Palmer Square Capital BDC Q4 2025 Earnings Report

Palmer Square Capital BDC EPS Results

• Actual EPS: $0.41
• Consensus EPS: $0.42
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

Palmer Square Capital BDC Revenue Results

• Actual Revenue: ($0.31) million
• Expected Revenue: $30.11 million
• Beat/Miss: Missed by -$30.42 million
• YoY Revenue Growth: N/A

Palmer Square Capital BDC Announcement Details

• Quarter: Q4 2025
• Date: 2/26/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, February 26, 2026
• Conference Call Time: 1:00PM ET

Palmer Square Capital BDC (NYSE:PSBD) (NYSE: PSBD) is a closed-end, externally managed business development company that provides customized financing solutions to middle-market companies in the United States. The firm offers a broad range of debt and equity products—including first-lien and second-lien senior secured loans, unitranche financings, mezzanine debt and equity co-investments—to support corporate acquisitions, refinancings, growth initiatives and balance sheet restructurings.

PSBD primarily targets established privately owned and sponsored businesses across diverse industries such as healthcare, business services, industrials and consumer products. By tailoring its capital structures to meet specific client needs, the company seeks to deliver attractive risk-adjusted returns through current income and potential capital appreciation while also providing sponsors and management teams with flexible long-term capital.

Since commencing operations in mid-2021, Palmer Square Capital BDC has built a diversified portfolio of direct lending and specialty finance investments. Its disciplined underwriting process emphasizes rigorous credit analysis, active portfolio monitoring and collaboration with management teams to drive operational improvements and support strategic growth objectives.

The firm’s external manager, Palmer Square Capital Management, draws on a team of credit professionals with deep experience in middle-market lending. Headquartered in New York City, PSBD leverages the broader firm’s resources and market relationships to originate, structure and manage bespoke financing transactions for businesses across North America.

Palmer Square Capital BDC Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: PSBD reported Q4 net investment income of $0.41 per share, covering its $0.36 base dividend and supporting a $0.43 total payout that included a supplemental distribution. Management said it intends to continue returning excess earnings to shareholders through supplements.
• Negative Sentiment: NAV per share declined to $14.85 at quarter-end from $15.39 in the prior quarter, and the company posted $18.4 million in net realized and unrealized losses in Q4. Total investment income also fell year over year to $29.8 million.
• Positive Sentiment: The portfolio remains highly diversified and conservative, with 42 industries represented, 95% senior secured assets, and low non-accruals. Management emphasized that software exposure is only about 11% of the portfolio and is concentrated in mission-critical enterprise platforms.
• Positive Sentiment: PSBD refined its balance sheet by refinancing the Wells Fargo credit facility, cutting spreads by about 55 basis points, extending maturity to November 2030, and increasing capacity to $200 million. Liquidity also improved to about $311.3 million.
• Neutral Sentiment: Management sees a healthier but uneven deal environment, with more activity at the top end of the market and continued volatility around AI-related software credits. They expect opportunities in both private credit and secondary loan markets, while staying selective and cautious on deployment.

Presentation

[Operator]

Welcome to Palmer Square Capital BDC's fourth quarter and year-end 2025 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the prepared remarks. As a reminder, this conference call is being recorded. At this time, I'd like to turn the call over to Jeremy Goff, Managing Director. You may begin.

[Jeremy Goff, Managing Director at Palmer Square Capital BDC]

Welcome to Palmer Square Capital BDC's fourth quarter and year-end 2025 earnings call. Joining me this afternoon are Chris Long, Chairman and Chief Executive Officer. Angie Long, Chief Investment Officer. Matt Bloomfield, President, and Jeff Fox, Chief Financial Officer and Director. Palmer Square Capital BDC's fourth quarter and fiscal year ended 2025 financial results were released earlier today and can also be accessed on Palmer Square's investor relations website at palmersquarebdc.com. We have also arranged for a replay of today's event that can be accessed on our website. During this call, I want to remind you that the forward-looking statements we make are based on current expectations. The statements on this call that are not purely historical are forward-looking statements.

[Jeremy Goff, Managing Director at Palmer Square Capital BDC]

These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements, including and without limitation, market conditions caused by uncertainties surrounding interest rates, changing economic conditions, and other factors we identified in our filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements made during this call are made as of the date hereof, and Palmer Square Capital BDC assumes no obligation to update the forward-looking statements unless required by law. To obtain copies of SEC-related filings, please visit our website at palmersquarebdc.com.

