Business development companies increased deal origination in Q3 while repayments and exits declined, returning the top lenders to net asset growth after portfolios shrank in the first half of 2025, according to an LCD analysis.
Despite the quarter-over-quarter improvement, BDC investment activity continues to lag that of recent years. Gross fundings for the top twelve BDCs tracked in LCD’s recent analysis totaled roughly $24.7 billion year-to-date, down more than 13% from the $28.4 billion recorded in the same 2024 period.
Meanwhile, repayments and exits year-to-date have increased by nearly 10% to $23.8 billion, from $21.7 billion in the comparable 2024 period.
Not every BDC in the sample grew its portfolio during the quarter: FS KKR Capital Corp., Golub Capital BDC, MidCap Financial Investment Corp., Goldman Sachs BDC Inc., New Mountain Finance Corp. and Morgan Stanley Direct Lending Fund each reported net repayments and sales in Q3.
Ares Capital Corp. led net fundings at $872 million, followed by Blackstone Secured Lending Fund with $571 million and Blue Owl Capital Corp. with $166 million.
Blue Owl’s net growth marks a turnaround from a repayment-heavy first half of 2025, during which the BDC’s portfolio contracted by $1.17 billion. Funds managed by Blue Owl had held portions of several large private credit loans taken out by the broadly syndicated market during that time.
It’s important to note that some of the recent volume of portfolio exits reflects sales of investments, including transfers of assets to other BDCs managed by the same lender. For instance, Barings BDC, which was not included in LCD’s sample, told investors on a recent earnings call that a jump in exit activity reflected sales to a joint venture.
Much of the exit volume, however, reflects a continued drip of repayments by private credit borrowers as they refinance loans at lower spreads in the syndicated loan market. Deal activity has been down, too, intensifying the supply-demand imbalance.
For example, one BDC, Sixth Street Specialty Lending, reported some $339 million in sales and repayments during Q3, roughly double the sales and repayments reported in Q3 2024. Of that total, repayments comprised $303 million, reflecting nine total investment realizations during the quarter and one partial realization, the company said on a Nov. 5 earnings call.
“Seventy-five percent of [our] repayments were driven by refinancings at lower spreads in the private credit or broadly syndicated loan markets,” said Sixth Street Specialty Lending co-CEO Bo Stanley.
Stanley noted that the spreads on refinanced deals ranged from 325-525 bps.
Only a handful of BDCs report the weighted average yield of new investments versus the yield of investments fully sold or paid down in their earnings presentations. Among those that do, the data shows a meaningful gap — ranging from 20 to 90 bps in Q3. While the sample size is small, the results are consistent with the broader trend of yield compression.
The pressure to reprice deals, combined with declining spreads on new issuance, was reflected in yet another drop in the average yield on BDC investments.
Every BDC in the sample reported a decline in weighted average yield during the quarter. The average yield across BDCs fell to 10.5%, down from 10.7% in Q2 and 11.7% in Q3 2024 quarter, the research showed.
Featured image by Jordan Lye/Getty Images
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