KBRA Assigns Ratings to Stone Point Credit Corporation's $300 Million Senior Unsecured Notes

KBRA assigns ratings of BBB to Stone Point Credit Corporation's ("SPCC" or “the company”) $60 million, 6.03% senior unsecured notes due 2028 and its $240 million, 6.26% senior unsecured notes due 2030. The rating Outlook is Stable. The proceeds will be used for general corporate purposes and for repayment of maturing unsecured debt.

Key Credit Considerations

The ratings and Stable Outlook are supported by SPCC’s ties to Stone Point Capital LLC's ("SPCL") $55+ billion investment platform, of which, $45+ billion is managed by the private equity group and $10+ billion is managed by Stone Point Credit, the private credit platform. Credit platform strategies include direct lending, opportunistic credit, and liquid credit (i.e., BSLs and high-yield bonds). The company maintains SEC exemptive relief which permits SPCC to co-invest alongside other funds, vehicles, and accounts managed by Stone Point Credit Adviser LLC or certain of its affiliates in a manner consistent with the company's investment objective, positions, policies, strategies, and restrictions, as well as regulatory requirements and other pertinent factors. SPCC is the flagship investment vehicle of the direct lending strategy, representing about 45% of the $6+ billion direct lending AUM. Ratings are further supported by a best-in-class management team with a long track record working within the private debt markets with average tenure with SPCL on the Investment Committee of more than 20 years.

SPCC has a growing and well-diversified $2.5 billion investment portfolio comprised largely of senior secured first lien loans (88%) to 100 portfolio companies across 11 sectors with a median portfolio company EBITDA of $117 million as of December 31, 2024. SPCC is a covenant-heavy lender (99% of transactions) that focuses primarily on upper middle market companies in the U.S. that are private equity sponsored (99%) that have a meaningful equity cushion (39% portfolio LTV). Although still somewhat unseasoned, the investment portfolio has not incurred any non-accruals since investment operations began approximately four years ago. Insurance (21.9%), Health Care Providers & Services (16.8%), and Professional Services (16.5%) are the leading portfolio sectors, with 75 subsectors represented. SPCC maintains sector and subsector specialists and materially benefits from its ties to SPCL’s private equity platform, which contributes to sourcing, banking relationships, deep and extensive sponsor relationships, and research.

As of December 31, 2024, gross and net leverage were adequate at 1.06x and 1.02x, respectively, within regulatory coverage of 2:1 (gross) and within SPCC’s target net leverage of less than 1.10x. The company’s asset coverage was 194%, providing for a solid cushion of 29% to the 150% regulatory minimum. As of December 31, 2024, SPCC's liquidity was adequate with available liquidity of $696.4 million, including credit line capacity of $308 million, cash of $51.8 million, and uncalled capital of $336.6 million, set against $225 million of unsecured debt due within two years and unfunded commitments of $402.6 million, of which, a portion of the unfunded commitments is tied to covenants and transactions and is not expected to be drawn. The $300 million issuance which is set to close in May 2025 will refinance the maturing $225 million 2025 Notes and provide $75 million in additional funds.

Counterbalancing these credit strengths is the company’s mostly secured funding profile at 66%, though improving with recent unsecured note issuances, the relatively unseasoned investment portfolio with high portfolio growth, the potential risks related to the company’s illiquid investments, retained earnings constraints as an RIC, and a more uncertain economic environment with high base interest rates and geopolitical risks.

SPCC is an externally managed, non-diversified closed-end investment management company that has elected to be treated as a Business Development Company under the 1940 Act and has elected 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, began investment activities in 4Q20, and is managed by Stone Point Credit Adviser LLC, an affiliate of Stone Point Capital LLC. The company is headquartered in Greenwich, CT.

Rating Sensitivities

The ratings are unlikely to be upgraded in the intermediate term. Over time, scaling of the private credit platform, additional seasoning of the investment portfolio, and continued solid earnings performance could lead to positive rating momentum. The Outlook could be revised to Negative, or the rating could be downgraded, if a prolonged downturn in the U.S. economy has a material impact on performance, including increased non-accruals and a significant rise in leverage. An increased focus on riskier investments, a change in the current management structure, and/or a change in strategy and risk management that negatively impacts credit metrics could also pressure ratings.

To access ratings and relevant documents, click here.

Disclosures

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.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA 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 (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1008830

View source version on businesswire.com: https://www.businesswire.com/news/home/20250328005674/en/