With expected repayments leading to net portfolio declines to reach the target leverage range, what is the company's view on future portfolio composition, specifically regarding position sizes, once target leverage is achieved, especially if the origination market becomes more active?

In the near term, the focus is on adding smaller positions, likely below the average 0.5% of the total portfolio, to enhance diversification and leverage the broader platform's origination capabilities, while managing the current leverage profile. “Yes, in the near term, Robert, our focus here is going to be adding positions that are likely going to be smaller than our average position size of approximately 50 basis points on the total portfolio.”

Is growing through scale, potentially via M&A, a priority for CCAP, and would Sun Life be willing to commit more capital to the BDC?

CCAP remains a core strategic vehicle within Crescent's platform, with Sun Life being a strong supporter through equity and debt investments. While M&A has been executed in the past and is considered part of fiduciary duty, the primary focus currently is on addressing NAV declines, non-accruals, and cleaning up the portfolio. “I will say, as we talked about on the preparatory, We're not happy with the NAV declines and what we've seen in the recent trends. We're not happy with where our non-recruits are. We're trying to clean that up. And that remains our primary focus right now for manpower managing this vehicle.”

Have the underperforming positions been concentrated solely within the BDC, or has there been a broader performance headwind across the institutional franchise due to vintage or sector-specific issues?

There's a normalization period reflecting higher defaults from more aggressive structures in the 2021-2022 vintage and zero base rates. While there's significant overlap in co-investments between CCAP and the institutional business, the legacy First Eagle names acquired via M&A are uniquely challenged and represented only within the CCAP portfolio. “The one, I would say the one exception to that, that I would call out certainly is anything that CCAT might do on the M&A side. And so we do have some first Eagle legacy, first Eagle names that we onboarded at the time of that acquisition. We knew they were challenged names. They continue to be challenged names, and those are only represented within the CCAP portfolio.”

CCAP

Crescent Capital BDC (CCAP) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Aug 11, 2026

Source: earnings call transcript

Executive summary

Crescent Capital BDC, Inc. Q2 FY26 — NAV Decline Amidst Portfolio Rotation and Deleveraging Focus

Crescent Capital BDC reported a decline in NAV and an elevated debt-to-equity ratio in Q2 FY26, primarily driven by unrealized losses on non-accrual investments and a modest increase in watch list assets. Management is focused on rotating watch list investments and deleveraging the portfolio, supported by a recently revised fee structure and strong liquidity. The company aims to stabilize the portfolio and improve long-term shareholder returns amidst a normalizing private credit market.

Highlights

Net investment income (NII) of $0.36 per share exceeded the $0.34 base dividend.
Fee structure revised with reduced management and incentive fees effective April 1, enhancing long-term earnings power.
Maintained a strong liquidity position with approximately $200 million of available borrowing capacity and $36 million of cash.
Upsized SPV asset facility by $100 million to $500 million and SMBC corporate facility by $25 million to $335 million.
Unsecured debt maturity profile extended to 2028 and beyond, providing meaningful financial flexibility.

Concerns

Net asset value (NAV) declined to $17.82 per share from $18.27, primarily due to $0.47 per share in unrealized losses on non-accrual investments.
Debt to equity ratio increased to 1.42 times (1.37 times net of cash), ending the quarter above the long-term target range.
Watch list investments increased modestly from 14% to 15% quarter over quarter, concentrated in deferrable consumer spending.
NAV has declined for several consecutive quarters, reflecting ongoing pressure from challenged credits.

Guidance & targets

Category	Target	Timeline	Confidence
Net leverage ratio	within our target net leverage range high materiality	second half of the year · FY26	High

Deals & partnerships

Not stated Upsized SPV asset credit facility $100 million increase to $500 million

Upsized the SPV asset facility by $100 million to $500 million.

Not stated Upsized SMBC corporate credit facility $25 million increase to $335 million

Upsized the SMBC corporate facility by $25 million to $335 million.

Not stated Funded tranche of fixed rate unsecured notes $50 million due May 2029

Funded the previously committed $50 million tranche of Series 2025 fixed rate unsecured notes.

Risks & headwinds

NAV decline due to unrealized losses Q2 FY26

$0.47 per share in unrealized losses

Mitigation:Actively managing non-accrual investments and focusing on long-term value maximization through portfolio rotation.

