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Date
Thursday, November 13, 2025 at 9:00 a.m. ET
Call participants
- Chief Executive Officer — Peter S. Sack
- Interim Chief Financial Officer — Thomas Napoleon Geoffroy
- President — Bernardino M Colonna
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Takeaways
- Net Investment Income per Share -- 42¢ for the third quarter of 2025, demonstrating the potential of the business model to generate a 12.5% yield to book value and covering the declared 34¢ dividend.
- New Investment Funding -- $66.7 million was deployed to 13 new investments, of which seven were to new borrowers, marking a record for originations.
- Portfolio Composition -- 99.5% of the portfolio is senior secured; 24% of assets are invested in non-cannabis companies across multiple sectors.
- Interest Rate Structure -- 31% of the debt portfolio is fixed-rate, 69% is floating-rate; 58% of floating-rate loans have reached their interest rate floors.
- Interest Rate Sensitivity -- Management stated that a 100 basis point rate drop would impact only 17% of the portfolio, reflecting effects of rate floors.
- Portfolio Yield -- Weighted average yield on debt investments is 15.8% as of September 30, 2025.
- Portfolio Diversification -- 37 portfolio company investments, with the average credit investment approximately 2.4% of the debt portfolio.
- Repayments and Amortization -- $62.7 million in repayments and amortization, including $59.6 million in early principal payoffs.
- Non‑Accruals -- There are currently no loans on non‑accrual status, compared with a 3.5% average for peer BDCs by cost.
- Leverage and Liquidity -- $11 million of total debt outstanding with $97.8 million of liquidity available at November 12, 2025 ($92.5 million credit facility capacity plus $5.3 million cash).
- Expense Management -- Net expenses for the quarter totaled $5.6 million, net of the expense limitation agreement.
- Net Investment Income -- $9.5 million (42¢ per share), up from $7.7 million (34¢ per share) in the previous quarter.
- Net Asset Value -- $302.9 million at quarter end, with a net asset value per share of $13.27 (up from $13.23 last quarter).
- Dividend -- 34¢, marking the fifth consecutive quarter at this rate and fully covered this quarter by net investment income.
- Unfunded Commitments -- $27 million in total unfunded commitments within the portfolio at quarter end.
- Q4 Deployments To-Date -- $5 million funded to one new borrower since September 30, 2025.
- Investment Pipeline -- approximately $610 million in potential transactions, with approximately $415 million in cannabis opportunities and approximately $195 million in non-cannabis.
- Direct Origination Model -- 84% of portfolio company investments are agented internally without reliance on syndicated deals.
Summary
Chicago Atlantic BDC (NASDAQ:LIEN) reported record quarterly new investment origination, with $66.7 million funded across a broadened portfolio base that is now 24% non-cannabis. Management emphasized distinctive portfolio construction, highlighting 99.5% senior secured exposure and direct origination practices enabling tighter risk controls, particularly in less-transparent, smaller borrower segments. The business remains underlevered—with just $11 million in outstanding debt versus a $100 million facility—and maintains high liquidity, with most capital deployment capacity still available. Strong yield preservation was evidenced by a 15.8% portfolio yield and credit risk mitigation through no reported non-accruals, despite peer sector challenges. All loans are performing, with portfolio monitoring, interest rate discipline, and expense management reinforcing management’s stated intent to extend above-market risk-adjusted returns independent of broader private credit trends.
- During Q&A, management explicitly noted record repayments but indicated deployment pace is pipeline-driven and not reactive to repayments.
- CEO Sack said, "I suspect that part of [cannabis sector] price compression is driven by competition with the hemp derived THC markets," forecasting the closure of related loopholes as a likely near-term positive catalyst for state-regulated borrowers.
- Management underscored that uncertain tax liabilities for portfolio companies are treated as indebtedness and limited in loan terms, framing such exposures as managed credit risks within lending covenants.
- The origination approach prioritizes internally agented loans, granting the firm negotiation power to implement stronger covenants and oversight with smaller, private borrower companies.
Industry glossary
- Senior Secured: A debt structure in which the lender has priority claim on collateral assets in default events.
- Non‑Accrual: Loans on which the lender ceases to accrue interest income due to borrower performance concerns.
- Make-Whole Fees: Prepayment penalties paid by borrowers for early loan repayment, designed to compensate lenders for lost income.
- Agented Loans: Loans where the lender serves as the lead arranger and manager for the lending syndicate or, in this case, for direct origination deals.
- Unfunded Commitments: Contracted but undisbursed funds the business is obligated to deploy upon borrower request.
