Carlyle Secured Lending Inc.
05/11/2026 | Press release | Distributed by Public on 05/11/2026 04:12
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations (dollar amounts in thousands, except share and per share data, unless otherwise indicated)
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We have included or incorporated by reference in this Form 10-Q, and from time to time our management may make, "forward-looking statements". These forward-looking statements are not historical facts, but instead relate to future events or the future performance or financial condition of Carlyle Secured Lending, Inc. (together with its consolidated subsidiaries, "we," "us," "our," "CGBD" or the "Company"). These statements are based on current expectations, estimates and projections about us, our current or prospective portfolio investments, our industry, our beliefs, and our assumptions. The forward-looking statements contained in this Form 10-Q and the documents incorporated by reference herein involve a number of risks and uncertainties, including statements concerning:
•our, or our portfolio companies', future business, operations, operating results or prospects, including our and their ability to achieve our respective objectives;
•the return or impact of current and future investments;
•the general economy and its impact on the industries in which we invest;
•the impact of any protracted decline in the liquidity of credit markets on our business;
•the impact of fluctuations in interest rates on our business;
•the valuation of our investments in portfolio companies, particularly those having no liquid trading market;
•the impact of supply chain constraints on our portfolio companies and the global economy, including, in particular, as a result of the military conflict in Iran;
•the level of inflation, and its impact on our portfolio companies and on the industries in which we invest;
•the impact on our business of changes in laws, policies or regulations (including the interpretation thereof) affecting our operations or the operations of our portfolio companies, including those caused by tariffs and trade disputes with other countries;
•our ability to recover unrealized losses;
•market conditions and our ability to access alternative debt markets and additional debt and equity capital;
•our contractual arrangements and relationships with third parties;
•uncertainty surrounding the financial stability of the United States, Europe and China, including a possible shutdown of the U.S. federal government;
•uncertainty surrounding Russia's military invasion of Ukraine and the impact of geopolitical tensions in other regions such as the Middle East, the status of tariffs and developing tensions between China and the United States;
•competition with other entities and our affiliates for investment opportunities;
•the speculative and illiquid nature of our investments;
•the use of borrowed money to finance a portion of our investments;
•our expected financings and investments;
•the adequacy of our cash resources and working capital;
•the timing, form and amount of any dividend distributions;
•the timing of cash flows, if any, from the operations of our portfolio companies;
•the ability to consummate acquisitions;
•the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks;
•the ability of Carlyle Global Credit Investment Management L.L.C., the investment adviser (the "Investment Adviser"), to locate suitable investments for us and to monitor and administer our investments;
•currency fluctuations and the adverse effect such fluctuations could have on the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars;
•the ability of The Carlyle Group Employee Co., L.L.C. to attract and retain highly talented professionals that can provide services to the investment adviser and administrator;
•our ability to maintain our status as a business development company ("BDC"); and
•our intent to satisfy the requirements of a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the "Code");
•the expected synergies and savings associated with the CSL III Merger (as defined below);
•the ability to realize the benefits of the CSL III Merger;
•the combined company's plans, expectations, objectives and intentions, as a result of the CSL III Merger.
We use words such as "anticipates," "believes," "expects," "intends," "will," "should," "may," "plans," "continue," "believes," "seeks," "estimates," "would," "could," "targets," "projects," "outlook," "potential," "predicts" and variations of these words and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and condition could differ materially from those implied or expressed in the forward-looking information for any reason, including the factors set forth in "Risk Factors" in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2025 (or "2025 Form 10-K").
We have based the forward-looking statements included in this Form 10-Q on information available to us on the date of this Form 10-Q, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (the "SEC"), including our annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part I, Item 1 of this Form 10-Q "Financial Statements." This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in "Risk Factors" in Part I, Item 1A of our 2025 Form 10-K. Our actual results could differ materially from those anticipated by such forward-looking statements due to factors discussed under "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" appearing elsewhere in this Form 10-Q.
Overview
Carlyle Secured Lending, Inc., a Maryland corporation, is a specialty finance company that is a closed-end, externally managed, non-diversified management investment company. We have elected to be regulated as a business development company ("BDC") under the Investment Company Act and have operated our business as a BDC since we began our investment activities. For U.S. federal income tax purposes, we have elected to be treated as a registered investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the "Code"). We were formed in February 2012, commenced investment operations in May 2013 and began trading on the Nasdaq Global Select Market, under the symbol "CGBD," upon completion of our initial public offering in June 2017. Our principal executive offices are located at One Vanderbilt Avenue, Suite 3400, New York, New York 10017.
Our investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through assembling a portfolio of secured debt investments in U.S. middle market companies. Our core investment strategy focuses on lending to U.S. middle market companies, which we define as companies with approximately $25.0 million or greater of earnings before interest, taxes, depreciation and amortization ("EBITDA"), supported by financial sponsors. This core strategy is opportunistically supplemented with differentiated and complementary lending and investing strategies, which take advantage of the broad capabilities of Carlyle's Global Credit platform while offering risk-diversifying portfolio benefits. We seek to achieve our investment objective primarily through direct origination of secured debt instruments, including first lien senior secured loans (which may include stand-alone first lien loans, first lien/last out loans and "unitranche" loans) and second lien senior secured loans (collectively, "Middle Market Senior Loans"), with a minority of our assets invested in higher yielding investments (which may include unsecured debt, subordinated debt and investments in equities and structured products). The Middle Market Senior Loans are generally made to private U.S. middle market companies that are, in many cases, controlled by private equity firms.
We invest primarily in loans to middle market companies whose debt is rated below investment grade, or would likely be rated below investment grade if it was rated. These securities, which are often referred to as "junk," have predominately speculative characteristics with respect to the issuer's capacity to pay interest and repay principal.
We are externally managed by the Investment Adviser, an investment adviser registered under the Investment Advisers Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the "Investment Advisers Act") and a subsidiary of Carlyle. We benefit from the Investment Adviser's investment team of over 210 investment professionals with deep knowledge and expertise across multiple asset classes who are supported by a team of finance, operations and administrative professionals currently employed by Carlyle Employee Co., a wholly owned subsidiary of Carlyle. In conducting our investment activities, we believe that we benefit from the significant scale, relationships and resources of Carlyle, including the Investment Adviser and its affiliates.
First Quarter 2026 Highlights
Quarterly Results
•Net investment income was $25.2 million or $0.36 per common share.
•Adjusted for purchase accounting adjustments, the adjusted net investment income per common share (a non-GAAP financial measure) was $0.36. Refer to the Adjusted Net Investment Income and Adjusted Net Income discussion within this section for further details.
•For the first quarter, dividends declared on common shares were $28.1 million, or $0.40 per share.
•Net investment income for the three months ended March 31, 2026 increased from the comparable period in the prior year primarily driven by a higher average outstanding investment balance due to net origination activity over the last twelve months, including assets acquired in the CSL III Merger and the Credit Fund II Purchase in the first quarter of 2025. This was partially offset by lower yields on investments.
•The NAV per common share decreased to $15.89 as of March 31, 2026 from $16.26 as of December 31, 2025.
Portfolio and Investment Activity
•As of March 31, 2026, we held 248 investments across 171 portfolio companies and 31 industries for a total fair value of $2.3 billion.
•During the three months ended March 31, 2026, our investment balance decreased from $2.5 billion to $2.3 billion primarily due to sales to Credit Fund.
•As of March 31, 2026, non-accrual investments represented 1.0% and 0.9% of our portfolio based on cost and fair value, respectively.
Liquidity and Capital Activity
•On February 11, 2026, we, together with Credit Partners, entered into a second amendment to the Sixth Amended and Restated Limited Liability Company Agreement of Credit Fund. As a result of the amendment, each member's capital commitment increased to $250.0 million.
•On February 18, 2026, our Board of Directors approved a $100.0 million increase in the authorized amount available for repurchases under the Stock Repurchase Program to up to $300.0 million.
•Total liquidity as of March 31, 2026 was $641.9 million in cash and unused debt capacity.
•During the three months ended March 31, 2026, we repurchased 1,536,254 shares of our common stock for an aggregate purchase price of approximately $18.5 million, resulting in accretion to NAV per common share of approximately $0.09.