Elevated debt to equity ratio Q2 FY26

1.42 times (1.37 times net of cash), above target range

Mitigation:Expects portfolio realizations in the near term to reduce leverage to within target range during the second half of the year.

Increased watch list investments Q2 FY26

Increased from 14% to 15% of portfolio

Mitigation:Closely monitoring businesses indexed to deferrable consumer spending; proactive designation and management of watch list assets.

Legacy acquired assets (First Eagle portfolio) challenges Ongoing

Represents approximately 7% of CCAP's portfolio at fair value, reduced from over 70 to 27 investments

Mitigation:Continued focus on rotating the portfolio through restructurings and exits to improve overall portfolio quality.

Normalization of credit cycle and higher defaults Ongoing

Reflecting higher overall defaults and credit relative to a couple of years ago, stemming from more aggressive structures in 2021-2022 vintage and zero base rates.

Mitigation:Intentional moderation of hold sizes on new investments and disciplined deployment.

What to watch in Q3 FY26

Net leverage ratio

second half of the year

Current 1.37 times (net of cash)

Target within target range

Why it matters

Achieving the target leverage ratio is a key near-term priority for management and indicates successful portfolio realizations.

We have visibility into several portfolio realizations in the near term, which, all else equal, we expect will reduce leverage to within our target net leverage range during the second half of the year.

Find out whether CCAP delivers this. Inve re-checks your case every morning.

Q&A highlights

Given the consistent NAV decline over eight consecutive quarters, is the issue that turnarounds are not progressing as expected, or is the fair value being revised downward each quarter to keep up with current performance rather than being more forward-looking? How close is the company to the bottom on NAV?

Management acknowledges the long-term trend and emphasizes a focus on long-term value and recovery maximization for watch list investments, not just quick exits. Valuations reflect the nearest-term operating performance and outlook, which can vary significantly for watch list and non-accrual investments. The watch list increased modestly to 15%, and the company aims to be proactive in designating investments.

“Our goal and what we commit to is reflecting those in real time and providing the best current view that we have on the respective watches investments. So when I think about making sure that we factor in every relevant app input, those can change.”

asked by Robert Dodd · answered by Henry Chung

2 min read 5 chapters

Detailed narrative

NAV Decline and Credit Quality

The company's net asset value (NAV) per share decreased to $17.82 from $18.27 in the prior quarter. This reduction was primarily driven by $0.47 per share of separately recognized unrealized losses, reflecting continued operating pressure across a subset of non-accrual investments.

Realized losses from restructurings totaled $0.48 per share, which were offset by the reversal of previously recognized unrealized losses. The watch list increased modestly from 14% to 15% quarter over quarter, with a concentration in businesses indexed to deferrable consumer spending.

Portfolio Management and Rotation

Management is actively rotating its watch list investments and focusing on long-term value maximization. Three restructurings were completed during the quarter, leading to a decline in non-accruals from 5.7% to 4.8% of debt investments at cost. The legacy First Eagle portfolio, a significant contributor to the watch list, has been reduced from over 70 to 27 investments, now representing approximately 7% of CCAP's portfolio at fair value, with further realizations expected.

Leverage and Liquidity Management

The debt to equity ratio increased to 1.42 times (1.37 times net of cash), exceeding the target range due to NAV decline and positive net deployment. However, the company maintains strong liquidity with $200 million of available borrowing capacity and $36 million in cash.

Facilities were upsized, including the SPV asset facility by $100 million to $500 million and the SMBC corporate facility by $25 million to $335 million, extending the unsecured debt maturity profile to 2028 and beyond.

Fee Structure and Shareholder Alignment

A revised fee and dividend framework, including reduced management and incentive fees, became effective April 1. These actions are expected to enhance CCAP's long-term earnings power, support sustainable shareholder returns, and position the company with a competitive fee structure in the public BDC sector.

Sun Life, a long-term holder of approximately 6% of CCAP's shares, continues to support the platform with over $1.5 billion invested or committed since 2021.

Investment Activity and Market Conditions

Given the deleveraging priority, CCAP moderated its hold sizes on platform-originated investments. Post deployment totaled $57 million, including $28 million in new platform investments at weighted average spreads of approximately 550 basis points, and $29 million in follow-on investments. Exits, sales, and repayments amounted to $36 million, resulting in net deployment of $21 million.

Competitive dynamics in the private credit market have improved, particularly in the upper mid-market, due to slower capital formation in the non-traded retail BDC market.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.