Oct 19, 2025 15 min read Multiple BDCs

BDC Common Stocks Market Recap: Week Ended October 17, 2025

More that in any other time in recent history with the independence of the Fed under siege and uncertainty about the direction of the economy, it's anybody's guess what the future will hold. We may well look back on this period as an extended opportunity to invest in the BDC sector...

Re-Printed From The BDC Reporter

October 19, 2025

Confused

BDC COMMON STOCKS

Week 42

It was a topsy-turvy week for Wall Street, though the three major averages managed to post solid gains. Market participants digested ongoing trade tensions between the U.S. and China, a government shutdown that shows no sign of ending, the start of the third quarter earnings season, and a scare over the health of regional banks.
For the week, the S&P (SP500) gained +1.7%, while the blue-chip Dow (DJI) added +1.6%. The tech-heavy Nasdaq Composite (COMP:IND) advanced +2.1%.
seeking alpha – wall street breakfast – October 17, 2025

Undecided

By week’s end, the BDC sector – as measured by BIZD, its only exchange traded fund – was up a solid 3.6%.

[BTW, the S&P BDC Index on a price basis increased 3.4%].

However, the “price action” intra-week was not so clear-cut.

As this 5 day stock price chart of BIZD shows, the sector roared back in in the first two and a half trading days.

At its peak, BIZD was up 6.5% over the close on the prior Friday.

What’s more, trading volume was high – just as high as the week before when prices were tumbling – a suggestion that some of the price movement is tactical as investors move in and out, seeking advantage.

However, BIZD began to falter thereafter and fell back significantly – (3.8%) – before closing out the week a little stronger.

Noteworthy – and suggesting that this may have been a false dawn for BDC investors hoping for an end to the market pullback – 5 BDCs reached a new 52 week low during the week.

The new 52 week lows were set - mostly - by the usual suspects: Great Elm (GECC), still getting punished from that oversized exposure to First Brands; Gladstone Capital (GLAD) taking it on the chin for a (9%) reduction in its regular dividend even though the stock was already (34%) below its recent high point already before the distribution announcement came out; Horizon Technology Finance (HRZN) which has had more 52 week lows than we've had hot lunches and awaits its capital infusion from Monroe Capital; OFS Capital (OFS), which we'll be covering below. Finally, there's PennantPark Floating Rate (PFLT), which reached a 5 year price low and closed the week at a price of $8.52. That's (28.5%) off its 52 week high which is a bit dire for a BDC whose Net Asset Value Per Share (NAVPS) has declined a modest enough (3.3%) in the last 12 months. Investors are concerned about "dividend sustainability" given that the annual running rate of the payout is $1.23 a share while next year's earnings are projected to be $1.16 a share. Still, due to a recently announced acquisition and lower borrowing costs, management anticipates "continued net investment income growth and full dividend coverage". PFLT is one of our Best Ideas and despite this crisis of shareholder confidence we remain loyal to the stock. BTW, the current yield is 14.4%, which makes us wish an elderly relative had left us some money in their will. A portion - at least - would be going into PFLT which has one of the most diversified portfolios amongst middle market BDCs and a redoubtable record of very low credit losses: an annualized loss rate for its first lien loans of only (0.08%).

We also noticed that the number of BDCs trading at or above book net asset value per share (NAVPS) increased by only one: from 6 to 7.

Other Metrics

Anyway, 38 BDCs ended the week in the black – a robust result after 6 weeks where decliners far outnumbered gainers.

Of the BDCs in the black, 23 were up more than 3.0% – the best weekly result by that measure since May.

On the other hand, 2 BDCs did yet manage to drop in price by more than (3.0%): Great Elm Capital (GECC) and OFS Capital (OFS).

We discussed GECC at length last week in the Recap. Its continuing price decline should be no great surprise as the news continue to spill out gory details about the First Brands wreck that the BDC is part of.

We continue to promise to undertake an analysis of GECC to determine if its "beat down" has gone too far. Given that the BDC has - once again - reached a new 52 week low suggests all the usual "value buyers", typically drawn like a shark to blood in the water by such a price decline, are still holding off. Our main concern is that we could "analyze" GECC every which way based on what we knew as of the IIQ 2025 and the BDC's recent confessional about its First Brands exposure but there is plenty we cannot fathom due to the unusually opaque character of GECC's reporting. Maybe this will be a lesson to management: secrecy can hurt a stock when doubts arise as investors assume the worst and work back from there. This feature of GECC has kept us from owning the BDC's stock and its Baby Bonds for many years now, even after a big investment in CLO investments boosted their distributions and stock price. As this price chart below shows, GECC moved up nearly 50% in price between 2023 and a few weeks ago, but all of that price progress has been lost to this First Brands debacle.

