Golub Capital BDC (NASDAQ:GBDC) reported what management characterized as an “okay” fiscal quarter ended December 31, 2025, as lower base rates, tighter spreads, muted M&A activity and elevated credit stress continued to pressure results across private credit markets. Chief Executive Officer David Golub said the company is “planning for a challenging 2026” and the board reset the quarterly base dividend, while maintaining the existing variable supplemental dividend framework.
Quarterly results and dividend reset
Golub said adjusted net investment income (NII) was $0.38 per share, translating to an adjusted NII return on equity (ROE) of 10.2%. Adjusted net income was $0.25 per share, or an adjusted ROE of 6.7%. The company paid a $0.39 per share distribution during the quarter.
Chief Operating Officer Tim Topicz said the supplemental dividend will be evaluated quarterly and “will seek to distribute 50% of the earnings in excess of $0.33 per share.”
Credit quality: low non-accruals, but losses rose
Topicz said overall credit performance “generally remains solid,” with approximately 89% of the portfolio at fair value in the company’s highest-performing internal rating categories. Non-accruals remained low at 0.8% of the portfolio at fair value, which management said is well below the BDC peer average.
However, the quarter included higher losses: Topicz said adjusted net unrealized and realized losses increased to $0.13 per share, driven primarily by fair value markdowns on a small tail of underperforming borrowers, including $0.06 per share of markdowns on equity investments tied to those borrowers.
Chief Financial Officer Chris Ericson added that non-accruals increased quarter over quarter to 80 basis points of total investments at fair value and 1.3% at amortized cost. The number of non-accrual investments rose to 14, as one investment returned to accrual following a restructuring, offset by the addition of six portfolio company investments to non-accrual during the quarter.
Ericson also noted internal rating migration: investments rated “three” increased to 10.1% of the portfolio, while investments rated “one and two,” which management described as the most likely to see significant credit impairment, remained low at 1.3% of the portfolio at fair value.
Portfolio activity, yields and leverage
GBDC’s investment portfolio declined 1.5% sequentially to $8.6 billion at fair value. The company said it remained selective, closing on 3.1% of the deals reviewed in the quarter with a weighted average loan-to-value of approximately 43%. About 60% of origination volume came from existing sponsor relationships and portfolio company incumbencies, and the company made loans to 18 new borrowers. GBDC acted as sole or lead lender in 96% of transactions, according to Topicz.
Ericson said net funds growth decreased by $130 million for the quarter as repayments and exits outpaced funded new originations and draws. The weighted average rate on new investments was 8.6%, down 30 basis points from the prior quarter, primarily due to lower base rates at origination. Investments that repaid during the quarter carried a weighted average rate of 9.4%.
On earnings drivers, Topicz said GBDC’s investment income yield fell 40 basis points sequentially to 10%, mostly due to lower base rates and, to a lesser extent, lower portfolio spreads. Management highlighted a partial offset from lower borrowing costs due to a “predominantly floating rate debt capital structure,” as well as what it called a market-leading fee structure and low operating expense load.
Ericson said cost of debt decreased about 20 basis points to 5.4%, and net investment spread declined modestly to 4.6%. He also emphasized asset-liability positioning: 81% of total debt funding is floating rate or swapped to floating rate, and 49% of debt funding is in unsecured notes across a “well-laddered” maturity profile.
Leverage remained near the top of management’s target range. Net debt-to-equity ended the quarter at 1.23x, within the company’s stated target range of 0.85x to 1.25x.
NAV movement, buybacks and liquidity
Ericson said net asset value (NAV) per share ended the quarter at $14.84, reflecting adjusted NII of $0.38 per share, distributions paid of $0.39 per share, adjusted net realized and unrealized losses of $0.13 per share, and $0.01 per share of NAV accretion from share repurchases.
Topicz said share repurchases continued on an opportunistic basis during calendar 2025, with total repurchases of 5.5 million shares, or $76.5 million in aggregate value, and the quarter’s repurchases contributing $0.01 per share of accretion to NAV.
On liquidity, Ericson said GBDC ended the quarter with approximately $1.3 billion of liquidity from unrestricted cash, undrawn commitments on its corporate revolver, and an unused unsecured revolver provided by its advisor.
Management outlook: pressure on ROEs and focus on credit discipline
Golub reiterated the four headwinds he cited—lower base rates, tighter spreads, muted M&A and a “protracted credit cycle”—and described four related impacts he said the market is experiencing, including lower private credit ROEs and increased dispersion between managers. He estimated public BDC net returns are “on average about 4 percentage points lower year-over-year” based on earnings reports through September 30.
In response to a question about preparing for 2026, Golub said spreads are near a five-year low and M&A remains muted despite expectations for a rebound. He also said credit stress is elevated in both broadly syndicated and private credit markets, adding that it is “harder for us to produce the ROEs that we wanna be producing in the current environment than it’s been in recent years.”
During the Q&A, discussion also centered on software exposure and AI-related disruption. Golub said AI is advancing faster than many expected, particularly tools that make coding easier, and agreed that some software companies are vulnerable. He emphasized Golub Capital’s long history in software lending, including having completed “1,000 software deals” over 20 years and citing “only five defaults” over that period, while stressing the need for humility and vigilance. He said the firm prefers enterprise-critical platforms with sticky workflows, long implementation cycles, and proprietary datasets, and has limited exposure to areas he described as more vulnerable, such as content creation, analytical overlays, and tool-based software.
Golub also said the company has reduced exposure to recurring revenue (ARR) loan structures in recent years as pricing tightened, noting that many older ARR loans have migrated to traditional EBITDA-based structures and that the firm has reduced the volume of new ARR loans.
About Golub Capital BDC (NASDAQ:GBDC)
Golub Capital BDC (NASDAQ: GBDC) is a publicly traded business development company specializing in providing debt and equity financing solutions to middle-market companies in the United States. Externally managed by Golub Capital LLC, the firm focuses on building a diversified portfolio of senior secured loans, unitranche facilities and second-lien debt instruments designed to support growth, acquisitions and recapitalizations. As a closed-end investment vehicle, GBDC offers investors direct exposure to private credit strategies within a regulated structure.
The company’s core business activities center on originating and managing bespoke financing arrangements for U.S.
