Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Golub Capital Partners ABS Funding 2020-1, L.P. (GCPAF 2020-1), a securitization consisting of late stage lending loans (LSLs) and middle market loans (MMLs).
GCPAF 2019-1 is a $425.25 million securitization managed by GC Investment Management LLC (the collateral manager). The securitization consists of $30.00 million variable funding Class A-1 Notes that are expected to be undrawn on the transaction’s closing date, $265.70 million of Class A-2 fixed-rate notes, $36.20 million of Class B fixed-rate notes (collectively the "Notes"), and $141.854 million subordinated notes, which expect to receive payments from a portfolio of MMLs and LSLs. The transaction will have a two-year reinvestment period. The rating reflects initial credit enhancement levels, excess spread, and structural features.
The collateral in GCPAF 2020-1 may contain up to 75% LSLs which are loans to companies with relatively stable recurring revenue although many have negative or minimal earnings. 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 3917, which represents a weighted average portfolio assessment between B- and CCC+. The portfolio contains exposures to 45 obligors with approximately 73% of the par exposure to the LSLs in the portfolio presented to KBRA. The obligors related to the LSLs are typically software and technology services companies and are often younger in their lifecycles. These companies are usually growing more rapidly than a typical middle market lending borrower.
GC Investment Management LLC is an investment adviser established in 2010 and affiliate of GC Advisors LLC (collectively, with these affiliates and other funds managed by them and their affiliates "Golub Capital"). The collateral manager will leverage the Golub Capital platform, including its investment professionals and other resources. Founded in 1994, Golub Capital has over $30 billion in capital under management as of July 1, 2020 with over $26 billion in middle market direct lending, $5 billion in broadly syndicated leveraged loans, and has committed over $3.5 billion to LSLs since 2013.
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 published on March 13, 2020 and the Global Structured Finance Counterparty Methodology published on August 8, 2018.
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 U.S. Information Disclosure Form 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 U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. 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.
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