Carlyle Secured Lending NASDAQ: CGBD reported third-quarter 2026 net investment income of $0.36 per share, covering its $0.35 base dividend, as higher income from joint ventures helped offset a smaller average loan portfolio.
Net asset value rose to $15.65 per share as of Sept. 30 from $15.61 at the end of June. The company also repurchased $6.1 million of shares during the quarter, adding $0.04 per share to net asset value, President and Chief Financial Officer Tom Hennigan said on the earnings call.
Chief Executive Officer Alex Chi said direct lending volume declined year over year amid macroeconomic and geopolitical uncertainty and slower-than-expected private equity activity. He expects fourth-quarter originations to remain muted, but said the pipeline of new opportunities supports a more optimistic outlook for 2027.
Income and dividend coverage
Total investment income increased to $63 million from $62 million in the prior quarter, primarily because of higher dividend income from the company’s two joint ventures, Hennigan said. That gain was partly offset by a lower average investment balance in the loan book. Expenses were $38 million, in line with the prior quarter.
Net investment income was $25 million, or $0.36 per share, on both a generally accepted accounting principles basis and an adjusted basis. The board declared a fourth-quarter base dividend of $0.35 per share for shareholders of record at the close of business on Dec. 31.
Hennigan said the company maintained a supplemental dividend policy targeting distribution of 50% of earnings above the base dividend. Management expects to continue covering the base dividend and anticipates higher earnings and supplemental dividends as the joint ventures grow and rates rise, based on the latest forward curve.
The shares repurchased in the quarter were bought at an average discount of 32%, Hennigan said. Total repurchases under the program have exceeded $200 million, and the board reauthorized the existing $300 million plan through November 2027.
Originations and portfolio quality
Excluding joint venture activity, Carlyle Secured Lending funded $81 million of investments during the third quarter, while repayments totaled $129 million. Including joint venture activity, total investments remained relatively flat at $2.3 billion.
Chi said new originations carried weighted average spreads of approximately 505 basis points, about 35 basis points wider than in the fourth quarter of 2025. Weighted average leverage at entry fell by more than two-thirds of a turn from the prior quarter to 4.9 times, and a substantial majority of the quarter’s deals included financial maintenance covenants.
At quarter-end, the portfolio consisted of investments in 180 companies across more than 25 industries, with 96% of investments in senior secured loans. The median portfolio company’s earnings before interest, taxes, depreciation and amortization were $97 million, according to Chi.
Hennigan said overall credit quality remained stable, although two positions were added to non-accrual status. Non-accruals represented 1.1% of investments at fair value and 2.2% at amortized cost. Both payment-in-kind income and the fair value of loans using such provisions declined during the quarter, he said.
Joint ventures continue to expand
The Middle Market Credit Fund, or MMCF, generated an annualized dividend yield of 18.4%, up 80 basis points from the prior quarter, and held $1.2 billion in direct lending assets. Structured Credit Partners, or SCP, grew to $2.1 billion in investments and produced an annualized dividend yield of 20.3% to Carlyle Secured Lending.
Hennigan cautioned that SCP’s yield was elevated by delayed settlement of loan purchases and that management expects a mid-teens yield over the longer term. He said the venture’s rollout was on plan and that Carlyle Secured Lending expects to deploy the remainder of its original $150 million commitment over the next few quarters.
During the analyst question-and-answer session, Hennigan attributed a difference between SCP’s dividend and its reported earnings to GAAP-versus-tax treatment of organizational expenses. He said the income distributed was earned.
Outlook for rates and deal activity
Chi said nearly all of the company’s investment portfolio carries floating rates, making rising rates a potential earnings tailwind. He added that management did not expect rate increases implied by the latest forward curve to materially impair borrowers’ ability to service debt. Hennigan said the company’s debt was also entirely floating rate.
Chi said fourth-quarter originations could remain subdued because funding activity typically reflects opportunities developed in the preceding quarter. He pointed to a building pipeline as a reason for optimism about the first and second quarters of 2027, while noting that greater geopolitical certainty would help deal activity.
Asked about balancing new investments with buybacks, Chi said the company wanted sufficient capacity to pursue deals while continuing to consider repurchases at the stock’s current valuation. The company’s statutory leverage was 1.26 times at quarter-end, while net financial leverage was 1.2 times after adjusting for working capital.
About Carlyle Secured Lending (NASDAQ:CGBD)
Carlyle Secured Lending, Inc NASDAQ: CGBD is a business development company that invests in privately held, middle-market companies. Its primary objective is to generate current income and, to a lesser extent, capital appreciation by providing financing to businesses that may have limited access to traditional sources of capital.
The company primarily invests in first-lien senior secured loans, while also pursuing opportunities in second-lien loans, subordinated debt and equity investments.
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