A disciplined risk assessment approach makes Private credit investment safer and more transparent. Kilde, a licensed private credit platform, has developed a proprietary credit rating scale to evaluate non-bank financial institution (NBFI) borrowers.
This Kilde score ranges from 1.00 (worst) to 5.75 (best) and is aligned with standard Fitch Ratings categories.
In this post, we’ll explain how Kilde’s rating scale maps to familiar grades like BBB, BB, B, etc., what it means that Kilde only operates in the B- to BBB range, and the key components of Kilde’s borrower assessment methodology.
We’ll also walk through the credit assessment sequence – from gathering data to ongoing monitoring – to show how Kilde ensures a disciplined, transparent risk framework for private credit investing.
Kilde’s Credit Rating Scale (1.00 to 5.75) Mapped to Fitch Ratings
Kilde assigns each borrower a numeric credit score between 1.00 and 5.75, where a higher score indicates stronger credit quality.
This proprietary scale is benchmarked to Fitch’s NBFI credit rating criteria so investors can easily relate the scores to conventional ratings.
The table below shows how Kilde’s score bands correspond to Fitch-style ratings from high-grade BBB down to D (default):
Table: Kilde’s credit score bands mapped to equivalent letter ratings. (Scores below 3.50, corresponding to CCC/C/D, are outside Kilde’s scope.)
As shown above, a 5.75 score is equivalent to a BBB rating (the highest credit quality Kilde deals with), while a 4.0 score corresponds to a B rating.
At the lower end, scores near 3.50 align with B–, the cutoff for Kilde’s acceptable risk range.
Any score corresponding to CCC, CC, C, or D (default) is considered “out of scope” for Kilde – these extremely risky ratings (scores below ~3.5) are simply not funded on the platform.
Conversely, companies with ratings above BBB (e.g. A-rated) are outside Kilde’s scope (they would score above 5.75) as those borrowers typically seek capital in traditional markets.
What does this mean for investors?
Kilde’s focus on the B- to BBB spectrum ensures that all investment opportunities on the platform fall within a moderate risk band.
They avoid the deep-junk territory (CCC or lower) where default risk is very high, providing investors an extra layer of security.
At the same time, by not targeting ultra-high-grade (A or above) borrowers, Kilde’s deals can still offer attractive yields commensurate with the BB/B risk profile.
In short, Kilde stays in the “sweet spot” of credit risk – not too risky, not too low-yield – aiming for well-managed non-bank lenders that are solid but just below investment-grade. This disciplined focus benefits investors by balancing risk and return.
Key Components of Kilde’s Credit Assessment Methodology
Kilde employs a multi-faceted credit evaluation process to assess each borrower (typically non-bank lenders financing consumers or SME loan portfolios).
The methodology combines qualitative judgment, quantitative analysis, and tech-powered tools for a comprehensive risk assessment.
Below are the key components of Kilde’s credit assessment framework.
1. Qualitative & Quantitative Scoring
Every borrower undergoes rigorous credit scoring that covers qualitative and quantitative factors.
Kilde’s internal credit model examines eight major areas aligned with Fitch’s criteria.
- Qualitative factors (Sections 1–4)
These include the borrower’s Operational Environment (e.g. regulatory landscape, country risks), Company Profile (business model, management experience), Governance & Strategy, and Risk Management practices.
These elements capture how well-run and resilient the company is beyond the numbers.
For example, Kilde examines management quality and strategy coherence, and considers the regulatory framework in which the lender operates. - Quantitative factors (Sections 5–8)
These cover Asset Quality (performance of the loan book, e.g., default rates), Earnings and profitability, Capitalisation and leverage (debt ratios, equity buffer), and Funding, Liquidity, and coverage metrics.
Kilde analyses financial statements to evaluate profitability and capital adequacy and checks metrics like net debt-to-equity and interest coverage ratios.
The model emphasises quantitative criteria, ensuring the score reflects hard financial strength.
Based on these inputs, Kilde computes a comprehensive credit score for the borrower.
This Kilde Score (1.00 to 5.75 scale) essentially summarises the borrower’s creditworthiness in a single number, which maps to the equivalent Fitch letter rating discussed earlier. This scoring step forms the foundation of the credit assessment.
2. Loan Portfolio Analysis (AI-Powered Back-Testing)
Beyond static financial ratios, Kilde performs an in-depth portfolio analysis of the underlying loans the NBFI has originated.
Borrowers provide a “loan tape” – raw data on every loan in their portfolio for the past few years. Kilde uses proprietary tools enhanced with AI and Machine Learning to analyse this loan-level data.
This step serves multiple purposes:
- Data Integrity & Trends:
First, Kilde independently validates the data accuracy and checks that the NBFI’s loan loss provisions and reporting are reliable.
Then, using AI/ML, they identify trends or anomalies in the portfolio (e.g. changes in default rates, recoveries, prepayment behaviour). - Performance Back-Testing:
Kilde’s models simulate how the loan portfolio would perform under various scenarios.
