Q2 2026 BCP Investment Corp Earnings Call

August 7, 2026

Operator: Welcome to BCP Investment Corporation's Q2 and 30 June 2026 Earnings Conference Call. An earnings press release was distributed yesterday, 6 August, after market close. A copy of the release, along with an earnings presentation, is available on the company's website at www.bcpinvestmentcorporation.com in the investor relations section and should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC.

Speaker #1: Welcome to BCP Investment Corporation's second quarter and a June 30, 2026 earnings conference call. An earnings press release was distributed yesterday, August 6, after market close.

Speaker #1: A copy of the release, along with an earnings presentation, is available on the company's website at www.bcpinvestmentcorporation.com in the Investor Relations section and should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC.

Operator: A reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements, which are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the company's filings with the SEC. BCP Investment Corporation assumes no obligation to update any such forward-looking statements unless required by law. Speaking on today's call will be Ted Goldthorpe, Chief Executive Officer, President, and Director of BCP Investment Corporation, Brandon Satoren, Chief Financial Officer, and Patrick Schafer, Chief Investment Officer. I would now like to turn the call over to Ted Goldthorpe, Chief Executive Officer of BCP Investment Corporation. Please go ahead, Ted.

Speaker #1: As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements which are not guarantee of future performance or results and involve a number of risks and uncertainties.

Speaker #1: Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the company's filings with the SEC.

Speaker #1: BCP Investment Corporation assumes no obligation to update any such forward-looking statements unless required by law. Speaking on today's call, we'll be Tad Goldthorpe, Chief Executive Officer, President, and Director of BCP Investment Corporation.

Speaker #1: Brandon Satoren, Chief Financial Officer, and Patrick Schafer, Chief Investment Officer. With that, I would now like to turn the call over to Tad Goldthorpe, Chief Executive Officer of BCP Investment Corporation.

Speaker #1: Please go ahead, Tad.

Ted Goldthorpe: Good morning, and welcome to our Q2 2026 earnings call. I am joined today by our Chief Financial Officer, Brandon Satoren, and our Chief Investment Officer, Patrick Schafer. Following my opening remarks on the company's performance and activities during the Q2, Patrick will provide commentary on our investment portfolio and the broader market, and Brandon will discuss our operating results and financial condition in greater detail. During the Q2, we continued the execution against our plan as we strengthened our balance sheet and improved our asset coverage. We continued to reposition the portfolio, and we saw further improvement in our non-accrual profile. Subsequent to quarter end, we amended and upsized our KeyBank facility and used it to refinance and retire our Great Lakes revolving credit facility with JPMorgan.

Speaker #2: Good morning, and welcome to our second quarter 2026 earnings call. I'm joined today by our Chief Financial Officer, Brandon Satoren, and our Chief Investment Officer, Patrick Schafer.

Speaker #2: Following my opening remarks on the company's performance and activities during the second quarter, Patrick will provide commentary on our investment portfolio and the broader market, and Brandon will discuss our operating results and financial condition in greater detail.

Speaker #2: During the second quarter, we continued the execution against our plan as we strengthened our balance sheet and improved our asset coverage. We continue to reposition the portfolio, and we saw further improvement in our non-accrual profile.

Speaker #2: Subsequent to quarter end, we amended and upsized our KeyBank facility and used it to refinance and retire our Great Lakes revolving credit facility with JPMorgan.

Ted Goldthorpe: Net asset value declined during the quarter, driven predominantly by unrealized mark-to-market movements across the portfolio, which I will discuss in more detail. Taken together, the actions we took during the quarter have improved our financial flexibility and reduced near-term refinancing risk. During the quarter, we generated total investment income of $15.2 million and core investment income of $12.9 million, both above the Q2 2025. We generated net investment income of $5.5 million, or $0.45 per share, which exceeded our distribution for the period, with core investment income of $0.27 per share covering our base distribution. We also saw further improvement in underlying credit performance, with non-accruals declining on a net basis to 5.7% of the portfolio at amortized cost from 6.2% in the prior Q, and the number of portfolio companies on non-accrual declining to seven from nine.

Speaker #2: Net asset value declined during the quarter driven predominantly by unrealized mark-to-market movements across the portfolio, which I will discuss in more detail. Taken together, the actions we took during the quarter have improved our financial flexibility and reduced near-term refinancing risk.

Speaker #2: During the quarter, we generated total investment income of $15.2 million and core investment income of $12.9 million, both above the second quarter of 2025.

Speaker #2: We generated net investment income of $5.5 million, or $0.45 per share, which exceeded our distribution for the period. Core investment income of $0.27 per share covered our base distribution.

Speaker #2: We also saw further improvement in underlying credit performance with non-accruals declining on a net basis to 5.7% of the portfolio at amortized cost from $6.2% in the prior quarter and a number of portfolio companies on non-accrual declining to 7 from 9.

Ted Goldthorpe: We paid total distributions of $0.30 per share during Q2, comprised of our base $0.27 base distribution and $0.03 supplemental distribution declared on our Q1 earnings. We are also paying monthly base distributions of $0.09 per share for July, August, and September, as declared in May. Our board has now approved a Q4 2026 base distribution of $0.27 per share, payable in monthly installments of $0.09 per share in October, November, and December. With our monthly dividend structure now well-established, we believe this framework provides shareholders with a regular cadence of cash distributions while maintaining the flexibility to declare supplemental distributions when supported by earnings. We also continue to enhance our capital structure through proactive liability management.

Speaker #2: We paid total distributions of $0.30 per share during the second quarter, comprised of our $0.27 base distribution and a $0.03 supplemental distribution declared on our first quarter earnings.

Speaker #2: We're also paying monthly base distributions of $0.09 per share for July, August, and September as declared in May. Our board has now approved a fourth quarter 2026 base distribution of $0.27 per share payable and monthly installments of $0.09 per share in October, November, and December.

Speaker #2: With our monthly dividend structure now well established, we believe this framework provides shareholders with a regular cadence of cash distributions, while maintaining the flexibility to declare supplemental distributions when supported by earnings.

