You have perpetual non-traded BDCs that are open ended to HNWs / Private channels - e.g. BCRED. And you have those that are close ended - with tickers that are traded, and trade with discounts to NAVs.
The software concentration chart is the story. The issue isn't just 'high yields on floating debt.' It's that underwriting during the zero-rate era was often based on equity-like growth assumptions but with debt-like security. When those growth assumptions falter, the 'senior secured' position is secured by assets (intangibles) whose value is evaporating. This creates a massive gap between recovery expectations and reality, a lesson commercial credit analysts learned in the dot-com bust and need to remember now.
This is the most comprehensive post I have read so as to understand BDC as a sector. Definitely waiting for the second part.
I can’t agree with SD enough. Concise and well researched. One doesn’t see enough of this quality in today’s world. Ty.
early congrats on a time-worthy and timely 1-2 punch.
Very good piece of work.
Great primer on BDC. I learned a ton. Well written, clear, informative.
you should be on the Odd Lots podcast!
Great research, thank you
is it possible that BDCs with a higher % of secured revolving credit as liability are better priced because are more scrutinized by the banks?
Great post, v comprehensive. Small typo - BDCs are open-ended vehicles, can’t have perpetual capital and be closed-ended at the same time
You have perpetual non-traded BDCs that are open ended to HNWs / Private channels - e.g. BCRED. And you have those that are close ended - with tickers that are traded, and trade with discounts to NAVs.
The software concentration chart is the story. The issue isn't just 'high yields on floating debt.' It's that underwriting during the zero-rate era was often based on equity-like growth assumptions but with debt-like security. When those growth assumptions falter, the 'senior secured' position is secured by assets (intangibles) whose value is evaporating. This creates a massive gap between recovery expectations and reality, a lesson commercial credit analysts learned in the dot-com bust and need to remember now.