Q1 2026 Carlyle Secured Lending Inc Earnings Call

May 11, 2026

Speaker #1: Good day, and thank you for standing by. Welcome to Carlyle Secured Lending's first quarter 2026 earnings call. At this time, all participants are on listen-only mode.

Operator: Good day. Thank you for standing by. Welcome to Carlyle Secured Lending's First Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. I would now like to hand the conference over to your speaker today, Nishil Mehta. Please go ahead.

Operator: Good day. Thank you for standing by. Welcome to Carlyle Secured Lending's Q1 2026 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. I would now like to hand the conference over to your speaker today, Nishil Mehta. Please go ahead.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star one-one on your telephone. You will then hear an automated message that your device is in hand is raised.

Speaker #1: To withdraw your question, please press star one-one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nishil Mehta.

Speaker #1: Please go ahead.

Speaker #2: Good morning, and welcome to Carlyle Secured Lending's first quarter 2026 earnings call. I'm joined by Alex Chi, CGBD's Chief Executive Officer, and Tom Hennigan, our President and Chief Financial Officer.

Nishil Mehta: Good morning. Welcome to Carlyle Secured Lending's Q1 2026 Earnings Call. I'm joined by Alex Chi, CGBD's Chief Executive Officer, and Tom Hennigan, our President and Chief Financial Officer. This morning, we filed our Form 10-Q and issued a press release with the presentation of our results, which are available on the investor relations section of our website. Following our remarks today, we will hold a question and answer session for analysts and institutional investors. This call is being webcast, and a replay will be available on our website. Any forward-looking statements made today do not guarantee future performance. Any undue reliance should not be placed on them. Today's conference call may include forward-looking statements reflecting our views with respect to, among other things, our future operating results and financial performance.

Speaker #2: This morning, we filed our Form 10-Q and initiated a press release with a presentation of our results, which are available on the Investor Relations section of our website.

Speaker #2: Following our remarks today, we will hold a question-and-answer session for analysts and institutional investors. This call is being webcast, and a replay will be available on our website.

Speaker #2: Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. Today's conference call may include forward-looking statements reflecting views with respect to, among other things, our future operating results and financial performance.

Speaker #2: These statements are based on current management expectations, estimates, and projections, and involve inherent risks and uncertainties, including those identified in the risk factors and cautionary statement regarding forward-looking statements sections of our 10-K.

Nishil Mehta: These statements are based on current management expectations, estimates, and projections and involve inherent risks and uncertainties, including those identified in the Risk Factors and Cautionary Statement regarding forward-looking statements sections of our 10-K. These risks and uncertainties could cause actual results to differ materially from those indicated. CGBD assumes no obligation to update any forward-looking statements at any time.

Speaker #2: These risks and uncertainties could cause actual results to differ materially from those indicated. CGBD assumes no obligation to update any forward-looking statements at any time.

Speaker #2: During this conference call, the company may discuss certain non-GAAP measures as defined by SEC Regulation G, such as adjusted net investment income, or adjusted NII.

Nishil Mehta: During this conference call, the company may discuss certain non-GAAP measures as defined by SEC Regulation G, such as adjusted net investment income or adjusted NII. The company's management believes adjusted net investment income, adjusted net investment income per share, adjusted net income, and adjusted net income per share are useful to investors as additional tools to evaluate ongoing results and trends and to review our performance without giving effect to the amortization or accretion resulting from the new cost basis of the investments acquired and accounted for under the acquisition method of accounting in accordance with ASC 805 and the one-time purchase or non-recurring investment income and expense events, including the effect on incentive fees, and are used by management to evaluate the economic earnings of the company.

Speaker #2: The company's management believes adjusted net investment income, adjusted net investment income per share, adjusted net income, and adjusted net income per share are useful to investors as additional tools to evaluate ongoing results and trends, and to review our performance without getting affected by the amortization or accretion resulting from the new cost basis of the investment acquired and accounted for under the acquisition method of accounting in accordance with ASC 805, and the one-time purchase or non-recurring investment income and expense events.

Speaker #2: Including the effect on incentive fees and are used by management to evaluate the economic earnings of the company. A reconciliation of GAAP net investment income per share, the most directly comparable GAAP financial measure to adjusted NII per share, can be found in the accompanying slide presentation for this call.

Nishil Mehta: A reconciliation of GAAP net investment income per share, the most directly comparable GAAP financial measure to adjusted NII per share, can be found in the accompanying slide presentation for this call. A reconciliation of these measures may also be found in our earnings release filed this morning with the SEC on Form 8-K. With that, I'll turn the call over to Alex.

Speaker #2: In addition, a reconciliation of these measures may also be found in our earnings release filed this morning with the SEC on Form 8-K. With that, I'll turn the call over to Alex.

Speaker #3: Thanks, Nishil, and good morning. On today's call, I'll give an overview of our first quarter results, including the quarter's investment activity and portfolio positioning, and provide an update on our investment outlook.

Alex Chi: Thanks, Nishil, good morning. On today's call, I'll give an overview of our first quarter results, including the quarter's investment activity and portfolio positioning, and provide an update on our investment outlook. I'll then hand the call over to our President and CFO, Thomas Hennigan. Despite a complex backdrop marked by geopolitical events and market volatility, we continue to be very pleased with the consistent credit performance of CGBD and strength of the Carlyle Direct Lending platform. In total, we funded $217 million of investments at CGBD and closed over $1.2 billion of new and incremental commitments at the platform level, reflecting a strong quarter of originations.

