Group 1 - Business Development Companies (BDCs) remain attractive for investors due to the higher interest rate environment, but many are beginning to experience pressure from these elevated rates [1] - Stellus Capital Investment Corporation is highlighted as a specific example within the BDC sector [1] - A hybrid investment strategy combining classic dividend growth stocks, BDCs, REITs, and Closed-End Funds can enhance investment income while achieving total returns comparable to traditional index funds like the S&P [1]

Financial Data and Key Metrics Changes - For Q2 2025, the company generated GAAP net investment income of $0.34 per share and core net investment income of $0.35 per share, which excludes estimated excise taxes [6] - Net asset value per share decreased by $0.04 during the quarter due to a reduction in spillover income [6] - The investment portfolio at fair value was $985.9 million, slightly down from $991 million in Q1 2025 [7] Business Line Data and Key Metrics Changes - The company invested $15.4 million in three new portfolio companies during the quarter and had $7.4 million in other investment activity at par [7] - Two full repayments totaled $21.7 million, with an additional $10.4 million of other repayments, all at par [7] - 98% of loans were secured, and 91% were priced at floating rates [8] Market Data and Key Metrics Changes - The company ended the quarter with loans to five portfolio companies on nonaccrual, comprising 6.8% of total cost and 3.8% of fair value, representing a decrease from the prior quarter [9] - The average loan per company was $9.2 million, with the largest overall investment at $21.2 million [8] Company Strategy and Development Direction - The company expects to see more equity realizations in the second half of the year, estimating $12 million in proceeds and approximately $10 million in gains [11] - The company plans to continue funding qualifying portfolio company investments through new leverage under the SBIC III license [9] Management's Comments on Operating Environment and Future Outlook - Management noted a meaningful pickup in investment activity and M&A activity, indicating a busy second half of the year [10] - The company anticipates being able to grow the portfolio despite expected repayments, with a robust pipeline of opportunities [30][41] Other Important Information - The company has paid $306 million in dividends since its IPO, representing $17.35 per share to an investor in the IPO [6] - The company has received a green light letter from the Small Business Administration for SBIC III, which is an important step in the process [9] Q&A Session Summary Question: How much spillover is there left over and what's the strategy in terms of increasing leverage to cover the dividend? - The company has just under $45 million of spillover to work off through the dividend, expecting it to be about $38 million next year [17] - Current leverage is about 0.9 on a regulatory test and total leverage for GAAP is about 1.7 times, with a target leverage of about one to one [19] Question: How is the pipeline looking for the remainder of the year and where are the opportunities? - The company has seen a significant increase in M&A activity and expects to continue growing the portfolio with a robust pipeline of actionable opportunities [28][30] Question: Any insight into potential resolutions or progress with the current non-accrual list? - The company is working through the non-accruals, all backed by private equity firms, and had no new non-accruals this quarter [31] Question: What is the level of confidence on realizing potential equity realizations this year? - The company has a high likelihood of realizing the forecasted equity realizations as the businesses are actively marketed and well-performing [36] Question: How much of the portfolio rated three or lower is the company seriously nervous about? - The company expects to receive all principal and associated income from the portfolio rated three or lower, indicating a positive outlook [39]

Stellus Capital (SCM) came out with quarterly earnings of $0.35 per share, in line with the Zacks Consensus Estimate . This compares to earnings of $0.5 per share a year ago. These figures are adjusted for non-recurring items. A quarter ago, it was expected that this investment company would post earnings of $0.37 per share when it actually produced earnings of $0.37, delivering no surprise.Over the last four quarters, the company has not been able to surpass consensus EPS estimates.Stellus Capital, which b ...

