Conferencia de resultados del Q3 de 2026 de OFS Capital (OFS): venta de SBIC por $52.3M y menor NAV

Conclusiones clave

• OFS Capital Corporation registró un resultado neto de las inversiones en el tercer trimestre de 2026 de 719.000 dólares, o 0,05 dólares por acción, por debajo de los 0,08 dólares por acción del segundo trimestre y por debajo de la distribución trimestral de 0,17 dólares por acción.
• El valor liquidativo cayó un 12% intertrimestral hasta los 7,38 dólares por acción desde los 8,41 dólares, lo que refleja principalmente 6,8 millones de dólares en depreciación de una inversión de renta variable importante y 3,2 millones de dólares en pérdidas netas realizadas y no realizadas en participaciones de renta variable de CLO.
• Poco después del cierre del trimestre, OFS completó la venta de aproximadamente el 57% de su participación como socio comanditario en OFS SBIC I LP por un importe bruto de 52,3 millones de dólares. La sociedad conservó el 43% restante y sigue siendo el socio colectivo de la sociedad en comandita.
• OFS amortizó 31,4 millones de dólares de deuda durante el trimestre. La deuda total se ha reducido en aproximadamente 84,8 millones de dólares en los últimos 12 meses, mientras que la ratio regulatoria de cobertura de activos mejoró 3 puntos porcentuales hasta el 164%.
• La sociedad mantuvo su distribución del cuarto trimestre de 2026 en 0,17 dólares por acción. La dirección señaló que una redistribución disciplinada de los fondos de la operación de SBIC hacia activos generadores de ingresos podría mejorar el resultado neto de las inversiones con el tiempo.
• La calidad crediticia siguió siendo un aspecto prioritario. Se retiró a un prestatario del estado de no devengo (nonaccrual), mientras que se añadieron dos prestatarios con inversiones por un total de 2,1 millones de dólares a valor razonable.

Datos financieros clave

Evolución operativa y del negocio

OFS continuó priorizando la mejora del balance durante el trimestre. Los vencimientos de deuda de la sociedad se extienden ahora desde 2028 hasta 2031, y la dirección señaló que la reducción del apalancamiento ha mejorado la flexibilidad operativa.

La operación de SBIC posterior al cierre del trimestre redujo la exposición a lo que representaba aproximadamente el 35% de la cartera a valor razonable al 30 de septiembre. La dirección describió la operación como un paso hacia la reducción de la concentración de la cartera y la monetización de inversiones de renta variable que no devengan intereses.

Sobre la base del coste amortizado, la cartera al cierre del trimestre estaba compuesta por aproximadamente un 61% de préstamos con garantía real prioritaria (senior secured), un 21% de valores de financiación estructurada y un 18% de títulos de renta variable. Dentro de la cartera de préstamos, el 97% de las posiciones eran de primer rango (first-lien) en función del valor razonable.

Los préstamos en suspensión de devengo de intereses (nonaccrual) disminuyeron en 2,3 millones de dólares a coste amortizado con respecto al trimestre anterior. Sin embargo, la exposición en suspensión de devengo como porcentaje del valor razonable de la cartera aumentó debido a que la cartera global se redujo.

Previsiones de la dirección

La dirección prevé redistribuir los 52,3 millones de dólares en ingresos brutos de la operación de SBIC principalmente en inversiones generadoras de ingresos. La sociedad afirmó que esto podría respaldar un mayor resultado neto de las inversiones durante los próximos trimestres y a más largo plazo, aunque el despliegue se realizará con prudencia a lo largo del tiempo.

OFS está evaluando oportunidades en préstamos tradicionales al mercado mediano (middle-market), crédito a infraestructuras, crédito inmobiliario, financiación respaldada por activos, crédito líquido y crédito estructurado. La dirección hizo hincapié en una suscripción disciplinada, la preservación del capital y la rentabilidad ajustada al riesgo.

La sociedad también espera que su refinanciación parcial de pagarés no garantizados de mayor cupón con una línea de crédito de menor coste genere un ahorro en gastos por intereses. La dirección afirmó que el reciente aumento de los tipos de interés de referencia también debería tener un efecto positivo en los beneficios futuros.

