BDC Cash Income Dividend Coverage Pressured by Payment-in-Kind Income
U.S. business development companies’ (BDCs) cash earnings coverage of dividends is expected to weaken further from 2Q24 levels as the persistence of elevated interest rates will drive further increases in paid-in-kind (PIK) income, Fitch Ratings says. Potential rate cuts, spread compression and higher non-accruals are also headwinds to BDCs’ net-investment income (NII).
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