Trailing four quarter NII coverage of declared distributions, ranked across the universe. Combined with cash income share (the PIK liquidity mismatch signal), coverage trajectory, and spillover cushion where reported. The model that BDC Buzz used to predict PSEC's cut and TCPC's reduction before the announcements landed.
For each BDC we take the trailing four quarters of nii_coverage as reported in the platform's processed timeseries, average it, and express as a percentage. Where the field is missing or fewer than two quarters are reported, the fund is excluded from the ranking rather than shown with a misleadingly thin score.
The 8Q trend shows the slope of the coverage ratio over the last eight quarters. A negative slope means coverage has been deteriorating, even if the current level is healthy. The Scott Kennedy framework treats trajectory as more predictive than level · a fund at 105% and falling is more dangerous than one at 95% and rising.
The cash income share is the PIK liquidity mismatch signal from Octus / Reorg. When this falls below 90%, NII is increasingly composed of non cash PIK accruals while dividends must still be paid in cash. A widening gap between accounting NII and cash NII is the most reliable early warning of a cut.
WEAK Below 95% coverage. The BDC is paying out more than NII generates. Sustainable for a quarter or two if spillover exists; structurally untenable beyond that.
BORD 95% to 105%. Borderline coverage. Could swing either way. Pair with cash income share and PIK trend to read direction.
COV 105% to 120%. Comfortable cushion. Most BDCs sit here when underwriting and rate environment are stable.
STRONG Above 120%. Well covered. Special distributions and dividend increases tend to come from this group.
BDC Buzz's track record on this framework is documented at fifty plus quarters of dividend prediction. PSEC's November 2025 25% cut and TCPC's $0.36 to $0.30 reduction were both flagged months ahead using these signals.