Q3 2025 Crescent Capital BDC Inc Earnings Call
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Please note that Crescent capital BDC, Inc. May be referred to as C cap Crescent be D C or the company throughout the call.
I'll start with important reminders.
Comments made over the course of this conference call and webcast may contain forward looking statements and are subject to risks and uncertainties.
The company's actual results could differ materially from those expressed in forward looking statements for any reason, including those listed in its SEC filings.
Henry Chung: In order to summarize that, I would say that for the broader portfolio, it's certainly the case that we have seen management teams and sponsors enabled to respond proactively to the actions outside of specific portfolio companies where we just have seen our view is that that outlook is going to be longer term.
The company assumes no obligation for update any searching taking any search forward looking statements.
Please also note that past performance or market information is not a guarantee of future results.
I'll now turn the call over to Dan Mcmahon.
Thank you yesterday after the market closed the company issued its earnings press release for the third quarter ended September 32025.
Robert Dodd: Got it. Got it. Thank you for that. One more, if I can. Your focus obviously is core lower middle market. Lower middle market isn't what it used to be. The tone this quarter from other BDCs seems to be that the competition in the core and lower market has heated up in terms of spreads, etc., has heated up at kind of an accelerated rate as we've gone through this year. Can you give an economy what do you think is the state of the market? You're still getting coverage, but are they as tight as they were? The spreads aren't necessarily where they were. Obviously, everybody's seen spread compression, but to some degree, has it exceeded your expectations for what you normally see in your core market? When do you think that changes if it does?
And posted a presentation to the IR section of its website at Www Dot Crescent BDC Dot com.
Patients should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC.
As a reminder, this call is being recorded for replay purposes.
On today's call will be <unk>, Chief Executive Officer, Jason Borough, President, Henry Chung, and Chief Financial Officer, Gierhart and Lombard.
With that I'd now like to turn it over to Jason.
Thank you Dan Hello, everyone and thank you all for joining us.
I'll start today's call by summarizing our third quarter results.
Although the app with some thoughts on the market.
In our portfolio and our forward earnings outlook.
In terms of third quarter earnings we reported net investment income of 46 per share.
Change from the prior quarter.
Henry Chung: Robert, Jason here. Thanks. I would say we've certainly all seen spread compression this year across the middle market, whether it's lower core or upper. It's certainly been exacerbated in the upper where you're really competing with the broadly syndicated loan market. Quite frankly, you can get single B type spreads in that market in the 300s. Where we're operating, I would say not a significantly notable pickup in increased competition from actual new competitors. I think there's certainly competition for deals because of lower volumes, certainly in the first half of the year. That has resulted in some spread compression in our end of the market as opposed to new entrants.
Translating into an annualized NII yield of nine 5%.
Earnings continue to remain in excess of our dividend, 110% base dividend coverage for the quarter.
Net asset value was $19 28 per share as of September 30, compared to $19 55 per share as of June 30.
The quarter over quarter decline was primarily due to unrealized and realized losses stemming from certain portfolio companies and have demonstrated we can operating outlooks due to tariffs.
Let me now discuss what we're seeing in our markets and our positioning.
With respect to the macroeconomic environment. The U S economy has largely remained resilient.
While we have been seeing signs of some slowing momentum amid mixed labor and economic data.
I believe that the federal reserve's recent rate cuts combined with greater clarity on tariff policies may lead to near term growth and L deal activity.
On new investment opportunities, our private credit platform continues to maintain lethal and the majority of our transactions.
Henry Chung: What I would say is that I think that we're still seeing transactions, high-quality private transactions in the lower and core in the S-plus 450 to 500 range versus what you might see in the upper mid in the low 400 range. Importantly, different leverage structures, right? In the upper mid market, you might see deals getting done at the low 400s at one or two turns more leverage than what you might see in the lower and core. From a risk-adjusted standpoint, we like where we're investing. I do think from a spread standpoint, we have some optimism that with the demonstrated rate cuts by the Fed, we are seeing increased pipeline activity, increased dialogue. Now, we've said this before, but we do have some optimism around a real pickup in activity in 2026.
Given our focus on the core and lower Middle markets. We believe we drive better structural protections and deals and the more competitive upper middle market or BSL replacement segment.
Our segment focus provides us with the opportunity to lead our transactions and drive the documentation.
We are focused on strong cash flow generation.
Type EBITDA definitions as well as enhanced monitoring rights, which allow us to be proactive versus reactive as we think about our approach to portfolio management.
While we have no exposure to first brands and tricolor. These recent bankruptcies highlight governance issues that we seek to avoid by working with well established private equity sponsors.
We believe we drive better structural protections than deals in the more competitive upper middle market or BSL replacement segments.
Our segment Focus provides us with the opportunity to lead our transactions and drive the documentation.
We've established our private credit business by partnering closely with our long standing sponsor relationships to uphold strong governance and oversight across our portfolio of companies.
We are focused on strong cash flow generation.
Let's shift gears and discuss the investment portfolio.
Tight EVA definitions, as well as enhanced monitoring rights, allow us to be proactive versus reactive as we think about our approach to portfolio management.
Please turn to slide 13 and 14.
We ended the quarter with approximately $1 6 billion of investments at fair value across our highly diversified portfolio of 187 companies.
Well, we have no exposure to First Brands and tri-color these recent bankruptcies highlight governance issues that we seek to avoid by working with Wells established private Equity sponsors.
An average investment size of approximately 0.6% of the total portfolio.
Our top 10 largest borrowers represented 16% of the portfolio.
Robert Dodd: Just to add to that, across the platform, as you know, Robert, CCAP is a small part of Crescent's broader private credit platform. We've been actually quite active, with a lot of activity coming in recent quarters. We're just at around $6 billion total over the last 12 months that have been deployed across private credit here. That's with taking our spots. It's certainly been competitive on the rate side, but what we're not really willing to compromise is on how these businesses are capitalized, and our corresponding documentation that goes with it.
We've established our private credit business by partnering closely with our long-standing sponsor relationships to uphold strong governance and oversight across our portfolio companies.
We are believers in modulating credit risk position size.
Let's shift gears and discuss the Investment Portfolio.
We have maintained an investment portfolio that consists primarily of first lien loans since inception.
Please turn to slide 13 and 14.
Electively, representing 90% of the portfolio at fair value at quarter end.
Additionally, we have positioned our portfolio to focus on domestic service oriented businesses and in our view mitigate concentrated risks associated with tariffs shifting governance, sending and other policy changes.
We ended the quarter with approximately $1.6 billion of investments that are at fair value across a highly diversified portfolio of 187 companies.
An average investment size, approximately 0.6% of the total portfolio.
Finally, our investments are supported by well capitalized private equity sponsors with 99% of our debt portfolio and sponsor backed companies as of quarter end.
Our top 10 largest borrowers represented 16% of the portfolio, as we are believers in modulating credit risks to position size.
Robert Dodd: I think there's a strong case here for, in the near term, expecting that opportunity set to be larger over the next 12 months than it was over the prior 12 months, which I think kind of feeds to your original question as well, which is thinking about levers here to continue to drive attractive reinvestment and consistent investment income here. Got it. Thank you.
We have partnered with our sponsors to invest and well capitalized borrowers with significant equity capital beneath us.
We have maintained an Investment Portfolio that consists primarily of personally loaned. Since Inception, collectively representing 90% of the portfolio that fair value in quarter end,
We note that the weighted average loan to value of the portfolio at time of them underwrite is approximately 40%.
Additionally, we have positioned our portfolio to focus on domestic service-oriented businesses. In our view, this strategy mitigates the concentrated risks associated with tariffs.
