BDC COMMON STOCKS

Week 22

Ups And Downs

We did warn at the beginning of this year – long before “reciprocal tariffs” and “Liberation Day” became part of our everyday lexicon – that 2025 would be an unusually volatile year where BDC stock prices were concerned.

Nonetheless, we are still surprised at times by all the comings and goings that we have the honor to chronicle from week to week.

A week ago, the President was threatening the EU and the markets were down. This week, it’s kumbaya on that front and the markets are – once again – in a hopeful mood.

Copycat

Going by the stock price of the only BDC exchange traded fund – BIZD – we kept pace with the major indices.

BIZD was up 2.0% and the S&P BDC Index – on a price only basis – increased 1.9%.

The number of BDCs up and down were a reverse image of last week: 40 were up and 6 were down.

In Week 21, 10 BDCs fell (3.0%) or more in price. This week 9 BDCs increased by 3.0% or more.

Different

Not everything was exactly the opposite. This week there were 2 BDCs down (3.0%) or more while the week before none had exceeded the 3.0% increase limit.

The presence of Prospect Capital (PSEC) on this short list is not surprising.

We devoted some space in last week’s recap to PSEC’s travails.

This week, the BDC reached a new 52 week low of $3.21, after its ex-dividend date.

That’s also a new all-time low for the once high flying stock and leaves us wondering how management is going to rescue this controversial BDC.

Really? Now?

There’s been no news out of Investcorp Credit Management (ICMB) for two weeks now – since the tiny BDC announced its IQ 2025 results and was one of a small group of BDCs that could point to an increase in its net asset value per share (NAVPS).

However, we imagine investors were more focused on the fact that ICMB announced a dividend of $0.12 per share for the second quarter of 2025 while booking recurring earnings in the form of Net Investment Income Per Share (NIIPS) of only $0.05 in the IQ 2025.

Like most BDCs, ICMB piled up excess earnings during the high interest rate years and has undistributed earnings to pay out to “subsidize” the dividend.

For the year, the analysts are projecting NIIPS will reach only $0.36, well short of the $0.48 dividend running rate, so at some point ICMB seems due for a dividend haircut.

The stock is trading at 7.5x its projected 2025 earnings and a (50%) discount to book.

Only one other BDC has a lower price to NAVPS than ICMB and that’s …PSEC.

Trapped

On its most recent conference call management didn’t have anything very reassuring to say about how ICMB might get out of this unedifying status.

There’s some hope that investment activity will pick up and that new funds being raised elsewhere by the parent might reduce overhead expenses.

However, the BDC has very little in liquidity and – in any case – is highly leveraged at 1.7x debt to equity.

On the last earnings conference call analyst Paul Johnson of KBW pointed out:

And this quarter, you strip out the PIK income, it doesn’t really appear that you’re cash flow positive

ICMB – IQ 2025 – Earnings Conference Call.

Checking It Twice

There’s an ever longer list of BDCs like ICMB and PSEC whose future seems very dim.

None appear to face the prospect of bankruptcy or a forced liquidation, but face becoming BDC “zombies”.

WHERE WE ARE

Crawling Back

With this week’s performance, the BDC sector continues its recovery from the tariff tantrum, which reached a nadir on April 8th.

Intra-day, BIZD traded as low as a price of $13.78, before closing at $13.96.

Ever so briefly – but frighteningly for BDC investors – the sector was down (23%) from its price height in mid-February.

Now – 7 weeks later – BIZD is trading at $16.14, up 17% from the lowest low and about (10%) below its recent peak.

As this 2025 YTD stock price chart shows, BIZD’s price recovery has come with plenty of volatility along the way:

The S&P BDC Total Return – probably an even better measure of performance given the inclusion in its calculation of all the dividends received – is now down only (0.7%) in 2025.

Granular

Looking at the 46 BDCs we track, only 9 (including MSC Investment – MSIF – which came on the scene during the year) are in the black price-wise this year, while 37 are in the red – a vivid reminder of how tough conditions have been.

As this chart shows, the year’s price winners to date are a heterogenous group, led by Gladstone Investment (GAIN), which is performing more and more like an equity group:

Could anyone have guessed these would be the market leaders price-wise at the beginning of the year?

Merciless

Maybe more interesting – and a little shocking for the shareholders of the BDCs involved – is how much the stock price of certain out of favor BDCs have fallen:

We used a cut-off percentage loss of (15%) or greater, and found 8 names.

Leading the pack are Portman Ridge (PTMN) and Logan Ridge (LRFC).

At least, the manager of those two BDCs is trying to keep them from turning into zombies by merging them, which will happen shortly.

The presence of Monroe Capital (MRCC) on the list is not surprising given its recent weakness, which we discussed recently.

Crescent Capital’s (CCAP) fate was likely sealed when the BDC reported 4 new non-accruals in the IQ 2025.

Investors will be looking for signs of a turnaround before piling back in.

Carlyle Secured Lending (CGBD) has reported 4 quarters in a row of lower NAVPS.

As recently as late January 2025, though, the stock was trading high but has lost a remarkable (25%) of its market value since.

WHERE WE’RE HEADED

Still Quiet

As we noted last week, we’re still weeks away from BDC earnings season.

As a result, BDC prices are likely to be hostage to changing investor sentiment about the big issues like the direction of the economy, inflation, interest rates and the trade war – now a seemingly permanent fixture.

Pop Up

However, there will be occasional credit stories – like the one we wrote this week about the weakening credit performance of Peraton – a very large BDC borrower.

Jamie Dimon and a host of others are predicting a great deal of credit losses ahead for private credit – and by implication – for the BDC sector.

No Worries

Nobody seems to have warned investors in BKLN – the ETF which owns the 100 largest non-investment grade leveraged loans, which is currently trending up in price.

Also trending up price-wise since April 8 are the largest high yield bond ETFs.

Our research – as conducted by Perplexity and covering a lot of ground – indicates all remains well in both those arenas.

The Paul Revere-types warning us that a recession is coming have been less vocal of late and the strength of the major indices should be evidence enough that the market is not worried on that score.

Unpredictable

Of course, a Truth Social tweet or a hasty word out of the White House could change price conditions at any time but the underlying trends in the non-investment grade markets are benign at this point.

We’ll likely need a lot more Peraton stories to move the needle and to prove the credit nay-sayers right.

As always, we are agnostic on the subject and will only go where the data takes us