Full Conference Call Transcript
Peter Sack, Chief Executive Officer; Thomas Napoleon Geoffroy, Interim Chief Financial Officer; and Bernardino M Colonna, President. Our results were released this morning in our earnings press release, which can be found on the Investor Relations section of our website, and in our supplemental earnings presentation filed with the SEC. A live audio webcast of this call is being made available today. For those who listen to the replay of this webcast, we remind you that the remarks made herein are as of today and will not be updated subsequent to this call.
Before we begin, I would like to remind everyone that certain statements that are not based on historical facts made during this call, including any statements related to financial guidance, may be deemed forward-looking statements under federal securities laws because such statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Encourage you to refer to our most recent SEC filings for information on some of these risk factors. Chicago Atlantic BDC, Inc. assumes no obligation or to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, November 13, 2025.
Therefore, you are advised that time-sensitive information may no longer be accurate at the time of any replay or transcript reading. And now I'll turn the call over to Peter Sack. Please go ahead.
Peter S. Sack: Thank you, Tripp. Good morning, everyone. During the third quarter, the results continued to demonstrate that Chicago Atlantic BDC, Inc. is a uniquely positioned BDC with the experience and expertise to capture above-market returns while protecting principal. We remain the only BDC focused on and able to lend to cannabis companies, together with a focus on the lower middle market, commonly underserved by capital providers. We believe that this differentiation provides uncorrelated distinct credit opportunities. Net investment income per share was 42¢ for the 2025, demonstrating the potential of the business model to generate a 12.5% yield to book value.
For the third quarter, we are excited to announce that we executed on our pipeline and funded $66.7 million to 13 new investments, of which seven were new borrowers. This improved diversification of the portfolio and allowed us to utilize our credit facility. I'm proud to say that's a new originations record for us. I believe we're all familiar with the issues that arise in the broader private credit markets, such as borrowers defaulting, interest rate sensitivity, dividend coverage, and in some cases, outright fraud. With our company seeming to trade as if these issues apply to us equally, it's worth pointing out some specifics when we say Chicago Atlantic is a differentiated BDC.
The public BDC industry data point that I'm about to mention is taken from Oppenheimer's Equity Research Industry Update as of August 20, 2025, except for the average yield, which was taken from October. Our weighted average yield on debt investments as of September 30, 2025, was 15.8% compared to 11.4% for the average BDC.
99.5% of our portfolio is senior secured, compared to other BDCs with an average of 19.5% exposure to subordinated debt equity, and JV investments. The balance of fixed to floating interest rates in the portfolio has improved with 31% of the debt portfolio fixed and 69% floating, better positioning the company against a drop in interest rates. We calculate that a 100 basis point drop in rates only impacts 17% of the portfolio, demonstrating the impact of high interest rate floors. Our unique investment strategy is focused on underserved markets, providing no overlap in investments made by any other public BDC that we are aware of.
We conduct full due diligence on new credits ourselves, instead of relying on underwriting conducted by banks or co-investors. We carefully monitor the performance of each of our companies ourselves. The portfolio is under-levered with only $11 million of debt as of quarter end, compared with the BDC average of 1.2 times debt to equity. Assuming full utilization of our $100 million credit facility during the year, we would still be well below industry averages. Lastly, we have no non-accruals compared with an average of 3.5% of cost. Today, we announced a 34¢ dividend marking the fifth consecutive quarter at that rate. This dividend is also well covered this quarter with net investment income per share of 42¢.
As we continue executing our strategy, we will focus on further diversifying the portfolio, utilizing the credit facility, and managing interest rate sensitivity while maintaining the overall strength of the portfolio. Now I'll turn it over to Thomas to discuss the numbers in greater detail.
Thomas Napoleon Geoffroy: Good morning. Thanks, Peter. I want to highlight our investor presentation that we filed with the SEC this morning that serves as our earnings supplemental. I'll start with the investment portfolio. We have 37 portfolio company investments. 24% of the portfolio is invested in non-cannabis companies, across multiple sectors. The average credit investment size is approximately 2.4% of our debt portfolio. 69% of the portfolio has floating interest rates, and 58% of these loans have already reached their respective interest rate floors. The gross weighted average yield of the company's credit investment portfolio is approximately 15.8%. And all loans are performing. As of September 30, 2025, the company had $11 million of debt outstanding.
All of which was drawn from the new credit facility. As of November 12, 2025, the company had approximately $97.8 million of liquidity comprised of $92.5 million of borrowing capacity and $5.3 million of cash on the balance sheet. Which is available to deploy. This gives us ample liquidity to deploy additional capital over the remainder of the year while remaining relatively underlevered compared to other BDCs. Financial highlights for the third quarter were gross investment income, totaling $15.1 million compared to $13.1 million for the second quarter. Interest income included $1.9 million of onetime prepayment and make-whole fees from unscheduled repayments. Net expenses were $5.6 million which is net of the expense limitation agreement.
