KBRA released research following the Federal Reserve’s highly anticipated monetary easing cycle on Sept. 18 with a 50 basis point (bps) reduction of its target base rate. Lower rates will be a windfall for most private credit borrowers, but what may appear as a blessing may not be enough for those already struggling.
In August, KBRA reported how strong revenue and EBITDA growth cushioned the blow from climbing interest costs for many of the 1,067 unique corporate borrowers assessed in H1/24. In this report, we wanted to determine how those 1,067 borrowers would be impacted in a falling rate environment. With rates projected to decline to 300 bps, from over 500 bps before the rate cut announcement, KBRA determined all-in rates for the population would fall 20% on average, equating to roughly $9 billion of annual interest savings in the aggregate — cash that otherwise would have gone to lenders can now be reallocated to other initiatives.
