KBRA Releases Research–Second-Quarter 2023 Business Development Company (BDC) Ratings Compendium
September 7, 2023 | Business Wire
KBRA releases its Business Development Company Ratings Compendium, which looks at results for the quarter ended June 30, 2023, and offers a review of perpetual continuously offered non-traded BDCs as well as recent industry developments. KBRA believes that despite recent headwinds, including a potential recession and asset quality uncertainty, the BDCs in its coverage universe remain stable with few near-term maturities and solid credit metrics, including comfortable liquidity, low non-accruals, and appropriate leverage.
Key Takeaways
- BDCs continue to gain market share at the expense of banks and the broadly syndicated markets—a trend that has dominated for several years, boosted by the creation of perpetual continuously offered non-traded BDCs and the expansion into global wealth channels (accredited investors).
- BDCs account for less than 20% of the total global direct lending market and have the capacity to continue increasing share.
- As BDCs continue to broaden their market share, they have underwritten loans upmarket to include portfolio companies with EBITDA in excess of $100 million. These loans may better withstand a recession, and private credit overall has achieved more attractive pricing, higher original issue discount (OID), and, in some cases, tighter covenants.
