KBRA Assigns Ratings to Glendower Capital Secondaries CFO, LLC
Gracie Gottlieb | 2 August, 2023
Asset Coverage, Transaction Structure, and Manager Review Highlighted in KBRA Ratings
Glendower Capital Secondaries CFO, LLC has been assigned ratings by Kroll Bond Rating Agency (KBRA) for its Class A, Class B, and Class C Loans. The proceeds from these loans, along with additional Subordinated Loans, will be used to commit and finance capital to funds pursuing Glendower's private equity secondaries strategy.
KBRA's analysis identified several key credit considerations for Glendower Capital's ratings. The asset coverage of the Rated Debt was found to be strong, with initial draws on the debt at conservative advance rates. The transaction structure also includes key features that mitigate credit risk, such as a Borrower Reserve Account and loan-to-value tests. Furthermore, Glendower Capital's established track record and experienced management team contributed positively to the ratings.
However, KBRA also identified potential risks, including the delayed draw funding structure, which exposes Rated Debt investors to investor credit risk if a participant fails to fund a required draw. Additionally, significant underperformance of the Underlying Funds or deterioration in the credit quality of the Rated Debt and/or Subordinated lenders could impact the ratings.
KBRA's quantitative rating determinants considered the asset quality, asset coverage, liquidity, duration, and cash flow analysis of Glendower Capital's investments. The Underlying Funds, consisting of secondary investments in private equity funds, were deemed to have a complex and illiquid asset class. However, KBRA found that the asset coverage and cash flow analysis supported the ratings assigned to the Rated Debt.
Qualitatively, KBRA conducted a manager review of Glendower Capital, noting the firm's focus on secondary private markets globally and its value investing approach. The firm has demonstrated consistent deployment, underwriting, and performance capabilities over multiple economic cycles. Glendower Capital's experienced management team and track record contributed to the positive qualitative factors considered in the ratings.
Overall, the ratings assigned by KBRA reflect the strength of Glendower Capital's transaction structure, the ability of the Rated Debt to withstand underperformance, and the firm's established track record and management team.
The full rating report, which provides a more detailed analysis, will be published upon the final close of the Underlying Funds.
Please note that this blog post is based on the information provided by KBRA and does not include the press release or business wire.
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