BDC Common Stocks Market Recap: Week Ended April 25, 2025 - Annotated

April 28, 2025

BDC COMMON STOCKS

Week 17

The World Is Watching

A wink and a nod from the White House and the Treasury Secretary were enough to bring the markets roaring back this week.

Nothing substantive was agreed upon where tariffs are concerned with any trade partner; China continues to sulk/remain defiant and “soft data from surveys is getting softer” but – no mind – investors were in rebound mode.

Not Left Out

BDC investors shared the same animal spirits as everyone else.

BIZD – the only BDC sector exchange traded fund – moved up 3.0%, and 7.1% over the last two weeks.

40 BDCs out of 46 were flat or up in price.

Of the gainers, 19 were up 3.0% or more.

These are not the highest weekly levels ever in our records – or even in 2025 – but are on the high side.

Amongst the percentage losers, the biggest drop was only (1.5%) and that was at PhenixFin (PFX) – a micro BDC.

Newsies

There were very few BDC news stories this week, even if this was the nominal beginning of IQ 2025 BDC earnings season.

Another micro-BDC with a unique strategic approach – Oxford Square Capital (OXSQ) – reported its results and held a conference call which no-one seemed to attend as there were no questions.

Readers will know from our article on the subject OXSQ performed much as before, except for recording a very large drop in its book value and book value per share.

The BDC recently raised new capital:

For the quarter ended March 31, 2025, we issued a total of approximately 1.3 million shares of common stock pursuant to an “at-the-market” offering. After deducting the sales agent’s commissions and offering expenses, this resulted in net proceeds of approximately $3.5 million. As of March 31, 2025, we had approximately 71.2 million shares of common stock outstanding.

However, all that new capital has been wiped out – and more – by large realized and unrealized losses of ($14.3mn) this quarter.

Check out the updated BDC NAV Change Table to see how much OXSQ’s net asset value per share (NAVPS) has dropped this quarter, in the past 12 months and in the past 5 years.

However, OXSQ’s investors are a hardy bunch and the confirmation that the BDC will continue paying another round of $0.035 per share monthly distributions through September was enough to cause its stock price to increase 4.5% after the earnings were released.

Lest We Forget

In other news – and also the subject of BDC Reporter articles – was PennantPark Floating Rate’s (PFLT) amended Revolver and Capital Southwest’s (CSWC) just granted second SBIC license.

Where We Are

In-Between

This week, no BDC reached either a 52 week high or low.

In fact, most BDCs are far off both levels after the wide movements in recent weeks which saw most everyone plumb new depths, and then rally back some of the way.

At the moment, there is no BDC trading within 5% of its 52 week high and only 3 in the 5%-10% range.

Before everyone began using tariff as a swear word – back in February – there were 29 BDCs trading in these upper regions.

Likewise, there is only 1 BDC trading within 5% of its 52 week low and 4 in the 5%-10% off region.

Naming Name

That solitary BDC close to its nadir is Logan Ridge Finance (LRFC) – (4%) off. The BDC will shortly be acquired by Portman Ridge Finance (PTMN) as reported repeatedly.

PTMN is (6%) off its 52 week low.

Neither Up Nor Down

The BDC sector – going by BIZD – is down (6.7%) in price terms in 2025 and (13.2%) below its 52 week high.

BIZD is also 15% above its 52 week low, set on April 8 when the White House was sending chills through the markets with every other utterance.

BIZD is sitting (almost) exactly between its 52 week high and low, even after 2 weeks of feverish rallying.

More On That

Some other metrics we regularly survey also suggest a BDC sector some way from its prior – pre tariff – levels.

For example, only 12 BDCs are trading at or above their NAVPS. We were at 20 at the end of February.

Overall, BDC stocks are trading at 90% of book.

Only 9 BDCs can boast a higher price as of Friday than at the end of 2024.

A few weeks ago, there were 44 BDCs making that boast.

If we look at the last month alone, only 3 BDCs are up in price.

We have been down and we have gone up, but more of the former.

Relatively Speaking

Still, our favorite performance metric – because it most accurately captures how an investor “long” BDCs might be performing – is the S&P Total Return BDC Index for 2025.

By this measure, the BDC sector is down (4.6%), which is better than the S&P 500’s total return of (5.7%).