Moving onto our dividend.
Shifts and governance, sending and other policy changes.
For the fourth quarter, our board declared a regular dividend of 42 cents per share, which represents a 9% and 12% annualized dividend yield based on NAV at today's closing stock price respectively.
Finally, our investments are supported by well, capitalized. Private Equity sponsors at 99% of our debt. Portfolio is sponsored by companies as a quarter end.
This dividend is payable on January 15, 2026.
Henry Chung: Thank you.
We have partnered with our sponsors to invest in well-capitalized borrowers with significant equity and capital beneath us.
Operator: Your next question comes from the line of Mickey Schlein with Clearstreet. Please go ahead.
<unk> holders of record as of December 31.
This marks our 39th consecutive quarter of hurting our regular dividend that seek out.
And we note that the weighted average loan to value in the portfolio. A time of underwrite is approximately 40%
Mickey Schleien: Yes. Good afternoon, everyone. Sticking to the issue of spreads, looking at page eight of your presentation, it was, I'd say, gratifying to see that spreads on your new investments increased quarter to quarter. Could you help us understand what drove that increase?
moving on to our dividend.
Before I turn it over to Henry I'd like to take a moment to discuss our outlook for C caps earnings potential.
And base dividend in light of recent rate cuts and potential further easing in 2026.
Looking ahead.
For the fourth quarter, our board declared a regular dividend of $0.42 per share, which represents a 9% annualized dividend yield based on NAV and a 12% yield based on today's closing stock price, respectively.
This space at a lower base rate environment may gradually reduced portfolio yields and place some pressure on net investment income given our largely floating rate nature of direct lending portfolios.
Henry Chung: Yeah. Thanks for the question. This is Henry. We've actually been able to, I'd say, over the last five quarters here, kind of hold the origination spreads at around that 500 over SOFR baseline. It's going to be a mix of incremental activity from our existing portfolio, a strong source of our origination on a quarter-to-quarter basis, our add-ons with existing portfolio companies, as well as just opportunities that we're seeing within our specific market segments that kind of tie closer to that 475 to 525 over SOFR band. As you kind of think about where we play in the market, as well as add-ons being a large, can it be anywhere from 1/3 to 1/2 of our origination on a quarter-to-quarter basis, those two dynamics are certainly providing us the ability to maintain spreads here, even in this market.
This dividend is payable on January 15, 2026, to stockholders of record as of December 31.
We believe several factors positions <unk> well to address base rate driven earnings headwinds.
This marks our 39th consecutive quarter of earning our regular dividend that we seek out.
To start the <unk>.
Before I turn it over to Henry, I'd like to take a moment to discuss our outlook for ccaps earnings potential.
Third quarter of 2025, our net investment income once again exceeded our base dividend 110% coverage.
And bass dividend in light of recent rate, cuts and potential further easing in 2026.
Looking ahead.
On the liability side approximately half of our borrowings are also floating rate, allowing funding cost to adjust downward to preserve our net interest margin.
We anticipate that a lower base rate, environment, May gradually reduce portfolio yields and place. Some pressure on net investment income, given the largely floating rate, nature of direct running portfolios,
We have several additional levers that may help offset potential earnings pressure from lower base rates and support future growth.
We believe several factors positioned CCAP well to address base rate-driven earnings headwinds.
First we ended the quarter with net debt to equity of 120 times.
Below the upper end of our 1.30 times target range.
To start, our net investment income for the third quarter of 2025 once again exceeded our base dividend, achieving 110% coverage.
This provides us with flexibility to leverage crescents attractive origination pipeline and enhance earnings through prudent portfolio growth.
On the liability side, approximately half of our borrowings are also floating rates. Allowing funding cost to adjust downward to preserve our net interest margin
<unk> private credit platform has been active.
<unk> 6 billion of capital committed to new and add on investments on a trailing 12 month basis, including over $1 7 billion during the third quarter.
Mickey Schleien: Would it be reasonable to say that the spread expansion quarter to quarter did not include taking on excessive risk?
we have several additional levers that may help offset potential earnings pressure from lower base rates and support future growth
First, we ended the quarter with net, debt Tech Equity of 1.200 times.
Being associated with Crescent private credit platform provides ample opportunity for C captured reinvest and attractive private credit investment opportunities.
Below the upper end of our 1.30 times target range.
Henry Chung: Yes. I would absolutely agree with that. We're very conscious to stay within our lane in terms of where we're underwriting with respect to security. We haven't deviated from being focused on top of the capital structure. Everything we do historically and today remains sponsored by portfolio companies. It's never been our ethos to stretch for yield by either taking on leverage beyond what we think is prudent, or expanding to company types that are outside of our comfort zone.
Second.
This provides us with the flexibility to leverage our presence, attractive origination pipeline, and enhance earnings through prudent portfolio growth.
A more accommodative rate environment should serve as a tailwind for new deal activity.
Lower borrowing costs are expected to support renewed M&A and refinancing volumes, creating opportunities for attractive reinvestment and additional fee income.
Preference: The private credit platform has been active with over $6 billion of capital committed to new and add-on investments. On a trailing 12-month basis, including over $1.7 billion during the third quarter.
We are optimistic that over time, we may see higher levels of noninterest related income as compared to this third quarter driven by a pickup in origination and structuring fees on new investments as well as accelerated amortization on realizations.
Being associated with Crescent's private credit platform provides ample opportunity for CCAP to reinvest in attractive private credit investment opportunities.
Second.
Third our spillover income remains a meaningful source of earnings support at.
Serve as a Tailwind for New Deal activities.
Mickey Schleien: I understand. That's helpful. Staying with the presentation, but switching to page 15, new equity investments represented 20% of this quarter's new investments. Could you say what those equity investments were, and what did you see that made them interesting to you?
At approximately $1 10 per share. This balanced provides a cushion as we navigate the current rate outlook.
Lower borrowing costs are expected to support renewed M&A and refinancing volumes, creating opportunities for attractive reinvestment and additional fee income.
And finally, we have a demonstrated record of alignment with shareholder since inception.
We are optimistic that over time, we may see higher levels of non-interest-related income as compared to this third quarter.
Each of our portfolio ramping initiatives, both when we established <unk> in 2015 and listed C. Cap in 2020 were supported by our fee structure during the respective ramps.
Henry Chung: Yeah. Those new equity investments are actually tied to restructurings of portfolio companies where we recapitalize part of the capital structure into both the debt and equity components. When you think about the breakdown there, the majority of what you'll see on that page is tied to the recapitalization and change of control that we did with two portfolio companies during the quarter.
Driven by a pickup and origination and structuring fees on new Investments as well as accelerated. Amortizations on realizations.
Additionally, we have committed substantial advisor support for accretive not dilutive growth opportunities, including our two public acquisitions.
Third, our spillover income remains and meaningful source of earning support.
At approximately $1.10 per share, this balance provides a cushion as we navigate the current rate outlook.
As I noted last quarter.
Our positioning has and always will be for a long term.
And finally, we have a demonstrated record of alignment with shareholders since Inception.
And today, we are comfortable with our dividend level.
With that I will now turn the call over to Henri Henri.
Thanks, Jason Please turn to slide 15, where we highlight our recent activity.
Each of our portfolio ramping initiatives. Both when we established CCAP and 2015 and listed CCAP in 2020, we're supported by our fee structure during the respected ramps.
Gross deployment in the second quarter totaled $74 million as you can see on the left hand side of the page.
