BDC Credit Ratings
Ticker BDC Name S&P Fitch
AINV Apollo Investment Corporation BBB- BBB-
ARCC Ares Capital Corporation BBB BBB
BKCC BlackRock Capital Investment Corp. BBB- BBB-
FSC Fifth Street Finance BBB- Withdrawn at BB
FSIC FS Investment Corporation BBB- BBB-
GSBD Goldman Sachs BDC BBB- NR
HTGC Hercules Capital BBB- NR
MAIN Main Street Capital BBB NR
PNNT PennantPark Investment Corporation BBB- BBB-
PSEC Prospect Capital Corporation BBB- NR
SLRC Solar Capital NR BBB
TSLX TPG Specialty Lending NR BBB-

Investment-grade (IG) rated Business Development Companies have an advantage on other BDCs and other financiers. They can borrow for longer periods of time, pay lower interest rates on their leverage, and spread out their maturities so that they do not rely on just one slug of debt capital.

BDCs that do not have an IG rating are generally limited to credit facilities and high-cost “baby bonds” to finance their investments. All things being equal, a BDC with an investment-grade rating has several advantages over BDCs that do not.

What’s in an investment-grade rating?

Anything lower than “BBB-” from Standard & Poor’s and Fitch is a “junk” or non-IG rating. Generally, the ratings agencies require that investment-grade BDCs adhere to certain leverage requirements, have good investment performance, and generate healthy earnings. Some criteria for maintaining an investment-grade rating include:

  • Debt-to-equity ratio generally less than 0.85 to 1.00
  • Low amounts of paid-in-kind (PIK) interest or dividend income
  • Consistent underwriting performance
  • Low amounts of off-balance sheet leverage
  • Limited use of BDC’s “30% bucket”
  • Favorable fee agreements
  • Proven access to capital markets (debt and equity)
  • Size (portfolio >$1 billion in assets, usually).