KBRA released a series of three research reports that examine how tariffs, market volatility, economic uncertainty, fluctuating spreads, and other macroeconomic headwinds may impact various segments of private credit’s rated transactions, including corporate borrowers, funds, business development companies (BDC), asset managers, and middle market (MM) collateralized loan obligations (CLO).
While these risks are worth monitoring, the recent turbulence has underscored the relative stability of private markets compared to their public and bank loan counterparts. This resilience is underpinned by structural flexibility, a long-term investment horizon, and the capacity to extend liquidity through bilateral relationships and direct lending. Although the private credit market remains largely untested through prolonged downturns, its matched funding structures and ample dry powder—estimated at $433 billion—position it well to capitalize on market dislocations and remain a more reliable source of liquidity. However, amid ongoing uncertainty and shifting tariff policies, business planning may become more difficult, capital investments could slow, and private credit sponsors and lenders may face greater challenges when making investment decisions.
A breakdown of the three reports is as follows:
- Corporates: Private Credit: Tariffs and Market Volatility Impact on Private Credit Corporates examines the potential primary, secondary, and tertiary impacts on leveraged sponsor-backed MM borrowers, including tariffs, interest rates, market volatility, valuations, and economic uncertainty. It also delves into the factors that KBRA believes will drive credit quality performance across our rating and assessment universe.