PIK interest income at the 15 largest non-traded BDCs rose 6.4% in Q2 2026 to $292 million. Cash interest income barely moved.
On its own, that says little about credit quality. Payment-in-kind interest isn’t inherently bad. Many loans are written with a PIK component from day one, and some amendments that switch a borrower to PIK may have merit. A rising PIK number is not proof of distress in and of itself.
But in private credit, LPs see very little. They don’t get borrower financials, the marks come from the managers, and a loan can sit near par long after the business behind it starts to struggle. Against that backdrop, PIK is one of the few signals that is consistent, observable and comparable across funds. It ain’t a crystal ball, but it’s about the only thing we get to see..
Here are two good case studies on the subject:
So I pulled eight quarters of income data for the 15 largest non-traded BDCs (and wore out my Ctrl+F keys searching for “PIK”)
PIK is rising while cash interest is flat
The cohort’s PIK interest rose from $186M in Q3 2024 to $314M in Q4 2025, dipped 12.8% in Q1 2026 (more on that below), then recovered to $292M in Q2.
Meanwhile, quarterly cash interest income has hovered between $5.35 billion and $5.40 billion for three consecutive quarters.
To be fair, cash interest income isn’t a perfect measure of portfolio performance, either. It depends on portfolio size, loan repayments, new originations and base interest rates.
But when we compare the two over a full year, the gap is clear. Over the 12 months to June 2026, PIK income grew faster than cash interest at 10 of the 15 funds.
PIK’s share of interest income is rising
You may have noted the blue column chart above is in absolute dollars. And dollar growth can simply mean bigger books. To control for that, we need to look at PIK as a share of total interest income.
PIK made up 5.16% of the cohort’s interest income in Q2, up from 4.56% in Q3 2024. We do have a behemoth in our sample: Blackstone’s BCRED holds about a third of the cohort’s NAV. Without BCRED, the rest of the group stands at 4.86%, the highest in the eight quarters I tracked.
‼️The non-traded group still runs below listed BDCs, where PIK represented 8.2% of interest income as of Q1 2026, according to PitchBook.
The Q1 dip, and why it isn’t good news
Q1 warrants a closer look, because it shows the indicator moving in the “right” direction for the wrong reason.