[Jeremy Goff, Managing Director at Palmer Square Capital BDC]

With that, I will turn the call over to Chris Long.

[Chris Long, Chairman and CEO at Palmer Square Capital BDC]

Good afternoon, everyone. Thank you for joining us today for Palmer Square Capital BDC's fourth quarter and year-end 2025 conference call. On today's call, I will provide an overview of our fourth quarter results and full-year highlights, touch on our market outlook and competitive positioning, and then turn the call to the teams to discuss the current industry dynamics at play, our portfolio activity, and financial results. During the fourth quarter, our team deployed $91.4 million of capital and generated total and net investment income of $29.8 million and $13.1 million, respectively. We delivered net investment income of $0.41 per share, covering our $0.36 per share fourth quarter base dividend and paid a $0.43 per share total dividend, which includes a $0.07 supplemental distribution. As we previously emphasized, we follow a distribution strategy that maximizes cash returns to our investors.

[Chris Long, Chairman and CEO at Palmer Square Capital BDC]

In that spirit, we continue to aim to pay out nearly all of our excess earnings in the form of a supplemental dividend. Additionally, we recently announced our January NAV per share of $14.48. As the only publicly traded BDC to disclose NAV on a monthly basis, we believe we provide a unique level of transparency and accountability, giving shareholders regular insight into our performance in the evolving market. Throughout 2025, uncertainty was the norm, shaped by tariff policy, evolving geopolitical dynamics, and a heightened focus on the trajectory of rate cuts. We also saw reasons to be optimistic toward the end of the year, including an improvement in deal momentum and increasing sponsor engagement. Most notably, the $55 billion take private of Electronic Arts, which will require approximately $20 billion in debt financing, and the approximately $18 billion take private of Hologic.

[Chris Long, Chairman and CEO at Palmer Square Capital BDC]

Before I hand it over to Angie, I want to spend some time discussing why we feel confident in our software portfolio despite the heightened concerns around AI-driven disruption in recent weeks. For background, our investment preference in software has skewed towards mission-critical enterprise platforms in areas such as cybersecurity, IT infrastructure, and ERP systems. Within these sub-sectors, we are lending to large, highly scaled, and deeply embedded providers that have meaningful profitability and cash flow. We found that these large enterprise platforms tend to be backed by large, sophisticated private equity sponsors and believe their capital structures provide meaningful equity cushions below our senior secured loans. We are most comfortable with these mission-critical enterprise platforms given they are ingrained across entire organizations, have a high cost of failure with tangible failure risk, in many cases are systems of record, and require nearly 100% uptime and accuracy levels.

[Chris Long, Chairman and CEO at Palmer Square Capital BDC]

Given there is little room for margin of error in these types of platforms, we believe they have a very large moat surrounding them, regardless of the trajectory of AI. Additionally, in our experience, these providers frequently have a higher incumbency advantage and a longer lead time to develop in-house AI solutions and react to market changes, most of which are already in advanced stages. We believe another advantage is the fact that all of the data these software companies have collected across industries will, in theory, make their AI better than their more nascent peers, as data quality underpins all AI inference. Further, as it relates to sector exposure, I'd like to reiterate that PSBD's portfolio is highly diversified by industry and size, with 42 different industries represented, and our 10 largest investments comprising just 10.9% of the overall portfolio.

[Chris Long, Chairman and CEO at Palmer Square Capital BDC]

At present, software comprises less than 11% of our overall portfolio. As we kick off 2026, our investment strategy and approach to portfolio management that has served us well for nearly two decades remains unchanged. We believe that active credit management, when executed properly, can generate attractive total returns in excess of yield alone, and that our focus on credit selection, combined with our core competency of locating relative value, will drive strong outcomes. With that, I will hand the call over to Angie.

[Angie Long, CIO at Palmer Square Capital BDC]

Thank you, Chris. We are pleased with PSBD's fourth quarter results and our broader positioning entering the new year. While market activity improved modestly through the end of 2025, January and February of 2026 have served as reminders that volatility and uncertainty remain elevated throughout financial markets. Despite that backdrop, we believe PSBD's portfolio continues to be resilient and deliver strong results across shifting environments. In terms of deal volume, M&A activity is beginning to show signs of the gradual improvement we alluded to last quarter. Though the recovery remains uneven. Activity has been much more prevalent at the upper end of the market, while sponsor-to-sponsor deals in the $1 billion-$5 billion enterprise value range have been slower to reemerge. Spread compression continued through the fourth quarter across many parts of the market.

