Does the current private credit environment suggest the SEC might take longer to review the merger?

Management has no specific reasons to believe the SEC will take longer. “We don't have any specific reasons to believe why the SEC will take longer.”

Is investor interest in the cannabis sector and Chicago Atlantic specifically changing due to federal regulatory changes and NYSE uplistings, similar to what other cannabis companies are seeing?

Federal regulatory changes and broader interest in cannabis equities are supportive. However, the merger's primary benefit is creating a larger entity (over $600 million book equity) that will attract larger institutional investors due to increased liquidity and market cap, placing it among the top 25 BDCs. “Even more important in our case is the opportunities afforded by the merger. that a limited size of book equity and limited size market cap is a significant deterrent for larger investors to invest in our capital stack, simply because liquidity is more limited and you reach a significant holdings much more quickly.”

What is the breakdown of the $1.1 billion pipeline between cannabis and non-cannabis, and how much M&A activity is truly happening in cannabis given some operators' caution?

The pipeline is approximately 60% cannabis and 40% diversified direct lending. The company's recent $25 million funding subsequent to quarter end was M&A related. They primarily work with large-scale private operators, not just the largest public MSOs. “Approximately 60% is cannabis and approximately 40% is diversified direct lending.”

LIEN

Chicago Atlantic BDC (LIEN) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Aug 13, 2026

Source: earnings call transcript

Executive summary

Chicago Atlantic BDC Q2 FY26 — Strong Credit Quality and Merger Progress

Chicago Atlantic BDC maintained strong credit quality and a unique market position in cannabis lending during Q2 FY26, with a high-yielding, fully senior secured portfolio and no non-accruals. The company is progressing with its merger with Chicago Atlantic Real Estate Finance, which is expected to close in Q4 2026, aiming to enhance scale, capital access, and market visibility. Despite a temporary slowdown in originations and a decrease in net investment income, the firm's disciplined underwriting and robust pipeline position it for future deployment.

Highlights

Net investment income for Q2 FY26 was $7.7 million, or $0.34 per share.
Weighted average yield on debt investments was 16% as of June 30, 2026, significantly higher than the 10.8% average for public BDCs.
The debt portfolio is 100% senior secured, with only 1.4% exposure to sub-debt, equity, or JV investments, compared to a BDC average of 25.8%.
The company reported no non-accruals, contrasting with an industry average of 3.8% of costs.
Liquidity totaled $73.9 million at quarter end, providing additional capacity for investments.

Concerns

Gross investment income decreased to $14 million from $16.7 million QoQ, primarily due to lower fee income reflecting lower origination activity.
Net investment income decreased to $7.7 million ($0.34 per share) from $10 million ($0.44 per share) in Q1 FY26.
The fair value of the portfolio decreased by $29.1 million to $334.8 million, mainly due to gross paydowns and a slower pace of deployment.

Guidance & targets

Category	Target	Timeline	Confidence
Merger closing	Q4 2026 high materiality	Q4 · FY26	High
Deployment activity	increased deployment activity medium materiality	periods ahead	Medium

Deals & partnerships

Chicago Atlantic Real Estate Finance Inc. (ReFi) All-stock NAB for NAB transaction to combine two highly complementary portfolios, creating a larger and better capitalized BDC.

A preliminary registration statement on Form N-14, including a joint proxy statement, has been filed with the SEC and is subject to review. Closing is subject to required stockholder approvals, regulatory approvals, and customary closing conditions.

Risks & headwinds

Merger closing timeline uncertainty Q4 2026

difficult to tell if it will take longer or shorter

Mitigation:Iteration with the SEC on Form N14 and proxy statements is the most significant and uncertain variable, but management expects Q4 2026 close based on current information.

Volatility in originations and repayments quarter over quarter

Originations ($2.7 million) and repayments ($32.2 million) were volatile in Q2 FY26.

