KBRA Assigns Ratings to Goldman Sachs Private Credit Corp.
KBRA assigns issuer and senior unsecured debt ratings of BBB to Goldman Sachs Private Credit Corp. ("GSCR" or "the company"). The rating Outlook is Stable.
Key Credit Considerations
The ratings and Outlook are supported by Goldman Sachs Private Credit Corp.'s ties to Goldman Sachs' ("GS") $3 trillion of Assets Under Supervision, including the $55 billion global senior direct lending platform that allows for SEC exemptive relief to co-invest with GS affiliates. GS provides the company with access to capital through its significant wealth channels of $900+ billion, robust deal sourcing and research, a 400+ sponsor network, and strong banking relationships. Additionally, the company has a solid management team, which has a long track record working with the private debt markets with each member of senior management having 20 or more years of experience in the industry. Also, the ratings are supported by GSCR's $1.2 billion investment portfolio comprised almost entirely of first lien senior secured loans (98.3%), including broadly syndicated loans (BSLs). The company intends to maintain a minimum of 90% of its investment portfolio in first lien senior secured debt. As of September 30, 2023, the average portfolio company EBITDA was $116 million and the weighted average leverage was 5.5x with interest coverage of 1.5x using current base rates. At 3Q23, the top four portfolio sectors were Software (22.0%), Diversified Consumer Services (9.6%), Diversified Financial Services (8.6%), and Media (7.0%). With an unseasoned portfolio, there were no non-accruals, as of September 30, 2023. Leverage was only 0.22x, reflective of the company's strong capital raises of +$100 million per month and its conservative investment deployment. GSCR targets its leverage at 1.0x, lower than its peers, though appropriate for a perpetual BDC that requires more liquidity for potential redemptions. The company's funding profile is fully secured and includes two bank facilities with $736 million of credit availability. GSCR plans to issue senior unsecured debt when market opportunities allow with a target of 60% unsecured debt to total debt outstanding over the next several years.
GSCR is structured as a continuously offered, perpetual private BDC that does not intend to seek a liquidity event. As a continuously offered BDC, GSCR raises capital monthly and offers up to 5% of its shares for repurchase quarterly. Share repurchases are at the direction of the Board of Directors and should markets become disrupted, such that the company's business would be severely affected by repurchases, the company has no obligation to repurchase any shares. As of November 1, 2023, the company has raised gross proceeds of approximately $1.4 billion with no shares tendered. GS committed $100 million to GSCR with $50 million dawn. To ensure sufficient liquidity for repurchases, the company maintains sufficient cash, available credit lines, and more liquid investments, such as BSLs, which comprised about 25% of total investments, as of September 30, 2023.
The rating strengths are counterbalanced by the potential risk related to the company's illiquid investments, fully secured funding profile, and retained earnings constraints as a Regulated Investment Company (RIC).
GSCR is an externally managed, non-diversified closed-end management investment company that has elected to be treated as a Business Development Company (BDC) under the 1940 Act and intends to elect to be treated as an RIC, which among other things, must distribute to its shareholders at least 90% of the company's investment company taxable income. The company was formed as a Delaware Corporation in March 2022, began investing activities in April 2023, and is managed by Goldman Sachs Asset Management, L.P. ("GSAM"), an affiliate of Goldman Sachs & Co. LLC. The company's public BDC, Goldman Sachs BDC, Inc. (NYSE: GSBD) is rated by KBRA (Issuer and Senior Unsecured Debt: BBB/Stable).
Over the medium term, a rating upgrade is not expected. A rating downgrade and/or Outlook change to Negative from Stable could be considered if there is a significant downturn in the U.S. economy with negative impact on GSCR's earnings performance, asset quality, and leverage. A significant change in senior management and/or risk management policies could also lead to negative rating action.
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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 Information Disclosure Form(s) 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 Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. 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.
Doc ID: 1002730