Business development companies (BDCs) and interval funds have extended their private credit maturities amid improved financing conditions.

The US vehicles, whose assets are majority private credit, have more than halved their private credit maturities for 2024 over the past year, according to S&P Global Ratings.

The ratings and research firm analysed the public filings of 190 BDCs and interval funds since the first quarter of 2021.

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“While debt held by BDCs and interval funds represents just a slice of the $1tn (£0.77tn) US private credit market, these portfolios offer a glimpse of how these maturities are changing,” the report said.

“Close to $5bn in private credit loans held by BDCs is scheduled to mature this year as of first-quarter 2024 – 55 per cent lower than the 2024 total as of first-quarter 2023. Borrowers have also reduced 2025 maturities by 22 per cent over the past year.”

S&P highlighted that maturities for private credit held by BDCs and interval funds peak in 2028, when nearly $60bn comes due.

This mirrors the broadly syndicated loan (BSL) market, which also peaks in 2028.

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“Both new borrowing and the extension of existing debt have contributed to the escalation of 2028 maturities, which are up 33 per cent since first-quarter 2023 and up 119 per cent since first-quarter 2022,” the report said.

S&P noted “brighter financing conditions this year” for both BSL and private credit borrowers.

Around $155bn in private credit loans held by BDCs is maturing between now and 2028, and North American private credit funds had almost $300bn in ‘dry powder’ as of July 2024, according to Preqin data cited by S&P.

“Private credit lenders appear to have more than sufficient liquidity to meet these upcoming maturity demands,” the research said.

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However, S&P warned that US interest rates will pressure some smaller and weaker borrowers. While the Federal Reserve is expected to start cutting rates next month, S&P expects a lag before the reduced funding cost reaches those borrowers, until the first quarter of 2025 at the earliest.

It expects to see increased use of payment-in-kind facilities over the next few quarters.

“Financing conditions this year have supported private credit refinancings of near-term debt, but this is adding to maturities down the line, including in the peak year of 2028,” S&P said. “With an uncertain economy clouding the horizon, many question whether financing conditions can remain as supportive as they’ve been in the first half of 2024.”