Alex Chi: Thanks, Nishil, good morning. On today's call, I'll give an overview of our Q1 results, including the quarter's investment activity and portfolio positioning, and provide an update on our investment outlook. I'll then hand the call over to our President and CFO, Tom Hennigan. Despite a complex backdrop marked by geopolitical events and market volatility, we continue to be very pleased with the consistent credit performance of CGBD and strength of the Carlyle Direct Lending platform. In total, we funded $217 million of investments at CGBD and closed over $1.2 billion of new and incremental commitments at the platform level, reflecting a strong quarter of originations.

Speaker #3: I'll then hand the call over to our President and CFO, Tom Hennigan. Despite a complex backdrop marked by geopolitical events and market volatility, we continue to be very pleased with the consistent credit performance of CGBD and the strength of the Carlyle direct lending platform.

Speaker #3: In total, we funded $217 million of investments at CGBD and closed over $1.2 billion of new and incremental commitments at the platform level. Reflecting a strong quarter of originations, despite the market volatility, our platform originations were up 14% year over year in the face of U.S. private equity deal activity being down nearly 25% over the same period, as the Carlyle direct lending platform continues to take share. In addition, we're seeing signs of an increasingly attractive investment environment, with wider spreads and tighter documentation showing up in our new originations as a result of volatility in the recent rebalancing of capital supply amongst direct lenders.

Alex Chi: Despite the market volatility, our platform originations were up 14% year over year in the face of US private equity deal activity being down nearly 25% over the same period as the Carlyle Direct Lending platform continues to take share. In addition, we're seeing signs of an increasingly attractive investment environment with wider spreads and tighter documentation showing up in our new originations as a result of volatility and the recent rebalancing of capital supply amongst direct lenders. In Q1, spreads for CGBD's new investments widened by nearly 50 basis points on average compared to the Q4's average of approximately 475 basis points. Our first lien deals were over a quarter turn less levered at origination.

Alex Chi: Despite the market volatility, our platform originations were up 14% year-over-year in the face of US private equity deal activity being down nearly 25% over the same period as the Carlyle Direct Lending platform continues to take share. In addition, we're seeing signs of an increasingly attractive investment environment with wider spreads and tighter documentation showing up in our new originations as a result of volatility and the recent rebalancing of capital supply amongst direct lenders. In Q1, spreads for CGBD's new investments widened by nearly 50 basis points on average compared to the Q4's average of approximately 475 basis points. Our first lien deals were over a quarter turn less levered at origination.

Speaker #3: In the first quarter, spreads for CGBD's new investments widened by nearly 50 basis points on average compared to the fourth quarter's average of approximately 475 basis points.

Speaker #3: And our first lien deals were over a quarter-turn less levered at origination. We also saw our enhanced origination team drive several wins during the quarter, including closing deals with two new private equity sponsors that we had not partnered with before.

Alex Chi: We also saw our enhanced origination team drive several wins during the quarter, including closing deals with two new private equity sponsors that we had not partnered with before. Repayments remained elevated with $216 million of activity during the quarter, combined with $153 million in sales to our MMCF joint venture. Net investment activity drove total investments at CGBD to decrease from $2.5 billion to $2.3 billion during the quarter. Given a strong visible pipeline and fewer expected repayments, we do expect to see portfolio growth in Q2. Total investments at our MMCF joint venture increased to over $1 billion as we continue to prioritize ramping this vehicle given the enhanced returns MMCF generates for CGBD.

Speaker #3: Payments remained elevated, with $216 million of activity during the quarter. Combined with $153 million in sales to our MMCF joint venture, net investment activity drove total investments at CGBD to decrease from $2.5 billion to $2.3 billion during the quarter.

Speaker #3: Given a strong visible pipeline and fewer expected repayments, we do expect to see portfolio growth in the second quarter. Total investments at our MMCF joint venture increased to over $1 billion as we continue to prioritize ramping this vehicle, given the enhanced returns MMCF generates for CGBD.

Speaker #3: During the quarter, we generated $0.36 per share of net investment income on both a GAAP and adjusted basis. Our net asset value as of March 31st was $15.89 per share, compared to $16.26 per share as of December 31st.

Alex Chi: During Q1, we generated $0.36 per share of net investment income on both a GAAP and adjusted basis. Our net asset value as of 31 March was $15.89 per share compared to $16.26 per share as of 31 December. The decrease was primarily attributable to market-related valuation factors, which Tom will describe in more detail later. Although concern around software companies persists, we remain confident in the quality and stability of our portfolio. The software borrowers in our book continue to grow revenue and EBITDA on a year-over-year basis. As it relates to AI disruption risk, we continue to feel comfortable with our exposure, finding no material near-term risks to our portfolio companies at this stage. We remain focused on portfolio diversification while managing target leverage.

Alex Chi: During the quarter, we generated $0.36 per share of net investment income on both a GAAP and adjusted basis. Our net asset value as of 31 March was $15.89 per share compared to $16.26 per share as of 31 December. The decrease was primarily attributable to market-related valuation factors, which Tom will describe in more detail later. Although concern around software companies persists, we remain confident in the quality and stability of our portfolio. The software borrowers in our book continue to grow revenue and EBITDA on a year-over-year basis. As it relates to AI disruption risk, we continue to feel comfortable with our exposure, finding no material near-term risks to our portfolio companies at this stage. We remain focused on portfolio diversification while managing target leverage.

