Several private credit managers reduced the reported values of their loan and debt holdings in the first quarter, according to regulatory filings, underscoring pressure inside the $3.5 trillion private-credit market as borrowers and lenders adjust to a more difficult financing backdrop and changing business prospects for smaller firms.
A review of filings by 14 major business development companies (BDCs) found that the combined fair value-to-cost ratio for their investments fell 103 basis points to 98.55% at the end of March. Collectively, the reviewed portfolios were marked at about $1.2 billion below amortized cost, a notably wider discount than at the end of the prior quarter.
Specific company filings show varied but clear downward moves in valuation metrics. CION Investment Corp reported a decline in its fair value-to-cost ratio of 176 basis points to 91.59% from 93.35%. Ares Capital Corp’s ratio eased by 131 basis points to 99.50%. Blackstone Secured Lending Fund’s metric dropped 122 basis points to 97.52%, and Goldman Sachs BDC Inc’s ratio fell 119 basis points to 94.88%.
The markdowns were accompanied by reductions in reported net asset values at several BDCs. BlackRock TCP Capital Corp’s NAV fell 4.95% to $6.72 from $7.07. CION’s NAV declined 4.72% to $13.11. Sixth Street Specialty Lending Inc recorded a 4.36% drop to $16.24. Goldman Sachs BDC’s NAV slipped 3.72% to $12.17, and Blue Owl Capital Corp reported a 2.70% fall to $14.41.
Managers and issuers provided a range of explanations on recent earnings calls and in regulatory disclosures. Some said much of the downward marking reflected market-wide spread widening rather than deterioration at specific borrowers. Ares Capital said most of its marks were market-driven. Goldman Sachs BDC likewise pointed to broader spread widening as a partial driver of its NAV decline and noted that its newer loans were performing well.
Not all firms framed the moves as systemic market effects. At FS KKR Capital Corp, adviser KKR is planning a $300 million support package after the company experienced mounting losses, a sharp NAV decline and higher non-accruals, according to company disclosures.
Outside of individual company commentary, rating agencies and industry reports are expressing concern. Moody’s has moved the outlook for the BDC sector to negative. Fitch reported that redemptions at perpetually non-traded BDCs rose to 3.8% of prior-quarter NAV in the first quarter, a sign of growing liquidity pressure in that segment.
Market-wide metrics cited in industry reporting also signal stress among underlying loans. One report found that private-credit funds have taken steep write-downs on a portion of their holdings, with more than 10% of loans marked down by at least half. The same report noted that loans valued at under 50% are typically associated with deep distress or restructuring risk, a classification that points to substantial borrower strain where it appears.
For investors and market participants, the recent quarter’s marks and NAV moves are a reminder of the combination of valuation risk, borrower credit risk and potential redemption dynamics that can affect closed-end investment vehicles focused on middle-market lending. Managers emphasized that some of the accounting adjustments reflected wider market conditions rather than borrower-specific credit events, while agency commentary and reported redemptions indicated heightened vulnerability for certain segments of the BDC market.
Looking ahead, BDC disclosures and industry reports suggest monitoring will remain intense as market participants gauge whether the recent spread widening and loan impairments represent a temporary repricing or a broader deterioration in credit quality for leveraged, mid-sized corporate borrowers.