Perpetual Non-Traded BDCs Can Absorb Elevated Redemptions: Fitch
Perpetually non-traded business development companies remain well-positioned to meet elevated investor redemption requests over the next year, even under severe stress scenarios, according to a new report from Fitch Ratings.
The ratings agency analyzed eight rated perpetually non-traded BDCs and concluded that current liquidity levels and asset coverage cushions should be sufficient to support quarterly redemption requests at the maximum 5% tender level through the next four quarters, even if no new equity capital is raised.
Average leverage among the rated BDCs stood at 0.85x as of March 31, 2026, below levels typically seen among rated non-perpetual peers. Under Fitch’s most severe stress scenario—which assumes no new equity inflows and no portfolio repayments for a full year—average leverage would rise to 1.39x.
Importantly, all eight rated BDCs remained below the regulatory 2.0x leverage threshold across Fitch’s stress tests, indicating that balance sheets retain meaningful capacity to absorb elevated redemption activity and valuation pressure.
“While Fitch expects perpetually non-traded BDCs to continue to experience slower inflows and elevated redemption requests in the coming quarters, current liquidity and asset coverage cushions should support rated issuers’ ability to manage elevated tenders over the next year without material pressure on credit profiles,” said Chelsea Richardson, senior director at Fitch Ratings.
Fitch expects redemption requests to remain above 5% during the second quarter and potentially throughout 2026. The agency said maintaining quarterly tender caps at 5% remains a prudent approach to managing liquidity and leverage.
“However, sustained increases in leverage or weakening liquidity profiles could drive negative rating action over the medium term,” Richardson added.
All eight rated perpetually non-traded BDCs currently carry Stable Rating Outlooks.
