Payment-in-kind (PIK) usage within business development companies (BDCs) has remained “broadly stable”, despite heightened scrutiny of private credit and worries over potential disruption from artificial intelligence, according to new research.
A report by S&P Global Ratings found that PIK-paying loans made up around 12.8 per cent of total BDC loans in the third quarter of 2025, which it described as “broadly stable”.
This is largely in line with the same quarter in 2024, although the share has fallen slightly from a peak of 13–13.5 per cent in late 2024 and early 2025, the ratings agency said.
The report also highlighted that BDC exposure to software and related sectors accounted for roughly 29 per cent of total assets managed by BDCs and interval funds as of the third quarter of 2025. S&P Global Ratings noted that, despite this sizeable share, the exposure has “held steady over the past three years”.
The findings come amid jitters in the US wealth market, as heightened concerns about private credit quality and high exposure to software prompted a sell-off in BDCs, many of which also faced elevated redemption requests.
Read more: Private credit firms take hit on exposure to software selloff
However, S&P Global’s research found that credit quality among software borrowers has actually improved. Around 80 per cent of software companies covered by S&P credit estimates recorded revenue growth in 2025, with upgrades outpacing downgrades over the year.
It also found that BDCs hold $18.3bn (£13.6bn) of private credit loans maturing in 2026, rising to $63.9bn in 2028 and $70.7bn in 2031, with software loans representing an increasing share of these maturities.
Overall, total assets of BDCs, including publicly traded, non-traded, and interval funds, reached $598bn as of the third quarter of 2025, according to S&P Global.
Read more: Private credit leaders unshaken by software sell-off but warn on fiscal risk
