Moody’s Turns Negative on Blackstone and Golub Capital Private Credit Funds

Moody’s Ratings has revised its outlook to negative on two prominent private credit vehicles, Benzinga reported Tuesday. The agency kept its Baa2 long-term issuer ratings intact for both Golub Capital BDC and Blackstone Secured Lending Fund. However, it moved each fund’s outlook from stable to negative, citing leverage creep and softening loan book quality.

Leverage Exceeds Targets at Both BDCs

For Golub Capital BDC (GBDC), Moody’s flagged a debt-to-equity ratio of 1.27x as of March 31. That figure sits above the upper bound of the company’s own stated target range. The asset coverage ratio cushion came in at 19 percent, below what Moody’s considers peer-median territory. When the agency upgraded GBDC to Baa2 in early 2025, it had expected the firm to keep leverage comfortably inside that ceiling.

Blackstone Secured Lending Fund (BXSL) presented a more acute picture. Its debt-to-equity stood at 1.32x, marking a second straight quarter above its target ceiling. The asset coverage cushion fell to 17 percent. Moody’s also noted higher portfolio concentration risk at BXSL relative to comparable peers.

Also Read: What Rising BDC Leverage Means for Private Credit Investors

Asset Quality Deterioration Accelerates

Non-accrual investments at GBDC climbed to 2.3 percent of total holdings, up from 1.3 percent at year-end 2025. Five new positions drove that move. At BXSL, the deterioration was sharper. Non-accruals jumped to 4.7 percent from just 0.6 percent, with three portfolio companies entering that category, including software firm Medallia. Moody’s separately noted meaningful exposure to software assets at both funds. Some of those positions may encounter additional pressure as debt maturities approach.

What Would Restore a Stable Outlook

Despite the negative revisions, Moody’s acknowledged structural strengths shared across the BDC sector. Both funds run predominantly first-lien and unitranche portfolios. GBDC holds around 92 percent of investments in that senior-secured bucket. Both vehicles also accessed capital markets recently. GBDC issued $500 million in five-year notes, while BXSL raised $650 million on the same tenor, signaling continued investor appetite.

Moody’s outlined a clear path back to stable. Either fund could recover its prior outlook by sustaining an asset coverage cushion above 20 percent and arresting non-accrual growth. Downgrades remain possible if leverage stays elevated or loan performance worsens further. Upgrades, by contrast, would require debt-to-equity below 1.0x alongside meaningfully stronger capitalization and a clean credit track record through the cycle.

Read Next: Private Credit Market Faces Stress Test as Defaults Tick Higher