KBRA assigns a rating of BBB to Stone Point Credit Corporation's (“SPCC” or “the company”) $200 million 6.70% senior unsecured notes due 2029. The rating Outlook is Stable. The proceeds will be used to repay secured debt and for general corporate purposes.

Key Credit Considerations

The rating and Outlook are supported by SPCC’s ties to Stone Point Capital LLC's ("SPCL") $50+ billion investment platform, of which $45+ billion is managed by the private equity group and $8+ billion is managed by Stone Point Credit, the credit-investing platform of Stone Point Capital. Credit platform strategies include direct lending, opportunistic credit, and liquid credit (i.e., BSLs and bonds). There is a unified strategy across the investment platform, with SEC exemptive relief permitting SPCC to co-invest alongside other funds, vehicles, and accounts managed by Stone Point Credit Adviser LLC (SPCC's Adviser) 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 half of direct lending AUM. The rating is further supported by the company’s solid management team, which has 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 well-diversified $2.3 billion investment portfolio comprised largely of senior secured first lien loans (86%) to 86 portfolio companies across 10 sectors with a median portfolio company EBITDA of $115 million as of June 30, 2024. SPCC focuses primarily on upper middle market companies in the U.S. that are private equity sponsored (99%) that have a meaningful amount of equity cushion with low LTVs (38% weighted average). The weighted-average portfolio leverage was 5.4x, with minimum underwriting interest coverage of 2.0x. Although still somewhat unseasoned, the investment portfolio has not incurred any non-accruals in three-and-a-half years since investment activities began. Insurance (21.7%), Health Care Providers & Services (13.9%), and Professional Services (13.5%) are the leading portfolio sectors. The company maintains sector and subsector specialists. As of June 30, 2024, gross and net leverage were 1.00x and 0.89x, respectively, within SPCC’s target net leverage of less than 1.10x. The company’s asset coverage was 200%, providing for a solid cushion of 33% to the 150% regulatory minimum. The company's liquidity is adequate with available credit lines and cash of $371.8 million and $342.2 million of uncalled capital compared with $225 million of unsecured debt due within two years of June 30, 2024, and unfunded commitments of $355.1 million.

Counterbalancing these credit strengths is the company’s mostly secured funding profile at 81%, though this issuance will improve its funding mix with pro forma (June 30, 2024) unsecured debt to total debt outstanding of ~30%. Further counterbalancing strengths are the relatively unseasoned investment portfolio (investment activities commenced three-and-a-half years ago), the potential risk related to the company’s relatively illiquid investments, retained earnings constraints as a regulated investment company ("RIC"), and an uncertain economic environment with high base rates, inflation, and geopolitical risk.

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 and 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 New York.

Rating Sensitivities

The ratings are 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 impact credit metrics could also pressure ratings.

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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) 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: 1005243

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