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…