Riesgos y aspectos a vigilar

• El resultado neto de las inversiones del T3 de 0,05 dólares por acción no cubrió la distribución trimestral de 0,17 dólares.
• El NAV disminuyó de forma sustancial debido a valoraciones más bajas en una inversión de renta variable importante y a pérdidas en participaciones de renta variable de CLO.
• Dos prestatarios pasaron a estado de no devengo (nonaccrual), aunque las posiciones relacionadas sumaban únicamente 2,1 millones de dólares a valor razonable. Uno sigue realizando los pagos contractuales de intereses, pero fue clasificado en no devengo tras una evaluación interna del riesgo crediticio.
• El 26 de octubre, Pan Steel presentó una demanda ante el Tribunal de Cancillería de Delaware impugnando la operación de SBIC. OFS afirmó que considera que la reclamación carece de fundamento y pretende defenderse enérgicamente en este asunto.
• La dirección citó la incertidumbre macroeconómica, la evolución de los tipos de interés y las cambiantes condiciones del mercado como factores en constante consideración.

Transcripción completa de la conferencia de resultados

Transcripción completa de la conferencia de resultados

Comentarios de la dirección

Operator

Good morning, and welcome to the OFS Capital Corporation Third Quarter 2026 Earnings Results Conference Call. Please note that today's event is being recorded. I would now like to turn the conference over to Steve Altebrando. Please go ahead.

[p id="560890251" name="Stephen Altebrando" type="E" />

Good morning, everyone, and thank you for joining us. Also on the call today are Bilal Rashid, our Chairman and Chief Executive Officer; and Kyle Spina, the company's Chief Financial Officer and Treasurer.

Before we begin, please note that the statements made on this call and webcast may constitute forward-looking statements as defined under applicable securities laws. Such statements reflect various assumptions, expectations and opinions by OFS Capital's management concerning anticipated results are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from such statements.

The uncertainties and other factors are in some way beyond management's control, including the risk factors described from time to time in our filings with the SEC. Although we believe these assumptions are reasonable, any of those assumptions could prove incorrect, and as a result, the forward-looking statements based on those assumptions also could be incorrect. You should not place undue reliance on these forward-looking statements. Except as required by applicable law, OFS Capital has no obligation to update any forward-looking statements made herein, and all forward-looking statements speak only as of the date of this call.

With that, I'll turn the call over to Chairman and Chief Executive Officer, Bilal Rashid.

Bilal Rashid

Thank you, Steve. Yesterday afternoon, we reported our third quarter results. On October 6, we announced the sale of approximately 57% of the limited partnership interest in one of our subsidiaries, OFS SBIC I LP for gross proceeds of $52.3 million. SBIC One LP holds our common equity investment in Fransteel. The BDC is retaining the remaining 43% limited partnership interest and remains the general partner of the partnership. We believe that this transaction represents a strategic step towards strengthening our balance sheet, improving liquidity and reducing portfolio concentration risk. In addition, it provides us with a meaningful amount of capital for redeployment into investments in accordance with the BDC's primary investment objectives. We believe that this potential investment deployment into primarily income-generating investments presents an opportunity to enhance our net investment income over the coming quarters and the long term. As we discussed on prior calls, SandSsteel has been the largest position in our investment portfolio, representing approximately 35% of our portfolio at fair value as of September 30. We expect the completion of this transaction to be a significant step toward our long-stated objective of monetizing certain noninterest-bearing equity investments. I also want to emphasize that we believe that the success of our investment in Transteel reflects a component of our investment strategy that has served us well. While our focus is on current income and capital preservation by primarily investing in senior secured loans, we selectively make equity investments in borrowers where there is a significant growth potential. These equity investments can provide potential opportunities for capital appreciation to enhance the value of our BDC. Tran Steel is a compelling example of this. What began as a relatively modest equity investment of approximately $200,000 in 2014 has generated substantial value for our shareholders over time. We intend to continue pursuing these types of opportunities selectively while maintaining our focus on income-generating investments and capital preservation. That said, on October 26, Pan Steel filed a complaint in Delaware Challstrery Court to, among other things, challenge the transaction. We believe the claim is meritless, and we intend to defend the matter vigorously. Turning to our financial results for the quarter. Net investment income totaled $0.05 per share compared to $0.08 per share in the prior quarter. While this remains below our quarterly distribution of $0.17 per share, we believe the steps we have taken in the past several quarters to strengthen our financial position, together with the significant proceeds from the FDIC equity transaction have created an opportunity to improve our earnings going forward. As we seek to prudently redeploy this capital primarily into new income-generating investments, over time, we expect to see a corresponding improvement in net investment income. Our net asset value at quarter end was $7.38 per share compared to $8.41 per share in the prior quarter. The decline was primarily driven by a reduction in the valuation of certain investments, including Pan Steel and our CLO equity investments. With respect to credit quality, loans to one borrower that was previously on nonaccrual were resolved during the quarter, while loans to 2 additional borrowers were placed on nonaccrual status. Importantly, the new nonaccruals represent relatively small positions within our overall portfolio, totaling $2.1 million at fair value, and the investments had already been on our radar for heightened credit risk monitoring. It's important to note that one of these borrowers continues to make its contractual interest payments but was placed on nonaccrual based on our internal assessment of credit risk. We continue to work closely with our borrowers and other stakeholders to maximize recoveries and preserve value across the portfolio. Our portfolio remains diversified with limited exposure to highly cyclical industries. We also benefit from the senior secured nature of our loan portfolio, which is entirely composed of first and second lien senior secured loans with 97% of our loan holdings in first lien positions based on fair value. This underscores our ongoing emphasis of maintaining a senior position in the capital structure and to help protect our invested capital. We also continued to make progress on strengthening our balance sheet during the quarter. including the repayment of $31.4 million of outstanding debt and an improvement in our asset coverage ratio of 3 percentage points to 164%. For the past several quarters, we have been focused on extending our debt maturities, reducing leverage and improving operational flexibility.