Speaker #3: The decrease was primarily attributable to market-related valuation factors, which Tom will describe in more detail later. Although concern around software companies persists, we remain confident in the quality and stability of our portfolio.

Speaker #3: The software borrowers in our book continue to grow revenue and EBITDA on a year-over-year basis. As it relates to AI disruption risk, we continue to feel comfortable with our exposure, finding no material near-term risks to our portfolio companies at this stage.

Speaker #3: We remain focused on portfolio diversification while managing target leverage. As of March 31st, our portfolio was comprised of 171 companies across more than 25 industries.

Alex Chi: As of March 31st, our portfolio was comprised of 171 companies across more than 25 industries. The average exposure to any single portfolio company was less than 60 basis points of total investments, and 94% of our investments were in senior secured loans. The median EBITDA across our portfolio was $100 million. As always, discipline and consistency drove performance in Q1. We expect these tenets to drive performance in future quarters. Looking ahead, we continue to expect a wave of M&A activity over the medium term, and we are well-positioned with our revitalized origination platform to take advantage of increasing market activity and to continue taking share. Looking at our pipeline, a significant majority of deals are in old economy sectors, including industrials, aerospace and defense, healthcare, and consumer products.

Speaker #3: The average exposure to any single portfolio company was less than 60 basis points of total investments in 94% of our investments when senior secured loans.

Speaker #3: The median EBITDA across our portfolio was $100 million. As always, discipline and consistency drove performance in the first quarter, and we expect these tenets to drive performance in future quarters.

Speaker #3: Looking ahead, we continue to expect a wave of M&A activity over the medium term, and we are well positioned with our revitalized origination platform to take advantage of increasing market activity and to continue taking share.

Speaker #3: Looking at our pipeline, a significant majority of deals are in old economy sectors, including industrials, aerospace and defense, healthcare, and consumer products. While we are optimistic about the potential for a continued shift to an increasingly lender-friendly investment environment, CGBD's current income generation continues to be impacted by lower investment yields on the current portfolio, driven by the tight market spreads of recent years.

Alex Chi: While we are optimistic about the potential for continued shift to an increasingly lender-friendly investment environment, CGBD's current income generation continues to be impacted by lower investment yields on the current portfolio, driven by the tight market spreads of recent years. Following discussions with our board of directors, we have reset the base dividend to $0.35 per share for Q2 2026 compared to our previous $0.40 per share base dividend, which equates to a dividend yield on NAV of 8.8%. We are maintaining our existing supplemental dividend policy, which targets paying out at least 50% of excess earnings above the base dividend.

Speaker #3: Following discussions with our board of directors, we have reset the base dividend to $0.35 per share for the second quarter of 2026, compared to our previous $0.40 per share base dividend, which equates to a dividend yield on NAV of 8.8%.

Speaker #3: We are maintaining our existing supplemental dividend policy, which targets paying out at least 50% of excess earnings above the base dividend. This change will enable us to support a stable NAV in the near term and increase our financial flexibility and dividend coverage cushion, while also allowing us to deliver additional value to shareholders over time as the investment environment becomes more attractive and we scale our joint ventures.

Alex Chi: This change will enable us to support a stable NAV in the near term and increases our financial flexibility and dividend coverage cushion while also allowing us to deliver additional value to shareholders over time as the investment environment becomes more attractive and we scale our joint ventures. As manager dispersion increases, we expect the breadth of the Carlyle platform and the consistency of our performance to differentiate us through our ability to leverage Carlyle scale, scope of investment capabilities, and dedicated in-house investing, portfolio management, and restructuring resources. With that, I'll now hand the call over to our President and CFO, Thomas Hennigan.

Speaker #3: As manager dispersion increases, we expect the breadth of the Carlyle platform and the consistency of our performance to differentiate us through our ability to leverage Carlyle's scale, scope of investment capabilities, and dedicated in-house investing, portfolio management, and restructuring resources.

Speaker #3: With that, I'll now hand the call over to our President and CFO, Tom Hennigan.

Speaker #1: Thank you, Alex. Today, I'll begin with an overview of our first quarter financial results. Then I'll discuss portfolio performance, before concluding with detail on our balance sheet positioning.

Thomas Hennigan: Thank you, Alex. Today, I'll begin with an overview of our Q1 financial results. I'll discuss portfolio performance before concluding with detail on our balance sheet positioning. Total investment income for Q1 was $64 million. Below prior quarter, primarily driven by a decrease in the average portfolio size and a decrease in total portfolio yields as a result of lower base rates and lower spreads. This was partially offset by higher fee income. Total expenses of $39 million also decreased versus prior quarter, primarily as a result of lower interest expense due to lower outstanding debt balance and lower base rates, as well as the acceleration of debt issuance costs from the repayment of our 2028 notes during Q4.

