Non-traded enterprise growth firms (BDCs) rated by Fitch are well-positioned to satisfy investor redemption requests over the following 12 months, the rankings company has mentioned.
In response to new analysis from Fitch Scores, the BDCs it charges have ample liquidity to proceed assembly quarterly tenders of as much as 5 per cent over the following 4 quarters beneath a draw back state of affairs that assumes no new fairness inflows.
The findings come as US BDCs have skilled elevated redemption ranges in current months following issues over credit score high quality and the asset class’s publicity to the software program sector.
A number of of the biggest various asset managers, together with Blue Owl, Blackstone and BlackRock, have confronted rising redemption requests as retail buyers develop more and more cautious in regards to the asset class. One of many highest-profile examples was Blue Owl’s choice to limit investor redemptions from certainly one of its retail debt funds.
Fitch mentioned all of its rated BDCs stay beneath the two.0x leverage threshold throughout its stress eventualities, indicating that present asset protection cushions are ample to soak up elevated redemptions and valuation strain over the following yr.
“Whereas Fitch expects perpetually non-traded BDCs to proceed to expertise slower inflows and elevated redemption requests within the coming quarters, present liquidity and asset protection cushions ought to assist rated issuers’ capacity to handle elevated tenders over the following yr with out materials strain on credit score profiles,” mentioned Chelsea Richardson, Fitch senior director. “Nonetheless, sustained will increase in leverage or weakening liquidity profiles may drive damaging score motion over the medium time period.”
The rankings company mentioned common leverage amongst Fitch’s eight rated perpetually non-traded BDCs stood at 0.85x as of 31 March, beneath the degrees recorded by rated non-perpetual friends.
It added that, beneath its most extreme stress state of affairs, which assumes no fairness inflows or portfolio repayments over the following 4 quarters, common leverage would improve to 1.39x.
General, Fitch mentioned it expects redemption requests to stay above 5 per cent within the second quarter of 2026 and doubtlessly all year long, but it surely views sustaining quarterly tender caps at 5 per cent as a prudent method to managing leverage and liquidity.