BCP Investment Corporation

Third quarter ended September 30, 2025 earnings conference call. An earnings press release was distributed yesterday, November 6, after market closed. A copy of release along the earnings presentation is available on the company's website at www.bcpinvestmentcorporation.com in the investor relations section. and should be reviewed in conjunction with the company's Form 10Q filed yesterday with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements which are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual notes may differ materially from those in forward-looking statements as a result of a number of factors, including those described in the company's filings with the SEC. BCP Investment Corporations assume no obligation to update any such forward-looking statements unless required by law. Speaking on today's call will be Ted Goldthorpe, Chief Executive Officer, President and Director of BCP Investment Corporation, Brandon Satoran, Chief Financial Officer, and Patrick Schaefer, Chief Investment Officer. With that, I would now like to turn the call over to Ted Goldthorpe, Chief Executive Officer of BCP Investment Corp. Please go ahead, Ted.

Good morning.

Welcome to our third quarter 2025 earnings call. I'm joined today by our Chief Financial Officer, Brandon Satorin, and our Chief Investment Officer, Patrick Schaefer. Following my open remarks on the company's performance and activities during the third quarter, Patrick will provide commentary on our investment portfolio and our markets, and Brandon will discuss our operating results and financial condition in greater detail. We are pleased to report strong results for the third quarter. Our first earnings as a combined company from the completion of our merger with Logan Ridge on July 15th, 2025. This milestone marks the beginning of a new chapter for BCIC we continue to leverage our expanded scale, broader portfolio diversification, and enhanced operant efficiency to drive long-term value for shareholders. I'm pleased to report meaningful progress on the value creation initiatives we announced in June 2025. Notably, consistent with our previously stated intentions, the company plans to commence a modified Dutch auction tender of approximately $9 million combined with the daily share purchases executed by the company under the buyback program, as well as open market purchases by management, the advisor, and its affiliates. We anticipate total repurchases when combined with management, advisors, and its affiliates. Ownership of BCIC's outstanding stock can approximate 10% by year end. These actions underscore our continued focus on driving shareholder value and narrowing the discount to NAV. During the quarter, we generated net investment income of $8.8 million, or 71 cents per share, compared with $4.6 million, or 50 cents per share, in the prior quarter. We expect to realize further benefits of our expanded scale and broader investment platform. For the fourth quarter of 2025, the Board of Directors approved a base distribution of 47 cents per share, which, when annualized, based on November 6th, 2025, closing price of $12.13 per share represents a yield of 15.5 percent. Before handing over the call, I'd like to take a moment to address recent commentary in the broader private credit markets. While recent high-profile collapses of certain borrowers understandably drawn market attention, we firmly believe the full scale of concern for the overall private credit market is unwarranted. Echoing sentiment from other leaders in our industry, in the case of First Brands, for example, only 2% of its nearly $12 billion balance sheet was linked to private credit, highlighting that events like this aren't signs of systemic weakness, yet the sector has been subject to disproportionately heightened scrutiny despite its limited involvement in these high-profile bankruptcies. Looking ahead, our focus remains on disciplined capital allocation, maintaining a high-quality portfolio, and delivering attractive, risk-adjusted return for our shareholders. With a larger, more diversified platform, a stronger balance sheet, we believe we are well-positioned to drive continuing earnings growth and long-term value creation. With that, I will turn the call over to Patrick Schaefer, our Chief Investment Officer, for a review of our investment activity.

Patrick Schaefer Thanks, Ted. Overall M&A activity in our core markets continued to increase during the quarter as a combination of easing benchmark rates and more settled tariff framework gave sponsors more confidence in the macro environment.

To illustrate this, over 80 percent of our new fundings during the quarter We're in new borrowers, a significantly higher percentage than what has historically been over the last several quarters.