Recent Developments
•On April 29, 2026, we declared common stock dividends of $0.35 per share to be paid on July 16, 2026.
•From April 1, 2026 through May 8, 2026, we repurchased 773,808 shares of our common stock for an aggregate purchase price of approximately $8.8 million resulting in $0.09 per common share of NAV accretion.
Key Components of Our Results of Operations
As a BDC, we believe that the key components of our results of operations for our business are earnings per share, dividends declared, net investment income and net asset value per common share. For the three months ended March 31, 2026, we recorded basic earnings per common share of $(0.06), declared a dividend of $0.40 per common share and earned $0.36 of net investment income per common share.
The following table sets forth the calculation of basic and diluted earnings per share (dollar amounts in thousands, except share and per share data):
| Three Months Ended | |||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Basic | Diluted | Basic | Diluted | ||||||||||||||||||||
| Net increase (decrease) in net assets resulting from operations attributable to Common Stockholders | $ | (4,218) | $ | (4,218) | $ | 17,385 | $ | 17,385 | |||||||||||||||
| Weighted-average common shares outstanding | 70,907,909 | 70,907,909 | 72,617,834 | 72,617,834 | |||||||||||||||||||
| Earnings per share - Basic and Diluted | $ | (0.06) | $ | (0.06) | $ | 0.24 | $ | 0.24 | |||||||||||||||
For the three months ended March 31, 2026 and December 31, 2025, we declared dividends per common share of $0.40 in each period. As of March 31, 2026 and December 31, 2025, our NAV per share was $15.89 and $16.26, respectively.
Investment Income
We generate investment income primarily in the form of interest income on debt investments we hold. In addition, we generate income from dividends on direct equity investments, capital gains on the sales of loans and debt and equity securities and various loan origination and other fees. Our debt investments generally have a stated term of five to eight years and generally bear interest at a floating rate usually determined on the basis of a benchmark such as SOFR. Interest on these debt investments is generally paid quarterly. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. At times, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity reflects the proceeds of sales of securities. We may also generate investment income in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees.
Expenses
Our primary operating expenses include: (i) investment advisory fees, including base management fees and incentive fees, to the Investment Adviser pursuant to the Investment Advisory Agreement; (ii) debt service and other costs of borrowings or other financing arrangements; (iii) costs and other expenses and our allocable portion of overhead incurred by our Administrator in performing its administrative obligations under the Administration Agreement; and (iv) other operating expenses summarized below:
•administration fees payable under our Administration Agreement and Sub-Administration Agreements, including related expenses;
•the costs of any offerings of our common stock and other securities, if any;
•calculating individual asset values and our net asset value (including the cost and expenses of any independent valuation firms);
•expenses, including travel expenses, incurred by the Investment Adviser, or members of the Investment Adviser team managing our investments, or payable to third parties, performing due diligence on prospective portfolio companies;
•the allocated costs incurred by the Investment Adviser in providing managerial assistance to those portfolio companies that request it;
•amounts payable to third parties relating to, or associated with, making or holding investments;
•the costs associated with subscriptions to data service, research-related subscriptions and expenses and quotation equipment and services used in making or holding investments;
•transfer agent and custodial fees;
•commissions and other compensation payable to brokers or dealers;
•U.S. federal, state and local taxes;
•independent director fees and expenses;
•costs of preparing financial statements and maintaining books and records, costs of preparing tax returns, costs of Sarbanes-Oxley Act compliance and attestation and costs of filing reports or other documents with the SEC (or other regulatory bodies), and other reporting and compliance costs, including federal and state registration and any applicable listing fees;
•the costs of any reports, proxy statements or other notices to our stockholders and the costs of any stockholders' meetings;
•the costs of specialty and custom software for monitoring risk, compliance and overall portfolio;
•fidelity bond, liability insurance, and any other insurance premiums;
•indemnification payments;
•direct fees and expenses associated with independent audits, agency, consulting and legal costs; and
•all other expenses incurred by us or our Administrator in connection with administering our business, including our allocable share of certain officers and their staff compensation.
Net Investment Income
The following table summarizes our net investment income and net investment income per common share:
| Three Months Ended | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
| Total investment income | $ | 64,079 | $ | 66,913 | |||||||
| Total expenses (including excise tax expense) | 38,875 | 42,885 | |||||||||
| Net investment income | $ | 25,204 | $ | 24,028 | |||||||
| Weighted-average common shares outstanding | 70,907,909 | 72,617,834 | |||||||||
| Net investment income per common share | $ | 0.36 | $ | 0.33 | |||||||
Adjusted Net Investment Income and Adjusted Net Income
On a supplemental basis, we are disclosing Adjusted Net Investment Income, Adjusted Net Investment Income Per Common Share, Adjusted Net Income and Adjusted Net Income Per Common Share each of which is calculated and presented on a basis other than in accordance with GAAP ("non-GAAP"). We use these non-GAAP financial measures internally to analyze and evaluate financial results and performance, and we believe these non-GAAP financial measures are useful to investors as an additional tool to evaluate our ongoing results and trends and to review our performance without giving effect to (i) the amortization/accretion resulting from the new cost basis of the investments acquired and accounted for under the acquisition method of accounting in accordance with ASC 805 and (ii) the one-time purchase or non-recurring investment income and expense events, including the effects on incentive fees. The presentation of these non-GAAP measures is not intended to be a substitute for financial results prepared in accordance with GAAP and should not be considered in isolation.
We believe that excluding the financial impact of the purchase premium in the above non-GAAP financial measures is useful for investors as this is a non-cash expense/loss and is one method we use to measure our operations. In addition, we use the non-GAAP financial measures described above internally to analyze and evaluate financial results and performance and to compare our financial results with those of other business development companies that do not have similar financial impacts from asset acquisitions and have not had similar one-time or non-recurring events. We believe "Adjusted Net Investment Income", "Adjusted Net Investment Income Per Common Share", "Adjusted Net Income" and "Adjusted Net Income Per Common Share" are useful to investors as an additional tool to evaluate our ongoing results and trends without giving effect these considerations and these metrics are used to evaluate our economic earnings.
The following table summarizes our Adjusted Net Investment Income, Adjusted Net Investment Income Per Common Share, Adjusted Net Income, and Adjusted Net Income Per Common Share:
| Three Months Ended | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
| Net investment income | $ | 25,204 | $ | 24,028 | |||||||
|
Acceleration of debt issuance costs, net of incentive fee impact (1)
|
- | 1,691 | |||||||||
|
Amortization of premium/discount on acquired assets(2)
|
178 | 107 | |||||||||
| Adjusted Net Investment Income | $ | 25,382 | $ | 25,826 | |||||||
| Net increase (decrease) in net assets resulting from operations attributable to Common Stockholders | $ | (4,218) | $ | 17,385 | |||||||
|
Acceleration of debt issuance costs, net of incentive fee impact (1)
|
- | 1,691 | |||||||||
|
Amortization of premium/discount on acquired assets(2)
|
178 | 107 | |||||||||
|
Reversal of unrealized appreciation from the amortization of premium/discount on acquired assets |
(178) | (107) | |||||||||
| Adjusted Net Income | $ | (4,218) | $ | 19,076 | |||||||
| Net Investment Income Per Share | $ | 0.36 | $ | 0.33 | |||||||
|
Acceleration of debt issuance costs, net of incentive fee impact (1)
|
- | 0.02 | |||||||||
|
Amortization of premium/discount on acquired assets(2)
|
0.00 | 0.01 | |||||||||
| Adjusted Net Investment Income Per Common Share | $ | 0.36 | $ | 0.36 | |||||||
| Net Income Per Share | $ | (0.06) | $ | 0.24 | |||||||
|
Acceleration of debt issuance costs, net of incentive fee impact (1)
|
- | 0.02 | |||||||||
|
Amortization of premium/discount on acquired assets(2)
|
0.00 | 0.01 | |||||||||
|
Reversal of unrealized appreciation from the amortization of premium/discount on acquired assets |
(0.00 | ) | (0.01) | ||||||||
| Adjusted Net Income Per Common Share | $ | (0.06) | $ | 0.26 | |||||||
| Weighted-average common shares outstanding | 70,907,909 | 72,617,834 | |||||||||
(1)On December 1, 2025, the 2028 Notes were redeemed. In connection with the 2015-1R Refinancing and the redemption of the 2028 Notes, debt issuance costs were accelerated in accordance with GAAP for the three months ended December 31, 2025. Refer to Note 9, Borrowings, in the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q for more information on the redemption of the 2028 Notes.