Mickey Schleien: Okay. I guess it's new in sort of quotation marks. Another question on investing. I noticed your investment in Family Dollar, which is interesting. What is your thesis there? We're getting such mixed messages on the health of the consumer, particularly at the low end of the spectrum. I wanted to understand what your thinking is there.
Additionally, we have committed substantial advisor, support for accredited non-diluted growth opportunities, including our 2 public acquisitions.
During the quarter, we closed seven new platform investments totaling $51 million.
As I noted last quarter.
Even though spreads have tightened our focus remains on high quality companies with strong credit profiles.
Our positioning has, and always will be, for the long term.
And today, we are comfortable with our dividend level.
These new investments were loans private equity backed companies with a weighted average spread of approximately 530 basis points. The remaining 22 million came from incremental investments in our existing portfolio of companies.
With that, I will now turn the call over to Henry Chung.
Thanks, Jason. Please turn to slide 15, where we highlight our recent activity.
Henry Chung: Yeah. That loan was actually done in conjunction with equity investment that we have in an asset-based lender called Whitehawk. This is a group that we've been investing in and alongside going back to 2017 across multiple vintages. Historically, they were called Great American Capital Partners. Selectively, we have participated in co-investment opportunities alongside them from time to time. If you kind of look back at our history, some notable investments that would fall within that category in the past include Amherst, as well as BJ Services. Family Dollar is one of the more recent ones that we've done with them. When you think about the investment thesis there, given that their focus is on asset-based lending, that is an asset-based loan where the primary collateral there is not the ongoing operations of the business.
The $74 million in gross deployment compares to approximately $86 million in aggregate exits sales and repayments, resulting in net realizations of approximately $12 million for the third quarter.
Gross deployment in the second quarter totaled $74 million. As you can see on the left-hand side of the page,
During the quarter, we closed 7 new platform Investments, totaling 51 million.
Our portfolio activity resulted in net realizations during the quarter due to several commitments to new portfolio companies.
Even as spreads of tighten, our Focus remains on high quality companies with strong credit profiles.
Using your Investments were loaned to private Equity. Backed companies with the weighted average spread of approximately 530 basis points,
Slipped into the fourth quarter.
Turning back to the broader portfolio. Please flip to slide 16, you can see that the weighted average yield of our income producing securities at cost remained stable quarter over quarter at 10, 4%.
the remaining 22 million came from incremental investments, in our existing portfolio companies,
As of June 30th 97% of our debt investments at fair value were floating rate with a weighted average floor of 77 basis points.
The 74 million in Gross deployment compares to approximately 86 million in adjective. Exits sales and repayments resulting in a net realization of approximately 12 million for the third quarter.
Weighted average interest coverage of the companies in our investment portfolio at quarter end was stable at two one times, demonstrating durability and strength within the earnings at our underlying portfolio companies.
Our portfolio activity, resulted in net realizations during the quarter, to, to several commitments to new portfolio. Companies that's flipped into the fourth quarter.
As a reminder, this calculation is based on the latest annualized base rates each quarter.
Turning back to the broader portfolio, please flip to slide 16. You can see that the weighted average yield of our income-producing securities and costs remained stable quarter over quarter at 10.4%.
Please flip to slide 17, which shows the trends in internal performance ratings.
Henry Chung: We're not underwriting to necessarily consumer demand for that specific type of retailer, but more so the hard assets that underpin the loan there. It's something that we've done in spots historically over the last eight years or so. Never a large percentage of our portfolio, but that investment would be part of that categorization.
Overall, we have seen stability in the fundamental performance of our portfolio, resulting in consistency and our risk ratings and a weighted average portfolio risk rating of 2.1.
By June 30th, 97% of our debt investments at fair value were floating rate, with a weighted average floor of 77 basis points.
On the right hand side of the slide you'll see that one and two rated investments representing named that are performing at or above our underwriting expectations.
The weighted average interest coverage of the companies in our investment portfolio was stable at 2.1 times for the quarter end, demonstrating durability and strength within the earnings of our underlying portfolio companies.
Kris modestly from 86% to 87% quarter over quarter, continuing to represent the lion's share of our portfolio at fair value.
As a reminder, this calculation is based on the latest annualized base rates from each quarter.
Mickey Schleien: Okay. That's interesting. We've seen other BDCs do really well in that space. Just one final question, if I can. It's more of a, I guess, a philosophical question. It's a small position referring to, I don't know if it's CECO or SECO. I don't know how you pronounce it. It's valued above par, but it's on non-accrual, which is unusual. What is the valuation reflecting there? Just philosophically, if you can explain the approach.
Please flip the slide 17 which shows the trends in internal performance ratings.
As a percentage of those investments at fair value non accruals improved from two 4% as of June 30th to one 6% as of September 30th driven by a change of control and recapitalization as well as the sale of an investment that had previously been on non accrual.
overall, we have seen stability in the fundamental performance of our portfolio, resulting in consistency in our risk ratings and a weighted average portfolio risk rating of 2.1
This was partially offset by two new nonaccrual investments during the quarter.
The overall portfolio continues to demonstrate resilient business fundamentals supported by the fact that the vast majority of our borrowers experienced steady revenue and EBITDA growth year over year.
Henry Chung: Yeah. CECO is a third-party logistics provider. That company we actually restructured at the beginning or in the first half of the year. The valuation that you see reflects its position in the capital structure as the priority revolver. As far as the accrual status of the loan goes, what that reflects is just the ultimate view here in terms of recovering the initial cost basis in that loan. CECO, in particular, operates in one of, I would say, the hardest-hit subsectors that we've seen, which is third-party logistics following the Liberation Day announcements. As a result, there's a fair amount of near-term operating uncertainty with the business just in terms of operating performance, given some of the revenue headwinds that we're seeing both on the rate, as well as the volume side.
On the right-hand side of the slide, you'll see that 1- and 2-rated investments, representing names that are performing at or above our underlying expectations, increased modestly from 86 to 87 quarter over quarter. This continues to represent the lion's share of our portfolio at fair value.
We have seen weakness in search and watch list investments that are facing operating challenges, resulting from tariff impacts.
Two of these investments, one which exports goods to the U S from Europe, the other which sources a meaningful percentages of its inventory from overseas negatively impacted now this quarter collectively accounting for 15 cents per share and unrealized losses.
As a percentage of Investments at fair value, non-accruals improved from 2.4% as of June 30th to 1.6%. As of September 30th, driven by a change of control and recapitalization, as well as a sale of an investment that has previously been on non-approval.
This is partially offset by two new nautical investments during the quarter.
As a reminder, in May we highlighted at our initial tariff analysis identified 4% of our portfolio.
The overall portfolio continues to demonstrate resilient business fundamentals supported by the fact that the vast majority of our borrowers experienced steady revenue and Ava dog growth year-over-year.
They based direct operating impact from tariff policies we.
We have seen weakness in certain watch list Investments that are facing operating challenges resulting from tariff impacts.
We do not believe this exposure has increased in any meaningful way sort of initial review and outside of a select portfolio companies highlighted the portfolio impact from tariffs remain muted.
We continue to monitor it closely for potential adverse impact in the portfolio stemming from trade policy and believe our aggregate risk is manageable, particularly as the portfolio further diversifies.
Two of these investments—one which exports goods to the U.S. from Europe and the other which sources a meaningful percentage of its inventory from overseas—were negatively impacted. Now this quarter, collectively accounting for 15 cents per share in unrealized losses.
Henry Chung: As a result, we made that determination just based on the latest near-term outlook that we had. To the extent that that changes here, it's something that we'll reevaluate. We really want to make sure that we're conservative in terms of factoring in the near-term outlooks, especially for businesses that are kind of at the front lines of potential macro headwinds like a business like CECO. That's what you'll see as far as that particular line item goes.