[Angie Long, CIO at Palmer Square Capital BDC]

On the private credit side, it appears to be moderating, while tightening in the broadly syndicated market has continued. In light of this, we are maintaining our defensive posture while staying invested. We believe the recent volatility may present high-quality opportunities at attractive entry points. In those cases, we would actively look to rotate into those opportunities. As expected, activity slowed entering the first quarter, which is typically the shortest and seasonally weakest period, January has tracked in line with historical patterns. That said, our team's engagement with sponsors and capital market desks continues to increase, and pipelines in both the private credit and broadly syndicated markets feel healthier than earlier in 2025. We believe the market is still some distance away from a sustained and meaningful increase in overall transaction volumes.

[Angie Long, CIO at Palmer Square Capital BDC]

Recent transactions continue to highlight the evolving relationship between the broadly syndicated loan and private credit markets. With the recent Hologic take-private serving as a prime example of these dynamics at play. As has been reported, Palmer Square's comprehensive platform participated as a private credit provider in the second lien tranche, initially committing $100 million and ultimately funding $75 million after the transaction was resized following a strong first lien syndication process. More importantly, the Hologic transaction demonstrates the breadth of our platform. We were able to support the sponsors with early and sizable commitments, and ultimately participate across both the private second lien and the syndicated first lien tranches in US dollars and euros. We applied a similar approach with the MacLean Power Systems transaction.

[Angie Long, CIO at Palmer Square Capital BDC]

We believe our platform's flexibility will serve as an important competitive advantage for PSBD as we continue to see transactions move between public and private markets, often within the same capital structure. As referenced previously, volatility has returned meaningfully since the beginning of the year. While this has been driven by a number of factors, including macro uncertainty and geopolitical developments, the past few weeks have been defined by renewed concerns around the pace and scope of AI-driven disruption, which has weighed on sentiment across both equity and credit markets. Since there's been scrutiny around BDCs through this lens, we believe it's worth providing some additional context for our investors while reiterating that approximately 11% of PSBD's portfolio was invested in software-related credits as of quarter end, which is substantially lower than the 20% average BDC exposure level reported in the press.

[Angie Long, CIO at Palmer Square Capital BDC]

Our average position size in software is approximately $4.6 million. To echo Chris, our exposure is intentionally skewed towards mission-critical enterprise platforms that tend to be backed by very large, sophisticated private equity sponsors, and that we believe have meaningful equity cushions below our senior secured loans. We intentionally avoid lending to fast-growing but negative cash flow businesses or companies in more commoditized subsectors, such as customer marketing automation, for example, which we believe are more vulnerable to disintermediation by AI. Although recent market sentiment has been pronounced, we believe the genesis of the concern is not necessarily that current credit fundamentals are deteriorating or at risk, but rather the underlying question of what the terminal value of some of these software businesses will be five, 10, or 20 years down the line.

[Angie Long, CIO at Palmer Square Capital BDC]

There are undoubtedly going to be winners and losers in the software space, which was also the case before AI. As we have seen in past bouts of volatility over the years and decades, tremendous opportunities can arise to invest in great companies at meaningful discounts to their intrinsic value. We believe the current backdrop in certain pockets of loans and high-yield bonds may help our investment team uncover opportunities to generate attractive returns, as some credits have traded down five to 10 points or more with no apparent fundamental changes to the underlying business performance. As always, we will continue to be diligent in our deployment as we monitor each corner of the market and leverage our platform's flexibility to rotate into the most appealing risk-adjusted opportunities as they emerge. Turning to our portfolio, credit performance remains solid across the board.

[Angie Long, CIO at Palmer Square Capital BDC]

As discussed during our last call, First Brands represented the most notable credit-specific development. Given some uncertainty around the sales process and deteriorating customer sentiment, we reduced most of our exposure in January and chose not to commit any additional capital. We retained a small residual position as option value should conditions improve. In terms of our balance sheet, we refinanced our private credit facility with Wells Fargo during the fourth quarter, reducing the spreads by approximately 55 basis points and increasing the overall capacity of the facility. We will continue to evaluate additional right-side balance sheet optimization opportunities in the first half of 2026, including a potential CLO refinancing and other initiatives. As a reminder, we also put in place a new $5 million open market share repurchase authorization during the fourth quarter.

[Angie Long, CIO at Palmer Square Capital BDC]

While we have not yet utilized this authorization due to blackout restrictions, we continue to believe PSBD's valuation represents an attractive opportunity, and we will judiciously deploy capital to support the stock. Additionally, we expect to continue discussions with the board regarding future use of the 10b5-1 program following the full utilization of the prior plan. For added context, PSBD shares were yielding 15.7% as of February 2026, a significant premium to the 11.6% on NAV. Given the quality and conservative positioning of PSBD's portfolio, we believe this is a compelling yield, even while taking into consideration the volatile market environment we've experienced as of late. As we look forward to the rest of 2026, we remain discerning but cautiously optimistic. While near-term sentiment across certain sectors remains fragile, we believe the long-term fundamentals supporting the credit markets remain intact, particularly for platforms with disciplined underwriting and conservative portfolio construction.

[Angie Long, CIO at Palmer Square Capital BDC]

PSBD's ability to invest across both liquid and private markets allows us to remain flexible and patient as conditions evolve and opportunities arise. With that, I'll turn the call over to Matt to discuss our portfolio and investment activity in more detail.

[Matt Bloomfield, President at Palmer Square Capital BDC]

Thank you, Angie. Turning to our portfolio and investment activity for the fourth quarter. Our total investment portfolio as of December 31, 2025, had a fair value of approximately $1.2 billion across 42 industries that demonstrate strong credit quality, industry and company-specific tailwinds, and a diverse mix of end markets. This compares to a fair value of $1.26 billion at the end of the third quarter of 2025, reflecting a decrease of approximately 4.4%. In the fourth quarter, we invested $91.4 million of capital, which included 24 new investment commitments at an average value of approximately $3.4 million. During the same period, we realized approximately $148.3 million through repayments and sales. As you will notice, we continue to think about diversification as we allocate new capital in the portfolio.

[Matt Bloomfield, President at Palmer Square Capital BDC]

To recap key portfolio highlights, at the end of the fourth quarter, our weighted average total yield to maturity of debt and income-producing securities at fair value was 11.30%, and our weighted average total yield to maturity of debt and income-producing securities at amortized cost was 8.15%. We believe our focus on first lien loans and diversification by industry and size contribute to a strong credit profile, with 42 different industries represented in our investment mix. Further, our 10 largest investments account for just 10.9% of the overall portfolio, and our portfolio is 95% senior secured, with an average hold size of approximately $4.7 million. Again, we believe this position sizing is an important risk management tool for PSBD. On a fair valuated basis, our first lien borrowers have a weighted average EBITDA of $436 million, senior secured leverage of 5.5 times, and interest coverage of 2.6 times.

[Matt Bloomfield, President at Palmer Square Capital BDC]

Additionally, new private credit loans comprised 14.7% of overall new investments and were funded at a weighted average spread of 463 basis points over the reference rate. While credit quality is a focus across the sector, non-accruals continue to be low at PSBD. On a fair value basis, it is only nine basis points, and on an at-cost basis, only 134 basis points. Our PIK income as a percentage of total investment income remains well below our largest peers and below the industry at approximately 1.45%. We believe this will give our shareholders greater confidence in the quality of our disclosed investment income. We've maintained an average internal rating of 3.6 on a fair valuated basis for all loan investments. Our ratings derive from a unique relative value-based scoring system. We believe credit performance within the portfolio remains strong.

[Matt Bloomfield, President at Palmer Square Capital BDC]

Our non-accruals remain very low by industry standards. The underlying credit metrics of our borrowers appear encouraging. We continue to see stability in both leverage levels and loan-to-value ratios across our portfolio companies. As both Chris and Angie mentioned, we believe our portfolio is well diversified for the dynamic markets that we participate in. As we've talked about many times in the past, we believe larger borrowers provide for better credit outcomes for myriad reasons. We think this will apply to AI as well. That larger companies may be able to invest in and ultimately benefit from the tools and efficiencies that AI can provide. As previously disclosed, during the quarter, we took further strides in optimizing the right side of our balance sheet by refinancing the Wells Fargo credit facility, tightening the spread by 55 basis points.

