The pain is spreading among business development companies that put money to work in an unloved corner of the capital markets: CLO equity.

Business development companies, closed-end funds that trade on an exchange, like stocks, are themselves out of favor. They are trading at steep discounts to their net asset values as many of their investments sour, causing them to trim payouts to shareholders. That’s particularly true of BDCs that invest in the equity, or most subordinate tranches of notes issued by collateralized loan obligations.

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