Over the past 12 months, we have reduced our total outstanding debt balance by approximately $84.8 million with our earliest maturity occurring in 2028. Having made substantial progress on these objectives, we believe we are now in a much stronger position to focus on new investment deployment and growing net investment income. In addition, during the quarter, we completed a partial refinancing of our higher coupon unsecured notes through the use of our lower-cost credit facility, which we expect will generate net interest expense savings going forward.

We also anticipate the recent increase in base rates will be accretive to our earnings on a going-forward basis. Looking ahead, we are focused on deploying the capital generated from the SBIC equity transaction in a disciplined manner with an emphasis on generating attractive risk-adjusted returns and improving our net investment income while we continue to evaluate opportunities in traditional middle market lending, we also benefit from the breadth of investment capabilities and expertise across our broader platform. This includes access to opportunities in infrastructure credit real estate credit, asset-backed finance, liquid credit and structured credit investments.

We are actively evaluating opportunities across these markets and believe this flexibility provides us with a broader universe of potential investments as we seek to identify the most compelling risk-adjusted return mix. Importantly, our approach remains grounded in disciplined underwriting, capital preservation and a focus on investments that we believe can generate sustainable income for our shareholders.

We continue to navigate an environment of macroeconomic uncertainty, evolving interest rates and changing market conditions. We believe our ability to invest across a broad range of credit opportunities, supported by the experience and capabilities of our adviser provides an important competitive advantage.

With approximately $3.8 billion in assets under management across the loan and structured credit markets, deep expertise across industries and our track record spanning more than 25 years and multiple credit cycles, we believe we are well-positioned to capitalize on opportunities as they arise.

We believe the SBIC equity transaction marks an important inflection point for OFS Capital. We have meaningfully reduced a significant portfolio concentration, strengthen our financial flexibility and generated investable capital that can now be redeployed into income-producing investments.

We believe these developments provide a strong foundation for improving net investment income and creating long-term value for our shareholders.

With that, I'll turn the call over to Kyle Spina, our Chief Financial Officer, to give you more details and color for the quarter.

Kyle Spina

Thanks, Bilal, and good morning, everyone. As Bilal mentioned, we posted net investment income of $719,000 or $0.05 per share for the third quarter of 2026, and a decline of $0.03 per share from the second quarter. Top line income decreased $899,000 quarter-over-quarter, partially offset by a $612,000 decrease in total expenses resulting in the decline in net investment income. We announced that we are maintaining our quarterly distribution at $0.17 per share for the fourth quarter of 2026.

At September 30, our quarterly distribution rate represented an 18.7% annualized yield based on the market price of our common stock. As Bilal described, while we fell short of covering the distribution in the third quarter, the proceeds generated by the SBIC equity transaction completed shortly after quarter end, provides us with the opportunity to enhance our net investment income going forward as we seek to prudently deploy this capital over time.

Our net asset value per share decreased by approximately 12% or $1.03 this quarter to $7.38. As Bilal described, the decline in our NAV was primarily related to depreciation of $6.8 million on our equity investment in Fans deal as well as net realized and unrealized losses in our credit portfolio, most pronounced in our CLO equity holdings totaling $3.2 million.

As Bilal mentioned, during the quarter, we experienced a decent amount of turnover in our nonaccrual loan positions with loans to one borrower removed from nonaccrual status following our restructuring transactions and loans to 2 new borrowers placed on nonaccrual status.

