GOLUB Capital BDC (GBDC) risk factors, 2025 10-K

Risks Related to Our Business and Structure

1. 01We are subject to risks associated with the current interest rate environment and to the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income29% rewritten
2. 02A number of entities compete with us to make the types of investments that we plan to make, and we believe that recent market trends have increased the number of competitors seeking to invest in loans to private, middle-market companies in the United Statesnew
3. 03Changing interest rates could affect the value of our investments and make it more difficult for portfolio companies to make periodic payments on their loans52% rewritten
4. 04We are dependent upon GC Advisors for our success and upon its access to the investment professionals and partners of Golub Capital and its affiliates39% rewritten
5. 05when a default does not occur, a private equity sponsor could be less willing to provide ongoing financial support to a portfolio company after it has received one or more capital distributions on its investmentnew
6. 06We can provide no assurance that we will be able to replicate the historical results achieved by other entities managed or sponsored by members of GC Advisors’ investment committee, or by GC Advisors or its affiliates
7. 07Our financial condition, results of operations and cash flows depend on our ability to manage our business effectively
8. 08There are significant potential conflicts of interest as a result of our arrangements with GC Advisors and its affiliates and GC Advisors’ investment committee that could affect our investment returns
9. 09There are conflicts related to the obligations of GC Advisors’ investment committee, GC Advisors or its affiliates have to other clients and conflicts related to fees and expenses of such other clients64% rewritten
10. 10GC Advisors’ investment committee, GC Advisors or its affiliates could, from time to time, possess material non-public information, limiting our investment discretion
11. 11Our management and incentive fee structure creates incentives for GC Advisors that are not fully aligned with the interests of our stockholders and could induce GC Advisors to make certain investments, including speculative investments
12. 12Our securities could be purchased by GC Advisors or its affiliates
13. 13The valuation process for certain of our portfolio holdings creates a conflict of interestnew
14. 14Conflicts related to other arrangements with GC Advisors or its affiliates
15. 15Our ability to enter into transactions with our affiliates is restricted, which could limit the scope of investments available to us88% rewritten
16. 16We have entered into the Adviser Revolver, resulting in a conflict of interest between GC Advisors’ obligation to act in its own best interest and in our best interest
17. 17GC Advisors could make certain investment decisions for the purpose of receiving transaction fees
18. 18Reductions, waivers or absorptions of fees and costs can temporarily result in higher returns to investors than they would otherwise receive if full fees and costs were charged
19. 19GC Advisors could prioritize its relationship with a borrower or private equity sponsor instead of seeking the most advantageous terms for our investments
20. 20GC Advisors operates in multiple business lines and jurisdictions and could pursue additional business lines or operations in additional jurisdictions, which could create a conflict of interest in the allocation of its time and focus31% rewritten
21. 21Golub Capital could pursue strategic transactions, which could create a conflict of interest in the allocation of GC Advisors’ time and focus46% rewritten
22. 22We and GC Advisors could be the target of litigation or regulatory investigations25% rewritten
23. 23We will be subject to corporate-level income tax if we are unable to qualify for taxation as a RIC
24. 24We could need to raise additional capital to grow because we must distribute most of our income
25. 25We could have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income
26. 26The tax treatment of a non-U.S. stockholder in its jurisdiction of tax residence will depend entirely on the laws of such jurisdiction and could vary considerably from jurisdiction to jurisdiction
27. 27Regulations governing our operation as a business development company affect our ability to, and the way in which we, raise additional capital. As a business development company, the necessity of raising additional capital exposes us to risks, including the typical risks associated with leverage
28. 28We finance our investments with borrowed money, which will accelerate and increase the potential for gain or loss on amounts invested and could increase the risk of investing in us34% rewritten
29. 29As a business development company, we generally are required to meet the asset coverage ratio of total assets to total borrowings and other senior securities, which include our borrowings and any preferred stock that we could issue in the future, that is applicable to us under the 1940 Actnew
30. 30(1)Assumes $9.0 billion in total assets, $4.9 billion in debt and $4.0 billion in net assets as of September 30, 2025 and an effective annual interest rate of 5.8% as of September 30, 202536% rewritten
31. 31We are subject to risks associated with the Debt Securitizations46% rewritten
32. 32We are subject to certain risks as a result of our direct or indirect interests in the junior notes and membership interests of each Securitization Issuer58% rewritten
33. 33The notes and membership interests that we hold that are issued by the Securitization Issuers are subordinated obligations of the applicable Securitization Issuer and we could be prevented from receiving cash from such Securitization Issuer
34. 34The interests of holders of the senior classes of securities issued by the Securitization Issuers could not be aligned with our interests46% rewritten
35. 35Under the documents governing each of the Debt Securitizations, there are two asset coverage tests applicable to the Class A-1R 2024 Notes, the Class A-2RR 2024 Notes, the Class B-R 2024 Notes and the Class C-R 2024 Notes, with respect to the 2024 Issuernew
36. 36We could be required to assume liabilities of a Securitization Issuer and are indirectly liable for certain representations and warranties in connection with each Debt Securitization
37. 37Certain Securitization Issuers could issue additional Notes34% rewritten
38. 38We are subject to risks associated with any Revolving Credit Facility that utilizes a Funding Subsidiary as our interests in any Funding Subsidiary are subordinated and we could be prevented from receiving cash on our equity interests from a Funding Subsidiary89% rewritten
39. 39priority of payment to every other obligation of such Funding Subsidiary and are subject to certain payment restrictions set forth in each Revolving Credit Facilitynew
40. 40The ability to sell investments held by our Funding Subsidiaries is limited
41. 41We can enter into repurchase agreements, which are another form of leverage
42. 42Adverse developments in the credit markets can impair our ability to enter into new debt financing arrangements
43. 43Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties could have a material adverse effect on us, GC Advisors and our portfolio companies
44. 44See “Business — Regulation — Qualifying Assets.”
45. 45The majority of our portfolio investments are valued using the investment’s fair value, as determined in good faith by the Valuation Designee, subject to oversight by the Board and, as a result, there could be uncertainty as to the value of our portfolio investments23% rewritten
46. 46Government intervention in the credit markets could adversely affect our business58% rewritten
47. 47The Board could change our investment objective, operating policies and strategies without prior notice or stockholder approval
48. 48Provisions of the General Corporation Law of the State of Delaware and our certificate of incorporation and bylaws could deter takeover attempts, which could have an adverse effect on the price of our common stock
49. 49GC Advisors can resign on 60 days’ notice, and we can provide no assurance that we would be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations
50. 50The Administrator can resign on 60 days’ notice, and we can provide no assurance that we would be able to find a suitable replacement, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations
51. 51Our business could be unable to realize the benefits anticipated by the GBDC 3 Merger, including estimated cost savings, or it could take longer than anticipated to achieve such benefits