Tom Hennigan: Thank you, Alex. Today, I'll begin with an overview of our Q1 financial results. I'll discuss portfolio performance before concluding with detail on our balance sheet positioning. Total investment income for Q1 was $64 million. Below prior quarter, primarily driven by a decrease in the average portfolio size and a decrease in total portfolio yields as a result of lower base rates and lower spreads. This was partially offset by higher fee income. Total expenses of $39 million also decreased versus prior quarter, primarily as a result of lower interest expense due to lower outstanding debt balance and lower base rates, as well as the acceleration of debt issuance costs from the repayment of our 2028 notes during Q4.

Speaker #1: Total investment income for the first quarter was $64 million, below the prior quarter, primarily driven by a decrease in the average portfolio size and a decrease in total portfolio yields as a result of lower base rates and lower spreads.

Speaker #1: This was partially offset by higher fee income. Total expenses of $39 million also decreased versus the prior quarter, primarily as a result of lower interest expense due to a lower outstanding debt balance and lower base rates.

Speaker #1: As well as the acceleration of debt issuance costs from the repayment of our 2028 notes during the fourth quarter. The result was net investment income for the first quarter of $25 million, or $0.36 per share, on both a GAAP basis and after adjusting for the impact of asset acquisition accounting related to the CSL3 merger and the consolidation of Credit Fund II.

Thomas Hennigan: The result was net investment income for Q1 of $25 million or $0.36 per share on both a GAAP basis and after adjusting for the impact of asset acquisition accounting related to the CSL3 merger and consolidation of Credit Fund II, both which closed in Q1 2025. Our board of directors declared the dividend for Q2 2026 at a level of $0.35 per share, which is payable to stockholders of record as of the close of business on 30 June. As Alex discussed, this resets the base dividend to a level supported by the earnings power of the current portfolio. With the investment environment becoming more attractive, as we continue to deploy and scale our joint ventures, we expect to potentially deliver additional value to shareholders through the supplemental dividend.

Tom Hennigan: The result was net investment income for Q1 of $25 million or $0.36 per share on both a GAAP basis and after adjusting for the impact of asset acquisition accounting related to the CSL3 merger and consolidation of Credit Fund II, both which closed in Q1 2025. Our board of directors declared the dividend for Q2 2026 at a level of $0.35 per share, which is payable to stockholders of record as of the close of business on 30 June. As Alex discussed, this resets the base dividend to a level supported by the earnings power of the current portfolio. With the investment environment becoming more attractive, as we continue to deploy and scale our joint ventures, we expect to potentially deliver additional value to shareholders through the supplemental dividend.

Speaker #1: Both of which closed in the first quarter of 2025. Our Board of Directors declared the dividend for the second quarter of 2026 at a level of $0.35 per share.

Speaker #1: Which is payable to stockholders of record as of the close of business on June 30th. As Alex discussed, this resets the base dividend to a level supported by the earnings power of the current portfolio.

Speaker #1: With the investment environment becoming more attractive, and as we continue to deploy and scale our joint ventures, we expect to potentially deliver additional value to shareholders through the supplemental dividend.

Speaker #1: In addition, we currently estimate we have $0.70 per share of spillover income to support the quarterly dividend. As we mentioned in prior earnings calls, we expect earnings to trough in the second quarter, and we anticipate an increase in earnings thereafter as we ramp the portfolio in both JVs.

Thomas Hennigan: In addition, we currently estimate we have $0.70 per share of spillover income to support the quarterly dividend. As mentioned in prior earnings calls, we expect earnings to trough in Q2, and we anticipate an increase in earnings thereafter as we ramp the portfolio of both JVs. Given CGBD shares continue to trade at a compelling discount, we repurchased $19 million of shares at an average discount of 26% during Q1, resulting in $0.09 of accretion to NAV per share. We continue to repurchase shares in Q2 with additional $8 million to date, which will result in an additional $0.05 per share of accretion. As a reminder, our board approved a $100 million upsize in February, increasing the total program to $300 million.

Tom Hennigan: In addition, we currently estimate we have $0.70 per share of spillover income to support the quarterly dividend. As mentioned in prior earnings calls, we expect earnings to trough in Q2, and we anticipate an increase in earnings thereafter as we ramp the portfolio of both JVs. Given CGBD shares continue to trade at a compelling discount, we repurchased $19 million of shares at an average discount of 26% during Q1, resulting in $0.09 of accretion to NAV per share. We continue to repurchase shares in Q2 with additional $8 million to date, which will result in an additional $0.05 per share of accretion. As a reminder, our board approved a $100 million upsize in February, increasing the total program to $300 million.

Speaker #1: The given CGBD shares continue to trade at a compelling discount. We repurchased $19 million of shares at an average discount of 26% during the first quarter.

Speaker #1: Resulting in $0.09 of accretion to NAV per share. We continue to repurchase shares in the second quarter, with an additional $8 million to date.

Speaker #1: Which will result in an additional $0.05 per share of accretion. And as a reminder, our board approved a $100 million upsize in February, increasing the total program to $300 million.

Speaker #1: On valuations, our total aggregate realized and unrealized net loss for the quarter was about $29 million, or $0.42 per share. Now, about two-thirds of the decline was attributable to unrealized losses from widening spreads across the broader portfolio.

