First-quarter data shows a 15% increase in stressed borrowers, with software firms accounting for 26% of troubled investments.
Business development companies face growing credit stress, with 538 of roughly 5,000 portfolio companies showing signs of pressure in Q1 2026. The number of troubled borrowers rose 15% from the prior quarter, while the volume of first-lien and unitranche loans under stress surged 44% to $35.4 billion.
Software names now represent 26% of investments at fair value under pressure, up from 19% at the end of 2025. Despite the rise in stress, half of the 538 companies on the watchlist continued to make cash payments rather than relying on payments-in-kind (PIK).
The trend reflects broader concerns about lower base rates, heavy PIK income reliance, and an approaching maturity wall, with restructurings and exits of troubled positions expected in upcoming filings.