More broadly speaking, we will continue to take a preemptive and rigorous approach to our watch list recognizing that there are a variety of approaches to how managers think about these categorization.
As a reminder, in May we highlighted that our initial tariff analysis identified 4% of our portfolio may face direct operating impact from tariff policies.
It's worth noting that as of the end of the third quarter as a percentage of total investments at fair value.
We do not believe this exposure has increased in any meaningful way since our initial review. Outside of the Select Portfolio companies, the portfolio impacts from tariffs have remained muted.
<unk> watch list, which we define as three four and five rated investments.
13% as compared to non accruals of one 6% so a gap of over 11% based.
As the portfolio further diversifies.
Based on an analysis of our public peers. This gas is approximately 5%.
Mickey Schleien: Thank you for that. That's helpful. Those are all my questions this afternoon. Thank you for your time.
We do not wait until Theres default for moving an investment down the risk rating scale, we strive to be transparent about the health of our portfolio with the market and one of the ways. We do so is by taking preemptive approach towards how we classify our watch list divestments.
More. Broadly speaking we have continued to take a preemptive and rigorous approach to our watch list recognizing that there are variety of approaches to how managers think about these categorizations.
Henry Chung: Thank you.
Operator: Your next question comes from the line of Christopher Nolan with Weidenberg Solomon. Please go ahead.
Mickey Schleien: Hi. Thanks for taking my questions. Are there any non-recurring items in earnings this quarter?
With that I will now turn it over to Gerhard.
Thanks, Henry and Hello, everyone.
It's worth noting that as of the end of the third quarter, as a percentage of total investments at fair value, the ECAS watch list, which we define as 3, 4, and 5 rated investments, was 13% compared to non-ECAS of 1.6%. So, there's a gap of over 11%.
The evening, we reported net investment income of 46 per share which is in line with the prior quarter.
Based on an analysis of where public peers, this gap is approximately 5%.
Net income for the third quarter was <unk> 19 cents per share compared to 41 cents in the prior quarter.
Robert Dodd: Non-recurring items. Yeah. I can take that question. Certainly in the revenue top line, I think Jason mentioned this earlier in response to your question. Our sort of fee income is running a little bit lower than, I'd say, maybe at 1/3, about 1/3 of the historical run rate. We only have about a penny of fee income, sort of non-interest fee income in our revenues this quarter. Other than that, there's nothing that I'd call out that's material from a non-recurring perspective. The core interest income, meaning cash income, PIK income, amortization of OID, unused fees, and what we view as the recurring distribution from the loan in JV, represents about 96% to 97% of total top-line revenue. Nothing out of the ordinary or non-recurring that I'd call out there.
The quarter over quarter change, primarily reflect higher net realized and unrealized losses.
The tariff impact that investments that Henry noted accounted for the majority of the change in realized and unrealized losses during the quarter.
We do not wait until there's default for moving and investment down the risk rating scale. We strive to be transparent about the health of our portfolio with the market and 1 of the ways we do so is by taking a preemptive approach towards how we classify our watch list Investments.
With that, I will now turn it over to Gerard.
While these items impacted results this quarter, they represent isolated credit events and.
Thanks, Andre, and hello, everyone. Yesterday evening, we reported net investment income of $0.46 per share, which is in line with the prior quarter.
And otherwise stable and well diversified portfolio.
Turning to the balance sheet as of September 32025, our investment portfolio at fair value totaled $1 6 billion consistent with the prior quarter.
Net income. For the third quarter was 19 cents per share compared to 41 cents in the prior quarter.
A quarter of a quarter change primarily reflects higher net Reliance and unrealized losses.
Total net assets were $714 million in NAV per share was $19 and 28.
The tariff impacted investments that Henry noted accounted for the majority of the change in realizing unrealized losses during the quarter.
A decrease from $19 55 at the end of the second quarter.
While these items impacted results this quarter, they represent isolated credit events within an otherwise stable and well-diversified portfolio.
Let's shift to our capitalization and liquidity.
<unk> 19.
In light of the continued tightening in credit spreads were actively pursuing opportunities to optimize the pricing enter and diversification of our financing sources.
Turning to the balance sheet as of September 30, 2025, our investment portfolio at fair value totaled $1.6 billion, an increase from the prior quarter.
Mickey Schleien: Great. Following up on the earlier question, how you guys are holding the line in terms of the yields on new investments, are you seeing more PIK or OID as components of the overall weighted yield for these deals?
Leveraging more constructive dynamics in the private placement market.
So total net assets were 714 million and nav per share was 19.28.
At the end of October we priced $185 million of new senior unsecured notes broken down into three <unk> first $67 $5 million. Due February 2029, second $67 $5 million due February 2031, and third $50 million due may 2020.
A decrease from $19,555 at the end of the second quarter.
Let's shift to our capitalization and liquidity. I'm on slide 19.
Henry Chung: This is Henry. I can comment on that. Within our deals, the PIK component is something that we just de-emphasized from the beginning. I think the short answer on PIK is no. We've certainly seen deals out there where there's more PIK, either in the form of PIK that can be toggled or just PIK premium that's added on the coupon at the beginning in order to deliver yields in excess of market. As far as what we're originating, PIK is not a material component of the spreads at underwrite this quarter and overall in terms of where we invest. On the OID side, I would say that OIDs generally have been tightening. About a year ago, OIDs were probably kind of in the one and a half to a point of the original deal. Now that's probably 25 basis points tight of where we've seen.
Okay.
In light of the continued tightening and credit spreads, we're actively pursuing opportunities to optimize the pricing tenor and diversification of our financing sources.
The notes will be issued in two clothing.
First and second tranches totaling $135 million will be issued in February 26.
Leveraging more constructive dynamics in the private placement markets.
And the third tranche will be issued in May 2020.
The proceeds from these respective issuances will be used to repay the majority of our existing unsecured debt maturing in 2026.
Pro forma for this activity over 90% total committed debt now matures in 2028 or later.
At the end of October, we priced 185 million of new senior unsecured notes broken down into 3 tranches. First 67.5 million view February 2029 second 67.5 million view, February 2031 and 3rd, 50 million due May 2029.
Without progress here.
The weighted average stated interest rate on our total borrowings were 599% as of quarter end down from six 9% in the prior quarter due primarily to a 60 basis point spread reduction and our SPV asset facility, which we rightsize during the second quarter and discussed on last quarters call.
The notes will be issued in 2 closing, the first and second tranches coating, 135 million will be issued in February 26th.
And the third branch will be issued in May 2026.
The proceeds from these respective issuances will be used to repay the majority of our existing unsecured debt maturing in 2026.
Our quarter end debt to equity ratio was one two or three times, a 120 times on a net basis.
Pro forma for this activity over 90% total committed debt. Now matures in 2028 or later, so we're pleased with our progress here.
Henry Chung: That component, along with just market pricing as a whole, has tightened a bit. OID is always kind of one component of our upfront yield that we consider as we're thinking about our investments here. Like spreads, we've seen some modest tightening there.
Unchanged from the prior quarter and within our stated target range of one one times to one three times.
With $240 million of Undrawn capacity, I think the leverage borrowing base and other restrictions and $28 million of cash and cash equivalents as of quarter end, we have sufficient liquidity to selectively fund further investment activity, while maintaining a debt to equity ratio inside out perfectly.
The weighted average stated interest rates on our total borrowings were 5.99% as of the quarter and down from 6.09% in the prior quarter, due primarily to a 50 basis point spread reduction in our SPV facility, which we right-sized during the second quarter and discussed on last quarter's call.
