HLEND's $382.5 million markdown shows restructurings bite

HPS Corporate Lending Fund's first-half numbers have the feel of a bill finally arriving. The half ended June 30. HLEND booked $382.5 million in net unrealized depreciation. AltsWire reported the year-earlier first-half markdown at $4.7 million. The latest figure is more than 80 times that. The second quarter alone carried $156.3 million of the damage. The prior-year quarter had $12.4 million.

Operating results moved with the marks. Net increase in net assets from operations was $211.8 million for the half. A year earlier it was $343.6 million. The decline works out to 38%. Cumulative distributable earnings swung harder. At the end of 2025 the balance was positive. It was $71.2 million. By the end of June it sat at negative $342.3 million. That is a turn of more than $413 million.

The realized losses tell a harder story. HLEND recorded $49.3 million in losses tied to restructurings during the first half. The restructurings covered four private debt positions. The largest was $16.6 million on Foundation Automotive US Corp. Daphne S.P.A. cost $15.8 million. Spanx LLC was $15.6 million. DCA Acquisition Holdings LLC was $1.4 million. Markdowns can be reversed; realized losses on restructured credits are permanent.

The credit data are mixed. Non-accruals reached 1.27% of debt and income-producing investments at amortized cost. The year-end rate was 1.08%. The fair-value measure eased to 0.7%. It had been 0.74%. The portfolio shrank to 359 companies. It held 380 at year-end. Weighted average yield on the total portfolio at amortized cost slipped to 9.2%. The prior reading was 9.4%. That remains a high yield for a credit fund. Asset coverage improved to 198.5%. The prior level was 195.7%. The BDC minimum is 150%.

Redemption requests keep climbing. Shareholders tendered roughly 13.3% of shares outstanding in the second quarter. The first quarter rate was 9.3%. The fund responded then by prorating repurchases to about 54%. That payout cost $610.8 million. On July 28 the board rejected a below-NAV mini-tender from Cox Capital. It pointed to the June 30 net asset value. That value was $24.42 per share. Aggregate NAV stood at $12.05 billion.

HLEND is not the only fund in this position. BCRED, Blackstone's semi-liquid private credit fund, posted its fourth straight quarterly NAV decline earlier this month, as previous coverage noted. HLEND's distinction is the combination: a negative cumulative earnings balance, realized losses from restructurings, and an exit queue that keeps stretching.

None of that makes the fund insolvent. Asset coverage of 198.5% leaves a real margin. The BDC minimum is 150%. For investors in a nontraded BDC, the quarterly tender is the one liquid exit. The rising tender requests show shareholders using it. The next repurchase offer will show how the sponsor balances the queue against NAV.