-

KBRA Releases Research – Private Credit: Pulling Rank and the Game of Senior Preferreds in LMEs

NEW YORK--(BUSINESS WIRE)--KBRA releases research observing how secured lenders have long looked to “Disqualified Stock” provisions in credit documentation to protect them against cash leakage on account of junior ranking instruments. However, lessons from a recent private credit liability management exercise (LME) raised questions regarding the perceived benign nature of permitted junior ranking hybrid instruments.

Key Takeaways

  • A recent LME transaction widely discussed in media reports did not exhibit qualities of lender-on-lender gamesmanship, although the transaction does provide a new template for value-shifting transactions.
  • A review of a random sampling of credit documents highlights another avenue where stressed borrowers can leverage document terms to shift some value away from credit parties, a matter that is becoming a bigger discussion point in private credit deal negotiations.
  • Preferred equity—commonly viewed as nonthreatening to senior lenders—can pull rank if the document allows it, and it appears most could.

Click here to view the report.

Related Publications

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.

Doc ID: 1006158

Contacts

Judah Gross, Senior Director
+1 646-731-1361
judah.gross@kbra.com

John Sage, Senior Director
+1 646-731-1452
john.sage@kbra.com

John Hogan, Senior Managing Director, Global Head of Ratings Legal
+353 1 588 1191
john.hogan@kbra.com

Andrew Giudici, Global Head of Corporate, Project, and Infrastructure Finance
+1 646-731-2372
andrew.giudici@kbra.com

Media Contact

Adam Tempkin, Director of Communications
+1 646-731-1347
adam.tempkin@kbra.com

Business Development Contact

Jason Lilien, Senior Managing Director
+1 646-731-2442
jason.lilien@kbra.com

Kroll Bond Rating Agency, LLC

Details
Headquarters: New York City, New York
CEO: Jim Nadler
Employees: 400+
Organization: PRI

Release Versions

Contacts

Judah Gross, Senior Director
+1 646-731-1361
judah.gross@kbra.com

John Sage, Senior Director
+1 646-731-1452
john.sage@kbra.com

John Hogan, Senior Managing Director, Global Head of Ratings Legal
+353 1 588 1191
john.hogan@kbra.com

Andrew Giudici, Global Head of Corporate, Project, and Infrastructure Finance
+1 646-731-2372
andrew.giudici@kbra.com

Media Contact

Adam Tempkin, Director of Communications
+1 646-731-1347
adam.tempkin@kbra.com

Business Development Contact

Jason Lilien, Senior Managing Director
+1 646-731-2442
jason.lilien@kbra.com

Social Media Profiles
More News From Kroll Bond Rating Agency, LLC

KBRA Assigns Preliminary Ratings to CROSS 2026-NQM3 Mortgage Trust

NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to ten classes of mortgage pass-through certificates from CROSS 2026-NQM3 Mortgage Trust, an RMBS transaction issued under the CROSS shelf that is managed by CrossCountry Capital, LLC (“CCC”). CROSS 2026-NQM3 is a co-sponsored transaction with CCC and APF II RESI O4B, LLC. This $538.3 million transaction is collateralized by a pool of 911 residential mortgages, including a meaningful concentration of collateral that KBRA considers to b...

KBRA Releases Research – Data Center Leases: Variations on Established Themes

NEW YORK--(BUSINESS WIRE)--KBRA releases research examining lease structures in the data center industry. This industry continues to expand rapidly amid increasing demand for artificial intelligence (AI) compute capacity, cloud services, and the proliferation of data-intensive technologies. As the need for financing has also risen, data centers have become an increasingly popular asset type in the securitization market. Total new issuance volume in the space reached $27 billion in 2025 and is e...

KBRA Assigns Preliminary Ratings to New Residential Mortgage Loan Trust 2026-NQM4 (NRMLT 2026-NQM4)

NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to 10 classes of mortgage-backed notes from New Residential Mortgage Loan Trust 2026-NQM4 (NRMLT 2026-NQM4), a $496.3 million non-prime RMBS transaction sponsored by Rithm Capital Corp. (formerly New Residential Investment Corp.), a publicly traded (NYSE: RITM) real estate investment trust (REIT). The underlying mortgages in the subject pool were primarily originated by NewRez LLC (66.5%). In addition, all loans will be serviced by New...
Back to Newsroom