Q2 2026 Nuveen Churchill Direct Lending Corp Earnings Call

August 6, 2026

Speaker #1: Welcome to Nuveen Churchill Direct Lending Corp's second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the management team's prepared remarks.

Operator: Welcome to Nuveen Churchill Direct Lending Corp.'s Q2 2026 Earnings Call. At this time, all participants are in listen only mode. A question and answer session will follow the management team's prepared remarks. As a reminder, this conference call is being recorded for replay purposes. I'd now like to turn the call over to Robert Paun, Head of Investor Relations for NCDL. Robert, please go ahead.

Speaker #1: As a reminder, this conference call is being recorded for replay purposes. I'd now like to turn the call over to Robert Paun, Head of Investor Relations for NCDL.

Speaker #1: Robert, please go ahead.

Speaker #2: Good morning and welcome to Nuveen Churchill Direct Lending Corp's second quarter 2026 earnings call. Today I'm joined by NCDL's Chairman, President, and CEO, Kenneth Kencel.

Robert Paun: Good morning and welcome to Nuveen Churchill Direct Lending Corp.'s second quarter 2026 earnings call. Today I'm joined by NCDL's Chairman, President, and CEO, Ken Kencel, and Chief Financial Officer and Treasurer, Shai Vichness. Following our prepared remarks, we will be available to take your questions. Today's call may include forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors, and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates, and projections about the company, our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict. Actual results may differ materially from those expressed or forecasted in the forward-looking statements.

Speaker #2: And Chief Financial Officer and Treasurer, Shaul Vichness. Following our prepared remarks, we will be available to take your questions. Today's call may include forward-looking statements.

Speaker #2: Such statements involve known and unknown risks uncertainties and other factors, and undue reliance should not be placed thereon. These forward-looking statements are not historical facts but rather are based on current expectations, estimates, and projections about the company are current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions.

Speaker #2: These statements are not guarantees of future performance and are subject to risks uncertainties and other factors, some of which are beyond our control and difficult to predict.

Speaker #2: Actual results may differ materially from those expressed or forecasted in the forward-looking statements. We ask that you refer to the company's most recent filings with the SEC for important risk factors.

Robert Paun: We ask that you refer to the company's most recent filings with the SEC for important risk factors. Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. The company assumes no obligation to update any forward-looking statements at any time. Our earnings release, 10-Q, and supplemental earnings presentation are available on the News and Investors sections of our website at ncdl.nuveen.com. Now I would like to turn the call over to Ken.

Speaker #2: Any forward-looking statements made today do not guarantee future performance and undue reliance should not be placed on them. The company assumes no obligation to update any forward-looking statements at any time.

Speaker #2: Our earnings release 10Q and supplemental earnings presentation are available on the news and investors sections of our website, at ncdl.com. Now I would like to turn the call over to Kenneth.

Speaker #3: Thank you, Robert. Good morning, everyone, and thank you for joining us today. During my prepared remarks, I will start with the discussion of our second quarter results followed by some comments and thoughts on the current market environment, our portfolio positioning, and the strategic initiative that occurred post-quarter end.

Ken Kencel: Thank you, Robert. Good morning, everyone, and thank you for joining us today. During my prepared remarks, I will start with a discussion of our Q2 results, followed by some comments and thoughts on the current market environment, our portfolio positioning, and a strategic initiative that occurred post quarter end. First, I'd like to start by reviewing our financial results for the quarter. Overall, we continue to be pleased with the operating performance of NCDL and our investment portfolio, despite a challenging market environment. This morning, we reported Q2 net investment income of $0.41 per share, fully covering our $0.36 per share base quarterly distribution. Based on the results, the board has declared a total Q3 distribution of $0.38 per share, consisting of a regular quarterly distribution of $0.36 per share and a supplemental distribution of $0.02 per share.

Speaker #3: First, I'd like to start by reviewing our financial results for the quarter. Overall, we continue to be pleased with the operating performance of NCDL and our investment portfolio.

Speaker #3: Despite a challenging market environment. This morning, we reported second quarter net investment income of 41 cents per share. Fully covering our 36 cents per share base quarterly distribution.

Speaker #3: Based on our results, the board has declared a total third quarter distribution of 38 cents per share. Consisting of a regular quarterly distribution of 36 cents per share and a supplemental distribution of 2 cents per share.

Speaker #3: During the quarter, gross originations totaled approximately 12 million dollars, compared to 83 million dollars in the first quarter of this year. The decline in gross originations quarter over quarter was driven by two factors.

Ken Kencel: During the quarter, gross originations totaled approximately $12 million, compared to $83 million in the Q1 of this year. The decline in gross originations quarter over quarter was driven by two factors. Our desire to manage our leverage ratio towards the upper end of our target leverage range, and timing of certain transactions which were underwritten in the Q2, but ultimately closed in July. As I'll discuss later in my prepared remarks, the Churchill platform continues to see strong asset growth and new originations. Net asset value at 30 June was $17.19 per share, compared to $17.50 per share at 31 March, driven by unrealized markdowns and unrealized losses on two amendments that Shai will touch on in his remarks.

Speaker #3: Our desire to manage our leverage ratio towards the upper end of our target leverage range, and timing of certain transactions which were underwritten in the second quarter, but ultimately closed in July.

Speaker #3: As I've discussed later in my prepared remarks, the Churchill platform continues to see strong asset growth and new originations. Net asset value at June 30th was 17 dollars and 19 cents per share, compared to 17 dollars and 50 cents per share at March 31.

Speaker #3: Driven by unrealized markdowns and a realized losses on two amendments that Shai will touch on in his remarks. In terms of the current market conditions and economic environment, the first half of 2026 has been one of the most closely watched periods in private credit's history.

Ken Kencel: In terms of the current market conditions and economic environment, H1 2026 has been one of the most closely watched periods in private credit's history, unfolding against a backdrop of elevated public market volatility, geopolitical tensions, and negative headlines. These headlines have been driven by concerns around AI disruption, software exposure, and increased redemption activity in private BDCs. We continue to believe there is a significant disconnect between the narrative in the media and the underlying fundamentals in private credit, particularly with our investment portfolio and the continued strength of our credit metrics. Dispersion amongst private credit managers has started to emerge. In our view, we think it will continue to be a focus area with investors.

Speaker #3: Unfolding against a backdrop of elevated public market volatility, geopolitical tensions, and negative headlines. These headlines have been driven by concerns around AI disruption, software exposure, and increased redemption activity in private BDCs.

Speaker #3: We continue to believe there is a significant disconnect between the narrative in the media and the underlying fundamentals in private investment portfolio and the continued strength of our credit metrics.

Speaker #3: Dispersion amongst private credit managers has started to emerge. In our view, and we think it will continue to be a focus area, with investors.

Speaker #3: Amid these market conditions, private equity M&A activity was highly selective in the second quarter. As financial sponsor deal activity slowed compared to the first quarter, despite overall global M&A recording new highs.

