Summary

• Sentiment around business development companies (BDCs) has rebounded recently, although stock prices continue to reflect questions about reported net asset values (NAVs), while credit investors have required extra compensation.
• Large gaps in how similar loans are marked across BDCs are a reminder that private credit valuations can lag and shouldn’t be taken at face value.
• In the high yield bond market, defaults are happening but in a managed way, with most issuers opting for negotiated restructurings rather than disorderly bankruptcies.

Sentiment toward BDCs – funds that invest in small and midsize private U.S. businesses – has improved since early March. BDC bond spreads have stabilized and outperformed the broader investment grade (IG) index, suggesting credit investors are increasingly comfortable with downside risk. Publicly listed BDC

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