Compared to $5.4 million of net expenses in the second quarter. Net investment income was $9.5 million or 42¢ per share, up from $7.7 million or 34¢ per share in the second quarter. Net assets totaled $302.9 million at quarter end and the net asset value per share was $13.27, up from $13.23 in the second quarter. At quarter end, there were $22.8 million common shares issued and outstanding on a basic and fully diluted basis. I will now turn it over to Bernardino to talk about our origination efforts.
Bernardino M Colonna: Thanks, Thomas. During the third quarter, we funded $66.3 million in new debt investments to 11 portfolio companies. A record quarter for us. Seven of these investments are new borrowers to BDC. Of these new debt investments, 100% of them are senior secured and 84% are either fixed-floating rate loans at their respective floors as of quarter end. During the third quarter, we also had loan repayments and amortization totaling $62.7 million which included early principal payoffs of $59.6 million. As of the end of the third quarter, there was approximately $27 million in total unfunded commitments for the portfolio. To date in the fourth quarter, we have funded $5 million to one new borrower.
We expect additional deployment activity between now and year-end but at a more measured pace than the robust gross originations activity we have seen in the last two quarters. The pipeline across the Chicago Atlantic platform as of quarter end which includes cannabis and non-cannabis opportunities, totaled approximately $610 million in potential debt transactions. The breakdown of the opportunity set includes approximately $415 million in cannabis opportunities and approximately $195 million in non-cannabis investments. As Thomas mentioned, we have approximately $98 million of dry powder to grow the portfolio, but we will maintain our high bar when it comes to underwriting and structuring investments that deliver above-market risk-adjusted returns.
We've had to show patience in the past when the markets around us seem to underprice risk, and we will continue to adhere to that discipline when needed. Both the cannabis and non-cannabis verticals continue to show healthy performance in the portfolio and strong demand for new debt capital within the lower middle markets, where our focus lies. As Peter noted earlier, this is in contrast to some middle and upper middle market credit lenders which are experiencing growing credit issues where there is some overlap among lenders and even certain challenges maintaining existing dividends. At Chicago Atlantic, our focus has always been on building credit portfolios with attractive risk-adjusted returns.
We believe our approach to lending is unique, and our results thus far have highlighted our ability to create alpha in the private credit market. As a result of our direct origination model, 84% of our portfolio company investments are agented internally. This model allows us to be highly selective. And not dependent on syndicated deals, which tend to have overlap among other public BDCs. Lastly, our rigorous approach to underwriting and structuring loans while maintaining pricing discipline has allowed us to craft a differentiated portfolio with strong credit metrics. Thank you for your continued support, we look forward to updating you again next quarter. Operator, we're now ready for questions.
Operator: We will now begin the question and answer session. You were using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
Operator: First question comes from Pablo Zuanic with Zuanic and Associates. Please go ahead.
Pablo Zuanic: Thank you, and good morning, everyone. Congratulations on deploying, you know, the large amount of new loans in the quarter I think it's at $66.6 million. I'd I guess the question is more about the repayments of loans in the quarter, you know, were they in line with your expectations, or were there some repayments that were unexpected And did that in a way, you know, force you to be more aggressive in lending in the quarter to show some book growth If you can comment on that, And then the second question, in the context of other lenders, they are sounding pretty bearish about the cannabis industry outlook.
It seems to me that you have a more constructive view about the industry. And that's allowing you to increase your book. If you can comment on that. Thank you.
Thomas Napoleon Geoffroy: Sure. Thank you, Pablo. You know, our pipeline is more longer takes a long time to develop. A long time to mature into deployment. These are relationships that are nurtured over many months and sometimes years. And so while we had a larger amount of repayments in Q3 than expected, that does not impact the pace of our deployment because our pipeline and deployment is simply not that reactive to liquidity for better or worse. I think we are extremely proud of our deployment. We executed 13 new investments. That's almost one investment per week in the quarter. To which seven were new borrowers.
I think that's a testament to the work to build relationships and nurture relationships across the industry that goes back in time way long way before this quarter. With regards to our outlook on the industry as a whole, I think from the start of our involvement in the cannabis industry, we haven't viewed the industry as a monolith. The industry is challenging to speak as one national industry because it's really a collective of 40 or 41 different jurisdictions in which adult use and medical markets are active. And each of these reflects its own supply and demand dynamics, its own growth expectations, and its own competitive dynamics.
