KBRA Affirms Ratings for Franklin BSP Capital Corporation

KBRA affirms the BBB issuer and senior unsecured debt ratings for Franklin BSP Capital Corporation ("FBCC" or "the company"). The rating Outlook is Stable.

Key Credit Considerations

The ratings and Outlook are supported by FBCC’s affiliation with Franklin Templeton, a leading global asset manager with $1.68 trillion in AUM as of March 31, 2026, as well as FBCC's ties to Franklin Templeton's wholly owned subsidiary, Benefit Street Partners ("BSP"), a credit platform with $92.9 billion in AUM as of March 31, 2026. The credit platform includes a $25.5 billion direct lending platform that provides SEC exemptive relief to co-invest among BSP affiliates and enhances scale in the competitive private credit environment.

Ratings are also supported by FBCC's diversified $4.1 billion investment portfolio, comprised of 148 companies. As of March 31, 2026, the investment portfolio is comprised mostly of first lien senior secured loans (75.7%, and 90.8% when looking through to the joint venture ("JV"), Post Road Equipment Finance, LLC, and Siena Capital Finance, LLC) to middle market companies. The investment portfolio includes 34 industries, excluding investments in the JV. The top three portfolio sectors, excluding investments in JVs and asset based finance, are Health Care Providers & Services, Professional Services, and Software. Notably, at 9.6% of the investment portfolio, software is comparatively low. Despite recent negative valuation marks, non-accrual investments as a percentage of total investments at 1.4% and 0.8% of cost and fair value, respectively, decreased year-over-year from 3.0% and 1.8%, respectively, due principally to the resolution and exit of several legacy challenged credits. Payment-in-kind income is low relative to peers at 4% of investment income.

Further supporting the ratings is FBCC’s solid access to capital markets, backed by a diversified funding base that includes a secured bank facility, SPV asset facilities, and senior unsecured debt. As of March 31, 2026, FBCC’s liquidity was solid with available bank lines and cash/equivalents of $693.1 million, including $619.8 million of bank line availability and $73.2 million of unrestricted cash, compared with no near-term maturities and unfunded portfolio company commitments of $638.5 million, a portion of which remains contingent upon the satisfaction of covenant and transaction-related conditions. With preferred equity accounted for as unsecured debt, unsecured debt to total debt was 34%, providing financial flexibility and sufficient unencumbered assets for the benefit of the unsecured noteholders. Gross and net leverage, including preferred equity as debt, are 1.25x and 1.21x, respectively, within FBCC's 1.00x–1.25x target net range. Although reported leverage excludes debt within unconsolidated investment vehicles, KBRA considers this exposure in its analysis and believes FBCC’s economic leverage profile remains appropriate for the current rating level.

Strengths are counterbalanced by potential risks related to FBCC’s business as a BDC, the illiquid nature of the assets, and retained earnings constraints as a regulated investment company ("RIC"), as well as an uncertain economic environment with high base rates, inflation, and geopolitical risk.

Franklin BSP Capital Corporation is a non-traded externally managed non-diversified investment management company regulated as a business development company under the Investment Company Act of 1940. The company has elected to be treated as a RIC. The company is managed by Franklin BSP Capital Adviser L.L.C., an affiliate of Benefit Street Partners, which is a wholly-owned subsidiary of Franklin Templeton.

Rating Sensitivities

The ratings are unlikely to be upgraded in the intermediate term. The Outlook could be revised to Negative, or the rating could be downgraded, if there is a significant downturn in the U.S. economy that has a negative impact on earnings performance, asset quality, and leverage. Other unexpected asset quality deterioration, a sustained rise in leverage metrics, or a significant change in senior management could also pressure the ratings.

To access ratings and relevant documents, click here.

Methodology