Accessible Version
The Price of Bank Funding Behind Private Credit: Evidence from Business Development Companies, Accessible Data
Figure 1. The Rise of Bank Credit Line Lending to BDCs
This figure is a combination chart with three line series and one bar series. The x-axis shows quarterly periods from 2012Q3 to 2023Q4, and the y-axis shows amounts in billions of U.S. dollars. The red line with diamond markers represents aggregate committed bank loans to BDCs. The gray line with round markers represents aggregate committed bank credit lines to BDCs. The blue line with triangle markers represents aggregate committed bank loans to BDC-affiliated special purpose vehicles, or SPVs. The gray bars represent aggregate utilized bank loans to BDCs each quarter. The shaded area indicates the monetary tightening period from 2022Q1 to 2023Q4. The figure shows that total committed bank loans, committed credit lines, utilized bank loans, and committed bank loans to SPVs all increased over the sample period, with especially sharp growth during the tightening period. Committed credit lines account for most bank lending to BDCs throughout the period, and committed bank loans to SPVs account for a substantial share of aggregate BDC bank-loan commitments by the end of the sample.
Source: FR Y-14Q Schedule H.1; LSEG Data & Analytics, BDC Collateral; authors’ calculations.
Figure 2. Bank Loan Rates to BDCs Rose More Sharply During Tightening
This figure is a two-line time-series chart. The horizontal axis shows quarters from 2012Q3 to 2023Q4, and the vertical axis ranges from 0% to 8%, showing interest rates in percent. The red solid line shows average interest rates on bank loans to BDCs. The gray dashed line shows average interest rates on bank loans to non-BDC borrowers. The shaded area indicates the monetary tightening period from 2022Q1 to 2023Q4. Before 2022, the two lines move closely together, with both rates generally declining after 2019 and remaining relatively low before the tightening cycle. The figure shows that the raw interest-rate premium charged to BDC borrowers widened during monetary tightening.
Source: FR Y-14Q Schedule H.1; LSEG Data & Analytics, BDC Collateral; authors’ calculations.
Figure 3. Concentration in Bank-to-BDC Lending
This figure is a Lorenz-curve chart. The horizontal axis shows the cumulative share of banks, from 0 percent to 100 percent. The vertical axis shows the cumulative share of lending volume, also from 0 percent to 100 percent. A gray 45-degree line represents perfect equality, meaning that each cumulative share of banks would account for the same cumulative share of lending. The black curve shows the distribution of utilized bank lending to BDCs. The dotted red curve shows the distribution of utilized bank lending to nonfinancial firms. Both curves lie below the 45-degree line, showing concentration, but the black BDC curve lies farther from the equality line than the red nonfinancial-firm curve. The BDC curve remains low for much of the bank distribution and rises sharply only near the largest banks, showing that a relatively small share of banks accounts for a large share of lending to BDCs. The figure shows that bank lending to BDCs is more concentrated than bank lending to nonfinancial firms.
Source: FR Y-14Q Schedule H.1; LSEG Data & Analytics, BDC Collateral; authors’ calculations.
Figure 4. BDCs Rarely Switch Bank Lenders
This figure is a time-series chart showing the share of outstanding BDC bank loans classified as switches. The horizontal axis shows quarters, beginning in 2013Q3 and ending in 2023Q4. The vertical axis reports the share of switches in percent. The line is generally low throughout the sample, often close to zero and usually only a few percentage points. A horizontal dashed line marks the sample average switching rate. The figure shows that BDCs rarely change bank lenders, consistent with persistent bank-BDC relationships and potentially meaningful switching costs.
Source: FR Y-14Q Schedule H.1; LSEG Data & Analytics, BDC Collateral; authors’ calculations.