And our focus within each of those jurisdictions evolves over time as certain markets are growing, certain markets are declining, certain markets are facing more difficult margin pressure, and certain markets are facing less difficult margin pressure or none at all. And so I think this is where the investment in a very fulsome originations platform, a very fulsome underwriting platform pays off. It's the ability to be able to pivot from challenging markets to less challenging markets, to be constantly developing relationships with the strongest borrowers possible, to maintain the broadest pipeline possible. And pipeline and relationships are the lifeblood of our industry.
Ultimately, the quality of our deployments is determined by the quality of the relationships that we can garner at the beginning of the process in the development of that pipeline.
Pablo Zuanic: Right. Thank you for that. And congratulations on all the deployment in the quarter. Look, this is again a bigger picture industry question, and I know the bill was only signed last night. But, some people have estimated the hemp derivatives industry to be north of $20 billion. I don't know if I totally agree with that number. But if that's the right number, you know, and that were to flow to the cannabis industry, that would be a big lift for the industry that we're all involved in. Right? Do you see it that way?
Do you see a lot of that, with a lot of hemp derivatives being recombinized that type of volume flowing into cannabis players benefiting the industry? And I know that this has yet happened how do you think about that in terms of the industry outlook?
Peter S. Sack: Mhmm. I think that part of price compression that we're seeing in many cannabis markets over the last year, while data is difficult to ascertain, I suspect that part of that price compression is driven by competition with the hemp derived THC markets. And so the closing of the hemp related loophole, I suspect, is going to support state regulated markets. Going to be a positive catalyst for most of our borrowers. I think on the flip side, there are some negatives that are worth recognizing. I think that the hemp derived beverage market in particular was successful in expanding the pie and the market of users of the THC ecosystem.
I think it brought consumers into the THC ecosystem that were not consumers previously. And it is somewhat unfortunate that this area of the market that was not necessarily well served by dispensaries in the state licensed market will not exist anymore. But I think overall, this is an unequivocal positive for our target markets and for our investment base.
Pablo Zuanic: K. And then one more, in terms of what you can share publicly, I know we've talked about two eighty many times before. What we are hearing is that Trulieve in their 10 Q disclosed that there's a penalty being charged by the IRS because of their uncertain tax provisions. And, of course, you are going to contest that. That's the only company that disclosed that so far. We are hearing that other companies are starting to negotiate terms on those long-term uncertain tax provisions with the IRS and they are beginning to pay them over time. Without interest, without penalties, but paying them over time.
I don't know if you can comment in very general terms about what you are hearing in terms of how companies are starting to deal with paying back those long-term uncertain tax provisions that are in most companies' balance sheets. Again, it is the way you can share, Peter.
Peter S. Sack: Sure. I think our outlook is a little bit different. In that we assume that uncertain tax liabilities, unpaid tax liabilities, we view them as indebtedness that ultimately will have to be paid. When and under what terms is difficult to forecast, but we view it in no uncertain terms as a liability and obligation of our borrowers. In our loan documents, we aim to limit the incurrence of such liability as it does add ultimate risk to the balance sheet. I'm not surprised by such articles and not surprised that companies ultimately do want to reduce the liabilities on their balance sheet because it leads to a healthier, more sustainable enterprise.
But I don't have additional information beyond what you've been reading, Pablo.
Pablo Zuanic: Right. Look. And apologies if there's more people on the queue here, but, I'm gonna ask a couple of more. You know what? Obviously, because of a BDC's structure, you are able to lend against cash flow and not just real estate backed loans. But a lot of these loans are to medium sized, maybe smaller private companies. Right? There's very few large public MSOs here. Obviously, Curaleaf is a large one. There's a new loan to Cresco. I'm looking here in the October. But in general, they are mostly smaller mid-sized companies in which we don't have a lot of visibility. I don't know if you want to comment on that.
I mean, from my perspective, that would imply a little bit more risk, but maybe I'm interpreting it wrongly.
Peter S. Sack: Mhmm. With smaller companies, we have more leverage and bargaining power to negotiate greater asset downside protection in our loans. And so with smaller companies, we find the ability to limit leverage, have greater negotiation power in structuring our loan documents, in structuring covenants, in structuring portfolio monitoring activities. And so we try to balance the risk of lending to smaller enterprises with lower leverage, with stronger portfolio monitoring characteristics. And with a very strong focus on the markets in which we are lending.
Pablo Zuanic: Right. Understood. That's all for me. Thank you.
Operator: Again, if you have a question, please press star then 1. This concludes our question and answer session. I would like to turn the conference back over to Peter S. Sack for any closing remarks.
Peter S. Sack: You, Pablo, for your questions, and thank you to our investors for your support. We look forward to finishing out the year on a strong note and reporting earnings in the first quarter. Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.