S&P revises Cliffwater's private credit fund outlook to 'negative' on surging redemptions

March 18 (Reuters) - Ratings agency S&P Global revised the outlook on Cliffwater LLC's flagship private credit fund to "negative" from "stable" on Wednesday, citing higher investor redemption requests.

The $33 billion Cliffwater Corporate ?Lending Fund capped repurchases at 7% after investors looked to redeem about 14% of shares in the first quarter, Bloomberg ?News reported last week, citing a ?letter to investors.

* S&P said the liquidity profile of the fund could weaken if large redemption requests continue and the decision to allow redemptions above the 5% minimum becomes the new norm rather than the exception.

* "We view the 5% redemption cap as an important guardrail for liquidity. Raising the redemption cap to 7% per quarter would weaken our opinion of the fund's liquidity," S&P said.

* The move comes amid rising concerns over asset quality and valuations in private credit, particularly software lending, following high-profile defaults that have triggered redemption waves across funds.

* Despite weaker performance in early 2026, S&P affirmed the "A" rating on Cliffwater Corporate ?Lending Fund, citing stable asset quality, low leverage and satisfactory liquidity.

* Cliffwater is the largest interval fund and one of the largest private credit funds in the U.S., according to S&P Global, operating as a closed-ended investment company that periodically buys back its shares from investors.

* Cliffwater this week was in the market, selling $1 billion of its loans. When a closed-ended credit fund does this, it is often to shore up the fund's cash position or meet redemptions.

* Cliffwater's CEO publicly claimed ample liquidity, but conceded that this liquidity "would be secured through additional borrowing, the New York Times reported earlier this month, referencing an investor letter.

* Performance in the underlying loans of private credit has widened with the best performing now priced above 97% of par, while the share of loans that have fallen more than 10% in value has jumped 5% in the last three years, according to a recent Houlihan Lokey report shared with Reuters.

* A move by JPMorgan Chase (JPM) to mark down the value of certain loans to private credit players ?will reduce lending to the funds, Reuters reported last week. (Reporting by by Atharva Singh, Nell Mackenzie and Arasu Kannagi Basil; Editing by Shilpi Majumdar)