Private Credit: Rate Cuts Will Help Most but Not All Borrowers

The Federal Reserve kicked off its highly anticipated monetary easing cycle on September 18 with a 50 basis point (bps) reduction of its target base rate. Lower rates will be a windfall for most private credit borrowers, but what may appear as a blessing may not be enough for those already struggling.

In August, KBRA reported how strong revenue and EBITDA growth cushioned the blow from climbing interest costs for many of the 1,067 unique corporate borrowers assessed in 1H 2024 (see Private Credit: Q2 2024 Middle Market Borrower Surveillance Compendium–EBITDA to the Rescue). In this report, we wanted to determine how those 1,067 borrowers would be impacted in a falling rate environment. With rates projected to decline to 300 bps, from over 500 bps before the rate cut announcement, we determined all-in rates for…