BDC COMMON STOCKS

Week 39

Unvarnished

We have nothing but bad news for BDC investors where this week’s prices are concerned.

The headline is how BIZD fared.

The sector’s exchange traded fund dropped (4.0%), its worst performance since the week ended August 1, 2025.

Confirmed

We tend to double check on sector performance by looking at the S&P BDC Index.

That fell a little less this week: (3.7%), but that’s still high in absolute terms.

As noted above, this swoon is far greater than the (0.3%) dip in the S&P 500.

Almost Everyone

Of the 46 BDCs we track, only 1 was in the black and that was PhenixFin (PFX) whose market cap is tiny.

Of the BDCs in the red, three quarters – 30 – were down (3%) or more.

Wow!

In a week with little BDC-specific news some individual price drops were dramatic.

See below a list of all the BDCs that fell from (6.0%) all the way down to (12.95%).

Long Time Coming

The collapse of Oxford Square Capital‘s (OXSQ) stock price this week should probably not be a great surprise.

We’ve been asking – rhetorically speaking – what is the purpose of this BDC – either to its shareholders or external manager – for years.

Here’s a link to an article where we posed the question as far back as May 2023.

Anyway, as this lifetime stock chart shows, the BDC is at an all-time low – a stinging rebuke to an idiosyncratic strategy of investing heavily in CLO equity over the long term.

What’s most notable about the chart is the huge increase in shares traded in recent weeks as if all the shareholders wakened to their plight at the same time – and by doing so made it worse.

Hurting

White Horse Finance (WHF) – down (11.6%) in price – is a different sort of BDC but has incurred a series of credit losses and appears unable to pull out of its credit dive.

WHF now trades at 60% of its book value suggesting the market believes that its net asset value per share (NAVPS) – down (12.1%) in the past 12 months – will be dropping a lot further.

Palmer Square (PSBD) went public not very long with a unique strategy in the public BDC universe: lending to the very largest borrowers out there in loans of such size that they trade in the secondary markets.

That allows PSBD to offer its shareholders a monthly NAVPS rather than the quarterly update painfully calculated by all the other BDCs.

So we can tell you that in August PSBD’s NAVPS was $15.94, up from $15.68 in June.

Nonetheless, the BDC was trading almost at an all time low and at a (24%) discount to that August book value.

We could go on and on pointing out the walking wounded but we covered much of this ground earlier in the week when we wrote about 12 BDCs at new 52 week lows.

Method To The Madness

The article discerned two distinct patterns amongst these BDCs.

By week’s end – for the record – the number of BDCs at new 52 week lows had increased to 13.

Noteworthy

Given this extreme amount of red ink, we can’t help noting that the number of BDCs trading at or above book value per share has not dropped as much as one could have expected.

There are now 10, down from 11 the week before.

This supports our contention that this recent market collapse remains a very divided one with a number of better performing BDCs holding their own as many of their peers crasah and burn price-wise.

More on that in a minute when we pull back to gain a wider perspective.

WHERE WE ARE

Warning

The metrics we are about to review for the BDC sector YTD are not pretty and that’s even more the case when compared against the major indices, especially the S&P 500.

Over there in the main markets – despite a slight dip this week – the champagne is flowing only a few months after everyone was certain tariffs would bring on devastation.

In any case, BIZD is at $15.04 – down (9.6%) YTD in 2025 but off (15.8%) from its February high point. That’s deep in “correction” territory for those who like to use that tag.

The S&P BDC Index is down (8.8%) on a price basis.

Even when we turn to the total return number for the S&P BDC Index the result is still dismal: down (4.8%) despite plenty of generous dividends still being paid out.

By contrast, the S&P 500 – which pays out very modest dividends – is up 14.1%.

Details

Getting into the weeds, only 2 BDCs are up in price in the last month and only 7 of 44 BDCs trading all year are in the black on a price basis.

Ray Of Sunshine

Of late we’ve been reviewing the total return of BDCs in 2025 using Sharesight and that data continues to offer some solace.

We count 17 BDCs in the black when dividends are figured in alongside price changes.

Admittedly only 3 BDCs are out-performing the S&P 500 but the data is less glum.

The median total return gain of the BDCs in the black is 4.5%.

WHERE WE ARE HEADED

Glass Darkly

Our view is that the BDC sector’s recent price woes represent a re-pricing of expected future cash flows following the Fed’s rate cutting.

The markets are looking way beyond the puny 0.25% Fed Funds cut to the many more expected in 2026 and 2027. And – possibly – beyond.

Depending on one’s view of what will happen to short term rates, this BDC price swoon could be seen as over-done or not enough to reflect the likely actual macro conditions down the road.

Unperturbed

We don’t think the market is worried about the economy or a recession or particular threats to private credit.

Naturally, we point you to the red hot markets for everything but BDCs; the GDP growth numbers; multiple middle market reports indicating companies sales and EBITDA continue to grow while their debt service numbers improve; razor thin spreads on new loans and bonds; the ever increasing capital moving into credit and a host of other positive metrics.

Exception

Yes, we’re aware that the Fed is worried about employment but that’s starting from a low base and even then the case has not been made conclusively.

Glass Half Full

Getting back to where we are headed BDC-wise, here is the argument a bull might make where BDC prices are concerned for the rest of 2025:

This week – both in terms of prices and trading volumes – we likely reached a capitulation point.

Those investors who believe BDCs are over-priced have moved on.

Moreover – a bull might say – the rate cut apocalypse may not happen.

There are a few voices out there amongst the cognoscenti who do not favor a continuous series of rate reductions.

Here is a link to a Perplexity generated piece we curated called “Federal Reserve’s Inflation Hawks: A Comprehensive Analysis of Opposition to Rate Cuts in Late 2025”.

If we don’t get many – or any – new rate reductions BDC earnings might be substantially higher than the market currently seems to anticipate.

Also…

There’s another argument for BDC prices stabilizing and increasing, even if rates do get cut to the level the Administration seeks.

Back in 2021-2022 – during the days of the Zero Interest Rate Policy (ZIRP) – the BDC sector reached even higher price levels than they did in the 2023-2024 high interest rate era.

Best On Offer

Investors were drawn to the relatively high dividend yields compared to the measly offerings elsewhere in the market.

What BDCs pay out in absolute terms is less important than their yield relative to other investment opportunities.

BIZD – in the final days of ZIRP – traded up at $18.05 – 20% higher than its current price and yielded only 7.6% going by its trailing 12 months of distributions.

Once the dust settles, BDCs might come back into favor and in one of those ironies the markets are famous for – trade up in price even as their distributions decline…