US private credit portfolio values showed signs of stabilizing in the second quarter, but markdowns continued, particularly in software-related loans. According to a Reuters analysis, the portfolio values of 44 US business development companies (BDCs) fell below their reported cost basis in the first half of 2026. As of June 30, the total fair value was $92.88 billion, below the cost basis of $95.19 billion. The fair value to cost ratio declined from 99.25% at the end of December 2025 to 97.77% in the first quarter, and stood at 97.57% in the second quarter. Chris Sessna of Houlihan Lokey noted that the 168 basis point decline in the first half was significantly above normal. BDCs marked down 81% of their software-related loans this year, compared with only 40% in other sectors. Blue Owl Capital Corp attributed its second-quarter net asset value decline to a single credit risk, while at Ares Capital Corp, two software companies accounted for more than a third of the year-to-date unrealized net loss of $527 million. Non-accrual investments rose from 2.5% at the end of 2025 to approximately 3.4% by the end of June.
