KBRA releases its Business Development Company Ratings Compendium, which looks at results for the quarter ended March 31, 2026.
In this quarter’s Compendium, KBRA examines the 1Q26 performance of its rated business development companies (BDC), along with an overview of nonqualifying assets and the role joint ventures (JV) play in increasing look-through leverage. Despite heightened market volatility, investor concerns regarding credit quality, and ongoing pressure on earnings generation, the BDC sector continued to demonstrate relative financial stability through 1Q26. BDCs continue to operate with conservative leverage profiles, manageable non-accrual levels, and reliable access to debt capital markets—factors that remain central to our analysis. KBRA maintains Stable Outlooks for the vast majority of its rated BDCs while continuing to assess evolving market conditions.
During 1Q26, KBRA changed several ratings and Outlooks in its BDC portfolio. The issuer and senior unsecured debt ratings of BlackRock TCP Capital Corp. were downgraded to BB+ with a Negative Outlook, from BBB- with a Stable Outlook. The issuer and senior unsecured debt ratings of FS KKR Capital Corp. were downgraded to BBB- from BBB with a Stable Outlook. The issuer and senior unsecured debt ratings of MidCap Financial Investment Corporation were affirmed at BBB-, and the Outlook was revised to Stable from Positive. The issuer and senior unsecured debt ratings of New Mountain Finance Corporation were affirmed at BBB-, and the Outlook was revised to Negative from Stable. New Mountain Finance Corporation subsequently requested withdrawal of the ratings, which was completed on May 6. On May 21, KBRA withdrew the issuer and senior unsecured debt ratings of Blue Owl Capital Corporation II at the issuer’s request, coinciding with the repayment of its rated debt.
Key Takeaways
- As expected, during 1Q26 profitability continued to be pressured by spread compression and lower base rates coupled with net asset value (NAV) declines primarily due to unrealized losses on investment portfolios, more notably in technology-focused BDCs.
- Capital formation slowed considerably, with capital raises at the top five perpetual-life BDCs by total investments at fair value (FV) declining approximately 50% year-over-year (YoY).
- Non-accrual investments remained muted for most BDCs, with the exception of a few issuers that experienced credit quality deterioration with increases in portfolio companies placed on non-accrual status.
- Most perpetual-life BDCs gated redemptions at 5% to preserve liquidity and maintain low leverage levels while some chose to increase capital for deployment.
- Nonqualifying assets remained stable compared to two years ago for non-perpetual BDCs, and only a small percentage of KBRA-rated BDCs had leveraged JVs with meaningful look-through leverage.
Click here to view the report.
About KBRA
KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.
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