Risks Relating to Our Investments

1. 52Economic recessions or downturns could impair our portfolio companies and defaults by our portfolio companies will harm our operating results
2. 53Inflation could adversely affect the business, results of operations and financial condition of our portfolio companies
3. 54Our debt investments are risky and we could lose all or part of our investments
4. 55Our investments in leveraged portfolio companies are risky, and we could lose all or part of our investment. Investment in leveraged companies involves a number of significant risks
5. 56Our investments in private and middle-market portfolio companies are risky, and we could lose all or part of our investment60% rewritten
6. 57companies often require additional financing to expand or maintain their competitive position, and they could have a more difficult time obtaining additional capital than larger companiesnew
7. 58An investment strategy focused primarily on privately held companies presents certain challenges, including, but not limited to, the lack of available information about these companies
8. 59We would be subject to risks if we are required to assume operation of portfolio companies upon default30% rewritten
9. 60The lack of liquidity in our investments could adversely affect our business
10. 61Price declines and illiquidity in the corporate debt markets could adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation28% rewritten
11. 62Our portfolio companies could prepay loans, which could reduce our yields if capital returned cannot be invested in transactions with equal or greater expected yields
12. 63We are subject to risks to the extent we invest in covenant-lite loans83% rewritten
13. 64We are subject to credit and default risk and our portfolio companies could be unable to repay or refinance outstanding principal on their loans at or prior to maturity
14. 65We have not yet identified the portfolio company investments we will acquire and we could have difficulty sourcing investment opportunities
15. 66We are a non-diversified investment company within the meaning of the 1940 Act, and we are therefore not limited with respect to the proportion of our assets that could be invested in securities of a single issuer
16. 67Our portfolio could be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry
17. 68We could hold the debt securities of leveraged companies that could, due to the significant volatility of such companies, enter into bankruptcy proceedings
18. 69Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio
19. 70Because we generally do not hold controlling equity interests in our portfolio companies, we generally will not be able to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments
20. 71Our portfolio companies could incur debt that ranks equally with, or senior to, our investments in such companies and such portfolio companies could fail to generate sufficient cash flow to service their debt obligations to us41% rewritten
21. 72The disposition of our investments could result in contingent liabilities
22. 73GC Advisors’ liability is limited, and we have agreed to indemnify GC Advisors against certain liabilities, which could lead GC Advisors to act in a riskier manner on our behalf than it would when acting for its own account33% rewritten
23. 74We could be subject to risks related to investments in non-U.S. companies
24. 75We could be subject to risks if we engage in hedging transactions and could become subject to risks if we invest in foreign securities
25. 76We could suffer losses from our equity investments
26. 77We could be subject to lender liability claims with respect to our portfolio company investments