With the renewed activity has also come renewed competition on deals and overall tightening of spreads. As we've known in the past, our focus on companies with less than $50 million of EBITDA and our sourcing of non-sponsor-backed companies provides some insulation to these trends. We continue to be selective from a credit quality perspective and are focused on maximizing risk-adjusted return for our shareholders. Turning to slide 10, originations for the third quarter were $14.2 million, and repayments and sales were $43.8 million, resulting in net repayments and sales of approximately $29.6 million. Overall yield on par of the new debt investments during the quarter was 12.5%. This compares to a 13.8% weighted average annualized yield, excluding income from non-accruals and collateralized loan obligations, as of September 30, 2025. Excluding the impact of purchase discount accounting, the weighted average annualized yield, excluding income from non-accruals and collateralized loan obligations, was approximately 10.3% as of September 30, 2025. Our investment portfolio at year-end remained highly diversified. We ended the third quarter with a debt investment portfolio, when excluding our investments in CLO funds, equities, and joint ventures, spread across 79 different portfolio companies and 28 different industries. with an average par balance of $3.2 million per entity. Turn to slide 11. At the end of the third quarter of 2025, we had 10 investments on non-recrual status, representing 3.8 percent and 6.3 percent of the portfolio at fair value and cost, respectively. This compares to six investments on non-recrual status as of June 30, 2025, representing 2.1 percent and 4.8 percent of the portfolio at fair value and cost, respectively. I would note that the quarter-over-quarter increase does include investments acquired through the Logan Ridge transaction that were on non-recrual at the time of that transaction.

It's further worth noting that two of the investments currently on non-recrual status, we continue to recognize interest income on a cash basis.

That is, only when payments are actually received. On slide 12, excluding our non-accrual investments, we have an aggregate debt investment portfolio of $429.5 million at fair value, which represents a blended price of 93.1% of par value and is 84.4% comprised of first-lane loans at par value. Assuming a par recovery, our September 30, 2025 fair values reflect a potential of $31.2 million of incremental NAP value, or a 13.7% increase to NAP. When applying a less than 10% default rate and 70% recovery rate, our debt portfolio would generate an incremental $1.36 per share of NAV, or a 7.8% increase as it rotates. And I'll turn the call over to Brandon to further discuss our financial results for the quarter.

Thanks, Patrick. For the quarter ended September 30th, 2025, the company generated $18.9 million in investment income. an increase of $6.3 million compared to $12.6 million reported for the quarter ended June 30, 2025. Core income for the same periods was $15.3 million and $12.6 million, respectively. The increase in investment income from the prior quarter was primarily driven by the Logan Ridge acquisition. which contributed $7.4 million of gap income and $3.8 million of core. For the quarter-ended September 30, 2025, gross expenses were $10.3 million, and net expenses were $10.1 million, which includes the $0.2 million performance-based incentive fee waiver This represents a $2 million increase compared to $8.1 million for the prior quarter. The increase in expenses compared to the prior quarter reflect the larger combined company. Accordingly, our net investment income for the quarter ended September for the third quarter of 2025 was $8.8 million or 71 cents per share. cents per share from $4.6 million or 50 cents per share for the second quarter of 2025. Core net investment income for the third quarter of 2025 was $5.3 million or 42 cents per share compared to $4.6 million or 50 cents per share for the second quarter of 2025.

As of September 30th, 2025,

Our net asset value totaled $231.3 million, an increase of $66.6 million from the prior quarter's NAV of $164.7 million. The increase in total NAV on a gross dollar basis was primarily driven by net realized and unrealized gains of $14.8 million. The $49.6 million impact on a GAAP basis of the Logan Ridge acquisition partially offset by the third quarter distribution exceeding poor net investment income compared to the prior quarter's distribution of $1.1 million. On a per share basis, NAB was $17.55 per share as of September 30, 2025, representing a 34-cent decrease compared to $17.89 as of June 30, 2005. The decline in that per share was primarily due to core net investment income, which excludes purchase discount accretion, not fully covering the dividend for the quarter, and approximately $4 million of mark-to-market loss across the portfolio. As of September 30, 2025, our gross and net leverage ratios were 1.4 times and 1.3 times, respectively, compared to 1.6 and 1.4 times, respectively, in the prior quarter. Specifically, as of September 30, 2025, we had a total of $324.6 million of borrowings outstanding, with a current weighted average contractual interest rate of 6.1%. This compares to $255.4 million of borrowings outstanding as of the prior quarter with a weighted average contractual interest rate of 6%. The company finished the quarter with $110 million of available borrowing capacity under the senior secured revolving credit facilities subject to borrowing-based restriction. Consistent with our long-term capital approach, we proactively extended and laddered our unsecured debt maturities, issuing a $75 million, 7.75% note that is due in October 2030, and a $35 million, 7.5% note due October 2028. while at the same time initiating the reduction of our four and seven-eighths notes due in April 2026, expected to be completed on or about November 13th. These actions diversify funding, reduce near-term refinancing risk, and enhance financial flexibility. With that, I will now turn the call back over to Ted.

