...BDCs Can Withstand Energy Stress: Fitch Ratings conducted partial and full writedown stress tests on the energy exposures of 10 rated business development companies (BDCs) to understand the impact of valuation writedowns or realized losses on balance sheet leverage ratios, given recently observed volatility in oil prices. The results of the stress tests are deemed manageable from ratings and leverage perspectives, with leverage ratios increasing two bps for the sector, on average, and four bps, at most, for an individual firm. While BDCs appear well positioned to weather an energy stress, in isolation, a number of other industry challenges, including heightened competition, declining asset yields, dividend coverage pressure, increased leverage and expanded investment strategies support Fitch's negative sector and rating outlooks for BDCs and could pressure ratings in the future. Energy Exposure Moderate: The modest stress test impacts are attributable to fairly low average exposure to the...
