BCP Investment Corporation reported higher investment income and stable core earnings for the first quarter of 2026, while management said a decline in net asset value was primarily tied to unrealized markdowns concentrated in software and software-exposed holdings.
Chief Executive Officer Ted Goldthorpe said the company entered 2026 “on stronger footing” after completing several strategic actions tied to the Logan Ridge merger, including its rebranding, tender offer, share repurchase program and move to monthly dividends. He said the company also took steps to diversify its funding base and extend its maturity profile.
For the quarter ended March 31, 2026, the company generated net investment income of $6.9 million, or $0.55 per share. Goldthorpe said that exceeded the company’s base distribution. Core net investment income was $4.1 million, or $0.33 per share, compared with $4.1 million, or $0.32 per share, in the fourth quarter of 2025.
Distributions and Shareholder Returns
Goldthorpe said the company’s share repurchase activity during the quarter was accretive to net asset value by $0.07 per share. The board declared a supplemental cash distribution of $0.03 per share for the second quarter, bringing total second-quarter distributions to $0.30 per share.
The board also approved a third-quarter 2026 base distribution of $0.27 per share, payable in monthly installments of $0.09 per share in July, August and September. Goldthorpe said the monthly dividend structure, which began with the first payment in April, is intended to provide shareholders with a more regular cadence of cash distributions while preserving flexibility for supplemental distributions when earnings support them.
Software Exposure Weighs on NAV
Net asset value totaled $193 million as of March 31, down $16.2 million, or 7.7%, from the prior quarter. On a per-share basis, NAV was $15.60, a decline of $1.08, or 6.5%, from $16.68 at year-end 2025.
Goldthorpe said the decline was driven primarily by unrealized markdowns on the investment portfolio. Approximately 40% of the quarter’s unrealized markdowns were attributable to investments classified as software, and approximately 70% when including software or AI-exposed names. He said about 70% of those markdowns were from portfolio investments without at least one publicly quoted security, which affected valuations across the capital structure.
Management said it believes most of the markdowns reflected sector-specific valuation pressure and broader middle-market dislocation rather than fundamental credit deterioration. Goldthorpe said most of the company’s software exposure is in “mission-critical, vertically specialized businesses” that management believes are positioned to withstand AI-driven uncertainty.
In response to an analyst question, Chief Investment Officer Patrick Schafer said some valuation changes were tied to comparable-company multiples and quoted securities in the capital structure. He cited a healthcare data analytics business where a third-party valuation used healthcare IT comparables, and multiples declined between Dec. 31 and March 31. Schafer also said quoted first-lien securities in some capital structures affected valuations of other, non-quoted securities through relative value approaches used by valuation firms.
Portfolio Activity Remains Selective
Schafer said deal activity in the company’s core market remained “fairly active and orderly” in 2026 despite public-market headlines around private credit, software and AI. Excluding software, he said M&A and private credit markets remained open, with opportunities in both sponsor and non-sponsor transactions.
During the quarter, the company completed two new portfolio investments and one follow-on investment. Originations totaled $13.3 million, while repayments and sales totaled $28.3 million, resulting in net repayments and sales of about $15 million. Schafer said the higher level of repayments and sales was consistent with a more active realization environment and increased M&A activity.
The overall yield on par of new investments during the quarter was 10.7%, compared with a 12.8% weighted average annualized yield for the portfolio, excluding income from non-accruals and collateralized loan obligations, as of March 31. Schafer said the company viewed the new investment yield in the context of the specific deals completed during the quarter rather than as a broader signal about the opportunity set.
As of March 31, the company’s debt investment portfolio, excluding CLO funds, equities and joint ventures, was spread across 72 portfolio companies and 33 industries, with an average par balance of $3.3 million per investment.
Credit Metrics Improve, Leverage Rises
The company reported improvement in its non-accrual profile. At quarter-end, 12 investments tied to nine portfolio companies were on non-accrual status, representing 2.6% of the portfolio at fair value and 6.2% at cost. That compared with 13 investments tied to 10 portfolio companies on non-accrual status at Dec. 31, representing 4.0% at fair value and 7.1% at cost.
Excluding non-accrual investments, Schafer said the aggregate debt investment portfolio was $371.8 million at fair value, representing a blended price of 90.3% of par value. First-lien loans made up 81.3% of that portfolio at par value.
The company ended the quarter with gross and net leverage ratios of 1.8 times and 1.5 times, respectively, up from 1.5 times and 1.4 times in the prior quarter. Prepared remarks stated that the increase primarily reflected the timing of a March issuance of $50 million of 7.5% notes due 2029, ahead of the April partial redemption of $40 million of LRFC 5.25% notes due 2026.
Excluding the $40 million of 2026 notes called in March and repaid in April, gross and net leverage would have been 1.6 times and 1.5 times, respectively. The company ended the quarter with $342.2 million of borrowings outstanding at a weighted average contractual interest rate of 6.9% and $69.8 million of available borrowing capacity under its senior secured revolving credit facilities, subject to borrowing-base restrictions.
Management Sees Wider Spreads in Middle Market Credit
During the question-and-answer portion of the call, Goldthorpe said the market had slowed in recent weeks amid volatility, but that spreads in middle market credit were wider. He said the company had seen about 50 basis points of spread widening, while liquid markets were showing a different trend.
Goldthorpe said the bar for new private credit investments has risen, with market participants focused on capital optimization. He said management remains optimistic that spreads will either widen further or remain near current levels.
Looking ahead, Goldthorpe said the company remains focused on active portfolio management, disciplined underwriting and prudent capital allocation. He said management expects to capitalize on opportunities in its pipeline through the remainder of 2026 as M&A activity increases.
About Portman Ridge Finance NASDAQ: PTMN
Portman Ridge Finance NASDAQ: PTMN is a publicly traded, closed-end management investment company that has elected to be regulated as a Business Development Company (BDC) under the Investment Company Act of 1940. Since its formation in 2015, the firm has focused on providing customized financing solutions to U.S. middle-market companies, including senior secured loans, unitranche instruments, mezzanine debt and select equity co‐investments. Its flexible approach allows Portman Ridge to structure transactions that address a range of sponsor-backed and privately negotiated financing needs.
The company's portfolio spans a variety of industry sectors such as healthcare, business services, consumer goods and industrials.
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