Octus Private Credit Software Analysis Reveals Almost 30% Exposure to BDCs; 13% of Loans Have PIK Component; Fewer Than 10% Loans Mature Before 2028

Credit Research: Lexie Wang, Mark Fischer

Relevant Items:
Octus’ BDC Database
Octus’ Private Credit Database
Link to Individual and Aggregate BDC Exposure to Software Loans 

Key Takeaways

• Octus’ proprietary analysis of business development company, or BDC, exposure reveals software companies comprise almost 30% of investment cost and fair value. Octus’ analysis relies on BDC defined sectors, estimates of software-adjacent sectors and analysis of company business descriptions.
• PIK interest for software loans at 12.8% on average appears elevated relative to broader private credit loans. However, the majority of PIK interest was negotiated at issuance.
• Fewer than 10% of software loans mature before 2028. Write-downs being somewhat correlated with near-term maturities and lack of current financial pressure outside of a few software subsectors suggest little reduction in fair values and few defaults in the near term. Fewer than 6% of software loans were marked below 90% of par as of Sept 30, 2025.
• BDCs cite proprietary data, regulated end-market exposure and deeply embedded software platforms as most resilient to AI disruption.
• Single function, tool-oriented content creation software not tied to proprietary data faces greater risk, and market volatility is creating attractive deployment opportunities for private credit lenders. 

Data Analysis and BDC Exposure

The percentage of business development company, or BDC, investments in software companies was approximately 29% as of Sept. 30, 2025, according to an analysis of 155 public and private BDC portfolios, representing $152.6 billion of debt principal and $152.9 billion of investment cost. Prices, as measured by fair value divided by principal, averaged 97% of par, with approximately 6% of loans marked below 90% of par. 

Octus’ results are higher than the 20% exposure estimated by other institutions because our analysis includes any company in which the primary service provided is via software and pulls from companies also marked by BDCs as information technology, business services and healthcare technology. In addition to manually searching business models and BDC descriptions, our model relies on AI to search through business models and eliminate companies whose primary function is not software.

Aggregate results are provided in this report. As shown in the table below, Octus has estimated exposure by BDC, in addition to percentage of companies with PIK interest, maturity schedules and average pricing.

If you are interested in a download providing details for each BDC, please reach out to [email protected]

The sharp selloff in software companies, driven by fears of AI displacing a number of business models, has resulted in sharply reduced valuations and questions about private equity exits and refinancing risks, as discussed previously by Octus. Year to date, the S&P North American Technology Software Index is down more than 20%. Similarly, public loans and bonds have sold off sharply. 

However, in the near term, private credit restructurings for software companies is likely to be minimal given the relatively low number of loans set to mature over the next few years. According to our analysis, just 9.7% of software loans mature prior to 2028. Maturities, absent extensions or refinancings, pick up in 2028, as shown below. Octus calculates average maturities for software loans across BDC portfolios of 4.9 years as of Sept. 30, 2025.

Despite the selloff in public debt and equity, as shown above, pricing remains near par across average software portfolios. Average prices across all software held by BDCs was 97.8% of par as of Sept. 30, 2025.

The data used for this analysis is from Sept. 30, 2025, reports. However, quarter to date for BDCs that reported results for quarters ended Dec. 31, 2025, fair values for software loans have experienced little movement, at least based on publicly reported filers analyzed by Octus. This makes sense given fair value marks for those reports would have been as of Dec. 31, prior to the recent selloff.

Oaktree Specialty Lending Corp. highlighted that the primary risk related to AI disruption is not immediate credit deterioration but rather “calls into question the refinanceability of these loans when they mature,” particularly for software companies whose business models may become less competitive over time. Oaktree emphasized that even before operational performance weakens, private equity sponsors may be less willing to support companies facing structural disruption, increasing refinancing risk.

Public evidence to date suggests little widespread fundamental pressure, except for certain subsectors.

To read the full analysis, please reach out to [email protected]