Palmer Square BDC (PSBD) Earnings Call Transcript

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DATE

Thursday, February 26, 2026 at 1 p.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Christopher Long
• Chief Investment Officer — Angie Long
• President — Matthew Bloomfield
• Chief Financial Officer and Director — Jeffrey Fox

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TAKEAWAYS

• Total Investment Income -- $29,800,000, down 14.5% compared to $34,900,000 in 2024.
• Net Investment Income -- $13,100,000, or $0.41 per share, compared to $14,800,000, or $0.45 per share, in 2024.
• Dividend -- $0.43 per share for the fourth quarter, including a $0.07 supplemental distribution, fully covering the $0.36 base dividend.
• NAV per Share -- $14.85 at quarter end, compared to $15.39 at end of 2025.
• Realized and Unrealized Losses -- $18,400,000 total; includes $20,000,000 of net unrealized depreciation and $2,000,000 of net appreciation on exited investments.
• Portfolio Fair Value -- $1,200,000,000 across 42 industries, a 4.4% decrease from $1,260,000,000 at the end of 2025.
• New Investments -- $91,400,000 deployed in the quarter, including 24 new commitments averaging $3,400,000 each.
• Repayments and Sales -- approximately $148,300,000 realized in the quarter.
• Portfolio Composition -- 95% senior secured loans, with an average position size of approximately $4,700,000.
• First-Lien Loan Metrics -- Fair value–weighted average enterprise value of $436,000,000, senior secured leverage of 5.5x, and interest coverage of 2.6x.
• Yield to Maturity -- Weighted average: 11.3% at fair value and 8.15% at amortized cost.
• Nonaccrual Levels -- 9 basis points at fair value and 134 basis points at cost; PIK income comprised approximately 1.45% of total investment income.
• Diversification -- Exposure to software was below 11% of the portfolio; 10 largest investments represent 10.9% of total portfolio value.
• Credit Facility Refinancing -- Wells Fargo facility refinanced, spread reduced by 55 basis points, size increased to $200,000,000, and maturity extended to November 2030.
• Liquidity -- $311,300,000 at quarter end, up from $252,800,000 at end of 2024.
• Debt-to-Equity Ratio -- 1.54x at quarter end, marginally higher than 1.53x at end of 2024.
• Share Repurchase Authorization -- New $5,000,000 open market program implemented but not yet utilized due to blackout restrictions.
• Q1 2026 Base Dividend Declared -- $0.36 per share, in line with the dividend policy.
• Private Credit Loan Activity -- 14.7% of new investments were private credit loans, funded at a weighted average spread of 463 basis points over the reference rate.
• NAV Disclosure -- Management maintains monthly NAV per share reporting for increased transparency.
• Portfolio Rating -- Average internal rating of 3.6 on a fair value–weighted basis, using a relative value–based scoring system.
• Share Yield -- Shares were yielding 15.7% as of February 2026, compared to an 11.6% yield on NAV.
• Hologic Take-Private Participation -- Platform participated as a private credit provider in the second-lien tranche, committing $100,000,000 and funding $75,000,000 following transaction resizing.
• Nonaccruals Trend -- Management highlighted nonaccrual rates as "very low by industry standards."
• Sector Allocation Management -- Commitment to avoid lending to negative cash flow businesses in commoditized software subsectors and to maintain a diversified approach.

SUMMARY

Management noted that fourth quarter deal flow benefited from increased sponsor engagement and select large take-private transactions, such as those involving Electronic Arts and Hologic. Portfolio activity slowed entering the first quarter, attributed to seasonal patterns and heightened volatility, but engagement with sponsors and deal pipelines improved compared with earlier in the prior year. Executives explained that recent spread compression moderated in the private credit market while tightening continued in broadly syndicated loans, with sector-based volatility—especially in software—opening potential opportunities for selectively higher returns. The company's average position in software, at $4,600,000, remains conservative and intentionally focused on mission-critical, enterprise platforms with strong private equity backing. Strategic refinancings and increased liquidity position the balance sheet for flexibility while share repurchase programs are on hold, pending the end of blackout restrictions.

