Golub Capital BDC's Q3 2025: Navigating Contradictions in Leverage and Market Spread Dynamics

Leverage expectations, spread compression and market response are the key contradictions discussed in Golub Capital BDC's latest 2025Q3 earnings call.



Financial Performance:
- Golub Capital BDC reported adjusted net income (NII) per share of $0.39, corresponding to an adjusted NII return on equity of 10.4%.
- The company's adjusted net income per share was $0.34, with an adjusted return on equity of 9.1%, resulting in a since IPO internal rate of return for GBDC shareholders of 9.6% over 15 years.
- The financial performance supports the company's resilient investment strategy.

Investment Portfolio Growth:
- GBDC's investment portfolio grew by 4% to nearly $9 billion at fair value, driven by $557 million in new investment commitments, with $411 million funded.
- The growth was supported by selective underwriting, with only 3.1% of reviewed deals closing and a weighted average LTV of approximately 34%.

Credit Quality and Liquidity:
- The company maintained low nonaccruals at 60 basis points of the total investment portfolio at fair value, well below the BDC peer industry average.
- GBDC's liquidity position remains strong, with approximately $950 million in unrestricted cash, commitments on its corporate revolver, and unused revolver capacity.

Spread Compression and Interest Rates:
- GBDC's investment income yield fell by 20 basis points sequentially to 10.6%, primarily due to lower weighted average spreads and a re-indexing of the portfolio to lower reference rates.
- The cost of debt decreased by 20 basis points to 5.7%, indicating efficient management of debt financing costs.