Speaker #2: We also continue to enhance our capital structure through proactive liability management. During the quarter, we used proceeds from the $50 million of 7.5% notes due 2029 that we issued in March to redeem $40 million of our 2026 notes at par, and we further reduced outstanding borrowings under our revolving credit facilities.

Ted Goldthorpe: During the quarter, we used proceeds from the $50 million of 7.5% notes due 2029 that we issued in March to redeem $40 million of our 2026 Notes at par. We further reduced outstanding borrowings under our revolving credit facilities. In total, par borrowings declined by $56 million during the quarter to $286 million. Our asset coverage ratio improved to 162% from 156%, and gross leverage declined to 1.6x from 1.8x. Subsequent to quarter end, we amended our KeyBank credit facility, reducing applicable borrowing spreads during the reinvestment period by 30 basis points, extending the facility's reinvestment period of maturity and increasing committed borrowing capacity from $75 million to $150 million.

Speaker #2: In total, par borrowings declined by $56 million during the quarter to $286 million, our asset coverage ratio improved to 162% from 156%, and gross leverage declined to 1.6 times from 1.8 times.

Speaker #2: Subsequent to quarter-end, we amended our KeyBank credit facility, reducing applicable borrowing spreads during the reinvestment period by 30 basis points, extending the facility's reinvestment period and maturity, and increasing committed borrowing capacity from $75 million to $150 million.

Ted Goldthorpe: In connection with the amendment, we used borrowings under the upsized facility to repay in full all outstanding borrowings under our Great Lakes revolving credit facility with JPMorgan. The commitments under that facility were terminated. This consolidates our secured revolving borrowings into a single facility with a longer runway, improves our overall cost of capital, and provides greater financial flexibility as we continue to execute our investment strategy. Net assets per share declined to $14.49 per share this quarter, driven primarily by unrealized mark-to-market declines across the portfolio. Approximately 34% of this quarter's unrealized markdowns were attributable to investments classified as software in our consolidated scheduled investments, and approximately 47% when including software exposed names, compared with approximately 40% and 70%, respectively, in Q1. We believe the majority of these markdowns continue to reflect sector-specific valuation pressure and broader market dislocation rather than fundamental credit deterioration.

Speaker #2: In connection with the amendment, we used borrowings under the upsized facility to repay in full all outstanding borrowings under our Great Lakes revolving credit facility with JPMorgan and the commitments under that facility were terminated.

Speaker #2: This consolidates our secure revolving borrowings into a single facility with a longer runway, improves our overall cost of capital, and provides greater financial flexibility as we continue to invest continue to execute our investment strategy.

Speaker #2: Net assets per share declined to $14.49 per share this quarter, driven primarily by unrealized mark-to-market declines across the portfolio. Approximately 34% of this quarter's unrealized markdowns were attributable to investments classified as software and are consolidated scheduled investments, and approximately 47% when including software-exposed names, compared with approximately 40% and 70%, respectively, in the first quarter.

Speaker #2: We believe the majority of these markdowns continue to reflect sector-specific valuation pressure and broader market dislocation rather than fundamental credit deterioration. Approximately 93.5% of our software exposure is rated low to medium AI impact under our internal review, concentrated in mission-critical, vertically specialized businesses with proprietary data embedded workflows and high switching costs, and these are unrealized marks against the senior secured positions with contracted cash flows and covenant protection.

Ted Goldthorpe: Approximately 93.5% of our software exposure is rated low to medium AI impact under our internal review, concentrated in mission-critical, vertically specialized businesses with proprietary data, embedded workflows, and high switching costs. These are unrealized marks against the senior secured positions with contracted cash flows and covenant protection. Our approach to deployment has not changed, but the environment has. Transaction volumes across the broader market were meaningfully lower this quarter. In a slower market, we would rather be selective than compromise on structure. What we are finding is our best opportunities continue to come from smaller and more complex situations and from borrowers and sponsors we already know, where we can dictate terms rather than respond to process. That is the same discipline we describe in our prior quarters. The difference this quarter is we are applying it to a narrower set of transactions.

Speaker #2: Our approach to deployment has not changed, but the environment has. Transaction volumes across the broader market were meaningful lower this meaningfully lower this quarter and in a slower market, we would be rather be selective than compromise on structure.

Speaker #2: What we are finding is our best opportunities continue to come from smaller more complex situations and from borrowers and sponsors we already know where we can dictate terms rather than respond to process.

Speaker #2: That is the same discipline we described in our prior quarters and the difference this quarter is we are applying it to a narrower set of transactions.

Ted Goldthorpe: As we look to H2 of 2026, we remain focused on active portfolio management, disciplined underwriting, and prudent capital allocation with the goal of driving long-term value for our shareholders. We are not relying on market-wide recovery and M&A transaction activity. Our focus is on the opportunities we are sourcing directly and on the pipeline we've built in our core market. With that, I will turn the call over to Patrick Schafer, our Chief Investment Officer, for a review of our investment activity.

Speaker #2: As we look to the second half of 2026, we remain focused on active portfolio management, disciplined underwriting, and prudent capital allocation, with the goal of driving long-term value for our shareholders.

Speaker #2: We are not relying on market-wide recovery and M&A transaction activity. Our focus is on the opportunities we are sourcing directly and on the pipeline we have built in our core market.

Speaker #2: With that, I will turn the call over to Patrick Schafer, our Chief Investment Officer, for a review of our investment activity.

Patrick Schafer: Thanks, Ted. Before turning to the quarter, a few comments on our core market. Our core market has not changed. We continue to focus on companies with $15 to $50 million of EBITDA in industries or business models where we have an edge, and ideally non-sponsor or non-traditional sponsor situations where we have the ability to drive pricing and structure. Given the continued uncertain macro environment, overall activity in our market has remained low, and terms on new deals have generally moved in our favor, with spreads on new issuance modestly wider than at year-end as our clients value certainty of execution over pricing. More importantly, credit markets were generally stable during the quarter. The B-rated loan index improved modestly, and the loan benchmarks we use in our valuation process ended the quarter flat to slightly tighter.

