Moody’s Ratings has dropped the outlook on two business development companies (BDCs) managed by Blackstone and Golub Capital from stable to negative, citing signs of deteriorating asset quality from their software exposure.
The ratings agency said it has changed the outlook for the Blackstone Secured Lending Fund (BXSL) and Golub Capital BDC, while affirming the Baa2 rating on both funds.
Moody’s said the outlook change reflects elevated leverage, weaker-than-peer asset coverage ratio cushions and weakening asset quality across both vehicles.
The move comes amid BDCs experiencing elevated levels of redemptions in recent months, as investors react to concerns over credit quality and the sector’s exposure to software.
It also follows heightened scrutiny of the software industry this year, as the potential impact of artificial intelligence has raised questions over its long-term business models and investment risk. More broadly, BDCs have come under pressure as a result linked to their high exposure to the sector.
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For BXSL, Moody’s noted that elevated leverage has coincided with weakening asset quality. Non-accrual investments as a percentage of total investments at cost rose to 4.7 per cent in the first quarter, up from 0.6 per cent previously.
The increase in non-accruals was driven by three portfolio companies, including one of its largest positions, software firm Medallia, the ratings agency said.
However, Moody’s said the fund remains well positioned from a funding and liquidity perspective, supported by its recent $650m (£483.2m) issuance of five-year notes. It therefore affirmed the Baa2 rating.
Overall, BXSL has $13.9bn of investments at fair value and an annual total return of 10.9 per cent.
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For Golub Capital BDC, non-accrual investments as a percentage of total investments at cost rose to 2.3 per cent as of March 2026, up from 1.3 per cent due to its exposure to software, which accounts for 26 per cent of its portfolio at fair value, Moody’s said.
“Some of these exposures could face incremental headwinds as they move closer to maturity,” Moody’s warned.
However, the ratings agency affirmed the Baa2 rating, citing the fund’s highly diversified, largely first-lien and unitranche portfolio, alongside its long track record of low defaults and losses.
Golub Capital BDC reported an annualised total return of 9.4 per cent, with 92 per cent of its portfolio in first-lien senior secured debt. The fund has an investment portfolio at around $8.6bn at fair value.
