Business development companies (BDCs) are signaling increasing strain within the private credit market, with a growing number trading at discounts to their net asset value (NAV), according to recent market data. This trend coincides with broader concerns about the health of the $2 trillion private credit industry, as investors reassess risk in a higher interest rate environment.
The discounts to NAV suggest investors are becoming more cautious about the underlying value of assets held by these firms. BDCs, which provide financing to middle-market companies, have been popular with investors seeking income, but rising interest rates and credit concerns are prompting a reassessment of their portfolios. Apollo Global Management noted in a recent analysis that manager selection is becoming “more critical than ever” given the current economic conditions.
KBRA, a credit rating agency, reported in its third-quarter 2025 BDC Compendium that while credit performance across rated BDCs remained generally solid, “signs of late-cycle softening have begun to emerge.” The agency observed widening dispersion in credit metrics across platforms, indicating idiosyncratic pressures and borrower underperformance. KBRA’s outlook for rated BDCs remains generally stable heading into 2026, but the report highlights increasing competitive pressures and the need to preserve distribution yields.
The shift in investor sentiment is too reflected in the performance of non-traded BDCs. BlackRock Private Credit Fund (BDEBT), a non-traded BDC, focuses on directly-originated, senior-secured corporate debt investments. The broader market context, though, suggests increased scrutiny of these types of investments.
Recent market activity indicates a decline in the value of some BDCs, with some changing hands below their previous valuations. This has raised concerns about potential contagion risk within the broader financial system, as highlighted by reports of investors pulling back from private credit funds. Financial Times reporting indicates investors are increasingly worried about potential losses in the sector.
As of March 16, 2026, KBRA has not made any changes to ratings or outlooks for the BDCs it rates, but continues to monitor the situation closely. The agency offers premium subscriptions for detailed reports and analytical tools for credit risk analysis and benchmarking.
