A recent analysis by Reuters has found that the majority of publicly traded business development companies (BDCs) have turned unprofitable due to falling asset values and rising costs. This is a sign of pressure building in the private credit market, which has grown to $3.5 trillion. BDCs are investment loan vehicles that make money by collecting interest payments on credit extended to borrowers.
Industry Stress
The private credit industry has come under stress in part due to its sizeable exposure to software companies disrupted by AI advances. A Reuters analysis of balance sheet data from S&P Global Market Intelligence examined 53 publicly traded BDCs, finding that their loan losses and debt costs have jumped. Many of these BDCs are also utilizing more off-balance-sheet borrowing.
Companies in this industry tend to be appraised based on the health of their net investment income, which excludes changes in underlying loan values. However, S&P’s data platform standardizes net profit figures across all BDCs to arrive at a bottom-line income figure that adds in debt costs and changes in loan values.
Financial Stability
BDCs maintain financial stability by borrowing off balance sheet via special purpose vehicles and joint ventures. This borrowing is not counted towards regulatory-required safety metrics. A Reuters analysis of the group’s earnings reports found that only 14 BDCs published complete data on their joint ventures, and at those funds, off-balance sheet borrowing rose sharply.
The S&P BDC index is down 8.4% since the start of 2026, while the S&P 500 has climbed nearly 9%. Some funds have marked down existing loans, with Blue Owl’s OTF fund taking a markdown of $490 million in the first quarter.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
