By Bill Alpert

Business development company Golub Capital BDC is a longtime lender to the software industry so, not surprisingly, its earnings call dwelled on this week's software AI apocalypse.

The shares of software and information businesses such as Salesforce and Thomson Reuters had fallen all week, after powerful new tools were unveiled by the AI firm Anthropic. The fear spread to private credit firms that lend to the software companies acquired by private equity.

"AI is advancing more quickly than most people expected," said CEO David Golub on the Thursday call. "There's a real issue here. It isn't just a market tantrum."

The Golub BDC -- a midsize lender to the midsize businesses bought by private equity -- has faced other headwinds as well. Falling base interest rates have pulled down the floating rates it charges. Interest rate spreads are at five-year lows. Acquisition activity remains muted.

At a recent $12.63, the BDC's stock is down to 83% of the fund's net asset value. It will trim its dividend this quarter to 33 cents a share, from 39 cents.

And now investors worry AI imperils the equity and credit of traditional software businesses. Over 20 years, Golub's firm has lent $145 billion in a thousand software deals.

Golub thinks the most likely scenario is that AI slows the growth of enterprise software firms. It is less likely sales will decline or collapse. So equity valuations for software companies will shrink, but they will still pay their lenders.

Software that is embedded and critical to an enterprise is safer from AI than software for data analysis or content creation, Golub said, noting that his BDC's exposure to the latter types is limited. Defaults have been just 0.25% of the BDC's software loans. Nonaccrual loans comprise only 0.8% of its overall portfolio.

The Golub BDC's loans will continue to outperform the industry, in the view of Raymond James analyst Robert Dodd, who rates the stock a Hold. Still, with almost 30% of its portfolio categorized as "software and services," the BDC will be a way to watch how today's software credit panic plays out.

Golub said during the conference call the AI panic could also prove an opportunity to private lenders such as his firm. If good software companies can't access markets for high-yield or broadly syndicated loans, lenders like Golub can command better prices for lending.

Today's BDC environment will test the industry, Golub said.

"The overwhelming driver of alpha and private credit comes from minimizing realized credit losses and periods of credit stress put this to the test," he said. "Dispersion between good managers and let's call them not-so-good managers has increased."

He added that the private credit industry is maturing after a period of growth in new entrants.

"And we'll now, in my judgment, go through a Darwinian moment," Golub said.

Write to Bill Alpert at william.alpert@barrons.com

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February 06, 2026 14:18 ET (19:18 GMT)

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