Thomas Hennigan: On valuations, our total aggregate realized and unrealized net loss for the quarter was about $29 million or $0.42 per share. About two-thirds of the decline was attributable to unrealized losses from widening spreads across the broader portfolio, including software investments, driven by overall market volatility. The remainder due to credit-related impacts on a handful of underperforming investments. To turn to credit performance, we continue to see overall stability and credit quality across the portfolio. Key credit stats continue to be stable, including portfolio company margins, leverage levels, and LTVs. Although the fair value of loans utilizing PIK provisions did increase during Q1, the majority of our PIK is underwritten at origination or for performing borrowers, or what we would consider the good PIK. Non-accruals decreased as of 31 March, with one borrower, Alpine, completing a balance sheet restructuring during the quarter.

Tom Hennigan: On valuations, our total aggregate realized and unrealized net loss for the quarter was about $29 million or $0.42 per share. About two-thirds of the decline was attributable to unrealized losses from widening spreads across the broader portfolio, including software investments, driven by overall market volatility. The remainder due to credit-related impacts on a handful of underperforming investments. To turn to credit performance, we continue to see overall stability and credit quality across the portfolio. Key credit stats continue to be stable, including portfolio company margins, leverage levels, and LTVs. Although the fair value of loans utilizing PIK provisions did increase during Q1, the majority of our PIK is underwritten at origination or for performing borrowers, or what we would consider the good PIK. Non-accruals decreased as of 31 March, with one borrower, Alpine, completing a balance sheet restructuring during the quarter.

Speaker #1: Including software investments, driven by overall market volatility, with the remainder due to credit-related impacts on a handful of underperforming investments. To turn to credit performance, we continuously see overall stability in credit quality across the portfolio.

Speaker #1: Key credit stats continue to be stable, including portfolio company margins, leverage levels, and LTVs. Although the fair value of loans utilizing PIC provisions did increase during the first quarter, the majority of our PIC is underwritten at origination or for performing borrowers.

Speaker #1: Or what we would consider to be good PIC. Non-accruals decreased as of March 31. With one borrower, Alpine, completing a balance sheet restructuring during the quarter.

Speaker #1: The four remaining borrowers on non-accrual represent only 0.9% of investments at fair value, and 1% at amortized cost. Moving to the Middle Market Credit Fund, or MMCF, our longstanding joint venture.

Thomas Hennigan: The four remaining borrowers on non-accrual represent only 0.9% of investments at fair value and 1% at amortized cost. Moving to the Middle Market Credit Fund or MMCF, our long-standing joint venture, we continue to focus on maximizing both asset growth and returns. During Q1, we closed an upsize to the MMCF equity commitments from $175 million to $250 million for each partner. Further supporting additional ramp, in February, we closed a new $200 million financing facility for MMCF with an attractive cost of SOFR plus 180 basis points. Last week, we closed a $400 million upsize to the existing credit facility from $800 million to $1.2 billion at an attractive spread of SOFR plus 170 basis points.

Tom Hennigan: The four remaining borrowers on non-accrual represent only 0.9% of investments at fair value and 1% at amortized cost. Moving to the Middle Market Credit Fund or MMCF, our long-standing joint venture, we continue to focus on maximizing both asset growth and returns. During Q1, we closed an upsize to the MMCF equity commitments from $175 million to $250 million for each partner. Further supporting additional ramp, in February, we closed a new $200 million financing facility for MMCF with an attractive cost of SOFR plus 180 basis points. Last week, we closed a $400 million upsize to the existing credit facility from $800 million to $1.2 billion at an attractive spread of SOFR plus 170 basis points.

Speaker #1: We continue to focus on maximizing both asset growth and returns. During the first quarter, we closed an upsize to the MMCF equity commitments from $175 million to $250 million for each partner.

Speaker #1: Further supporting additional ramp, in February, we closed a new $200 million financing facility for MMCF, with an attractive cost of SOFR plus 180 basis points.

Speaker #1: And last week, we closed a $400 million upsize to the existing credit facility, from $800 million to $1.2 billion, at an attractive spread of SOFR plus 170 basis points.

Speaker #1: MMCF is currently achieving a 15% dividend yield, generated through over $1 billion of investments with no fees at the joint venture. The equity and debt upsize is positioning us to continue to grow assets at the JV and increase the impact on CGBD earnings.

Thomas Hennigan: MMCF is currently achieving a 15% dividend yield generated through over $1 billion of investments with no fees at the joint venture. The equity and debt upsize has positioned us to continue to grow assets at the JV and increase the impact to CGBD earnings. In addition, we began ramping our new JV, Structured Credit Partners or SCP. As a reminder, SCP is capitalized with $600 million of equity commitments from the Carlyle and Sixth Street BDCs, and will invest in broadly syndicated first lien senior secured loans. The financing of these assets will be primarily through CLOs separately managed by Carlyle and Sixth Street, subject to the oversight of SCP's board of directors.

Tom Hennigan: MMCF is currently achieving a 15% dividend yield generated through over $1 billion of investments with no fees at the joint venture. The equity and debt upsize has positioned us to continue to grow assets at the JV and increase the impact to CGBD earnings. In addition, we began ramping our new JV, Structured Credit Partners or SCP. As a reminder, SCP is capitalized with $600 million of equity commitments from the Carlyle and Sixth Street BDCs, and will invest in broadly syndicated first lien senior secured loans. The financing of these assets will be primarily through CLOs separately managed by Carlyle and Sixth Street, subject to the oversight of SCP's board of directors.

Speaker #1: In addition, we began ramping our new JV, Structured Credit Partners, or SCP. As a reminder, SCP is capitalized with $600 million of equity commitments from the Carlyle N6 Street BDCs.

