Chicago Atlantic BDC Funding Collapses After Record Quarter
Second-quarter investment income was $14.0 million, or $0.61 a share, as the cannabis-focused BDC funded just $2.7 million.
Chicago Atlantic BDC, Inc. (LIEN), a specialty finance company that has elected to be regulated as a business development company, funded only one investment of $2.7 million to an existing borrower in the three months ended June 30, 2026, after funding seven companies totaling $93.9 million in the prior quarter.
The pause in deployment reversed a first-quarter expansion that had lifted the investment portfolio to a then-peak of $364.0 million. The fair value of the book fell to $334.8 million across 37 companies from $364.0 million across 40 companies. Chief Executive Officer Peter Sack said the decline in portfolio fair value was driven primarily by repayments and amortization rather than credit deterioration or valuation markdowns.
Repayments, amortization, and refinancing totaled $32.2 million in the June quarter, including $26.7 million of full repayments on three positions and $5.5 million of scheduled and unscheduled amortization. The prior quarter had seen $63.4 million of those outflows, including a $42.1 million refinancing.
Total investment income was $14.0 million, or $0.61 a share, down from a record $16.7 million, or $0.73 a share, in the three months ended March 31. Net investment income was $7.7 million, or $0.34 a share. The net increase in net assets resulting from operations was $6.1 million, or $0.27 a share. Interest income from non-controlled, non-affiliate investments was $12.3 million. Fee income on those positions was $659,000.
The company said there were no loans on non-accrual status as of June 30. The weighted average yield on debt investments was 16.0%, up from 15.8% at March 31. The portfolio remained 100% senior secured. The net change in unrealized gains (losses) was a $1.6 million loss, or $0.07 a share.
NAV per share was $13.26 at June 30, down from $13.33 at March 31. Total net assets were $302.5 million. Outstanding borrowings were $27.0 million and the debt-to-equity ratio was 0.09x. Liquidity was $73.9 million, including $0.9 million of cash and $73.0 million available on a $100.0 million senior credit facility. As of August 12, the company had $53.5 million outstanding on that facility and about $47.2 million of liquidity.
Sack said several anticipated fundings shifted into the third quarter due to transaction timing and that the company continues to see strong borrower demand and a pipeline of approximately $1.1 billion. Subsequent to quarter-end, one position of $25.0 million was funded to a new portfolio company. On May 11, the company filed a shelf registration that, once effective, will allow it to issue up to $500 million of securities, including debt.
On June 17, the company entered a merger agreement with Chicago Atlantic Real Estate Finance, Inc. (REFI), an affiliated real estate investment trust externally managed by an affiliate of LIEN’s adviser. REFI will merge into LIEN, with LIEN as the surviving company. Prior to the merger, REFI will elect to be regulated as a business development company. At closing, REFI stockholders will receive LIEN common stock based on an exchange ratio of the two companies’ NAVs per share shortly before closing. Based on March 31, 2026, NAVs, former REFI stockholders would be expected to own about 50.5% of the combined company. Closing is expected in the fourth quarter of 2026, subject to stockholder approvals, including REFI’s election to be regulated as a BDC, and other customary conditions.
On August 10, the board declared a third-quarter 2026 dividend of $0.34 a share, payable October 9, for about $7.8 million, the seventh consecutive dividend at that rate. The second-quarter dividend of $0.34 a share was paid July 10.