(2)This adjustment represents the difference between GAAP amortization under the asset acquisition method of accounting, in accordance with ASC 805 and management's non-GAAP measure of amortization related to assets acquired in connection with the CSL III Merger on March 27, 2025, and the Credit Fund II Purchase on February 11, 2025. This adjustment reflects management's view of the economic yield on the acquired assets and is consistent with the internal evaluation of performance.
Portfolio and Investment Activity
Portfolio Overview
The following tables summarize certain characteristics of our investment portfolio as of March 31, 2026:
| First Lien Debt | Second Lien Debt | Equity Investments | Investment Funds | Total Investments | |||||||||||||||||||||||||
| Count of investments | 196 | 8 | 39 | 5 | 248 | ||||||||||||||||||||||||
| Investments, at amortized cost | $ | 1,933,210 | $ | 87,031 | $ | 135,837 | $ | 150,300 | $ | 2,306,378 | |||||||||||||||||||
| Investments, at fair value | $ | 1,899,631 | $ | 78,325 | $ | 156,367 | $ | 142,782 | $ | 2,277,105 | |||||||||||||||||||
| Percentage of total investments at fair value | 83.4 | % | 3.4 | % | 6.9 | % | 6.3 | % | 100.0 | % | |||||||||||||||||||
| Weighted Average Yields at | |||||||||||
| Amortized Cost | Fair Value | ||||||||||
|
First Lien Debt(1)
|
9.5 | % | 9.7 | % | |||||||
|
Second Lien Debt(1)
|
12.2 | % | 13.6 | % | |||||||
|
Total Debt and Income Producing Investments(1)(2)
|
10.0 | % | 10.2 | % | |||||||
(1)Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of March 31, 2026. Weighted average yield at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount ("OID") and market discount earned, divided by (b) total fair value included in such securities. Weighted average yield at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned, divided by (b) total amortized cost included in such securities. Weighted average yields exclude investments on non-accrual status. Actual yields earned over the life of each investment could differ materially from the yields presented above. Inclusive of all debt and income producing investments and investments on non-accrual status, the weighted average yield on amortized cost was 9.9% as of March 31, 2026.
(2)Weighted average yield for total debt and income producing investments includes Credit Fund and Structured Credit Partners as well as income producing equity investments.
The geographical composition of investments at fair value as of March 31, 2026 were as follows:
| As of | ||||||||
| Geography-% of Fair Value | March 31, 2026 | |||||||
| Australia | 0.2 | % | ||||||
| Canada | 3.2 | |||||||
| France | 1.2 | |||||||
| Ireland | 0.3 | |||||||
| Italy | 1.7 | |||||||
| Luxembourg | 0.5 | |||||||
| Spain | 0.3 | |||||||
| Sweden | 0.0 | |||||||
| United Kingdom | 4.8 | |||||||
| United States | 87.8 | |||||||
| Total | 100.0 | % | ||||||
The industry composition of investments at fair value as of March 31, 2026 were as follows:
| As of | ||||||||
| Industry-% of Fair Value | March 31, 2026 | |||||||
| Aerospace & Defense | 1.9 | % | ||||||
| Auto Aftermarket & Services | 1.7 | |||||||
| Beverage & Food | 0.5 | |||||||
| Business Services | 7.4 | |||||||
| Capital Equipment | 4.6 | |||||||
| Chemicals, Plastics & Rubber | 1.3 | |||||||
| As of | ||||||||
| Industry-% of Fair Value | March 31, 2026 | |||||||
| Construction & Building | 2.6 | % | ||||||
| Consumer Goods: Durable | 0.0 | |||||||
| Consumer Goods: Non-Durable | 0.2 | |||||||
| Consumer Services | 8.1 | |||||||
| Containers, Packaging & Glass | 2.4 | |||||||
| Diversified Financial Services | 9.2 | |||||||
| Energy: Electricity | 0.5 | |||||||
| Energy: Oil & Gas | 0.1 | |||||||
| Environmental Industries | 2.6 | |||||||
| Healthcare & Pharmaceuticals | 18.4 | |||||||
| High Tech Industries | 6.9 | |||||||
| Investment Funds | 6.3 | |||||||
| Leisure Products & Services | 5.3 | |||||||
| Media: Advertising, Printing & Publishing | 0.0 | |||||||
| Media: Broadcasting & Subscription | 0.0 | |||||||
| Media: Diversified & Production | 0.6 | |||||||
| Retail | 0.9 | |||||||
| Software | 13.9 | |||||||
| Sovereign & Public Finance | 0.3 | |||||||
| Telecommunications | 1.1 | |||||||
| Transportation: Cargo | 0.8 | |||||||
| Transportation: Consumer | 0.5 | |||||||
| Utilities: Oil & Gas | 0.6 | |||||||
| Utilities: Water | 0.4 | |||||||
| Wholesale | 0.9 | |||||||
| Total | 100.0 | % | ||||||
Our investment activity for the three months ended March 31, 2026 is presented below (information presented herein is at amortized cost unless otherwise indicated):
| Three Months Ended | |||||
| March 31, 2026 | |||||
| Investments: | |||||
|
Total investments, beginning of period
|
$ | 2,469,396 | |||
| New investments purchased | 238,100 | ||||
| Net accretion of discount on investments | 2,513 | ||||
| Net realized gain (loss) on investments | (9,482) | ||||
| Investments sold or repaid | (394,149) | ||||
|
Total Investments, end of period
|
$ | 2,306,378 | |||
| Principal amount of investments funded: | |||||
| First Lien Debt | $ | 197,847 | |||
| Second Lien Debt | 740 | ||||
|
Equity Investments(1)
|
18,909 | ||||
| Investment Funds | 19,799 | ||||
| Total | $ | 237,295 | |||
| Principal amount of investments sold or repaid: | |||||
| First Lien Debt | $ | (355,563) | |||
| Second Lien Debt | (11,702) | ||||
|
Equity Investments(1)
|
(1,991) | ||||
| Investment Funds | (40,500) | ||||
| Total | $ | (409,756) | |||
|
Number of new investment commitments(2)(3)
|
14 | ||||
| Average new investment commitment amount | $ | 14,188 | |||
(1)Based on cost paid/proceeds received from equity activity.
(2)Represents commitments to a portfolio company as part of an individual transaction, excluding any investment fund activity.
(3)For the three months ended March 31, 2026, 100.0% of new funded debt investments were at floating interest rates.
See the Consolidated Schedules of Investments as of March 31, 2026 to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q for more information on these investments, including a list of companies and type and amount of investments.
Portfolio Credit
As part of the monitoring process, the Investment Adviser has developed risk assessment policies pursuant to which it regularly assesses the risk profile of each of our first lien and second lien debt investments and rates each of them based on the following categories, which we refer to as "Internal Risk Ratings". Key drivers of internal risk ratings include financial metrics, financial covenants, liquidity and enterprise value coverage. Pursuant to these risk policies, an Internal Risk Rating of 1 - 5, which are defined below, is assigned to each first lien and second lien debt investment in our portfolio.
| Rating | Definition | ||||
| 1 |
Borrower is operating above expectations, and the trends and risk factors are generally favorable.
|
||||
| 2 | Borrower is operating generally as expected or at an acceptable level of performance. The level of risk to our initial cost basis is similar to the risk to our initial cost basis at the time of origination. This is the initial risk rating assigned to all new borrowers. | ||||
| 3 |
Borrower is operating below expectations and level of risk to our cost basis has increased since the time of
origination. The borrower may be out of compliance with debt covenants. Payments are generally current although there may be higher risk of payment default.
|
||||
| 4 | Borrower is operating materially below expectations and the loan's risk has increased materially since origination. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due, but generally not by more than 120 days. It is anticipated that we may not recoup our initial cost basis and may realize a loss of our initial cost basis upon exit. | ||||
| 5 | Borrower is operating substantially below expectations and the loan's risk has increased substantially since origination. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. It is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit. | ||||
The Investment Adviser monitors and, when appropriate, changes the risk ratings assigned to each first lien and second lien debt investment in our portfolio. The Investment Adviser reviews our investment ratings in connection with our quarterly valuation process. The below table summarizes the Internal Risk Ratings as of March 31, 2026 and December 31, 2025.
