Nontraded BDCs Return $4.5B in Q3 Liquidity

Nontraded business development companies have returned nearly $4.5 billion to investors through third-quarter tender offers reported so far, as redemption demand showed signs of easing but remained elevated at several large private-credit funds.

Thirteen NAV BDCs reported third-quarter tender results as of Stanger’s Sept. 24 analysis, representing about 77% of the market. Investors submitted $9.6 billion in redemption requests, equal to 10.1% of estimated tender-offer net asset value, according to Robert A. Stanger & Co. That was down from 11.2% on a same-store basis in the second quarter.

The reporting funds fulfilled approximately 47% of tender requests, returning nearly $4.5 billion in liquidity to investors. About $5.1 billion of requests went unmet, compared with $6.2 billion in the prior quarter, when the same group satisfied 43% of requests. NAV BDCs had met more than $17.1 billion in redemptions year to date.

Nontraded BDCs raise capital continuously and lend mainly to middle-market companies, offering investors exposure to private credit and typically high distribution rates. Unlike publicly traded funds, they do not provide daily liquidity. Most limit quarterly repurchases to a specified portion of shares or NAV, creating proration when investor withdrawal requests exceed those limits.

“Redemption demand is easing across most reporting funds, but at several of the largest, requests remain backlogged and persisting,” Stanger Chairman and CEO Kevin T. Gannon said in a statement. He said the structure was functioning as designed by balancing the needs of investors seeking liquidity with those who remain invested.

The preliminary figures excluded eight funds with an estimated $28 billion in NAV, including Blue Owl Credit Income Corp. and Blue Owl Technology Income Corp. In the second quarter, withdrawal requests at those funds equaled 18.8% and 38.1% of NAV, respectively.