10-K: Goldman Sachs BDC Reports FY2025 Results, Navigates Market Shifts

Goldman Sachs BDC, Inc. reported its annual results for fiscal year 2025, highlighting a decrease in net investment income and net assets, alongside strategic debt repayments and board changes.

Summary

• Net investment income after taxes decreased to $181.57 million in 2025 from $252.55 million in 2024.
• Total investment income declined to $365.57 million in 2025 from $434.37 million in 2024, primarily due to lower base interest rates, tightening credit spreads, and a decrease in portfolio size.
• Net realized losses on investments were $123.12 million in 2025, compared to $157.97 million in 2024, mainly driven by restructurings and exits of certain portfolio companies.
• Net change in unrealized appreciation on investments was $64.65 million in 2025, a positive shift from a $37.06 million depreciation in 2024.
• The company's asset coverage ratio stood at 175% as of December 31, 2025, down from 181% in 2024, but still above the 150% regulatory requirement.
• The weighted average yield of the total portfolio (at fair value) decreased to 10.5% in 2025 from 13.2% in 2024.
• The portfolio consisted of 564 investments in 171 portfolio companies across 40 industries as of December 31, 2025.
• The largest industry concentrations by fair value were Software (17.6%), Health Care Providers & Services (8.8%), and Health Care Technology (8.4%).
• Geographically, 94.8% of the portfolio was in the United States, 3.2% in Canada, 1.5% in the United Kingdom, and 0.5% in India.
• Unfunded commitments to portfolio companies increased to $636.43 million as of December 31, 2025, from $492.97 million in 2024.
• The company repurchased 4,728,155 shares of common stock for $52.16 million in 2025 under its 10b5-1 plan.
• The Board of Directors approved a reduction in its size from seven to six directors and reallocated Class III directors effective February 25, 2026.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a moderately negative report due to the significant decline in net investment income and overall portfolio yield, despite some positive shifts in unrealized appreciation and portfolio company credit metrics. The increase in higher-risk graded investments is a concern.

Positives

• Net change in unrealized appreciation on investments turned positive at $64.65 million in 2025, reversing a depreciation trend from 2024.
• Weighted average leverage (net debt/EBITDA) improved to 5.9x in 2025 from 6.2x in 2024, indicating better debt servicing capacity for portfolio companies.
• Weighted average interest coverage for portfolio companies increased to 2.0x in 2025 from 1.8x in 2024, suggesting improved ability to cover interest expenses.
• The company successfully issued $400 million in 5.650% unsecured notes due 2030, demonstrating continued access to capital markets.
• The company maintained an asset coverage ratio of 175%, comfortably above the 150% regulatory minimum for BDCs.
• The company entered into interest rate swaps to align fixed-rate liabilities with its predominantly floating-rate investment portfolio, mitigating interest rate risk.

Negatives

• Net investment income after taxes decreased significantly to $181.57 million in 2025 from $252.55 million in 2024.
• Total investment income decreased to $365.57 million in 2025 from $434.37 million in 2024, driven by lower base interest rates, tightening credit spreads, and a smaller portfolio.
• PIK income from investments decreased to $32.90 million in 2025 from $50.43 million in 2024, due to exits of PIK-earning investments and declining interest rates/spreads.
• Net realized losses on investments were substantial at $123.12 million in 2025, primarily from restructurings of Khoros, LLC and Streamland Media Midco LLC, and exits of Animal Supply Holdings, LLC and Animal Supply Intermediate, LLC.
• The total portfolio weighted average yield (at fair value) decreased to 10.5% in 2025 from 13.2% in 2024.
• The percentage of investments with a Grade 3 performance rating (increased risk) rose to 6.0% in 2025 from 5.2% in 2024, and Grade 4 (substantially increased risk) rose to 2.3% from 1.6%.
• The net asset value per share decreased to $12.64 as of December 31, 2025, from $13.41 as of December 31, 2024.
• The market price of common stock traded at a significant discount to NAV, with a 26.74% discount as of February 25, 2026.