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Fair Value | % of Fair Value | Fair Value | % of Fair Value | ||||||||||||||||||||
| Internal Risk Rating 1 | $ | - | - | % | $ | - | - | % | |||||||||||||||
| Internal Risk Rating 2 | 1,803,165 | 91.2 | 2,011,980 | 93.3 | |||||||||||||||||||
| Internal Risk Rating 3 | 154,174 | 7.8 | 114,456 | 5.3 | |||||||||||||||||||
| Internal Risk Rating 4 | 20,617 | 1.0 | 20,240 | 0.9 | |||||||||||||||||||
| Internal Risk Rating 5 | - | - | 10,301 | 0.5 | |||||||||||||||||||
| Total | $ | 1,977,956 | 100.0 | % | $ | 2,156,977 | 100.0 | % | |||||||||||||||
As of March 31, 2026 and December 31, 2025, the weighted average Internal Risk Rating of our first lien and second lien debt investment portfolio was 2.1. As of March 31, 2026 and December 31, 2025, five and six of our first lien and second lien debt investments were assigned an Internal Risk Rating of 4 or 5, respectively.
The following table summarizes the fair value of our performing and non-accrual/non-performing investments as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||
| Number of Investments | Fair Value | % of Fair Value | Number of Investments | Fair Value | % of Fair Value | ||||||||||||||||||||||||||||||
| Performing | 242 | $ | 2,256,488 | 99.1 | % | 222 | $ | 2,433,381 | 98.8 | % | |||||||||||||||||||||||||
|
Non-accrual(1)
|
6 | 20,617 | 0.9 | 7 | 30,541 | 1.2 | |||||||||||||||||||||||||||||
| Total | 248 | $ | 2,277,105 | 100.0 | % | 229 | $ | 2,463,922 | 100.0 | % | |||||||||||||||||||||||||
(1)For information regarding our non-accrual policy, see Note 2, Significant Accounting Policies, to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.
Portfolio Financing
Our primary sources of financing consist of secured debt, unsecured debt, and securitizations, which are presented on the Consolidated Statements of Assets and Liabilities as Debt and secured borrowings. Refer to Note 9, Borrowings, to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding our financing. The following table details those sources of financing:
| Outstanding Principal Balance as of | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
| Secured Debt | |||||||||||
| Credit Facility | $ | 415,319 | $ | 563,660 | |||||||
| Unsecured Debt | |||||||||||
| 2030 Notes | 300,000 | 300,000 | |||||||||
| 2031 Notes | 300,000 | 300,000 | |||||||||
| Securitizations | |||||||||||
| 2015-1N Debt | 380,000 | 380,000 | |||||||||
| Total | $ | 1,395,319 | $ | 1,543,660 | |||||||
| Weighted average interest rate | 5.78 | % | 6.02 | % | |||||||
Credit Facilities
On March 21, 2014, we closed on a senior secured revolving credit facility (the "Credit Facility"), which was most recently amended and restated on March 12, 2025, and may be further amended from time to time. On July 10, 2025, we increased the total commitments under the Credit Facility by $25,000, resulting in total commitments increasing to $960,000 ($935,000 prior to the July 10, 2025 increase), pursuant to the terms of the agreement, subject to availability under the Credit Facility, which is based on certain advance rates multiplied by the value of our portfolio investments (subject to certain concentration limitations) net of certain other indebtedness that we may incur in accordance with the terms of the Credit Facility. Proceeds of the Credit Facility may be used for general corporate purposes, including the funding of portfolio investments. Maximum capacity under the Credit Facility may be increased, subject to certain conditions, to $1,402,500 through the exercise by us of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. The Credit Facility includes a $75,000 limit for swingline loans and a $30,000 limit for letters of credit. Subject to certain exceptions, the Credit Facility is secured by a first lien security interest in substantially all of the portfolio investments held by us and Credit Fund II. The Credit Facility includes customary covenants, including certain financial covenants related to asset coverage, stockholders' equity and liquidity, certain limitations on the incurrence of additional indebtedness and liens, and other maintenance covenants, as well as usual and customary events of default for senior secured revolving credit facilities of this nature.
The Credit Facility consisted of the following as of March 31, 2026 and December 31, 2025:
|
Total Facility
|
Borrowings Outstanding
|
Unused
Portion(1)
|
Amount Available(2)
|
Weighted Average Interest Rate | |||||||||||||||||||||||||
| March 31, 2026 | $ | 960,000 | $ | 415,319 | $ | 544,681 | $ | 544,632 | 4.98 | % | |||||||||||||||||||
| December 31, 2025 | $ | 960,000 | $ | 563,660 | $ | 396,340 | $ | 396,340 | 5.28 | % | |||||||||||||||||||
(1)The unused portion is the amount upon which commitment fees are based.
(2)The amount available is based on the computation of collateral to support the borrowings and subject to compliance with applicable covenants and financial ratios.
Effective March 27, 2025, as a result of the completion of the CSL III Merger, we succeeded to the obligations of CSL III under a senior secured revolving credit facility (as amended, the "CSL III SPV Credit Facility" and together with the Credit Facility, the "Credit Facilities") previously entered into by CSL III SPV on September 30, 2022. On October 2, 2025, all outstanding borrowings of the CSL III SPV Credit Facility were repaid in full. Upon such repayment, the CSL III SPV Credit Facility was terminated and all commitments and obligations of the lenders were cancelled.
Unsecured Debt
On December 30, 2019, we closed a private offering of $115.0 million in aggregate principal amount of 4.75% senior unsecured notes due December 31, 2024 and on December 11, 2020, we issued an additional $75.0 million aggregate principal
amount of 4.50% senior unsecured notes due December 31, 2024 (together the "2024 Notes"). The 2024 Notes were repaid in full at maturity on December 31, 2024.
On November 20, 2023, we completed a public offering of $85.0 million in aggregate principal of 8.20% senior unsecured notes due December 1, 2028 (the "2028 Notes"). On December 1, 2025, we redeemed the 2028 Notes at a redemption price equal to 100% of the principal amount redeemed, plus accrued and unpaid interest otherwise payable for the then-current quarterly interest period accrued to, but excluding, the December 1, 2025 (the "Redemption Date"). In connection with the redemption, the 2028 Notes were delisted from the Nasdaq Global Select Market ("Nasdaq").
On October 18, 2024, we completed a public offering of $300.0 million aggregate principal of 6.75% senior unsecured notes due February 18, 2030 (the "2030 Notes"). We may redeem the 2030 Notes in whole or in part at our option at any time or from time to time at a redemption price equal to the greater of (1) (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming the notes matured on January 18, 2030) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 45 basis points less (b) interest accrued to the date of redemption, or (2) 100% of the principal amount of the 2030 Notes to be redeemed, plus, in either case, accrued and unpaid interest thereon to, but excluding, the redemption date. At any time on or after January 18, 2030, we may redeem the 2030 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the 2030 Notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding the redemption date.
On October 7, 2025, we completed a public offering of $300.0 million aggregate principal of 5.75% senior unsecured notes due February 15, 2031 (the "2031 Notes" and together with the 2024 Notes, 2028 Notes, and 2030 Notes, the "Senior Notes"). We may redeem the 2031 Notes, in whole or in part at our option at any time or from time to time, at a redemption price equal to the greater of (1) (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming the notes matured on January 15, 2031) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 35 basis points, less (b) interest accrued to the date of redemption, or (2) 100% of the principal amount of the 2031 Notes to be redeemed, plus, in either case, accrued and unpaid interest thereon to, but excluding, the redemption date. At any time on or after January 15, 2031, we may redeem the 2031 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the 2031 Notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the redemption date.
