KBRA Releases Research – Recurring Revenue Loan Metrics Dashboard: May 2023 Update

NEW YORK--(BUSINESS WIRE)--KBRA releases research that tracks several reported metrics within recurring revenue loan (RRL) securitizations. The report is an update to our February analysis.

In the 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 February analysis used collateral tapes dated through December 2022, and this update uses reports dated through March 2023. Overall, the transaction collateral has continued to perform, as recurring revenue, cash, and liquidity figures have shown improvement since the last report. However, debt-to-ARR and loan-to-value (LTV) metrics are up modestly.

Key Takeaways

• On an aggregate basis, annual recurring revenue (ARR) for the borrowers in the dashboard has grown approximately 3.5% quarter-over-quarter (QoQ) and 37% year-over-year (YoY), which is relatively consistent with the last report. The debt-to-ARR ratio is up approximately 6% both QoQ and YoY.
• Balance sheet cash is up approximately 3.8% QoQ and 36% YoY. At current interest rate levels, cash will be an important source of liquidity for recurring revenue borrowers.
• Liquidity cushion, which measures cash and capacity under undrawn revolvers, is up approximately 80% both QoQ and YoY. The increase is primarily driven by two individual obligors that have reported large liquidity covenants for the first time in this reporting cycle. Absent these two names, liquidity cushion would have trended flat QoQ and slightly higher (+3%) on YoY basis.
• The average LTV ratio is up approximately 0.6% QoQ and 2.2% YoY.
• The weighted-average life of the loans remains generally flat at approximately four years.
• The all-in rate for the loans in the dashboard is now approximately 10.9%, up 0.6% QoQ and 3.6% YoY. Interest payment-in-kind (PIK) has trended upward, albeit mildly. Approximately 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 Industry Conference on Direct Lending and Middle Market Finance 2023 Recap
• Structured Credit Trend Watch: The Dust Settles on Q1 2023
• KBRA Update on SVB-Related RRL Structured Credit Exposure
• Recurring Revenue Loan Metrics Dashboard
• Private Credit: Recurring Revenue Loans in a Rising Rate Environment
• 2023 Structured Credit Sector Outlook: A Whole New World?

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.