Thanks, Brendan. On our questions, I'd like to reemphasize how excited we are about the opportunities the newly combined company are already creating. As we move forward, our focus remains on disciplined capital allocation, maintaining a high-quality portfolio, and delivering attractive, risk-adjusted returns for our shareholders. With a more diversified platform and a strengthened balance sheet, we believe we are well-positioned to drive the continued earnings growth and value creation in the quarters ahead. Thank you once again to all of our shareholders for your ongoing support. This concludes our prepared remarks, and I'll turn on the call for any questions.

Thank you. As a reminder, to ask a question, you will need to press star, then the number one on your telephone keypad. And if you would like to withdraw your question, press star one again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Eric Zwick with Lucid Capital Markets. Please go ahead.

Thank you. Good morning, guys. I wanted to start first in terms of with your kind of pronouncement of potentially repurchasing 10% of the shares. I just want to make sure, is that relative to the 930 outstanding balance of about 13.96?

It's relative to the transaction closing date shares, which was about $13.2 million off the top of my head.

Hold on, I have that right here. When we closed the transaction, we committed to shareholders that we'd buy back a bunch of stock as soon as practically possible. And obviously, we were in our blackout period until today. The intention is to buy back 10% of the closing amount of shares.

But Eric, the short answer is there were not a lot of days in Q3 that we could do anything because of some of the rules around six-day cooling off period, things like that. So it's off of a slightly higher number than the September 30th, but that's going to be a decent approximation.

That's right. If you recall, we had...

I was going to say, Eric, we had to wait 60 days until after closing before we could turn the buyback back on. But we did provide some color on post-quarter end daily repurchases and our subsequent events, which was about $1.2 million.

Actually, yep, I did see that too. So great. Yep, that's helpful. And then, you know, secondly, looking at slide 11 and just noticing the quarter-over-quarter improvement in your internal ratings, performing versus underperforming. Was the majority of that change from June 30 to September 30 the result of the combination as well, or was there any additional upgrades going on within the combined portfolio?

Yeah, I mean, the short answer is, like, both. I mean, there were certainly upgrades going on in the portfolio, but the reality is we added a significant chunk through the Logan and kind of using those internal ratings kind of gives you that. So, again, it's a little bit of both, but, you know, my hunch is, without giving the specifics, like, it's probably the assets from Logan coming on to the balance sheet and those ratings as opposed to, you know, a broad swath of increases.

Yeah, probably like the biggest surprise for us over the last six months is we really haven't had a lot of negative portfolio surprises. And we've had a bunch of positive portfolio surprises. And again, our LPs and our shareholders are a little rattled by some of the recent headlines out there around first brands, Tricolor, this telecom name last week. The reality is a lot of those are really idiosyncratic. I mean, a lot of them are related to fraud, number one. But number two is a lot of the underperformance has been in their asset-based parts of their business as opposed to their cash flow-based parts of their business. So this BDC sell-off, we think, is probably overdone.

It's beginning to correct a little bit, but we're not seeing broad-based weakness in our portfolio.

I appreciate the commentary there, and I would echo that sentiment just from the number of portfolios I've reviewed so far this earnings season. Just with respect to the 10 credits that are on non-accrual at this point, could you just kind of maybe walk through your strategy and methodology for resolving those, if there's any potential for restructurings or sales or resolutions in the near term for any of those?