The following table details the carrying value of our Senior Notes as of March 31, 2026 and December 31, 2025:
| As of | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
| 2030 Notes | $ | 300,000 | $ | 300,000 | |||||||
| 2031 Notes | 300,000 | 300,000 | |||||||||
| Total principal amount | 600,000 | 600,000 | |||||||||
| Less: unamortized debt issuance costs | (8,737) | (9,240) | |||||||||
| Effective interest rate swap hedge | (5,048) | (1,184) | |||||||||
| Total carrying value | $ | 586,215 | $ | 589,576 | |||||||
| Weighted average interest rate | 6.44 | % | 6.84 | % | |||||||
In November 2023, in connection with the issuance of the 2028 Notes, we entered into a five-year interest rate swap agreement with Morgan Stanley Capital Services LLC ("Morgan Stanley") to mitigate the exposure to adverse fluctuations in interest rates for a total notional amount of $85.0 million, maturing on December 1, 2028. Morgan Stanley had the ability to exercise an early termination commencing on December 1, 2025, subject to providing written notice thirty days prior. Under the interest rate swap agreement, we received a fixed interest of 8.20% and paid a floating rate based on the compounded average daily SOFR rate plus 3.139%. We designated this interest rate swap agreement as a hedging instrument to the 2028 Notes. In connection with the redemption of the 2028 Notes, Morgan Stanley elected to exercise the early termination right, and the interest rate swap agreement was terminated effective December 1, 2025.
In October 2024, in connection with the issuance of the 2030 Notes, we entered into an interest rate swap agreement with JP Morgan Chase Bank N.A. ("JP Morgan") to mitigate the exposure to adverse fluctuations in interest rates for a total notional amount of $300.0 million, maturing on February 18, 2030. Under the interest rate agreement, commencing on the effective date of August 18, 2025, we receive a fixed interest rate of 6.75% and pay a floating interest rate based on the compounded average daily SOFR plus 3.235%. We designated this interest rate swap agreement as a hedging instrument to the 2030 Notes.
In October 2025, in connection with the issuance of the 2031 Notes, we entered into an interest rate swap agreement with JP Morgan to mitigate the exposure to adverse fluctuations in interest rates for a total notional amount of $300.0 million, maturing on February 15, 2031. The interest rate swap agreement was executed on September 30, 2025 and became effective on October 7, 2025. Under the interest rate swap agreement, we receive a fixed interest rate of 5.75% and pay a floating interest rate based on the compounded average daily SOFR plus 2.312%. We designated this interest rate swap agreement as a hedging instrument to the 2031 Notes.
Securitizations
On June 26, 2015, we completed the 2015-1 Debt Securitization (as defined in Note 1, Organization, to these unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q), which was refinanced on August 30, 2018 (the "2015-1 Debt Securitization Refinancing") by redeeming in full the previously issued securitized notes and issuing new notes (the "2015-1R Notes"). The 2015-1R Notes were issued by Carlyle Direct Lending CLO 2015-1R LLC (the "2015-1 Issuer"), a wholly owned and consolidated subsidiary of us. The 2015-1R Notes were secured by a diversified portfolio of the 2015-1 Issuer consisting primarily of first and second lien senior secured loans.
We received 100% of the $125,900 in nominal value of the non-interest bearing preferred interests issued by the 2015-1 Issuer (the "2015-1 Issuer Preferred Interests") on the closing date of the 2015-1 Debt Securitization in exchange for our contribution to the 2015-1 Issuer of the initial closing date loan portfolio. Following the 2015-1 Debt Securitization Refinancing, the 2015-1 Issuer Preferred Interests were reduced by approximately $21,375 to approximately $104,525.
On July 2, 2024, we and the 2015-1 Issuer completed a refinancing of the 2015-1R Notes (the "2015-1R Refinancing"), which resulted in the issuance of a $410.0 million collateralized loan obligation (the "2015-1N Debt"). On the closing date of the 2015-1R Refinancing, the 2015-1 Issuer refinanced the 2015-1R Notes with the 2015-1N Debt, issued additional 2015-1 Issuer Preferred Interests to us in the aggregate notional amount of $13,500, thereby increasing the 2015-1 Issuer Preferred Interests held by us to $118,054 and extended the reinvestment period end date and maturity date applicable to the 2015-1 Issuer to July 15, 2028 and July 1, 2036, respectively.
Following the 2015-1R Refinancing, we retained the 2015-1 Issuer Preferred Interests. The 2015-1N Debt in the 2015-1R Refinancing was issued by the 2015-1 Issuer and is secured by a diversified portfolio of the 2015-1 Issuer consisting primarily of first and second lien senior secured loans. As of the closing date, we retained the $30.0 million Class C-R Notes. The following table summarizes the terms of the 2015-1N Debt tranches and their principal amount:
| As of | |||||||||||||||||||||||||||||
|
2015-1N Debt Tranche (1)
|
Credit Rating | Reference Rate | Spread | March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||
| Class A-1-1-A Notes | AAA | SOFR | 1.80% | $ | 240,000 | $ | 240,000 | ||||||||||||||||||||||
| Class A-L Loans | AAA | SOFR | 1.80% | 50,000 | 50,000 | ||||||||||||||||||||||||
| Class A-1-2-B Notes | AAA | SOFR | 2.00% | 20,000 | 20,000 | ||||||||||||||||||||||||
| Class A-2-RR Notes | AA | SOFR | 2.15% | 30,000 | 30,000 | ||||||||||||||||||||||||
| Class B-R Notes | Single A | SOFR | 2.75% | 40,000 | 40,000 | ||||||||||||||||||||||||
| Total Principal Amount Outstanding | 380,000 | 380,000 | |||||||||||||||||||||||||||
| Less: unamortized debt issuance costs | (1,979) | (2,026) | |||||||||||||||||||||||||||
| Total Carrying Value | $ | 378,021 | $ | 377,974 | |||||||||||||||||||||||||
| Weighted average interest rate | 5.61 | % | 5.84 | % | |||||||||||||||||||||||||
(1)Excludes $30.0 million of Class C-R notes, which are rated BBB-, accrue interest at SOFR plus spread of 3.75%, and are retained by the Company.
Middle Market Credit Fund, LLC ("Credit Fund")
On February 29, 2016, we and Credit Partners USA LLC ("Credit Partners") entered into an amended and restated limited liability company agreement, as amended from time to time, to co-manage Credit Fund, a Delaware limited liability company that is not consolidated in our unaudited consolidated financial statements. Credit Fund is managed by a six-member board of managers, on which we and Credit Partners each have equal representation. We and Credit Partners each have 50% economic ownership of Credit Fund and have commitments to fund, from time to time, capital of up to $250,000 each as of March 31, 2026, which increased from $175,000 each as of February 11, 2026. Funding of such commitments generally requires the approval of the board of Credit Fund, including the board members appointed by us. By virtue of our respective
membership interests, we and Credit Partners each indirectly bear an allocable share of all expenses and other obligations of Credit Fund.
Credit Fund primarily invests in first lien loans of middle market companies sourced primarily by us and our affiliates. Portfolio and investment decisions with respect to Credit Fund must be unanimously approved by a quorum of Credit Fund's investment committee consisting of an equal number of representatives of us and Credit Partners. Therefore, although we own more than 25% of the voting securities of Credit Fund, we do not believe that we have control over Credit Fund (other than for purposes of the Investment Company Act). Middle Market Credit Fund SPV, LLC ("Credit Fund Sub"), a Delaware limited liability company is a wholly owned subsidiary of Credit Fund and is consolidated in Credit Fund's consolidated financial statements.
Since inception of Credit Fund and through March 31, 2026, we and Credit Partners each made capital contributions of $1 in members' equity and $216,000 in subordinated loans to Credit Fund. On March 24, 2025, we and Credit Partners each received an aggregate return of capital on subordinated loans of $62,500. Since inception, we and Credit Partners each have received an aggregate return of capital on subordinated loans of $85,500. The cost and fair value of our investment in Credit Fund were $130,501 and $122,983, respectively, as of March 31, 2026 and $171,001 and $163,614, respectively, as of December 31, 2025.