Speaker #3: Thanks, Ted. For training to the quarter, a few comments on our core market. Our core market has not changed. We continue to focus on companies with 15 to 50 million dollars of EBITDA in industries or business models where we have an edge and ideally non-sponsor or non-traditional sponsor situations where we have the ability to drive pricing and structure.

Speaker #3: Given the continued uncertain macro environment, overall activity in our market has remained low in terms on new deals have generally moved in our favor.

Speaker #3: With spreads on new issuance modestly wider than at year-end, as our clients value certainty of execution over pricing. More importantly, credit markets were generally stable during the quarter.

Speaker #3: The B-rated loan index improved modestly, and the loan benchmarks we use in our valuation process ended the quarter flat to slightly tighter. Software was the exception, with spreads widening further to a level several hundred basis points wide of the broader B-rated index.

Patrick Schafer: Software was the exception, with spreads widening further to a level several hundred basis points wide of the broader B-rated index. That divergence is an important context for our marks this quarter. Within software, our exposure continues to be concentrated in businesses with proprietary data, embedded workflows, and vertical market positioning. While the markets have generally differentiated between these credits in a positive way relative to those without these characteristics, we are still in a world where the syndicated markets view all software as a four-letter word. As a result of that lower activity level during Q2, our investment activity remains measured and selective. We completed three new portfolio company investments and four follow-on investments during the period. Repayments and sales remained elevated for the quarter, reflecting a mix of borrowers refinancing or being acquired and the resolution of two non-accrual positions.

Speaker #3: That divergence is an important context for our marks this quarter. Within software, our exposure continues to be concentrated in businesses with proprietary data embedded workflows and vertical market positioning.

Speaker #3: While the markets have generally differentiated between these credits in a positive way, relative to those without these characteristics, we are still in a world where this indicator, markets view all software as a four-letter word.

Speaker #3: As a result of that lower activity level during the second quarter, our investment activity remains measured and selective. We completed three new portfolio company investments and four follow-on investments during the period.

Speaker #3: Repayments and sales remained elevated for the quarter reflecting a mix of borrowers refinancing or being required and the resolution of two non-accrual positions. As a result, originations for the quarter were 20.9 million dollars and repayments and sales were 34.9 million dollars, resulting in net repayments and sales of approximately 14 million dollars.

Patrick Schafer: As a result, originations for the quarter were $20.9 million, and repayments and sales were $34.9 million, resulting in net repayments and sales of approximately $14 million. A little over half of our originations by dollar amount came through increasing exposure to existing portfolio companies that we know and that are performing well. Overall, we are constantly evaluating our deployment levels relative to leverage levels and desire to repurchase stock. Turning to slide 10. The overall yield on par value of new debt investments during the quarter was 13.3%. This compares to a 12.2% weighted average annualized yield, excluding income from non-accruals and collateralized loan obligations as of 30 June 2026, and a weighted average annualized yield of 12.8% as of 31 March 2026. Our focus remains on credit quality, structure, and overall risk-adjusted return. Our investment portfolio as of 30 June 2026, remained highly diversified.

Speaker #3: A little over half of our originations by dollar amount came through increased increase in exposure to existing portfolio companies that we know and that are performing well.

Speaker #3: Overall, we are constantly evaluating our deployment levels relative to leverage levels and desire to repurchase stock. Turning to slide 10, the overall yield on par value of new debt investments during the quarter was 13.3%.

Speaker #3: This compares to a 12.2% weighted average annualized yield, excluding income from non-accruals and collateralized loan obligations, as of June 30, 2026, and a weighted average annualized yield of 12.8% as of March 31, 2026.

Speaker #3: Our focus remains on credit quality, structure, and overall risk-adjusted return. Our investment portfolio as of June 30th, 2026, remained highly diversified. We ended the quarter with a debt investment portfolio of 349.7 million dollars at fair value excluding our investments in CLO funds, equities, and joint ventures, spread across 71 different portfolio companies and 33 different industries, with an average par balance of 3.2 million dollars per investment.

Patrick Schafer: We ended the quarter with a debt investment portfolio of $349.7 million at fair value, excluding our investments in CLO funds, equities, and joint ventures, spread across 71 different portfolio companies and 33 different industries, with an average par balance of $3.2 million per investment. Turning to slide 11, our non-accrual profile continued to improve on a cost basis during the quarter. At the end of Q2, we had 11 investments on non-accrual status attributable to seven portfolio companies, representing 3.1% and 5.7% of the portfolio at fair value and amortized cost, respectively. This compares to 12 investments attributable to nine portfolio companies on non-accrual status as of 31 March 2026, representing 2.6% and 6.2% of the portfolio at fair value and cost, respectively. The number of investments and companies on non-accrual, along with the amortized cost percentage, both improved.

Speaker #3: Turning to slide 11, our non-accrual profile continued to improve on a cost basis during the quarter. At the end of the second quarter, we had 11 investments on non-accrual status attributable to seven portfolio companies representing 3.1% and 5.7% of the portfolio at fair value and amortized costs, respectively.

Speaker #3: This compares to 12 investments attributable to nine portfolio companies on non-accrual status as of March 31st, 2026, representing 2.6% and 6.2% of the portfolio at fair value and cost, respectively.

Speaker #3: The number of investments and companies on non-accrual, along with the amortized cost percentage, both improved, though the fair value percentage increased, reflecting one additional investment placed on non-accrual during the quarter, alongside a lower total portfolio value.

Patrick Schafer: The fair value percentage increased, reflecting one additional investment placed on non-accrual during the quarter alongside a lower total portfolio value. On slide 12, excluding our non-accrual investments, we have aggregate debt investment portfolio of $335.6 million at fair value, representing a blended price of 88.6% of par value, and 79.4% of that portfolio was comprised of first lien loans at par value. Assuming par recovery, our 30 June 2026 fair value implies approximately $43.2 million of incremental NAV value, or a 24.1% increase to NAV. Applying an illustrative 10% default rate and 70% recovery rate, the debt portfolio would imply approximately $2.57 per share of incremental NAV, or a 17.7% increase as the portfolio rotates. I'll now turn the call over to Brandon to further discuss our financial results for the period.