Ken Kencel: Amid these market conditions, private equity M&A activity was highly selective in Q2 as financial sponsor deal activity slowed compared to Q1, despite overall global M&A recording new highs. Private equity volumes were relatively light compared to prior periods, driven by continued market volatility as buyers navigated geopolitical uncertainties and AI-driven disruptions. The gap between strategic acquirers and private equity sponsors widened as financial sponsors faced disciplined underwriting and tighter credit constraints. However, in June and July, we experienced a material increase in deals reviewed over prior months as transaction activity across our platform has returned to a more normalized level. We attribute this to our focus on the core traditional middle market, as well as our relationships with high-quality private equity sponsors.

Speaker #3: Private equity volumes were relatively light compared to prior periods, driven by continued market volatility as buyers navigated geopolitical uncertainties and AI-driven disruptions. The gap between strategic acquirers and private equity sponsors widened.

Speaker #3: As financial sponsors faced disciplined underwriting and tighter credit constraints. However, in June and July, we experienced a material increase in deals reviewed over prior months.

Speaker #3: As transaction activity across our platform has returned to a more normalized level. We attribute this to our focus on the core traditional middle market, as well as our relationships with high-quality private equity sponsors.

Speaker #3: In terms of spreads, we started to see a widening of direct lending spreads early in the second quarter. Driven by the recent market concerns volatility and disruption.

Ken Kencel: In terms of spreads, we started to see a widening of direct lending spreads early in Q2, driven by the recent market concerns, volatility, and disruption. Today, spreads have stabilized around a more normalized level of between 475 and 500 over for traditional first lien loans. As far as the interest rate environment is concerned, given that inflation remains above the Fed's targets, expectations for rate cuts for the remainder of the year have diminished, with the forward SOFR curve now showing potential rate hikes. This shift from earlier in the year is largely driven by persistent inflation, a resilient labor market, as well as geopolitical tensions, which have created economic uncertainty. Despite all of these factors, we continue to view private credit and direct lending as an attractive asset class with a compelling risk-return profile. Turning to our investment activity.

Speaker #3: Today, spreads have stabilized around a more normalized level of between 475 and 500 over for traditional first lien loans. As far as the interest rate environment is concerned, given that inflation remains above the Fed's targets, expectations for rate cuts for the remainder of the year have diminished, with the Ford sulfur curve now showing potential rate hikes.

Speaker #3: This shift from earlier in the year is largely driven by persistent inflation. A resilient labor market, as well as geopolitical tensions, which have created economic uncertainty.

Speaker #3: Despite all of these factors, we continue to view private credit and direct lending as an attractive asset class with a compelling risk-return profile. Turning to our investment activity.

Speaker #3: The first half of 2026 brought a more measured environment for new LBO volume, reflecting the broader macroeconomic backdrop. US private equity deal volume and direct lending volume for private equity-backed borrowers declined materially quarter over quarter.

Ken Kencel: H1 2026 brought a more measured environment for new LBO volume, reflecting the broader macroeconomic backdrop. US private equity deal volume and direct lending volume for private equity-backed borrowers declined materially quarter-over-quarter. Despite that, the Churchill platform delivered strong investment activity, outpacing the market by a meaningful margin while maintaining our underwriting standards and high level of selectivity. During Q2 at the platform level, Churchill closed or committed to over 80 transactions totaling approximately $4.3 billion. With the majority of that volume concentrated in senior lending. As I mentioned earlier, gross originations at NCDL were muted in the quarter, which was intentional. Given that we were operating slightly above our target leverage range at the end of Q1, and as a result of timing to close transactions underwritten in June.

Speaker #3: Despite that, the Churchill platform delivered strong investment activity. Outpacing the market by a meaningful margin, while maintaining our underwriting standards and high level of selectivity.

Speaker #3: During the second quarter, at the platform level, Churchill closed or committed to over 80 transactions totaling approximately 4.3 billion. With the majority of that volume concentrated in senior lending.

Speaker #3: As I mentioned earlier, gross originations at NCDL were muted in the quarter. Which was intentional. Given that we were operating slightly above our target leverage range at the end of the first quarter and as a result of timing to close transactions underwritten in June.

Speaker #3: We remain focused on actively reinvesting cash received from repayments and sales into high-quality assets while optimizing our use of leverage. During the second quarter, investment fundings totaled approximately 24.8 million and repayments and sales totaled approximately 67.5 million.

Ken Kencel: We remain focused on actively reinvesting cash received from repayments and sales into high-quality assets while optimizing our use of leverage. During the second quarter, investment fundings totaled approximately $24.8 million, and repayments and sales totaled approximately $67.5 million. It is also important to remind everyone that at Churchill, we focus on the traditional core middle market, benefiting from our differentiated sourcing and long-term track record. We continue to target companies with $10 to $100 million of EBITDA, which we believe helps insulate us from the more aggressive structures and loosening terms prevalent in the upper middle market and broadly syndicated loan space. We believe that risk-adjusted returns in this segment of the market remain among the most compelling in private credit, particularly for scaled, highly selective managers with deep private equity relationships.

Speaker #3: It's also important to remind everyone that at Churchill, we focus on the traditional core middle market. Benefiting from our differentiated sourcing, and long-term track record.

Speaker #3: We continue to target companies with 10 to 100 million dollars of EBITDA which we believe helps insulate us from the more aggressive structures loosening terms prevalent in the upper middle market and broadly syndicated loan space.

Speaker #3: We believe that risk-adjusted returns in this segment of the market remain among the most compelling in private credit. Particularly for scaled highly selective managers with deep private equity relationships.

Speaker #3: We see the core middle market as a durable opportunity to generate long-term value and enhance portfolio diversification for our investors. As far as our investment portfolio and credit quality is concerned, overall company performance across our portfolio remains healthy.

Ken Kencel: We see the core middle market as a durable opportunity to generate long-term value and enhance portfolio diversification for our investors. As far as our investment portfolio and credit quality is concerned, overall company performance across our portfolio remains healthy, which we believe reflects the quality of the deal flow we have experienced over the last several years. While we did experience a few company-specific credit challenges in the quarter, which is not overly surprising to us given the current market environment, our high-quality, well-diversified investment portfolio continues to perform well and in line with our expectations. During these periods of market volatility and economic uncertainty, it is important to remain focused on our core values and pillars that have benefited Churchill over the past two decades. We have deep expertise, substantial experience, strong relationships, relevant size and scale, and a differentiated approach to sourcing and originating high-quality deal flow.

Speaker #3: Which we believe reflects the quality of the deal flow we have experienced over the last several years. While we did experience a few company-specific credit challenges in the quarter, which is not overly surprising to us given the current market environment, our high-quality well-diversified investment portfolio continues to perform well in in line with our expectations.

Speaker #3: During these periods of market volatility and economic uncertainty, it is important to remain focused on our core values and pillars that have benefited Churchill over the past two decades.