Inescapable

The price decline at OFS is based on simple mathematics, rather than on any news development.

The lower middle market BDC is now trading at a level not reached since 2021 and currently yields nearly (20%) – a sure sign that investors do not expect its current $0.34 regular quarterly dividend to hold.

You can’t blame investors for being skeptical.

In the most recent quarter, the BDC’s Net Investment Income Per Share (NIIPS) was only $0.25.

In 2026, the analyst consensus is that OFS will earn only $0.78, or less than $0.20 a quarter.

That could explain why OFS closed the week at a price of $6.95.

The $0.25 per share in spillover income won’t last long with that sort of variance between payout and recurring earnings.

The BDC Reporter has written about OFS multiple times in recent weeks.

By The Way

Without being alarmist about a BDC that has been active since 2007 and public since 2012, we remain concerned about more than lower earnings and distributions – but liquidity.

The BDC has recently seen its secured Revolver decrease in size from $150mn to $80mn and extended only until September 30, 2025.

See the BDC Reporter article: “OFS Capital: What’s Happening To The BNP-Led Revolver”, written on August 26, 2025.

We’ve checked the BDC’s SEC Filings and press releases of recent weeks and found no word of any extension of the Revolver or any new financing facility.

More will be learned when OFS reports its latest results.

You're going to hear us complain - both in this article and in others in the days to come - about irresponsible fear mongering going on by bankers, pundits and journalists in a (successful) attempt to grab attention. We don't want to be guilty of the same sin where OFS is concerned. The liquidity concerns we have for the BDC may prove to be over wrought or based on erroneous or missing information. On the other hand, if one does have a reasonable doubt there's absolutely no argument for getting involved with the stock. There are so many other opportunities out there - such as the afore mentioned PFLT. Moreover, there are other problems with OFS - as the price decline should suggest - including an (8.9%) reduction in its NAVPS in the IIQ 2025. Here's a brief analysis of the BDC's credit metrics.

WHERE WE ARE

Maybe. Maybe Not

BDC investors must be breathing a little easier after this first week in the black in a long time.

However, the sector’s recent loss of popularity has caused much damage in a shortish period.

Let us review some of the lowlights.

BIZD – on a price basis – is down (16.0%) in 2025 YTD and, from its brief price height in February, is down (21.8%) – “Bear Territory” for those who use this ursine categorization.

Even when we figure in distributions received, BIZD is off (8.36%) on a total return basis.

This is confirmed by the total return of the S&P BDC Index, off (8.37%).

Individual Performance

Seeking Alpha indicates only 3 BDCs are in the black price-wise in 2025 after 42 weeks.

The rest are in the red, including 25 more than (15%) down and 8 off by (30%) or more.

What little good news we have to report is that Sharesight calculates that 10 BDCs are in the black on a total return basis.

Here’s the list:

The BDC Best Ideas Investment Portfolio has not been spared by the drastic pullback in BDC prices. As of last Friday, only 2 of of our positions where in the black on a price basis. However, 5 were positive on a total return basis; GAIN, TRIN, CSWC, FDUS and SAR. Lagging in this regard are the other five, with PFLT the worst performer: (12.9%) down. As noted previously we continue to be constructive on PFLT regardless. Furthermore, we're pleased with SAR's most recent full results and what we heard about CSWC when the BDC reported some preliminary IIIQ 2025 results. Coming up is much more data on the rest of the BDC Best Ideas. We wonder if anything will turn up that will cause us to change our views on the fundamental outlook for any our curated stock picks? If there isn't, the Investment Portfolio will just have to sit and wait this out, except for the occasional additional investment we'll make - as we did this week where BXSL is concerned - to dollar cost average down our positions. At the moment, our total return amounts to 0.2% - confirmed by Fidelity's Performance calculation - while BIZD

Where Are They Now ?

You’ll notice that missing from the list above are any BDCs – including the sector’s GOAT Ares Capital (ARCC) – serving the upper middle market (UMM).

Interestingly, ARCC has managed to remain above its 52 week low of $18.26 a share set in April 2025 during this period. The lowest price reached was $18.79 on October 10, 2025 - (21%) below its 52 week high. As of Friday, the stock was back up to $19.51, just (2%) below its NAVPS. Make of that what you will. We note that ARCC has not (yet?) taken as much of a tumble as occurred in April. Maybe we're grasping at straws but that suggests that all the talk about lower rates and private credit in crisis the OG of BDCs remains popular. Assuming the $1.92 a year of distributions are maintained, ARCC - which is one of our Best Ideas - yields only 9.8%. That suggests most investors are not expecting a dividend cut in the near or medium term.

