Palmer Square yield reaches 11.95% as NAV stays 16% below last year

Palmer Square Capital BDC increased its portfolio yield to 11.95% during the second quarter, but lower investment income and a net asset value that remains almost 16% below its year-earlier level point to continuing pressure across parts of the private-credit portfolio.

Total investment income fell to US$27.3m from US$31.7m in the corresponding period of 2025. Net investment income declined to US$12m, or US$0.39 a share, from US$13.8m, or US$0.43 a share.

Net asset value ended June at US$13.21 a share, compared with US$13.30 at the end of March and US$15.68 a year earlier. The year-on-year decline was approximately 15.8%, although the second-quarter reduction was considerably smaller than the fall recorded during the opening three months of 2026.

The portfolio had an aggregate fair value of approximately US$1.11bn across 282 investments in 206 companies and 45 industries. Some 96% of long-term investments were senior secured, while 98% were floating rate. Two companies were on non-accrual, representing 0.29% of investments at fair value.

The higher portfolio yield therefore came alongside a modest deterioration in non-accruals from zero at the end of March, although the absolute exposure remained low. Debt-to-equity increased slightly to 1.71 times from 1.70 times.

Palmer Square funded US$72.4m of new investments during the quarter but recorded US$109.8m of sales and repayments. The resulting contraction in portfolio assets helps explain why the higher yield did not translate into year-on-year investment-income growth.

The company also completed the refinancing of a US$300m term debt securitisation in July. The structure comprised US$228m of AAA notes priced at term SOFR plus 1.27% and US$72m of AA notes at term SOFR plus 1.75%, both maturing in 2039. It separately reduced aggregate commitments under its Bank of America facility from US$525m to US$350m.

Available liquidity stood at approximately US$331m, compared with US$21.5m of unfunded investment commitments.

The results show a portfolio producing higher headline yields while the lender continues to manage the effects of earlier valuation losses, repayments and lower interest income. The refinancing may reduce funding costs, but a recovery in NAV and investment income will depend on credit performance and the pace at which repayments can be redeployed.