Palmer Square Capital BDC(PSBD) - 2025 Q3 - Quarterly Report

Investment Portfolio - As of September 30, 2025, the company had 262 debt and equity investments in 209 portfolio companies with an aggregate fair value of approximately $1.2 billion[204] - As of December 31, 2024, the company had 262 debt and equity investments in 207 portfolio companies with an aggregate fair value of approximately $1.3 billion[204] - The investment portfolio primarily consisted of floating rate loans in a falling rate environment, contributing to lower total investment income[214] - The company’s investment portfolio at fair value decreased from $1.3 billion as of December 31, 2024 to $1.2 billion as of September 30, 2025[214] - For the nine months ended September 30, 2025, the company experienced a net unrealized depreciation of $42.9 million related to existing portfolio investments[221] Financial Performance - For the three months ended September 30, 2025, gross investments amounted to $138.67 million, while sold investments totaled $156.03 million, resulting in a total new investment of $(17.36) million[206] - Total investment income for the three months ended September 30, 2025 was $31.69 million, down from $37.31 million in the same period of 2024, reflecting a decrease in interest income[213] - Net investment income for the nine months ended September 30, 2025 was $40.40 million, compared to $47.80 million for the same period in 2024[213] - Interest expense for the nine months ended September 30, 2025 was $38.30 million, down from $43.85 million in the same period of 2024[215] - Net unrealized losses on investments for the three months ended September 30, 2025 were $(9.04) million, compared to $(1.05) million for the same period in 2024[220] Debt and Financing - The principal amount of first-lien senior secured debt investments funded for the three months ended September 30, 2025, was $121.39 million[206] - As of September 30, 2025, total investments amounted to $1.33 billion, a decrease from $1.45 billion as of December 31, 2024[209] - The company has total contractual obligations of $752.35 million due by September 30, 2025, including $294.64 million from the BoA Credit Facility and $155.42 million from the WF Credit Facility[267] - As of September 30, 2025, the principal outstanding under the BoA Credit Facility was $297.1 million[239] - The WF Credit Facility was amended to increase the borrowing amount from $150 million to $175 million and extend the maturity date to December 18, 2028[241] Investment Commitments - The average new investment commitment amount for the three months ended September 30, 2025, was $4.76 million, an increase from $2.72 million in the same period of 2024[207] - The percentage of new debt investment commitments at floating rates was 97.75% for the three months ended September 30, 2025[207] - The weighted average interest rate of new investment commitments for the three months ended September 30, 2025, was 8.48%[207] - As of September 30, 2025, the company had 24 unfunded commitments totaling $16.4 million, down from 26 commitments totaling $21.6 million as of December 31, 2024[268] Dividends and Tax Treatment - The company intends to distribute quarterly dividends to stockholders, contingent on available income[250] - To maintain RIC tax treatment, the company must distribute at least 90% of its net ordinary income and net short-term capital gains[251] - The company has adopted a dividend reinvestment plan, allowing stockholders to reinvest dividends unless they opt for cash[254] - The company may retain capital gains for investment, incurring corporate-level tax, and treat them as deemed distributions to stockholders[253] Management and Advisory - The company is externally managed by an Investment Advisor registered with the SEC, which oversees day-to-day operations and investment management[199] - The Investment Advisor, which is majority-owned by PSCM, has an indirect pecuniary interest in the company, as several executive officers are involved[265] - The company has entered into an Advisory Agreement with an annual base management fee of 1.75% of the average value of total net assets, with an incentive fee based on performance[266] Risk Factors - The company is subject to interest rate sensitivity, with potential impacts on net investment income due to changes in interest rates, which could materially affect earnings[270] - A hypothetical increase of 200 basis points in interest rates could result in a net increase of $10.30 million in net investment income, while a decrease of 200 basis points could lead to a decrease of $10.38 million[272] - The company’s investments denominated in foreign currencies are subject to risks associated with currency exchange rate fluctuations[273] - The company may hedge against interest rate and currency exchange rate fluctuations using standard hedging instruments, subject to regulatory requirements[274] Liquidity and Cash Position - The company generated net cash provided by operating activities of $104.9 million during the nine months ended September 30, 2025, primarily from proceeds of $433.7 million from the sale of investments[223] - As of September 30, 2025, the company had cash and cash equivalents of $4.2 million and $227.9 million in undrawn capacity under the BoA Credit Facility[225] - The company maintains sufficient liquidity to fund unfunded commitments, supported by cash, receivables, and borrowing capacity[268] - The company does not have any off-balance sheet financings or liabilities other than contractual commitments and legal contingencies[269] Shareholder Activities - The company completed its IPO on January 22, 2024, issuing 5,450,000 shares at a public offering price of $16.45 per share[198] - During the nine months ended September 30, 2025, the company issued and sold 32,662 shares at an aggregate purchase price of $0.5 million[227] - The company repurchased 756,508 shares of its common stock under the Company Rule 10b5-1 Repurchase Plan and Extended Company Rule 10b5-1 Stock Repurchase Plan[230] - The company purchased 38,119 shares of its common stock under the PSCM Rule 10b5-1 Stock Purchase Plan and Extended PSCM Rule 10b5-1 Stock Purchase Plan[233] Asset Coverage - The asset coverage ratio as of September 30, 2025, was 165%, exceeding the required minimum of 150%[226]