KBRA releases a report exploring recurring revenue loan (RRL) asset-backed securities (ABS), which provide access to growth-stage, high-yield businesses, while shielding investors from the potential losses normally associated with growth-stage equity investments. RRL ABS also offer a flexible source of balance sheet financing for originators, typically established middle market collateralized loan obligation (CLO) and fund managers, in place of trading vehicles.

Key Takeaways

• Since the first securitization in 2019, over 27 issuances/refinances have occurred, for an issuance compound annual growth rate (CAGR) of 67% over six years.
• Although similar to CLOs, RRL ABS use unique distribution mechanics—based on a 5% default threshold—that can shift from pro rata to fully sequential payments.
• While RRL ABS portfolios appear concentrated in software and tech, diverse end-market exposure and specialized borrower niches help mitigate correlation risk and strengthen overall portfolio resilience.
• Despite higher interest rates and the potential for elevated defaults in other segments, RRL ABS transactions have demonstrated stable performance—benefiting from strong sponsor support, robust structures, and active management.

Click here to view the report.

Recent Publications

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• Private Credit: Recurring Revenue Loans in a Rising Rate Environment

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

Doc ID: 1008195

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