Blog Post
Data Drop: Software-Exposed BDC Nonaccruals Ease in Q2’26, but Remain at Very High Levels
In a group of 47 business development companies, or BDCs, with high software exposure, Octus identified a total of $3.4 billion of debt (at cost) in nonaccrual status reported in the second quarter of 2026, a decline of 17% from the first quarter of 2026. The aggregate debt nonaccruals for this group of BDCs represented 1.86% of their total debt investments at cost down from 2.16% in the first quarter of 2026.
The decline in aggregate nonaccruals came on the heels of a dramatic rise in the first quarter, when nonaccruals for BDCs with high software exposure more than doubled from fourth quarter of 2026 levels, topping the aggregate nonaccruals for those BDCs with average software exposure. In the first quarter, the information technology sector, which includes the software sector, saw the biggest shift on a cost basis in the first quarter with $2.46 billion of loans in nonaccruals, almost four times the $621 million reported in the fourth quarter. The jump in the cost value moved the sector from the No. 5 position in the fourth quarter of 2025 to second place in the first quarter. While the aggregate cost of nonaccruals declined slightly for the IT sector In the second quarter, the sector moved to the number one spot.
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