Speaker #1: And will invest in broadly syndicated first lien Senior Secured Loans. The financing of these assets will be primarily through CLOs separately managed by Carlyle N6 Street, subject to the oversight of SCP's board of directors.

Speaker #1: CGBD committed $150 million of capital to the vehicle, which will not charge any management or incentive fees on the underlying JV assets, providing a potential 400 to 500 basis point uplift to total returns.

Thomas Hennigan: CGBD committed $150 million of capital to the vehicle, which will not charge any management or incentive fees on the underlying JV assets, providing a potential 400 to 500 basis point uplift to total returns. In April, we were able to capitalize on market volatility and accelerated the timeline for the first 2 CLOs to price and close, benefiting from depressed loan prices and tight liability pricing. We expect to price and close 2 additional CLOs in 2026, subject to market conditions, in line with our plan to ramp at a cadence of 4 CLO issuances per year to ensure vintage diversification. Over time, the JV is expected to manage approximately $6 to 7 billion of assets fee-free at FCP. We expect to grow the dividend to CGBD as the JV ramps in the coming quarters.

Tom Hennigan: CGBD committed $150 million of capital to the vehicle, which will not charge any management or incentive fees on the underlying JV assets, providing a potential 400 to 500 basis point uplift to total returns. In April, we were able to capitalize on market volatility and accelerated the timeline for the first 2 CLOs to price and close, benefiting from depressed loan prices and tight liability pricing. We expect to price and close 2 additional CLOs in 2026, subject to market conditions, in line with our plan to ramp at a cadence of 4 CLO issuances per year to ensure vintage diversification. Over time, the JV is expected to manage approximately $6 to 7 billion of assets fee-free at FCP. We expect to grow the dividend to CGBD as the JV ramps in the coming quarters.

Speaker #1: In April, we were able to capitalize on market volatility and accelerated the timeline for the first two CLOs to price and close, benefiting from depressed loan prices and tight liability pricing.

Speaker #1: We expect to price and close two additional CLOs in 2026, subject to market conditions, in line with our plan to ramp at a cadence of four CLO issuances per year to ensure vintage diversification.

Speaker #1: Over time, the JV is expected to manage approximately $6 to $7 billion of assets fee-free at SCP. We expect to grow the dividend to CGBD as the JV ramps in the coming quarters.

Speaker #1: I'll finish by touching on our financing facilities and leverage. Our debt stack is 100% floating rate, matching up primarily floating rate assets, meaning CGBD is well positioned in advance of any additional interest rate movements.

Thomas Hennigan: I'll finish by touching on our financing facilities and leverage. Our debt stack is 100% floating rate, matching our primarily floating rate assets, meaning CGBD is well-positioned in advance of any additional interest rate movements, and we have limited maturities until 2030. At quarter end, statutory leverage was 1.25 times, and net financial leverage, after adjusting for unsettled sales of loans to MMCF, was only 1.06 times. Given our current strong liquidity profile, we believe we're well positioned to benefit from both more attractive terms for new investments and the expected pickup in deal volume in future quarters. With that, I'll turn the call back over to Alex.

Tom Hennigan: I'll finish by touching on our financing facilities and leverage. Our debt stack is 100% floating rate, matching our primarily floating rate assets, meaning CGBD is well-positioned in advance of any additional interest rate movements, and we have limited maturities until 2030. At quarter end, statutory leverage was 1.25 times, and net financial leverage, after adjusting for unsettled sales of loans to MMCF, was only 1.06 times. Given our current strong liquidity profile, we believe we're well positioned to benefit from both more attractive terms for new investments and the expected pickup in deal volume in future quarters. With that, I'll turn the call back over to Alex.

Speaker #1: And we have limited maturities until 2030. At quarter end, statutory leverage was 1.25 times, and net financial leverage, after adjusting for unsettled sales of loans to MMCF, was only 1.06 times.

Speaker #1: Given our current strong liquidity profile, we believe we're well positioned to benefit from both more attractive terms for new investments and the expected pickup in deal volume in future quarters.

Speaker #1: With that, I'll turn the call back over to Alex.

Speaker #2: Thanks, Tom. As we push into the middle of the second quarter, our portfolio remains resilient and our strategy remains unchanged. We continue to focus on sourcing and transactions with significant equity cushions, conservative leverage profiles, and attractive spreads relative to market levels.

Alex Chi: Thanks, Tom. As we approach the middle of Q2, our portfolio remains resilient and our strategy remains unchanged. We continue to focus on sourcing transactions with significant equity cushions, conservative leverage profiles, and attractive spreads relative to market levels, and expect to take advantage of improved conditions in the market with a revitalized origination platform. Our pipeline of new originations is active, and with a stable, high-quality portfolio, CGBD stockholders are benefiting from the continued execution of our strategy. As always, we remain committed to delivering a resilient, stable cash flow stream to our investors through consistent income and solid credit performance. I'd like to now hand the call over to the operator to take your questions. Thank you.

Speaker #2: And expect to take advantage of improved conditions in the market and the revitalized origination platform. Our pipeline of new originations is active, and with a stable, high-quality portfolio, CGBD stockholders are benefiting from the continued execution of our strategy.

