Group 1 - Business development companies are currently under pressure, leading to many trading at discounted valuations [1] - Runway Growth Finance (RWAY) is highlighted as a company trading near a deeply discounted valuation [1] - The article emphasizes the potential for long-term growth and income generation through a diversified investment strategy that includes dividend stocks, business development companies, REITs, and closed-end funds [1]

Core Viewpoint - Runway Growth Finance Corp. has announced a public offering of $100 million in notes due 2031, aiming to provide flexible capital solutions to late and growth-stage companies [1][2] Group 1: Offering Details - The offering is priced at $100 million with net proceeds expected to be approximately $97 million after underwriting discounts [1] - The notes will mature on February 3, 2031, with an interest rate of 7.25% per year, payable quarterly starting March 1, 2026 [1] - A 30-day option for underwriters to purchase an additional $15 million in notes is included to cover overallotments [1] Group 2: Use of Proceeds - The net proceeds will be used to repay outstanding indebtedness, including redeeming all of the 8.00% Notes due 2027 and a portion of the 7.50% Notes due 2027 [2] - As of January 23, 2026, the company had $51.75 million outstanding under the December 2027 Notes and $80.5 million under the July 2027 Notes [2] Group 3: Management and Structure - Oppenheimer & Co. Inc., B. Riley Securities, Inc., Lucid Capital Markets, LLC, and BC Partners Securities, LLC are the joint book-running managers for the offering [3] - Runway Growth is externally managed by Runway Growth Capital LLC, an affiliate of BC Partners Advisors L.P., and led by David Spreng [7]

Core Viewpoint - Runway Growth Finance Corp. has initiated an underwritten offering of unsecured notes to provide flexible capital solutions to late and growth-stage companies, with proceeds aimed at repaying existing debt and financing an acquisition [1][2]. Group 1: Offering Details - The company has commenced an offering of unsecured notes, which are expected to be listed on the Nasdaq Global Select Market, pending approval [1]. - The interest rate and terms of the notes will be determined at the time of pricing [1]. - The offering is managed by Oppenheimer & Co. Inc., B. Riley Securities, Inc., Lucid Capital Markets, LLC, and BC Partners Securities, LLC, with co-managers including InspereX LLC and William Blair & Company L.L.C. [3]. Group 2: Use of Proceeds - The net proceeds from the offering will be used to repay outstanding indebtedness, including redeeming a portion of the 8.00% Notes due 2027, which had an outstanding amount of $51.75 million as of January 23, 2026 [2]. - The proceeds will also finance the acquisition of SWK Holdings Corporation and for general corporate purposes [2]. Group 3: Company Overview - Runway Growth is a specialty finance company focused on providing flexible capital solutions to late- and growth-stage companies, regulated as a business development company under the Investment Company Act of 1940 [7]. - The company is externally managed by Runway Growth Capital LLC, an affiliate of BC Partners Advisors L.P., and led by industry veteran David Spreng [7].

For Immediate ReleaseChicago, IL – January 21, 2026 – Today, Zacks Equity Research discusses New Mountain Finance Corp. (NMFC) and Runway Growth Finance Corp. (RWAY) .Industry: Commercial FinanceLink: https://www.zacks.com/commentary/2819732/2-sbic-commercial-finance-stocks-to-buy-despite-industry-concernsWith interest rates declining, the Zacks SBIC & Commercial Finance industry is expected to face margin compression and lower investment income as the majority of loans are tied to floating rates. Asset qua ...

Industry Overview - The Zacks SBIC & Commercial Finance industry provides financing to small and mid-sized privately held firms, often underserved by traditional banks, focusing on customized financing solutions such as senior debt and equity capital [3] - The industry targets firms in financial distress, offering products like mezzanine loans that typically pay high interest rates and can convert into equity [3] Key Themes - **Declining Interest Rates**: The Federal Reserve has lowered interest rates three times in 2025 to a range of 3.50–3.75%, following a 100-basis-point cut in 2024. This decline is expected to compress loan yields for many industry players with floating-rate loans, negatively impacting net investment income, although loan origination and refinancing activities may improve due to rising demand [4] - **Asset Quality Concerns**: Prolonged high interest rates may weaken asset quality as portfolio companies struggle to service debt. Geopolitical risks and tariff uncertainties further strain asset quality for SBIC & Commercial Finance companies [6] - **Regulatory Changes**: The 2018 amendment to the Investment Company Act eased leverage limits for SBICs, allowing a debt-to-equity ratio increase to 2:1, which provides funding flexibility and growth opportunities for these companies [7] Industry Performance - The Zacks SBIC & Commercial Finance industry ranks 181 out of over 240 Zacks industries, placing it in the bottom 26%, indicating underperformance in the near term [8] - The industry has collectively lost 15.6% over the past year, underperforming the Zacks S&P 500 composite, which has gained 17.3%, and the Zacks Finance sector, which has increased by 14.1% [11] Valuation Metrics - The industry has a trailing 12-month price-to-tangible book (P/TB) ratio of 0.90X, significantly lower than the S&P 500 composite's 13.05X and the Zacks Finance sector's 6.19X, indicating a substantial discount compared to the broader market [14][16] Company Highlights - **New Mountain Finance Corporation (NMFC)**: A specialty finance firm focusing on upper middle market companies, NMFC has seen growth in total investment income and is expected to continue this trend due to regulatory changes and rising demand for customized financing. As of Sept. 30, 2025, NMFC had total statutory debt of $1.59 billion and a market cap of $940.8 million [19][21] - **Runway Growth Finance Corp. (RWAY)**: This company provides senior secured loans to growth-stage companies, showing steady growth in total investment income. As of Sept. 30, 2025, RWAY had $371.9 million in liquidity and a market cap of $339.3 million [23][26]