Speaker #3: On slide 12, excluding our non-accrual investments, we had an aggregate debt investment portfolio of 335.6 million dollars at fair value representing a blended price of 88.6% of par value and 79.4% of that portfolio was comprised of firstly loans at par value.

Speaker #3: Assuming par recovery, our June 30th, 2026 fair value imply approximately 43.2 million dollars of incremental net value or a 24.1% increase to NAV. Applying an illustrious 10% default rate and 70% recovery rate, the debt portfolio would imply approximately $2.57 per share of incremental NAV or a 17.7% increase as the portfolio rotates.

Speaker #3: I'll now turn the call over to Brandon to further discuss our financial results for the period.

Brandon Satoren: Thanks, Patrick. For the quarter ended 30 June 2026, the company generated $15.2 million in investment income, as compared to $17.6 million reported for the quarter ended 31 March 2026. The decrease was largely due to net portfolio repayments and sales over the past several quarters, including $14 million in Q2. The impact of placing one investment on non-accrual status and lower core paydown and non-recurring fee income. For the same period, expenses were $9.6 million, or $1.1 million below the $10.7 million reported for the prior quarter. The decrease in expenses was primarily due to the absence of performance-based incentive fees during the quarter, as compared to approximately $0.9 million of incentive fees incurred in Q1 2026.

Speaker #2: Thanks, Patrick. For the quarter ended June 30, 2026, the company generated $15.2 million in investment income, compared to $17.6 million reported for the quarter ended March 31, 2026.

Speaker #2: The decrease was largely due to net portfolio repayments and sales over the past several quarters, including 14

Speaker #1: Million dollars in the second quarter . The impact of placing one investment on Non-accrual status and lower core pay down and nonrecurring fee income for the same period Expenses were $9.6 million , or $1.1 million , below the $10.7 million reported for the prior quarter .

Speaker #1: The decrease in expenses was primarily due to the absence of performance based incentive fees during the quarter , as compared to approximately $0.9 million of incentive fees incurred in the first quarter of 2026 .

Brandon Satoren: Our net investment income for Q2 2026 was $5.5 million, or $0.45 per share, from $6.9 million, or $0.55 per share reported for the prior quarter. Core net investment income for Q2 was $3.3 million, or $0.27 per share, compared to $4.1 million, or $0.33 per share for Q1 2026. As of 30 June 2026, our net asset value, or NAV, totaled $179.5 million, as compared to the prior quarter's NAV of $193 million. On a per share basis, NAV was $14.49 as of 30 June 2026, as compared to the prior quarter's NAV of $15.60. As Ted noted, the decline in NAV during the quarter was driven predominantly by unrealized mark-to-market declines across the portfolio.

Speaker #1: Accordingly , our net investment income for the second quarter of 2026 was $5.5 million , or $0.45 per share , from $6.9 million , or $0.55 per share reported for the prior quarter Core net investment income for the second quarter was $3.3 million , or $0.27 per share , compared to $4.1 million , or $0.33 per share , for the first quarter of 2026 .

Speaker #1: As of June 30th, 2026, our net asset value, or NAV, totaled $179.5 million, as compared to the prior quarter's NAV of $193 million.

Speaker #1: On a per share basis , Nav was $14.49 as of June 30th , 2026 , as compared to the prior quarters Nav of $15.60 .

Speaker #1: As Ted noted , the decline in Nav during the quarter was predominantly was driven predominantly by unrealized mark to market declines across the portfolio We also recorded a $10.5 million net realized loss related relating primarily to the resolution of two positions that had been on Non-accrual and were carried at a significant discount to costs .

Brandon Satoren: We also recorded a $10.5 million net realized loss relating primarily to the resolution of two positions that had been on non-accrual and were carried at a significant discount to cost. Those losses were substantially reflected in the net asset value reported in prior periods. Separately, the partial redemption of our 2026 Notes resulted in a $0.4 million realized loss on extinguishment of debt from the write-off of unamortized deferred financing costs. As of 30 June 2026, our gross and net leverage ratios were both 1.6 times respectively, compared to 1.8 times and 1.5 times in the prior Q. The increase in net leverage reflects the use of cash on hand to reduce borrowings and a lower net asset value. At Q-end, our total outstanding borrowings were $286.1 million, with an asset coverage ratio of 162%, compared to $342.2 million and 156%, respectively, as of 31 March 2026.

Speaker #1: So those losses were substantially reflected in the net asset value reported in prior periods Separately , the partial redemption of our 2026 notes resulted in a $0.4 million realized loss on extinguishment of debt from the write off of Unamortized deferred financing costs As of June 30th , 2026 , our gross and net leverage ratios were both 1.6 times , respectively , compared to 1.8 times in 1.5 times in the prior quarter The increase in net leverage reflects the use of cash on hand to reduce borrowings and a lower net asset value at quarter end .

Speaker #1: Our total outstanding borrowings were $286.1 million , with an asset coverage ratio of 162% , compared to $342.2 million and 156% , respectively , as of March 31st , 2026 .

Brandon Satoren: As Ted mentioned, we redeemed $40 million of the 2026 Notes during the Q and reduced our outstanding borrowings under our revolving credit facilities. As of 30 June 2026, our total borrowings carried a weighted average contractual interest rate of approximately 7%, and we finished the Q with $86 million of available borrowing capacity under our senior secured revolving credit facilities, subject to borrowing-based restrictions. Subsequent to Q-end, we amended the credit facility, reducing the spread by 30 basis points, extending the reinvestment period and maturity by 2 years, and increasing committed capacity from $75 million to $150 million. We also reduced the unfunded fee.