Speaker #2: As always, we remain committed to delivering a resilient, stable cash flow stream to our investors through consistent income and solid credit performance. I’d like to now hand the call over to the operator to take your questions.

Speaker #2: Thank you.

Speaker #3: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press star one one again.

Operator: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered or you wish to remove yourself from the queue, please press star one one again. We will pause for a moment while we compile our Q&A roster. Our first question comes from Richard Shane with JP Morgan. Your line is open.

Speaker #3: We will pause for a moment while we compile our Q&A roster. Our first question comes from Rick Shane with J.P. Morgan. Your line is open.

Speaker #4: Hey, guys. Thanks for taking my questions this morning. Look, you're highlighting the opportunity in terms of better origination and terms. I am curious, sort of where you see us in the cycle as things start to normalize.

Richard Shane: Hey, guys. Thanks for taking my questions this morning. look, you're highlighting the opportunity in terms of better origination terms. I am curious, you know, sort of where you see us in the cycle as things start to normalize. Are we in a scenario where it's sort of back to mid-cycle levels in terms of spreads and in terms of deal structure? Or is this sort of the classic tight market where you are able to extract premiums and especially strong terms?

Speaker #4: Are we in a scenario where it’s sort of back to mid-cycle levels in terms of spreads and in terms of deal structure? Or is this sort of the classic tight market where you are able to extract premiums and especially strong terms?

Speaker #2: Hey, it's Alex. Thanks a lot for the question. It feels to me like, as we've talked about, just given the rebalancing and the capital supply amongst the direct lending landscape, on top of the fact that there is still deal activity out there, there is just more discipline when it comes to spreads that are being indicated, as well as for documentation.

Alex Chi: Hey, it's Alex. Thanks a lot for the question. It feels to me like, as we've talked about, just given the rebalancing in the capital supply amongst the direct lending landscape, on top of the fact that there is still deal activity out there is just more discipline where it comes to spreads that are being indicated as well as for documentation. For the time being and as we look at the pipeline and our dialogue with the borrowers, it feels to us like we're clearly back in an environment where we're getting some spread back. As we mentioned, our originations in Q1, the spreads were up around 50 basis points. We're getting a bit more OID, and the documentation standards are also going a bit further back into lenders' hands.

Speaker #2: So, for the time being, and as we look at the pipeline and our dialogue with the borrowers, it feels to us like we’re clearly back in an environment where we’re getting some spread back. As we mentioned, our originations in the first quarter—

Speaker #2: The spreads were up around 50 basis points. We're getting a bit more OID, and the documentation standards are also going a bit further back into lenders' hands.

Speaker #2: And so, for the foreseeable future, and as we look at our pipeline, it feels like this dynamic will continue.

Alex Chi: For the foreseeable future and as we look at our pipeline, it feels like this dynamic will continue.

Speaker #4: Got it. Okay. Appreciate it, guys. Thank you.

Richard Shane: Got it. Okay. Appreciate it, guys. Thank you.

Speaker #2: Thank you.

Alex Chi: Thank you.

Speaker #3: One moment for our next question. Our next question comes from Eric Zwick with Lucid Capital Markets. Your line is open.

Operator: One moment for our next question. Our next question comes from Erik Zwick with Lucid Capital Markets. Your line is open.

Speaker #5: Thanks. Good morning. Just wanted to follow up on the questions. I'm sorry, on the commentary that Tom gave with the question. I think, Tom, you mentioned that you expect the earnings to trough in Q2, given the expected kind of ramp in the JVs.

Erik Zwick: Thanks. Good morning. Just wanted to follow up on the questions, I’m sorry, on the commentary that Tom gave, but the question, you know, I think, Tom, you mentioned that you expect the earnings to trough in Q2, given the expected kind of ramp in the JVs. You know, just you mentioned some spread widening as well for the core portfolio, but it looks like, you know, Q1 new investments, you know, the weighted average yield for that is still below the average yield in the portfolio. That earnings trough can happen even with potentially a little bit of more kind of core investment yield compression. Is that the right way to think about your commentary?

Speaker #5: Just—you mentioned some spread widening, as well, for the core portfolio, but it looks like Q1 new investments' yield is near the weighted average yield for that, which is still below the average yield in the portfolio.

Speaker #5: So that earnings trough can happen even with potentially a little bit more, kind of, core investment yield compression. Is that the right way to think about your commentary?

Speaker #2: Hey, Eric. Thanks for the question. I think that's right. When you look at the second quarter in particular compared to the first quarter, a couple of dynamics.

Thomas Hennigan: Hey, Erik. Thanks for the question. I think that's right. When you look at the Q2 in particular compared to the Q1, a couple of dynamics. Number one is overall portfolio spread continues to have a little bit of pressure, but I think that's pretty much worked its way through. Second, base rates, we think at least for our portfolio, base rates the impact worked its way through in the Q1. Absent additional rate cuts, at least the prior rate cuts, we felt the pain to date already. When you look at our average assets, particularly when we had some attractive sales to our JV at the end of the quarter, the average assets for the Q2 are likely to be lower than the Q1.

Tom Hennigan: Hey, Erik. Thanks for the question. I think that's right. When you look at the Q2 in particular compared to the Q1, a couple of dynamics. Number one is overall portfolio spread continues to have a little bit of pressure, but I think that's pretty much worked its way through. Second, base rates, we think at least for our portfolio, base rates the impact worked its way through in the Q1. Absent additional rate cuts, at least the prior rate cuts, we felt the pain to date already. When you look at our average assets, particularly when we had some attractive sales to our JV at the end of the quarter, the average assets for the Q2 are likely to be lower than the Q1.

