Capital Southwest Corporation (CSWC) reported a total investment income of approximately $56.9 million for the three months ended September 30, 2025, marking a 16.9% increase from $48.7 million in the same period last year. The growth in investment income was primarily driven by a rise in interest income, which reached $46.2 million, up from $42.1 million year-over-year. The company also noted an increase in payment-in-kind (PIK) interest income and dividend income, contributing to the overall revenue growth. However, total operating expenses also rose, with interest expenses increasing by 27.3% to $16.0 million, reflecting higher average borrowings.
In terms of profitability, CSWC reported a net investment income of $32.0 million for the quarter, a slight increase of 2.6% compared to $31.2 million in the prior year. The net increase in net assets from operations was $25.6 million, up 12.9% from $22.7 million in the same quarter of 2024. The company experienced a net realized loss on investments of $4.9 million, a significant improvement from a loss of $10.3 million in the previous year, while net unrealized depreciation on investments totaled $1.4 million, contrasting with a gain of $1.8 million in the prior year.
CSWC's total assets increased to $2.02 billion as of September 30, 2025, compared to $1.88 billion at the end of the previous fiscal period. The company’s investment portfolio, valued at $1.88 billion, included 126 portfolio companies, up from 121 in March 2025. The fair value of first lien loans constituted 89.9% of the total portfolio, indicating a stable focus on secured lending. The weighted average annual effective yield on debt investments was reported at 11.5%, slightly down from 11.7% in the previous period.
Strategically, CSWC has been active in managing its capital structure, having issued $350 million in September 2025 in 5.950% notes due 2030, alongside other debt instruments. The company also redeemed $150 million of its October 2026 Notes and $71.9 million of its August 2028 Notes in October 2025, which will result in a realized loss of approximately $2.2 million in the upcoming quarter. The company’s asset coverage ratio stood at 208%, well above the regulatory requirement, providing a strong buffer for its borrowing capacity.
Looking ahead, CSWC remains focused on its investment strategy targeting lower middle-market companies, with plans to continue leveraging its capital resources to support growth. The company is closely monitoring market conditions, including interest rate fluctuations and economic stability, to navigate potential risks and capitalize on investment opportunities.
About CAPITAL SOUTHWEST CORP
Capital Southwest Corporation is an internally managed, non-diversified closed-end business development company (BDC) specializing in customized debt and equity financing for lower middle market U.S. companies. It primarily invests in first lien debt securities and equity interests in established companies with positive cash flow and proven management. The company targets flexible financing solutions across capital structures, leveraging deep industry expertise and long-standing relationships to generate attractive risk-adjusted returns.
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