Private-Lending Managers Recover After Q2 Results

Fears of a Crisis Are Fading

The $1.8 trillion private-credit market spent 2026 as the worry of the moment, with investors bracing for defaults. Publicly traded BDCs, or business development companies, pool direct loans and trade on exchanges. Their quarterly filings reveal non-accruals, net asset values, and dividends, making them a rare window into private loan performance.

Ares Capital Corp. (ARCC), the largest listed BDC, shows the mixed picture. Its $29 billion flagship fund counted $708 million in non-accruing loans - a status that generally indicates missed payments - at the end of Q2.

That was up 15% from the first quarter and 26% from a year earlier. It still works out to 2.4% of the portfolio at cost, or original loan value, below its post-crisis average of about 3%. ARCC kept its dividend at 48 cents, a level it has held for years.

Credit Quality Is Steadier Than Analysts Expected

Blackstone Secured Lending Fund (BXSL), a $13.4 billion fund, also calmed nerves. Its net asset value, or what each share is worth after subtracting liabilities, fell to $25.53 from $26.26, missing the $26.19 average analyst estimate.

The fund earned $174 million in net investment income, or interest profit after costs, little changed from a year earlier. Its second-quarter profit fell 94% as the value of its holdings declined.

No new loans went on non-accrual status in Q2. The fund's 3.6% non-accrual rate beat the 4.73% that analysts had estimated.

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Oaktree Specialty Lending Corp. (OCSL), with about $2.7 billion in assets, had six non-accruals, down from ten. At cost, those loans represented 4.2% of the portfolio; by fair value, 1.8% - an improvement from 5.9% and 2.6%, respectively. OCSL set its cash payout at 33 cents per share, while adjusted net investment income was 37 cents.

MidCap Financial Investment Corp. (MFIC), run by Apollo, earned 40 cents per share in net investment income. That is up from 39 cents and above estimates. The fund's net asset value came in at $13.37, down from $14.75 twelve months earlier, with non-accruals at about 4.6% of portfolio cost as of June 30, improving from 5.3% in the prior quarter. Software exposure rose to 12% of fair value from 11%, and the dividend stayed at 31 cents.

Some Funds Are Shrinking or Restructuring

BlackRock TCP Capital Corp. (TCPC) is selling nearly half its loan portfolio to a continuation vehicle backed by Pantheon. The vehicle will hold 95% of the investments' equity, while TCPC keeps 5%. Its assets total $523 million across 78 companies.

After the deal, TCPC's net asset value is expected to fall by roughly 10.4%, or 68 cents per share. The board hired Keefe, Bruyette & Woods to explore strategic alternatives, including asset sales and combinations.

Blue Owl Capital Corp. (OBDC) trimmed its net asset value by 1% to $14.26 per share, with markdowns on a few holdings partly offset by about $35 million in buybacks.

OBDC's non-accruals rose to 2.8% of portfolio at cost from 2%, while repayments hit $747 million versus $319 million of new commitments.

Blue Owl Technology Finance Corp. (OTF) saw its net asset value barely move at $16.48 per share. It repurchased $55 million of stock.

FS KKR Capital Corp. (FSK), an $11.4 billion fund, reported its first results after KKR unveiled a $300 million capital infusion and buyback plan. Its net asset value fell to $18.30 per share, below Wall Street estimates, but non-accruals improved to 3.8% of portfolio fair value from 4.2%.

Per-share losses narrowed to 13 cents from $1.57 in the previous quarter and 75 cents a year earlier.

Sixth Street Specialty Lending (TSLX), a $3.5 billion fund, posted net investment income of 43 cents per share. That is down from 54 cents a year earlier but still above estimates. After cutting its dividend last quarter, TSLX will keep its third-quarter payout at 42 cents per share.

What This Means for Your Portfolio

Blue Owl co-president Craig Packer said on the earnings call Thursday, "The second quarter was much more stable than the first," and "the investment backdrop has improved meaningfully from where we started the year."

The sector is not yet back to obvious expansion, and several large private-credit players are shifting their focus to investment-grade companies and big artificial-intelligence data-center projects.

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