Meridian Credit Partners Section 07
Returns & Scenarios
Income-led returns,
modeled to a downside.
The base case targets an 11.5% net IRR and a 1.55x net MOIC, driven by a ~9% current cash yield. This section shows the scenarios, the J-curve, the DPI build, the fee bridge, and sensitivity to defaults.
11.5%
Base Net IRR
1.55x
Base Net MOIC
9%
Cash Yield
Shallow
J-curve
Base / Upside / Downside

Three cases, one protected floor.

CaseNet IRRNet MOICDPI (life)Loss rate
Downside7.5%1.32x1.32x~6%
Base11.5%1.55x1.55x~3%
Upside14.0%1.70x1.70x~1%
What moves the cases
The single biggest driver is the cumulative loss rate. Income is broadly stable across scenarios because it is contractual and floating; the spread between cases is almost entirely credit losses and recovery timing. Even the downside returns capital plus a mid-single-digit yield.
The floor
A fully realized fund distributes at least its capital back (DPI ≥ 1.0x) in every modeled case. The question is how much yield on top, not whether capital returns.
Meridian Credit Partners · Fund IIReturns 02 / 06
J-Curve · Cumulative net cash to LP (% of commitment)

A shallow J-curve. Income starts early.

BaseUpsideDownside
+60% +20% 0 -20% -60% Y0 Y1 Y2 Y3 Y4 Y5 Y6
~Q2
First distribution
~-55%
Peak called (base)
Yr 4
Cash breakeven (DPI 1.0x)
+55%
Net gain at wind-down
Meridian Credit Partners · Fund IIReturns 03 / 06
Distributions · DPI build over fund life (base case)

Capital back by year four to five, yield on top.

0.0x 0.3x 0.6x 1.0x 1.2x 1.55x at wind-down Y0 Y1 Y2 Y3 Y4 Y5 Y6 DPI 1.0x
Quarterly
Distribution cadence
Yr 4–5
DPI crosses 1.0x
1.55x
Terminal DPI (base)
~9%
Annual cash yield
Meridian Credit Partners · Fund IIReturns 04 / 06
Gross-to-net bridge (base case, IRR)

From 15.0% gross to 11.5% net.

15.0% Gross IRR -1.4% Mgmt fee -1.6% Carry -0.5% Fund exp. 11.5% Net IRR
Fees are charged on invested, not committed, capital, and carry is earned only after LPs clear a 7% preferred through a European whole-fund waterfall. Net return is what the LP keeps.
3.5%
Total drag
Meridian Credit Partners · Fund IIReturns 05 / 06
Sensitivity · Net return vs cumulative portfolio default rate

Losses set the return. Capital holds.

Cumulative loss rateNet IRRNet MOICDPI
0% (no losses)13.5%1.63x1.63x
3% (base)11.5%1.55x1.55x
6% (stress)7.5%1.32x1.32x
9% (severe)4.2%1.17x1.17x
Read it this way
A cumulative loss rate is losses net of recovery across the whole portfolio over the fund's life. Fund I ran at zero. At three times the base assumption (9%), the fund still returns capital plus a positive yield. First-lien seniority and current income are what hold the floor.
The point
There is no modeled default rate short of a portfolio-wide collapse that turns this fund into a loss of capital.
Meridian Credit Partners · Fund IIReturns 06 / 06