Bond investors are increasingly differentiating between US private credit lenders, with smaller firms seeing materially wider spreads as concerns grow around portfolio quality, funding risk, and borrower stress, according to an analysis by Reuters.
Analysis of public bond data shows investors are demanding significantly higher premiums to hold debt issued by smaller lenders compared to larger, more diversified private credit platforms. The divergence comes as higher interest rates, subdued exits, and growing scrutiny of software sector exposure continue to pressure parts of the market.
According to LSEG data cited by Reuters, BCP Investment Corp recorded the highest weighted average option-adjusted spread (OAS) among surveyed firms at 680 basis points, followed by Prospect Capital at 449bps, Trinity Capital at 403bps, and Fidus Investment Corp at 392bps.
In contrast, larger platforms including Ares Capital, Blackstone Secured Lending Fund, Blue Owl Capital, and Golub Capital were trading with spreads broadly between 150bps and 200bps.
Option-adjusted spread measures the additional yield investors demand over US Treasuries after accounting for embedded bond features such as call options. Wider spreads can be associated with higher perceived credit or liquidity risk.
The analysis reviewed 884 bonds issued by 41 BDCs and found spreads have widened sharply this year for several mid-sized lenders. Trinity Capital’s weighted average OAS widened by 140bps, while Fidus widened by 92bps and Prospect Capital by 85bps.
Meanwhile, BlackRock TCP Capital saw spreads rise by 40bps, while vehicles linked to Goldman Sachs, Blue Owl, and Golub Capital saw increases of 20bps to 31bps.
By contrast, Ares Capital’s spreads were broadly stable, while lenders including Sixth Street Specialty Lending and Hercules Capital experienced modest tightening.
