NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Golub Capital Partners ABS Funding 2021-1, L.P. (GCPAF 2021-1), a securitization backed by a portfolio of recurring revenue and middle market corporate loans.
GCPAF 2021-1 is a $400.00 million securitization managed by managed by GC Investment Management LLC (“GCIM” or the “Collateral Manager”), an investment adviser and affiliate of GC Advisors LLC (collectively, with these affiliates and other funds managed by them and their affiliates “Golub Capital”). The securitization consists of $30.0 million Class A-1 variable funding notes, $252.0 million Class A-2 fixed-rate notes, $40.0 million Class B fixed-rate notes, and $108.0 million subordinated notes, which expect to receive payments from a portfolio of recurring revenue loans (“RRLs”) and middle market loans (“MMLs”). The reinvestment period is approximately two years from the closing date. The ratings reflect initial credit enhancement levels, excess spread, and structural features.
Golub Capital’s recurring revenue lending strategy focuses on first-lien senior secured loans to software and technology companies with a minimum level of recurring revenue and low loan-to-value ratios. Despite the low level of earnings, the obligors in the portfolio usually have strong liquidity profiles and loan covenants. The overall K-WARF of the portfolio is 3431, which represents a weighted average portfolio assessment between B- and CCC+. The portfolio presented to KBRA contains exposures to 46 obligors with 69.1% of the par exposure to the RRLs. Due to the economic fallout from COVID-19, there may be pressure on overall portfolio credit quality. As such, the portfolio’s K-WARF may increase in the near-term. KBRA considered the impact of potential credit migration.
GC Investment Management LLC is an investment adviser established in 2010. GCIM is a USVI company providing investment management, fund accounting, operational and administrative services to manage certain of Golub Capital’s offshore funds. Through services agreements, the collateral manager will leverage the Golub Capital platform, including its investment professionals and other resources. Founded in 1994, Golub Capital has over $35 billion in capital under management as of January 1, 2021 with over $30 billion in middle market direct lending and over $5 billion in broadly syndicated leveraged loans.
KBRA’s ratings on the Class A-1, A-2, and B notes consider timely payment of interest and ultimate payment of principal by the applicable stated maturity date.
KBRA analyzed the transaction using Structured Credit Global Rating Methodology and the Global Structured Finance Counterparty Methodology.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. 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.
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