Monetary Matters with Jack Farley “Overblown” Sell-off in Software Loans | Matthew Bloomfield on Public BDCs (Business Development Companies) and Collateralized Loan Obligations (CLOs)
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Apr 26, 2026 
Matthew Bloomfield, President and partner at Palmer Square Capital, is a structured-credit and CLO specialist. He explains why software loan sell-offs were overblown and how AI fears drove trading. He breaks down BDC portfolio composition, syndicated versus private credit, CLO mechanics and equity dynamics. He also discusses tactical opportunities from market dislocations and buyback versus lending tradeoffs.
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Favor Buybacks Over Issuance When Shares Trade Deeply Discounted
- With many BDCs trading at discounts, buybacks are often the most accretive use of capital versus issuing shares.
- Palmer Square instituted buybacks and expects boards to favor repurchases over issuance while discounts persist.
Non Accruals Remain Low Despite Cycle Concerns
- Non-accruals (loans on which interest is not being accrued) remain low for many BDCs; PSBD's non-accruals are sub-25 basis points.
- Matt cites legacy 2021-22 deals that struggle with high leverage, but overall credit trends stay benign.
CLOs Are Asset Liabilities Arbitrage Where Excess Spread Goes To Equity
- CLOs pool hundreds of leveraged loans and issue tranched liabilities (AAA down to BB), with excess spread flowing to equity as residual returns.
- Equity returns derive from the difference between asset yields and liability costs after structural waterfall rules.