• Management said, "the recent volatility may present high-quality opportunities at attractive entry points," signaling intent to actively seek these through rotation within the portfolio.
• Angie Long emphasized the importance of active credit management and said, "We believe our platform's flexibility will serve as an important competitive advantage for Palmer Square Capital BDC Inc. as we continue to see transactions move between public and private markets."
• Matthew Bloomfield stated, "we are certainly looking at all avenues in front of us," when considering capital deployment between repurchases and investment origination, factoring in market dislocations.
• Portfolio metrics remain stable, with management indicating confidence in underlying credit performance and limited exposure to nonaccruals despite macroeconomic and sector-specific volatility.
• Management reaffirmed a strategy of distributing excess earnings via supplemental dividends, maintaining a shareholder-friendly return policy.

INDUSTRY GLOSSARY

• BDC: Business Development Company; a closed-end investment company that invests in small- and mid-sized businesses, typically through debt and equity financing.
• PIK income: Payment-in-kind income; interest paid not in cash but via additional securities or loan principal, common in private credit and high-yield lending.
• Nonaccrual: Loans or investments on which interest income is no longer being recognized due to borrower payment issues or credit concerns.

Full Conference Call Transcript

Jeremy Goff: Welcome to Palmer Square Capital BDC Inc.'s fourth quarter and year-end 2025 earnings call. Joining me this afternoon are Christopher Long, Chairman and Chief Executive Officer; Angie Long, Chief Investment Officer; Matthew Bloomfield, President; and Jeffrey Fox, Chief Financial Officer and Director. Palmer Square Capital BDC Inc.'s fourth quarter and fiscal year ended 2025 financial results were released earlier today and can also be accessed on Palmer Square Capital BDC Inc.'s investor relations website at palmersquarebdc.com. We have also arranged for a replay of today's event that can be accessed on our website. During this call, I want to remind you that the forward-looking statements we make are based on current expectations.

The statements on this call that are not purely historical are forward-looking statements. These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements, including, without limitation, market conditions caused by uncertainty surrounding interest rates, changing economic conditions, and other factors we identified in our filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward-looking statements.

The forward-looking statements made during this call are made as of the date hereof, and Palmer Square Capital BDC Inc. assumes no obligation to update the forward-looking statements unless required by law. To obtain copies of SEC-related filings, please visit our website at palmersquarebdc.com. With that, I will now turn the call over to Christopher Long.

Christopher Long: Good afternoon, everyone. Thank you for joining us today for Palmer Square Capital BDC Inc.'s fourth quarter and year-end 2025 conference call. On today's call, I will provide an overview of our fourth quarter results and full-year highlights, touch on our market outlook and competitive positioning, and then turn the call to the team to discuss the current industry dynamics at play, our portfolio activity, and financial results. During the fourth quarter, our team deployed $91,400,000 of capital and generated total and net investment income of $29,800,000 and $13,100,000, respectively.

We delivered net investment income of $0.41 per share, covering our $0.36 per share fourth quarter base dividend, and paid a $0.43 per share total dividend, which includes a $0.07 supplemental distribution. As we previously emphasized, we follow a distribution strategy that maximizes cash returns to our investors. In that spirit, we continue to aim to pay out nearly all of our excess earnings in the form of a supplemental dividend. Additionally, we recently announced our January NAV per share of $14.48. As the only publicly traded BDC to disclose NAV on a monthly basis, we believe we provide a unique level of transparency and accountability, giving shareholders regular insight into our performance in the evolving market.

Throughout 2025, uncertainty was the norm, shaped by tariff policy, evolving geopolitical dynamics, and a heightened focus on the trajectory of rate cuts. We also saw reasons to be optimistic toward the end of the year, including an improvement in deal momentum and increasing sponsor engagement. Most notably, the $55,000,000,000 take-private of Electronic Arts, which will require approximately $20,000,000,000 in debt financing, and the approximately $18,000,000,000 take-private of Hologic. Before I hand it over to Angie, I want to spend some time discussing why we feel confident in our software portfolio, despite the heightened concerns around AI-driven disruption in recent weeks.

For background, our investment preference in software has skewed towards mission-critical enterprise platforms in areas such as cybersecurity, IT infrastructure, and ERP systems. Within these subsectors, we are lending to large, highly scaled, and deeply embedded providers that have meaningful profitability and cash flow. We have found that these large enterprise platforms tend to be backed by large, sophisticated private equity sponsors and believe their capital structures provide meaningful equity cushion below our senior secured loans. We are most comfortable with these mission-critical enterprise platforms given they are ingrained across entire organizations, have a high cost of failure with tangible failure risk, are, in many cases, systems of record, and require nearly 100% uptime and accuracy levels.

Given there is little room for margin of error in these types of platforms, we believe they have a very large moat surrounding them, regardless of the trajectory of AI. Additionally, in our experience, these providers frequently have a higher incumbency advantage, a longer lead time to develop in-house AI solutions and react to market changes, most of which are already in advanced stages. We believe another advantage is the fact that all of the data these software companies have collected across industries will, in theory, make their AI better than their more nascent peers, as data quality underpins all AI inference.

Further, as it relates to sector exposure, I would like to reiterate that Palmer Square Capital BDC Inc.'s portfolio is highly diversified by industry and size, with 42 different industries represented and our 10 largest investments comprising just 10.9% of the overall portfolio. At present, software comprises less than 11% of our overall portfolio. As we kick off 2026, our investment strategy and approach to portfolio management that has served us well for nearly two decades remains unchanged. We believe that active credit management, when executed properly, can generate attractive total returns in excess of yield alone and that our focus on credit selection, combined with our core competency of locating relative value, will drive strong outcomes.

With that, I will hand the call over to Angie.

Angie Long: Thank you, Chris. We are pleased with Palmer Square Capital BDC Inc.'s fourth quarter results and our broader positioning entering the new year. While market activity improved modestly through 2025, January and February 2026 have served as reminders that volatility and uncertainty remain elevated throughout financial markets. Despite that backdrop, we believe Palmer Square Capital BDC Inc.'s portfolio continues to be resilient and deliver strong results across shifting environments. In terms of deal volume, M&A activity is beginning to show signs of the gradual improvement we alluded to last quarter, though the recovery remains uneven.

Activity has been much more prevalent at the upper end of the market, and sponsor-to-sponsor deals in the $1,000,000,000 to $5,000,000,000 value range have been slower to reemerge. Spread compression continued through the fourth quarter across many parts of the market. On the private credit side, it appears to be moderating, while tightening in the broadly syndicated market has continued. In light of this, we are maintaining our defensive posture while staying invested. However, we believe the recent volatility may present high-quality opportunities at attractive entry points, and in those cases, we would actively look to rotate into those opportunities.

As expected, activity slowed entering the first quarter, which is typically the shortest and seasonally weakest period, and January has tracked in line with historical patterns. That said, our team's engagement with sponsors and capital markets desks continues to increase, and pipelines in both the private credit and broadly syndicated markets feel healthier than earlier in 2025. However, we believe the market is still some distance away from a sustained and meaningful increase in overall transaction volume. Recent transactions continue to highlight the evolving relationship between the broadly syndicated loan and private credit markets, with the recent Hologic take-private serving as a prime example of these dynamics at play.

As has been reported, Palmer Square's comprehensive platform participated as a private credit provider in the second-lien tranche, initially committing $100,000,000 and ultimately funding $75,000,000 after the transaction was resized following a strong first-lien syndication process. More importantly, the Hologic transaction demonstrates the breadth of our platform. We were able to support the sponsors with early and sizable commitments and ultimately participate across both the private second-lien and the syndicated first-lien tranches in U.S. dollars and euros. We applied a similar approach with the McLean Power System transaction.

We believe our platform's flexibility will serve as an important competitive advantage for Palmer Square Capital BDC Inc. as we continue to see transactions move between public and private markets, often within the same capital structure. As referenced previously, volatility has returned meaningfully since the beginning of the year. While this has been driven by a number of factors, including macro uncertainty and geopolitical developments, the past few weeks have been defined by renewed concerns around the pace and scope of AI-driven disruption, which has weighed on sentiment across both equity and credit markets.

Since there has been scrutiny around BDCs through this lens, we believe it is worth providing some additional context for our investors while reiterating approximately 11% of Palmer Square Capital BDC Inc.'s portfolio was invested in software-related credits as of quarter end, which is substantially lower than the 20% average BDC exposure level reported in the press. Our average position size in software is approximately $4,600,000, and to echo Chris, our exposure is intentionally skewed towards mission-critical enterprise platforms that tend to be backed by very large, sophisticated private equity sponsors and that we believe have meaningful equity cushions below our senior secured loans.

We intentionally avoid lending to fast-growing but negative cash flow businesses or companies in more commoditized subsectors, such as customer marketing automation, for example, which we believe are more vulnerable to disintermediation by AI. Although recent market sentiment has been pronounced, we believe the genesis of the concern is not necessarily that current credit fundamentals are deteriorating or at risk, but rather the underlying question of what the terminal value of some of these software businesses will be five, ten, or twenty years down the line. There are undoubtedly going to be winners and losers in the software space, which was also the case before AI.

As we have seen in past bouts of volatility over the years and decades, tremendous opportunities can arise to invest in great companies at meaningful discounts to their intrinsic value. We believe the current backdrop in certain pockets of loans and high-yield bonds may help our investment team uncover opportunities to generate attractive returns, as some credits have traded down five to ten points or more, with no apparent fundamental changes to the underlying business performance. As always, we will continue to be diligent in our deployment as we monitor each corner of the market and leverage our platform's flexibility to rotate into the most appealing risk-adjusted opportunities as they emerge.

Turning to our portfolio, credit performance remained solid across the board. As discussed during our last call, First Brands represented the most notable credit-specific development. Given some uncertainty around the sales process and deteriorating customer sentiment, we reduced most of our exposure in January and chose not to commit any additional capital. We retained a small residual position as option value should conditions improve. In terms of our balance sheet, we refinanced our private credit facility with Wells Fargo during the fourth quarter, reducing the spreads by approximately 55 basis points and increasing the overall capacity of the facility. We will continue to evaluate additional right-side balance sheet optimization opportunities in 2026, including a potential CLO refinancing and other initiatives.

As a reminder, we also put in place a new $5,000,000 open market share repurchase authorization during the fourth quarter. While we have not yet utilized this authorization due to blackout restrictions, we continue to believe Palmer Square Capital BDC Inc.'s valuation represents an attractive opportunity, and we will judiciously deploy capital to support the stock. Additionally, we expect to continue discussions with the Board regarding future use of the 10b5-1 program following the full utilization of the prior plan. For added context, Palmer Square Capital BDC Inc. shares were yielding 15.7% as of February 2026, a significant premium to the 11.6% on NAV.

Given the quality and conservative positioning of Palmer Square Capital BDC Inc.'s portfolio, we believe this is a compelling yield even while taking into consideration the volatile market environment we have experienced. As of 2026, we remain discerning but cautiously optimistic. While near-term sentiment across certain sectors remains fragile, we believe the long-term fundamentals supporting the credit markets remain intact, particularly for platforms with disciplined underwriting and conservative portfolio construction. Palmer Square Capital BDC Inc.'s ability to invest across both liquid and private markets allows us to remain flexible and patient as conditions evolve and opportunities arise. With that, I will turn the call over to Matthew Bloomfield to discuss our portfolio and investment activity in more detail.

Matthew Bloomfield: Thank you, Angie. Turning to our portfolio and investment activity for the fourth quarter, our total investment portfolio as of 12/31/2025 had a fair value of approximately $1,200,000,000 across 42 industries that demonstrate strong credit quality, industry and company-specific tailwinds, and a diverse mix of end markets. This compares to a fair value of $1,260,000,000 at the end of 2025, reflecting a decrease of approximately 4.4%. In the fourth quarter, we invested $91,400,000 of capital, which included 24 new investment commitments at an average value of approximately $3,400,000. During the same period, we realized approximately $148,300,000 through repayments and sales. As you will notice, we continue to think about diversification as we allocate new capital in the portfolio.

To recap key portfolio highlights, at the end of the fourth quarter, our weighted average total yield to maturity of debt and income-producing securities at fair value was 11.3%. Our weighted average total yield to maturity of debt and income-producing securities at amortized cost was 8.15%. We believe our focus on first-lien loans and diversification by industry and size contributes to a strong credit profile, with 42 different industries represented in our investment mix. Further, our 10 largest investments account for just 10.9% of the overall portfolio, and our portfolio is 95% senior secured, with an average hold size of approximately $4,700,000. Again, we believe this position sizing is an important risk management tool for Palmer Square Capital BDC Inc.

On a fair value–weighted basis, our first-lien borrowers have a weighted average enterprise value of $436,000,000, senior secured leverage of 5.5x, and interest coverage of 2.6x. Additionally, new private credit loans comprised 14.7% of overall new investments and were funded at a weighted average spread of 463 basis points over the reference rate. While credit quality is a focus across the sector, nonaccruals continue to be low at Palmer Square Capital BDC Inc. On a fair value basis, it is only 9 basis points, and on a cost basis, 134 basis points. Our PIK income as a percentage of total investment income remains well below our largest peers and below the industry at approximately 1.45%.

We believe this will give our shareholders greater confidence in the quality of our disclosed investment income. We have maintained an average internal rating of 3.6 on a fair value–weighted basis for all loan investments. Our rating is derived from a unique relative value–based scoring system. We believe credit performance within the portfolio remains strong. Our nonaccruals remain very low by industry standards, and the underlying credit metrics of our borrowers appear encouraging. We continue to see stability in both leverage levels and loan-to-value ratios across our portfolio companies. As both Chris and Angie mentioned, we believe our portfolio is well diversified for the dynamic markets we participate in.

As we have talked about many times in the past, we believe larger borrowers provide for better credit outcomes for myriad reasons. We think this will apply to AI as well—that larger companies may be able to invest in and ultimately benefit from the tools and efficiencies that AI can provide. As previously disclosed, during the quarter, we took further strides in optimizing the right side of our balance sheet, refinancing the Wells Fargo credit facility, tightening the spread by 55 basis points. Additionally, we extended the maturity of the facility to November 2030 and increased the facility amount to $200,000,000 from $175,000,000.

We believe this exemplifies our focus on driving earnings power to the BDC through active balance sheet management in addition to active portfolio management. Lastly, as discussed on our third quarter earnings call, our Board has approved an additional $5,000,000 of open market share repurchases at Palmer Square Capital BDC Inc. We have not yet utilized the program due to an ongoing lockup period. Given the market-level discounts to NAV in the BDC space, we believe this could be an accretive tool to further shareholder return in the future. As we navigate current market dynamics, we remain aligned with the priorities of our shareholders and will continue to provide transparent visibility into our performance.

Now, I would like to turn the call over to Jeffrey Fox, who will review our fourth quarter 2025 financial results.

Jeffrey Fox: Thank you, Matt. Total investment income was $29,800,000 for 2025, down 14.5% from $34,900,000 for the comparable prior-year period. Income generation during the quarter reflected a mix of contractual interest income, paydown-related income, and select fee income from new deal activity. Total net expenses for the fourth quarter were $16,800,000, compared to $20,100,000 in the prior-year period. Net investment income for 2025 was $13,100,000, or $0.41 per share, compared to $14,800,000, or $0.45 per share, for the comparable period last year. During 2025, the company had total net realized and unrealized losses of $18,400,000, compared to total net realized and unrealized losses of $2,900,000 in 2024.

This consisted of net unrealized depreciation of $20,000,000 related to the existing portfolio investments and net unrealized appreciation of $2,000,000 related to exited portfolio investments. At the end of the fourth quarter, NAV per share was $14.85, compared to $15.39 at the end of 2025. Moving to our balance sheet, total assets were $1,200,000,000 and total net assets were $464,100,000 as of 12/31/2025. At the end of the fourth quarter, our debt-to-equity ratio was 1.54x, very slightly up from 1.53x at the end of 2025. Available liquidity, consisting of cash and undrawn capacity on our credit facilities, was approximately $311,300,000. This compares to approximately $252,800,000 at the end of 2025.

Finally, on February 26, 2026, the Board of Directors declared a first quarter 2026 base dividend of $0.36 per share, in line with our formalized dividend policy. Furthermore, our policy continues to be distributing excess earnings in the form of a quarterly supplemental distribution. With that, I would now like to open the call up for questions.

Operator: We will now begin the question-and-answer session. Our first question will come from the line of Rick Shane with JPMorgan. Please go ahead.

Rick Shane: Hey, guys. Thanks for taking my question. Look, you have alluded to the repurchase. I am looking at the leverage levels. As you think about capital deployment—and again, you indicated, hey, we see some at the margin, we see potentially some opportunity—are you going to keep dry powder or, given where the stock is trading, does it just make sense to buy stock, given it is probably hard to find something that generates a comparable return?

