Reported 4 months ago
Banks and insurers have been seeking credit ratings from U.S. agencies for risky loans to private equity funds, secured against their portfolios and cash flows, as they face challenges exiting investments profitably in a high interest rate environment. Agencies like S&P, Moody's, and Fitch are cautious as valuing these loans is difficult due to opaque investor bases. Lenders are approaching agencies to rate loans to reduce capital requirements and assess risks. Only S&P and KBRA rate Net Asset Value (NAV) loans, with S&P expecting NAV facilities to double to $150 billion in the next two years. Moody’s lacks a methodology for NAV loans due to lack of standardization in the market. KBRA evaluates fund managers' history and NAV loan security provisions, while S&P assesses funds' performance under stress scenarios.
Source: YAHOO