Our share of the dividends declared by Credit Fund was $5,000 for the three months ended March 31, 2026 and $5,000 for the three months ended December 31, 2025. As of both March 31, 2026 and December 31, 2025, our annualized dividend yield from Credit Fund was 15.3%. Below is a summary of Credit Fund's portfolio as of March 31, 2026 and December 31, 2025:
| As of | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
|
Senior secured loans(1)
|
$ | 1,039,554 | $ | 978,828 | |||||||
|
Weighted average yields of senior secured loans based on amortized cost(2)
|
8.9 | % | 9.1 | % | |||||||
|
Weighted average yields of senior secured loans based on fair value(2)
|
9.0 | % | 9.1 | % | |||||||
| Number of portfolio companies in Credit Fund | 60 | 55 | |||||||||
|
Average amount per portfolio company(1)
|
$ | 17,326 | $ | 17,797 | |||||||
| Number of loans on non-accrual status | 1 | 2 | |||||||||
| Fair value of loans on non-accrual status | $ | 1,739 | $ | 6,297 | |||||||
|
Percentage of loans at floating interest rates(3)(4)
|
100.0 | % | 100.0 | % | |||||||
| Fair value of loans with PIK provisions | $ | 37,111 | $ | 36,618 | |||||||
|
Percentage of portfolio with PIK provisions(4)
|
3.6 | % | 3.8 | % | |||||||
(1)At par/principal amount.
(2)Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of March 31, 2026 and December 31, 2025. Weighted average yield on debt at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount ("OID") and market discount earned, divided by (b) total fair value included in such securities. Weighted average yield on debt at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned, divided by (b) total amortized cost included in such securities. Weighted average yields exclude investments on non-accrual status. Actual yields earned over the life of each investment could differ materially from the yields presented above.
(3)Floating rate debt investments are generally subject to interest rate floors.
(4)Percentages based on fair value.
Structured Credit Partners JV, LLC ("Structured Credit Partners")
On December 23, 2025, we, together with CARS, an affiliated BDC, and Sixth Street (collectively, the "SCP Members"), entered into an amended and restated limited liability company agreement, as amended from time to time, to co-manage Structured Credit Partners, a Delaware limited liability company that is not consolidated in our consolidated financial statements. Structured Credit Partners is managed by a board consisting of eight members, on which each Member has equal representation. The SCP Members each hold 25% voting interests through non-economic Class A membership interests. Economic interests are based on funded capital contributions and capital commitments through Class B and Class C membership as follows:
| Class A Capital Commitment | Class A Capital Called | Class B Capital Commitment | Class B Capital Called | Class C Capital Commitment | Class C Capital Called | |||||||||||||||
| Carlyle Secured Lending, Inc. | $ | 1 | $ | 1 | $ | 135,000 | $ | 19,798 | $ | 15,000 | $ | - | ||||||||
| Carlyle Credit Solutions, Inc. | 1 | 1 | 15,000 | 2,200 | 135,000 | - | ||||||||||||||
| Sixth Street | 2 | 2 | 150,000 | 21,998 | 150,000 | - | ||||||||||||||
| Total | $ | 4 | $ | 4 | $ | 300,000 | $ | 43,996 | $ | 300,000 | $ | - | ||||||||
Funding of capital commitments generally requires board approval. In accordance with their respective economic interests, the SCP Members indirectly bear an allocable share of all expenses and other obligations of Structured Credit Partners.
Structured Credit Partners invests in the equity and debt of financing subsidiaries that act as warehouses for the acquisition of broadly syndicated loans and issue debt securities collateralized by such loans, with investment opportunities sourced primarily by affiliates of the SCP Members. Portfolio and investment decisions with respect to Structured Credit Partners must be unanimously approved by a quorum of Structured Credit Partners' investment committee consisting of an equal number of representatives appointed by the Carlyle-affiliated SCP Members and the Sixth Street-affiliated SCP Members. Therefore, because we do not own more than 25% of the voting interests of Structured Credit Partners, we do not believe that we have control over Structured Credit Partners for accounting purposes or for purposes of the Investment Company Act.
Our share of the dividends declared by Structured Credit Partners was $302 for the three months ended March 31, 2026. As of March 31, 2026, our annualized dividend yield from Structured Credit Partners was 10.7%.
Below is a summary of Structured Credit Partners' portfolio as of March 31, 2026:
| As of | |||||
| March 31, 2026 | |||||
|
Senior secured loans(1)
|
$ | 1,044,693 | |||
|
Weighted average yield on senior secured loans based on amortized cost(2)
|
6.9 | % | |||
|
Weighted average yield on senior secured loans based on fair value(2)
|
7.0 | % | |||
| Number of portfolio companies in Structured Credit Partners | 334 | ||||
| Average amount per portfolio company | $ | 3,128 | |||
|
Floating rate loans(3)
|
100.0 | % | |||
(1)At par/principal amount.
(2)Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of March 31, 2026. Weighted average yield on debt at fair value is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount ("OID") and market discount earned, divided by (b) total fair value included in such securities. Weighted average yield on debt at amortized cost is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of OID and market discount earned, divided by (b) total amortized cost included in such securities. Weighted average yields exclude investments on non-accrual status. Actual yields earned over the life of each investment could differ materially from the yields presented above.
(3)Percent of total investments at fair value.
Consolidated Results of Operations
For the three months ended March 31, 2026 and December 31, 2025
The following table sets forth information regarding our consolidated results of operations for the three months ended March 31, 2026 and December 31, 2025:
| Three Months Ended | Change | ||||||||||||||||
| March 31, 2026 | December 31, 2025 | $ | |||||||||||||||
| Investment income: | |||||||||||||||||
| Interest income | $ | 49,701 | $ | 54,638 | $ | (4,937) | |||||||||||
| PIK income | 6,481 | 6,083 | 398 | ||||||||||||||
| Dividend income | 5,302 | 5,000 | 302 | ||||||||||||||
| Other income | 2,595 | 1,192 | 1,403 | ||||||||||||||
| Total investment income | 64,079 | 66,913 | (2,834) | ||||||||||||||
| Expenses: | |||||||||||||||||
| Base management fees | 8,786 | 9,231 | (445) | ||||||||||||||
| Incentive fees | 5,348 | 5,130 | 218 | ||||||||||||||
| Professional fees | 1,097 | 1,253 | (156) | ||||||||||||||
| Administrative service fees | 482 | 425 | 57 | ||||||||||||||
| Interest expense and credit facility fees | 21,770 | 25,450 | (3,680) | ||||||||||||||
| Directors' fees and expenses | 187 | 208 | (21) | ||||||||||||||
| Other general and administrative | 764 | 838 | (74) | ||||||||||||||
| Excise tax expense | 441 | 350 | 91 | ||||||||||||||
| Total expenses | 38,875 | 42,885 | (4,010) | ||||||||||||||
| Net investment income (loss) | 25,204 | 24,028 | 1,176 | ||||||||||||||
| Net realized gain (loss) and net change in unrealized appreciation (depreciation): | |||||||||||||||||
| Net realized gain (loss) on investments | (9,482) | (19,777) | 10,295 | ||||||||||||||
| Net realized currency gain (loss) on non-investment assets and liabilities | (136) | (470) | 334 | ||||||||||||||
| Net change in unrealized appreciation (depreciation) on investments | (23,799) | 14,087 | (37,886) | ||||||||||||||
| Net change in unrealized currency gain (loss) on non-investment assets and liabilities | 3,995 | (483) | 4,478 | ||||||||||||||
| Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities | (29,422) | (6,643) | (22,779) | ||||||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | (4,218) | $ | 17,385 | $ | (21,603) | |||||||||||
Investment Income
The decrease in investment income for the three months ended March 31, 2026, as compared to the three months ended December 31, 2025, was primarily driven by a lower weighted average yield on the portfolio and a lower average outstanding principal balance. As of March 31, 2026, the size of our portfolio decreased to $2,306,378 from $2,469,396 as of December 31, 2025, at amortized cost. As of March 31, 2026 and December 31, 2025, the weighted average yield of our total debt and income producing investments was 10.0% and 10.1%, respectively, based on amortized cost.