Matthew Bloomfield: Hey, Rick. It is Matt. Thanks for the question. I think from the management team's perspective and the Board, we are certainly looking at all avenues in front of us. To your point, it is certainly accretive from a stockholder standpoint given where the discount is trading, undoubtedly. We also mentioned some of the dislocations in the market that we have seen are likely going to provide some great opportunities in the secondary investing side as well. All that being said, we do think from a new underwriting origination standpoint, spreads should be more conducive than they have been in quite some time.

So we are really trying to look across all the avenues of the opportunity set in front of us and make not just the best near term, but obviously the best long-term decision for shareholders. So we are taking a look at everything that is on the table, and there is certainly a lot to investigate at this point. I think we will try to be as prudent as we can across all those facets. But undoubtedly, to your point, the shares look really attractive to us at this level.

Rick Shane: Got it. And, look, obviously, in the equity markets, we are seeing similar dislocations. In some ways, what we have seen is sectors move from being potentially at the high end of their valuation range potentially into a more normal sort of average range. Generally speaking, things do not just sort of mean revert; they typically over-correct. We are thinking about that in terms of stocks more broadly. Where do you think we are in the cycle on the credit side? And if we are just sort of moving back to normal pricing, as opposed to really, really tight spreads, is it really the time to weigh in, or do you actually think we are approaching historically attractive pricing?

Matthew Bloomfield: Another really fair point. I think in credit it certainly depends on sector. Undoubtedly, the focus of the past several weeks has been specifically on software and then AI-related risks across certain industries. I think the credit markets have definitely reacted amongst those, and so you have not really seen much in the way of spread widening outside of AI-worried industries. On the public credit side versus the private credit side, private credit obviously moves slower from a spread reaction. I do not know that, to your point, we are going to see this massive opportunity set of much wider spreads just across all credit. I do not think that is going to occur barring some more broad-based uncertainty.

I do not think anybody would argue that in the software credit space spreads are not meaningfully wider. So I think there will be interesting opportunity sets within there. We look across some of these deeply embedded software companies. I think in the past couple days, maybe the narrative has changed a little bit as you have seen some of the NVIDIA CEO comments about layering those types of AI products on top of embedded software, which I think is what most people have been trying to communicate on the credit side as of late.

So I think we are definitely going to see some opportunities in some of those impacted areas where things have just gotten to levels that I think a lot of people would agree just do not make sense. We want to be prudent about not getting over our skis there, but I do think there are some interesting opportunities. And then outside of those types of sectors, I hope we start to see some more normalized spreads. I think it makes sense with all the macro uncertainty in general, but I think those will move a little bit slower because there is still a lot of dry powder on the sidelines that wants to be deployed.

So I think it is going to take a little bit more for spreads to widen holistically to levels where we are through longer-term averages, per se.

Operator: Our next question will come from the line of Douglas Michael Harter with UBS. Please go ahead.

Douglas Michael Harter: Thanks. Just kind of piggybacking on Rick's question. How do you weigh the opportunity to maybe buy some of those software loans where you might feel comfortable in it versus, obviously, the perception of increasing risk and the potential volatility that comes with that before markets settle down?

Matthew Bloomfield: It is a balanced process, I think. We definitely do not necessarily outright increase exposure holistically to the sector. There is obviously enough noise going on and, quite frankly, I think we just need to be really fundamentally sound in how we are analyzing these specific businesses on a company-by-company basis. But I think we have done enough work and have had enough conversations with management teams, with sponsors, with others in the industry where we do think there are going to be some opportunities.

Our whole relative value process within Palmer Square Capital BDC Inc., being differentiated from just traditional private credit BDCs, we do want to be able to take advantage of those opportunities in the liquid secondary market. It is something we have done really well historically across a lot of different strategies. So we are not going to be scared, per se, just because something is labeled software if we think it exhibits very strong total return opportunities, but we also want to be cognizant of—and I think everybody needs to be somewhat humble in that—AI is moving very, very quickly, and there are a lot of unknown unknowns three, five, ten years down the road.

So we want to make the best decisions we can, but we definitely think there are some interesting opportunity sets that we are taking a look at.

