Valuation discrepancies across US private credit portfolios are widening, with more than 12% of borrowers held by multiple lenders showing significant differences in how their debt is marked, according to a report by Bloomberg citing research from the Frankfurt School of Finance & Management.
The study found that 12.3% of borrowers held by two or more business development companies (BDCs) had loan valuations differing by at least five percentage points as of June 30, up from 9.3% a year earlier. The findings were based on regulatory filings submitted to the US Securities and Exchange Commission.
The research also found that approximately one in 10 private credit loans held by BDCs were valued below 90% of face value, compared with 7.7% a year earlier, suggesting growing pressure on borrower credit quality.
Sascha Steffen, an author of the study, said widening valuation differences could indicate underlying financial deterioration, while warning that private credit markdowns often emerge more slowly than in publicly traded debt markets.
The findings highlight mounting concerns over valuation transparency in private credit, where managers exercise significant discretion over portfolio marks and reported net asset values influence management fees.
