Bank of America Securities maintained underperform ratings on five business development companies (BDCs) and a neutral rating on one, citing ongoing credit and leverage risks despite varied operational performances.
The firm kept its underperform rating on Runway Growth Finance Corp. (NYSE: RWAY) following its acquisition of SWK Holdings, which expanded RWAY’s scale and investment capabilities in healthcare and life sciences. BofA noted the deal diversified RWAY’s portfolio but highlighted concerns over the venture lending environment, portfolio concentration, elevated leverage and upcoming debt maturities in 2026 and 2027.
Goldman Sachs BDC Inc. (NYSE: GSBD) retained its underperform rating even as profitability improved due to a lookback provision that removed incentive fees and several investments returning to accrual status. BofA pointed to persistently high non-accruals at cost, weaker credit performance, reduced earnings power and limited near-term improvement prospects.
Carlyle Secured Lending Inc. (NASDAQ: CGBD) saw a mixed quarter with core earnings per share covering its base dividend, low non-accruals and improved capital deployment. However, profitability and net asset value were pressured by portfolio markdowns despite these positives.
Palmer Square Capital BDC Inc. (NYSE: PSBD) received a neutral rating from BofA, which acknowledged improved profitability and strong credit quality despite a modest rise in non-accruals. The firm noted PSBD’s strategy of investing across liquid and private markets could deliver attractive risk-adjusted returns, though the risk-reward balance was viewed as neutral.
MidCap Financial Investment Corp. (NASDAQ: MFIC) faced credit weakness in select positions that weighed on profitability and net asset value. While non-accruals improved and share buybacks added value, the company reduced new originations to focus on deleveraging.
New Mountain Finance Corp. (NASDAQ: NMFC) saw profitability improve as losses moderated, non-accruals declined and portfolio yield remained stable. BofA stated further work is needed to enhance profitability and close the valuation gap with top-performing peers before revising its underperform rating.
