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Private Credit Return Calculator

Bridge coupon, entry discount, fees, default assumptions and recovery into a gross yield and an expected net return under base, stress and severe-stress scenarios.

Editable assumptionsIndian rupeesBrowser-only inputs

Interactive model

Bridge coupon to expected return

Inputs stay on this device

Test credit loss, fee and recovery assumptions instead of treating the coupon as the outcome.

Face value / principal

₹

Cash coupon13%0%24%Holding period3 years1 years8 yearsEntry price100%80%110%OID2%0%8%Upfront investor fee1%0%5%Annual fees1.3%0%4%Default probability5%0%30%Recovery rate40%0%100%

Entry price is stated before OID. Expected coupon assumes defaults occur halfway through the holding period. Enforcement time and taxes are excluded.

Base expected return9.9%Illustrative annualised result

Gross yield12.0%Before expected loss and annual fees

Expected principal loss₹3 lakh

Expected recovery₹2 lakh

ScenarioDefaultRecoveryExpected return

Base5.0%40.0%9.9%

Stress8.8%25.0%8.7%

Severe15.0%0.0%5.8%

Explain my result

The 13.0% coupon is not the net expected return. In the base case, probability-weighted principal loss is ₹3 lakh, while annual and upfront fees also reduce investor proceeds. The scenario result is an average model—not a promise or a prediction of one smooth outcome.

Compare scenario

What this means

High coupon is compensation for risk, illiquidity and complexity. A 14% coupon can produce a much lower expected return when loss severity, fees or a discounted exit are included.

Credit upside is usually capped while downside is not. Underwriting needs to begin with debt-service capacity and recovery, not the coupon shown on a term sheet.

Calculation method

How this tool works

Expected loss = principal × default rate × (1 − recovery rate). Expected proceeds combine surviving principal, recoveries and coupon income, less fees and acquisition cash.

The educational model assumes defaults occur around the middle of the holding period for coupon accrual. It applies user-set default and recovery assumptions to one exposure and annualises expected proceeds. Actual loans can have amortisation, PIK, covenants, enforcement delay, taxes and non-linear recoveries.

View calculation limitations

Results depend entirely on the values and scenarios entered. The model simplifies real legal, tax, liquidity, valuation and market conditions and should be used to understand relationships—not to predict an actual investment outcome.

Common mistakes

Where a correct calculation can still mislead.

01
Treating coupon as IRR.
02
Applying a recovery rate without enforcement time and costs.
03
Assuming defaults happen only at maturity after all coupons are paid.
04
Ignoring PIK, OID, arrangement fees and manager fees.

Continue through the knowledge graph

Tools, guides and real cases connected to this result.

Learn the concept

Private Credit: Structures, Covenants and Recovery→Private Credit — Complete Guide→Private Equity vs Private Credit→

Test it in a case

Cecil & Lou: financing inventory solved a timing problem, not the whole underwriting case→NAV loans: when an early distribution is funded by a new senior claim→

Questions investors ask

Answers without the sales pitch.

What is expected credit loss?

It is a probability-weighted estimate: exposure multiplied by the likelihood of default and the share not recovered.

Is expected return a promised return?

No. It is a model output based on assumptions. Actual outcomes can cluster around no default or a much larger loss.

Why does recovery timing matter?

A delayed recovery reduces IRR and may require legal or restructuring costs even when the eventual rupee recovery is reasonable.

Important information

AssetsNest tools and calculations are provided solely for educational and informational purposes. Results are illustrative and depend on assumptions entered by the user. Actual performance, liquidity, fees, taxes, risks and outcomes may differ materially. Nothing on this page is investment advice, a recommendation, solicitation, assurance of returns or an offer to buy or sell any security or investment product. Investors should conduct independent due diligence and consult appropriately qualified financial, legal and tax professionals where required. AssetsNest Investor Services — ARN 318691.

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