Yeah, Eric, I mean, the short answer is they're all very, like, company-specific. So there is one name that we're in the process of restructuring, and that hopefully is going to get resolved in Q4. You know, it may get flipped into Q1, but that's a kind of relatively near-term thing that will get resolved out. You know, there's one of them that is sort of for sale on the market, and hopefully, you know, they have a couple divisions, and hopefully some or all that gets resolved. in Q4. And then, but, you know, other than that, you know, the rest of them, it's again, you know, continuing to optimize what's the best return, whether that is, you know, putting a little bit more capital, growing the businesses, whether it's looking for, you know, restructuring the balance sheet or just kind of an outright sale. Each of the opportunities are sort of like one-off and have their own kind of pros and cons. But there are, again, probably two or three companies that we would hope to have a,

near-term resolution on. And Eric, I think for the update there. Go ahead.

It's worth highlighting. Last quarter, you may have noticed there were two assets we put on cash basis income recognition. That's generally a good indicator when you start recognizing some income on the assets, and again, when those assets are current on the debt and paying their coupon interest.

Yep, that makes sense.

Thanks for taking my questions this morning. Thanks. Have a good weekend.

Your next question comes from the line of Stephen Martin with Slater Capital. Please go ahead.

Morning, guys, and congratulations on getting the deal done and starting the cleanup process. With respect to the buyback, which you know we applaud, how is that going to affect your ability to continue to do deals going forward? And can you also talk about what the Q4 activity level looks like?

Yeah, I'll answer the first comment. I mean, if you look this quarter, we obviously came into the quarter with a lot of cash because we were just kind of gearing up for this. You know, again, when you take a huge step back, you know, if you look at where spreads are in the middle market versus where our stock trades, you know, it's still accretive for us to buy back stock. So we aren't seeing, there's a massive pipeline, and I should really defer to Patrick on this, but we have a massive pipeline of what I would call generic sponsor finance. You know, the ability to get premium pricing, I would say, are wider spreads. You know, our pipeline in that area is probably not as robust. So we have an unlimited amount of supply, like L-475 to L-500 kind of thing. We're not seeing a lot of, like, you know, much wider spreading stuff that we like right now. I don't know, Patrick, I don't know if you agree with that.

No, I thought you were right. I've kind of said this several times on our calls, but from our perspective, it's around... getting the right pipeline in the portfolio as opposed to, as Ted said, we could load up on S-475, S-500 unit tranches. I'm not sure that that ultimately fits out the right ROE for our shareholders. So we're being careful and judicious with how we actually deploy our capital, but we do have a very, very large pipeline of opportunities to the extent that we feel like the credit and the pricing align with each other.

Well, you know, we're investing in your own stock where your own stock trades.

Yeah, that's right. So, again, we run the math every single quarter for our board, and we show the math of doing a new investment versus the buyback. And, you know, buybacks generally, they're kind of fairly similar, to be honest, depending on what you do on pricing. But buybacks are a guaranteed return. And, you know, we feel like it's pretty Chevrolet-friendly, and we're supportive of making the right capital allocation decisions for our shareholders.

I think it's worth noting, Steve, just sort of reinforcing the point that we think it's important to do for shareholders at these prices, especially because of the day one have impact. However, it is hard to buy back large swaths of capital our equity and maintain prudent leverage ratios. So you'll note the fund is going to buy back $7.5 million. Management is going to come in and fill out the rest of the order book for the buyback. So recognizing exactly what you're getting at.

Yeah, no, and look, we applaud both, and we have been a proponent of management increasing its stake as well. Just out of curiosity, has there been any further realizations? I assume most of what's in the legacy LRFC portfolio is still a lot of equity?

No, I don't think that's a fair statement. I don't have the number off the top of my head, to be honest, Steve. But it's probably disproportionate relative to the rest of our book. But I would have to run the math. I mean... Maybe it's a third to a half of it, you know, $20 million or so of equity. But I would not say it's the majority of it.

Okay. On that same page, just out of curiosity on page 10, the weighted average yield on debt investments at par is 13.8. Does that have something to do with the purchase accounting? Because it jumped up from 10.7 to 13.8.

