Davis Polk partner Oran Ebel was quoted in Creditflux discussing the growing number of options business development companies (BDCs) have as they look to improve liquidity. 

The article noted that BDCs have found a way to free up some capital and deleverage by selling CLO equity, which has some unique benefits.

“Values of CLO equity are tied to the ultimate performance of the loans in the CLO, so buying CLO equity could be seen as a vote of confidence in performance of the underlying portfolio,” Oran explained. “It also can be easier to execute than a name-by-name sale of the underlying loans.” 

He added that BDCs use CLOs to obtain leverage and drive returns, but historically the market has not seen BDCs sell large amounts of their CLO equity in a secondary transaction. This may be because there has not been much pressure to do so previously due to strong historical inflows.  

“We are in a different environment now than we were a year or two ago…BDC sponsors are evaluating new ways to access liquidity to meet the current market environment,” Oran said.

“BDCs find a new liquidity valve in CLO equity secondary sales,” Creditflux (August 21, 2026) (subscription required)

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