BCP Investment Corporation reported second-quarter results marked by lower net asset value, continued deleveraging and an improvement in its non-accrual portfolio. Management also detailed a post-quarter-end amendment and expansion of its KeyBank credit facility, which was used to repay and terminate the company’s Great Lakes revolving credit facility with JPMorgan.
Chief Executive Officer Ted Goldthorpe said the company continued to strengthen its balance sheet, reposition its portfolio and improve asset coverage during the quarter. Total investment income was $15.2 million, while net investment income was $5.5 million, or $0.45 per share. Core net investment income totaled $3.3 million, or $0.27 per share.
The company paid total distributions of $0.30 per share during the quarter, consisting of a $0.27 base distribution and a $0.03 supplemental distribution. It is paying monthly base distributions of $0.09 per share for July through September, and its board approved a fourth-quarter base distribution of $0.27 per share, payable in monthly $0.09 installments during October, November and December.
Net Asset Value Declines on Unrealized Marks
Net asset value fell to $179.5 million, or $14.49 per share, as of June 30, from $193 million, or $15.60 per share, at the end of the first quarter. Goldthorpe said the decline was predominantly driven by unrealized mark-to-market movements across the portfolio.
Software investments represented about 34% of unrealized markdowns during the quarter, or about 47% when including software-exposed companies. Goldthorpe said management believed most of the markdowns reflected sector-specific valuation pressure and broader market dislocation rather than fundamental credit deterioration.
Goldthorpe said approximately 93.5% of the company’s software exposure was internally assessed as having low to medium AI impact and was concentrated in businesses with proprietary data, embedded workflows, high switching costs and vertical-market specialization. He added that the company views its software positions as senior secured investments with contracted cash flows and covenant protections.
Chief Financial Officer Brandon Satoren said the company recorded a $10.5 million net realized loss, primarily related to the resolution of two investments previously on non-accrual and carried at substantial discounts to cost. The losses had been substantially reflected in NAV in prior periods. The company also recorded a $0.4 million realized loss on debt extinguishment related to the partial redemption of its 2026 notes.
Debt Reduction and Facility Consolidation
During the quarter, BCP Investment Corporation used proceeds from $50 million of 7.5% notes due 2029, issued in March, to redeem $40 million of 2026 notes at par. It also reduced borrowings under its revolving facilities. Total outstanding borrowings declined to $286.1 million as of June 30 from $342.2 million at the end of March.
The company’s asset coverage ratio improved to 162% from 156%, while gross leverage declined to 1.6 times from 1.8 times. Satoren said total borrowings carried a weighted-average contractual interest rate of about 7% at quarter-end, and the company had $86 million of available borrowing capacity under its senior secured revolving facilities, subject to borrowing-base restrictions.
After quarter-end, the company amended its KeyBank credit facility by reducing borrowing spreads by 30 basis points during the reinvestment period, extending the reinvestment period and maturity by two years, and increasing committed capacity to $150 million from $75 million. Borrowings under the expanded KeyBank facility were used to repay the JPMorgan Great Lakes facility in full, and the Great Lakes facility was terminated.
Selective Originations and Improving Non-Accruals
Chief Investment Officer Patrick Schafer said investment activity remained measured amid low market activity and macroeconomic uncertainty. The company completed three new portfolio-company investments and four follow-on investments during the quarter. Originations totaled $20.9 million, while repayments and sales totaled $34.9 million, producing net repayments and sales of about $14 million.
More than half of originations by dollar amount involved increasing exposure to existing portfolio companies that were performing well, Schafer said. The yield on par value of new debt investments was 13.3%, compared with a 12.2% weighted-average annualized yield for the portfolio excluding non-accruals and CLOs as of June 30.
The debt portfolio, excluding CLO funds, equities and joint ventures, totaled $349.7 million at fair value and was spread across 71 portfolio companies in 33 industries. The company’s non-accrual investments declined to 11 investments across seven portfolio companies, representing 5.7% of the portfolio at amortized cost, compared with 12 investments across nine companies and 6.2% of amortized cost in the first quarter.
In response to analyst questions, Schafer said management expects to remain in a net-repayment position as it seeks to use repayments to further reduce leverage while remaining selective on new investments. He said many current opportunities involve business services, distribution companies and other businesses viewed as having lower AI risk, with financing proceeds generally supporting acquisitions rather than refinancings.
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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