Market Overview

KBRA Releases Research - Business Development Company (BDC) Ratings Compendium: December 2019 and COVID-19 Update

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Kroll Bond Rating Agency (KBRA) releases its Business Development Company (BDC) Ratings Compendium, which analyzes the quarter ended December 31, 2019 results in addition to the impact of the coronavirus (COVID-19) on BDCs within the KBRA universe.

Themes discussed in the compendium include:

  • Mark-to-market valuations are expected to pressure asset coverage ratios for the quarter ended March 31, 2020 with potentially more severe marks in upcoming quarters.
  • BDCs that issued unsecured debt over the past year and have no near-term maturities are better positioned to weather the severe and abrupt downturn in the markets in the short term.
  • BDC portfolios with a greater percentage of first lien secured loans to companies with higher earnings before interest, taxes, depreciation, and amortization (EBITDAs) and lower net leverage should perform better. Those with lower exposure to the energy, retail, entertainment, and travel sectors should see less of an impact to their valuations due to COVID-19.
  • The net interest margin (NIM) is pressured from a significant drop in the Fed Funds rate, somewhat cushioned by interest rate floors.
  • Government assistance for non-bank financials is uncertain at this time.

Click here to view the report.

About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA. Kroll Bond Rating Agency Europe Limited is located at 6-8 College Green, Dublin 2, Ireland.

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