[Matt Bloomfield, President at Palmer Square Capital BDC]

Additionally, we extended the maturity of the facility to November 2030. Increased the facility amount to $200 million from $175 million. We believe this exemplifies our focus on driving earnings power to the BDC through active balance sheet management in addition to active portfolio management. As discussed on the third quarter earnings call, our board has approved an additional $5 million of open market share repurchases at PSBD. We have not yet utilized the program due to an ongoing lock-up period. Given the market level discounts to NAV in the BDC space, we believe this could be an accretive tool to further shareholder return in the future. As we navigate current market dynamics, we remain aligned with the priorities of our shareholders and will continue to provide transparent visibility into our performance.

[Matt Bloomfield, President at Palmer Square Capital BDC]

I'd like to turn the call over to Jeff, who will review our fourth quarter 2025 financial results.

[Jeff Fox, CFO and Director at Palmer Square Capital BDC]

Thank you, Matt. Total investment income was $29.8 million for the fourth quarter of 2025, down 14.5% from $34.9 million for the comparable prior year period. Income generation during the quarter reflected a mix of contractual interest income, paydown related income, and select fee income from the new deal activity. Total net expenses for the fourth quarter were $16.8 million, compared to $20.1 million in the prior year period. Net investment income for the fourth quarter of 2025 was $13.1 million or $0.41 per share, compared to $14.8 million or $0.45 per share for the comparable period last year. During the fourth quarter of 2025, the company had total net realized and unrealized losses of $18.4 million, compared to the total net and unrealized losses of $2.9 million in the fourth quarter of 2024.

[Jeff Fox, CFO and Director at Palmer Square Capital BDC]

This consists of net unrealized depreciation of $20 million related to the existing portfolio investments and net unrealized appreciation of $2 million related to exited portfolio investments. At the end of the fourth quarter, NAV per share was $14.85, compared to $15.39 at the end of the third quarter of 2025. Moving to our balance sheet, total assets were $1.2 billion and total net assets were $464.1 million as of December 31, 2025. At the end of the fourth quarter, our debt-to-equity ratio was 1.54 times, very slightly up from the 1.53 times at the end of the third quarter of 2025. Available liquidity, consisting of cash and undrawn capacity on our credit facilities, was approximately $311.3 million. This compares to approximately $252.8 million at the end of the third quarter of 2025.

[Jeff Fox, CFO and Director at Palmer Square Capital BDC]

Finally, on February 26, the board of directors declared a first quarter 2026 base dividend of $0.36 per share, in line with our formalized dividend policy. Furthermore, our policy continues to be distributing excess earnings in the form of a quarterly supplemental distribution. With that, I'd now like to open the call up for questions.

[Operator]

We will now begin the question and answer session. To ask a question, press star then the number one on your telephone keypad. Our first question will come from the line of Richard Shane with JP Morgan. Please go ahead.

[Richard Shane, Analyst at JPMorgan]

Hey, guys. Thanks for taking my question. Look, you've alluded to the repurchase. I'm looking at the leverage levels. As you think about capital deployment, again, you've indicated, Hey, at the margin we see potentially some opportunity. Are you going to keep dry powder, or given where the stock is trading, does it just make sense to buy stock given it's probably hard to find something that generates comparable return?

[Matt Bloomfield, President at Palmer Square Capital BDC]

Hey, Rick, it's Matt. Thanks for the question. I think from the management team's perspective and the board, we're certainly looking at all avenues in front of us. To your point, it's certainly accretive from a stockholder standpoint, given where the discount's trading, undoubtedly. We also mentioned some of the dislocations in the market that we've seen are likely going to provide some great opportunities in the secondary investing side as well. All that being said, we do think from a new underwriting origination standpoint, spreads should be more conducive than they've been in quite some time. We're really trying to look across all the avenues of opportunity set in front of us. Maybe not just the best near term, but obviously the best long-term decision for shareholders. Taking a look at everything that's on the table, there's certainly a lot to investigate at this stage.

[Matt Bloomfield, President at Palmer Square Capital BDC]

I think we'll try to be as prudent as we can across all those facets. Undoubtedly to your point, the shares look really attractive to us at this level.

[Richard Shane, Analyst at JPMorgan]

Got it. Look, obviously in the equity markets, we're seeing similar dislocations. In some ways, what we've seen is sectors move from being potentially at the high end of their valuation range, potentially into a more normal sort of average range. Generally speaking, things don't just sort of mean revert, they typically over-correct. We're thinking about that in terms of stocks more broadly. Where do you think we are in the cycle on the credit side? If we're just sort of moving back to normal pricing as opposed to really, really tight spreads, is it really the time to weigh in, or do you actually think we're approaching historically attractive pricing?