HOUSTON, Aug. 6, 2025 /PRNewswire/ -- Stellus Capital Investment Corporation (NYSE:SCM) ("Stellus", "we", or the "Company") today announced financial results for its fiscal quarter ended June 30, 2025.Robert T. Ladd, Chief Executive Officer of Stellus, stated, "I am pleased to report solid operating results for the quarter ended June 30, 2025, in which we earned U.S. GAAP net investment income of $0.34 per share and core net investment income of $0.35 per share. During the quarter, we funded $23 million of ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for Q2 2025, covering assets, operations, cash flows, and investments [Consolidated Statements of Assets and Liabilities](index=3&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) Total assets increased to $1,034.8 million, liabilities to $659.4 million, and NAV per share decreased to $13.21 Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Investments, at fair value** | $985.9 | $953.5 | | **Cash and cash equivalents** | $40.0 | $20.1 | | **Total Assets** | $1,034.8 | $980.9 | | **Total Liabilities** | $659.4 | $611.0 | | **Net Assets** | $375.4 | $369.9 | | **Net Asset Value Per Share** | $13.21 | $13.46 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Net increase in net assets for H1 2025 was $15.1 million ($0.54 per share), down from $21.7 million in H1 2024 Key Operating Results (in millions, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Investment Income** | $25.7 | $26.6 | $50.6 | $52.6 | | **Net Investment Income** | $9.6 | $11.8 | $19.4 | $22.0 | | **Net Increase in Net Assets** | $10.1 | $8.5 | $15.1 | $21.7 | | **Net Investment Income Per Share** | $0.34 | $0.48 | $0.69 | $0.90 | | **Net Increase in Net Assets Per Share** | $0.36 | $0.35 | $0.54 | $0.89 | [Consolidated Statements of Changes in Net Assets](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) Net assets grew to $375.4 million, driven by stock issuance and net income, partially offset by distributions Reconciliation of Net Assets for the Six Months Ended June 30, 2025 (in millions) | Description | Amount | | :--- | :--- | | **Net Assets at December 31, 2024** | $369.9 | | Net investment income | $19.4 | | Net realized loss on investments | ($6.8) | | Net change in unrealized appreciation | $2.6 | | **Net Increase in Net Assets from Operations** | **$15.1** | | Distributions from net investment income | ($22.4) | | Issuance of common stock, net | $12.8 | | **Net Assets at June 30, 2025** | **$375.4** | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations was $13.3 million, financing provided $33.2 million, increasing cash to $40.0 million Cash Flow Summary (in millions) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net Cash Used in Operating Activities** | ($13.3) | ($8.6) | | **Net Cash Provided by Financing Activities** | $33.2 | $18.4 | | **Net Increase in Cash and Cash Equivalents** | $19.9 | $9.7 | | **Cash and Cash Equivalents at End of Period** | $40.0 | $35.9 | [Consolidated Schedules of Investments](index=7&type=section&id=Consolidated%20Schedules%20of%20Investments) Portfolio fair value was $985.9 million across 112 companies, primarily non-controlled, with $58.7 million unfunded commitments Portfolio Summary as of June 30, 2025 | Investment Type | Amortized Cost | Fair Value | % of Net Assets | | :--- | :--- | :--- | :--- | | Control investments | $32,732,016 | $13,046,041 | 3.47% | | Non-controlled, non-affiliated investments | $957,687,672 | $972,839,633 | 259.17% | | **Total Investments** | **$990,419,688** | **$985,885,674** | **262.64%** | - As of June 30, 2025, the company had total unfunded debt commitments of **$58,445,238** across numerous portfolio companies[53](index=53&type=chunk) - The company's investments are deemed to be Level 3 under the fair value hierarchy, meaning their valuation is determined using significant unobservable inputs[41](index=41&type=chunk) [Notes to Unaudited Financial Statements](index=37&type=section&id=Notes%20to%20Unaudited%20Financial%20Statements) Detailed explanations of accounting policies, related party transactions, debt, and BDC/RIC structure disclosures - The company operates as a Business Development Company (BDC) and has elected to be treated as a Regulated Investment Company (RIC) for tax purposes, utilizing two SBIC subsidiaries for SBA-guaranteed leverage[111](index=111&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) - The Investment Advisory Agreement stipulates a base management fee of **1.75% of gross assets** (excluding cash) and a two-part incentive fee based on investment income and capital gains[172](index=172&type=chunk)[174](index=174&type=chunk) - As of June 30, 2025, the company had five portfolio companies on non-accrual status, representing **3.8% of the loan portfolio at fair value**[147](index=147&type=chunk) - Subsequent to the quarter end, the company made new and add-on investments totaling approximately **$25.5 million** and had one full repayment of **$8.3 million**[292](index=292&type=chunk)[293](index=293&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=69&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion of financial performance, portfolio, investment activity, liquidity, and capital resources [Portfolio Composition and Investment Activity](index=70&type=section&id=Portfolio%20Composition%20and%20Investment%20Activity) Portfolio fair value was $985.9 million, 89% first-lien debt, with $78.2 million invested and stable asset quality Portfolio Composition by Investment Type (at Fair Value) | Investment Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Senior Secured – First Lien | 89% | 90% | | Senior Secured – Second Lien | 1% | 1% | | Unsecured Debt | 1% | 1% | | Equity | 9% | 8% | - For the six months ended June 30, 2025, the company invested **$78.2 million** in 9 new and 13 existing portfolio companies and received **$46.6 million** in proceeds from repayments[323](index=323&type=chunk) Asset Quality Rating (% of Total Portfolio at Fair Value) | Investment Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | 1 - Performing Above Expectations | 25% | 24% | | 2 - Performing Within Expectations | 59% | 59% | | 3 - Performing Below Expectations | 12% | 12% | | 4 - Substantially Below (Loss of Return) | 3% | 4% | | 5 - Substantially Below (Loss of Principal) | 1% | 1% | [Results of Operations](index=77&type=section&id=Results%20of%20Operations) Total investment income decreased to $50.6 million, net investment income to $19.4 million, due to lower rates Comparison of Operating Results (in millions) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Total Investment Income** | $50.6 | $52.6 | | **Total Operating Expenses, net** | $31.3 | $30.6 | | **Net Investment Income** | $19.4 | $22.0 | | **Net Realized Loss** | ($6.8) | ($18.4) | | **Net Change in Unrealized Appreciation** | $2.6 | $17.9 | | **Net Increase in Net Assets** | $15.1 | $21.7 | [Financial Condition, Liquidity and Capital Resources](index=81&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) Strong liquidity with $40.0 million cash, $315 million credit facility, and 211% asset coverage ratio - The company's asset coverage ratio was **211%** as of June 30, 2025, well above the regulatory requirement of 150%[361](index=361&type=chunk) Key Debt Facilities as of June 30, 2025 (in millions) | Facility | Total Commitment/Issued | Outstanding Balance | | :--- | :--- | :--- | | Credit Facility | $315.0 | $163.1 | | SBA-guaranteed Debentures | $308.8 | $308.8 | | 2026 Notes Payable | $100.0 | $100.0 | | 2030 Notes Payable | $75.0 | $75.0 | - During the six months ended June 30, 2025, the company issued **935,030 shares** under its ATM Program for gross proceeds of **$13.2 million**[383](index=383&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=87&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary exposure to interest rate risk with 91.2% floating-rate debt; 100 bps rate hike increases net income by $6.7 million - As of June 30, 2025, **91.2%** of the loans in the company's portfolio bore interest at a floating rate, making interest rate changes a key market risk[399](index=399&type=chunk) Annual Impact on Net Income from Interest Rate Changes (in millions) | Change in Basis Points | Net Interest Income Impact | | :--- | :--- | | Up 200 | $13.3 | | Up 100 | $6.7 | | Up 50 | $3.3 | | Down 50 | ($3.3) | | Down 100 | ($6.7) | | Down 200 | ($13.3) | [Item 4. Controls and Procedures](index=88&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[404](index=404&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[405](index=405&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=89&type=section&id=Item%201.%20Legal%20Proceedings) No material legal proceedings are currently active or threatened against the company - The company is not currently a party to any material legal proceedings[407](index=407&type=chunk) [Item 1A. Risk Factors](index=89&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the 2024 Annual Report on Form 10-K - During the three and six months ended June 30, 2025, there were no material changes to the risk factors discussed in the company's prior SEC filings[409](index=409&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=89&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or shares issued under dividend reinvestment program in Q2 2025 - No unregistered sales of equity securities occurred during the three months ended June 30, 2025[410](index=410&type=chunk) [Item 3. Defaults Upon Senior Securities](index=89&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable, as there were no defaults on senior securities during the period - Not applicable[412](index=412&type=chunk) [Item 4. Mine Safety Disclosures](index=89&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable, as the company does not engage in mining operations - Not applicable[413](index=413&type=chunk) [Item 5. Other Information](index=89&type=section&id=Item%205.