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BDC Weekly Review: Reported Nonaccruals Decline Sequentially, but Adjusted Rate Remains Elevated at 3.74%; Large Q2 Write-Downs Driven by IT Sector

By: Mark Fischer, Seth Brumby

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✨ Summary by AI at Octus
Octus analyzed over 170 BDCs to identify investments with reductions in fair-value marks of more than 15% in the second quarter. The analysis revealed that loans from 102 borrowers experienced such reductions, a decrease from 135 borrowers in the previous quarter, yet still higher than figures from late 2025. The total principal amount of marked-down loans reached $5.7 billion, with a notable concentration in the information technology sector.
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Key Coverage

Private Credit Stress

Octus analyzed over 170 BDCs to identify investments with reductions in fair-value marks of more than 15% in the second quarter. The analysis revealed that loans from 102 borrowers experienced such reductions, a decrease from 135 borrowers in the previous quarter, yet still higher than figures from late 2025. The total principal amount of marked-down loans reached $5.7 billion, with a notable concentration in the information technology sector.

Octus identified a total of $9.5 billion of debt (at cost) in nonaccrual status reported in the second quarter of 2026, a slight decline of 5% from $10 billion in the first quarter of 2026. The aggregate debt nonaccruals represented 1.9% of total aggregate BDC reported debt investments (at cost) in the second quarter, down from 2.02% the prior quarter. Although there was a sequential decline in nonaccruals, the total cost of nonaccruals was 58% higher year over year.

Lender Analysis

Octus analyzed funds advised by FS/KKR and KKR including FS KKR Capital Corp., KKR FS Income Trust, KKR FS Income Trust Select and KKR Enhanced US Direct Lending Fund. The funds combine different asset mixes and in turn exhibit different risks despite common investment decisions. The funds overlap significantly in borrowers, but additional asset classes at FS KKR Capital Corp. produce different yield and risk outcomes.

Fund Redemptions

  • BDCs began reporting redemption requests for the third quarter. Results so far show a slight sequential decline as compared with the second quarter. Results, however, still remain elevated.

 

News Roundup

Here is the complete list of stories published under BDC News and Analysis over the prior-week period:

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