1 April 2020

S&P Global Ratings announced yesterday that it had increased its rating of Metrics Credit Partners Diversified Australian Senior Loan Fund (DASLF) from BBB+ to A-, with a stable outlook.

Approximately 60% of capital invested in the ASX-listed MCP Master Income Trust (ASX: MXT) is invested into the unlisted DASLF.

S&P also reaffirmed its short-term issuer credit rating of DASLF at A-2 due to the funds’ “very strong risk-adjusted leverage and low under-lying credit risk profile relative to peers and solid franchise among target investors”.

The global rating house said despite the current market dislocation “we expect that DASLF will continue to grow and diversify across both the number of underlying investments and the number of investors”.

S&P said: “We consider that DASLF’s exposure to credit risk is low, relative to most of its rated peers. Since inception in June 2013, the fund has not experienced any material impairments in its portfolio, demonstrating sound underwriting across a portfolio that has lower underlying credit risk than its rated peers.

“MCP combines bottom-up fundamental credit analysis that utilises the framework of S&P Global Ratings Corporate Ratings Methodology with a top-down approach to identify the major corporate participants in each industry sector to construct the portfolio.”

As of 30 March, DASLF was invested in a diversified portfolio of Australian corporate loans to Australian public and private companies as well as projects. The fund follows a ‘buy and hold’ philosophy. The fund does not intend to invest in nonperforming, distressed, or structured credit assets and has no derivative, hybrid or public bond exposures.

“In our view, DASLF holds a unique position as the only fund in the market offering investors the ability to invest in Australian corporate debt a cross the credit spectrum, and further provides a distinctive investment option for those seeking higher yields. It would take a competitor several years to establish a fund that could compete directly with DASLF. MCP originates assets directly with target corporate borrowers or via the syndicated loan market,” S&P reported.

Andrew Lockhart, Managing Partner of Metrics Credit Partners (Metrics), welcomed the increased rating and said Metrics continued to enjoy a strong pipeline of lending opportunities.

He added that Metrics’ MXT and MCP Income Opportunities Trust (ASX: MOT) funds continued to pay consistent regular income for investors.

S&P noted DASLF had posted strong net returns since inception, averaging 310 basis points (bps) over the Reserve Bank of Australia cash rate, up from 303 bps one year earlier.