Risks Relating to Investors in Our Securities

1. 78Investing in our securities could involve an above average degree of risk
2. 79Shares of closed-end investment companies, including business development companies, often trade at a discount to their net asset value
3. 80There is a risk that investors in our equity securities will not receive distributions or that our distributions will not grow over time and a portion of our distributions could be a return of capital22% rewritten
4. 81We have not established any limit on the amount of funds we can use from available sources, such as borrowings, if any, or proceeds from private placements of our common stock, to fund distributions (which could reduce the amount of capital we ultimately invest in assets)
5. 82The market price of our common stock after the GBDC 3 Merger could be affected by factors different from those affecting our common stock before the GBDC 3 Merger
6. 83The market price of our securities could fluctuate significantly
7. 84The Unsecured Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have incurred or could incur in the future
8. 85and other liabilities (including trade payables) incurred by any of our existing or future subsidiaries, financing vehicles or similar facilities. All of the existing indebtedness of our subsidiaries is structurally senior to the Unsecured Notesnew
9. 86The indenture governing the Unsecured Notes contains limited protection for holders of the Unsecured Notes
10. 87If an active trading market for the Unsecured Notes does not develop, holders could be unable to resell them
11. 88If we default on our obligations to pay our other indebtedness, we could be unable to make payments on the Unsecured Notes
12. 89If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required
13. 90Our current indebtedness could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations under the Unsecured Notes and our other debtnew
14. 91A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or to any of the Unsecured Notes, if any, or change in the debt markets, could cause the liquidity or market value of any of the Unsecured Notes to decline significantly
15. 92An increase in market interest rates could result in a decrease in the market value of the Unsecured Notes
16. 93The optional redemption provision could materially adversely affect the return on the Unsecured Notes
17. 94We could be unable to repurchase the Unsecured Notes upon a Change of Control Repurchase Event
18. 95We are a holding company and depend on payments from our subsidiaries in order to make payments on any debt securities that we could issue as well as to pay distributions on our common stock. Any debt securities that we issue will be structurally subordinated to the obligations of our subsidiaries
19. 96Holders of any preferred stock that we could issue will have the right to elect members of the board of directors and have class voting rights on certain matters39% rewritten
20. 97Our common stockholders’ interest in us could be diluted if they do not fully exercise subscription rights in any rights offering. In addition, if the subscription price is less than our NAV per share, then common stockholders will experience an immediate dilution of the aggregate NAV of their sharesnew
21. 98Our stockholders will experience dilution in their ownership percentage if they do not participate in our dividend reinvestment plan
22. 99Our stockholders could receive shares of our common stock as dividends, which could result in adverse tax consequences to them
23. 100Sales of substantial amounts of our common stock in the public market could have an adverse effect on the market price of our common stock
24. 101The trading market or market value of our publicly issued debt securities could fluctuate
25. 102Terms relating to redemption could materially adversely affect the return on any debt securities that we could issue
26. 103our common stock could become more volatile
27. 104Our stock repurchase program could affect the price of our common stock and increase volatility and could be suspended or terminated at any time, which could result in a decrease in the trading price of our common stock
28. 105We are currently in a period of capital markets disruption and economic uncertainty80% rewritten
29. 106illiquidity could impair our profitability or result in losses. These factors also could adversely affect the availability or cost of our leverage, which would result in lower returnsnew
30. 107Events outside of our control, including public health crises, could negatively affect our portfolio companies, our investment adviser and the results of our operations
31. 108We could experience fluctuations in our quarterly operating results
32. 109Political uncertainty could adversely affect our business72% rewritten
33. 110The outcome of the U.S. presidential, congressional and other elections creates significant uncertainty with respect to the legal, tax and regulatory regime in which GC Advisors and its affiliates, as well as Golub Capital BDC and its investments, will operatenew
34. 111Trade negotiations and related government actions may create regulatory uncertainty for our portfolio companies and our investment strategies and adversely affect the profitability of our portfolio companiesnew
35. 112GC Advisors and its affiliates, their respective clients (including us), and the investments such clients hold could be affected by war and other international conflictsnew
36. 113The current state of the economy and volatility in the global financial markets could have a material adverse effect on our business, financial condition and results of operationsnew
37. 114New or modified laws or regulations governing our operations could adversely affect our business
38. 115We incur significant costs as a result of being a publicly traded company
39. 116Our compliance with Section 404 of the Sarbanes-Oxley Act involves significant expenditures, and non-compliance with Section 404 of the Sarbanes-Oxley Act would adversely affect us and the market price of our common stock
40. 117Technological innovations and industry disruptions could negatively impact us98% rewritten
41. 118We are highly dependent on information systems and systems failures could significantly disrupt our business, which could, in turn, negatively affect the market price of our common stock and our ability to pay distributions
42. 119Failure or alleged failure to comply with applicable data protection and privacy laws and regulations could subject us to ongoing costs and, in some cases, fines and reputational harm
43. 120Cybersecurity risks and cyber incidents could adversely affect our business or the business of our portfolio companies27% rewritten
44. 121Our business and operations could be negatively affected if we become subject to stockholder activism, which could cause us to incur significant expense, hinder the execution of our investment strategy or impact our stock price
45. 122We and/or our portfolio companies could be materially and adversely impacted by global climate change
46. 123We are subject to risks related to corporate social responsibility39% rewritten