Carlyle Secured Lending(US:CGBD)2026-02-25 17:00Financial Data and Key Metrics Changes - Total investment income for Q4 2025 was $67 million, consistent with the prior quarter, as an increase in average portfolio size was offset by a decrease in total portfolio yields due to lower base rates and lower spreads [17] - Net investment income for Q4 was $24 million, or $0.33 per share on a GAAP basis, and $0.36 per share after adjustments [18] - The board declared a first-quarter 2026 dividend of $0.40 per share, with an estimated $0.74 per share of spillover income to support the dividend [18] Business Line Data and Key Metrics Changes - CGBD deployed over $1.2 billion and closed over $7 billion of commitments at the platform level in 2025, with Q4 being a record quarter for CGBD with over $400 million of investment fundings [9] - Total investments at CGBD increased from $2.4 billion to $2.5 billion during the quarter, while total investments at the MMCF joint venture increased to over $950 million [9] Market Data and Key Metrics Changes - CGBD's net asset value as of December 31 was $16.26 per share, down from $16.36 per share as of September 30 [10] - The company reported a total aggregate realized and unrealized net loss for the quarter of about $7 million, primarily due to unrealized markdowns on select underperforming investments [20] Company Strategy and Development Direction - The core investment strategy remains focused on stable, high-quality credits in the core and upper middle market, with an emphasis on enhancing origination capabilities [7][8] - The formation of a new joint venture, Structured Credit Partners (SCP), aims to increase diversification and portfolio yield at CGBD, focusing on investing in broadly syndicated first lien, senior secured loans [14][21] Management's Comments on Operating Environment and Future Outlook - Management expects earnings to trough in the first half of 2026 due to base rate cuts, with an anticipated increase in earnings thereafter as portfolios ramp up [19] - The company remains confident in the quality and stability of its portfolio despite market volatility, particularly in the software sector, which has shown strong performance metrics [10][12] Other Important Information - CGBD's software exposure as a percentage of the portfolio is below that of its peer group, with a strong track record of no defaults in software deals over the last five years [11] - The company has nearly exhausted its existing $200 million share repurchase program and has approved an increase to $300 million [19] Q&A Session Summary Question: Who will CGBD take market share from? - CGBD plans to take market share from the BSL market, other private credit funds, and banks, leveraging its strong credit culture and industry expertise [28][29] Question: What is driving borrowing demand? - The middle market provides a consistent flow of opportunities, with increased activity in sectors like industrials, aerospace, and healthcare contributing to strong pipeline flow [32][33] Question: Rationale for the SCP joint venture? - The SCP joint venture aims to maximize non-qualifying asset buckets and leverage the broader Carlyle network for strong expected returns based on a no-fee structure [35][36] Question: How significant is interest expense for borrowers? - Interest coverage ratios are improving, and borrowers are adopting more conservative leverage profiles, which is beneficial for overall credit quality [53][55] Question: Is share repurchase or new investment the best use of capital? - A balanced approach is being taken, with ongoing share repurchases while also investing in joint ventures that are expected to be accretive [58][60]