Non-traded business development companies (BDCs) rated by Fitch are well-positioned to meet investor redemption requests over the next 12 months, the ratings agency has said.
According to new research from Fitch Ratings, the BDCs it rates have sufficient liquidity to continue meeting quarterly tenders of up to five per cent over the next four quarters under a downside scenario that assumes no new equity inflows.
The findings come as US BDCs have experienced elevated redemption levels in recent months following concerns over credit quality and the asset class’s exposure to the software sector.
Several of the largest alternative asset managers, including Blue Owl, Blackstone and BlackRock, have faced rising redemption requests as retail investors grow increasingly cautious about the asset class. One of the highest-profile examples was Blue Owl’s decision to restrict investor redemptions from one of its retail debt funds.
Fitch said all of its rated BDCs remain below the 2.0x leverage threshold across its stress scenarios, indicating that current asset coverage cushions are sufficient to absorb elevated redemptions and valuation pressure over the next year.
“While Fitch expects perpetually non-traded BDCs to continue to experience slower inflows and elevated redemption requests in the coming quarters, current liquidity and asset coverage cushions should support rated issuers’ ability to manage elevated tenders over the next year without material pressure on credit profiles,” said Chelsea Richardson, Fitch senior director. “However, sustained increases in leverage or weakening liquidity profiles could drive negative rating action over the medium term.”
The ratings agency said average leverage among Fitch’s eight rated perpetually non-traded BDCs stood at 0.85x as of 31 March, below the levels recorded by rated non-perpetual peers.
It added that, under its most severe stress scenario, which assumes no equity inflows or portfolio repayments over the next four quarters, average leverage would increase to 1.39x.
Overall, Fitch said it expects redemption requests to remain above five per cent in the second quarter of 2026 and potentially throughout the year, but it views maintaining quarterly tender caps at five per cent as a prudent approach to managing leverage and liquidity.
