Private creditportfolio valuations.

Private credit investments are valued at fair value, typically using a discounted cash flow approach that reflects the loan's contractual cash flows, the borrower's credit risk, and current market yields for comparable debt. For performing loans the result often sits close to par, but it should never be assumed to equal par without analysis. Deterioration in the borrower's position or a widening of market spreads can move fair value below face value well before any default.

A private credit loan is rarely worth exactly its face value because fair value reflects current market conditions and borrower credit risk, not the amount originally lent. If market yields have risen since origination, or the borrower's credit has weakened, the loan's fair value falls below par even while it continues to perform. Holding every performing loan at par is one of the most common weaknesses auditors challenge in private credit portfolios.

A non-performing loan is valued by estimating the recoverable amount, usually through a recovery analysis that weighs the value of any collateral against the costs and time expected to realise it. Where recovery depends on uncertain outcomes, a probability-weighted scenario approach gives a more defensible result than a single point estimate. The key judgements are the recovery timeline and the discount rate applied to reflect the heightened risk.