Palmer Square Capital BDC Reports Strong Fourth Quarter and Year-End 2025 Results

In its fourth quarter and year-end 2025 earnings call, Palmer Square Capital BDC reported a solid performance marked by strategic investments and a focus on risk management. With a net investment income of $13.1 million or $0.41 per share, the company continues to prioritize shareholder returns through dividends and active portfolio management. The management team expressed cautious optimism about market conditions, highlighting the importance of maintaining a defensive posture amid ongoing volatility.

Financial Performance

Palmer Square Capital BDC's financial results for the fourth quarter revealed key metrics worth noting:

• Total investment income: $29.8 million, down 14.5% year-over-year from $34.9 million.
• Net investment income: $13.1 million or $0.41 per share, compared to $14.8 million or $0.45 per share in Q4 2024.
• Total net expenses: $16.8 million, reduced from $20.1 million in the prior year.
• NAV per share: Decreased to $14.85 from $15.39 at the end of Q3 2025.

Despite a decline in investment income, the company successfully managed expenses, leading to a more favorable debt-to-equity ratio of 1.54 times. Palmer Square’s diversified portfolio across 42 different industries highlights its commitment to maintaining strong credit quality, evidenced by low non-accrual rates of only 9 basis points on a fair value basis. This reflects a solid underlying credit performance, positioning the company well against market uncertainties.

Strategic Initiatives

During the fourth quarter, Palmer Square Capital BDC deployed $91.4 million into new investments, focusing on mission-critical sectors, particularly in software and technology. The company’s strategic emphasis on cybersecurity, IT infrastructure, and ERP systems aims to mitigate risks associated with AI-driven disruptions. Noteworthy highlights include:

• Investments skewed towards large, highly scaled providers backed by sophisticated private equity sponsors.
• A focus on first lien loans, which comprise 95% of the overall portfolio, ensuring a safer investment profile.
• A commitment to active credit management, which the management believes will yield attractive total returns.

Moreover, the company has established a $5 million open market share repurchase authorization to enhance shareholder value, although it has not yet utilized this authorization due to blackout restrictions. With a total investment portfolio valued at approximately $1.2 billion, Palmer Square continues to evaluate opportunities for balance sheet optimization, including a potential CLO refinancing in 2026.

Future Outlook

Looking ahead, management provided guidance that reflects a cautiously optimistic view of the market. While acknowledging the volatility and uncertainty that have characterized recent months, they pointed out signs of a gradual improvement in deal momentum. Key takeaways from the management’s outlook include:

• Increased engagement with sponsors and capital market desks, indicating a healthier pipeline in both the private credit and broadly syndicated markets.
• Expectations that M&A activity will pick up, especially as the market stabilizes and valuations adjust.
• An ongoing commitment to monitoring credit fundamentals closely to identify high-quality opportunities amid market dislocations.

Management also highlighted the importance of maintaining a defensive posture while being ready to capitalize on attractive entry points in the market. Given the current landscape, Palmer Square believes there are potential investment opportunities available that could yield significant returns for shareholders.

“Despite the heightened uncertainties, we believe our portfolio continues to be resilient and deliver strong results across shifting environments,” stated Chris Long, Chairman and CEO.

Conclusion

In summary, Palmer Square Capital BDC's fourth quarter and year-end 2025 results reflect a company strategically positioned for future growth despite current market challenges. With a strong focus on risk management, diversified investments, and a commitment to shareholder returns through dividends and share repurchases, the company is poised to navigate the evolving financial landscape. As it moves into 2026, Palmer Square aims to leverage its expertise in credit management and capital allocation to unlock value for its investors in the coming months. Investors should remain attentive to the company’s updates and potential opportunities that may arise as market conditions evolve.