Speaker #1: As Ted mentioned , we redeemed 40 million of the 2026 notes during the quarter , and reduced our outstanding borrowings under our revolving credit facilities As of June 30th , 2026 , our total borrowings carried a weighted average contractual interest rate of approximately 7% , and we finished the quarter with $86 million of available borrowing capacity under our senior secured revolving credit facilities , subject to borrowing base restrictions Subsequent to quarter end , we reduced we amended the credit facility , reducing the spread by 30 basis points , extending the reinvestment period and maturity by two years and increasing committed capacity from $75 million to $150 million .

Speaker #1: We also reduced the unfunded fee in connection with the amendment . Certain portfolio investments previously securing the J.P. Morgan Great Lakes Revolving Credit facility were transferred into the KeyBank collateral pool and borrowings under the amended KeyBank Credit Facility were used to repay all outstanding borrowings under the J.P.

Brandon Satoren: In connection with the amendment, certain portfolio investments previously securing the JPMorgan Great Lakes revolving credit facility were transferred into the KeyBank collateral pool, and borrowings under the amended KeyBank credit facility were used to repay all outstanding borrowings under the JPMorgan Great Lakes revolving credit facility, which was then terminated. This will be reflected in Q3 and provides us with greater financial flexibility as we continue to execute our investment strategy. With that, I will turn the call back over to Ted.

Speaker #1: Morgan Great Lakes Revolving Credit Facility , which was then terminated This will be reflected in the third quarter and provides us with greater financial flexibility as we continue to execute our investment strategy .

Speaker #1: With that, I will turn the call back over to Ted.

Ted Goldthorpe: Thank you, Brandon. Ahead of questions, I'd like to re-emphasize our commitment to our shareholders. Our focus remains on active portfolio management

Ted Goldthorpe: Thank you, Brandon. Ahead of questions, I'd like to re-emphasize our commitment to our shareholders. Our focus remains on active portfolio management disciplined underwriting and diligent capital management with a goal of delivering sustainable long-term value creation for our shareholders. Thank you once again to all of our shareholders, employees, and partners for your ongoing support. This concludes our prepared remarks, and I'll turn the call over for any questions.

Speaker #2: Thank you . Brandon . I had a questions I'd like to . Reemphasize our commitment to our shareholders . Our focus remains on active portfolio management , disciplined underwriting , and diligent capital with a goal of delivering sustainable long term value creation for our shareholders Thank you once again to all of our shareholders , employees and partners for your ongoing support .

Ted Goldthorpe: Disciplined underwriting and diligent capital management with a goal of delivering sustainable long-term value creation for our shareholders. Thank you once again to all of our shareholders, employees, and partners for your ongoing support. This concludes our prepared remarks, and I'll turn the call over for any questions.

Speaker #2: This concludes our prepared remarks, and I'll turn the call over for any questions.

Operator: 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. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Erik Zwick with Lucid Capital Markets. Your line is open.

Speaker #3: 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 .

Speaker #3: We will pause for just a moment to compile the Q&A roster Your first question comes from the line of Eric Zwick with Lucid Capital Markets .

Speaker #3: Your line is open .

Erik Zwick: Thank you. Good morning, guys.

Speaker #4: Thank you . Good morning guys Hi , Eric . You've made some . Hey . Good morning . You've made some nice progress on on deleveraging the balance sheet and bringing the leverage ratio down .

Ted Goldthorpe: Hi, Erik.

Erik Zwick: Hey, good morning. You've made some nice progress on de-leveraging the balance sheet and bringing the leverage ratio down. I think there still may be, curious if you agree, a little bit more room to go in terms of maybe reaching the target that you had laid out before. To some degree, I think the valuation marks worked against you this quarter, and who knows where those go. Hopefully, maybe next quarter reverse to some degree. From what you can control, curious, do you expect to continue using cash flow from the investments and repayments potentially to continue paying down some of the borrowings at this point, or what are your current thoughts on leverage and where it goes from here?

Speaker #4: I think there's still maybe a curious if you agree a little bit more room to go in terms of maybe reaching the targets that you had laid out before To some degree , I think the valuation marks worked against you this quarter and who knows where those go .

Speaker #4: Hopefully , maybe next quarter reverse to to some degree , but from , from what you can control . Curious , do you expect to continue using , you know , cash flow from the investments and repayments potentially to continue paying down some of the borrowings at this point ?

Speaker #4: Or what are your current thoughts on leverage, and where it goes from here?

Patrick Schafer: Yeah. Thanks, Eric. I think, as you mentioned, we are still a little bit above what we view our long-term average to be. I think consistent with the last couple of quarters, you saw us be in a net repayment position, retaining for all the deployments. I think you could probably reasonably expect that to continue going forward, which is, we do see a lot of good opportunities in the market, and we believe we're being relatively prudent in terms of being selective on those new investments, but generally speaking trying to take advantage of repayments to overall reduce leverage.

Speaker #5: Yeah . Thanks , Eric . So I think , as you mentioned , I , we are still a little bit above kind of what we view our kind of long term average to be .

Speaker #5: And so I think kind of consistent with the last couple of quarters , you know , you saw us be in a net repayment position , you know , repayments , relative deployments .

Speaker #5: And I think you could probably reasonably expect that to kind of continue going forward , which is , you know , we do see a lot of good opportunity or good opportunities in the market .

Speaker #5: And we're being we believe we're being relatively prudent in terms of , being selective on those new investments . But generally speaking , you know , trying to take advantage of repayments to overall reduce leverage .

Erik Zwick: Okay. Thanks, Patrick. I appreciate that. Also nice to see that the non-accrual accounts go down quarter over quarter. For those investments that are still on non-accrual, any noteworthy updates there of things that are maybe you've been working on for a little while and maybe getting a little closer to resolution that could potentially return to the accrual list at some point in the near future?

Speaker #4: Okay . Thanks , Patrick . I appreciate that . And also nice to see that the Non-accrual account go down quarter over quarter for those investments that are still on Non-accrual .

Speaker #4: Any noteworthy updates there of things that are you know , maybe you've been working on for a little while and maybe getting a little closer to resolution that could potentially return to the accrual list at some point in the near future .