Speaker #3: We have deep expertise substantial experience strong relationships relevant size and scale and a differentiated approach to sourcing and originating high-quality deal flow. Our ability to navigate these market conditions and environments stems from our experienced investment operating and management teams.

Ken Kencel: Our ability to navigate these market conditions and environment stems from our experienced investment, operating, and management teams. Our weighted average internal risk rating was 4.3 at the end of the second quarter, consistent with the prior quarter, and versus an original rating of 4.0 for all of our investments at the time of origination. Our internal watchlist ticked up to approximately 10.8% of fair value, compared to 8.4% at the end of the first quarter. As a reminder, we employ a dynamic internal risk rating system with a 1 through 10 rating scale. Our watchlist starts at a 6 rating, and we ensure that our workout team is involved early on in the process of a potential credit challenge or event. The percentage of watchlist names for NCDL remains consistent with the Churchill platform and our long-term historical averages.

Speaker #3: Our weighted average internal risk rating was 4.3 at the end of the second quarter. Consistent with the prior quarter. And versus an original rating of 4.0 for all of our investments at the time of origination.

Speaker #3: Our internal watch list increased to approximately 10.8% of fair value, compared to 8.4% at the end of the first quarter. As a reminder, we employ a dynamic internal risk rating system with a 1 through 10 rating scale.

Speaker #3: Our watch list starts at a 6 rating and we ensure that our workout team is involved early on in the process of a potential credit challenge or event.

Speaker #3: The percentage of watch list names for NCDL remains consistent with the Churchill platform and our long-term historical averages. Credit metrics and fundamentals within the NCDL portfolio remain strong.

Ken Kencel: Credit metrics and fundamentals within the NCDL portfolio remain strong, with portfolio company total net leverage of 5.2 times and interest coverage of 2.5 times on traditional middle market first lien loans. Interest coverage increased during the quarter from 2.3 times at the end of the first quarter. These credit metrics are a direct result of our conservative structuring and relatively low attachment points that we target when underwriting new transactions. During the second quarter, we added four new names to nonaccrual, with a total cost of $33.3 million and a fair value of $18.7 million. At 30 June, nonaccruals represented 2.7% of our total investment portfolio on a cost basis and 1.5% on a fair value basis. Despite the increase in nonaccruals this quarter compared to prior quarters, we believe these percentages continue to compare favorably versus current BDC industry averages and the long-term historical BDC average.

Speaker #3: With portfolio company total net leverage of 5.2 times and interest coverage of 2.5 times on traditional middle market first lien loans. Interest coverage increased during the quarter from 2.3 times at the end of the first quarter these credit metrics are a direct result of our conservative structuring and relatively low attachment points that we target when underwriting new transactions.

Speaker #3: During the second quarter, we added four new names to non-accrual. With a total cost of 33.3 million dollars and a fair value of 18.7 million.

Speaker #3: As of June 30th, non-accruals represented 2.7% of our total investment portfolio on a cost basis and 1.5% on a fair value basis. Despite the increase in non-accruals this quarter compared to prior quarters, we believe these percentages continue to compare favorably versus current BDC industry averages and the long-term historical BDC average.

Speaker #3: At June 30th, we had 244 companies in our portfolio. And our top 10 portfolio companies represented approximately 13% of the total fair value. This diversification remains a key focus of ours and is critical as we seek to maintain exceptional credit quality and originate additional attractive investment opportunities.

Ken Kencel: At 30 June, we had 244 companies in our portfolio, and our top 10 portfolio companies represented approximately 13% of the total fair value. This diversification remains a key focus of ours and is critical as we seek to maintain exceptional credit quality and originate additional attractive investment opportunities. We have achieved this diversification with a continued high level of selectivity, facilitated by the significant proprietary deal flow our sourcing engine is able to generate from the breadth and depth of our PE relationships. As we highlighted last quarter, market concerns regarding AI's potential disruption of software businesses have raised a lot of questions about private credit portfolios' software exposure. We believe this underscores the importance of a diversified approach to portfolio construction. As a reminder, we have relatively low exposure to software, as these are not the type of deals we tend to underwrite.

Speaker #3: We have achieved this diversification with a continued high level of selectivity. Facilitated by the significant proprietary deal flow our sourcing engine is able to generate from the breadth and depth of our PE relationships.

Speaker #3: As we highlighted last quarter, market concerns regarding AI's potential disruption of software businesses have raised a lot of questions about private credit portfolios, software exposure.

Speaker #3: We believe this underscores the importance of a diversified approach to portfolio construction. As a reminder, we have relatively low exposure to software. As these are not the type of deals we tend to underwrite.

Speaker #3: The rapid pace of innovation in the software sector often coupled with higher leverage attachment points and less room for error were key reasons we passed on many software deals.

Ken Kencel: The rapid pace of innovation in the software sector, often coupled with higher leverage attachment points and less room for error, were key reasons we passed on many software deals. As of 30 June, software businesses represented approximately 2.4% of NCDL's total investment portfolio at fair value. While AI will certainly contribute to disruption in the technology sector, the full impact remains difficult to assess at this time. We continue to monitor AI and its potential impact across the portfolio as we have done long before these headlines emerged. We maintain an active dialogue with the senior management teams of all of our borrowers, as well as the private equity firms that own them so that we have an informed and real-time view on this and any other risks our borrowers may face.

Speaker #3: As of June 30th, software businesses represented approximately 2.4% of NCDL's total investment portfolio at fair value. While AI will certainly contribute to disruption in the technology sector, the full impact remains difficult to assess at this time.

Speaker #3: We continue to monitor AI and its potential impact across the portfolio as we have done long before these headlines emerged. We maintain an active dialogue with the senior management teams of all of our borrowers as well as the private equity firms that own them.

Speaker #3: So that we have informed and real-time view on this and any other risks our borrowers may face. Overall, we feel very positive as to how we are positioned relative to the risk that AI may pose to our portfolio companies.

Ken Kencel: Overall, we feel very positive as to how we are positioned relative to the risk that AI may pose to our portfolio companies. Before I conclude and turn it over to Shai, I'd like to provide an update on a new strategic initiative for NCDL. In July, we successfully closed a joint venture with an institutional partner in which we will deploy assets and investments that align with the Churchill platform and NCDL's investment strategy and portfolio allocation. We'll also utilize a manageable level of leverage at the JV, and we believe this equity investment will be accretive to NCDL's long-term earnings profile. We believe this partnership is a testament to the Churchill platform with an experienced management team, investment and operating teams, as well as a successful track record of investing and operating across various market conditions and cycles.

Speaker #3: Before I conclude and turn it over to Shai, I'd like to provide an update on a new strategic initiative for NCDL. In July, we successfully closed a joint venture with an institutional partner, in which we will deploy assets and investments that align with the Churchill platform and NCDL's investment strategy and portfolio allocation.

