PGIM Private Credit Fund (PGIM) stock intrinsic value fair value estimate & owner earnings analysis

PGIM Private Credit Fund is a perpetual, non-listed lender run by PGIM (Prudential's investment arm). It raises money from investors, adds bank borrowing, and makes floating-rate, first-lien senior secured loans to U.S. middle-market companies, plus a handful of borrowers in the United Kingdom and the Netherlands. At June 30, 2026 it held about $430 million of loans, funded by $294 million of shareholder capital (11.9 million shares at a net asset value of about $24.76) and $148 million drawn on a bank revolver (Sumitomo Mitsui, due October 2028, priced at roughly SOFR plus 2.35%). No loan was on non-accrual status at year-end 2025. Shares have no public market; investors transact at monthly net asset value and can redeem through limited periodic repurchases. Because it is a lender, borrowing is its raw material and interest is an operating cost, so we value the earnings after interest and do not subtract the revolver again. What we measure. Cash from operations is not useful here because it is dominated by loan purchases (negative $128 million in 2025). We instead measure owner earnings as net investment income, plus realized gains and losses, after every fee and expense. The important accounting judgement: through December 31, 2025 the manager waived its entire 1.25% management fee and its incentive fee, and reimbursed operating expenses. Those waivers flattered reported income by about $7.5 million (about 36%) in 2025, and the fee waivers ended on schedule on December 31, 2025. We therefore add them back and treat fees as fully payable. On that basis owner earnings per share were about $1.59 in 2023, $1.90 in 2024 and $1.88 in 2025 (reported income, before this adjustment, was about $3.15 per share in 2025). The first half of 2026, the first period with no fee waivers and only a small remaining expense reimbursement that has now lapsed, is consistent with this: net investment income was $11.8 million, or about $10.6 million without the remaining reimbursement. We set the earnings level from the fully-loaded 2024 and 2025 results as corroborated by the first two quarters of 2026: about $1.89 per share before credit losses. The fund is too young to have a full cycle, so we cannot use a longer window. Growth and reconciliation. Owner earnings per share fell about 1% in 2025 ($1.90 to $1.88); we assume no growth in year one, supported by the stable first-half 2026 results. We credit no growth from raising new capital or adding leverage: new shares are sold at net asset value and add no value per existing share, and a higher loan book would rest on future fundraising, not on anything already secured. We do credit one thing: reinvestment of repaid loans into new loans at today's economics. Loan repayments (turnover was 19% of the portfolio in 2025) are recycled by a manager that originated $99 million, $117 million and $196 million of loans in 2023, 2024 and 2025. We also deduct a credit-loss charge of about 0.5% of the loan book a year (about $0.18 per share), reflecting the $1.0 million realized loss in 2025 on an otherwise clean book, so base owner earnings are about $1.71 per share. Base case, about $26.70 per share. Earnings of $1.71 per share for ten years while repayments are recycled, then the book runs off over four years with capital returned at par, with nothing assumed beyond that because no evidence supports a longer life. The business is worth about $26.70 per share, it owes nothing further beyond the revolver already charged through interest, so the difference is the same, versus a net asset value of about $24.76. Bear case, about $22.60 per share. This fund has never been through a downturn, and every loan is a below-investment-grade, floating-rate first-lien loan. We assume the book stops reinvesting and repays over five years, credit losses of 2% of the portfolio a year for three years and 0.75% after, a 10% income drag from loans that stop paying in those three years, a 100 basis point decline in base rates (the book is fully floating and only about two-thirds funded by equity), and possible repayment of roughly $0.60 per share of past expense reimbursements to the manager, which the agreements allow but do not require. The revolver ($148 million) is due in October 2028; we assume it is renewed or repaid from loan repayments, and the asset coverage of about 300% at mid-2026 leaves a wide margin above the 150% legal minimum. Worth about $22.60 per share, owing nothing further, difference the same. Bull case, about $28.10 per share. Credit losses stay at about 0.25% a year, in line with the record so far, and the manager keeps recycling repayments for fifteen years before a four-year run-off. Upside is deliberately narrow: this is a floating-rate lender whose return on shareholder capital is about 7.6% before losses, so even good execution is only modestly above the 6% we discount at. Worth about $28.10 per share. What could make this wrong. A recession with losses well above 2% of loans a year, faster falling interest rates than we assume, or a higher-cost renewal of the revolver would push value below our bear case. The fund's early loan vintages have not yet been tested through a credit cycle. Fees also are now payable in full and the incentive fee takes 12.5% of income above a 5% annual hurdle. The margin-of-safety price is about $17 per share, roughly 25% below the bear case, reflecting an untested loan book, thin history and limited liquidity.