Patrick Schafer: Yeah. Good question. I would say there's definitely a couple of them are in various different stages. I would say probably on the margin between of the names in the list, I would say what you'll generally see probably more likely is sort of a resolution and repayment of some amount of value, which again, we believe were reasonably marked relative to what we think a resolution would be, and then to reinvest those proceeds into something new or pay down debt, et cetera, relative to again, for the most part either resetting, restructuring, and continue to be invested in these particular portfolio companies.

Speaker #5: Yeah , good question . I would say there's definitely like a couple of them are in various different , different stages . I would say probably on the margin between , you know , of , of the names in the list , I would say like what you'll generally see probably more likely is sort of a resolution .

Speaker #5: And , and , you know , repayment of some amount of value , which again , we believe we're kind of like reasonably marked , you know , relative to what we think a resolution would be .

Speaker #5: And then to reinvest those proceeds into something new or pay down debt , etc. , relative to , again , for the most part , sort of like either resetting , restructuring and kind of continue to be invested in , in these particular portfolio companies Got it .

Erik Zwick: Got it. Appreciate that.

Patrick Schafer: If you go down the list-

Speaker #4: Appreciate that .

Speaker #5: If you if you go , if you go down the list and just follow up , if you go down the list of them , like most of them are like legacy positions from different portfolios .

Erik Zwick: Go ahead

Patrick Schafer: Sorry, just to follow up, if you go down the list of them, most of them are legacy positions from different portfolios, and they're generally speaking on the longer end, and you've got a number of different lenders within these different portfolio companies, and everyone in the groups, generally speaking, are looking to move on and focus on new investments as opposed to continue to stay in these capital structures. It's not just us. I think, again, when you scan through the list of them, by and large, you've got lender groups who are probably more excited to exit and replace that with a new portfolio company as opposed to continuing on as a lender.

Speaker #5: And they're generally speaking on like the longer end and you've got , you know , a number of different lenders within , within these different portfolio companies and kind of everyone is , you know , everyone in the groups , generally speaking , are sort of looking to looking to sort of move on from a and focus on new investments as opposed to as opposed to kind of continue to stay in these capital structures .

Speaker #5: It's not it's not just us , but I think , again , when you kind of scan through the list of them , you know , by and large , you've got lender groups who are probably more excited to exit and , and replace that with a new portfolio company as opposed to continuing on as a lender

Erik Zwick: Makes sense. Last one, just thinking about the pipeline for new originations. You mentioned seeing some wider spreads and seeing some opportunities. Curious if there's any themes there in terms of industries where you're seeing stronger opportunities, and then also just in terms of the opportunities. Are they more towards growth or M&A? I'm guessing not refinancing at this point, given wider spreads and where rates are, but just curious what you're seeing from that perspective.

Speaker #4: Makes sense . And last one , just thinking about the pipeline for for new originations , you know , you mentioned seeing some wider spreads and seeing some opportunities .

Speaker #4: Curious if there's any , you know , themes there in terms of industries we're seeing stronger , stronger opportunities . And then also just in terms of , I guess , kind of , you know , the opportunities , are they more towards growth or M&A ?

Speaker #4: I'm guessing not refinancing at this point given kind of wider spreads and where rates are , but just kind of curious what you're seeing from that perspective

Patrick Schafer: Yeah, good question. I would say, as you would imagine, I'm not going out on a limb with a hot take. A lot of the companies that we are seeing are companies that would believe to be "AI-proof." Business services, things of that distribution businesses, things of that nature where obviously you don't have or have a much lower component of AI risk. That tends to be more of what we are seeing. Having said that, you do still see, and we are still seeing software deals being done in the private markets at reasonable leverage levels, and wider but not insanely wide pricing with a good bid from private lenders. We haven't done a lot of that and certainly haven't done any of that in BCIC. I would say that the software market in private credit is not completely shut down.

Speaker #5: Yeah . Good question . I would say as you like , as you would imagine . So I'm not I'm not like , you know , I'm not going out with going out on a limb with a hot take .

Speaker #5: A lot of the companies that we are seeing , you know , are companies that like , would believe to be , quote unquote , AI proof , right ?

Speaker #5: Service , you know , business services , you know , things of that distribution businesses , things of that nature where obviously you don't have or have a much lower component of , of , of AI risk that tends to be more of what we are seeing .

Speaker #5: But , but having said that , you know , you do still see and we are still seeing software deals , you know , being done in the private markets at reasonable leverage levels , you know .

Speaker #5: And , and not , you know , wider , but not , you know , insanely wide pricing with , you know , a good bid from private lenders .

Speaker #5: You know , we haven't done a lot of that and certainly haven't done any of that in , in BC . I see , but you are still , you know , I would say that the software market in private credit is not is not completely shut down in terms of use of proceeds .

Patrick Schafer: In terms of use of proceeds, again, I think generally speaking it is for M&A as opposed to refinancing. Again, I know we said activity level's low, and it is lower. It still exists out there, and again, particularly in our size of the market where you're looking at 15 to 50 of EBITDA. Sponsors I think are a lot more willing to write a $100 to $300 million check than if we were trying to fish in a $150 to $400 million EBITDA business. I think there's a lot more reticence from the sponsor community to be writing a $1.5, $2 billion equity check or something, given a little bit of the macro uncertainty. Yeah, I think in general, our market has fared a little bit better from an activity level.

Speaker #5: Again , I think , I think generally speaking , it is for M&A as opposed to refinancing . Again , I know we said activity levels low and it is lower , but it still exists out there .

Speaker #5: And again , particularly in our size of the market where you're looking at , you know , 15 to 50 of EBITDA , you know , sponsors , I think are a lot more willing to , you know , write a , you know , 100 to , you know , $300 million check .

Speaker #5: Then , you know , if we were trying to fish in a , you 150 to $400 million EBITDA business , I think there's a lot more reticence from the sponsor community to be writing a , you know , $1.52 billion equity check or something , kind of given a little bit of the macro uncertainty .

