Most listed business development companies in a Reuters analysis have become unprofitable as asset values fall and borrowing costs rise, offering a rare public view of stress inside the private credit market.
The majority of publicly traded business development companies analysed using standardised financial data have turned unprofitable, according to a new examination of the most visible part of the private-credit market.
The finding does not mean the entire private-credit sector is in crisis. It does show that listed vehicles are absorbing falling asset values, higher financing costs and weaker borrower performance at a time when non-bank lending has become a major source of credit for medium-sized companies.
The analysis of listed BDC accounts used figures standardised by S&P’s data platform to include borrowing costs and changes in loan valuations. Across 14 companies examined, overall borrowing rose 80 per cent during 2025 and a further 14 per cent in the first quarter of 2026.
For investors and regulators, the significance lies in visibility. Much of private credit is difficult to observe in real time. Listed BDCs publish market prices and financial statements, making them an imperfect but valuable window into a much larger market.
What business development companies do
BDCs are US-listed investment companies that lend to private businesses, often firms too small, leveraged or specialised for public bond markets. They raise equity from investors, borrow additional money and use the combined capital to make loans.
The structure can generate attractive income when borrowers pay and loan values hold. It also magnifies pressure when credit quality weakens. Leverage increases returns in good periods but raises interest expense and amplifies losses when assets are marked down.
Private loans are not traded continuously like public bonds. Fund managers or third-party appraisers estimate their value. Those estimates matter because they influence reported net asset value, leverage ratios and investors’ assessment of performance.
The new analysis includes those valuation changes in the bottom-line result rather than focusing only on distributable income. That produces a less flattering picture than headline dividend yields may suggest.
Why investors are sceptical
Market prices had already been sending a warning. In April, listed private-credit funds were trading at their deepest discounts to reported net asset value in more than five years.
A discount can reflect excessive pessimism, but across a sector it often indicates doubt about valuations, future losses or the sustainability of distributions. Investors may believe that reported loan values have not fully adjusted to deteriorating conditions.
Borrowers are also dealing with higher interest expense. Many private-credit loans carry floating rates, so debt-service costs rose as central banks tightened policy. Lenders initially benefited from higher income, but the advantage fades if borrowers struggle to pay, seek amendments or move interest into payment-in-kind arrangements that add to the loan balance rather than producing cash.
Software and other growth companies have attracted particular attention because changing technology expectations can affect both revenue forecasts and collateral values.
A European regulatory interest
Private credit is often discussed as a US market, but European investors, asset managers and borrowers participate in the same expansion of non-bank finance. The EU has spent years trying to deepen capital markets and reduce corporate dependence on bank lending.
That makes the risk question delicate. Private credit can diversify financing and support firms that traditional banks do not serve efficiently. Excessive leverage, opaque valuations and liquidity promises can nevertheless move risk outside the banking system without making it disappear.
European regulators will therefore watch whether losses remain concentrated in identifiable portfolios or spread through asset managers, insurers, pension funds and leveraged investment vehicles. The key channels are not necessarily depositor runs of the kind associated with banks. They include redemption pressure, forced asset sales, reduced lending and valuation shocks passed to institutional investors.
EU Today recently examined how Europe’s largest fintech firms are being forced to confront banking-supervision standards. Private credit presents the related question from another direction: how should authorities oversee bank-like lending carried out through investment structures?
What the data do not prove
The listed BDC sample should not be treated as a complete map of private credit. Listed vehicles are subject to market pressure that private funds can avoid, and portfolio quality varies widely. Some managers have stronger underwriting, lower leverage or more defensive sector exposure.
Accounting losses also do not automatically become realised defaults. Loans marked down today may recover if borrowers refinance or economic conditions improve. Conversely, stable valuations may prove too optimistic if stress persists.
The useful conclusion is narrower. A visible group of leveraged private lenders is showing measurable weakness at the same time as the market continues to grow. That deserves scrutiny before losses become large enough to affect the supply of credit.
Private credit expanded partly because it promised speed, flexibility and attractive returns outside traditional banks. Its next test is whether those advantages remain when financing costs are high and borrowers falter. Listed BDCs are providing an early answer, and it is less reassuring than the sector’s growth narrative.
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