KBRA Year-End Review 2025

KBRA sees a mixed outlook for private credit in 2025, with improved debt serviceability, renewed M&A activity, and regulatory tailwinds offset by higher-for-longer rates and slowing revenue growth for some borrowers. While many companies have de-levered, KBRA expects stress among weaker obligors, driving a projected 3% default rate by count. Longer term, growth opportunities remain in investment-grade debt and specialty finance despite rising competition from banks.

KBRA’s research examines the structure and credit protections of collateralized fund obligations (CFOs), which are backed by diversified pools of private capital assets and issued through multi-tranche special-purpose vehicles. While CFOs have existed for decades, issuance has accelerated, with KBRA rating 152 tranches across 67 CFOs totaling about $37.7 billion from 2018 to 2024. The report also reviews issuance trends, structural features, and rating performance since inception.

Structured finance professionals gathered in large numbers at a major industry conference in Las Vegas, with strong attendance reflecting broad market engagement. The event featured high-level discussions on the macro environment alongside sector-focused panels covering key segments of the structured finance market.

Van Hesser, Chief Markets Strategist, highlights three key themes shaping the current market landscape. Home Depot’s warning underscores mounting pressure on consumer durability, while the continued growth of private credit reinforces the importance of closely tracking leveraged finance activity. He also provides a measured perspective on the AI bubble and its implications for credit amid intense market focus.

KBRA’s European Macro Strategist Gordon Kerr concludes Conversations in European Credit and highlights the launch of his new KBRA podcast, Credit Compass: Navigating European Credit Markets. The new podcast will serve as a guide for navigating the complexities of European credit and capital markets from a broader macro perspective. It will offer valuable insights and analysis to help investors stay informed and ahead of market trends.

In this episode John Sage, Senior Director and Head of Private Credit Research here at KBRA will be joined by two colleagues — Ken Egan from the Sovereign team and Karim Nassif from the Corporate, Infrastructure and Project Finance team. They will be diving into the topic of how euro area inflation has become less correlated with oil price swings. We’ll unpack why that link has weakened — from reduced oil intensity and greater supply diversification, to stronger policy buffers. We’ll also explore what all this means for the credit outlook of European energy companies.