They back-test cash flow projections against historical data to gauge the NBFI’s credit scoring and provisioning accuracy.
Essentially, they ask: If we apply our risk model to the past loan book, would the predicted losses match actual outcomes?
This validation helps fine-tune the risk assessment. - Portfolio Quality Insights:
The analysis yields key risk metrics like probability of default and cumulative payback trends for the portfolio.
Kilde can see, for example, what percentage of loans go 30+ days past due, recovery rates on defaulted loans, and how diversified the portfolio is.
These insights feed into the overall credit decision – a healthier, well-performing loan portfolio means lower risk for investors.
By leveraging AI/ML on granular loan data, Kilde gains a forward-looking view of the borrower’s asset quality beyond static financial ratios.
This high-tech portfolio scrutiny adds a layer of diligence that traditional credit analyses might miss, ensuring no surprises in the loan book.
3. Static and Dynamic Credit Limits
Determining “how much” to lend (or what size facility to extend) is a critical part of risk management. Kilde addresses this through both Static and Dynamic credit limit frameworks:
- Static Credit Limit:
Initially, Kilde sets a maximum credit limit for the borrower based on its current fundamental financials.
This static limit is “what the company can handle”, given its equity, earnings capacity, and other fundamentals.
For example, a borrower with a stronger balance sheet and earnings may qualify for a larger facility, whereas a smaller or riskier firm is capped at a lower amount.
This ensures the debt is proportional to the borrower’s financial strength, protecting both the borrower and investors from over-leverage. - Dynamic Credit Limit:
Rather than set and forget, Kilde continuously reassesses the limit as conditions evolve.
They use projections of the borrower’s loan portfolio cash flows to adjust how much credit the NBFI can support on an ongoing basis.
In practice, if the underlying loan portfolio is performing well and growing (generating more cash flow), Kilde might dynamically increase the credit facility to allow the borrower to expand lending.
Conversely, if performance deteriorates, the credit limit can be tightened.
This dynamic approach is akin to a revolving credit line that responds to the borrower’s actual cash flow capacity, ensuring the exposure remains sustainable over time.
Employing static and dynamic limits, enforces prudent lending boundaries.
The static limit provides an upfront check (grounded in fundamentals) on how much debt is reasonable, and the dynamic limit adds a real-time safety valve based on performance.
This two-tier limit policy helps prevent borrowers from overextending and assures investors that each deal’s size is risk-calibrated.
4. Loan Covenants
To further safeguard investors, Kilde structures each deal with loan covenants – protective conditions to which the borrower must adhere.
These covenants act as early warning triggers and loss mitigants.
Kilde typically includes covenants at both the financial statement level and the loan portfolio level:
- Financial Covenants require the company to maintain specific financial ratios within agreed thresholds.
For example, Kilde might stipulate that Leverage (L/E) must stay below 4, Cost-to-income ratio must stay below 80%, Capital adequacy ratio at least 20%..
Such covenants ensure the borrower keeps a healthy profitability and capital buffer.
If the company’s equity ratio falls or interest coverage worsens, Kilde is alerted to rising risk and can intervene (e.g. halt further drawdowns, ask for corrective action). - Portfolio Performance Covenants, Kilde’s loans are asset-backed by the borrower’s loan portfolio, and covenants are tied to portfolio quality.
Typical requirements include maintaining a minimum collateral cover (e.g. the underlying loan portfolio must always be at least 125% of the outstanding loan amount, equivalent to an 80% Loan-to-Value).
Additionally, if certain loans in the portfolio become delinquent (e.g. 60+ days past due), the borrower must replace those non-performing loans with current ones.
These measures ensure the pool of loans backing the investment remains robust and that investors have a cushion of extra collateral.
Kilde closely monitors these covenants, receiving regular financial reports and loan tape updates from the borrower.
If any covenant is breached or trends negatively, it’s a red flag. Kilde can take action such as freezing the facility, adjusting terms, or enhancing collateral.
The covenant framework creates a transparent, rules-based system where borrowers are incentivised to stay financially sound, and investors gain confidence that if things go wrong, they’ll know early.
5. Risk-Based Pricing Methodology
Finally, after assessing risk and structuring the deal, Kilde sets a loan interest rate that appropriately compensates for the risk – a process known as risk-based pricing.
The pricing methodology considers several factors, as explained below.
- Kilde Rating (Credit Score)
The borrower’s numeric score/letter rating directly influences the interest rate.
Higher-risk borrowers will pay higher yields, whereas lower-risk borrowers can secure relatively lower rates.
This aligns investor returns with the underlying probability of default – essentially, the interest rate includes a premium for the expected risk. - Country Risk Premium
Since Kilde’s borrowers operate in various countries (often emerging markets), sovereign and macro risk is also priced in.
Kilde references data (e.g. Damodaran’s country risk premiums by credit rating ) to adjust yields for the country where the borrower operates.
