KBRA Affirms Ratings for Class A Notes, Class B Notes, and Class C Notes Issued by Sculptor Alternative Solutions LLC
9 Mar 2026 | New York
KBRA affirms its ratings for the Class A Notes, Class B Notes, and Class C Notes (collectively, the “Rated Notes”) issued by Sculptor Alternative Solutions LLC (the “Issuer”).
The Issuer issued the Rated Notes in 2022 to make capital commitments to various open-ended funds and closed-end fund vehicles (the “Core Strategies”) managed by Sculptor Capital II LP (the “Investment Manager”). Proceeds from the Notes were initially used to acquire Liquid Assets, Liquid Strategies, investments in open-ended funds, and finance various transaction costs.
KBRA notes that there has been an increase in valuation of the fund interests securing the repayment of the Rated Notes. This increase can largely be attributed to cash flow generation in the Core Strategies. KBRA notes that there have not been any notable changes in portfolio allocation since the 2025 surveillance report.
Key Credit Considerations
1. Asset Coverage (N/A)
Asset coverage on the Rated Notes is calculated as the NAV of the underlying investments, including the Liquid Strategies, Liquid Assets, and Core Strategies, divided by the Notes principal outstanding. As of November 2025, asset coverage on the Class A Notes, the Class B Notes, and the Class C Notes are approximately 300.9%, 189.5%, and 159.9%, respectively.
2. Transaction Structure
The following are the key structural features of the transaction:
i. LTV Triggers (+)
Noteholders benefit from two sets of LTV tests. The Primary LTV test, which governs permitted distributions to Subordinated Noteholders, starts at 70.0% and then gradually steps down to 40% by year 8, after which it remains at that level until the legal maturity of the Notes. To the extent the aggregate LTV of the Liquidity Facility, Class A Notes, Class B Notes and Class C Notes exceeds this test, there can be no distributions to the Subordinated Noteholders. Any remaining cash will be trapped and, at the discretion of the transaction sponsor, can either be re-invested into Liquid Strategies or used to repay the Notes in a sequential order. The Secondary LTV trigger governs any additional amortization of Class A Notes and Class B Notes using remaining cash left in the collection account after giving effect to scheduled amortizations for all three classes of Notes, beginning in year four. If the pro-forma LTV following scheduled amortization exceeds these thresholds, any remaining cash must be used to cure this test prior to permitted distributions to the Subordinated Noteholders. Currently, the LTV is 62.6%, which exceeds the 60.0% Primary LTV threshold and remains below the 70.0% Secondary LTV threshold at year 4, resulting in restricted distributions to the Subordinated Noteholders but not triggering early amortization.
ii. Amortization Profile (+/-)
Beginning in year 4 of the transaction, the Notes are governed by a targeted amortization schedule that is designed to result in full repayment on all three classes of Notes with the anticipated repayment date in year 8. To the extent there are insufficient cash proceeds to meet these targeted amortization amounts, unpaid principal can be paid in subsequent periods. Following year 8, principal repayment is accelerated and there can be no leakage to the Subordinated Notes until the Class A Notes, Class B Notes and Class C Notes have been paid in full. The transaction is in year 4 and amortization has commenced. As of November 2025, approximately 15% ($21 million) of the Class A drawn amount has been amortized, in-line with the target schedule.
iii. Liquidity Ratio (+)
The transaction benefits from a Liquidity Ratio, calculated as Total NAV of (i) the Liquid Strategy Products, (ii) the Money Markets, and (iii) the Undrawn Liquidity Facility divided by the total remaining capital commitments to the Core Strategies. During the transaction’s 3-year investment period, no distributions are permitted to Subordinated Noteholders unless the Liquidity Ratio is greater than or equal to 1.00x. Following the investment period, this threshold increases to 1.50x. As of November 2025, the liquidity ratio is 3.61x, passing the threshold.
iv. Liquid Assets Minimum Balance (+)
The transaction benefits from a minimum Liquid Asset Balance test of 4.0% of the remaining outstanding Notes balance until the Notes are repaid in full. The Liquid Assets are required to consist of cash or other highly liquid investments of investment grade credit quality. As of November 2025, the balance of liquid assets is $38.4 million, satisfying the minimum Liquid Asset Balance threshold.
