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Private credit losses rise in BDCs, challenging the “contained risk” view
Reuters found 28 of 53 publicly traded business development companies swung to losses in Q1 2026, with average profit falling to negative $7.6 million from positive $26 million a year earlier.
JPMorgan Chase CEO Jamie Dimon said in April that the roughly $1.8 trillion private credit market does not pose systemic risk unless losses become very large, warning that only then could banks be hit, according to CryptoSlate.
However, a Reuters analysis of 53 publicly traded business development companies, which function as publicly traded private credit funds, found deterioration in early 2026. In the first quarter of 2026, 28 BDCs were loss-making, compared with 12 a year earlier, and average profit dropped from positive $26 million to negative $7.6 million, driven largely by loan markdowns and higher borrowing costs.
The reporting also highlights how BDCs can present profits that appear steadier than underlying performance. Loan markdowns and debt-related expenses can be obscured by adjusted metrics, and the standardized approach used by Reuters with S&P Global Market Intelligence is intended to capture those items.
The analysis points to additional funding stress channels and accounting dynamics, including that payment-in-kind interest, which adds interest to borrowers’ debt balances instead of paying cash, accounted for an average of 8.1% of BDC interest and dividend income in 2025, about twice the pre-2020 share. Reuters also reported that off-balance-sheet borrowing increased 80% during 2025 for 14 BDCs with complete joint-venture disclosures, followed by another 14% increase.