Interest income and PIK income on our first and second lien debt investments are dependent on the composition and credit quality of the portfolio. Generally, we expect the portfolio to generate predictable quarterly interest income based on the terms stated in each loan's credit agreement. As of March 31, 2026 and December 31, 2025, six and seven of our debt and preferred equity investments, respectively, were on non-accrual status. As of March 31, 2026 and December 31, 2025, non-accrual investments had a fair value of $20,617 and $30,541, which represented approximately 0.9% and 1.2% of total investments at fair value, respectively. The remaining income producing investments were performing and current on their interest payments as of March 31, 2026 and December 31, 2025.
The increase in other income for the three months ended March 31, 2026, compared to the three months ended December 31, 2025, was primarily driven by an increase in prepayment fees.
The increase in dividend income for the three months ended March 31, 2026, compared to the three months ended December 31, 2025 is due to dividends declared from Structured Credit Partners.
Expenses
The decrease in interest expense and credit facility fees was primarily driven by lower base rates and the acceleration of debt issuance cost during the three months ended December 31, 2025.
The decrease in base management fees was driven by lower average gross assets for the three months ended March 31, 2026 compared to the three months ended December 31, 2025.
The increase in incentive fees was driven by higher pre-incentive fee net investment income for the three months ended March 31, 2026 compared to the three months ended December 31, 2025.
For the three months ended March 31, 2026, there were no accrued capital gains incentive fees based upon the cumulative net realized and unrealized appreciation (depreciation) as of March 31, 2026. The accrual for any capital gains incentive fee under accounting principles generally accepted in the United States ("U.S. GAAP") in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. See Note 4, Related Party Transactions, to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q for more information on the incentive and base management fees.
Professional fees include legal, rating agencies, audit, tax, valuation, technology and other professional fees incurred related to the management of the Company. Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including our allocable portion of the cost of certain of our executive officers and their respective staff. Other general and administrative expenses include insurance, filing, research, subscriptions and other costs.
Net Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation)
The amount of and number of investments with realized gain (loss) and change in unrealized appreciation (depreciation) for the three months ended March 31, 2026 and December 31, 2025 were as follows:
| Three Months Ended | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
| Realized gains on investments | $ | 667 | $ | 424 | |||||||
| Number of investments with realized gains | 11 | 12 | |||||||||
| Realized losses on investments | $ | (10,149) | $ | (20,201) | |||||||
| Number of investments with realized losses | 21 | 12 | |||||||||
| Change in unrealized appreciation on investments | $ | 12,446 | $ | 30,489 | |||||||
| Number of investments with unrealized appreciation | 52 | 93 | |||||||||
| Change in unrealized depreciation on investments | $ | (36,245) | $ | (16,402) | |||||||
| Number of investments with unrealized depreciation | 173 | 120 | |||||||||
During the three months ended March 31, 2026, we recognized a net realized loss related to the restructuring of our investments in 48forty Intermediate Holdings, Inc. During the three months ended December 31, 2025, we recognized a realized net loss related to the sale of Comar Holding Company, LLC and the sale of our investment in iRobot Corporation.
The net change in unrealized appreciation (depreciation) is driven by changes in various inputs used in our valuation methodology, including, but not limited to, enterprise value multiples, borrower leverage ratios, borrower ratings, and the impact of exits.
For the three months ended March 31, 2026 and March 31, 2025
The following table sets forth information regarding our consolidated results of operations for the three months ended March 31, 2026 and March 31, 2025:
| Three Months Ended March 31, | Change | ||||||||||||||||
| 2026 | 2025 | $ | |||||||||||||||
| Investment income: | |||||||||||||||||
| Interest income | $ | 49,701 | $ | 41,980 | $ | 7,721 | |||||||||||
| PIK income | 6,481 | 5,379 | 1,102 | ||||||||||||||
| Dividend income | 5,302 | 6,554 | (1,252) | ||||||||||||||
| Other income | 2,595 | 951 | 1,644 | ||||||||||||||
| Total investment income | 64,079 | 54,864 | 9,215 | ||||||||||||||
| Expenses: | |||||||||||||||||
| Base management fees | 8,786 | 7,609 | 1,177 | ||||||||||||||
| Incentive fees | 5,348 | 4,400 | 948 | ||||||||||||||
| Professional fees | 1,097 | 715 | 382 | ||||||||||||||
| Administrative service fees | 482 | 406 | 76 | ||||||||||||||
| Interest expense and credit facility fees | 21,770 | 18,603 | 3,167 | ||||||||||||||
| Directors' fees and expenses | 187 | 148 | 39 | ||||||||||||||
| Other general and administrative | 764 | 678 | 86 | ||||||||||||||
| Excise tax expense | 441 | 676 | (235) | ||||||||||||||
| Total expenses | 38,875 | 33,235 | 5,640 | ||||||||||||||
| Net investment income (loss) | 25,204 | 21,629 | 3,575 | ||||||||||||||
| Net realized gain (loss) and net change in unrealized appreciation (depreciation): | |||||||||||||||||
| Net realized gain (loss) on investments | (9,482) | (21,529) | 12,047 | ||||||||||||||
| Net realized currency gain (loss) on non-investment assets and liabilities | (136) | (596) | 460 | ||||||||||||||
| Net realized gain (loss) on forward currency contracts | - | 2,784 | (2,784) | ||||||||||||||
| Net change in unrealized appreciation (depreciation) on investments | (23,799) | 16,297 | (40,096) | ||||||||||||||
| Net change in unrealized currency gain (loss) on non-investment assets and liabilities | 3,995 | (1,339) | 5,334 | ||||||||||||||
| Net change in unrealized gain (loss) on forward currency contracts | - | (3,192) | 3,192 | ||||||||||||||
| Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments, non-investment assets and liabilities, and forward currency contracts | (29,422) | (7,575) | (21,847) | ||||||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | (4,218) | $ | 14,054 | $ | (18,272) | |||||||||||
Investment Income
The increase in investment income for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, was primarily driven by a higher average outstanding investment balance due to net origination activity over the last twelve months, including assets acquired in the CSL III Merger and the Credit Fund II Purchase in the first quarter of 2025. This was partially offset by lower yields on investments. As of March 31, 2026, the size of our portfolio increased to $2,306,378 from $2,273,998 as of March 31, 2025, at amortized cost. As of March 31, 2026 and March 31, 2025, the weighted average yield of our total debt and income producing investments was 10.0% and 10.9%, respectively, based on amortized cost.
Interest income and PIK income on our first and second lien debt investments are dependent on the composition and credit quality of the portfolio. Generally, we expect the portfolio to generate predictable quarterly interest income based on the terms stated in each loan's credit agreement. As of March 31, 2026 and March 31, 2025, six and five of our debt and preferred equity investments were on non-accrual status, respectively. Non-accrual investments had a fair value of $20,617 and $36,622, which represented approximately 0.9% and 1.6% of total investments at fair value as of March 31, 2026 and March 31, 2025, respectively. The remaining income producing investments were performing and current on their interest payments as of March 31, 2026 and March 31, 2025.
The decrease in dividend income for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily driven by a decrease in dividend income from Credit Fund II due to the Credit Fund II Purchase, partially offset by the dividend received from Structured Credit Partners.
The increase in other income for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily driven by an increase in prepayment fees.
Expenses
The increase in interest expense and credit facility fees for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, was primarily driven by a higher average principal balance during the three months ended March 31, 2026.
The increase in base management fees for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was driven by a higher average gross assets for the three months ended March 31, 2026.
The increase in incentive fees was driven by higher pre-incentive fee net investment income for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
For the three months ended March 31, 2026, there were no accrued capital gains incentive fees based upon the cumulative net realized and unrealized appreciation (depreciation) as of March 31, 2026. The accrual for any capital gains incentive fee under U.S. GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. See Note 4, Related Party Transactions, to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q for more information on the incentive and base management fees.
Professional fees include legal, rating agencies, audit, tax, valuation, technology and other professional fees incurred related to the management of the Company. Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including our allocable portion of the cost of certain of our executive officers and their respective staff. Other general and administrative expenses include insurance, filing, research, subscriptions and other costs.
