. In contrast, commitments to newer fund vintages are subject to blind pool risk, as a portion of the capital has yet to be invested. As such, the composition of these portfolios remains less certain at this stage. KBRA developed assumptions of the future investments by evaluating the manager’s investment strategy, historical deployment patterns, and anticipated portfolio composition.
  • Alignment of Interests: In certain strategies of the Private Assets, and particularly with respect to GP-Centered Investments, AlpInvest seeks sizeable personal investments from the GP. Moderate fees and tiered carried interest waterfalls as well as management incentive plans are aligned to AlpInvest’s entry price for both the GP and underlying management teams.
  • Vulnerability to Uncertain Cash Flow: Whilst the initial pool of Liquid Assets provides reliable cash flow for debt service in the early years of the transaction, the payment of ultimate interest and principal on the Secured Notes in the later stages of the transaction depends heavily on realizations from Private Assets, which, as alternative investments, do not generate cashflow on a fixed schedule nor in predetermined amounts. This risk is partially mitigated through ongoing allocations to Liquid Assets and access to a five year Liquidity Facility, which provides a cushion to cover unanticipated liquidity shortfalls before the Private Assets begin to generate positive cashflow. The borrowers of the Liquidity Facility can request one-year extensions on each anniversary of the Closing Date to maintain a five year tenor.
  • Issuer Overcommitment: The Issuer will raise $1,250 million to purchase LP interests at approximately $999 million and service an estimated unfunded commitment of $746 million. The reason for this overcommitment is to ensure that most, if not all, the Notes’ proceeds will be deployed into the Private Assets. The Issuer expects that distributions in the early periods of the transaction will be recycled and used to fulfill capital calls in lieu of Notes’ proceeds. This, combined with a $250.0 million Liquidity Facility, would cover all expected called commitments. However, any capital called beyond the expected amount would have to be serviced by any excess cash from distributions in various accounts, the Liquid Assets or the Reserve Account.
  • Quality of Private Assets: The Private Assets are considered to have greater price volatility, inherent illiquidity, and more idiosyncratic risk than the Liquid Assets. On a blended basis over the life of the transaction, KBRA views the expected overall asset quality of the collateral to reflect quality consistent with equity-like risk.
  • Quality of Liquid Assets: The Private Assets are considered to have greater price volatility, inherent illiquidity, and more idiosyncratic risk than the Liquid Assets. On a blended basis over the life of the transaction, KBRA views the expected overall asset quality of the collateral to reflect quality consistent with equity-like risk.
    • No Concentration or Diversity Limitations: No single obligor limits are applied to the Liquid Assets, which may result in concentration across particular assets or specific industries.
    • Obligor Risk: Aside from performance related reasons, the value of investments may decline for reasons directly related to the respective obligor such as management performance, financial leverage or just a reduced demand for the obligor’s goods or services. KBRA does not have reasonable insight into who these obligors are to carry out any meaningful analysis on them.
    • Credit Rating Requirements: The Liquid Assets are subject to Liquid Asset Required Ratings such that any obligation or security has both a long-term and short-term credit rating from Moody’s of Aa3 or higher and P-1 or higher, respectively, or just a long-term credit rating at least equal to or higher than the current Moody’s long-term rating of the U.S Government debt. Downgraded assets would be liquidated and new assets in compliance would be acquired. Ratings do not evaluate the risks of fluctuations in market value and so KBRA considers this in its cash flow analysis.
  • Events of Default Linked to the Manager: The Secured Notes include Events of Default linked to the Issuer General Partner, the Manager or any Permitted Subsidiary, including bankruptcy or insolvency, or if a court of competent jurisdiction appoints a liquidator of the Issuer General Partner or Manager. As such, an Event of Default on the Secured Notes could be triggered following an adjudication of insolvency of the Manager, without any significant deterioration in the performance of the underlying assets. KBRA recognizes that The Carlyle Group Inc. is a publicly rated entity and has assets under management (“AUM”) of $465 billion, while the Manager is a wholly-owned subsidiary of The Carlyle Group Inc. with AUM of $97 billion, as of June 30, 2025. However, a deterioration of the credit worthiness of the Manager could impact the ratings assigned to the Secured Notes as a result of these non-standard Events of Default.
  • Manager Review and Track Record: AlpInvest is a global private equity asset manager with $97 billion in AUM and over 267 professionals across six offices globally. As of June 30, 2025, AlpInvest’s parent company, Carlyle, reported $465 billion in AUM. AlpInvest is a core part of the Carlyle platform, representing just over 20% of Carlyle's total AUM. The strategies employed by AlpInvest include (i) primary investments, launched in 2000, (ii) co-investments, launched in 2000, and (iii) secondary investments, launched in 2002 with the dedicated portfolio finance strategy established in 2021. As of June 30, 2025, AlpInvest has completed 245+ secondary and portfolio finance investments, and 425+ co-investments, with over $41 billion and $26 billion in assets under management respectively.

Rating Sensitivities

  • Significant Underperformance of Fund Collateral: Significant deterioration in portfolio valuation or a trend of collateral cash flows that are notably lower than current forecasted performance.
  • Asset Coverage: Significant de-leveraging of the Secured Notes coupled with stable performance that decreases LTV.

To access ratings and relevant documents, click here.

Click here to view the report.

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.

The Manager is, or has a relationship with, one or more of KBRA Europe/KBRA UK shareholders that is required to be disclosed under applicable credit rating agency regulation in the EU and/or the UK. Please review KBRA’s shareholder disclosures, which are updated periodically.

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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