Barclays Says Soaring BDC Risk Premiums Are ‘Justified’

Investors are demanding higher risk premiums to own the debt of business development companies, reflecting their anxiety around private credit exposure, according to Barclays Plc.

A broad-based index of the debt shows spreads climbing 80 basis points to 260 basis points this year, reaching “rarefied territory,” strategists including Corry Short wrote on March 17. Unsecured bonds of BDCs have also “meaningfully” underperformed collateralized loan obligations — an asset class that offers the best point of comparison, according to the bank.