BDC loans marked below 80% of cost

## What this measures

The share of business development companies' debt, by cost, that the lender itself values at less than 80% of what it cost.

## Why it matters

A loan marked below 80 cents is one the lender expects trouble on. The share is a stressed-loan count that does not wait for a non-accrual decision.

## How it is made

Palanor reads every BDC 10-K and 10-Q in the SEC's BDC data sets (inline XBRL, periods from August 2022) and turns the tagged schedule of investments into one row per holding: borrower, holding type, lien, base rate, spread, PIK rate, maturity, principal, cost, fair value. Some filers also tag subtotals on the same rows, so rows are pruned in steps and a filing counts only when its rows add up to between 85% and 120% of the total investments it reports. Amended filings replace the original. A quarter is the calendar quarter the balance-sheet date falls in, and it publishes once at least 60 BDCs pass the check and 80 days have passed since it ended. Debt is every loan and bond with a positive cost: first lien, unitranche, second lien, subordinated and unsecured. Equity, warrants, structured products (CLO and ABS tranches), fund and joint-venture interests and cash are left out. For each loan Palanor compares fair value with cost; the reading is the cost of loans below 80% over all debt cost, times 100.

## How to read it

Higher means more of the book is marked as distressed. A lender can mark a loan down before it stops accruing interest on it, so this share can move before the non-accrual share does. The series starts in Q1 2023 at 2.86%. The reading for Q2 2026 is 4.14%, from 157 BDCs. Over the series the high is 4.14% (Q2 2026) and the low 1.79% (Q4 2024).

## What it does not say

The panel changes as BDCs start and stop filing, and as new funds launch, so a move can come from who is in it as well as from credit. Marks are each lender's own fair values, set by its valuation process each quarter; they move with market spreads as well as with the borrowers. Holdings a BDC owns through a joint venture are counted where the BDC tags them on its own schedule. A low mark can reflect a loan bought at a discount, or a market move, rather than a problem borrower.

## Source

Palanor calculation from SEC filings: the SEC Business Development Company (BDC) data sets and each filing's XBRL on EDGAR (U.S. Securities and Exchange Commission; public domain).