Net Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation)
The amount of and number of investments with realized gain (loss) and change in unrealized appreciation (depreciation) for the three months ended March 31, 2026 and March 31, 2025 were as follows:
| Three Months Ended | |||||||||||
| March 31, 2026 | March 31, 2025 | ||||||||||
| Realized gains on investments | $ | 667 | $ | 944 | |||||||
| Number of investments with realized gains | 11 | 12 | |||||||||
| Realized losses on investments | $ | (10,149) | $ | (22,473) | |||||||
| Number of investments with realized losses | 21 | 4 | |||||||||
| Change in unrealized appreciation on investments | $ | 12,446 | $ | 37,184 | |||||||
| Number of investments with unrealized appreciation | 52 | 62 | |||||||||
| Change in unrealized depreciation on investments | $ | (36,245) | $ | (20,887) | |||||||
| Number of investments with unrealized depreciation | 173 | 126 | |||||||||
During the three months ended March 31, 2026, we recognized a net realized loss related to the restructuring of our investments in 48forty Intermediate Holdings, Inc. During the three months ended March 31, 2025, we recognized a realized loss related to the restructuring of our investment in Aimbridge Acquisition Co., Inc. and the consolidation of our investment in Credit Fund II as a result of Credit Fund II Purchase.
The net change in unrealized appreciation (depreciation) is driven by changes in various inputs used in our valuation methodology, including but not limited to enterprise value multiples, borrower leverage ratios, borrower ratings, and the impact of exits.
Financial Condition, Liquidity and Capital Resources
Capitalization
We have capitalized our business to date primarily through the issuance and sale of our common stock, asset-level financing, and the issuance of unsecured senior debt. As of March 31, 2026, we had $1,395,319 of outstanding consolidated indebtedness under the Credit Facility, the 2015-1N Debt, the 2030 Notes, and the 2031 Notes as previously discussed within Portfolio and Investment Activity - Portfolio Financing. As of March 31, 2026, we had $641,873 of liquidity that can be used to satisfy our short-term cash requirements and working capital for our business. Refer to Note 9, Borrowings, to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding our financing.
The following table presents our capitalization ratios:
| As of | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
|
Debt to Equity
|
1.25x | 1.32x | |||||||||
|
Net Financial Leverage (1)
|
1.06x | 1.13x | |||||||||
(1) Net financial leverage adjusts for net working capital at period end, which was $214.5 million and $225.8 million as of March 31, 2026 and December 31, 2025, respectively.
Sources of Liquidity
Our primary sources of liquidity include cash and cash equivalents and available borrowings under our Credit Facility.
| As of | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
| Cash, cash equivalents and restricted cash | $ | 97,241 | $ | 76,493 | |||||||
| Available borrowings under Credit Facility | 544,632 | 396,340 | |||||||||
| Total Liquidity | $ | 641,873 | $ | 472,833 | |||||||
We generate cash from cash flows from operations, including investment sales and repayments, income earned on investments and cash equivalents, and through the net proceeds of offerings of our common stock sold through our at-the-market program. We may also fund a portion of our investments through borrowings under the Credit Facility, the issuance of debt, and through securitization of a portion of our existing investments. The primary use of existing funds and any funds raised in the future is expected to be for investments in portfolio companies, repayment of indebtedness, cash distributions to our stockholders, repurchases of our common stock and for other general corporate purposes. We believe our current cash position, available capacity on our Credit Facility, which is well in excess of our unfunded commitments, and net cash provided by operating activities will provide us with sufficient resources to meet our obligations and continue to support our investment objectives, including reserving for the capital needs which may arise at our portfolio companies.
Liquidity Needs
Our primary liquidity needs include our funding of new and existing portfolio investments, payment of operating expenses and interest and principal payments under the Credit Facility, the 2015-1N Debt, the 2030 Notes, and the 2031 Notes. From time to time, we may also repurchase our outstanding debt or shares of our common stock.
Contractual Obligations and Contingencies
In the ordinary course of our business, we enter into contracts or agreements that contain indemnifications or warranties. Future events could occur which may give rise to liabilities arising from these provisions against us. We believe that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made for any such exposure in the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.
We have in the past, currently are and may in the future become obligated to fund commitments such as revolving credit facilities, bridge financing commitments, or delayed draw commitments. We had the following unfunded commitments to fund delayed draw and revolving senior secured loans as of March 31, 2026 and December 31, 2025:
| Par/Principal Amount as of | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
| Unfunded delayed draw commitments | $ | 229,347 | $ | 256,926 | |||||||
| Unfunded revolving commitments | 165,829 | 174,680 | |||||||||
| Total unfunded commitments | $ | 395,176 | $ | 431,606 | |||||||
Pursuant to an undertaking by us in connection with the 2015-1 Debt Securitization, we agreed to hold on an ongoing basis the 2015-1 Issuer Preferred Interests with an aggregate dollar purchase price at least equal to 5% of the aggregate outstanding amount of all collateral obligations by the 2015-1 Issuer for so long as any securities of the 2015-1 Issuer remains outstanding. As of March 31, 2026 and December 31, 2025, we were in compliance with this undertaking.
Cash Flows
The following table details the net change in our cash and cash equivalents:
| Three Months Ended | |||||
| March 31, 2026 | |||||
| Cash flows provided by (used in) operating activities | $ | 212,389 | |||
| Cash flows provided by (used in) financing activities | (191,641) | ||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 20,748 | |||
During the three months ended March 31, 2026, we paid $240,926 related to cost of investments purchased and received $444,368 in proceeds from sales and repayments on our investments. During the three months ended March 31, 2026, we had net repayments of $144,349 on our Credit Facility and paid $28,723 of dividends in cash.
Asset Coverage
In accordance with the Investment Company Act, a BDC is only allowed to borrow amounts such that its "asset coverage," as defined in the Investment Company Act, satisfies the minimum asset coverage ratio specified in the Investment Company Act after such borrowing. "Asset coverage" generally refers to a company's total assets, less all liabilities and indebtedness not represented by "senior securities," as defined in the Investment Company Act, divided by total senior securities representing indebtedness and, if applicable, preferred stock. "Senior securities" for this purpose includes borrowings from banks or other lenders, debt securities and preferred stock.
Prior to March 23, 2018, BDCs were required to maintain a minimum asset coverage ratio of 200%. On March 23, 2018, an amendment to Section 61(a) of the Investment Company Act was signed into law to permit BDCs to reduce the minimum asset coverage ratio from 200% to 150%, so long as certain approval and disclosure requirements are satisfied. Under the 200% minimum asset coverage ratio, BDCs are permitted to borrow up to one dollar for investment purposes for every one dollar of investor equity, and under the 150% minimum asset coverage ratio, BDCs are permitted to borrow up to two dollars for investment purposes for every one dollar of investor equity. In other words, Section 61(a) of the Investment Company Act, as amended, permits BDCs to potentially increase their debt-to-equity ratio from a maximum of 1 to 1 to a maximum of 2 to 1.
On April 9, 2018 and June 6, 2018, the Board of Directors, including a "required majority" (as such term is defined in Section 57(o) of the Investment Company Act), and the stockholders of the Company, respectively, approved the application to the Company of the 150% minimum asset coverage ratio set forth in Section 61(a)(2) of the Investment Company Act, as amended. As a result, the minimum asset coverage ratio applicable to the Company was reduced from 200% to 150%, effective as of June 7, 2018.
As of March 31, 2026 and December 31, 2025, the Company had total senior securities of $1,395,319 and $1,543,660, respectively, consisting of secured borrowings under the Credit Facility, the 2030 Notes, the 2031 Notes, and the 2015-1N Debt, and had asset coverage ratios of 180.0% and 175.6%, respectively.
Critical Accounting Policies and Estimates
The preparation of our unaudited consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and judgments are based on historical information, information currently available to us and on various other assumptions management believes to be reasonable under the circumstances. Actual results could vary from those estimates and we may change our estimates and assumptions in future evaluations. Changes in these estimates and assumptions may have a material effect on our results of operations and financial condition. There have been no material changes in the critical accounting estimates since those discussed in our Annual Report on Form 10-K for the year ended December 31, 2025.
Carlyle Secured Lending Inc. published this content on May 11, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 11, 2026 at 10:12 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]