This report explores the potential impact of escalating trade tensions, tariffs, market volatility, and a possible economic slowdown on KBRA-rated business development companies (BDC), asset managers, and middle market (MM) collateralized loan obligations (CLO). While these ratings are not immune to broader macroeconomic headwinds, recent events underscore the relative stability of private markets compared to their public and bank loan market counterparts. The comparative resilience of private markets—evidenced, in part, by KBRA observing little to no disruption to planned private lending transactions—reflects their ample liquidity. It also highlights the significant structural protections, including matched funding and/or low loan-to-value thresholds in most rated transactions, the lack of forced liquidation during public market gyrations, and the ability of investors and lenders to remain focused on longer-term considerations in their mostly bilateral relationships.
Still, highly…