KBDC, BCSF: Fund Redemptions Widen Private Credit Loan Spreads

Kayne Anderson BDC (KBDC), Bain Capital Specialty Finance (BCSF) and Oaktree Specialty Lending (OCSL) all said on their quarterly earnings calls between 5 and 11 August 2026 that non-traded private credit funds sold to individual investors faced heavy redemptions in the June quarter, that fewer lenders are now bidding for loans to mid-sized and larger companies, and that new loans are being written at higher rates than a quarter ago.

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Fewer bidders show up for a large sponsor loan

Private credit means funds lending directly to companies that are not listed, without a bank in between. The listed lenders in this business are called BDCs. A BDC earns the difference between the rate it charges borrowers and the cost of the money it borrows, and it quotes loans as a spread over SOFR, the benchmark rate, measured in basis points, where one basis point is 0.01 of a percentage point. Over the past few years most of the new bidders in this market came from non-traded funds — vehicles that are not listed on an exchange, are sold to individual investors, and allow only limited quarterly withdrawals.

That money can be called back. In the June quarter, Blackstone's (BX) BCRED received withdrawal requests for about 10% of its shares, Cliffwater (private) 17%, BlackRock (BLK) 13%, Apollo (APO) 17%, and Blue Owl's (OWL) two funds 18.8% and 38.1%. The first four capped payouts at 5% of shares for the quarter, and Blue Owl's two funds set caps as well [1]. The debt side tightened at the same time: on 7 July HSBC Holdings (HSBC) told certain higher-risk private credit fund clients that it would not renew back leverage, the bank borrowing that lets a fund expand the size of its loan book [2]. A fund working through a redemption queue does not chase new large loans, so pricing power returns to the lenders still bidding. Because the trigger is redemptions at the same group of vehicles, lenders serving the same borrowers feel it in the same quarter.

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Three unaffiliated lenders attribute wider spreads to the same cause

KBDC said on 11 August that new floating rate loans in the quarter averaged 566 basis points over SOFR, 17 basis points wider than in the first quarter, and management attributed it to slowing capital formation in non-traded and private vehicles [3]. On the same day, BCSF reported a weighted average spread of roughly 570 basis points on new first lien originations against roughly 525 basis points for comparable loans in the market, with net leverage on those loans of 4.5 times against a market average of 5.4 times — a higher price on borrowers carrying less debt [4]. FS KKR Capital (FSK) put the move higher still on 6 August, saying spreads widened by up to 75 basis points or more over the course of the quarter and that the environment had turned from borrower-friendly to lender-friendly [5].

The three lenders are unaffiliated and point to the same cause, but the effect has a limited range. KBDC said on the same call that loans to borrowers with EBITDA below $20 million remain very competitive, that one lender is often enough to close such a deal, and that these can still clear at very tight spreads [3]. The repricing is at the larger end.

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Pricing power moves from redeemable money to money that cannot be withdrawn

What changed is which lenders can stay at the table. The equity of a listed BDC is permanent capital: investors can only sell the shares to someone else in the secondary market and cannot redeem from the company, so the company does not have to hold cash against withdrawals. OCSL said on 5 August that redemption requests at several large non-traded vehicles reached the mid to high teens as a percentage of equity in the quarter, called this a net positive for permanent capital public BDCs with capital to deploy, and cautioned that the redemption queues will take several quarters to clear [6].

The benefit does not show up in earnings immediately. Only a portion of a loan book turns over each year, and only newly written loans carry the wider spread, so the money arrives in interest income as the book turns. The market is currently reading it the other way: KBDC said coverage of redemption pressure at large non-traded BDCs has left healthy listed BDCs trading at a discount as well [3], and BCSF closed at $12.84 on 11 August against net asset value of $16.65 per share [7]. Two things are worth tracking from here: whether new origination spreads stay above SOFR plus 550 basis points, and whether net flows at non-traded BDCs turn positive.

Banks have not withdrawn from the sector across the board. Crescent Capital BDC (CCAP) disclosed on 11 August that it upsized an SPV financing facility by $100 million to $500 million and raised a corporate facility from SMBC to $335 million in the quarter [8]. Blackstone President Jonathan Gray, on 23 July, explained the slowdown in redemptions by saying the level of noise has come down, which reads the episode as sentiment that is receding [9].

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Companies exposed to the same change

• Customers Bancorp (CUBI): A US bank with roughly $18 billion of loans whose disclosed business lines include fund finance — variable rate loans to private equity and private credit funds secured by pools of their assets, the same instrument HSBC stopped renewing in July. Its earnings call did not discuss the line, so the connection rests only on its publicly disclosed business scope [10].
• CION Investment (CION): A listed middle-market lender with no non-traded retail vehicle behind it, so it is not funding a redemption queue while it lends, which puts it in a position to deploy into loans at the wider spread [11].
• Blue Owl Technology Finance (OTF): A listed, non-redeemable Blue Owl lending vehicle, while the same manager's two non-traded funds took redemption requests of 18.8% and 38.1% in the quarter. Its second quarter fundings were commitments made before spreads widened, so the newer pricing reaches its book in later quarters [12].

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Sources

[1] Drillr · news search, "Private Credit Funds Face Liquidity Squeeze" · 2026-06-02 to 2026-07-02 · news events

[2] FStech, reporting the Financial Times · HSBC Scales Back Lending To Riskier Private Credit Funds · 2026-07-07 · news report · https://www.fstech.co.uk/fst/HSBC_Scales_Back_Lending_To_Riskier_Private_Credit_Funds.php

[3] Drillr · Kayne Anderson BDC (KBDC) · 2026-08-11 · earnings call

The pricing environment for new originations remains favorable, with our new floating rate loans averaging 566 basis points over SOFR during the quarter, which was 17 basis points wider than in the first quarter. The current pricing environment reflects sustained demand for private credit amongst middle-market borrowers, slowing capital formation in non-traded and private vehicles, and a general increase in risk premiums.

[4] Drillr · Bain Capital Specialty Finance (BCSF) · 2026-08-11 · earnings call

[5] Drillr · FS KKR Capital (FSK) · 2026-08-06 · earnings call

[6] Drillr · Oaktree Specialty Lending (OCSL) · 2026-08-05 · earnings call

[7] Drillr · Bain Capital Specialty Finance (BCSF) · 2026-08-11 · daily price data and net asset value per share disclosed on the same call

[8] Drillr · Crescent Capital BDC (CCAP) · 2026-08-11 · earnings call

[9] Drillr · Blackstone (BX) · 2026-07-23 · earnings call

[10] Drillr · Customers Bancorp (CUBI) · 2026-07-24 · earnings call and company business description

[11] Drillr · CION Investment (CION) · 2026-08-06 · earnings call

[12] Drillr · Blue Owl Technology Finance (OTF) · 2026-08-06 · earnings call

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