A quarter-end debt-to-equity ratio was 1.23 times for 1.20 times on our net basis.
Mickey Schleien: I guess the final question is, it's more broad-based in terms of the lower middle market and middle market sectors. Sure, tariffs have been a headwind, but energy costs have gone down as well. Given the lower interest rates, do you think this is going to help the EBITDA multiples on deals that you're going to see or not? What's your thoughts on this?
The third and final previously announced five cents per share special cash dividend related to undistributed taxable income was paid in September.
Unchanged from the private quarter and within our stated target range of 1.1 times to 1.3 times.
As Jason noted for the fourth quarter of 2025, our board has declared a regular dividend of <unk> 40 per share.
While our existing variable supplemental dividend framework remains in effect take up will not pay a Q4 supplemental dividend as the measurement cap.
The $240 million of undrawn capacity is subject to leverage, borrowing, base, and other restrictions in $28 million of cash and cash equivalents. As of the quarter end, we have sufficient liquidity to selectively fund further investment activity while maintaining a debt-to-equity ratio within our target range.
He did 50% of this quarter's excess available earnings.
Henry Chung: Yeah. I think in the near term, it can potentially be a tailwind on both of those fronts. What we're seeing across our portfolio, just in terms of free cash generation, despite some of the tariff headwinds, is that with lower borrowing costs, interest coverages are the highest we've seen in really two years since the tightening cycle, or sorry, since the prior rate hiking cycle began. With higher interest coverages kind of across the board, you have the ability potentially for borrowers to be able to service a larger quantum of debt, which allows buyers to justify larger purchase multiples. While we haven't seen that dynamic in a broad-based fashion yet, a lot of the multiples and business that we've seen trade in this market have really been amongst kind of the highest quality assets that have been out there.
And with that I'd like to turn it back to Jason for closing remarks. Thank.
The third and final, previously announced $0.05 per share special cast dividend, related to undistributed taxable income, was paid in September.
Thank you Gary.
In closing as we entered the last two months of the year and look towards 2026.
We believe <unk> remains well positioned with respect to our experienced investment team high quality diversified portfolio, a strong capital structure.
As Jason noted for the fourth quarter of 2025, our board has declared our regular dividend of $0.42 per share.
We remain optimistic about the long term prospects of the company given our positioning as a leader in the core lower middle market.
While our existing variable supplemental dividend framework remains in effect, pickup will not pay a Q4 supplemental dividend as the measurement cap.
Exceeded 50% of this quarter's excess available earnings.
With access to the breadth and resources of the broader Crescent platform.
And with that, I'd like to turn it back to Jason for closing remarks.
Thank you, Gerard.
And we're focused on continuing to deliver a stable NAV profile.
<unk> total economic return in excess of the public BDC space.
In closing, as we enter the last 2 months of the year and look towards 2026.
Thank you all for joining us today and your interest in C cap.
I'll now turn the call over to the operator for Q&A.
My portfolio and strong capital structure.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
We remain optimistic about the long-term prospects of the company, given our positioning, as a leader, in the core and lower Middle Market.
With access to the breadth and resources of the broader Crescent platform.
And your first question comes from the line of Robert Dodd with Raymond James. Please go ahead.
Henry Chung: We can certainly see that being a potential tailwind coming in the coming quarters here as we see broader M&A volumes increase.
Hi, guys. Thanks for all the color on kind of the earnings outlook.
And we are focused on continuing to deliver a stable map profile and an attractive total economic return in excess of the public BDC space.
And question, so I mean.
Thank you all for joining us today and your interest in CCAP.
You get into that I mean, as you said spillover above 10, so you have that as a Christian.
I’ll now turn the call over to the operator for Q&A.
Mickey Schleien: Great. Thank you.
But I mean, obviously that eats away anything if you dip into that I mean, what do you think.
Operator: Again, if you would like to ask a question, press star one on your telephone keypad. There are no further questions at this time. I will now turn the call back over to Jason Breaux for closing remarks.
At this time, I would like to remind everyone in order to ask a question. Press star, then the number 1 on your telephone keypad,
Between your liability side some of the leverage activity fees et cetera. What do you think the probability is that you have enough levers to actually keep an eye on my coverage of the dividend.
And your first question comes from the line of Robert Dodd with Raymond James. Please go ahead.
Robert Dodd: Thank you, operator. Thank you all for your time and attention here today, and your support of CCAP. We appreciate it, and we look forward to speaking with you all again soon.
100% or what do you think spill.
<unk> necessarily.
Seasoned.
During 2026.
Hi guys. Thanks for all the color on uh kind of the earnings Outlook and and and the dividend um, question. So I mean, dig, dig it into that. I mean, as you said spill over a buck 10. So you, you, you have that as a Christian if necessary. But, I mean, obviously that eats away nav if you dip into that. I mean, what do you think?
Okay.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Hey, Robert Jason here, Thanks for the question.
We are we certainly think that the levers will be available to us on a on a go forward basis here.
I think for the for the immediate near term, we do believe that we are going to cover.
Between your, your, your liability side. Um, it's like the leverage, um, activity fees Etc. What do you think the probability is that you have enough levers to actually, uh, keep knee coverage of the dividend at 100%, or more or do you think spillover is, is going to be necessary or consumed?
Our base dividend with NII I think we are certainly going to be tactical about how we think about generating incremental NII to sip.
During during 2026.
Hey Robert. Uh, Jason here. Thanks for the question.
Um,
To support our base dividend.
And as noted on the call, we've got and availability to <unk>.
Certainly increased the size of the portfolio, we do think that there is the potential for.
Increased.
Non interest related income that can be driven from a pickup in activity relative to a more subdued line item.
For non interest related income.
And then lastly, as noted I think we.
We've always tried to do the right thing.
And support.
Catherine support our shareholders and so between all of those levers.
We're focused on covering the dividend.
Thank you.
Uh huh.
Hum on only the only.
Lastly, the markdown.
Yeah.
we uh, we certainly think that the levers will be available to us on a, on a go forward basis here. Um, I I think for the, for the immediate near-term, we do believe that we are going to cover, uh, our base dividend with nii, I think, um, we are, uh, certainly going to be tactical about how we think about generating incremental nii to, uh, support our base dividend. Um, and uh, as, as noted on the call, we've got, uh, an availability to, uh, certainly increase the size of the portfolio. We do think that there is the potential for increased, uh, non-interest related income. That can be driven from a pickup in activity, uh, relative to a, a more subdued line item uh, for for non-interest related income. And then lastly as noted, I think we, um, we've always tried to uh, do the right thing.
Next question.
um,
Yeah, Henry I don't think the tariff exposure has increased.
Yes.
The ability of the exposed companies did to your ability to handle the tariffs the tomb raider because your exposure doesn't seem to have gone up.
And, uh, support, uh, cap and support our shareholders. And so, uh, between all of those levers, uh, you know, we're focused on covering the dividend.
Thank you for that. So I just, um,
uh,
Some of them have been marked down fairly significantly on.
On a talent issue that.
I mean, I want to say, it's been known about Oh, yeah.
It hasn't.
It wasn't a huge surprise this quarter is that something that's changed in the ability to.
Give me some notes on on the, the the, on the, um, you know, a couple of assets that that got marked down, um, you know, the the, the tone of question. Um, you know, it's a Geo to Henry's point. I don't think the the Tower of exposure is increased but has
On specific types of Oh.
Anything like that.
Yeah. Robert This is Henry I'll take that the short answer is in aggregate no nothing has changed there we've actually been.