[Matt Bloomfield, President at Palmer Square Capital BDC]

Another really fair point. I think it certainly, in credit, depends on sector. Undoubtedly, the focus, right, of the past several weeks has been specifically on software and then AI-related risks across certain industries. I think the credit markets have definitely bifurcated amongst those, and you haven't really seen much in the way of spread widening outside of AI-worried industries. On the public credit side versus the private credit side, private credit obviously moves slower from a spread reaction. I don't know that, to your point, that we're going to see this massive opportunity set of much wider spreads just across all credit. I don't think that's going to occur barring some more broad-based macro uncertainty. I don't think anybody would argue that in the software credit space that spreads aren't meaningfully wider.

[Matt Bloomfield, President at Palmer Square Capital BDC]

I think there'll be interesting opportunity sets within there, right, as we look across some of these kind of deeply embedded software companies where I think, in the past couple days, maybe the narrative has changed a little bit as you've seen some of the NVIDIA CEO comments about layering those type of AI products on top of embedded software, which I think is what most people have been trying to communicate on the credit side as of late. I think we're definitely going to see some opportunities in some of those impacted where things have just gotten to levels that I think a lot of people would agree just don't make sense. We want to be prudent about getting over our skis there. I do think there's some interesting opportunities there.

[Matt Bloomfield, President at Palmer Square Capital BDC]

Outside of those type of sectors, I hope we start to see some more normalized spreads. I think it makes sense with all the just macro uncertainty in general. I think those will move a little bit slower because there's still a lot of dry powder on the sidelines that wants to be deployed. I think it's going to take a little bit more for spreads to widen holistically to levels where we're kind of through longer-term averages, per se.

[Richard Shane, Analyst at JPMorgan]

Terrific. I really do appreciate the answer, guys. Thank you.

[Operator]

Our next question will come from the line of Douglas Harter with UBS. Please go ahead.

[Douglas Harter, Analyst at UBS]

Thanks. Just kind of piggybacking on Rick's question. How do you weigh kind of the opportunity to maybe buy some of those software loans where you might feel comfortable in it, versus obviously the perception of increasing risk and the potential volatility that comes with that before kind of markets settle down?

[Matt Bloomfield, President at Palmer Square Capital BDC]

Yeah. It's a balanced process. I think we definitely don't necessarily just want to outright increase exposure holistically to the sector. There's just obviously enough noise going on, and quite frankly, I think we just need to be really fundamentally sound in kind of how we're analyzing these specific businesses on a company-by-company basis. I think we've done enough work and have had enough conversations with management teams, with sponsors, with others in the industry where we do think there's going to be some opportunities. Our whole relative value process within PSBD, being differentiated from just kind of traditional private credit BDCs, we do want to be able to take advantage of those opportunities in the liquid secondary market. It's something we've done really well historically across a lot of different strategies.

[Matt Bloomfield, President at Palmer Square Capital BDC]

We're not going to be scared per se, just because something's labeled software, if we think it exhibits very strong total return opportunities. Also want to be cognizant of, and I think everybody needs to be somewhat humble in that AI is moving very, very quickly. There's a lot of unknowns three, five, 10 years down the road. We want to make the best decisions we can, but definitely think there's some interesting opportunity sets that we're taking a look at.

[Douglas Harter, Analyst at UBS]

If I could get your perspective on, you talked about deal activity. Do you think that this market volatility and as you just said, the unknown unknowns, does that have the potential to kind of limit deal activity, limit lending activity, and kind of keep people on the sidelines? Or do you think the market is just going to find the ability to work through that?

[Matt Bloomfield, President at Palmer Square Capital BDC]

Yeah. Volatility never helps deal-making in general, whether that's M&A, IPO activity, which obviously all those things felt like they were starting the year off on the right foot finally. I think we all were kind of thinking the same thing, that to start 2025, then we had the tariff issues a couple of years back with some of the regional banking issues. It doesn't take a lot for, I think, at least things to slow down. I do think we're far enough along in a prolonged M&A drought. We've had 175 basis points of rate cuts over the past year and a half. I think there's still a lot of those reasons why we felt M&A was going to pick up still exist. Maybe in the software sector, that's probably going to slow down. I think it'll be maybe a near-term slowdown.