Speaker #3: We'll also utilize a manageable level of leverage at the JV. And we believe this equity investment will be accretive to NCDL's long-term earnings profile.

Speaker #3: We believe this partnership is a testament to the Churchill platform. With an experienced management team investment and operating teams as well as a successful track record of investing and operating across various market conditions and cycles.

Speaker #3: In summary, we are pleased with our financial results and the continued strength of NCDL's investment portfolio. Despite a few underperforming names and additions to the non-accrual list this quarter.

Ken Kencel: In summary, we are pleased with our financial results and the continued strength of NCDL's investment portfolio, despite a few underperforming names and additions to the non-accrual list this quarter. We have constructed a defensive portfolio balanced across multiple measures, including sponsor, position size, as well as industry and sector concentration. This has been critical to our success throughout our history and is a key reason why we are optimistic about our future performance and long-term prospects. From a forward-looking perspective, we also remain optimistic about the long-term outlook for the private credit industry, despite the headline noises in the market. Overall credit metrics remain strong and stable, and we believe systemic risk concerns are overstated and that our focus on the core traditional middle market continues to offer structural advantages. Now I'll turn the call over to Shai to discuss our financial results in more detail.

Speaker #3: We have constructed a defensive portfolio balanced across multiple measures including sponsor, position size, as well as industry and sector concentration. This has been critical to our success throughout our history.

Speaker #3: And is a key reason why we are optimistic about our future performance and long-term prospects. From a forward-looking perspective, we also remain optimistic about the long-term outlook for the private credit industry.

Speaker #3: Despite the headline noises in the market. Overall credit metrics remain strong and stable. And we believe systemic risk concerns are overstated in that our focus on the core traditional middle market continues to offer structural advantages.

Speaker #3: And now, I'll turn the call over to Shai to discuss our financial results in more detail.

Speaker #1: Thank you, Ken. And good morning, everyone. I will now review our second quarter financial results in more detail. During the second quarter, NCDL reported net investment income of 41 cents per share in line with our first quarter NII.

Shai Vichness: Thank you, Ken. Good morning, everyone. I will now review our Q2 financial results in more detail. During Q2, NCDL reported net investment income of $0.41 per share, in line with our Q1 NII. Total investment income declined to $44.3 million compared to $46.3 million in Q1 2026. This was primarily driven by the modest decline in the size of our investment portfolio, as well as a modest decline in portfolio yields. At 30 June, our gross debt-to-equity ratio was 1.29 times compared to 1.32 times at 31 March of this year. Our net debt-to-equity ratio was 1.23 times compared to 1.26 times at the end of Q1. In July, we paid our Q2 distribution of $0.38 per share. For Q3, our board has declared another $0.38 per share distribution.

Speaker #1: Total investment income declined to 44.3 million dollars compared to 46.3 million dollars in the first quarter of 2026. This was primarily driven by the modest decline in the size of our investment portfolio as well as a modest decline in portfolio yields.

Speaker #1: As of June 30, our gross debt-to-equity ratio was 1.29 times, compared to 1.32 times at March 31 of this year. Our net debt-to-equity ratio was 1.23 times, compared to 1.26 times at the end of the first quarter.

Speaker #1: In July, we paid our second quarter distribution of 38 cents per share and for the third quarter, our board has declared another 38 cents per share distribution.

Speaker #1: This consists of a regular quarterly distribution of 36 cents per share and a supplemental distribution of 2 cents per share. Both distributions will be paid on October 28th to shareholders of record as of September 30th.

Shai Vichness: This consists of a regular quarterly distribution of $0.36 per share, a supplemental distribution of $0.02 per share. Both distributions will be paid on 28 October to shareholders of record as of 30 September. We continue to operate with a base plus supplemental dividend program that sees us paying out a portion of the excess earnings over and above our regular dividend of $0.36 per share. For the most recent quarter, we generated $0.05 per share of incremental earnings above our regular distribution. We are distributing $0.02 of the excess earnings in the form of a supplemental distribution. Our total GAAP net income in Q2 was $0.07 per share compared to $0.18 per share in Q1. Q2 net income included $0.34 per share of net realized and unrealized losses.

Speaker #1: We continue to operate with a base plus supplemental dividend program that sees us paying out a portion of the excess earnings over and above our regular dividend of 36 cents per share.

Speaker #1: For the most recent quarter, we generated 5 cents per share of incremental earnings above our regular distribution and we are distributing 2 cents of the excess earnings in the form of a supplemental distribution.

Speaker #1: Our total gap net income in the second quarter was 7 cents per share compared to 18 cents per share in the first quarter. Second quarter net income included 34 cents per share of net realized and unrealized losses.

Speaker #1: Net realized losses of approximately 23 cents per share were primarily driven by amendments of two underperforming debt investments during the quarter. The net unrealized losses of 11 cents per share were primarily due to a decrease in the fair value of certain underperforming portfolio companies as market spreads remained broadly stable throughout the quarter partially offset by the reversal of unrealized losses on underperforming debt positions that were restructured or amended during the period.

Shai Vichness: Net realized losses of approximately $0.23 per share were primarily driven by amendments of 2 underperforming debt investments during the quarter. The net unrealized losses of $0.11 per share were primarily due to a decrease in the fair value of certain underperforming portfolio companies as market spreads remained broadly stable throughout the quarter, partially offset by the reversal of unrealized losses on underperforming debt positions that were restructured or amended during the period. By 30 June, our NAV was $17.19 per share, compared to $17.50 per share on 31 March, representing a 1.8% decline quarter-over-quarter, largely due to the impact of realized and unrealized losses during the quarter. At the end of Q2, NCDL's investment portfolio had a fair value of $1.9 billion, modestly down from the $2 billion at the end of Q1.

Speaker #1: At June 30th, our net asset value was $17.19 per share compared to $17.50 per share on March 31st representing a 1.8% decline quarter over quarter largely due to the impact of realized and unrealized losses during the quarter.

Speaker #1: At the end of Q2, NCDL's investment portfolio had a fair value of 1.9 billion dollars modestly down from the 2 billion dollars at the end of the first quarter.

Speaker #1: Gross origination totaled 12.1 million dollars and gross investment fundings totaled 24.8 million compared to 82.9 million and 85.4 million of gross originations and gross investment fundings respectively in the first quarter of 2026.

Shai Vichness: Gross originations totaled $12.1 million. Gross investment fundings totaled $24.8 million, compared to $82.9 million and $85.4 million of gross originations and gross investment fundings respectively in Q1 2026. As Ken mentioned earlier, investment activity slowed in the quarter, driven by continued market volatility as private equity-sponsored buyers navigated geopolitical uncertainties as well as AI disruptions. Late in Q2 and in July, however, we have seen a meaningful pickup in deals reviewed and a return to more normalized levels of transaction activity across the platform. During Q2, sales and repayments totaled $67.5 million, a rate of approximately 3.4%, relatively in line with last Q, still below our long-range assumption of 5% per quarter, attributable to lower sponsor M&A activity in Q2.

