KBRA Releases Research – Recurring Revenue Loan Metrics Dashboard: November 2023

KBRA releases an update to our earlier reports that track several reported metrics within recurring revenue loan (RRL) securitizations.

In this report, an update to our August analysis, KBRA continues to track several key metrics sourced from quarterly collateral loan tapes provided by the issuers of KBRA-rated RRL securitizations, in dashboard form. Changes in such metrics can provide an indication of the general health and credit quality of the portfolios. The August analysis used collateral tapes dated through June 2023, and for this update we utilized reports dated through September 2023. Cash and liquidity figures, on average, have stabilized quarter-over-quarter (QoQ) after experiencing a drop in the prior period. Further, ARR continues to increase across the names in the portfolios and weighted average life (WAL) continues to decrease.

Key Takeaways

• Balance sheet cash is up slightly QoQ after being down 30% in the report for the prior period. Cash is down 19.4% year-over-year (YoY), mainly due to a handful of borrowers that experienced more significant cash reductions during Q1 and Q2 2023. The average cash balance is now roughly in line with Q2 2022 levels.
• On an aggregate basis, ARR for the borrowers in the dashboard has increased approximately 10.6% QoQ and 29% YoY. The debt-to-recurring revenue (debt/RR) ratio increased 0.7% QoQ, which is relatively consistent with the last report. Debt/RR is now 11% higher on a YoY basis.
• Liquidity cushion, which measures cash and capacity under undrawn revolvers, is up nearly 8% QoQ but up 66.7% YoY.
• The average loan-to-value (LTV) ratio is up 0.6% QoQ and 1.5% YoY. LTV has been increasing since Q4 2021 and is up approximately 4% over that period.
• The WAL of the loans has decreased 3.6% QoQ and 11.5% YoY. The WAL has decreased every quarter since Q3 2021 and is down approximately 0.5 years over that period.
• The all-in rate for the loans in the dashboard is now 11.6%, up 0.3% QoQ and 2.6% YoY. Interest payment-in-kind (PIK) is flat QoQ. Just over one-third of the RRLs in the dashboard currently report a PIK balance, which is flat QoQ.
• There are currently no reported delinquencies or defaults.

Click here to view the report.

Related Publications

• 2024 Structured Credit Sector Outlook: Staying the Course
• Structured Credit Trend Watch: Meet Me in the Middle (Market)
• Recurring Revenue Loan Metrics Dashboard: August 2023 Update
• KBRA Insight on Private Credit: Middle Market Rate Stress―Another 50 Basis Points?
• Private Credit Industry Conference on Direct Lending and Middle Market Finance 2023 Recap
• Private Credit: Recurring Revenue Loans in a Rising Rate Environment

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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