BDC Earnings Review to Date Suggest Software Exposure Slightly Higher Than Reported; Early Signs of Stress in Education Software, Logistics

Credit Research: Mark Fischer Relevant Item: Link to Octus BDC Database With reporting by business development companies under way, much of the focus on earnings calls has been around BDCs’, and in turn, private credit’s exposure to software. Comments have been mixed with responses ranging from opportunity in the face of a selloff to issues around refinancing current exposure. Throughout the reporting season, we will be recapping BDC reported exposure to software and management thoughts on the way forward. BDCs that reported during the week of Feb. 2 largely reported slight increases in software exposure in their investment portfolios sequentially on both a cost and fair value basis. Golub Capital BDC, which was most vocal about headwinds within private credit in general, was the sole BDC to reduce exposure sequentially. However, Octus estimates Golub Capital BDC’s total exposure to software-related companies at approximately 33% of cost and fair value, higher than others that reported in the week of Feb. 2. As shown above, Octus’ estimate of software exposure is slightly higher than companies’ reported results because we search company business models and descriptions and include even if not part of a BDC’s categorization. For instance, Oaktree Specialty Lending lists Premium[...]