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What to Watch
- The impact of heightened competition on middle-market deal terms and structures.
- Potential for outsized realized losses for BDCs with elevated non-accrual levels.
- Dividend coverage metrics as NII is pressured by lower investment yields and cash NII is further weakened by elevated payment-in-kind (PIK) income.
- Ability to maintain economic access to the unsecured debt markets as near-term maturities rise.
- Management of leverage and asset coverage cushion if origination activity increases.
Additional Key Sector Issues
- Spread compression could lead to an expansion in BDCs’ risk appetite.
- BDCs’ ability to collect accrued PIK income in cash will be tested as 2021 vintage investments approach maturities.
- Potential risk of redemptions for perpetual non-traded BDCs, which could negatively affect leverage, liquidity and future fundraising.
Contact Brad Hamner
Latest news
Q2'26 BDC analysis shows additional 184 bps of nonaccruals at cost
September 10, 2026
In a universe of 173 business development companies, or BDCs, Octus identified a total of $9.5 billion of debt (at cost) in nonaccrual status reported in the second quarter of 2026, a slight decline of 5% from $10 billion in the first quarter of 2026.
Reading the Board
September 10, 2026
The story changes depending on which numbers you’re counting.
Private Credit Defaults 101: Different Numbers, Different Stories
In Season 2 of Billions, Bobby Axelrod takes his lawyer Orrin Bach to an empty Yonkers racetrack in the dead of night.