PennantPark Investment (US:PNNT)2026-02-09 21:07Portfolio Overview - As of December 31, 2025, the portfolio totaled $1,218.5 million, with 40% in first lien secured debt and a weighted average yield on interest-bearing debt investments of 10.9%[237] - For the three months ended December 31, 2025, the company invested $115.1 million in portfolio companies, with a weighted average yield on debt investments of 9.7%[239] - The company had four portfolio companies on non-accrual as of December 31, 2025, representing 2.2% of the overall portfolio on a cost basis[237] - As of September 30, 2025, the portfolio totaled $1,287.3 million, with 45% in first lien secured debt and a weighted average yield on interest-bearing debt investments of 11.0%[238] - The average investment size in the portfolio was $6.4 million as of December 31, 2025, excluding U.S. Government Securities[237] - PSLF's investment portfolio consisted of debt investments in 118 portfolio companies as of December 31, 2025, compared to 109 companies as of September 30, 2025[295] - Total investments increased to $1,357,342,000 as of December 31, 2025, up from $1,265,901,000 on September 30, 2025, representing a growth of approximately 7.2%[304] - The number of portfolio companies in PSLF rose to 118, compared to 109 in the previous quarter[304] Financial Performance - For the three months ended December 31, 2025, investment income was $27.3 million, a decrease from $34.2 million in the same period of 2024, primarily due to a decrease in total portfolio size and weighted average yield on debt investments[273] - Net investment income for the three months ended December 31, 2025, was $7.0 million, or $0.11 per share, compared to $13.0 million, or $0.20 per share, in 2024[275] - Total expenses for the three months ended December 31, 2025, were $20.3 million, down from $21.2 million in 2024, mainly due to a decrease in incentive fees[274] - Net realized gains for the three months ended December 31, 2025, totaled $59.0 million, compared to net losses of $(2.6) million in 2024, reflecting changes in market conditions[276] - The net change in unrealized depreciation on investments for the three months ended December 31, 2025, was $(57.1) million, compared to $2.4 million in 2024[277] - Net investment income for the three months ended December 31, 2025, was $7.7 million, a decrease from $9.3 million in the same period of 2024[315] - Total expenses for the three months ended December 31, 2025, were $25.1 million, compared to $24.2 million in the same period of 2024[315] Debt and Financing - The Truist Credit Facility had outstanding borrowings of $296.5 million as of December 31, 2025, with a weighted average interest rate of 5.8%[283] - The company incurred $3.9 million in expenses related to amendment costs on the Truist Credit Facility for the three months ended December 31, 2025[256] - The company has entered into an ATM Program with an aggregate offering price of up to $100 million for the sale of common stock[244] - PSLF has a $400.0 million senior secured revolving credit facility, increased from $325.0 million in August 2024, with interest at SOFR plus 225 basis points[298] - The company is actively managing its debt structure, with a focus on maintaining a balance between secured and subordinated debt[310] Investment Valuation and Policies - The fair value of the company's investments is primarily classified as Level 3, indicating reliance on unobservable inputs for valuation[251] - The company has adopted certain revisions to its valuation policies to comply with Rule 2a-5 under the 1940 Act, effective March 8, 2021[254] - The company utilizes a multi-step valuation process for investments without readily available market quotations, involving independent valuation firms[252] - The company evaluates the source of inputs for fair value assessments, ensuring compliance with ASC 820[255] Tax and Distributions - The company recorded a provision for taxes on net investment income of $0.7 million for both the three months ended December 31, 2025 and 2024, pertaining to U.S. federal excise tax[266] - The company expects to distribute dividends to maintain its RIC tax election, generally at least equal to 90% of net ordinary income and realized net short-term capital gains[263] - Distributions declared were $0.24 per share, totaling $15.7 million for both the three months ended December 31, 2025, and 2024[318] - The company transitioned from quarterly to monthly distributions effective October 2023, with future distributions determined by the board of directors[319] Market and Economic Conditions - The company acknowledges that significant changes in market interest rates could materially adversely affect net investment income or net assets[328] - The annualized impact of hypothetical base rate changes in interest rates shows that a 3% decrease in interest rates would result in a change in interest income net of interest expense of $(8,657,000) and a decrease of $(0.13) per share[327] - A 3% increase in interest rates would lead to a change in interest income net of interest expense of $9,847,000 and an increase of $0.15 per share[327] - The company may use standard hedging instruments to mitigate interest rate and foreign currency fluctuations but did not engage in such hedging activities during the reporting period[329] Cash and Assets - Cash and cash equivalents as of December 31, 2025, were $45.9 million, down from $51.8 million as of September 30, 2025[292] - Total assets increased to $1,409.3 million as of December 31, 2025, up from $1,315.4 million as of September 30, 2025[314] - Members' equity decreased to $107.1 million as of December 31, 2025, down from $121.0 million as of September 30, 2025[314] - Total cash equivalents are valued at $20.9 million, while total cash stands at $24.1 million, contributing to a total of $1,439.9 million in investments, cash equivalents, and cash[306] Sector Performance - The overall trend indicates a strong performance across various sectors, with several companies exceeding a net interest margin of 9%[10] - The company has significant investments in sectors such as healthcare, business services, and aerospace and defense, with notable debt issuances in these areas[306] - The healthcare and education sector is notably represented, with several acquisitions like Medina Health, LLC and Urology Management Holdings, Inc. contributing to the portfolio[310]