KBRA considers the themes that matter for private credit in 2025.
Key Takeaways
Trump 47 is expected to have a mixed impact on the private credit industry. The prospects for lower taxes and reduced regulations are likely to add fuel to the pent-up desire for exits, driving private credit loan growth and acting as a tailwind to portfolio company credit quality. Meanwhile, renewed inflationary concerns have already caused markets to anticipate fewer rate cuts. A mere two quarters ago, the implied fed funds rate was below 300 basis points (bps) at the end of 2025. That same measurement is now around 400 bps. KBRA sees an extended period of elevated rates as a risk to some borrowers’ credit quality.
KBRA believes most borrowers will have improved access to incremental debt capacity in 2025. In tandem with the nearly 60% of the nearly 2,000 companies in KBRA’s credit assessment portfolio that de-levered last year, base rate cuts and the 32% of borrowers who lowered their…
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KBRA is a global full-service rating agency with a mission to set a standard of excellence and integrity. Established in 2010, KBRA remains dedicated to the restoration of trust in credit ratings by creating new standards for assessing risk and by offering timely and transparent ratings. KBRA provides market participants with an alternative solution by delivering in-depth research across various sectors within the United States and European markets. We strive to provide the investment community with the products and tools needed to make informed investment decisions.