The ability of the exposed companies to deter the ability to handle the tasks deteriorated because the exposure doesn't seem to have gone up. However, some of them have been marked down fairly significantly on a tariff issue.
On a broader portfolio perspective.
Pleased with how our management teams have responded with respect to either enacting price increases repositioning supply chains are exercising customer power that they have over their suppliers to be able to address a potential pressures from tariffs we highlighted the two names that we.
I mean, I want to send what has been known about all year because it hasn't, but, you know, it wasn't a sudden surprise this quarter. Is there something that's changed in the ability to...
To cope with specific tariffs or anything like that.
We saw pronounced.
Reductions in near term operating outlooks, because while overall in the portfolio. We've certainly seen resilience those two companies at least in the near term outlooks.
Yeah. Uh, Robert. This is Henry, I I'll take that. Uh, the short answer is in the aggregate. Um, no. Nothing has changed there. We've actually been, uh, on, on a broader portfolio perspective. Uh, pleased with how management teams have responded with respect to either enacting price increases repositioning support.
We're going to have to have a longer road in terms of being able to exercise the levers to get to what I would say its more historical levels of profitability. So.
In order to summarize I would say that.
For the broader portfolio certainly the case that we have seen our management teams and sponsors and able to respond proactively to the options outside.
Our specific portfolio companies, where.
We we just have seen we are our view is that that outlook is gonna be longer term.
Got it got it. Thank you for that one more if I can.
You you focus obviously co lo minimum okay.
No middle market isn't what it used to be.
But.
The tone this quarter from some other bdcs seems to be that the competition in the corn market has heated up the spreads et cetera.
It up.
Kind of an accelerated rate as we go through and as we've gone through this year.
For the broader portfolio. Certainly the case that we have seen, uh, management teams and sponsors, and able to respond proactively to the actions, um, outside of, uh, specific portfolio companies. Uh, where, um, we we just have seen. We, we are our view is that that Outlook is going to be a longer term.
Can you get into the economy, what do you think that the state of the market, you're still getting covenants, but all of those types of things.
The spreads aren't necessarily why they were obviously everybody seen spread compression but.
Got it, got it. Thank you for that. One more thing, if I can rely on you. You focus, obviously, on the lower minimum market. Um, yeah, the low middle market is what it used to be. Um, but...
To some degree as it has it exceeded your expectations for what you normally see in your core market.
When do you think that changes if it does.
Yes.
Robert Jason here. Thanks.
I would say, we certainly all seen spread compression this year across the middle market, whether it's lower core or upper.
It's certainly been exacerbated in the upper where.
Youre really competing with with the broadly syndicated loan market.
The the the the, the tone that's quoted from from other BDC seems to be that the, the the competition in the core and lower Market is has heated up to the spreads Etc. Is heated up at kind of an accelerated rate as we go through as as we've gone through this year. Um, can you get an economy? What what what do you think is the state of the market? You're still getting covenants but are there as type as they were the the the the spreads aren't necessarily where they were obviously everybody seems to spread compression but to some degree is is it is it exceeded your expectations for what you normally see in your core market and
When do you think that changes, if it does?
And quite frankly, you can get.
Single B type spreads in that market in the 300.
Robert Jason here. Thanks. Um,
Where we're operating.
I'd say not not a significantly notable pick up in <unk>.
Increased competition from actual new competitors I think.
There's there's certainly competition.
For deals because of.
Seen spread compression, uh, this year across the middle market, whether it's lower core or upper. It's certainly been exacerbated in the upper, where, uh, you're really competing with the broadly syndicated loan market. Um, and quite frankly, you can get.
Lower volumes certainly in the first half of the year.
Um, single B-type spreads in that market are in the 300s.
And so that that has resulted in some spread compression in our end of the market.
As opposed to new entrants.
But what I would say is that I think that.
We're still seeing transactions.
Um where where we're operating? Uh I would say not not a significantly notable pickup in increased competition from actual new competitors. I think uh there's there's certainly competition
High quality private transactions.
for deals because of
In the lower in core in the U S.
That's plus.
With 50 to 500 range.
Versus what you might see in the upper mid in.
Uh, lower volumes certainly in the first half of the year, and um, that has resulted in some spread compression in our end of the market.
In the low 400 range.
And importantly different leverage structures right. So in the upper mid market you might see deals getting done at the low four hundreds.
Uh, as opposed to new entrants. Um, but what I would say is that I think that.
You know, we're still seeing transactions.
High quality private transactions.
At one or two turns more leverage than what you might see in the lower in core so from a risk adjusted standpoint, we like.
In the lower end core in the S Plus 450 to 500 range.
Where we're investing.
Do think from a spread standpoint.
We have some optimism that with the demonstrated rate cuts by the fed we are seeing.
Increased pipeline activity.
Increased dialogue and so.
Uh, versus what you might see in the upper mid, uh, in the low $400 million range, and importantly different leverage structures. Right? So, in the upper mid market, you might see deals getting done at the low $400s.
Now we've said this before.
But we do have some optimism around a real pickup in activity in 2026.
And just to add that across.
Across the platform as you know Robert P counts is a.
Small part of Crescent fraud, or private credit platform.
Uh, at one or two turns more leverage than what you might see in the lower end of the core. So, from a risk-adjusted standpoint, we like where we're investing. I do think, from a spread standpoint, we have some optimism that with the demonstrated rate cuts by the Fed, we are seeing increased pipeline activity.
We've been actually quite active with some a lot of activity coming in recent quarters.
We're just at around 6 billion total over the last 12 months that have been deployed across private credit here and that's we're picking our spots.
Uh, increased dialogue and so, um, you know, now we’ve said this before, but we do have some optimism around a real pickup in activity in 2026.
It's certainly been competitive on the on the rate side, but we are where we're really not really willing to compromise on how these businesses are capitalized and or a corresponding documentation that goes with it. So with that you know there's I think there's a.
Strong case here for in the near term expecting that opportunity set to be larger over the next 12 months than it was over the prior 12 months.
And, and just to add to that, um, across the platform as you know, Robert Decap is a small part of Crescent's broader private credit platform. Um, you know, we've been actually quite active with a lot of activity coming in recent quarters. Um, we're just at around $6 billion total over the last 12 months.
Which I think to the feeds to your original question as well, which is I'm thinking about levers here to continue to drive attractive reinvestment and.
And so our investments come here.
Got it thank you.
Thank you.
Your next question comes from the line of Mickey Schlein with Clearstream. Please go ahead.
Yes, good afternoon, everyone.
Sticking to the issue of spreads looking at page eight.
Presentation.
It was I'd say gratifying to see that spreads on your new investments increased quarter to quarter.
Cross private credit here and that's with taking our spots. Um, you know, it's certainly been better than the on the rate side. But we are what we're not really willing to compromise is on how these businesses are capitalized, and our corresponding documentation that goes with it. So, um, with that, you know, there's I think there's a strong case here for, in the near term, expecting that opportunity set to be larger, uh, over the next 12 months than it was over the prior 12 months, uh, which I think could feeds to your original question as well, which is, um, thinking about levers here to continue to drive attractive. Reinvestment and um, consistent uh, investment to come here.
Got it. Thank you.
Thank you.
Could you help us understand what drove that increase.
Yeah. Thanks for the question this is Henry.
Your next question comes from the line of Mickey Schlaen with Clear Street. Please go ahead.
We've actually been able to I'd say over the last five quarters, you're going to hold your origination spreads it around.
That 500 over so for baseline on it it's going to be a mix of incremental activity from our existing portfolio.
