KBRA Assigns Ratings to HPS Corporate Capital Solutions Fund

KBRA assigns issuer and senior unsecured debt ratings of BBB to HPS Corporate Capital Solutions Fund ("HCAP" or "the company"). The rating Outlook is Stable.

Key Credit Considerations

The ratings and Outlook are supported by HPS Corporate Capital Solutions Fund's ties to HPS Investment Partners, LLC ("HPS" or "the platform"), a leading alternative credit manager with $149 billion of AUM as of December 31, 2024, led by a solid management team with a long track record working within the private debt markets with each governing partner having 30+ years of industry experience. The company benefits from the platform's sourcing through well developed sponsor and non-sponsor relationships, underwriting, portfolio management, restructuring, capital markets, and SEC exemptive relief to co-invest with other funds managed by its external advisor, HPS Advisors, LLC, a wholly owned subsidiary of HPS and its affiliates. Furthermore, the company had a diversified $985 million investment portfolio comprised mostly of senior secured first lien loans (88.4%) spread across 94 companies in 31 industries as of December 31, 2024. The company targets portfolio companies within the upper middle market and had a weighted average EBITDA of $182 million for private credit portfolio companies with the top three sectors of Software and Computer Services (13.9%), Health Care Providers (9.8%), and Industrial Support Services (7.9%). Asset quality is solid with no non-accruals as of December 31, 2024 due to its unseasoned portfolio with a short operating history.

At December 31, 2024, HCAP maintained gross leverage of 0.44x, much lower than its target leverage of 0.75x to 1.0x due to its solid capital raises and conservative deployment. The company's target leverage is somewhat lower than its perpetual-life BDC peers, but KBRA believes that it is appropriate due to its target portfolio mix which includes a portion of junior capital, and to a lesser extent, opportunistic credit. The HPS platform has a team of dedicated investment professionals with years of experience in a vast array of strategic credit vehicles. As a perpetual-life BDC, the company raises equity monthly and offers redemptions quarterly. As of December 31, 2024, the company raised $656 million of equity and had $23.5 million of redemptions. Post year-end 2024, HCAP raised an additional $135.1 million of equity through March 1, 2025. The company's funding profile is limited to one $725 million committed revolving credit facility, increased from $650 million at YE 2024, but management expects to diversify with additional bank facilities, a CLO and unsecured senior secured funding with a target ratio of 35%+ for unsecured debt to total debt outstanding. To meet potential redemptions, the company manages its liquidity through available bank credit lines, cash, loan repayments, and more liquid assets such as broadly syndicated loans. As of December 31, 2024, the company had solid liquidity with $360 million of available credit, ~17% of its assets in more liquid Level 2 Assets, no near-term maturities, and $85 million of unfunded commitments.

Counterbalancing HCAP's credit strengths are the company's limited operating history primarily offset by the long tenure of its management team in private credit, unseasoned investment portfolio, relatively illiquid investments, retain earnings constraints as the company intends to elect to be treated for federal income tax purposes as a Regulated Investment Company ("RIC"), and uncertain economic environment with high base rates, inflation, and geopolitical risk that could stress its investment portfolio.

Formed in August 2023 as a Delaware statutory trust, HPS Corporate Capital Solutions Fund is a New York-based, externally managed, non-diversified closed-end investment management company regulated as a Business Development Company ("BDC") under the Investment Company Act of 1940. For tax purposes, HCAP intends to elect to be treated for federal income tax purposes as a RIC. The company commenced operations in April 2024. HPS has 770+ employees, including 250+ investment professionals working from 14 global offices as of December 31, 2024.

Rating Sensitivities

Given the Stable Outlook, a rating upgrade is not expected in the medium term. A rating downgrade and/or Outlook change to Negative could be considered if management alters its stated company strategy by increasing its focus on riskier investments coupled with high leverage metrics. A prolonged downturn in the U.S. economy with negative impact on HCAP's earnings performance, asset quality, and leverage or a significant change in senior management and/or risk management policies could also lead to negative rating action.

To access ratings and relevant documents, click here.

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.

Doc ID: 1008869

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