US Stock Market: Private credit funds of Blackstone, BlackRock mark down portfolios amid software sector stress

Private credit funds managed by Blackstone and BlackRock reduced the value of their portfolios in the first quarter, reflecting mounting pressure from troubled loans linked largely to software companies facing disruption from artificial intelligence.

According to a report by Reuters, the markdowns highlight growing investor scrutiny of business development companies (BDCs), a segment of the private credit market that lends to middle-market firms and often carries significant exposure to technology and software borrowers.

Blackstone Secured Lending Fund reported that its net asset value (NAV) per share declined 2.4% during the quarter to $26.26 at fair value. Software companies accounted for nearly 20% of the fund’s portfolio at the end of March.


The fund’s non-accrual rate, a measure of loans significantly behind on interest payments, rose to just over 3% in the quarter. Executives said during an earnings call that nearly half of the markdowns were tied to two loans that had moved into non-accrual status, while the remainder reflected broader concerns over AI-driven disruption across the software industry.

As per the report, one of the fund’s largest troubled loans involved software company Medallia. Blackstone executives said the firm was progressing through a restructuring process and that additional capital would be invested alongside partners to strengthen the company’s balance sheet and support the development of new AI-related features.

Despite the pressure on valuations, Blackstone Secured Lending Fund declared a quarterly dividend of 77 cents per share, unchanged from previous quarters. The fund also disclosed that repayments in its portfolio totaled $450 million during the quarter, while new investments stood at nearly $325 million.

Meanwhile, BlackRock TCP Capital Corp posted a steeper 5% decline in NAV per share to $6.72. Reuters said software companies represented 27.2% of the fund’s portfolio at fair value by the end of March.

The fund’s non-accrual rate improved slightly to 2.8% following two loan restructurings and one asset sale. However, Reuters reported that the company recorded $32.7 million in net realized losses and another $2 million in unrealized losses, largely tied to troubled loans involving software company Pluralsight and other borrowers.

BlackRock TCP also said it repurchased more than 156,000 shares for approximately $600,000 since April 1 under its existing buyback program. The company declared a dividend of 17 cents for the upcoming quarter.

The earnings updates from Blackstone and BlackRock followed similar results from private credit funds managed by Blue Owl Capital. Both Blue Owl Capital Corp and Blue Owl Technology Finance Corp also reported declines in NAV per share earlier this week.

Investor concerns around liquidity and credit quality in the private lending space have intensified in recent months. Blue Owl sold $1.4 billion worth of assets in February to improve liquidity after elevated investor withdrawal requests at another fund managed by the firm.