NEW YORK–(BUSINESS WIRE)–#creditratingagency–KBRA releases its Business Development Company Ratings Compendium, which looks at results for the quarter ended March 31, 2025.
In 1Q25, business development companies (BDC) demonstrated continued resilience and caution amid an uncertain operating environment marked by high base rates, tighter spreads, and uncertain trade policies. The sector remains concentrated, with 10 BDCs holding 53% of the total market of $449.9 billion at fair value (FV) as of 1Q25. Despite continued low transaction volume in a muted mergers and acquisitions (M&A) environment, perpetual-life BDCs continued to raise equity. The top five perpetual-life BDCs represented approximately one-third of the total BDC sector investments at 1Q25, relatively unchanged from 4Q24. At the same time, several non-perpetual-life BDCs saw loan repayments outpace originations, resulting in modest net negative fundings. In this uncertain environment, BDCs remain cautious in underwriting new loans, while much of the new fundings were to existing portfolio companies.
With interest rates remaining high and the broader economic picture unsettled, KBRA remains focused on signs of credit deterioration within BDC portfolios. While some increase in nonperforming loans is anticipated, the Sector Outlook remains Stable, reflecting a foundation of ample liquidity, conservative leverage practices, and portfolios concentrated in senior secured first lien positions. Portfolios remain focused on industries with relatively resilient fundamentals and limited exposure to proposed tariffs. This helps to insulate our rated BDCs from the more volatile effects of global trade and geopolitical developments. In the event of a broad economic slowdown, rated BDCs are generally well positioned to absorb increasing non-accruing loans.
Key Sector Takeaways
Click here to view the report.
About KBRA
KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.
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