On a net basis, our total nonaccrual loans at amortized costs decreased by $2.3 million quarter-over-quarter. At quarter end, our regulatory asset coverage ratio was 164%, an increase of 3 percentage points from the prior quarter, a continued trend of improvement as we move closer to our long-term leverage target range. Utilizing the proceeds received from a couple of large loan repayments, we made $31.4 million of aggregate debt repayments during the quarter.

We continue to believe that our actions over the last several quarters to extend our debt maturities and deleverage our balance sheet have improved our operational flexibility as we now turn our attention to new investment deployments and improving our NII. We believe that these efforts reflect the successful execution of certain of our previously stated strategic objectives.

Turning to the income statement. Total investment income decreased approximately 13% and to $5.9 million this quarter. This was primarily driven by the impact of our ongoing deleveraging efforts, reducing the size of our interest-bearing portfolio.

Total investment income was bolstered by certain nonrecurring interest and fee income from loan investment repayments during the quarter. Total expenses decreased by approximately 10% during the period to $5.2 million. The decrease was primarily attributable to a $556,000 decrease in interest expense related to lower outstanding debt balances from our ongoing deleveraging efforts.

Turning to our investments. We continue to closely monitor certain borrowers experiencing what we believe are idiosyncratic stresses. As mentioned, our nonaccrual investments at cost decreased by $2.3 million quarter-over-quarter. However, at fair value, our nonaccrual percentage relative to our total portfolio increased by 2.1%, primarily related to a reduction in the size of our total portfolio.

With respect to our loan portfolio, we remain committed to being senior in the capital structure with 97% of our loan holdings being in first line positions based on fair value. From a deployment perspective, New Deployment remained modest during the quarter, totaling $7.7 million as we prioritize deleveraging. However, the SBIC equity transaction completed shortly after quarter end, provides approximately $52.3 million of gross proceeds for transaction costs as our team turns our attention to prudent deployment of that capital.

Based on amortized cost as of quarter end, our investment portfolio was comprised of approximately 61% senior secured loans, 21% structured finance securities and 18% equity securities. At the end of the quarter, we had investments in 50 unique issuers totaling $252.1 million at fair value.

On the interest-bearing portion of the portfolio, the weighted average performing investment income yield increased approximately 1% to 13.1% quarter-over-quarter. The increase in yield was primarily due to the impact of nonrecurring interest and fee income received upon the repayment of certain loan investments.

This metric includes all interest, prepayment fee and amortization of deferred loan fee income but excludes syndication fee income if applicable.

With that, I'll turn the call back over to Bilal for concluding remarks.

Bilal Rashid

Thank you, Kyle. As we look ahead, we believe the BDC is at an important turning point. Over the past several quarters, we have taken meaningful steps to strengthen our financial position and create a solid foundation for future growth. These efforts have included extending our debt maturities, which now span from 2028 to 2031 and reducing our overall debt by $84.8 million over the past year.

Combined with the significant proceeds generated by the recent SBIC equity transaction, we believe these actions have improved our financial flexibility and positioned us to shift our focus toward new income-generating investment deployment and growing net investment income. Importantly, we benefit from the breadth of investment capabilities across our advisers' platform.

This allows us to evaluate a broad range of opportunities beyond traditional middle-market lending and pursue investments that we believe offer the most attractive risk-adjusted returns and the current market environment. We believe our loan portfolio remains well diversified across multiple industries, and we continue to emphasize investing higher in the capital structure.

As we pursue new investment opportunities, we remain committed to our disciplined underwriting standards and focus on capital preservation, which we believe the port resilience across a range of market conditions.

Our team's long-standing experience and investment discipline have driven consistent results. Since 2011, the BDC has invested more than $2.1 billion with an annualized net realized loss of just 0.31%. While continuing to deliver attractive risk-adjusted returns on our portfolio. Finally, we continue to benefit from the scale and capabilities of our adviser, with a $3.8 billion corporate credit platform and affiliation with a $32.5 billion asset management group.

Our adviser provides deep credit experience long-standing banking and capital markets relationships and access to a broad universe of investment opportunities. Our corporate credit platform has navigated multiple credit cycles over the last 25-plus years, and we believe this experience and breadth of capabilities will be particularly valuable as we enter this next phase of the company's growth.

Importantly, our adviser and affiliates remain strongly aligned with shareholders as they maintain approximately 23% ownership in the BDC.

Thank you again for joining us today, and we look forward to updating you on our call next quarter.

Operator

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines.