Kroll Bond Rating Agency (KBRA) releases its Business Development Company (BDC) Ratings Compendium, which analyzes the quarter ended June 30, 2020 results in addition to the impact of the coronavirus (COVID-19) on BDCs within the KBRA universe.
Themes discussed in the Compendium include:
- As expected, BDCs were able to reverse some of their unrealized losses from 1Q 2020 with spread tightening during 2Q 2020.
- Non-accruals increased in 2Q 2020 as the economic fallout from COVID-19 continued and is expected to remain uncertain until the end of the pandemic is in sight. The median non-accruals at cost and fair value for the KBRA-rated BDCs more than doubled to 4% and 1.75%, from 1.9% and 0.5%, respectively, in 2Q 2020 compared with 1Q 2020.
- As portfolio valuations increased, leverage declined in general and regulatory asset coverage ratios improved.
- KBRA expects the credit impact of COVID-19 to continue to result in increased non-accruals as the pandemic is prolonged and the fallout for future years becomes more apparent. However, we believe that the shoring up of balance sheets during and prior to the pandemic, in addition to prudent capital deployment in the uncertain environment with increased financial flexibility, should help most BDCs absorb additional non-accruals and write-downs.
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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