Douglas Michael Harter: And if I could get your perspective on—you talked about deal activity. Do you think that this market volatility and, as you just said, the unknown unknowns, has the potential to kind of limit deal activity, limit lending activity, and kind of keep people on the sidelines? Or do you think the market is going to find the ability to work through that?

Matthew Bloomfield: Volatility never helps dealmaking in general, whether that is M&A or IPO activity, which obviously all those things felt like they were starting the year off on the right foot finally. I think we were all kind of thinking the same thing to start 2025 and then we had the tariff issues, a couple years back with some of the regional banking issues. It does not take a lot for at least things to slow down, but I do think we are far enough along in a prolonged M&A drought. We have had 175 basis points of rate cuts over the past year and a half.

So I think there are still a lot of those reasons why we felt M&A was going to pick up that still exist. Maybe in the software sector that is probably going to slow down. I think it will be maybe a near-term slowdown, but we are still having conversations, still seeing deals in the early and middle stages. Maybe we do not see an acceleration from here, per se, but it definitely feels like there is still appetite for things to get done. Certainly outside of software/AI-related issues, other areas are still, I think, pretty ripe for transacting.

And just in general, in the sponsor private equity–backed community, it has been a dry patch so long, and I think naturally you are just going to see transaction activity pick up. All that being said, I will be surprised too if we do not see some transactions in the software space as valuations have rerated immensely in the public markets. I will be surprised if we do not see some sponsor activity to take advantage of some of these levels that, quite frankly, from a valuation standpoint, just have not been seen in quite some time.

So that was a long-winded way of saying we will see, but I think it will continue—maybe just not at the pace people were anticipating coming out of 2025 and into early 2026.

Operator: Again, for questions, press 1 on your telephone keypad. Our next question will come from the line of Kenneth Lee with RBC Capital Markets. Please go ahead.

Kenneth Lee: Hey. Good afternoon, and thanks for taking my question. Just given the prepared remarks around spreads tightening within the liquid side versus being a little bit more stable on the private side, how do you view the relative attractiveness between the liquid and the private side? And what is your preference for the marginal investment go-forward—more on the private or more on the liquid side?

Matthew Bloomfield: Hey, Ken. It is Matt. Thanks for the question. I think it is more balanced than we have seen. There definitely was some of the volatility in the broadly syndicated market. Probably the opportunity set there, specifically on the secondary loan side, is more attractive than it has been in quite some time. Our comments around spread tightening in that market were certainly true through 2025 and to start 2026. I do think just in the past few weeks, with the broader volatility in software, that is going to negate any spread tightening on new-issue loans coming to the market, at least for a little while.

We will see if that is meaningful widening or not, but I think there is definitely still a big appetite and capital to deploy in liquid credit. On the private credit side, I think that activity is a little steadier. I think spreads, to our comment earlier, move a little bit slower there. As you have seen this quarter, we deployed another 14.7% in private credit transactions, and I think it has been a good way for us to defend spread in the portfolio in a spread-tightening environment in general.

So I think the opportunity set is going to be good on both sides of the fence, but I definitely think there is more opportunity now in the secondary loan market than we have seen in quite some time.

Kenneth Lee: Got it. Very helpful there. And just one follow-up, if I may. In terms of distributions, any updated outlook around the distribution framework and how you think about dividends going forward?

Matthew Bloomfield: Like we have in the past, the Board continues to evaluate what we are seeing from income generation and other facets of the business. Certainly, we have absorbed 175 basis points of base rate reductions, so those have flowed through NII here as of late. We will see where the Fed goes from here. Obviously, we can see what the forward curve is saying, but that tends to move around quite a bit with just economic data that comes out. As of now, we have continued to put out the base dividend that we have, and we will continue to reevaluate at the Board level as we move through this quarter and beyond.

Again, we are hopeful, based on our conversations on spread, that the tightening we have seen on the spreads versus base rates feels a little bit better than it has in some time.

Operator: At this time, I would like to turn the call back to Christopher Long for closing remarks.

Christopher Long: Thank you, operator. Thank you all for your time and thoughtful questions. We look forward to updating you on our first quarter 2026 financial results in May. Have a good rest of your day.

Operator: This concludes today's call. Thank you all for joining. You may now disconnect.

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