Second-lien share of BDC debt

## What this measures

The share of business development companies' debt, by cost, that is second lien.

## Why it matters

Junior debt is the riskier end of a lender's book. Lenders move into it when first-lien yields are thin, and out of it when they want safety.

## 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. The lien comes from the row label ("First lien senior secured loan", "One stop", "Second lien", "Subordinated notes"). Rows whose label states no lien are left out of both sides of the share.

## How to read it

Higher means the book is more junior and more exposed to losses in a default. The series starts in Q1 2023 at 12.90%. The reading for Q2 2026 is 2.78%, from 141 BDCs. Over the series the high is 12.90% (Q1 2023) and the low 2.77% (Q1 2026).

## 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. Some large BDCs tag no lien on their rows; they count only where the label says. A unitranche loan counts as first lien.

## 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).