Nuveen Churchill Direct Lending Q3 NII Slips, NAV Falls to $17.13

Nuveen Churchill Direct Lending Corp. (NYSE: NCDL) reported lower net investment income for the third quarter of 2026, while a sharp reduction in realized and unrealized investment losses lifted net income from the prior quarter. Net asset value edged down to $17.13 per share, and quarterly net investment income of $0.38 per share fully covered the company’s total distribution.

For the three months ended September 30, net investment income was $18.8 million, or $0.38 per share, compared with $20.2 million, or $0.41 per share, in the second quarter. Total investment income declined to $43.7 million from $44.3 million, including a decrease in interest income to $40.0 million from $41.8 million.

Total expenses were $24.9 million, compared with $24.1 million in the preceding quarter. Interest and debt-financing expenses fell to $15.6 million from $16.6 million, while incentive fees on net investment income increased to $2.8 million from $646,000.

The net increase in assets resulting from operations rose to $16.0 million, or $0.32 per share, from $3.6 million, or $0.07 per share, in the second quarter. NCDL recorded $2.8 million of combined realized and unrealized losses, substantially below the $16.6 million loss in the prior quarter. The latest result included a $4.0 million net realized loss, partly offset by $1.2 million of net unrealized appreciation.

NAV declined by $0.06 per share from $17.19 at June 30, as the $0.38 of net investment income matched the quarter’s $0.36 regular distribution and $0.02 supplemental distribution, while realized and unrealized losses reduced NAV. Annualized return on equity was 8.8% based on net investment income and 7.5% based on net income.

Portfolio expands by borrower count as fair value declines

The investment portfolio had a fair value of $1.86 billion at quarter-end, down from $1.92 billion at June 30, but the number of portfolio companies increased to 258 from 244. The average position represented 0.4% of fair value, and the 10 largest portfolio companies accounted for 12.4% of the portfolio, excluding the joint venture.

First-lien debt represented 87.1% of fair value, subordinated debt 7.6%, equity investments 3.1% and the new joint venture 2.2%. On a look-through basis that includes the joint venture’s all-first-lien portfolio, first-lien exposure was 89.1%. About 93.9% of debt investments were floating-rate, and 86% of directly held debt investments had financial maintenance covenants.

The weighted average yield on debt and income-producing investments increased to 9.7% at cost and 9.8% at fair value, from 9.3% and 9.4%, respectively, in the second quarter. NCDL reported a quarter-end net interest margin of 415 basis points. Payment-in-kind income represented 6.2% of total investment income, up from 5.4% in the prior quarter.

Gross commitments reached $213.3 million, including $92.8 million committed to NCDL Senior Loan Fund I and $117.8 million of first-lien debt commitments. Investment fundings totaled $134.8 million, while sales and repayments were $192.4 million, resulting in net repaid activity of $57.6 million. The company closed 17 new investments and 11 add-on investments during the quarter. New debt and income-producing investments carried a weighted average annual interest rate of 8.9% at par.

The joint venture, owned 87.5% by NCDL and 12.5% by an unaffiliated institutional investor, held $147.5 million of investments at fair value. Its portfolio consisted entirely of first-lien debt and had a 9.2% weighted average yield at fair value. NCDL reported a 13.6% annualized return on its investment in the venture.

Credit indicators soften modestly

The weighted average internal risk rating moved to 4.4 from 4.3, compared with an initial rating of 4.0 assigned at origination. Investments rated 4, defined as performing with stable risk, declined to 70.0% of portfolio fair value from 73.7%, while rating-5 investments increased to 12.4% from 9.7%.

Nine portfolio companies were on non-accrual, representing 1.5% of the portfolio at fair value and 2.6% at cost. One company was placed on non-accrual during the quarter and one was removed. The presentation also identified unrealized losses associated with Spartech, Covercraft and other watchlist or management-notice borrowers.

Leverage declines; fourth-quarter distribution maintained

Total debt fell to $1.04 billion from $1.09 billion at June 30. The debt-to-equity ratio declined to 1.23 times from 1.29 times, while net debt-to-equity decreased to 1.17 times from 1.23 times. NCDL ended the quarter with $255.1 million of liquidity, consisting of $39.1 million in cash and cash equivalents and $216.0 million of available revolving-credit capacity. The company said it had no near-term debt maturities.

During the quarter, NCDL redeemed CLO-III with an aggregate principal balance of $297.9 million and issued an additional $100 million of its 2030 notes, purchased by parent company TIAA. Unsecured notes represented 38% of outstanding debt at September 30.

The board declared a fourth-quarter distribution of $0.38 per share, consisting of a $0.36 regular distribution and a $0.02 supplemental distribution. It is payable January 28, 2027, to shareholders of record on December 31, 2026. Under a $50 million share-repurchase plan, NCDL had repurchased 278,294 shares for $3.0 million through October 30.

The company identified changes in financial and lending markets, interest rates, tariffs and trade policy, geopolitical conditions and broader economic trends as factors that could affect future results and the performance of its portfolio companies.