v. Strategy Concentration Limits (+)
New commitments (on a cumulative basis) to a Core Strategy will be capped at 40.0% of the Issuer’s NAV. The Issuer can commit up to 20.0% of its NAV on a cumulative basis and 10.0% of its NAV per new fund, to new Sculptor-managed funds/strategies during the transaction’s three-year investment period. This concentration limit is no longer in effect as the transaction’s investment period expired.
vi. Liquidity Facility Quarterly Borrowing Cap (-)
Pursuant to the Liquidity Facility Agreement, any quarterly draws on the Liquidity Facility are capped at 35.0% of the Facility commitment, equal to approximately $16.8 million. This risk is mitigated by i) the Issuer’s limited exposure to delayed funding obligations and ii) the additional liquidity sources within the structure including the Liquid Assets and Core Strategies that consist of redeemable shares. KBRA notes that the Issuer can also redeem portions of its shares in locked up open-ended funds if the purpose of the redemption is to satisfy funding obligations or invest in other Sculptor-managed strategies. This gives the Issuer access to proceeds invested in Sculptor Master Fund (SCMF) share class T and Sculptor Credit Opportunities Master Fund (SCCO) share class A, if required. As of November 2025, the Liquidity Facility has not been used.
3. Drawdown Products Highly Exposed to Redemption Risk and Market Volatility, Partially Mitigated by Liquidity Management and Redemption Rights (-)
At issuance, approximately 34.7% of the transaction’s private asset commitments consisted of commitments to open-ended funds managed by Sculptor. These funds generally invest in publicly traded credit and equity products. Historically, these types of Funds have undergone periods of high volatility and severe market value decline that resulted in increased redemptions. The transaction’s open-ended funds have redemption restrictions. For example, the SCMF share class T investors have a three-year lockup period. If, following these three years, the redemption right is not exercised, the redemption protection rolls for an additional one year. This structure prevents significant waves of redemption requests by the Fund’s LPs and mitigates liquidity and fire sale risks that could affect the performance of the transaction.
Since the transaction's previous surveillance report in 2025, the allocations to open-ended Core Strategies have decreased as the proceeds from these strategies have been distributed to amortize the Rated Notes.
4. Institutional Control Framework (+)
Sculptor maintains middle and back-office functions, including risk management, treasury, and operations that are independent from the trading functions. Since KBRA’s initial rating assignment, Sculptor’s risk management strategy has remained broadly unchanged.
5. Relatively Unconstrained Investment Guidelines (-)
Sculptor’s open-ended funds are actively managed funds, and exposures and leverage will change as determined by these funds’ continuous research process. The risk presented by flexible risk guidelines is mitigated by an established control structure, layered system of limits and internal portfolio constraints, and the track record of senior management.
6. Dependence on Confidence-Sensitive Funding and Trading Counterparties (-)
As with other wholesale-funded trading businesses (especially hedge funds), Sculptor is dependent on the continued confidence of counterparties and funding providers. Even with some term maturities in its repo and Prime Brokerage funding, there is a reliance on wholesale funding access to operate the strategies effectively.
7. Manager Experience and Track Record (+)
Sculptor Capital Management Inc. (“Sculptor” or the “Firm”) is a diversified global alternative asset manager established in 1994. Its AUM of $38.0 billion, as of December 2025, comprises largely of its Multi Strategy Fund, Opportunistic Credit, Institutional Credit Strategies and Real Estate. The senior investment team comprises 23 partners who have worked together for an average of 16 years. As of December 2025, the Firm has approximately 116 investment professionals specialized by asset class across three continents. The Firm has a diverse investor base comprising institutional capital from pension funds, endowments, sovereign wealth funds, and private businesses.
In November 2023, Sculptor Capital Management was acquired by Rithm Capital Corp, a mortgage REIT based in New York City, for $719.8 million. The acquisition was part of Rithm’s strategy to broaden its capacity from real estate into multi-strategy asset management. According to Sculptor, there have been no changes to the investment strategy or policies as a result of the Rithm acquisition.
Rating Sensitivities
Significant Underperformance of Fund Collateral (-)
A rating downgrade may occur if there is significant deterioration in portfolio valuation or collateral cash flows are persistently lower than expected, eroding credit enhancement to the Rated Notes.
Asset Coverage (+)
A rating upgrade may occur if there is stable collateral performance and significant de-leveraging of the Notes driven by repayment that decreases LTV and increases asset coverage.
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