Speaker #1: As Ken mentioned earlier, investment activity slowed in the quarter driven by continued market volatility as private equity sponsor buyers navigated geopolitical uncertainties as well as AI disruptions.

Speaker #1: Late in the second quarter and in July, however, we have seen a meaningful pickup in deals reviewed and a return to more normalized levels of transaction activity across the platform.

Speaker #1: During the second quarter, sales and repayments totaled 67.5 million dollars a rate of approximately 3.4% relatively in line with last quarter but still below our long-range assumption of 5% per quarter attributable to lower sponsor M&A activity in the second quarter.

Speaker #1: We did have full repayments on three larger positions within NCDL totaling 59 million dollars and partial prepayments for another 9 million. We have been actively reinvesting capital received from repayments with a view towards maintaining leverage at the upper end of our target range.

Shai Vichness: We did have full repayments on three larger positions within NCDL, totaling $59 million, and partial prepayments for another $9 million. We have been actively reinvesting capital received from repayments with a view towards maintaining leverage at the upper end of our target range. Additionally, we remain focused on redeploying capital into traditional middle-market transactions across the capital structure, with the vast majority of new investments into senior secured first lien loans. At 30 June, our total investment portfolio consisted of 244 names, compared to 236 names at the end of Q1. Diversification across portfolio companies remains a key focus of ours, with our top 10 portfolio companies representing only 13.2% of the fair value of the portfolio, consistent with the prior quarter. Our largest exposure is only 1.6% of the total portfolio, and our average position size remains at 0.4%.

Speaker #1: Additionally, we remain focused on redeploying capital into traditional middle market transactions across the capital structure with the vast majority of new investments into senior secured first lane loans.

Speaker #1: At June 30th, our total investment portfolio consisted of 244 names compared to 236 names at the end of the first quarter. Diversification across portfolio companies remains a key focus of ours with our top 10 portfolio companies representing only 13.2% of the fair value of the portfolio consistent with the prior quarter.

Speaker #1: Our largest exposure is only 1.6% of the total portfolio and our average position size remains at 0.4%. As far as asset deployment and selection, during the second quarter, our modest amount of new originations were primarily spread across senior first lane loans and equity positions.

Shai Vichness: As far as asset deployment and selection, during Q2, our modest amount of new originations were primarily spread across senior first lien loans and equity positions. Of the $12.1 million of gross originations, $5.9 million were in senior loans and $4.8 million were invested in equity positions across five names. The balance was deployed into subordinated debt positions. As we mentioned in our last earnings call, we have been intentionally deploying more dollars into our equity bucket in recent quarters versus junior debt, with a focus on slightly increasing the percentage of equity to drive capital appreciation within NCDL. Spreads on new investments in Q2 were modestly higher than the prior quarter, with the average spread on first lien loans at approximately 475 basis points. Our weighted average yield on debt and income-producing investments at cost remained consistent with the prior quarter at 9.3%.

Speaker #1: Of the 12.1 million dollars of gross originations, 5.9 million were in senior loans and 4.8 million were invested in equity positions across five names.

Speaker #1: The balance was deployed into subordinated debt positions. As we mentioned in our last earnings call, we had intentionally deploying more dollars into our equity bucket in recent quarters versus junior debt with a focus on slightly increasing the percentage of equity to drive capital appreciation within NCDL.

Speaker #1: Spreads on new investments in the second quarter were modestly higher than the prior quarter with the average spread on first lane loans at approximately 475 basis points.

Speaker #1: Our weighted average yield on debt and income producing investments at cost remained consistent with the prior quarter at 9.3%. In terms of portfolio allocation, at June 30th, first lane loans represented approximately 89.6% of the total portfolio while junior debt and equity comprised 7.3% and 3.1% respectively.

Shai Vichness: In terms of portfolio allocation, at 30 June, first lien loans represented approximately 89.6% of the total portfolio, while junior debt and equity comprised 7.3% and 3.1%, respectively. Our allocation strategy remains unchanged as we continue to target a portfolio comprised of roughly 90% senior loans, with the balance allocated to junior debt and equity. We strongly believe that our focus on the traditional middle-market segment will benefit NCDL shareholders over the long term, as we see meaningfully higher spreads and tighter documentation terms in the traditional middle market as compared to the upper middle and BSL markets. Turning to credit quality, we continue to be very pleased with the overall health and strength of our investment portfolio, despite a few credit challenges during Q2.

Speaker #1: Our allocation strategy remains unchanged as we continue to target a portfolio comprised of roughly 90% senior loans with the balance allocated to junior debt and equity.

Speaker #1: We strongly believe that our focus on the traditional middle market segment will benefit NCDL shareholders over the long term as we see meaningfully higher spreads and tighter documentation terms in the traditional middle market as compared to the upper middle and BSL markets.

Speaker #1: Turning to credit quality, we continue to be very pleased with the overall health and strength of our investment portfolio despite a few credit challenges during the second quarter.

Speaker #1: During the quarter, we placed four new portfolio companies on non-accrual status with a cost basis of 33.3 million and a fair value of 18.7 million dollars.

Shai Vichness: During the quarter, we placed four new portfolio companies on non-accrual status with a cost basis of $33.3 million and a fair value of $18.7 million. At quarter end, NCDL had nine total names on non-accrual, representing 1.5% on a fair value basis and 2.7% at cost. This compares to 0.6% and 1.3% of the total portfolio at fair value and cost, respectively, as of the end of Q1. Our portfolio continues to perform well and in line with our expectations, as we have been operating with historically low level of non-accruals for an extended period. At 30 June, our weighted average internal risk rating was 4.3 times, consistent with the prior quarter, and our watch list, consisting of names with internal risk ratings of 6 or worse, increased slightly to 10.8% at the end of Q2, compared to 8.4% as of the end of Q1.

Speaker #1: At quarter end, NCDL had nine total names on non-accrual representing 1.5% on a fair value basis and 2.7% at cost. This compares to 0.6% and 1.3% of the total portfolio at fair value and cost respectively as of the end of Q1.

Speaker #1: Our portfolio continues to perform well and in line with our expectations as we have been operating with historically low level of non-accruals for an extended period.

Speaker #1: At June 30th, our weighted average internal risk rating was 4.3 times, consistent with the prior quarter, and our watch list, consisting of names with internal risk ratings of six or worse, increased slightly to 10.8% at the end of the second quarter, compared to 8.4% as of the end of the first quarter.

Speaker #1: This was largely driven by a few underperforming names as we discussed earlier. Our watch list percentage remains consistent with the Churchill platform overall as well as our long-term historical averages.