Yep, that's exactly right. So on a core basis, it's about 10.3%, Steve. But that is the impact of purchase accounting accretion. You know, you may note When you do an asset acquisition, the board negotiates everything on a NAV for NAV basis, but the actual accounting for it, when you issue the equity, it actually is issued at the market price or closing stock price on the issuance date. So because of the discount NAV on the issuance date, that creates a large disconnect between the NAV you're bringing on and the dollar value of the purchase reflected in your financials, which creates an unrealized gain that's allocated to the cost basis of your investment portfolio, which is accreted over time.

Yeah, I got that. You might want to consider either footnoting that or putting a second number there.

Yeah, good call, Steve. Yeah, again, putting the two portfolios together was slightly dilutive on a yield at par basis. But as I mentioned in my call, you know, our new origination was about a 12.5% yield. So obviously, you know, we're being thoughtful and selective about our new investments to kind of work on increasing that yield despite sort of, you know, where kind of spreads are going in the market in general.

Okay. Can you talk about PIX this quarter? It didn't move too much. And what's going on on the pick side of the portfolio?

So, Stephen, it actually did come down quite a bit as a percentage of the book. It's down about 14.3%. And I was pulling up what it was last quarter, but it was quite a bit higher, north of 20%, I believe.

19.5%. What is the percentage of the current quarter's income?

Yeah. Yes, that's right.

But yeah, I mean, it's come down quite materially, Steve. It's come down on a combined basis by, you know, a quarter.

Yeah, by five points. And again, we're, you know, as I said, like, But part of our strategy is a good amount, not good amount, but we have securities on our books that have a mix of cash and pick. We have investments that we do that we look at a first lien and a preferred equity investment together, you know, for the same company. And that preferred is pick and the first lien is cash. So, again, as you kind of noted before, you know, not all pick is bad pick. but we are certainly, you know, actively working to reduce that number and are conscious of, you know, market perception of that and are being careful as we think about new deals and how we think about allocating to kind of make sure that we are over-weighting, you know, cash opportunities versus things that have a blend of cash and pay.

Okay. Brandon, overhead expenses and the expense side of the income statement, Is this quarter exemplary or is there, you know, does this quarter still have merger-related costs that are going to come out?

So, this is actually a pretty decent run rate.

Most of the transaction costs don't flow through the income statement here. They hit NAV on the closing date. There were some elevated expenses, obviously, for time spent integrating the portfolios, et cetera. However, we closed on July 15th, so there's, you know, 15, the next quarter we'll have 15 days of extra expenses. However, we think that, you know, 1.9, 1.8 number is a reasonable run rate for the combined.

Got it. Professional fees were elevated. Is that still residual?

Yes, exactly.

Okay. Thanks a lot, guys. Yeah, thanks, Steve.

Your next question comes from the line of Christopher Nolan with Ladenburg. Please go ahead.

Steve just asked all my questions. Thanks.

Thanks, Chris.

Again, if you would like to ask a question, press star then the number one on your telephone keypad.

Your next question comes from the line of Eric Speak with Lucid Capital Markets. Your line is open.

Thanks. Just a quick follow-up. On the topic of the purchasing accounting accretion, what was all of the discount benefits recorded in 3Q, or I suspect there may still be potentially more, so what is that balance and over what kind of time period will the remaining amount be recognized?

Yeah, it's not a brand on the amount, but it's generally recognized over the duration of the underlying assets themselves. So it's tough to tell you exactly what that would be. The decline curve, if you will, is going to be based on how those assets get monetized and what their maturity dates are, et cetera.

That's right. Go ahead.

I was just going to say, Eric, there's about just north of 21 million of purchase accounting accretion. There's about 18 million left. I would just say, generally speaking, a lot of the purchase accounting increasing tends to work its way through the book in the first couple quarters after closing. It is recognized over time, but obviously you have assets with shorter maturities, things like that, and natural portfolio rotation as a result of the integration process.

effectively a stub quarter.

Yeah, okay, so greater amounts up front, and then it'll kind of trail off as that portfolio kind of matures and pays down over time.

Okay, that's very helpful. Thank you.

There are no further questions at this time. I will now turn the call back over to Ted Coulthorpe for closing remarks.

Thank you all for attending our call.

As always, please reach out to us with any questions which we're happy to discuss. We look forward to speaking to you again in March when we announce our fourth quarter and full year 2025 results. Have a good weekend and thank you very much.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.