US private credit firms mark down more loans

U.S. private credit firms have been marking down select software loans and reporting a rise in debt that has stopped generating income, according to a Reuters analysis of regulatory filings from 44 U.S. business development companies (BDCs). While portfolio values showed signs of stabilising in the second quarter after a broad deterioration early in the year, the aggregate fair-value-to-cost ratio fell to 97.77% in the first quarter from 99.25% at end-December, and eased further to 97.57% in the second quarter.

The markdowns are largely a result of weaker deal flow, redemption pressure at non-traded funds, softer sentiment, concerns over AI-driven software disruption, and near-term debt maturities. About 4% of all borrowers had loans marked below 80% of par, up from around 1% from 2023 through 2025, indicating that a relatively narrow group of investments accounted for an outsized share of unrealized losses at several prominent BDCs.

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