Business development company (BDC) loan valuations are a hot topic within the sector. Media reports have questioned the validity of BDC valuations, due to isolated incidents of materially differing valuations of the same loan among different BDCs. Given the importance of valuations to investor perceptions of credit quality and their implications for net asset value (NAV), bank collateral, and regulatory requirements, this report details KBRA’s view of BDC quarterly valuations in general and provides an overview and assessment of the valuation process.
Key Takeaways
- KBRA analyzed a sample of BDC loans via market data platform provider SOLVE Advantage’s database to demonstrate that isolated incidents cannot be used to make larger inferences about the reliability or validity of BDC loan valuations.
- The analysis included a review of the valuation process of KBRA-rated BDCs as well as interviews of independent valuation firms to provide further insight.
- KBRA…