We were briefly in “correction” territory by this measure a fortnight ago but now we’re back to just a mild headache with plenty more weeks ahead of us.

Should BDC prices not change any more for the rest of the year, the dividends coming this way will ensure this index is firmly in the black in 2025.

Who would have imagined that on April 8th?

Where We’re Going

Look To The Fed

As is often the case, what the Federal Reserve decides to do – or not to do – will be critical to sentiment, although not so much where earnings are concerned with a third of the year gone and nothing likely to change till the summer at the earliest.

BDC investors will be hoping the Fed stands its ground against inflation – and intimidation from the White House – and maintains interest rates at their current level, or thereabouts, for the rest of the year.

This week, though, we saw some Fed players “bending the knee” – or is it playing the game? – by talking up rate reductions.

Timing Is Everything

The necessary condition, though, for even the most pusillanimous/flexible Fed governors will be signs that employment metrics are weakening.

This will take time to show up – if it does.

Ditto for any impact of the New World Order showing up in the value and performance of BDC portfolio companies.

The IQ 2025 data will probably tell us little.

Even if the IIQ 2025 default/non-accrual/valuation metrics are more instructive, we won’t be privy to them till the summer.

(Palmer Square Capital (PSBD), which recalculates its NAVPS monthly, might be a useful canary in the coal mine for the credit condition of the largest deals but not much else).

We’ll get some insights from the publicly traded leveraged loan market, high yield bonds and other forms of financing for non-investment grade companies but these are not directly equivalent to BDC credit performance and could result in a false narrative.

Fog

Which is all to say, we foresee many months ahead of uncertainty both about the direction of interest rates and of portfolio company credit performance – both of which were looking pretty straightforward till a few weeks ago.

It Could Happen

The Best Case scenario for BDC investors is that we dodge a serious economic slowdown and end up with mildly higher inflation which keeps interest rates higher for even longer.

In this rosy world, sellers and buyers of private companies get back into action, generating a stream of new deals.

All that investment activity combined with a frisson of concern would increase loan spreads and keep private credit lenders busy.

The Other Side

The Worst Case – and one repeatedly mooted by many observers of late – would be the rapid advent of a recession of some sort; a big jump in unemployment and a decrease in GDP.

This would likely cause the Fed to cut rates – maybe quite quickly and sharply – which would reduce BDC earnings just when more and more loans are defaulting, in a classic double whammy for their results.

If matters spun further out of control, we could face a financial blow-up of some sort reminiscent of the GFC in 2007-2009, or the 2011 European or 1997 Asian crises, but with whatever unique twist that might be in the cards.

BDC prices are not likely to fare well if we get an honest to goodness recession but are at much greater risk if the viability of the financial system gets questioned.

Something Else

Most likely, we’ll get neither extreme but something in the middle which we can’t hope to foresee from where we’re sitting.

For BDC investors – accustomed to price volatility even in “normal” times – this promises to keep everyone on high alert for many months yet.

We don’t expect every week going forward to see the sharp swings in BDC prices that have been the feature of the last 10 weeks, but there could be bursts of frenetic activity like we’ve known.

At the end of the day, the buy and hold BDC investor might fare the best in this circus of uncertainty but with so much potential downside we can understand why so many investors have their brokers on speed dial.

A Last Word

We’ve been involved with leveraged lending in one capacity or another for over forty years, and twenty years with BDCs.

The landscape; the players and the terms have changed a great deal over that time, and there have been a multitude of difficult times when we wished we’d chosen another profession.

Frankly, during the depths of the GFC we even had doubts about whether the whole construct would survive in its then form.

However – and we’ve said this before – the BDC biosphere has never been as solid and well managed as it is today. Moreover, most loan activity booked in recent years has been sensible, bearing no resemblance to the “bubbles” that have affected other asset classes at times.

Maybe because BDC lenders greatest ambition is a modest one – only to get repaid whatever they have advanced plus a relatively small profit – keeps them from straying too far off their path.

Whatever the reason, we remain confident that – come what may – the BDCs – as a group – should be able to handle pretty much anything thrown at them in the months and years ahead.

However, there are a number of individual BDC players – either insufficiently large or due to a misguided strategy or just unlucky about the timing of their investment losses – that might not be with us for much longer if we get a downturn.

As always in the BDC sector – as in every other market – there will be winners and losers.

We just expect many more of the former than the latter.