%20Other%20Information) Updated fee and expense table as of June 30, 2025, detailing stockholder transaction and annual expenses Annual Expenses (as a percentage of net assets) | Expense Category | Percentage | | :--- | :--- | | Base management fee | 4.36% | | Incentive fees payable | 2.63% | | Interest payments on borrowed funds | 8.29% | | Other expenses | 1.91% | | **Total annual expenses** | **17.19%** | [Item 6. Exhibits](index=92&type=section&id=Item%206.%20Exhibits) List of exhibits filed, including CEO/CFO certifications and XBRL data files - The report includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[422](index=422&type=chunk)

HOUSTON, July 31, 2025 /PRNewswire/ --Stellus Capital Investment Corporation (NYSE: SCM) will release its financial results for the second quarter ended June 30, 2025 on Wednesday, August 6, 2025, after the close of the stock market.Stellus Capital Investment Corporation will host a conference call to discuss these results on Thursday, August 7, 2025 at 10:00 AM, Central Time. The conference call will be led by Robert T. Ladd, Chief Executive Officer, and W. Todd Huskinson, Chief Financial Officer, Chief Co ...

Core Viewpoint - Stellus Capital Investment Corporation has declared a monthly dividend of $0.1333 for July, August, and September 2025, totaling $0.40 per share for the third quarter [1] Dividend Summary - The declared monthly dividends are as follows: - July 2025: Ex-Dividend Date 7/31/2025, Record Date 7/31/2025, Payment Date 8/15/2025, Amount per Share $0.1333 [2] - August 2025: Ex-Dividend Date 8/29/2025, Record Date 8/29/2025, Payment Date 9/15/2025, Amount per Share $0.1333 [2] - September 2025: Ex-Dividend Date 9/30/2025, Record Date 9/30/2025, Payment Date 10/15/2025, Amount per Share $0.1333 [2] Company Overview - Stellus Capital Investment Corporation is an externally-managed, closed-end, non-diversified investment management company regulated as a business development company under the Investment Company Act of 1940 [3] - The company's investment objective is to maximize total return to stockholders through current income and capital appreciation by investing primarily in private middle-market companies with EBITDA between $5.0 million and $50.0 million [3] - Investment strategies include first lien, second lien, unitranche, and mezzanine debt financing, along with corresponding equity investments [3]

Financial Data and Key Metrics Changes - For the first quarter ended March 31, 2025, the company generated GAAP net investment income of $0.35 per share and core net investment income of $0.37 per share, which excludes estimated excise taxes [6] - Net asset value per share decreased by $0.21 during the quarter primarily due to company-specific write-downs in the loan portfolio and a reduction of spillover income [6] - The company issued 656,085 shares for $9.3 million at an average gross price of $14.11, all above net asset value [6] Business Line Data and Key Metrics Changes - The investment portfolio at fair value increased to $991.1 million across 110 portfolio companies, up from $953.5 million across 105 companies as of December 31, 2024 [7] - During the first quarter, the company invested $46.7 million in seven new portfolio companies and had $8.7 million in other investment activity at par [7] - 90% of the loans were secured, and 91% were priced at floating rates, with an average loan per company of $9.4 million [7][9] Market Data and Key Metrics Changes - The company noted that 52% of the portfolio is rated two or on or ahead of plan, while 21% is marked at an investment category of three or below, indicating some loans are not meeting expectations [9] - Currently, loans to five portfolio companies are on non-accrual status, comprising 6.7% of the total cost and 4% of the fair value of the total loan portfolio, representing a decrease from the prior quarter [9] Company Strategy and Development Direction - The company plans to draw new leverage under the SBIC III license to continue funding qualifying portfolio company investments [10] - The company aims to grow the portfolio to over $1 billion, with expectations for more than $10 million in equity gains by year-end [12] Management's Comments on Operating Environment and Future Outlook - Management indicated that the average portfolio in the first quarter was higher than in the fourth quarter, which is expected to continue into the second quarter, leading to a potential increase in yield [16] - The management expressed optimism about the return of M&A activity, which was temporarily disrupted due to tariff-related uncertainties [20][51] - The company expects to maintain the dividend at $0.40 per share for the second and third quarters, subject to Board approval [12][24] Other Important Information - The company has paid $295 million in dividends since its