BDC COMMON STOCKS

Week 1

We’ve Only Just Begun

The BDC Reporter published a full price market recap just a few days ago, but we’re back to our weekly missive.

As you can see above, across both the end of 2024 and the beginning of 2025 – with some time off on January 1 – the major indices had a soft week.

We don’t have any great sympathy because – as we’ve reported and as your monthly brokerage statements will have shown – 2024 and 2023 were wonderful years to be invested in the major indices.

2025 may yet prove to be a different kettle of fish, but we shall see.

Anyway, the BDC sector fared a little better week-on-week: up 0.2% – going by the S&P BDC Index on a price basis.

From year-end 2024, the index is up 1.0%.

Going forward, we’ll also be using the only BDC exchange traded fund – which has the ticker BIZD – to track sector performance.

Gone is BDCZ – the UBS sponsored exchange traded note that we’ve used historically.

In 2025 BIZD is up 0.7%.

New

As long promised, we’ve chosen this time to add 3 newly minted public BDCs to our coverage, bringing the total number to 45 from 42.

The BDCs involved are Kayne Anderson BDC (KBDC); Morgan Stanley Direct Lending (MSDL) and Nuveen Churchill Direct Lending (NCDL).

The combined assets under management come to just over $7.6bn.

Frankly, we are only just becoming familiar with the BDC newbies, but we’ll be sharing with you everything we learn in the months ahead.

All Over

You might well ask how comprehensive is our coverage of the public BDC sector.

We reviewed Advantage Data’s list of all public BDCs and counted out 50.

Not in our universe is Blue Owl Capital Corp III (OBDE). That’s a very big BDC with a FMV of $4.3bn.

However, OBDE is about to be swallowed up by its sister BDC Blue Owl Capital (OBDC) so we’ve held up adding the name to our list as it will be turning up anyway in a few weeks.

That leaves SuRo Capital Corp (SSSS); Equus Total Return (EQS); Rand Capital (RAND) and FirstHand Technology Value Fund (SVVV).

These last 4 are too small in terms of AUM, or not principally lenders as per our mandate, or both.

Calculations

Assuming OBDE ultimately gets folded into our coverage, the total FMV of the 45 BDCs we track was just under $150bn, and accounts for over 99% of all public BDC FMV.

With “Private Credit” assets said to be around $1.5 trillion globally, our set of lenders account for about 10%.

Total BDC assets – both public and private – amount to $387bn, just over a quarter of Private Credit assets.

Everything Everywhere

Harder to quantify – but likely very high – is the percentage of BDC monies in some portion of Private Credit borrowings, alongside other providers such as hedge funds; banks; family offices, etc.

This is important because BDCs – unlike those other providers of “alternative assets” – value their investments quarterly providing a very useful window into the creditworthiness of assets that would otherwise be hidden from view.

You can be sure that a family office lender will not be sharing with the world at large its evaluation of the investments on its own books.

We won’t go so far as to say that “where goes BDCs so goes private credit” but our corner of this now very popular segment of finance has a lot to tell anyone interested in the broader non-investment grade debt environment, even if they don’t own one share of a BDC.

Ever More

Anyway, we’ll be working all the data of the 3 new BDCs into our BDC NAV Change Table, Earnings Calendar and these market recaps.

Thankfully, we expect that some public BDCs might get swallowed up by larger players in 2025, helping to keep coverage of the industry more manageable.

Frankly, we have the view that several BDCs serve very little purpose to their shareholders or the markets – or even their managers – and it would be best for all concerned that they sell their assets and move on.

With that said, there are more BDCs likely to go public shortly so we may end up with more assets under management and a changing roster of names.

Individual BDC Performance

28 BDCs increased in price or were flat in this last week, while 18 were in the red.

Of the BDCs in the black, 4 moved up 3.0% or more and 3 fell (3.0%) plus.

We can’t help being impressed with Main Street Capital’s (MAIN) price performance.

Once again the BDC reached a new 52 week and all time high: this time to $60.19.

Here’s the 1 year price chart for MAIN:

As you can see, MAIN is up 38% in 12 months, including 3.4% over the last 5 days.

The BDC is projected to earn $3.99 per share in 2025 – according to the analysts – which implies a price-to-earnings multiple of 15.1x, using the recent highest price.

(By contrast, ARCC’s highest price of $22.44 multiplied by $2.35 comes to 9.5x).

There’s no denying investors love affair with MAIN.

Who’s to say more records will not be broken in the months ahead.

Not So Great

Most BDCs are far from these elysian heights.

The average BDC is priced at 98% of its Net Asset Value Per Share (NAVPS) – MAIN is trading at nearly 200%.

16 BDCs trade at or above NAVPS, which leaves 29 below.

Split

As has long been the case, price performance continues to be very different from BDC to BDC even as the sector has increased up to 10% in price since August.

10 BDCs are trading within 5% of their 52 week high and 8 between 5%-10%.

However, another 5 are just 0% -5% off their lowest 52 week price and 16 more 5%-10% off.

All in all – and barring exceptions like MAIN – the BDC market seems neither very hot, nor very cold.

Our View

It’s as if investors are waiting for a sign – or many signs.

Will the new Trump Administration bring us a period of economic growth, or are we headed off a precipice?

Will the Fed continue to cut short-term rates or swivel off in the other direction?

Will the “bond vigilantes” push up long-term rates to unexpected heights or will the uneven rate descent that began in 2023 resume?

Will the volume of M&A deals boom after several years in the doldrums, bringing BDC lenders plenty of new deals, big fees and higher spreads, as many are predicting?

Or will we continue to have lackluster LBO activity at a time when there is an abundance of lenders capital seeking a home – always a worrisome phenomenon whatever the desired object might be?

Inaction

Nobody knows and most BDC investors – at least – do not seem prepared to do much beyond watch and wait.

This won’t last, though, and we’re expecting fireworks of some kind in the weeks and months ahead.

BDC earnings season – which begins in February – could be instructive and market moving but investors will mostly be looking to macro factors, and these can be read all sorts of ways.

Don’t forget the 2022 consensus amongst the Good and the Great that the U.S. economy was headed for perdition, and what happened thereafter…

As we said last wee, we expect 2025 will be a very stressful year for investing of any kind.