OCREDIT Touts Strong Payouts Amidst Declining Asset Value

NEW YORK, NY – May 07, 2026 – T. Rowe Price OHA Select Private Credit Fund (OCREDIT) today announced robust shareholder distributions for the first quarter of 2026, painting a picture of operational strength even as the broader private credit market grapples with increasing headwinds. While the fund delivered a total distribution of $0.69 per share, a closer look at its financial results reveals a more complex narrative, marked by a decline in its net asset value and negative quarterly earnings.

The fund, a non-traded business development company (BDC) designed to give individual investors access to private corporate loans, reported an annualized distribution rate of 10.6% and expanded its portfolio by nearly $126.5 million. It added six new companies to its roster, bringing its total holdings to 139 companies in a $3.0 billion investment portfolio.

In a statement, CEO Eric Muller expressed confidence, noting, "Despite recent headlines and broader concerns around private credit, OCREDIT's portfolio remains fundamentally sound and the fund continues to deliver strong distributions to investors." However, the fund's own financial statements show its net asset value (NAV) per share fell to $26.15 as of March 31, 2026, a 2.75% decrease from the $26.89 reported at the end of 2025. This juxtaposition of high income distribution with declining asset value highlights the intricate challenges facing investors in the current economic climate.

Navigating a Turbulent Credit Market

Mr. Muller's reference to "broader concerns" points to a tangible shift in the private credit landscape. After years of rapid growth fueled by low interest rates, the sector is now facing its most significant test since the 2008 financial crisis. The sustained period of higher interest rates is pressuring the cash flows of portfolio companies, many of which were financed with floating-rate debt. This has led to a rise in default rates and an increased use of Payment-In-Kind (PIK) interest, where borrowers defer cash interest payments—a potential signal of underlying financial stress.

Analysts have noted that while private credit remains a critical source of capital, the market is becoming more discerning. The era of easy money has been replaced by a focus on credit quality, covenant strength, and the ability of borrowers to generate sufficient cash flow to service their debt. This environment creates both risks and opportunities for funds like OCREDIT, which must carefully underwrite new loans while managing the health of their existing portfolio.

The Tale of Two Metrics: Income vs. Value

The most telling aspect of OCREDIT's first-quarter report lies in the divergence between its income and its total earnings. The fund generated a healthy Net Investment Income (NII) of $0.59 per share. NII represents the profit made from interest payments on its loans after deducting fund expenses. This figure indicates that, on an operational basis, the fund's core lending activities are generating substantial cash flow.

However, the fund reported a net loss, with Earnings Per Share (EPS) coming in at negative $0.05. For a BDC, earnings include not only NII but also realized and unrealized gains or losses on the investment portfolio. The negative EPS, therefore, reveals that the fund experienced significant unrealized, non-cash losses from a mark-to-market decrease in the value of its holdings. These paper losses completely offset the strong operational income, leading to the overall drop in the fund's NAV.

This decline in the fair value of its investments reflects the market's reassessment of credit risk. As broader economic uncertainty grows, the perceived value of existing loans can decrease, even if the borrower has not yet defaulted. The gap between OCREDIT's strong income generation and its negative total return for the quarter encapsulates the central tension for private credit investors today: collecting high current yields while navigating the potential for capital depreciation.

A Defensive Strategy and Continued Growth

Despite the valuation pressures, OCREDIT's management appears to be actively positioning the fund for the current environment. The portfolio is heavily weighted towards first-lien senior secured loans, which stand first in line for repayment in the event of a borrower's bankruptcy, offering a degree of downside protection. As of March 31, over 91% of the fund's portfolio was comprised of these senior-most loans.

Furthermore, the fund is not retreating. It invested $221.0 million during the quarter, including $89.6 million into six new companies. This activity was funded in part by a significant capital raise, with the company issuing various classes of common shares for total proceeds of $91.9 million during the quarter, and another $23.5 million after the quarter's close. This continuous fundraising and deployment suggest a belief that attractive, well-structured lending opportunities still exist for disciplined investors. The new capital also helps maintain leverage ratios and provides liquidity to meet both new investment commitments and potential shareholder redemptions.

The Retail Rush into Private Credit

OCREDIT's performance and strategy serve as a case study for one of the most significant trends in modern finance: the 'retailization' of private markets. For decades, private credit was the exclusive domain of large institutions. BDCs like OCREDIT have opened the door for individual investors to participate, offering the allure of high yields and diversification away from public stocks and bonds.

The first-quarter results provide a clear-eyed view of the trade-offs. The 10.6% annualized distribution rate is an income stream that is difficult to find in traditional public markets. Yet, the risks are equally real. The NAV decline demonstrates that these are not risk-free investments, and their value can fluctuate with market sentiment and economic conditions. Furthermore, unlike publicly traded stocks, shares in non-traded BDCs are inherently illiquid, meaning investors may not be able to sell their shares quickly, especially during a market downturn.