FitchRatings
Recent Developments Rapid Growth: Perpetual non-traded business development companies (BDCs) have grown rapidly since Blackstone Private Credit Fund (BCRED) was launched in January 2021. Fitch Ratings estimates that perpetual non-traded BDCs accounted for 39% of BDC assets, based on the AUM of the top 49 BDCs tracked by SOLVE, as of Sept. 30, 2023. BCRED is the largest, with $51.7 billion in assets at 3Q23, followed by Blue Owl Credit Income Corp. (OCIC; $15.1 billion) and HPS Corporate Lending (HLEND; $8.1 billion). Fitch expects this growth to continue as recently launched BDC portfolios ramp up. Fitch closely tracks data on 19 perpetual non-traded BDCs, shown in the table on page 2. These are larger players in the space, an affiliate of a Fitch-rated BDC or affiliated with a large investment manager. Assets for these 19 BDCs grew 41% on average over the past year, led by Oaktree Strategic Credit Fund (OSCF), which grew 323% through 3Q23. Deteriorating Sector Outlook: Fitch’s 2024 sector outlook for BDCs is deteriorating, reflecting the expectation for weaker asset quality metrics, given increased debt service burdens for portfolio companies resulting from elevated interest rates and a challenging funding landscape amid a slowing economy. Low Losses, So Far: Given their short operating histories, perpetual non-traded BDCs continue to have relatively low levels of investments on non-accrual, averaging 0.3% of debt investments at cost and 0.1% at fair value at Sept. 30, 2023.
