Barclays_Private_Credit_BDCs_Taking_Fundamental_Cues_Amid_Uncertainty

This document is intended for institutional investors and is not subject to all of theindependence and disclosure standards applicable to debt research reports prepared for retailinvestors under U.S. FINRA Rule 2242. Barclays trades the securities covered in this report for itsown account and on a discretionary basis on behalf of certain clients. Such trading interestsmay be contrary to the recommendations offered in this report.Please see analyst certifications and important disclosures beginning on page 11.Private Credit & BDCsTaking Fundamental Cues AmidUncertaintyGiven elevated uncertainty around private credit and BDCs,we analyze fundamental trends within the middle marketdirect lending landscape.• Limited transparency into the private credit assets held by BDCs has has effectively causedfear of the unknown, given the recent increase in credit events in the market. This may not becured for a few more weeks, given that BDCs report late in the earnings cycle. However, thereare a few ways to get a more timely window into the performance of private credit generallyand BDCs more specifically.• Fundamental credit profiles of leveraged floating-rate borrowers have generally improvedamid lower base rates, tighter coupon spreads, and solid profitability. While pockets ofelevated credit stress remain in both public and private credit, the tail of weakest linksremains larger in the latter.• In CLOs, while private credit has matched the BSL market's spread compression, privatecredit CLO fundamentals are more mixed. S&P's credit quality indicators on private CLOcollateral are improving, while Moody's metrics are deteriorating; however, S&P rates a largerpart of the market.FIGURE 1. Interest coverage ratios of floating rate borrowers have inflected higher off the lows, whilemedian CCC buckets across PC CLOs have exhibited some divergence by agencySee Figure 6 and Figure 15 for more details. Source: Bixby Analytics, Houlihan Lokey, Kanerai, Intex, Barclays Research The authoring research analysts would like to thank Rushikesh Nalawade for his assistance inconnection with the preparation of this report.FICC ResearchCredit Research22 October 2025SIGNATURECLO ResearchGavin Zhu+ 1 212 526 0668gavin.zhu@barclays.comBCI, USUS HY and Leveraged LoansCorry Short+1 212 526 6253corry.short@barclays.comBCI, USHG Financials ResearchPeter Troisi+1 212 412 3695peter.troisi@barclays.comBCI, USJustin Moreno+1 212 526 4074justin.moreno@barclays.comBCI, USIshika Goyal+1 212 526 3789ishika.goyal1@barclays.comBCI, USCompleted: 22-Oct-25, 13:35 GMTReleased: 22-Oct-25, 13:39 GMTRestricted - ExternalPublic Comps and CLOs Provide Window into BDCCredit Quality TrendsPeter Troisi BCI, USTransparency into the private credit assets held by BDCs can be challenging. They reportdetailed schedules of their investments, but there is little to no financial disclosure on theunderlying borrowers to which BDCs have extended credit. As a result, many fixed incomeinvestors view BDCs as a blind p