Wrong source of our origination on a quarter to quarter basis, or add ons or existing portfolio companies as.
Uh, yes. Good afternoon, everyone. Um, sticking to the issue of spreads, uh, looking at page 8 of your presentation. Um, it was, uh, I'd say gratifying to see that spreads on your new investments increased quarter to quarter. Um, could you help us understand what drove that increase?
As well and I was just opportunities that we're seeing within our specific market segment.
Kind of tied closer to the 475 to 525 or so for Ben.
So as you kind of think about where we play in the market as well as add ons being a.
A large you know can they be anywhere from a third to a half of our origination on a quarter to quarter basis on those two dynamics.
Certainly providing us the ability to maintain spreads here even in this market.
So would it be reasonable to say that.
The spread expansion quarter to quarter did not include taking on excessive risk.
Yes, I would absolutely agree with that we're very conscious to stay within our lane in terms of where we're underwriting with respect to security. So we haven't deviated from being focused on top of the capital structure and everything we do historically and today remains.
Yeah. Um thanks for the question. This is Henry uh we've actually been able to I'd say over the last 5 Quarters here. Could hold in the origination spread that around uh that 500 over so far Baseline. Um it's it's going to be a mix of incremental activities from our existing portfolio. Um a strong source of our origination on a quarter to quarter basis. Our add-ons with existing portfolio companies um as well as just opportunities that we're seeing within our specific market segments, that, uh, kind of tie closer to that 475 to 525 over. So, for band. Um, so as as you kind of, think about, what are we playing the market, as well as add-ons being a, uh, a large, you know, can be anywhere from a third to a half of our origination on a quarter to quarter basis. Um, those 2 Dynamics are certainly um providing us the ability to maintain spread
Here, even in this market.
Sponsor backed portfolio companies and we're not it's never been our ethos to stretch for yield by either taking on leverage beyond what we think is prudent or expanding to come.
So would it be reasonable to say that um, the the the spread expansion quarter to quarter did not include, you know, taking on excessive risk?
Company types that are outside of our comfort zone.
I understand that's helpful.
Staying with the presentation, but switching to page 15.
New equity investments represented 20% of this quarter's new investments could you.
Equity investments were and what did you see them made them interesting to you.
Yeah, So those new equity investments are actually tied to.
Yes, I I would absolutely agree with that. We're very conscious to stay within our Lane in terms of where we're underwriting with respect to security. Um, so we haven't deviated from 15 focus on top of the capital structure, everything we do. Um historically and today remains sponsored by portfolio companies. And um, we're not, it's never been our ethos to stretch for yield by, um, either taking on Leverage beyond what we think is prudent or expanding to, uh, company types that are outside of our comfort zone.
Restructurings of portfolio companies, where we recapitalized.
Part of the capital structure into both the debt and equity components. So when you think about the break down there the majority of what you'll see on that page is tied to the.
I understand that's helpful. Um, staying with the presentation, but switching to page 15, um, new equity investments represented 20% of this quarter's new investments. Could you describe what those new equity investments were? And, you know, what did you see that made them interesting to you?
The recapitalization and and reach and change of control that we did with <unk>.
202 portfolio companies during the quarter.
Okay. So I guess, it's new in quotation marks.
Another question on investing I noticed.
Your investment in family dollar, which is interesting.
What is your thesis there, even though we're getting such mixed messages on the health of the consumer, particularly at the low end of the spectrum. So wanted to understand what your thinking is there.
Yes that loan was actually done in conjunction with our equity investment that we have and added an asset based lender called White Hot.
Yeah. Um, so those new Equity Investments are actually tied to um, restructurings of portfolio companies where we recapitalize uh part of the capital structure into both the debt and Equity components. So, when you think about the breakdown there, um the majority of what you'll see on that page is tied to uh the the recession and uh and re and change of control that we did with um uh to uh to portfolio companies during the quarter.
This is a.
Group that we've been investing in and alongside a going back to 2017 across multiple vintages on historically, they were calling great American capital partners and selectively we have participated in co investment opportunities alongside them from time to time so.
Okay, so I guess it's new and sort of quotation marks. Um, another question on investing, I noticed, uh, your investment in Family Dollar, which is interesting. Uh, what is your thesis there? You know, we're getting such mixed messages on the health of the consumer, particularly at the low end of the spectrum. So wanted to understand what you're thinking is there.
If you kind of look back at our history. Some notable investments that would all fall within that category in the past include Amyris as well.
Services and family dollar is one of the more recent ones that we've done with them. When you think about the investment thesis there given that their focus is on asset based lending that is a asset based loan where the primary collateral there is not the ongoing operations of the business.
Yeah, that loan uh, was actually done in conjunction with uh, Equity investment that we have and add an asset based lender called Whitehawk. Uh, this is a, a group that we've been investing in and alongside going back to 2017 across multiple vintages. On, historically, they were called, Great American Capital partners and selectively. Um, we have
So we're not underwriting to necessarily consumer demand for that specific type of retailer on but more so the hard assets that underpinned alone there. So it's.
It's something that we've done in spots historically over the last eight years or so never a large percentage of the portfolio, but that investment would be part of that categorization.
Okay. That's interesting we've seen other bdcs do really well in that space.
One.
One final question, if I can it's more of a I guess a philosophical question, it's a small position.
I'm, referring to I don't know if it's CCAR cycle I dunno, how do you pronounce it.
It's valued above par, but its on non accrual which is unusual.
That underpinned, the loan there. So, um, it's it's something that we've done in in spots, uh, historically over the last 8 years or so, um, never a large percentage of our portfolio but that investment would be part of that categorization.
What is the valuation, reflecting there and just philosophically if you can explain the approach.
Yeah. So CECO is a third party logistics provider that company, we actually restructured at the beginning or in the first half of the year and the valuation that you see reflects its position in the capital structure.
On a revolver as far as the accrual status of the loan goes.
What that reflects is just the the ultimate view here in terms of recovering the initial cost basis in that loan.
Okay, that that's interesting we we've seen other btc's do really well in that space. Um just 1 final question. If I can it's more of a I guess a philosophical question. It's it's a small position. Um referring to. I don't know if it's Seiko or Seiko. I don't know. How do you pronounce it? Um, it's valued above par but it's on non-accrual, which is unusual. Um, you know, what is the valuation reflecting there and just philosophically? If you can explain the approach,
CECO in particular is operating one of I would say the.
Hardest hit and in some sectors that we've seen which is third party logistics following the liberation day announcements.
And as a result, there's a fair amount of near term operating uncertainty with the business.
Just in terms of operating performance given some of the revenue headwinds that we're seeing both on the rate as well as the volume side I'm.
So as a result.
We made that determination just based on the latest news.
Yeah. Um so SEO is a third-party Logistics provider um that company we actually uh restructured at the beginning or in the first half of the year and the valuation that you see, reflects its position in the capital structure, um, as the priority revolver as far as the the approval status of the loan goes, um, what that? Reflects is just the, um, the ultimate view here in terms of recovering, the initial cost basis in that loan, uh, SEO in particular, is operating at 1 of, I would say the
Near term outlook that we had to the extent that that changes here, it's something that we'll reevaluate, but we really wanted to make sure that we're conservative in terms of factoring in.
The near term outlook, especially for businesses that are kind of at the front lines of potential macro headwinds like a business like CECO them. So that's what that's what you'll see as.
As far as on that particular line item.
Thank you for that that's helpful. Those are all my questions. This afternoon. Thank you for your time.
Thank you Vicky.
Your next question comes from the line of Christopher Nolan with Ladenburg Thalmann. Please go ahead.
