BDC IVQ 2025 Performance Ratings: Results Of The First Sixteen BDCs To Report

INTRODUCTION

BDC earnings season reached the three-week mark on Friday last, with 16 of the 46 public BDCs that the BDC Reporter tracks having reported their results in full. We’ve read all the earnings releases, investor presentations, quarterly/annual filings and conference call transcripts available and rated the financial performance of every BDC on our 1 to 5 scale. Remember that a 1 rating indicates that a BDC has outperformed reasonable expectations as evidenced in key metrics such as AUM growth, earnings per share, credit results and changes in net asset value per share (NAVPS). A 2 rating is for BDCs meeting expectations, while 3 through 5 are varying degrees of under-performance. The ratings are specific only to the quarter in question and are unaffected by how well or poorly performance was in prior quarters or over the medium or long term. A BDC could get a rating of 5 in one quarter and a 1 in the next, and vice versa. These are performance snapshots, not full assessments.

Readers can check out the BDC Performance Table for most of the metrics we’ll discuss here. For a one-paragraph summary of each BDC’s results, see the Individual BDC Performance Table. Here’s a PDF version for anyone interested, but you can also find a link to these summaries in the BDC Performance Table as well. 

FINDINGS

Coverage

There’s a wealth of data here which can be sliced and diced in any number of ways. At a 36,000-foot level, we’d start by pointing out that the BDCs involved account for nearly $100bn of investment assets at cost and FMV, representing about 57% of the total universe we cover. The BDCs serve all the key markets: lower, middle and upper, as well as venture debt and include players involved in multiple market segments. The BDCs come in all sizes, with portfolios as small as $325mn to as much as $29bn. This is a representative cross-section of the public BDC universe.

Expected

Expectations going into the IVQ 2025 were relatively muted as three rate cuts late in 2025 promised to weigh on the period’s investment income and net earnings. Although the final quarter of the year is typically busy, a still lacklustre M&A environment was expected to keep a lid on new transactions and refinancings, but these can vary widely from BDC to BDC. Spreads have flattened out for some time since the Golden Years, and that trend was expected to continue, which meant we were expecting most of the likely drop in portfolio yields to come principally from lower rates and the cumulative effect of replacing wider spread loans with new, narrower ones. Credit-wise, we expected only a modest impact on BDC portfolios, in line with the relatively favourable conditions that have become the norm in the past two years - aided by a still growing economy, the benefit to borrowers of the gradually lower rate environment and the very borrower-friendly environment. 

Outcome

While only 2 BDCs managed to perform better than expectations ( Hercules Capital and Saratoga Investment), 5 performed in line. Together, that’s just short of half the BDCs reviewed performing as one would hope or better.  Less auspiciously, that leaves 9 BDCs underperforming to varying degrees. Thankfully, most of these only stepped down one step to a rating of 3. Generally speaking, the main black mark applied was for higher than usual losses, mostly unrealised.