BDC COMMON STOCKS

Week 24

In Limbo

Every week we pore over the many metrics we track to prepare for writing the Market Recap and try to ascertain what we are being told by the movements of the markets.

Where the BDC sector is concerned – notwithstanding this week’s (0.3%) drop in the price of BIZD – the only exchange traded fund (ETF) we have to go by – and the (0.9%) decrease in the S&P BDC Index on a price-only basis – we seem to be stuck in neutral.

For the past 5 weeks, the sector as a whole has been pretty much in the same place. BIZD closed at a price of $16.04 on Friday May 16 and reached $16.14 this last Friday. That’s only a 0.6% increase.

The S&P BDC Index – over that same period – is only up 0.3%.

Rinse Repeat

Other metrics support this picture of stasis:

The number of BDCs trading at or above was at 14 on Week 20 and is now almost the same at 13 on Week 24.

Also, 7 BDCs are trading at or above book YTD at this week’s close, not very different than 9 back on May 20.

If it’s any comfort, the S&P 500 seems to be in the same boat, only up by 0.3% over this period, partly due to Friday’s fright when missiles began to fly 6,381 miles away.

Closer Look

Nonetheless, as always there were weekly price winners and losers.

As this table shows, there were 3 BDCs whose price jumped by 3.0% or more.

All the above are smaller BDCs whose limited float causes their prices to often move up and down a great deal.

Cutting

We don’t have much to say about this trio except that MRCC has been something of a “falling knife” in 2025.

Ironically, last year the stock was in “come-back kid” territory, as we covered in an article on September 11, 2024 when MRCC reached a 52 week high of $8.10.

However, just a few months later, we reviewed the BDC’s IVQ 2024 results and came away underwhelmed, as reported on March 4, 2025.

Here’s how we concluded:

One Way Street

With the exception of its stock price, all the fundamentals we’ve covered above are getting a little worse for MRCC: its yield is falling, recurring earnings per share are shrinking; credit results are a little worse; NAVPS continues to slide.

Some of this is baked into the analyst expectations for recurring earnings in 2025 which are expected to drop to $1.02 per share from $1.13 in 2024 – using NIIPS.

That’s a (10%) projected decrease.

However, we wonder if that may be a little optimistic, especially as the BDC is at full stretch from a leverage standpoint and is getting no help from the new owner of the external manager.

Source: BDC Reporter

Since then, MRCC’s IQ 2025 results came in much lighter than expected where earnings and book value are concerned and the analyst consensus for 2025 earnings has dropped to $0.80.

Still – to be fair – management continues to pay out that $0.25 quarterly distribution, as declared for the IIQ 2025 just 10 days ago.

Maybe MRCC’s “knife” has fallen as far as needed to adjust to the new earnings reality and – likely – eventual dividend cut…

Biggest Losers

Reasons

Of the BDCs whose price dropped (3.0%) or more, the only one that reported any development this week was MidCap Financial (MFIC).

That near (7%) drop – or ($0.79) per share – can partly be explained by the $0.38 dividend getting paid out but that’s not the whole story.

Gone

This week MFIC’s CFO Gregory Hunt resigned unexpectedly. There was the usual reassurance in the BDC’s press release that “Mr. Hunt’s decision to step down is not the result of any disagreement with the Company, its adviser or their affiliates regarding their operations, policies, practices or otherwise”.

However, he has been at Apollo/MFIC for 12 years and is a fixture on the BDC’s conference calls.

Maybe some investors were disappointed to see him go, even though Apollo – who serves as the ultimate external manager – has a deep bench and immediately replaced Mr Hunt with Mr Seifert, whose own bio is very impressive:

Mr. Seifert, 47, serves as the Chief Financial Officer and Treasurer of Apollo Diversified Credit Fund and Apollo Diversified Real Estate Fund since 2022. Mr. Seifert previously served as Chief Financial Officer and Treasurer of Apollo S3 Private Markets Fund from 2023 to 2024, Apollo SeniorFloating Rate Fund Inc. from 2021 to 2024 and Apollo Tactical Income Fund Inc. from 2021 to 2024. He joined Apollo in June 2015 and has worked in
Apollo’s Controllers group throughout his tenure. Prior to that time, Mr. Seifert was a Senior Manager at KPMGwhere he was an Auditor in theAlternative Investment practice, and before that, Mr. Seifert was a Senior Manager at Rothstein Kass where he was an Auditor in the Financial Servicespractice. In his positions, Mr. Seifert has specialized in alternative investments including Hedge, Private Equity, Fund of Funds, and Regulated Investment Companies. Mr. Seifert graduated from the Pennsylvania State University with a BS in Accounting and a minor in Business Law.

