Palmer Square Capital BDC Inc.

What they do

Palmer Square Capital BDC Inc. (PSBD) is a BDC that lends to and invests in corporate debt securities of U.S. companies, with a secondary focus on CLO structured credit funds. It is externally managed by Palmer Square BDC Advisor LLC, a majority-owned subsidiary of Palmer Square Capital Management. The company has elected to be treated as a RIC and operates through four consolidated wholly-owned subsidiaries, including funding vehicles for credit facilities and a CLO issuer.

Revenue drivers

• Corporate debt investments — Primary strategy; generates interest income from loans to private U.S. companies. As of June 30, 2026, total fair value of investments was $1.11 billion, with 96% in senior secured loans.
• CLO structured credit — Secondary strategy; invests in CLO equity and junior debt tranches. Less prominent than direct corporate debt but part of the stated investment mandate.
• Portfolio yield — Weighted average total yield on debt and income-producing securities was 11.95% as of June 30, 2026, up from 10.10% a year earlier, reflecting income generation capacity.

Recent performance

For Q2 2026, total investment income was $27.3 million, down from $31.7 million a year earlier. Net investment income was $12.0 million, or $0.39 per share, versus $13.8 million ($0.43 per share) in Q2 2025. NAV per share fell to $13.21 from $13.30 at March 31, 2026, and total net realized and unrealized losses were $3.6 million. As of June 30, 2026, total assets were $1.1 billion, total net assets were $406.2 million, and debt-to-equity stood at 1.71x. Net income for full-year 2025 was -$3.2 million, though diluted EPS was $1.66.

Strategy

PSBD aims to maximize total return from current income and capital appreciation by deploying capital across both broadly syndicated loans and private credit. Management has taken steps to improve liability structure and lower cost of capital, which they expect to enhance earnings power starting in Q4 2026. The company increased and extended its share repurchase program during Q2 2026. The investment objective is guided by a focus on corporate debt and, to a lesser extent, CLO funds.

Risks

• Credit risk on portfolio investments — Investments in corporate debt may default; as of June 30, 2026, investments on non-accrual were 0.29% of total investments, up from 0.00% at March 31, 2026.
• Leverage risk — Debt-to-equity of 1.71x exposes the company to higher interest costs and potential margin calls, especially in rising rate environments.
• CLO market risk — Investments in CLO tranches are subject to structured credit risks, including subordination and potential losses in stressed credit conditions.
• Interest rate risk — Changes in SOFR and other interest rates can affect both income from floating-rate loans and costs of borrowings, impacting net investment income.

Outlook

Management believes the company is well positioned to generate greater earnings power beginning in Q4 2026 and into 2027, following liability restructuring and lower cost of capital. They continue to selectively deploy capital across both broadly syndicated loans and private credit. A third-quarter base dividend of $0.36 per share was declared, with a supplemental dividend expected to be announced in September. The 8-K filings indicate ongoing actions such as entering material agreements and repurchase program enhancements.