Risks

• Capital markets may experience periods of disruption and instability, negatively impacting business and operations.
• Political, social, and economic uncertainties (e.g., wars, natural disasters, epidemics, inflation) may create and exacerbate risks for the company and its portfolio companies.
• Operation as a BDC imposes numerous constraints, reducing operating flexibility, and failure to maintain BDC status could lead to additional regulatory restrictions.
• Failure to maintain qualification for tax treatment as a RIC would result in U.S. federal income tax at corporate rates, materially affecting financial performance.
• Regulations governing BDC operations affect the ability to raise additional capital, potentially hindering the Investment Adviser's ability to seize attractive investment opportunities.
• Ability to enter into transactions with affiliates is restricted, potentially limiting investment opportunities.
• Activities may be limited due to being deemed controlled by GS Group Inc., a bank holding company, which imposes BHCA restrictions.
• CFTC rules may negatively impact the company and its Investment Adviser by limiting the use of futures, options, or swap transactions.
• Ability to enter into transactions involving derivatives and financial commitment transactions may be limited by Rule 18f-4 under the Investment Company Act.
• Certain investors are limited in their ability to make significant investments in the company due to Investment Company Act restrictions.
• Dependence on management personnel of the Investment Adviser for future success, with potential adverse effects if key personnel depart.
• Operating in a highly competitive market for investment opportunities may lead to less favorable terms or missed opportunities.
• Dependence on information systems, with systems failures or cybersecurity incidents potentially disrupting business and negatively affecting liquidity, financial condition, or results of operations.
• Exposure to risks associated with artificial intelligence and machine learning technology, including market disruptions, increased competition, and legal/regulatory risks.
• Potential conflicts of interest with other businesses of Goldman Sachs, incentivizing the Investment Adviser to favor other accounts.
• Goldman Sachs' influence over management and affairs, and over most votes requiring stockholder approval, could deter takeover attempts.
• The Board of Directors may change investment objectives, operating policies, and strategies without prior notice or stockholder approval (except for BDC status).
• Fluctuations in quarterly results due to interest rates, default rates, expenses, and realized/unrealized gains/losses.
• Investments are very risky and highly speculative, often below investment grade, with greater risk of loss.
• Investing in middle-market companies involves significant risks, including limited financial resources, shorter operating histories, and dependence on key management.
• Exposure to credit risk and other risks related to credit investments, including liquidity, market value, and interest rate risks.
• Changes in inflation may adversely affect portfolio companies' business, results of operations, and financial condition.
• Exposure to risks associated with changes in interest rates, particularly for floating-rate debt and the potential for increased interest expense or prepayment risk.
• Valuation of illiquid portfolio securities at fair value is inherently subjective and may not reflect actual realized sale values.
• Lack of liquidity in investments may adversely affect the business if quick sales are required.
• Portfolio may be focused in a limited number of companies or industries, increasing risk of significant loss from defaults or industry downturns.
• Inability to exercise control over portfolio companies or prevent adverse management decisions.
• Failure or inability to make follow-on investments in portfolio companies could impair portfolio value.
• Portfolio companies may prepay loans, reducing future stated yields if capital cannot be reinvested at equal or greater expected yields.
• Exposure to distressed lending risks when originating loans to companies in financial difficulty, including bankruptcy.
• Declines in market prices and liquidity in corporate debt markets can result in significant net unrealized depreciation.
• Economic recessions or downturns could impair portfolio companies and harm operating results.
• Portfolio companies may be highly leveraged, increasing their vulnerability.
• Incurrence or issuance of debt or equity securities by portfolio companies that rank equally with, or senior to, the company's investments, adversely affecting recovery in liquidation.
• Investments in non-U.S. companies involve significant additional risks, including exchange control regulations, political instability, and less liquid markets.
• Risks associated with hedging transactions, including imperfect correlation and inability to predict market movements.
• Formation of CLOs may subject the company to structured financing risks, including limitations on distributions and subordination of equity interests.
• Stockholders may experience dilution if they opt out of the DRIP.
• Stockholders not opting out of the DRIP may have current tax liabilities without receiving cash to pay them.
• Issuance of preferred stock could adversely affect the market value of common stock.
• Certain provisions of the certificate of incorporation and bylaws, DGCL, and GS Group Inc.'s ownership could deter takeover attempts.
• Difficulty paying required distributions if taxable income is recognized before or without receiving cash (OID, PIK interest).
• Credit ratings may not reflect all risks of an investment in debt securities.
• Holders of preferred stock would have the right to elect board members and class voting rights on certain matters.

Future Outlook

The company expects to continue generating cash from future securities offerings, borrowings, and operational cash flows, primarily for investments, stockholder distributions, and general corporate purposes. It anticipates using debt financing and issuing additional securities to fund growth, subject to market conditions and board approval. The company will continue to pay quarterly distributions, with a new framework of base and variable supplemental distributions, subject to earnings and board approval. The company also expects to continue monitoring and managing its unfunded commitments using its risk management framework.

Management Comments

• Our Investment Adviser monitors our portfolio companies on an ongoing basis to determine if they are meeting their respective business plans and to assess the appropriate course of action for each company.
• The Goldman Sachs Asset Management Private Credit Team believes there is an attractive investment opportunity to invest in U.S. middle-market companies.
• The Goldman Sachs Asset Management Private Credit Team believes that evaluating investment opportunities through direct discussions with borrowers leads to a better understanding of the underlying drivers of performance and business risks.
• The Goldman Sachs Asset Management Private Credit Team believes that its capability to hold large-sized, directly originated investments drives our ability to source, negotiate and commit capital in attractive opportunities.

Industry Context

StockSavvy.ai notes that the filing reflects a challenging but evolving landscape for middle-market lending. The decrease in investment income and yields aligns with broader market trends of tightening credit spreads and fluctuating interest rates, impacting the profitability of debt investments. The increase in unfunded commitments suggests a pipeline of potential future investments, while the improved leverage and interest coverage ratios for portfolio companies indicate a degree of resilience within the middle-market segment despite economic uncertainties. The strategic shift in distribution framework and share repurchases are common responses by BDCs to manage capital and shareholder returns in dynamic market conditions.