Shai Vichness: This was largely driven by a few underperforming names, as we discussed earlier. Our watch list percentage remains consistent with the Churchill platform overall, as well as our long-term historical averages. Finally, our conservative approach to underwriting is highlighted by our weighted average net leverage across the portfolio of 5.2 times and interest coverage of 2.5 times as of the end of Q2. Now turning to the right-hand side of our balance sheet. Our debt-to-equity ratio at 30 June was 1.29 times gross, compared to 1.32 times at 31 March. On a net basis, our net debt-to-equity ratio was 1.23 times at 30 June, net of our cash position at quarter-end.

Speaker #1: And finally, our conservative approach to underwriting is highlighted by our weighted average net leverage across the portfolio of 5.2 times and interest coverage of 2.5 times as of the end of the second quarter.

Speaker #1: Now turning to the right-hand side of our balance sheet, our debt to equity ratio at June 30th was 1.29 times gross compared to 1.32 times at March 31st.

Speaker #1: And on a net basis, our net debt to equity ratio was 1.23 times at June 30th, net of our cash position at quarter end.

Speaker #1: Our goal remains to redeploy capital received from repayments and maintain leverage towards the upper end of our target range of 1 to 1.25 times debt to equity and our focus for the near term is on optimizing the asset mix within the portfolio and actively reinvesting cash received from repayments and sales into high quality assets.

Shai Vichness: Our goal remains to redeploy capital received from repayments and maintain leverage towards the upper end of our target range of 1 to 1.25 times debt to equity. Our focus for the near term is on optimizing the asset mix within the portfolio and actively reinvesting cash received from repayments and sales into high-quality assets. Looking into quarter-end, we completed two capital structure transactions. First, in July, we redeemed NCDL CLO III with an aggregate principal balance of $297.9 million, inclusive of accrued interest, which we redeemed in full at par. CLO III had an interest rate of SOFR plus 211 basis points. Second, also in July, we completed a successful $100 million tap of our existing 2030 unsecured notes, which brings the aggregate amount of unsecured notes issued by NCDL to $400 million.

Speaker #1: Subsequent to quarter end, we completed two capital structure transactions. First, in July, we redeemed NCDL CLO 3 with an aggregate principal balance of 297.9 million inclusive of accrued interest.

Speaker #1: Which we redeemed in full at par. CLO 3 had an interest rate of SOFR plus 211 basis points. Second, also in July, we completed a successful 100 million dollar tap of our existing 2030 unsecured notes which brings the aggregate amount of unsecured notes issued by NCDL to 400 million.

Speaker #1: As a strong sign of ongoing support from our parent company, TIA purchased 100% of the notes issued. Also, in connection with the tap, we entered into an interest rate swap covering the incremental issuance, resulting in NCDL paying a floating rate of SOFR plus 2.55% on the incremental debt, which matures on March 15, 2030, together with the existing $300 million of unsecured notes issued in 2025.

Shai Vichness: As a strong sign of ongoing support from our parent company, TIAA purchased 100% of the notes issued. Also, in connection with the tap, we entered into an interest rate swap covering the incremental issuance, resulting in NCDL paying a floating rate of SOFR plus 2.55% on the incremental debt, which matures on 15 March 2030, together with the existing $300 million of unsecured notes issued in 2025. Giving effect to both of these capital structure transactions, the redemption of CLO III, and the unsecured debt issuance, our pro forma weighted average cost of debt was SOFR plus 188 basis points, largely unchanged from what we reported last quarter. Pro forma for the incremental issuance, our unsecured notes now represent approximately 41% of NCDL's outstanding debt, providing us with even greater operational flexibility. We maintain our investment-grade ratings from both Moody's and Fitch.

Speaker #1: Giving effect to both of these capital structure transactions, the redemption of CLO 3 and the unsecured debt issuance, our pro forma weighted average cost of debt was SOFR plus 188 basis points largely unchanged from what we reported last quarter.

Speaker #1: Pro forma for the incremental issuance, our unsecured notes now represent approximately 41% of NCDL's outstanding debt providing us with even greater operational flexibility and we maintain our investment grade ratings from both Moody's and Fitch.

Speaker #1: We were pleased to have successfully completed both transactions and we will continue to look for ways to optimize the debt capital structure of NCDL going forward.

Shai Vichness: We were pleased to have successfully completed both transactions. We will continue to look for ways to optimize the debt capital structure of NCDL going forward. Before turning it back to Ken, I'd like to briefly discuss a new strategic initiative for NCDL. In July, after quarter-end, we partnered with an institutional investor to form a joint venture with a total equity commitment of up to $106 million. NCDL committed 87.5% of the equity to the joint venture, with our partner committing the remainder. At closing, we sold a portfolio of approximately $150 million of first lien loans to the joint venture and expect to continue to ramp the joint venture towards a portfolio of approximately $300 million over the coming quarters.

Speaker #1: Before turning it back to Ken, I'd like to briefly discuss a new strategic initiative for NCDL. In July, after quarter end, we partnered with an institutional investor to form a joint venture with a total equity commitment of up to 106 million dollars.

Speaker #1: NCDL committed 87.5% of the equity to the joint venture with our partner committing the remainder. At closing, we sold the portfolio of approximately 150 million of first lane loans to the joint venture and expect to continue to ramp the joint venture towards a portfolio of approximately 300 million over the coming quarters.

Speaker #1: The leverage employed at the joint venture together with its high quality and diversified portfolio should provide for accretive returns to NCDL and further support our earnings profile.

Shai Vichness: The leverage employed at the joint venture, together with its high quality and diversified portfolio, should provide for accretive returns to NCDL and further support our earnings profile. Additionally, the joint venture provides NCDL with incremental capacity to deploy into our attractive pipeline of deal flow. With that, I'll turn it back to Ken for closing remarks.

Speaker #1: Additionally, the joint venture provides NCDL with incremental capacity to deploy into our attractive pipeline of deal flow. With that, I'll turn it back to Ken for closing remarks.

Speaker #2: Thank you, Shaul. In closing, while the first half of 2026 was an eventful period in the private credit market, we are pleased with how the team navigated these challenging market conditions.

Ken Kencel: Thank you, Shaul. In closing, while the H1 of 2026 was an eventful period of time in the private credit market, we are pleased with how the team navigated these challenging market conditions. We also remain confident that NCDL is well-positioned for the H2 of the year with an experienced investment team and our ability to originate high-quality investments in various market conditions and economic environments. We continue to benefit from our competitive advantages in the core middle market as well as our long-term successful track record. Thank you all for joining us today and for your interest in NCDL. I will now turn the call over to the operator for Q&A.

Speaker #2: We also remain confident that NCDL is well positioned for the second half of the year with an experienced investment team and our ability to originate high quality investments in various market conditions and economic environments.

Speaker #2: We continue to benefit from our competitive advantages in the core middle market as well as our long-term successful track record. Thank you all for joining us today and for your interest in NCDL.

Speaker #2: I will now turn the call over to the operator for Q&A.

Speaker #3: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Operator: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. The first question comes from the line of Melissa Weddle with UBS. Please proceed.

