Carlyle Secured Lending (NASDAQ:CGBD) reported fourth-quarter and full-year 2025 results highlighted by record origination activity, stable credit performance, and continued efforts to enhance portfolio returns through joint ventures and share repurchases. Management also outlined leadership changes, discussed how the portfolio is positioned amid market volatility—particularly in software—and provided an outlook that anticipates increased M&A-driven activity in 2026.
Leadership transition and strategy continuity
On the call, the company noted a leadership transition: Justin Plouffe, the former CEO, said he has assumed the role of Chief Financial Officer of Carlyle and resigned as CEO, President, and Director of CGBD. Alex Chi, who joined earlier in 2025 as Deputy Chief Investment Officer for Global Credit and Head of Direct Lending, was recently appointed CEO and a Director of CGBD. Thomas Hennigan, a long-tenured member of the platform, was appointed President in addition to his roles as CFO, Chief Risk Officer, and Director.
Record originations, but pressure on yields
Hennigan said 2025 was a record year of originations for both CGBD and the Carlyle Direct Lending platform, attributing the results to enhancements in origination capabilities. He reported:
- More than $1.2 billion deployed at CGBD in 2025
- More than $7 billion of commitments closed at the platform level
- More than $400 million of investment fundings in the fourth quarter, with net investment activity of $193 million after repayments
Total investments at CGBD rose from $2.4 billion to $2.5 billion during the quarter, and total investments at the Middle Market Credit Fund (MMCF) joint venture increased to over $950 million.
Management noted, however, that CGBD was impacted by lower investment yields due to lower base rates and “historically tight spreads on new originations.” Total investment income in the fourth quarter was $67 million, which Hennigan said was in line with the prior quarter as the benefit of a larger average portfolio was offset by lower yields.
Earnings, dividend, NAV, and buybacks
For the fourth quarter, the company generated net investment income (NII) of $24 million, or $0.33 per share on a GAAP basis. Adjusted NII was $0.36 per share, with adjustments including acceleration of debt issuance costs and the impact of acquisition accounting related to the CSL III merger and the consolidation of Credit Fund II, which closed in the first quarter of 2025.
The board declared a first-quarter 2026 dividend of $0.40 per share, payable to stockholders of record as of March 31. Hennigan also said the company estimates it has $0.74 per share of spillover income to support the quarterly dividend.
Net asset value (NAV) per share was $16.26 at December 31, compared with $16.36 at September 30. The company reported total aggregate realized and unrealized net loss of about $7 million, or $0.09 per share, which management primarily attributed to unrealized markdowns on select underperforming investments.
Management highlighted continued buyback activity given the stock’s discount to NAV. Hennigan said the company repurchased $14 million of shares in the fourth quarter at an average discount of nearly 23%, which he said resulted in $0.06 of accretion to NAV per share. The company repurchased an additional $14 million in the first quarter to date, also cited as another $0.06 of accretion. The existing $200 million repurchase program was described as nearly exhausted, and the board approved a $100 million upsize, bringing the total authorization to $300 million.
Looking ahead, Hennigan reiterated an expectation for an “earnings trough in the first half of 2026,” primarily due to base rate cuts, with earnings anticipated to increase as the company ramps the portfolios of its joint ventures.
Credit performance and portfolio positioning, including AI-related software scrutiny
Management said credit performance remained stable. As of December 31, non-accruals included five names, representing 1.2% of investments at fair value and 1.8% at amortized cost. Hennigan said key credit statistics such as portfolio company margins, leverage levels, and loan-to-value (LTV) were stable, and he expects interest coverage to continue to improve as base rates decline. He also noted that most payment-in-kind income (PIK) is underwritten at origination, characterizing it as “good PIK.”
The portfolio was described as diversified, comprised of 165 companies across more than 25 industries, with average exposure to any single company below 1% of total investments and 94% of investments in senior secured loans. Management said the median EBITDA across the portfolio was $97 million.
Executives addressed volatility tied to concerns that some companies may be “disintermediated by AI,” particularly within software. Hennigan said the platform’s software track record remains “exemplary,” citing that over the last five years Carlyle Direct Lending originated over $6 billion of commitments to software deals with 0 defaults. He also said software borrowers in the book have grown revenue and EBITDA by approximately 8% and 20% year-over-year, respectively, and described the weighted average loan-to-value of the software book as 40% below the rest of the portfolio, even after adjusting for multiple degradation based on public comparables. Management added that CGBD’s software exposure as a percentage of the portfolio is below that of its peer group.
In the Q&A, management said it has re-underwritten and examined the entire portfolio for AI disruption risk and found “no material near-term risks” at this stage. Chi noted the company may see “a bit of a pause” in software deal flow, driven by valuation gaps and uncertainty about AI implications for businesses acquired at high multiples in prior years. He also said the company and its third-party valuation providers are reviewing technology and software positions and that investors may see “a modest markdown on software names” due to volatility and uncertainty.
Joint ventures: MMCF expansion and new Structured Credit Partners
Management highlighted joint ventures as a key driver of future earnings and return enhancement. The company said MMCF equity commitments were upsized from $175 million to $250 million for each partner. Hennigan said MMCF is currently achieving a 15% dividend yield, generated through more than $950 million of investments, and that there are no fees at the JV.
After quarter end, CGBD announced a new joint venture, Structured Credit Partners (SCP), capitalized by four BDCs: CGBD, a private perpetual BDC, Carlyle Credit Solutions, and two BDCs managed by Sixth Street. SCP will focus on broadly syndicated first-lien senior secured loans financed with long-term, non-mark-to-market, predominantly investment-grade rated CLO debt. Management emphasized the structure is designed to be fee-free at the underlying CLOs and at the JV.
Hennigan said CGBD committed $150 million to SCP, and the JV has $600 million of equity commitments in total. He also said key decisions are subject to joint approval by the JV’s board, with governance shared equally between Carlyle and Sixth Street and each BDC having equal representation. Management cited historical median CLO returns “typically” within the 10%–12% range and said it anticipates a potential 400–500 basis point uplift from the fee-free structure. The JV plans to ramp via four CLO issuances per year to ensure vintage diversification, and management expects SCP to manage approximately $6 billion–$7 billion of assets over time on a fee-free basis.
On the balance sheet, Hennigan said the company raised a new five-year $300 million unsecured bond in October at a swap-adjusted rate of SOFR plus 231, redeemed an $85 million baby bond in December, and reduced its weighted average cost of borrowing by about 10 basis points while extending maturities with limited maturities until 2030. CGBD’s debt stack is 100% floating rate, which management said matches its primarily floating-rate assets. Statutory leverage was 1.3x at quarter end and approximately 1.1x when adjusted for unsettled trades of loans to MMCF.
Looking to 2026, management expects an active year as M&A activity increases, pointing to a pickup in the first-quarter pipeline and the benefits of a “rejuvenated” origination platform. Chi also said volatility may create an opportunity to “get some spread back” in middle-market deals, while noting that spread widening is not expected to be significant.
About Carlyle Secured Lending (NASDAQ:CGBD)
Carlyle Secured Lending, Inc (NASDAQ: CGBD) is a closed-end, non-diversified business development company that provides customized debt financing solutions to middle-market companies. Chartered under the Investment Company Act of 1940, the company invests primarily in floating-rate senior secured loans, including first-lien, unitranche and one-stop structures. Its objective is to generate current income and capital appreciation through disciplined credit selection and active portfolio management.
The firm focuses on U.S.
