Skip to main content Skip to main content
Not investment advice. Educational reading. See Disclaimer.
L.3 · INTERMEDIATE · 2 MIN

NAV and Premium / Discount

BDC NAV per share = (total assets minus liabilities) divided by shares outstanding. Unlike open-end mutual funds, BDCs trade on exchanges and the market price often diverges from NAV. The premium/discount is one of the most important signals in BDC analysis.

Quiz · 5 questions ↓
§ 01

A premium says the market trusts the manager and yield. A persistent deep discount usually says the market doubts the marks.

§ 02
BDCTypical price-to-NAV rangeWhat range signals
ARCC (Ares Capital)95-115% of NAVQuality leader; small premium normal
BXSL (Blackstone)100-120% of NAVSponsor strength commands premium
Mid-tier BDCs85-100% of NAVDiscount reflects lower confidence
Stressed / smaller BDCs50-80% of NAVMarket expects NAV write-downs
§ 03
In the BDC view, sort by Price-to-NAV. The highest premium and deepest discount names are usually the most informative.
§ 04

A 30% discount is the market saying 'we think reported NAV overstates real value.' Combined with a yield near 14%, it usually means investors expect a dividend cut and further mark-downs. Discount BDCs can be opportunities, but require deep

§ 05
A BDC trades at 0.78x NAV. Peer group average is 1.02x. The BDC's NII/dividend coverage is 95% (below 1.0x). Most likely explanation for the discount?
Five questions · AI feedback

Sit with the ideas.

A BDC trades at 70% of NAV with a 14% dividend yield. Most likely explanation?

Why:

Other lessons in this course.

  1. 01What is a Business Development Company?
  2. 02Reading a BDC's Schedule of Investments
  3. 03NAV and Premium / Discount— reading now
  4. 04Yield Decomposition -- Is the Dividend Safe?
  5. 05Non-Accruals -- The #1 Credit Metric
  6. 06Leverage and Regulatory Limits
  7. 07Manager Quality and Alignment
  8. 08Building a BDC Watchlist
See it on a real ticker →