Octus BDC Weekly Roundup: BDC Lenders Add 29 Borrowers Totaling $605M at Cost to Nonaccrual; BlackRock TCP’s Sale to Pantheon Prices at 99% of FV; Loans Sold Have Lower Nonaccrual Rate, Longer-Dated Maturities

Credit Research: Americas BDC Analysts
Reporting: Americas PCDO Team

Relevant Items:
Octus’ BDC Database
Private Credit Dashboard

Editor’s Note: A weekly roundup of business development company, or BDC, articles available to Private Credit and Deal Origination subscribers is below. To get access to any of the below, please reach out to [email protected]. Octus’ BDC Analyst team has published a series of articles covering BDC quarterly earnings, sector-level stressed watchlists and proprietary analysis built on top of the BDC data that Octus extracts from more than 170 private and public BDCs. Octus’ full Private Credit product suite includes deal origination and private credit coverage, BDC and Private Credit Data, Private Credit Fundamentals, Deal Term Analytics and Covenants analysis. Contact [email protected] or your account manager for a demo.

For year-to-date and prior-week coverage highlights, please see our roundups HERE, HERE, HERE, HERE, HERE, HERE, HERE, HERE, HERE, HERE, HERE, HERE and HERE.

BDC Earnings

Approximately 50 listed BDCs reported second-quarter results in the week ended Aug. 7. BDCs analyzed last week by Octus include Barings BDC, Horizon Technology Finance, BlackRock TCP, Blackstone Secured Lending, Oaktree Specialty Lending, FS KKR Capital Corp., Blue Owl Capital Corp., Sixth Street Specialty Lending, Golub Capital BDC and New Mountain Finance Corp. Summaries of all reports can be found under Intel coverage HERE.

Multiple companies took trading actions related to their portfolios. FS KKR Capital Corp. said that it sold $500 million of investments to third parties during the second quarter. Golub Capital BDC hinted at secondary activity, stating that “leveraging the capabilities of our Capital Markets desk, we acquired incremental interest in existing loans to high-quality borrowers at discounts to fair value.”

Many companies continued to report declines in investment income year over year driven by lower spreads and declining asset bases. A number of BDCs, however, talked about a stabilizing environment. Dividends also appear to have stabilized following multiple cuts in the first quarter.

New Nonaccruals

Octus tracks BDC changes to nonaccrual status. Twenty-nine companies were added to nonaccrual status last week, totaling $605 million in cost and $318.1 million in fair value as of June 30. One of the largest names added to nonaccrual status was Heniff Transportation Systems, a logistics and supply chain company specializing in liquid bulk transportation. FS KKR Capital Corp. placed its loans on nonaccrual status in the second quarter. Interest on the loans also was changed to PIK. Other lenders include Midcap Financial Investment Corp. and Midcap Apollo Institutional Private Lending according to Octus’ BDC Database.

All borrowers reportedly added last week to nonaccrual status as of June 30 are below:

(Click HERE to download.)

As a percentage of cost, each BDC that reported last week had an increase in nonaccruals. The table below shows nonaccruals as a percent of cost and fair value in the second quarter and compared to prior periods.

(Click HERE to download.)

For prior results and aggregate data, please see our latest quarterly nonaccrual report HERE.

BDC Special Coverage

BlackRock TCP Portfolio Sale Analysis: BlackRock TCP Capital Corp.’s portfolio sale to Pantheon Ventures values the assets sold at 98.9% of reported fair value using fair values provided by BlackRock TCP as of June 30, according to an Octus analysis. The floating rate assets sold have similar pricing, yields and PIK rates as the loans that BlackRock TCP would retain following the closing of the transaction. The assets sold, however, have on average later maturities and lower levels of nonaccrual rates.