Patrick Schafer: I think there's a lot more reticence from the sponsor community to be writing a $1.5, $2 billion equity check or something, given a little bit of the macro uncertainty. Yeah, I think in general, our market has fared a little bit better from an activity level. Again, to point, most of what we are seeing is, I'd say, new purchase, whether that is a management team sort of buying out a minority investor that they've had in there or a flip from a founder to a sponsor or just a, again, a new founder or a founder who is looking to do a dividend recap and growth for the first time. Those tend to be the majority of our deals.

Speaker #5: So I think in general , our market has fared a little bit better from an activity level . So again , two point most of what we are seeing is I'd say new purchase , new purchase , whether that is like a management team sort of buying out a minority investor that they've had in there , or , you know , a flip from a founder to a sponsor or just kind of a , again , a new founder or a founder who is kind of looking to do a dividend recap and growth for the first time .

Patrick Schafer: Again, to point, most of what we are seeing is, I'd say, new purchase, whether that is a management team sort of buying out a minority investor that they've had in there or a flip from a founder to a sponsor or just a, again, a new founder or a founder who is looking to do a dividend recap and growth for the first time. Those tend to be the majority of our deals.

Speaker #5: Those , those tend to be the majority of our of our deals

Erik Zwick: Thanks for answering my questions this morning.

Speaker #4: Thanks for taking my questions this morning .

Patrick Schafer: Thanks, Erik.

Patrick Schafer: Yeah, thanks, Erik.

Ted Goldthorpe: Yeah, thanks, Erik.

Speaker #2: Thanks .

Speaker #5: Eric . Thanks , Eric

Operator: Your next question comes from the line of Francis Lau with Lucida Capital. Your line is open.

Speaker #3: Your next question comes from the line of Francis Lai with Capital. Your line is open.

Francis Lau: Hey, Ted. Good morning. On the back of the software question, just want to have just a little bit more clarity on the unrealized depreciation. Half of that came from software in this quarter. How do you get comfortable that this is not going to weigh on the NAV in the future quarters?

Speaker #6: Hey , Todd . Good morning On the back of the software question , I just want to have a just a little bit more clarity on the .

Speaker #6: I realize depreciation , so half of that came from software in this quarter . How do you get comfortable with that ? This is not going to weigh on the Nav in the future quarters

Ted Goldthorpe: Yeah, I'll speak first, then I'll turn it over to Patrick. I think from my perspective, software is now less than 13% of our portfolio. As we mentioned earlier, almost all of it is mission-critical with structural protections. The one thing I'd say is, there is a big split in valuations in software between software valuations that have zero liquid securities in the capital structure versus ones that do. If you look at our average dollar price, we tend to be in larger, more scaled software assets, which is good, and those tend to be marked lower because they have a liquid benchmark that people can point to. We feel like we've taken the vast majority of our pay in this space. Again, fundamentally, we think our assets are actually good, we actually think there's a decent amount of upside in the valuations here.

Speaker #2: Yeah , I think I think from our I'll speak first and then I , I , I'll turn it over to Patrick . You know , I think from my perspective , you know , software is now less than 13% of our portfolio .

Speaker #2: And as you mentioned earlier , almost all of it is mission critical with structural protections . The the one thing I'd say is , you know , there is a big split in valuations in software between like software valuations that have zero liquid securities in the capital structure versus ones that do .

Speaker #2: So if you look at our average dollar price , you know , we tend to be in larger , more scaled software assets , which is good .

Speaker #2: And those tend to be marked lower because they have a liquid benchmark that people can point to. And so, we feel like we've taken the vast majority of our pain in the space.

Ted Goldthorpe: Again, fundamentally, we think our assets are actually good, we actually think there's a decent amount of upside in the valuations here. Obviously, there's still a lot of uncertainty in the space. As Patrick said, deals are getting done at the software space still at L+550 at par on small assets and medium-sized assets, and yet we're marked at pretty big discounts to par. There's a pretty big disconnect between broader public valuations versus where things are getting done in the private markets.

Speaker #2: Again , we think we fundamentally we think our assets are actually good . And so we actually think there's a decent amount of upside in the valuations here .

Ted Goldthorpe: Obviously, there's still a lot of uncertainty in the space. As Patrick said, deals are getting done at the software space still at L+550 at par on small assets and medium-sized assets, and yet we're marked at pretty big discounts to par. There's a pretty big disconnect between broader public valuations versus where things are getting done in the private markets.

Speaker #2: But , you know , obviously there's still a lot of uncertainty in the space . And as Patrick said , you know , there is a deals are getting done at the software space still at plus 550 at par on you know small assets and medium sized assets .

Speaker #2: And yet , you know , we're marked at , you know , pretty big discounts to par . So there's a pretty big disconnect between , you know , broader public valuations versus , you know , where things are getting done in the private markets

Francis Lau: I guess on that, widening spread is good for capital deployment. I guess two questions here are, how do you feel about the cadence of deploying capital in this current market? Do you want to wait? Do you want to go faster? The second thing is, given where the stock is trading at a massive discount to NAV, is that deployment into new deals better than buying back the stock here, being cognizant of the liquidity of the stock, obviously?

Speaker #6: And I guess on , you know , on that . So , you know , widening spread , it's good for capital deployment , I guess two questions here are how do you feel about the cadence of deploying capital in this current market ?

Speaker #6: Do you want to wait ? Do you want to go faster ? And the second thing is , you know , given where the stock is trading at , you know , at a massive discount to Nav , is that deployment into new deals better than buying back the stock here , being cognizant of the liquidity of the stock .

Speaker #6: Obviously .

Ted Goldthorpe: Yeah, it's a good question. I think our perspective is we think spreads are going to widen. Given the redemption pressure, just generally speaking in the space, plus the slowdown in fundraising, the M&A market's just not that robust. Our pipeline is okay. It's not bad. There's not a big M&A market right now. To your second point, we should be buying back stock. During open windows where we're not blacked out, it just makes a lot more sense for us to buy our stock back where it trades versus deploying new capital.