[Matt Bloomfield, President at Palmer Square Capital BDC]

We're still having conversations, still seeing deals talked about at early to middle stages. Maybe we don't see an acceleration from here per se, but it definitely feels like there's still appetite for things to get done. Certainly outside of software AI-related issues, other industries are still, I think, pretty ripe for transacting. Just in general, in the sponsor private equity-backed community, yeah, I think it's been a dry patch for so long, and I think naturally you're just going to see transaction activity pick up. All that being said, I would be surprised too if we don't see some transactions in the software space. As valuations have re-rated immensely in the public markets, I'll be surprised if we don't see some sponsor activity to take advantage of some of these levels that, quite frankly, from a valuation, just haven't been seen in quite some time.

[Matt Bloomfield, President at Palmer Square Capital BDC]

That was a long-winded way of saying we'll see. I think it'll continue, maybe just not at the pace people were anticipating coming out of 2025 and into early 2026.

[Douglas Harter, Analyst at UBS]

Makes sense. Appreciate the thoughts.

[Operator]

Again, for questions, press star one on your telephone keypad. Our next question will come from the line of Kenneth Lee with RBC Capital Markets. Please go ahead.

[Kenneth Lee, Analyst at RBC Capital Markets]

Hey, good afternoon, and thanks for taking my question. Just given the Fed remarks around spreads tightening within the liquid side versus being a little bit more stable on the private side, how do you view the relative attractiveness between the liquid and the private side? What's your preference for the marginal investment go forward, more on the private or more on the liquid side? Thanks.

[Matt Bloomfield, President at Palmer Square Capital BDC]

Hey, Ken, it's Matt. Thanks for the question. I think it's more balanced than we've seen. I think there definitely with some of the volatility in the broadly syndicated market, probably the opportunity set there, specifically on the secondary loan side, is more attractive than it has been in quite some time. Our comments around spread tightening in that market were certainly through the end of 2025 and the start of 2026. I do think just in the past few weeks with the broader volatility in software that that's going to negate any spread tightening on new issue loans coming to the market, at least for a little while. We'll see if that's meaningful widening or not. I think there's definitely still a big appetite and capital to deploy in liquid credit. On the private credit side, I think that activity is a little steadier.

[Matt Bloomfield, President at Palmer Square Capital BDC]

I think spreads, to our comment earlier, move a little bit slower there. As you've seen this quarter, we deployed another 14.5%+ into private credit transactions. I think it's been a good way for us to kind of defend spread in the portfolio in a spread tightening environment in general. I think the opportunity set's going to be good on both sides of the fence, I definitely think there's more opportunity now in the secondary loan market than we've seen in quite some time.

[Kenneth Lee, Analyst at RBC Capital Markets]

Got you. Very helpful there. Just one follow-up, if I may. In terms of distributions, any updated outlook around the distribution framework and how you think about dividends go forward? Thanks.

[Matt Bloomfield, President at Palmer Square Capital BDC]

Yeah. Like we have in the past, the board kind of continues to evaluate what we're seeing from income generation and other facets of the business. Certainly, we've absorbed 175 basis points of base rate reductions. Those have flown through NII here as of late. We'll see where the Fed goes from here. Obviously, we can see what the forward curve is saying, that tends to move around quite a bit with just economic data that comes out. As of now, we've continued to put out the base dividend that we've had. We'll continue to reevaluate at the board level as we move through this quarter and beyond. Again, hopeful on our conversations on spread that tightening we've seen on the spreads versus base rates feels a little bit better than it has in some time.

[Kenneth Lee, Analyst at RBC Capital Markets]

Got you. Very helpful there. Thanks again.

[Operator]

At this time, I'd like to turn the call back to Chris Long for closing remarks.

[Chris Long, Chairman and CEO at Palmer Square Capital BDC]

Thank you, operator. Thank you all for your time and thoughtful questions. We look forward to updating you on our first quarter 2026 financial results in May. Have a good rest of your day.

[Operator]

This concludes today's call. Thank you all for joining. You may now disconnect.

Participants

Executives

• Angie Long, CIO
• Chris Long, Chairman and CEO
• Jeff Fox, CFO and Director
• Jeremy Goff, Managing Director
• Matt Bloomfield, President

Analysts

• Douglas Harter, Analyst at UBS
• Kenneth Lee, Analyst at RBC Capital Markets
• Richard Shane, Analyst at JPMorgan