Hi, Thanks for taking my question. So are there any non recurring items earnings this quarter.
Hardest hit in in the sub sectors that we've seen, uh, which is third-party Logistics, uh, following The Liberation day announcements. And, as a result, there's a fair amount of near-term operating uncertainty with the business, uh, just in terms of, um, operating performance, um, given some of the revenue headwinds that we're seeing both on the rate as well as the volume side. Um, so as a result uh, that that we, we made that determination just based on the latest, uh, near-term Outlook that we had, um, to the extent that that changes here. Um, it's something that we'll reevaluate but we we really want to make sure that we're conservative and in terms of factoring in, um, the near-term Outlook, especially for businesses that are kind of at the front lines of potential macro headwinds like a business, like Seiko. Um, so that's what that's what you'll see as far as, um, that particular line item goes.
Yeah.
Thank you for that. That's helpful. Um, those are all my questions this afternoon. Thank you for your time.
Nonrecurring items.
Thank you.
Hi, I can I can take that question.
Uh huh.
Suddenly in the revenue top line I think Jason mentioned this in.
Your next question comes from the line of Christopher Nolan with wenberg Salman. Please go ahead.
Earlier in the in the in response to your question.
Sure.
Hi, thanks for taking my questions. Uh, are there any non-recurring items in earnings this quarter?
It's a fee income.
Is running a little bit lower than sort of the I'd say, maybe a third about one third of sort of the historical run rate, we only have about any of our.
Hum.
Income sort of noninterest fee income in our in our revenues this quarter, but other than that there's nothing that I'd call out that's material from a nonrecurring perspective.
Not recurring items. Yeah. Hi. I can take that question. Um, uh.
The sort of core interest income, meaning sort of cash income Pik income.
In certainly in the revenue Topline I think Jason mentioned this in our earlier, in the, in the, in response to question our um, sort of fee income.
The amortization of OID unused fees and we've used the distributions going distribution from the Logan JV represents about 19.
90, 790, 697% of total topline revenue.
So nothing nothing out of the ordinary or nonrecurring that I called out there.
Great.
And then following up on the earlier question. How you guys are holding the line in terms of the yields on new investments.
Are you seeing more.
Or OID.
The components of the overall weighted yields for these deals.
This is Henry I can comment on that.
Within our deals.
Uh, is running a little bit lower than sort of the, I would say maybe at a third about 1/3 of sort of the, the historical run rate. We only have about any of of, um, fee income sort of non-interest fee, income in our, in our Revenue, this quarter. But other than that, there's nothing that I call out that's material from a non-recurring perspective. Um, uh, the, uh, sort of core interest income, meaning sort of cash income pick income, you know, the amortization of oid, unused fees. And and what we've used sort of the, the distribution recurring distribution from the loan JV represents about, um, 97 96, 97% of total Topline Revenue. So nothing nothing out of the ordinary or or non.
Pik component is.
Seeing that we just de emphasized from the beginning so it's short answer on ticket.
No. We've certainly seen deals out there where there's more pick either in the form of pick that can be toggled or just pick premium that's added on the coupon at the beginning in order to deliver a yield in excess of market as far as what we're originating tick is not a material.
Great. Um, and then, following up on the earlier question, how are you guys holding the line in terms of the yields on new investments? Are you seeing more pick or OID?
Um, as components of the overall weighted yield for these deals.
<unk> of the spreads and underwrite them.
This quarter, and just and and just overall in terms of where we invest on the E side I would say that oid's generally have.
<unk> been tightening.
About a year ago I. These are probably kind of in the one and a half to a point of of the.
The original deal and now that's probably 25 this tight.
Where we've seen so that component along with just.
Market pricing as a whole has been.
And a bit but.
It's oh ideas as always it's kind of one component of our upfront deals that we are we want to we would consider as we're thinking about our investments here and like spreads we've seen that we've seen some modest tightening there.
And I guess the final question is it's more broad based in terms of.
To deliver yields in excess of markets. But as far as what we're originating, pick is not a material component of the spreads at, at under, right, um, for this quarter and, and just, um, and, and, and just overall, in terms of where we invest on the oie side, um, I would say that oid is generally have, um, been tightening, uh, you know, about a year ago or ideas are probably kind of in the 1 and a half to, uh, a point of of the, uh, the original, um, deal. And, and now, that's probably 25 Pips tight, uh, where we've seen so that component along with just
The lower middle market and middle market sectors, I'm sure tariffs have been a headwind.
Energy costs have gone down as well.
And given the lower interest rates.
Do you think this is.
According to help company the EBITDA multiples on deals that youre going to see or not.
Market pricing as a whole has, has tightened a bit. Um, but uh, it it's oh idea is is, is always kind of 1 component of our, our upfront yield that we uh, we want to. We, we consider as we're thinking about our investments here and like spreads. We've seen that we've seen some, some modest tightening their
Parsons.
Yeah.
Yeah its.
and I guess the final question is, it's more broad-based in terms of um
I think are in the near term it can potentially be a tailwind on both of those fronts.
The lower Middle Market and Middle Market sectors, um, sure. Tariffs have been a headwind. Um, but energy costs have gone down as well.
We're seeing across our portfolio just in terms of free cash generation. Despite some of the tariff headwinds is that with lower borrowing costs.
And given the lower interest rates, um,
Do you think this is?
Interest coverages are the highest we've seen in and are really two years since the tightening cycle or some sort of since the prior rate hiking cycle began.
Going to help company the ebida multiples on deals that you're going to see or not. Um what's your thoughts on this?
And with your with higher interest coverage is kind of across the board you have the ability to potentially.
For borrowers to be able to service the larger quantum of debt, which allows by buyers to justify larger purchase multiples, while we haven't seen that dynamic in a broad based fashion yet a lot of the multiple then visits that we've seen.
Trade in this market have really been amongst the highest quality assets out there. We can certainly see that being a potential tailwind I'm coming in and in the coming quarters here as we see it to see broader M&A volumes increase.
Thank you.
Okay.
Again, if you would like to ask a question press star one on your telephone keypad.
Yeah. Um it's I think uh in the in the near term it can potentially be a Tailwind on on both of those fronts. Uh, you know what, we're seeing across our portfolio just in terms of free cash Generation. Um, you need this by some of the Tariff headwinds is that with lower borrowing costs. Um, you know, interest coverage is, are the highest we've seen in in uh, really 2 years since uh, the the tightening site or so. Sorry, since the the prior rate hiking cycle began, um, and with the with higher interest coverage is kind of across the board, you have the ability potentially um for borrowers to be able to service a larger quantity of debt which allows um uh by buyers to um justify larger purchase multiples. While we haven't seen that dynamic in a broad-based fashion yet. Um, a lot of the multiples and business that we've seen trade in this market are really
There are no further questions at this time I will now turn the call back over to Jason Brown for closing remarks.
Okay. Thank you operator.
Really been amongst kind of the highest quality assets that have been out there. Uh, we can certainly see that being a potential Tailwind, um, coming in in, in the coming Quarters here, um, as we see it to see broader m&a volumes, uh, increase
great. Thank you.
Thank you all for your time and attention here today and your support of C cap.
We appreciate it and we look forward to speaking with you all again soon.
again, if you would like to ask a question press star 1 on your telephone keypad,
Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
There are no further questions at this time. I will now turn the call back over to Jason bro, for closing remarks.
Okay, thank you, operator. Uh, thank you. Thank you all for your time and attention here today, and your support of CCAP.
Uh, we appreciate it and we look forward to speaking with you all again soon.
Ladies and gentlemen, that concludes today's call, thank you all for joining. You may now disconnect