Speaker #2: Number one is, overall portfolio spread continues to have a little bit of pressure, but I think that's pretty much worked its way through. Second, base rates—we think, at least on the prior portfolio, base rates were the impact that worked its way through in the first quarter.

Speaker #2: So, absent additional rate cuts—at least the prior rate cuts—we felt the pain to date already. When you look at our average assets, and particularly when we had a subtractive sale to our JV at the end of the quarter, the average assets for the second quarter are likely to be lower than the first quarter.

Speaker #2: And then the first quarter was also aided by higher-than-typical fee income. We had a couple of exits—exit fees and prepayment fees.

Thomas Hennigan: The Q1 was also aided by higher than typical fee income. We had a couple of exits, exit fees and prepayment fees that probably aided the Q1 by a little bit north of $0.01. You put those together, we also anticipate we're going to finally start to see some ramp. I should say finally, we just started with our JVs. You're going to start to see some modest ramp, particularly with our new JV with Sixth Street in the Q2, but that's going to be more of a back end, 2026 into 2027, positive. You put that all together, and we think that you'll see, you know, we anticipate we'll trough in the Q2 and then see a rebound in the Q3.

Tom Hennigan: The Q1 was also aided by higher than typical fee income. We had a couple of exits, exit fees and prepayment fees that probably aided the Q1 by a little bit north of $0.01. You put those together, we also anticipate we're going to finally start to see some ramp. I should say finally, we just started with our JVs. You're going to start to see some modest ramp, particularly with our new JV with Sixth Street in the Q2, but that's going to be more of a back end, 2026 into 2027, positive. You put that all together, and we think that you'll see, you know, we anticipate we'll trough in the Q2 and then see a rebound in the Q3.

Speaker #2: That probably aided the first quarter by a little bit north of a penny. So you put those together. We also anticipate we're going to finally start to see some ramp.

Speaker #2: I should say, finally, we just started with our JVs. So you're going to start to see some modest ramp, particularly with our new JV with Sixth Street in the second quarter.

Speaker #2: But that's going to be more of a back end '26 into '27 positive. So, you put that all together, and we think that you'll see—we anticipate we'll trough in the second quarter and then see a rebound in the third quarter.

Speaker #5: That's helpful, thanks. And then just on the—I think it's $152 million of assets sold to the credit fund in the quarter. How were those assets selected?

Erik Zwick: That's helpful. Thanks. Then just on the, I think it was $152 million of assets sold to the Credit Fund in the quarter. You know, how were those assets selected? Any commentary you can give on just kind of the details on, you know, kind of, potentially the yield that was on those as well as the pricing.

Speaker #5: And any commentary you can give on just kind of the details on potentially the yield that was on those, as well as the pricing?

Speaker #2: Sure. So those, I'd say, are primarily late 2025 originations—regular course deals. The deals are typically in the 450, 475 spread. So those transactions, when we were originating across our platform throughout 2025, those lower spread transactions, typically with a four handle, we really weren't considering to maintain long term on the CGBD balance sheet.

Thomas Hennigan: Sure. Those I'd say are primarily late 2025 originations, regular course deals, the deals in the typically the 450, 475 spread. Those transactions when we originated across our platform throughout 2025, those lower spread transactions typically with a 4 handle, really weren't considering to maintain long term on the CGBD balance sheet. We're always working in concert with PSP with the thought that we would originate directly or ultimately sell to the JV. That was really just a timing factor of ultimately transacting on those deals that we originated at market terms throughout 2025.

Tom Hennigan: Sure. Those I'd say are primarily late 2025 originations, regular course deals, the deals in the typically the 450, 475 spread. Those transactions when we originated across our platform throughout 2025, those lower spread transactions typically with a 4 handle, really weren't considering to maintain long term on the CGBD balance sheet. We're always working in concert with PSP with the thought that we would originate directly or ultimately sell to the JV. That was really just a timing factor of ultimately transacting on those deals that we originated at market terms throughout 2025.

Speaker #2: We're always working in concert with PSP, with the thought that we would originate directly or ultimately sell to the JV. So that was really just a timing factor of ultimately transacting on those deals that we originated at market terms throughout 2025.

Speaker #5: Great. Thank you for taking my questions.

Erik Zwick: Great. Thank you for taking my questions.

Speaker #2: Thank you.

Thomas Hennigan: Thank you.

Tom Hennigan: Thank you.

Speaker #3: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. And I'm not showing any further questions at this time.

Operator: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 1 1 on your telephone. I'm not showing any further questions at this time. I turn the call back to Alex for any further remarks.

Speaker #3: I turn the call back to Alex for any further remarks.

Speaker #2: Great. Thanks, everyone, for participating in our call. We'll continue to execute and look forward to speaking with you when we report next quarter.

Alex Chi: Great. Thanks everyone for participating on our call. We'll continue to execute, and we look forward to speaking with you when we report the next quarter. Have a good day.

Speaker #2: Have a good day.

Speaker #3: Thank you, ladies and gentlemen. This does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.

Operator: Thank you, ladies and gentlemen. This concludes today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.