IPO, representing $17.9 per share to an investor in the IPO [6] - The company received a green light letter from the Small Business Administration for Stellus Capital SBIC III, which is a significant step in the licensing process [10] Q&A Session Summary Question: Impact of first quarter originations on interest income - Management noted that the average portfolio in the first quarter was higher than the fourth, which should lead to a pickup in yield in dollars [16] Question: Pipeline status and lending opportunities - Management indicated that the pipeline is slower compared to three months ago, but they expect interesting opportunities to close in the upcoming quarters [20] Question: Trajectory of net investment income (NII) to cover dividends - Management acknowledged that NII is currently less than the dividend but expects to be in a good position by the end of the year due to potential equity co-investments [24] Question: Trade education acquisition restructuring - Management confirmed that the business was restructured and recapitalized satisfactorily, expecting it to perform well going forward [29] Question: Logic behind issuing fixed-rate debt - Management explained that the issuance was necessary to retire maturing bonds and to have some unsecured debt in the capital stack [36] Question: Future issuance of common shares under the ATM program - Management stated that future issuances would depend on market conditions and stock price trading [40] Question: Second lien loans strategy - Management confirmed that they do not expect to issue new second lien loans, focusing instead on first lien unitranche secured lending [42] Question: Impact of SBA green light on earnings in a lower interest rate environment - Management confirmed that the potential for SBIC debentures would allow for borrowing at lower rates, positively impacting earnings [44]

Financial Data and Key Metrics Changes - For the first quarter ended March 31, 2025, the company generated GAAP net investment income of $0.35 per share and core net investment income of $0.37 per share, which excludes estimated excise taxes [5] - The net asset value per share decreased by $0.21 during the quarter, primarily due to company-specific write-downs in the loan portfolio and a reduction of spillover income [5] - The company has paid $295 million in dividends to investors since its IPO, representing $17.9 per share to an investor in the IPO [5] Business Line Data and Key Metrics Changes - The investment portfolio at fair value increased to $991.1 million across 110 portfolio companies, up from $953.5 million across 105 companies as of December 31, 2024 [6] - During the first quarter, the company invested $46.7 million in seven new portfolio companies and had $8.7 million in other investment activity at par [6] - The average loan per company is $9.4 million, with the largest overall investment at $21.9 million, both at fair value [6] Market Data and Key Metrics Changes - 90% of the company's loans were secured, and 91% were priced at floating rates as of March 31, 2025 [6] - Currently, loans to five portfolio companies are on non-accrual status, comprising 6.7% of the total cost and 4% of the fair value of the total loan portfolio, representing a decrease from the prior quarter [7] Company Strategy and Development Direction - The company plans to draw new leverage under the SBIC III license to continue funding qualifying portfolio company investments [8] - The company aims to grow its portfolio to over $1 billion, with potential for more than $10 million in equity gains by year-end [10] - The company has shifted its investment strategy to focus on first lien unitranche secured lending with equity co-investments, moving away from second lien loans due to risk management considerations [38] Management's Comments on Operating Environment and Future Outlook - The management noted that the pipeline for new loan originations is slower compared to three months ago, affected by tariff activity and overall economic conditions [17] - The management expressed optimism about picking up activity as clarity improves in the market, indicating that the current slowdown is temporary [46] - The company expects to maintain the dividend at $0.40 per share for the second and third quarters, although net investment income is currently running below this level [19][21] Other Important Information - The company issued $75 million in aggregate principal amount of 7.25% notes due April 1, 2030, using the proceeds to repay the bank facility [8] - The company has received a green light letter from the Small Business Administration for Stellus Capital SBIC III, which is a significant step in the licensing process [8] Q&A Session Summary Question: Impact of first quarter originations on interest income - The average portfolio in the first quarter was higher than in the fourth quarter, which is expected to result in a pickup in