Comparison to Industry Standards

• The company's asset coverage ratio of 175% is above the regulatory minimum of 150% for BDCs, indicating a healthy buffer compared to industry requirements.
• The weighted average leverage (net debt/EBITDA) of 5.9x for portfolio companies is within the typical range for leveraged middle-market debt, which can vary widely but often falls between 4x-7x depending on industry and credit quality.
• The weighted average interest coverage of 2.0x for portfolio companies is generally considered adequate for middle-market borrowers, though top-tier credits often exhibit coverage ratios above 2.5x-3.0x.
• The decrease in the total portfolio weighted average yield from 13.2% to 10.5% reflects a broader trend of yield compression in the direct lending market, influenced by increased competition and shifts in base rates, aligning with the performance of comparable BDCs like Ares Capital Corporation (ARCC) or Owl Rock Capital Corporation (ORCC) which have also seen yield adjustments in their portfolios.

Management Changes

Corporate Governance

Legal Proceedings

• The company and its Investment Adviser are not currently subject to any material legal proceedings, nor is any material legal proceeding threatened against them.

Related Party Transactions

• Goldman Sachs Asset Management, L.P. (GSAM) serves as the Investment Adviser, managing investment programs and related activities.
• The company pays GSAM a Management Fee, calculated at an annual rate of 1.00% of the average value of gross assets (excluding cash or cash equivalents but including assets purchased with borrowed amounts).
• GSAM waives a portion of its management fee equal to management fees earned from affiliated money market funds in which the company invests.
• An Incentive Fee is paid to GSAM, consisting of two components (income-based and capital gains-based), determined independently.
• GS Group Inc., together with certain subsidiaries, owned 5.8% of the company's outstanding common stock as of December 31, 2025.
• The company engages in co-investment activities with other client accounts managed by the Investment Adviser (Accounts), including proprietary accounts of Goldman Sachs, under an exemptive order from the SEC.
• The Investment Adviser pays certain general and administrative expenses on behalf of the company, which are reimbursed.
• The company has a license agreement with an affiliate of Goldman Sachs for non-exclusive, royalty-free use of the Goldman Sachs name.

Stakeholder Impact

• Shareholders: Will experience lower net investment income and NAV per share, but may benefit from share repurchases and a new distribution framework including supplemental distributions. Those not opting out of the DRIP may face tax liabilities without cash to cover them.
• Investment Adviser (GSAM): Received increased incentive fees in 2025 due to portfolio performance, but management fees decreased due to lower gross assets. Continues to manage the company under a renewed agreement.
• Portfolio Companies: Face ongoing monitoring and potential managerial assistance. Some experienced restructurings or underperformance, leading to realized losses for the company. Improved leverage and interest coverage ratios for the overall portfolio suggest better financial health for many.
• Lenders: The company continues to manage its debt obligations, including new note issuances and repayments, maintaining an asset coverage ratio above regulatory minimums, which is favorable for creditors.
• Employees (of Investment Adviser): The company relies on the expertise of GSAM's Private Credit Team; their continued service is crucial for the company's success.

Next Steps

• Continue to pay quarterly distributions, with a new framework of base and variable supplemental distributions.
• Monitor and manage unfunded commitments using the proprietary risk management framework.
• Evaluate additional investment opportunities and potentially pursue debt financing or issue additional securities to fund growth.
• The 2026 Notes matured on January 15, 2026, and were repaid using proceeds from the Revolving Credit Facility and cash on hand.
• The 2029 Notes were issued on January 28, 2026, with interest payable semi-annually commencing July 28, 2026.
• The Board of Directors will continue to oversee cybersecurity matters and the effectiveness of the Cybersecurity Program.

Key Dates

Recommendation

The company's financial performance in 2025 shows a notable decline in net investment income and overall portfolio yield, alongside significant realized losses from restructurings. While there's a positive shift in unrealized appreciation and improved credit metrics for portfolio companies, the decrease in NAV per share and the stock trading at a substantial discount to NAV indicate underlying concerns. The company's ability to access capital markets and its strategic share repurchases are positive, but the increased proportion of higher-risk graded investments warrants caution. A 'hold' recommendation is appropriate as investors should monitor whether the new distribution framework and strategic initiatives can reverse the declining income trend and narrow the NAV discount, while acknowledging the inherent risks in middle-market lending and the competitive environment.

Keywords

BDC, Business Development Company, Goldman Sachs, Middle Market Lending, Secured Debt, Unitranche Debt, Second Lien Debt, Unsecured Debt, Equity Investments, Investment Portfolio, Financial Services, Software, Healthcare, Credit Risk, Interest Rates, Fair Value Measurement, Leverage, Dividend Reinvestment Plan, Share Repurchase, SEC Filing, 10-K