KBRA Releases Research – Recurring Revenue Loan Metrics Dashboard: February 2024 Update

KBRA releases an updated report that tracks several reported metrics within recurring revenue loan (RRL) securitizations. The report is an update to our November analysis.

In this report, 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 November analysis used collateral tapes dated through September 2023, and for this update we utilized reports dated through December 2023. Notably, cash and liquidity figures have, on average, declined quarter-over-quarter (QoQ) and remain down year-over-year (YoY). However, ARR continues to increase across the names in the portfolios, and weighted average life (WAL) continues to decrease.

Key Takeaways

• Balance sheet cash is down 10% QoQ and 40% YoY. Approximately one-half of the borrowers in the dashboard reported a QoQ reduction in cash. The YoY change remains attributable 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 Q4 2021 levels.
• On an aggregate basis, ARR for the borrowers in the dashboard has increased approximately 4.6% QoQ and 24% YoY. The debt-to-recurring revenue (debt/RR) ratio decreased 0.2% QoQ and has been relatively flat for the last three reporting periods.
• Liquidity cushion, which measures cash and capacity under undrawn revolvers, is down 11% QoQ but remains up nearly 50% YoY.
• The average loan-to-value (LTV) ratio is up 0.3% QoQ and 1.5% YoY. LTV has been increasing since Q4 2021 and is up approximately 4.3% over that period.
• The WAL of the loans has decreased 4.2% QoQ and 14% YoY. The WAL has decreased every quarter since Q3 2022 and is down approximately 0.6 years over that period.
• The all-in rate for the loans in the dashboard is 11.54%, flat QoQ, and up 1.2% 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

• Private Credit: Potential for European MM and Direct Lending CLOs
• Private Credit: 2024 Maturity Wall Is a Myth
• 2024 Structured Credit Sector Outlook: Staying the Course
• Recurring Revenue Loan Metrics Dashboard: November 2023 Update
• Structured Credit Trend Watch: Meet Me in the Middle (Market)
• 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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