Source: MFIC Press Release

Maybe the price drop is unrelated to this coming and going.

However, this leaves MFIC’s stock price – which had been recovering of late, down (9.5%) in 2025.

WHERE WE ARE

Same Old

Given the statis previously mentioned, the BDC sector as a group remains in lukewarm territory as we grind our way towards the mid year.

BIZD trades nearly (10%) below its 52 week high and (3.1%) down in 2025.

By contrast, the S&P 500 in price terms is up 1.6%. The BDC sector trails the most famous index by 4.9%.

On a total return basis – a much more appropriate lens to consider performance – the S&P BDC Index is down only (0.8%) while the equivalent S&P 500 metric is up 2.3%.

That’s a little narrower of a gap, but nothing very exciting for BDC investors.

The Few

Looking at how individual BDCs have performed in 2025 is not very encouraging either, especially after several years of above average price and total return performance.

Of the 45 BDCs who have been trading all year, only 5 are in the black price-wise.

The price leader used to be Gladstone Investment (GAIN), but that crown was taken from the lower middle market BDC when its $0.54 a share “special dividend” got paid out a few days ago. Still, GAIN is up 6.7% for the year just in price and gets the bronze medal through the 24th week.

In second position is Sixth Street Specialty Finance (TSLX), up 9.5% in 2025.

Perverse Reward

By the way, we find this amusing given the comments made by the manager’s CEO Josh Easterly to the media of late and in a special letter to “stakeholders” on April 30, 2025.

Mr Easterly is something of a modern day Cassandra warning about “complacency” in private credit markets and cautioning that “today’s yields are not tomorrow’s yields”. (That latter invocation presumably means that interest rates are likely to go down and with them SOFR and BDC loan yields).

In the special letter, Mr Easterly opined that a “new world order” was upon us – and not in a good way. The whole epistle goes on for 15 pages and we don’t have the skills to fairly summarize what he wrote except that the content is a mixture of sweet and sour about the outlook for the economy, leveraged lending and the prospects for BDC shareholder returns.

Whether Mr Easterly was seeking to be on the record warning of trouble ahead or not, the market has reacted by bidding up the price of TSLX, and by a far greater amount than its peers.

For example, Ares Capital (ARCC) and Blackstone Secured Lending (BXSL) have seen their stock prices only increase by 1% in 2025.

Maybe he should write a shareholder letter every quarter…

Number One

Top of the BDC pops through 24 weeks is OFS Capital (OFS), up 11.4%. See the YTD stock price chart below:

WHERE WE ARE HEADED

Short And Sweet

We’ve already used up a good deal of your time reviewing this week’s price action and where the BDC sector stands YTD, so we’ll keep this section short.

Shocker

The only new factor that has transpired since our last Recap are a couple of price readings suggesting – to everyone’s consternation in the Dismal Science – that inflation has not reared its ugly head, but is actually moderating.

That could change – and will if you believe the former Fed chief Janet Yellen, and many others.

We don’t know what to think and that might be the case with many investors, greatly interested in knowing whether the BDCs they own will have to contend with lower loan yields – and thus income.

Late Night Anxieties

A little worrying is the pick up in the number of people applying for unemployment benefits for the first time.

The worst possible scenario for BDC investors would be the Fed cutting rates not because they’ve won the “war” on inflation but due to concerns about a weakening economy.

Defying Gravity

However, can an economy being so fiscally pumped up as ours really slump into a recession without some exogenous and unexpected event?

We just don’t know and till some of these uncertainties clear up – if only for a little while – we doubt BDC prices are going anywhere.

Ca-Ching

Let’s close, though, with a more sanguine viewpoint.

With every passing month, BDCs continue to pay out still very rich distributions.

Even if BDC prices continue to tread water till the end of the year, both the sector and most individual BDCs could still generate a positive total return.