For instance, a lender in a country with a “BB” sovereign rating might have a few percentage points added to the rate versus an equivalent lender in a safer jurisdiction, reflecting higher systemic risk. - Seniority and Security
All Kilde deals are senior secured loans, meaning investors have first claim on collateral in case of default.
This senior secured structure (80% LTV collateral coverage as noted earlier) helps lower the risk and thus the required return.
Kilde’s pricing considers that these loans have strong collateral backing, which enhances recovery prospects and can justify a tighter spread than unsecured debt. - Market Benchmarking
Kilde also examines prevailing market rates for similar private credit deals to ensure competitiveness and fairness.
The goal is to offer investors an attractive premium over public market bonds of comparable rating while still being affordable for the borrower.
The Risk-Based Pricing methodology results in transparent pricing that investors can understand: each deal’s interest rate is grounded in the borrower’s rating and risk profile.
By tying pricing to an objective rating scale and risk factors, Kilde ensures that investors are paid appropriately for the risk they take on and borrowers are charged consistently relative to their credit quality.
Kilde’s Credit Assessment Process
To sum up, here’s a simplified overview of Kilde’s credit assessment sequence — from initial data collection to ongoing monitoring.
1. Data Collection
Kilde gathers extensive information from the prospective borrower, including financial statements, operating metrics, and detailed loan tape data of the borrower’s loan portfolio. This provides the raw material for analysis.
2. Credit Scoring
Using the gathered data, Kilde performs qualitative and quantitative evaluation. The borrower is scored on factors like financial performance, governance, and portfolio quality, resulting in a Kilde credit score (1.00–5.75) and a mapped Fitch equivalent rating.
3. Portfolio Analysis
In parallel, Kilde’s team runs the AI/ML-powered analysis on the loan tape. They back-test and forecast the portfolio’s cash flows, validate data integrity, and estimate risk metrics (e.g. default rates, recovery rates). This step provides a deep insight into the borrower’s asset quality and future outlook.
4. Credit Limits Determination
Based on the above results, Kilde sets an appropriate Static Credit Limit for the deal (how much can be lent safely) and plans a Dynamic Limit strategy for adjustments over time. This ensures the deal size and structure are aligned with the borrower’s capacity and performance projections.
5. Deal Structuring – Covenants & Terms
Kilde structures the investment with protective covenants (financial ratio requirements, collateral conditions, etc.) and defines terms like collateral assets, tenor, and amortisation. All these terms are negotiated into the legal contracts to secure the deal. For example, covenants might enforce replacing non-performing loans in the portfolio or maintaining specific capital ratios.
6. Risk-Based Pricing
After finalising the risk assessment and structure, Kilde sets the interest rate for the loan/bond. The rate incorporates the borrower’s Kilde rating, relevant country risk premium, and the security structure (senior secured). The resulting yield offers investors fair compensation for the credit risk while remaining feasible for the borrower.
7. Investor Offering & Execution
The deal (often in the form of a privately placed bond or loan) is then presented on Kilde’s platform to investors. Investors subscribe, providing funding to the borrower, and the transaction closes.
8. Ongoing Monitoring
After funding, Kilde doesn’t just sit back. They continuously monitor the borrower and the loan portfolio throughout the life of the investment.
Borrowers regularly share updated loan tape data and financial reports. Kilde tracks covenant compliance (e.g. is the equity ratio still ≥25%? Are any triggers breached?) and overall performance.
If issues arise, Kilde can take proactive measures (such as adjusting credit limits or requiring remediation) to protect investors.
Investors receive periodic updates, and interest payments are passed through until maturity, when principal is repaid – ideally concluding a successful investment.
From thorough due diligence and scoring to active monitoring, the end–to–end investment process illustrates Kilde’s commitment to disciplined risk management. Each step is designed to filter out high-risk borrowers and fortify the approved borrowers with data-driven analysis and protective measures.
Discipline and Transparency in Private Credit Investing
Rather than a bureaucratic exercise, Kilde’s credit rating methodology is a core part of how the platform safeguards investors’ capital.
By mapping each deal to a familiar rating scale and sticking to the B- to BBB risk band, Kilde ensures you know precisely what level of risk you’re taking and avoids the extremes that could jeopardise returns.
Each borrower is put through a battery of qualitative and quantitative checks, bolstered by cutting-edge AI/ML analysis on loan portfolios, so that only sound opportunities make it onto the platform (Kilde’s borrower acceptance rate is below 10%).
Prudent limits, covenants, and Risk-Based Pricing for every deal, investors gain multiple layers of protection – from collateral buffers to early-warning triggers and fair compensation for risk.
In short, Kilde’s methodology brings institutional-grade rigour and transparency so that you can take comfort in knowing that each opportunity has been thoroughly vetted and structured to align with your interests.
Kilde’s disciplined framework helps turn an inherently illiquid, higher-yield asset class into a more predictable, manageable investment.
Disclaimer Notice
This page is provided for general informational purposes only and does not constitute legal, financial, or investment advice. Please refer to our Full Disclaimer for important details regarding eligibility, risks, and the limited scope of our services.