yield in dollars for the second quarter [13][14] Question: Pipeline status and opportunities - The pipeline is slower than three months ago, but there are still interesting opportunities expected to close in the current and next quarter [17][18] Question: Trajectory of net investment income to cover dividends - The company is currently running at a level of net investment income less than the dividend, but expects to be in a good position by the end of the year [21][22] Question: Trade education acquisition restructuring - The business was restructured and recapitalized satisfactorily, with expectations for improved performance going forward [25][26] Question: Logic behind issuing fixed-rate debt - The issuance was necessary to retire maturing bonds and to have some unsecured debt in the capital stack [32][33] Question: Future issuance of common shares - The company will consider issuing shares based on market conditions to ensure accretive outcomes [36] Question: Second lien loans strategy - The company does not expect to issue new second lien loans, focusing instead on first lien unitranche secured lending [38] Question: Impact of SBA green light letter on earnings - The potential for SBIC debentures could allow for lower rates than current borrowing, positively impacting earnings [40][41]

Financial Data and Key Metrics Changes - For Q1 2025, the company generated GAAP net investment income of $0.35 per share and core net investment income of $0.37 per share, which excludes estimated excise taxes [6] - Net asset value per share decreased by $0.21 during the quarter, primarily due to company-specific write-downs in the loan portfolio and a reduction of spillover income [6] - The company has paid $295 million in dividends since its IPO, representing $17.9 per share to an investor in the IPO [6] Business Line Data and Key Metrics Changes - The investment portfolio at fair value increased to $991.1 million across 110 portfolio companies, up from $953.5 million across 105 companies as of December 31, 2024 [7] - During Q1, the company invested $46.7 million in seven new portfolio companies and had $8.7 million in other investment activity at par [7] - 90% of the loans were secured, and 91% were priced at floating rates, with an average loan per company of $9.4 million [7][8] Market Data and Key Metrics Changes - The company noted that 52% of the portfolio is rated two or on or ahead of plan, while 21% is marked at an investment category of three or below [8] - Loans to five portfolio companies are on non-accrual, comprising 6.7% of the total cost and 4% of the fair value of the total loan portfolio, representing a decrease from the prior quarter [8] Company Strategy and Development Direction - The company plans to draw new leverage under the SBIC III license to continue funding qualifying portfolio company investments [9] - The company aims to grow the portfolio to over $1 billion, with potential for more than $10 million in equity gains by year-end [11] Management's Comments on Operating Environment and Future Outlook - Management expects new loan originations to be offset by loan repayments for the remainder of Q2 2025, indicating a flat portfolio [11] - The management expressed optimism about the return of M&A activity, which was temporarily disrupted due to tariff-related uncertainties [20][50] Other Important Information - The company issued $75 million in aggregate principal amount of 7.25% notes due April 1, 2030, to repay the bank facility [9] - The company has received a green light letter from the Small Business Administration for Stellus Capital SBIC III, which is a significant step in the licensing process [10] Q&A Session Summary Question: Impact of first quarter originations on interest income - Management indicated that the average portfolio in Q1 was higher than in Q4, which should lead to a pickup in yield for Q2 [15][16] Question: Pipeline status and lending opportunities - Management noted that the pipeline is slower compared to three months ago, but they expect interesting opportunities to close in the upcoming quarters [19][20] Question: Trajectory of net investment income (NII) to cover dividends - Management acknowledged that NII is currently less than the dividend but expects to be in a good position by the end of the year due to potential equity co-investments [23][24] Question: Trade education acquisition restructuring - Management confirmed that the business was restructured and recapitalized satisfactorily, expecting it to perform well moving forward [27][28] Question: Logic behind issuing fixed-rate debt - Management explained that the issuance was necessary to retire maturing bonds and to have some unsecured debt in the capital stack [34][35] Question: Future issuance of unsecured debt - Management indicated that more unsecured debt will be needed before the maturity of existing bonds, with the magnitude still being determined [54]