Core Insights - Runway Growth Finance Corp. completed seven investments totaling $42.9 million in the fourth quarter of 2025, diversifying its portfolio across core verticals [1][3] - The company is on track to close its acquisition of SWK Holdings Corporation in late Q1 2026, which is expected to enhance its balance sheet and broaden its deal pipeline [2][3] Investment Activities - The company funded three new portfolio companies and four existing ones during the fourth quarter [3] - Liquidity events in the same quarter totaled $77.8 million, indicating strong performance in the investment portfolio [3] Acquisition Update - The acquisition of SWK Holdings is pending regulatory approvals and is expected to drive portfolio scale and diversification, particularly in the healthcare and life sciences sectors [3][4] Portfolio Management - As of December 31, 2025, Runway Growth's portfolio included 40 debt investments in 31 companies and 72 equity investments in 48 companies, focusing on late and growth-stage businesses in technology, healthcare, and select consumer services [7] - The company maintains a credit-first approach, emphasizing high-quality investments and disciplined underwriting [6] Financial Profile - The company aims to enhance its financial profile and grow its shareholder base through both organic and inorganic strategies [5]

Core Insights - Runway Growth Capital LLC has appointed Ryan McCarthy as Managing Director to enhance its origination efforts in the technology market [1][4] Company Overview - Runway Growth Capital LLC specializes in providing growth loans to both venture-backed and non-venture-backed companies, focusing on delivering strategic capital solutions [1][5] - The firm targets senior term loans ranging from $10 million to $150 million for fast-growing companies in the United States and Canada [5] Leadership and Experience - Ryan McCarthy brings nearly 20 years of experience in venture debt, debt advisory, and investment banking, particularly in technology and life sciences [2][3] - Prior to joining Runway, McCarthy held the position of Managing Director at Capital Advisors Group, advising high-growth companies on various debt financing strategies [3] Strategic Goals - In his new role, McCarthy will focus on sourcing, evaluating, and structuring new investment opportunities while strengthening relationships with founders and financial sponsors [2][4] - McCarthy expressed enthusiasm about joining Runway, highlighting the firm's reputation for partnership and execution in the growth capital market [4]

Core Viewpoint - Runway Growth Finance Corp. (NASDAQ:RWAY) is undergoing strategic changes, including a price target reduction by Oppenheimer and a significant acquisition aimed at enhancing its portfolio and market presence in the healthcare sector [2][3]. Financial Performance - In Q3 2025, Runway Growth Finance Corp. reported total investment income of $36.7 million and net investment income of $15.7 million [4]. - The company made 11 new and follow-on investments totaling $128.3 million, focusing on technology, healthcare, and select consumer industries [4]. Strategic Developments - The CEO announced a definitive agreement to acquire SWK Holdings, which is expected to add approximately $242 million to the portfolio and increase healthcare and life sciences exposure from 14% to 31% based on fair value [3]. - Oppenheimer has adjusted its price target for RWAY to $12 from $13, projecting earnings of $1.07 per share in 2025 and $1.35 per share in 2026, indicating ROEs of 7.8% and 9.9% respectively [2].

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Core Industry Insights - The Zacks SBIC & Commercial Finance industry is facing margin compression and lower investment income due to declining interest rates, as most loans are tied to floating rates [5][6] - Asset quality is at risk as prolonged high rates may strain borrowers' ability to repay, although initial support from stimulus packages helped mitigate delinquency rates post-COVID-19 [7][8] - Regulatory changes, particularly the amendment to the Investment Company Act of 1940, have provided funding flexibility and growth opportunities for industry players [9][10] Industry Performance - The Zacks SBIC & Commercial Finance industry has underperformed the S&P 500 and the broader finance sector, with a collective loss of 13% over the past year compared to gains of 14.2% for the S&P 500 [15] - The industry's Zacks Industry Rank is 209, placing it in the bottom 14% of over 250 Zacks industries, indicating a discouraging earnings outlook [11][12][13] Valuation Metrics - The industry has a trailing 12-month price-to-tangible book (P/TB) ratio of 0.96X, significantly lower than the S&P 500's ratio of 12.55X, indicating a substantial discount compared to the market [17][18] Company Highlights - **Ares Capital Corp. (ARCC)**: A specialty finance firm focused on U.S. middle-market companies, with a market cap of $14.5 billion and total debt of $15.6 billion as of September 30, 2025. The company has seen growth in total investment income and is expected to continue this trend [19][21] - **Hercules Capital, Inc. (HTGC)**: A specialty finance company providing venture capital to technology and life science firms, with a market cap of $3.3 billion. The company maintains a robust balance sheet and is expected to benefit from rising demand for customized financing [22][24][25] - **Runway Growth Finance Corp. (RWAY)**: Focused on providing senior secured loans to growth-stage companies, with a market cap of $357.4 million. The company has posted steady growth in total investment income and is well-positioned to sustain this momentum [26][28][29]