Speaker #3: You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker #3: One moment please while we pull for questions. And the first question comes from the line of Melissa Weddell with UBS. Please proceed.

Speaker #4: Good morning. Thanks for taking my questions today. I wanted to first follow up on the comment about new originations this quarter and intentionally allocating a little bit more towards equity exposure for future NAV appreciation.

Melissa Wedel: Good morning. Thanks for taking my questions today. Wanted to first follow up on the comment about new originations this quarter and intentionally allocating a little bit more towards equity exposure for future NAV appreciation. I'm curious how you weigh that between the opportunity to play for future NAV appreciation, which could be years down the line, versus maybe allocating sort of down the stack a little bit, maybe to some junior debt positions just for a little bit of yield pickup, and how you really balance those two things.

Speaker #4: I'm curious how you weigh that between the opportunity to play for future NAV appreciation which could be years down the line versus maybe allocating sort of down the stack a little bit, maybe to some junior debt positions just for a little bit of yield pickup and how you really balance those two things.

Speaker #3: Yeah. Hey, Melissa, thank you. It's Shaul. Thanks for the question. So yeah, look, I think when we're talking about the allocations across the portfolio, I think the first thing to just sort of anchor around is that our focus is predominantly in senior secured first lien, and that's not changing.

Shai Vichness: Hey, Melissa. Thank you. It is Shai. Thanks for the question. I think when we are talking about sort of the allocations across the portfolio, I think the first thing to just sort of anchor around is that our focus is predominantly in senior secured first lien, and that is not changing. Our expectation is that will continue to comprise 90% of the portfolio, and we continue to believe that the levered senior trade is highly attractive even relative to junior debt. Now, you can make a bet on sort of which way you think interest rates are going. Obviously now with sort of a relatively stable to potentially increasing rate environment. I think that is even more clear that the levered senior trade is attractive.

Speaker #3: So our expectation is that will continue to comprise call it 90% of the portfolio and we continue to believe that the levered senior trade is highly attractive even relative to junior debt.

Speaker #3: Now, you can make a bet on which way you think interest rates are going. Obviously, now, with a relatively stable to potentially increasing rate environment...

Speaker #3: Again, I think that is even more clear that the levered senior trade is attractive. And then on the equity side, what we're really talking about is going from call it one and a half to 2% equity to 3 to 4% equity.

Shai Vichness: On the equity side, what we are really talking about is going from 1.5% to 2% equity to 3% to 4% equity. These are not sort of material movements in the overall allocation percentage. That ability to get a little bit more equity in the book, especially if the existing equity positions that have been invested over the last number of years are starting to mature, we think that gives us an opportunity to generate some of those capital gains, and have that sort of NAV appreciation that we can then redeploy into the pipeline. De-emphasizing a little bit the junior capital while still actively investing there. As I think you saw roughly 40% of the capital we deployed this last quarter was actually into junior debt positions. It is not that we are not investing there.

Speaker #3: So these are not sort of material movements. In the overall allocation percentage, but that ability to get a little bit more equity in the book especially if the existing equity positions that have been invested over the last number of years are starting to mature we think that gives us an opportunity to generate some of those capital gains and have that sort of NAV appreciation that we can then redeploy into the pipeline and then deemphasizing a little bit the junior capital while still actively investing there and as I think you saw roughly 40% of the capital we deployed this last quarter was actually into junior debt positions.

Speaker #3: So it's not that we're not investing there. It's still a focus but it's slightly deemphasized in favor of equity. So again, these are moves on the margin but the key takeaway is we believe very strongly in the levered senior trade and we think adding a little bit of incremental equity to the book makes sense just given the maturity profile of the vehicle.

Shai Vichness: It is still a focus, but it is slightly de-emphasized in favor of equity. These are moves on the margin, but the key takeaway is we believe very strongly in the levered senior trade, and we think adding a little bit of incremental equity to the book makes sense just given the maturity profile of the vehicle.

Speaker #1: Yeah. Melissa, it's Ken as well. And I would just add on the private equity side. And I think you know this about our platform.

Ken Kencel: Melissa, it is Ken as well. I would just add on the private equity side, and I think you know this about our platform. Today, we have investment commitments in over 350 US middle-market private equity funds that we manage overall. Obviously, along with that, we get co-investment opportunities that are often very attractive. We are leaning into those opportunities as well. It is a very small part of our portfolio. Those opportunities are coming from, by and large, very high-quality mid-market private equity funds that have fantastic track records. The opportunity to co-invest with them, we think, is quite unique. We want to make sure that we are taking advantage of that.

Speaker #1: Today, we have investment commitments in over 350 U.S. middle-market private equity funds that we manage overall. And, obviously, along with that, we get co-investment opportunities that are often very attractive.

Speaker #1: And so we're leaning into those opportunities as well. It's a very small part of our portfolio. But those opportunities are coming from by and large very high quality mid-market private equity funds that have fantastic track records and the opportunity to co-invest with them we think is quite unique.

Speaker #1: And so we want to make sure that we're taking advantage of that.

Speaker #4: I appreciate that. If I could follow up with a question about the JV, it certainly seems—certainly looks like you're trying to ramp it fairly quickly.

Melissa Wedel: I appreciate that. If I could follow on with a question about the JV.

Ken Kencel: Yeah.

Melissa Wedel: It certainly looks like you're trying to ramp it fairly quickly by seeding that with, it looks like half the capacity, I think if my math is right, from the existing portfolio. I'm curious if you're willing to share how long you're aiming it to take to ramp that vehicle more fully, and then what the yield profile might be between loans that you keep on balance sheet and loans that would go into the JV, and how that plays into target ROE, things like that. Thanks.

Speaker #4: By seeding that with it looks like half the capacity I think my math is right on from the existing portfolio. I'm curious what if you're willing to to take to ramp that vehicle more fully and then what the yield profile might be between loans that you keep on balance sheet and loans that would go into the JV and how that plays into target ROE, things like that.

Speaker #4: Thanks.

Speaker #1: Yeah, sure. So yeah,

Shai Vichness: Yeah, sure. Yeah, you're right in terms of your math. We dropped down $150 million of assets at the launch of the joint venture, our goal is to get that to roughly $300 million in assets. I would say that should happen over the medium term. Call it inside 12 months to get the remainder fully ramped. The focus there is going to be on almost 100% senior secured first lien loans, taking advantage of that levered senior trade. The assets will be very similar, frankly, to what's up in the BDC as well. It'll participate in the pipeline. It could acquire assets from time to time from NCDL as well. That will enable it to ramp and generate that levered trade.

Speaker #3: you're you're right in terms of your math. We drop down 150 million of assets at the launch of the joint venture and our goal is to get that to roughly 300 million in assets and I would say that should happen over the medium term.

Speaker #3: So call it inside 12 months. To get the remainder fully ramped. And the focus there is going to be on almost 100% senior secured first lane loans.