War Of The Words

That’s the segment of the market most in the news these days as Jamie Dimon – on Team Banks – has been exchanging barbs with asset managers like Blue Owl, Apollo, Carlyle and Blackstone – representing Team Private Credit.

This follows the loss booked by JP Morgan on auto lender Tricolor.

Dimon warned of more “cockroaches” after the Tricolor and First Brands implosions.

Throwing gas on the fire was the news that two regional banks were defrauded by a commercial real estate borrower and, for a minute or two, the markets went into credit shock.

Finger In Chest

JP Morgan – which was once saw its role as calming and guiding the financial community – is taking a different tack under Dimon.

Besides his cockroach analogy – cribbed from an expression Warren Buffet is famous for – he pointed directly at BDCs with this:

“Look at the price of the BDCs [business development companies] and their publicly traded private credit facilities and do the homework.”

This was less about BDCs really than supposed evidence that credit conditions are shaky and – according to Dimon – potentially getting shakier.

The financial news had a field day warning of “cracks” in private credit – including BDCs – and even worrying about the sturdiness of all the BDCs secured Revolvers financed by the banks.

(That’s a strange fascination of both Elizabeth Warren and the IMF – both of whom have been expressing great concern fo r some time).

For a brief article on the subject, click here.

Rebuttal

We don’t have room to discuss the Dimon matter at great length here so we’re going to cut to the chase:

This whole episode is ridiculous and the failures of Tricolor, First Brands and the real estate deals are all clearly instances of credit fraud rather than the result of broad based economic weakness.
There may be a few more “cockroaches” that come out of this as lenders look harder at their their borrowers but in an economy with tens of thousands of borrowers that’s immaterial.
Moreover, the institutions that had the wool most pulled over their eyes are the banks (including JP Morgan) and a miscellany of other sort of specialized trade lenders.
Private credit has virtually no exposure and the same can be said about the BDCs, as detailed in an earlier article. Of the 3 failures, BDCs are involved only in First Brands and their exposure amounts to less than 1% of the capital involved.
As to the decline in BDC stock prices or the recent reduction in the quarterly dividend of the largest non-traded BDC, we’re confident that most of the impetus – as we’ve discussed here – is the expected future course of interest rates rather than credit concerns.

Done The Homework

Over at the BDC Credit Reporter we identify the worst performing BDC-financed every day based on BDC disclosures and the private record.

Admittedly, with the exception of Saratoga Investment (SAR) we don’t have the latest valuations of the near 10,000 companies financed by BDCs.

However, the data we have from the IIQ 2025, and from the many sources of more recent news, does not suggest ANY material increase in credit stress across these non-investment grade companies.

Front Line

At the moment we can only identify 137 “Important Underperformers” – BDC-financed companies with an aggregate value over $5mn and deemed more likely than not to ultimately result in a material realized loss.

These Important Underperformers have an aggregate FMV of $6.5bn but that’s only 1.3% of the FMV of all BDCs.

Our database at the BDC Credit Reporter of the most significant, most troubled BDC financed companies is very versatile and can be queried all sorts of ways. For example, only 14 new Important Underperformers were added in the IIQ 2025. Admittedly, some big dollars were involved with 5 borrowers with total BDC exposure at $281mn and higher. However, both the number of new credit hotspots and the capital tied up are not out of the ordinary.

Valuable

If you’re not convinced by our metrics, then there are these numbers from Advantage Data:

BDCs of all stripes have invested $481.4bn at cost, as reported in their filings.

The fair value of those investments comes to $481.7bn, a premium to cost.

(We undertook this same analysis just for the 46 public BDCs we track and came to the same result – a very slight premium to cost).

Here's another interesting stat taken from our records: 12 of the 46 BDCs we track have portfolios valued above their cost and another 27 that range between o% and (5%) - a modest discount. Or, looking at the matter through the other end of the telescope: Only. 3 public BDCs have portfolios whose value is (15%) or more less than cost: OXSQ, HRZN and BCIC.

Are all these BDCs inflating the value of their positions or is the sector sound?

We clearly believe the latter.

Credit conditions could get worse going forward if only because conditions have just been so good for so long.

