KBRA assigns a rating of BBB to Kayne Anderson BDC, Inc.'s (NYSE: KBDC or "the company") $40 million floating rate senior unsecured notes due 2028, $60 million 5.80% senior unsecured notes due 2028, and $100 million 6.15% senior unsecured notes due 2030. The rating Outlook is Stable. The proceeds will be used to repay existing indebtedness and general corporate purposes.

Key Credit Considerations

The rating is supported by KBDC’s diversified ~$2.2 billion investment portfolio consisting almost entirely of senior secured first lien loans (~98%, excluding short-term investments) across 27 industries with a focus on investing in private, U.S. middle market companies with a median EBITDA of $33.7 million, excluding investments on watch list, as of June 30, 2025. KBDC benefits from exemptive relief to co-invest in all directly negotiated loans among Kayne Anderson Private Credit ("KAPC") vehicles. KAPC is a $7.2 billion AUM subsidiary of Kayne Anderson Capital Advisors, L.P. ("KACALP"), a $38 billion AUM investment platform with 150 investment professionals, and benefits from shared resources, including research, deal sourcing, and administrative services, such as treasury management. The rating also considers KBDC's solid management team that has a long track record of working within the private debt markets with senior members each having 20+ years of experience in leveraged finance. Furthermore, the company's solid underwriting and risk management practices of a highly granular investment portfolio have resulted in the credit platform's strong credit performance over its 14-year history. KBDC's investment portfolio is conservative, with weighted average portfolio company leverage and interest coverage, excluding investments on watch list and subordinated debt of Cuisine Solutions, Inc., of 4.3x and 2.5x, respectively. The top three portfolio sectors were Trading Companies & Distributors (15.5%), Commercial Services & Supplies (10.8%), and Health Care Providers (9.5%). The company's credit quality remains solid and in line with peers despite an increase in non-accruals to 2.6% at cost and 1.6% at fair value as of June 30, 2025, compared to 1.2% at cost and 1.0% at fair value as of June 30, 2024.

As of June 30, 2025, the company's liquidity was solid with available credit lines and cash of $390.4 million set against $25 million of unsecured debt maturities (June 2027) and unfunded portfolio company commitments of $250.8 million. As of June 30, 2025, KBDC’s gross leverage was low at 0.91x, below the company’s target of 1.0x-1.25x. However, leverage is expected to increase to the low end of its target with additional capital deployment in the near term. The company’s asset coverage ratio was 210%, providing a solid cushion to its 150% regulatory asset coverage to withstand additional market volatility in a less favorable economic environment.

These strengths are counterbalanced by KBDC’s mostly secured funding profile (~93%), though this should improve with the subject unsecured notes issuance. Management intends to issue additional senior unsecured debt in the medium term with a target range of unsecured debt to total debt between 20% and 30%, which would increase financial flexibility and unencumber assets for the benefit of the unsecured noteholders. Rating strengths are further counterbalanced by the company’s limited operating history offset by the long tenure of its management in private credit, the company’s requirement as a regulated investment company ("RIC") to distribute 90% of net investment income, negating the ability to retain earnings, illiquid assets, and an uncertain economic environment with high base rates, inflation, and geopolitical risk.

KBDC is an externally managed, closed-end, non-diversified investment management company that elected to be treated as a BDC under the Investment Company Act of 1940 and as a 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 limited liability company in 2018 and commenced operations on February 5, 2021, when it simultaneously converted to a Delaware corporation. On May 22, 2024, the company began trading on the New York Stock Exchange. The company is managed by KA Credit Advisors, LLC, an indirect subsidiary of KACALP.

Rating Sensitivities

The rating is unlikely to be upgraded in the intermediate term. 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 or a change in the current management structure and/or a change in strategy and risk management that negatively impacts credit metrics could also pressure the rating.

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Methodologies

• Financial Institutions: Finance Company Global Rating Methodology
• ESG Global Rating Methodology

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.

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