BDCs Are Selling Investment-Grade Bonds Again After a Frozen Quarter
Are the headwinds clearing for business development companies, or is there more to consider?
Overview
The big concern with business development companies (BDCs) in 2026 has been credit quality. Notably, several large private credit funds have limited withdrawals this year, including Blackstone's (NYSE: BX) Blackstone Private Credit fund, an industry giant. But concerns among investors may be waning, as evidenced by Barings BDC (NYSE: BBDC) issuing $350 million in debt. What does this really mean for the BDC sector?
Business development companies make loans to smaller companies that don't otherwise have access to capital. The BDC is supposed to provide guidance to the companies it lends to, in addition to loans. To fund the loans, the BDC must have capital of its own. A BDC can raise its own capital by either issuing stock or taking on its own debt. Essentially, the BDC is attempting to make the difference between its cost of capital and the interest it charges on the loans it makes to other companies.
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Originally published at www.fool.com.