Speaker #2: Yeah that's a good question . I mean , I think I think our perspective is we think spreads are going to widen . You know , given the redemption pressure , just generally speaking in the in the space plus the slowdown in fundraising , the M&A market is just not that robust .

Speaker #2: You know , so our pipeline is okay . It's not bad . It just it just there's not a big M&A market right now .

Ted Goldthorpe: To your second point, we should be buying back stock. During open windows where we're not blacked out, it just makes a lot more sense for us to buy our stock back where it trades versus deploying new capital. There's a limitation on how much we can actually buy. It's always a balance between originating new assets that are accretive to our shareholders. Obviously, we're trying to buy back as much stock as we can and buy stock personally and buy stock through our funds. We just think our stock doesn't reflect what we think is fair market value.

Speaker #2: And then your second point , you know , your second point , we should be buying back stock . So during open windows , we're not blacked out .

Speaker #2: You know, it just makes a lot more sense for us to buy our stock back where it trades, versus deploying new capital. But there's a limitation on how much we can actually buy.

Ted Goldthorpe: There's a limitation on how much we can actually buy. It's always a balance between originating new assets that are accretive to our shareholders. Obviously, we're trying to buy back as much stock as we can and buy stock personally and buy stock through our funds. We just think our stock doesn't reflect what we think is fair market value.

Speaker #2: So it's always a balance between , you know , originating new assets that are accretive to our shareholders . But obviously , you know , we're trying to buy back as much stock as we can .

Speaker #2: And buy stock personally and buy stock through our funds . You know , we just think of our stocks doesn't reflect what we think is fair market value .

Francis Lau: Got it. Thank you.

Speaker #7: Got it . Thank you

Operator: Your next question comes from the line of Christopher Nolan with Ladenburg Thalmann. Your line is open.

Speaker #3: Your next question comes from the line of Christopher Nolan with London Salmon . Your line is open .

Christopher Nolan: Hello, guys. Should we expect the Key facility just to absorb the borrowings in the Great Lakes facility in Q3?

Speaker #8: Hello, guys. Should we expect the key facility just to absorb the borrowings in the Great Lakes facility in the third quarter?

Patrick Schafer: Yeah. That's right, Chris. We'll have incremental borrowing capacity above and beyond what the two standalone facilities would otherwise have. Yeah, you should think of it as sort of just absorbing the assets in the JP facility as of now.

Speaker #5: Yeah that's right , that's right Chris . I mean it'll be we'll have incremental borrowing capacity above and beyond what the two facilities , two standalone facilities would otherwise have .

Speaker #5: But yeah , you should think of it as sort of just absorbing the assets in the in the JP facility . As of now .

Christopher Nolan: Yeah. As a broader question, everyone talks about how AI and blah, blah. How has that affected your diligence? You get a lot of these, and I would say idiots loading in all the company's secrets into AI, and they have no idea where it goes. They're doing it for tokens. At some point, that could be used against them. There's a lawsuit between Apple and Anthropic, where Anthropic basically has Apple secrets on polishing metal or something. When you're underwriting an investment, how do you gauge the intelligence of management dealing with this stuff? It's sort of like people on email when it first came out, when everyone's saying anything on email before they realize the repercussions. I'm just trying to see whether or not you have an AI intelligence test for some of the managements that you deal with.

Speaker #8: Yeah . And as a broader question , everyone talks about how AI and blah , blah , blah . Have , how has that affected your diligence ?

Speaker #8: I mean , you get a lot of these and I would say idiots loading in all the company secrets into a I and they have no idea where it goes .

Speaker #8: And at some point later on , they're doing it for tokens . And at some point , you know , that could be used against them .

Speaker #8: There's a lawsuit between Apple and Anthropic or anthropic basically has Apple secrets on polishing metal or something . And , you know , when you're underwriting an investment , how do you how do you gauge the intelligence of management and dealing with this stuff ?

Speaker #8: It's sort of like people , you know , on email . When it first came out , when everyone's like saying anything on email before they realize their repercussions and just try and see whether or not you have a , a , intelligence test for some of the managements that you deal with .

Ted Goldthorpe: Yeah, it's an interesting question. It's a hard one to answer. Generally speaking, as Patrick said earlier, we're really trying to avoid sectors with AI risk. What you said specifically, any deal we do, we do full IT diligence. Historically, it's focused on cyber. That's been more where we spend our time in cyber insurance. What you just said is an evolving area. We have a big team at BC Partners that is AI experts, we kind of try to apply that expertise into our portfolio companies. What you just said, it's a fair question. We try to pick it up in our IT diligence, it's evolving on a weekly basis.

Speaker #2: Yeah , it's an interesting question . I mean , it's a hard one to answer . I mean , generally speaking , as Patrick said earlier , we're really trying to avoid sectors with AI risk .

Speaker #2: What you said specifically , any deal we do , we do full IT diligence . Historically , it's focused on cyber . That's more where we spend our time and cyber insurance .

Speaker #2: You know , what you just said ? Is it evolving area ? It's it's I wouldn't say like , we we have a big team at BC partners that is AI experts .

Speaker #2: And we kind of try to apply that expertise into our portfolio companies . But what you just said , I mean , it's a fair it's a fair question .

Speaker #2: I , you know , we try to pick it up in our IT diligence , but , you know , again , it's evolving on a weekly basis .

Speaker #2: So okay .

Christopher Nolan: Okay. That's it. Thanks.

Speaker #8: That's it . Thanks

Operator: I will now turn the call back over to Ted Goldthorpe for closing remarks.

Speaker #3: I will now turn the call back over to Todd for closing remarks

Ted Goldthorpe: Great. Well, thank you all for attending our call. As always, please feel free to reach out to us with any questions which we're happy to discuss. We look forward to speaking to you again in November when we announce our Q3 2026 results, and have a great end of the summer. Thank you.

Speaker #2: Great . Well , thank you all for attending our call . As always , please feel free to reach out to us with any questions , which we're happy to discuss .

Speaker #2: We look forward to speaking to you again in November when we announce our third quarter 2026 results and have a great end of the summer .

Speaker #2: Thank you

Operator: Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.

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