U.S. private credit portfolio valuations showed signs of stabilizing in Q2 2026 after earlier deterioration, though lenders continue to mark down select software exposures alongside a rise in non-accrual loans.
📌 Key Financial Numbers & Valuation Metrics:
- $92.88 Billion Fair Value: Total fair market value across 44 analyzed BDCs on June 30, down from a reported cost basis of $95.19 billion.
- 97.57% Fair-Value-to-Cost Ratio: Aggregate ratio slid 168 bps in H1 2026 (down from 99.25% at year-end 2025), reflecting notable asset repricing.
- 81% Software Loan Markdown Rate: BDCs wrote down 81% of software loans in 2026 versus 40% in non-software sectors due to AI disruption concerns.
- 3.4% Non-Accrual Rate: Non-performing loans (delinquent/defaulted) rose to ~3.4% of portfolio cost at end-June, up from 2.5% at year-end 2025.
💡 Industry Drivers & Concentrated Risks:
- Concentrated Software Stress: Unrealized losses remain heavily concentrated; at Ares Capital Corp., 2 software companies accounted for >1/3 of its $527M net unrealized H1 losses.
- Macro Headwinds: Repricing driven by widening credit spreads, AI disruption fears, softer deal flow, near-term debt maturities, and redemption pressures at non-traded funds.