BDCs Give Thanks that 3Q21 NAVs Return to Pre-Pandemic Levels and Earnings Remain Resilient Despite Increased Repayments
This commentary reviews the 3Q21 results for business development companies (BDCs).Key highlights include:
• BDCs reported increased repayment activity, but the robust M&A market has lifted origination activity, resulting in generally stable investment portfolios which is a key driver of BDC earnings.
• NAVs have returned to pre-pandemic levels (4Q19), as middle market portfolio company valuations have rebounded.
• Non-accruals remain manageable at 2.8% of cost on average across the peer group, benefiting from financial sponsor support.
• Our BDC coverage universe maintains relatively low leverage when compared to regulatory limits, with debt-to-equity averaging 0.87x in 3Q21.
• The capital markets remain highly accommodative over 3Q21 and into 4Q21, with 11 issuances within our publicly rated BDC universe raising over $5 billion of capital in the public and private debt markets and through preferred equity issuance.
“Through 3Q21, the performance of business development companies (BDCs) in DBRS Morningstar's coverage universe was supported by a robust M&A environment lifting loan originations, as investment portfolios grew despite elevated repayment activity.” said Watson Tanlamai, CFA, Vice President – Global FIG.
DBRS Morningstar is a global credit ratings business with 700 employees in eight offices globally. DBRS and Morningstar Credit Ratings are committed to empowering investor success, serving the market through leading-edge technology and raising the bar for the industry.
Together, we are the world’s fourth largest credit ratings agency and a market leader in Canada, the U.S. and Europe in multiple asset classes. We rate more than 2,600 issuers and 54,000 securities worldwide and are driven to bring more clarity, diversity and responsiveness to the ratings process. Our approach and size provide the agility to respond to customers’ needs, while being large enough to provide the necessary expertise and resources. For more details visit us at dbrs.com.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.