Mitigation:Repayments are a validation of credit selection, and capital is redeployed into new originations. A strong pipeline is expected to drive increased deployment activity in future periods.

Regulatory uncertainty in cannabis industry ongoing

Not quantified as a negative impact, but as a potential for increased competition.

Mitigation:Maintain rigorous underwriting standards based on today's regulatory framework, not potential future reform. Do not include assumptions of regulatory changes in projections.

What to watch in Q3 FY26

Merger closing with Chicago Atlantic Real Estate Finance

Q4 2026

Current Preliminary registration statement filed, subject to SEC review.

Target Merger closes.

Why it matters

Creates a larger, better-capitalized BDC with enhanced market visibility and access to capital, significantly impacting the investment thesis.

We still expect the merger to close in the fourth quarter of 2026, subject to the required lien and refi stockholder approvals, regulatory approvals, and customary closing conditions.

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

Q&A highlights

Why is the merger timeline (Q4 2026) faster than typical BDC/REIT mergers, and what are the specific regulatory approvals needed?

The process involves SEC review of Form N14 and proxy statements, with comments expected soon. This iteration with the SEC is the most significant variable. No significant state regulatory hurdles.

“That process of iteration with the SEC is the most significant and uncertain variable. And until we receive comments back and begin that process of engagement, It's difficult to tell if it will take longer or shorter, but given what we know today, we expect Q4 2026.”

asked by Pablo Zwanek · answered by Peter Sack

2 min read 6 chapters

Detailed narrative

Unique Market Positioning

Chicago Atlantic BDC remains uniquely positioned as the first publicly listed BDC focused primarily on cannabis lending, operating in an underserved lower middle market segment. This allows for idiosyncratic opportunities not available to other BDCs, resulting in a weighted average yield on debt investments of 16%, significantly higher than the 10.8% average for public BDCs. The company's focus on non-sponsored transactions further differentiates its approach.

Strong Credit Quality

The company's debt portfolio is 100% senior secured, with minimal exposure (1.4%) to sub-debt, equity, or JV investments, compared to an industry average of 25.8%. It reported no non-accruals, contrasting with the BDC industry average of 3.8% of costs, reflecting disciplined underwriting and credit selection. Credit quality remained stable throughout the quarter, with internal risk ratings unchanged.

Merger with Chicago Atlantic Real Estate Finance

The proposed all-stock merger with Chicago Atlantic Real Estate Finance Inc. (ReFi) is on track to close in Q4 2026, subject to shareholder and regulatory approvals. This transaction is expected to create a larger, better-capitalized BDC with over $600 million in book equity, improving access to capital, supporting earnings growth, and enhancing trading liquidity and market visibility.

A preliminary registration statement on Form N-14 has been filed and is under SEC review.

Regulatory Developments in Cannabis

Federal cannabis policy saw momentum with the Department of Justice announcing rescheduling of medical cannabis to Schedule 3, and an administrative hearing concluding for recreational cannabis rescheduling. While these developments are viewed as positive for borrower credit quality and wider acceptance within capital markets, the company maintains rigorous underwriting standards based on current regulations, not potential future reforms, and does not include these assumptions in its projections.

Origination and Pipeline

Deployment activity was modest in Q2 FY26, with $2.7 million in new debt investments partially offset by $32.2 million in loan repayments and amortization. However, the company maintains a strong pipeline of approximately $1.1 billion in potential debt transactions, split 60% cannabis and 40% diversified direct lending.

Subsequent to quarter end, a $25 million debt investment was funded to a new portfolio company, indicating increased deployment activity ahead.

Liquidity and Capital Structure

The company reported $73.9 million in liquidity at quarter end, including $46.5 million of borrowing capacity under its $100 million credit facility and $0.7 million cash as of August 12, 2026. With only $27 million of debt outstanding and a low debt-to-equity ratio of 0.09x (compared to a BDC average of 1.3x), the company is underlevered and has ample room to expand liquidity and leverage.

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