BDC COMMON STOCKS

Week 40

More Of The Same

Forget about what is happening in the main markets. The BDC sector is on a trajectory all of its own and that continued downward this week.

For a 5th week in a row, the BDC S&P Index – on a price basis – fell in price.

This week, the index dropped by (2.2%). The scant comfort to be had for BDC investors is that the percentage loss was lower this week than in either of the prior weeks.

(We are not focusing on the change in the Van Eck sponsored exchange traded fund with the ticker BIZD this week because there was a quarterly distribution which caused the ETF to fall an outsized – but misleading – (4.3%)).

The S&P BDC Index calculated on a total return basis offered the least depressing return: down (1.2%), helped by some IIIQ 2025 payouts.

The BDCs Themselves

Of the 46 BDCs we track, only 10 managed to eke out a price gain during the week.

36 were down in price but that’s better than the prior week which had 45 in that situation.

Still, 17 BDCs were down (3.0%) or more, while only 2 were up by a corresponding percentage.

Hammered

Far and away the worst price performer was tiny Great Elm Capital (GECC) which fell nearly (22%) in price.

That’s quite a reversal for a BDC that recently was flying high on a higher distribution and had been raising new debt and equity capital.

Not helping the stock price was that Lucid Capital Capital Markets downgraded the stock from Buy to Neutral, with an $11.0 target.

“While we remain complementary of Great Elm’s turnaround execution and long-term prospects, we believe the combination of a premium valuation and new credit quality concerns limit the near-term opportunity for price outperformance,” said the analysts in the research note.

“With the stock trading at a P/NAV of 89%, above the peer median level (83%), we feel shares are fairly valued today. Our $11.00 price target translates to a 13.5% dividend yield based on our expectation for FY25 regular dividends of $1.48, compared to a current 13.8% dividend yield”.

Source: Seeking Alpha

Investors were in a take no chances mood and paid no attention to Lucid’s price “target”.

The stock closed at $8.84, a new 52 week low and a world away from GECC’s 52 week high of $11.45.

By the way, the “new credit quality concerns” mentioned by Lucid probably mostly consist of GECC’s involvement in the big credit wipe-out experienced by First Brands.

For a BDC of its size, GECC had a material position and there is reasonable doubt as to whether much will be recovered.

First Brands – and the BDCs involved – were a subject for an article of ours this week.

Ever Lower

Of late we’ve been writing about BDCs reaching new 52 week lows. Our last article on the subject was on September 25, 2025 when we identified 12 different names.

This week – after careful review – the number was 14.

10 of the 14 were on the earlier article’s list, as this was mostly a matter of the weak getting weaker.

Latest Addition

Still, formerly high flying Blackstone Secured Lending (BXSL) managed to reach a new 52 week low of $25.73 this week just after paying out its quarterly distribution.

As of Friday, the stock price had already moved up to $26.40.

Dodged

Avoiding reaching a new 52 week low this week was Prospect Capital (PSEC) which had been constantly finding its way to new record lows for months.

This happened even though PSEC paid out its monthly dividend this week.

As of Friday’s close, the much troubled BDC is priced 8% above its 52 week low but is trading at half the 52 week high.

Less Than A Handful

Another notable metric is that no BDC is left trading within 5% of its 52 week high and only 4 between 5%-10% off.

New Low

Also, the number of BDCs trading at or above its net asset value per share (NAVPS) has fallen to single digits – 9 to be specific.

This particular metric has not been so low since June 2023 which is evidence ewnough – if any more was needed – that BDC prices have really fallen out of bed.

More on that in the next section.

WHERE WE ARE

Unstoppable

With this latest round of red ink, BIZD is now down (13.5%) in price in 2025 and (19.4%) off the February 2025 high.

You can almost hear the bear growling.

Even when we look at the total return of the S&P BDC index – down (6.0%) in 2025 – there is no solace for BDC investors.

Thousand Words

This one year stock price chart of BIZD tells the story as well as we can:

All was well enough till late July but in the last 11 weeks, BIZD has fallen (14%) – going Friday close to Friday close. It’s the same with the S&P BDC Index, using the price only data.

Hit Hard

After 40 weeks of 2025, only 6 BDCs can claim to be up in price.

Interestingly, 4 operate in the lower middle market (MAIN, GAIN,CSWC and SAR), 1 in venture debt (TRIN) and 1 in the middle market but with a strong empohasis on ABL and generating an above average yield (TSLX).

Total Return

However – and as this chart shows – 13 BDCs are in the black when both price and dividends are considered:

WHERE WE ARE HEADED

Seems Like A Lifetime

We’ve been keeping weekly BDC percentage price change records for a long time – 7 years to be precise.

There has not been a 5 week losing streak like the one we’re experiencing since October 2018.

Clearly, the market is massively re-pricing expectations for future BDC earnings and distributions.

Reasons?

Maybe investors have taken out their pens to factor in the impact of that recession so many warn about that could be right around the corner.

However, given the steaming stock market; still narrow credit spreads, GDP growth expected to be 3.5%, this is unlikely to be the root cause of the price downfall.

The Never Ending Story

Much more likely is that the market is expecting a series of interest rate cuts, probably way in excess of the Fed’s own “dot plots”.

A lower Fed Funds rate means a lower SOFR and chips away at prospective BDC earnings.

The problem is that no one knows for sure how much rates might drop from here – if at all.

As a result, there is no clear destination for investors and analysts updating their financial models.

Either Way

This might result in BDC prices dropping too much, overshooting whatever the reality might be in 2026 or 2027.

Or, as we warned about a few months ago, the Administration might get its way and essentially force short term interest rates back close to the ZIRP era, which could cause BDC prices to seem still too expensive to many investors.

Clearly

All we can state is the obvious: the BDC sector is finding a new price equilibrium.

Given that the future is so uncertain in so many ways we don’t have much confidence that wherever we end up will “stick” for very long.

For BDC investors, making the right “macro call” is very important right now.

It’s one of those decisions that requires the passage of many quarters before one is proven right or wrong.