Speaker #3: So taking advantage of that levered senior trade. And the assets will be very similar frankly to what's up in the BDC as well. So it'll participate in the pipeline.

Speaker #3: It could acquire assets from time to time. From NCDL as well. And that will enable it to ramp and generate that levered trade. And again, if you think about the credit facility employed there and sort of the target leverage for that vehicle consistent with other JVs that you've seen sort of in that two times leverage range.

Shai Vichness: Again, if you think about the credit facility employed there and sort of the target leverage for that vehicle, consistent with other JVs that you've seen, sort of in that two times leverage range at the joint venture level, that'll allow us to generate those incremental returns and be accretive to the overall earnings profile of NCDL.

Speaker #3: At the joint venture level, that'll allow us to generate those incremental returns and be accretive to the overall earnings profile of NCDL.

Speaker #4: Thank you.

Melissa Wedel: Thank you.

Speaker #3: All right. Thank you.

Shai Vichness: All right. Thank you.

Speaker #1: Once again, if you would like to ask a question, please press star one on your telephone keypad. And the next question comes from the line of Aaron Siganovic with True Securities.

Operator: Once again, if you would like to ask a question, please press star one on your telephone keypad. The next question comes from the line of Aaron Cyganowicz with Truist Securities. Please proceed.

Speaker #1: Please proceed.

Speaker #5: Hey, this is Alex Brewer, Aaron's associate at Truist. Just on the credit, you mentioned a few companies-specific challenges during the quarter. I was just curious if there's any color that you could add on the take-up and non-accruals and the watchlist percentage.

Alex Brewer: Hey, this is Alex Brewer, Aaron's associate at Truist. Just on the credit, you mentioned a few company-specific challenges during the quarter. I was just curious if there's any color that you could add on the tick-up in non-accruals and the watch list percentage.

Speaker #3: Yeah. Look, I mean, I think it's important to sort of put Alex that the new non-accruals in the context of sort of the historical performance, which has been very strong, right?

Shai Vichness: I think it's important to sort of put, Alex, the new non-accruals in the context of sort of the historical performance, which has been very strong, right? The fact that we have a handful of incremental non-accruals, I believe four this quarter, is sort of not overly surprising just as sort of the portfolio evolves and matures. Again, if you look at the composition of those names that are going on the watch list, frankly, we get this question a lot, right? Are there trends? Are there themes, industries? Each of the four really were across four separate industries with no real through line, right? They're going to be company specific in terms of the performance. We're not seeing, frankly, a real trend or overarching sort of concern around the overall credit quality of the portfolio.

Speaker #3: So the fact that we have a handful of incremental non-accruals, I believe for this quarter, is sort of not overly surprising just as sort of the portfolio evolves and matures.

Speaker #3: But again, if you look at the composition of those names that are going on the watchlist, frankly, we get this question a lot, right?

Speaker #3: Are there trends? Are there themes, industries? And each of the four really were across four separate industries with no real through line, right? So they're going to be company-specific in terms of the performance.

Speaker #3: But we're not seeing, frankly, a real trend or overarching sort of concern around the overall credit quality of the portfolio. So modest increase in the watchlist, not surprising just given the maturity of the portfolio and the current environment.

Shai Vichness: Modest increase in the watch list, not surprising just given the maturity of the portfolio and the current environment. As we think about the non-accrual percentage, still fairly low in the context of the overall industry, right? On a relative performance basis quite solid on any metric, right, that you would look at. Things like quarter-over-quarter or even H1 NAV change in the book, as well as the non-accrual percentage relative to the overall industry, we still feel very good. Clearly an increase from the prior quarter, but something we're keeping a very close eye on.

Speaker #3: And then as we think about the non-accrual percentage, right, still fairly low in the context of the overall industry, right? So on relative performance basis, quite solid on any metric, right, that you would look at.

Speaker #3: So things like quarter over quarter or even first half NAV change, in the book, as well as the non-accrual percentage relative to the overall industry, we still feel very good.

Speaker #3: But clearly an increase from the prior quarter, but something we're keeping a very close eye on.

Speaker #1: Yeah, this is Ken. I would agree with that. And I would say that if you look at the four names, very much idiosyncratic. There really is no theme.

Ken Kencel: This is Ken. I would agree with that. I would say that if you look at the four names, very much idiosyncratic. There really is no theme. In each case, in each of the four, we did have ongoing sponsor support. The sponsors obviously engaged, stepped up, provided incremental capital, worked to try to address these issues. I think sponsor behavior was as we would have hoped for. Again, not every situation goes as planned. We're going to have a small handful of these names. Again, we have 244 names today in our portfolio. There are four here that we're dealing with, but there is really no common theme, either industry or otherwise.

Speaker #1: And in each case, in each of the four, we did have ongoing sponsor support. So the sponsors obviously engaged, stepped up, and provided incremental capital.

Speaker #1: Worked to try to address these issues. So I think sponsor behavior was as we would have hoped for. But again, not every situation goes as planned.

Speaker #1: So we're going to have a small handful of these names. Again, we have 244 names today in our portfolio. There are four here that we're dealing with, but there is really no common theme, either industry or otherwise.

Speaker #1: I will say overall, obviously given all the dynamics and the noise about AI that we've heard during the first half of the year, there's no AI theme here at all.

Ken Kencel: I will say overall obviously given all the dynamics and the noise about AI that we've heard during the H1 of the year, there's no AI theme here at all. I think it's just a function of some businesses that in a higher for longer environment may be a bit more challenged. Overall, we continue to be happy with the quality of the portfolio and the overall ongoing monitoring and support we've received from our sponsors.

Speaker #1: And I think it's just a function of some businesses that in a hire for longer environment, may be a bit more challenged. But overall, we continue to be happy with the quality of the portfolio.

Speaker #1: And the overall ongoing monitoring and support we've received from our sponsors.

Alex Brewer: Understood. Thank you.

Speaker #5: This is thank you.

Speaker #3: Thank you.

Shai Vichness: Thank you.

Ken Kencel: Thank you.

Speaker #1: Thank you. Ladies and gentlemen, this does conclude the question and answer session. And I would like to turn the call back over to Ken Kencel for closing remarks.

Operator: Thank you. Ladies and gentlemen, this does conclude the question and answer session. I would like to turn the call back over to Ken Kencel for closing remarks.

Speaker #2: Great, thank you very much. And thank you all for joining us today. We very much appreciate your interest and support, and hopefully all of you have a great remainder of the summer.

Ken Kencel: Great. Thank you very much. Thank you all for joining us today. We very much appreciate your interest and support. Hopefully, all of you have a great remainder to the summer. We look forward to getting together on our next quarterly call.

Speaker #2: And we'll look forward to getting together on our next quarterly call.

Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time.

Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Enjoy the rest of your day.

[Analyst]: Goodbye.

Operator: Enjoy the rest of your day.

Q2 2026 Nuveen Churchill Direct Lending Corp Earnings Call

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