Let us not forget that BDCs are lending to highly leveraged non-investment grade companies, many of them rated by groups like S&P, Moody's and Fitch in their lowest categories (CCC and below). That's a lot of potential eggs that could get broken but the sector's track record - and that of most individual BDCs - is very good, if placed in that context. We could write a book about why that's the case but we'll just point out that leveraged buyouts have changed drastically since the days of Michael Milken, and even since the GFC. Private equity players have raised more money than Croesus and have been willing to fund the bulk of the capital in the buyouts they sponsor. (Probably because they have seen with their own eyes how leverage can be a weapon of mass destruction when the music stops). That's why you hear BDCs frequently boasting that the loan to value on their debt advances is only around 40%. If we do get the credit crack-up that so many pundits seem to be expecting, we'd be much more worried about your favorite private equity sponsor than the lenders to its portfolio companies. Also - as we warm up to this theme - BDCs have spent the last ten years or so moving up the balance sheets of their portfolio companies as the banks have retreated AND have sought to build highly diversified portfolios. This process has been hastened by the advent of more and more mega asset managers running a number of leveraged loan funds, each with only slightly different profiles. These "external managers" have been sprinkling relatively small investment positions across these funds of theirs, limiting the impact on any one fund when even very large loans have gone kaput. One spectacular credit failure will do as an example. Last year, the BDCs messed up in a big way with the failure of Pluralsight, with $800mn advanced and about half of that was lost. However, there were 16 BDCs involved - many of them with the same manager (6 by our count)- and the impact both on the individual BDCs and the sector from this credit disaster was deemed "manageable due to portfolio diversification" by the rating agencies when all was said and done. Here's a link to a summary of what the 3 main rating agencies said.

However, we are far from the conditions that some would have us believe are right right round the corner.

And shame on the financial press for fear mongering to sell a few more clicks.

A little context and “calling around” would have gone a long way.

With that said, the "fear mongering" may prove useful for would-be investors with ice in their veins if BDC prices fall irrationally due to these sort of histrionics. Despite what has been said, though, we don't believe that most of the price movement we've seen in the BDC sector can be attributed to concern about an impending credit crisis, but to re-pricing due to expected lower rates causing a drop in earnings (see below). However, should we get a true market credit panic BDC stocks might come available at the best prices we've seen in years...

WHERE WE ARE HEADED

Any Which Way

We’ve seen BDC market rebounds before.

Sometimes we get days and days of higher prices as investors jump back in to the market after some potential meteorite passes by without causing the expected damage. Think Covid.

At other times, we get the “dead cat” bounce – like that lift early last week and then continue our descent.

At yet other times – and this is the most likely scenario here – investors remain undecided, regularly coming in and out, influenced by macro factors that have very little to do with BDC fundamentals.

It’s Been Said Before

The Big Unknown is where interest rates will go over in the rest of 2025 and – especially – in 2026.

We all have an opinion and so does everyone at the Federal Reserve it seems and then there’s the Administration to consider.

To say that there is no consensus – as Bloomberg wrote about this week in an excellent article – is understating the matter.

As a result, BDC prices could move with every shift in the “zeitgeist” and every new economic data point that we receive from private and public sources.

We’ll continue to chronicle these ups, downs and sideway moves in this weekly Recap and in the occasional article if we get a sizable shift.

What Really Matters

However, most of our attention will be on determining how the fundamental financial performance of the public BDCs is changing – for good or ill.

After all, BDC earnings season is right round the corner.

We know a little already thanks to SAR’s results through August and earnings previews from Capital Southwest (CSWC) and Main Street Capital (MAIN);some updates woven into the prospectuses of BDCs raising new debt and Palmer Square Capital‘s (PSBD) monthly NAV Per share announcement.

Still, there’s a great deal more to learn and we expect there will be wide variations between the various players even if the market seems to have turned their back on all of them.

We'll leave you with an interesting metric. In our BDC Performance Table we constantly update what the analysts are projecting the BDCs will earn in 2025 and in 2026. (Most of the numbers are on a calendar year basis but some are fiscal years, so not always strictly comparable). Curiously, given the market sell-off, the analysts are projecting that 2026's overall BDC earnings per share will drop only (5.0%) versus the 2025 level. Interpret that as you will but we had expected to see much lower prospective results for 2026. Of course, the analysts may be way too sanguine and the actual 2026 results could be much lower than what they're predicing right now. If not incorrect, though, and if the markets are really looking ahead prices seem to be getting hit much harder than prospective fundamentals. More that in any other time in recent history with the independence of the Fed under siege and uncertainty about the direction of the economy, it's anybody's guess what the future will hold. We may well look back on this period as an extended opportunity to invest in the BDC sector at relatively rock bottom prices. Ironically, though, that same uncertainty may keep investors from committing to purchases on the hope that EVEN BETTER bargains may be around the corner. This could last some time.

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