西南资本商业发展公司（CSWC）：2025财年第四季度回顾核心业绩稳健，流动性强劲且关税监测到位

USA | Commercial FinanceCapital Southwest BDC F4Q25 Recap: Solid Core Results with StrongLiquidity and Tariff Monitoring Adj. NIIPS of $0.61 aligned with expectations; credit performance was stable,dividends remained well covered (including supplementals) and portfolioquality is strong. Macro risks cloud the outlook, as with all BDCs, but CSWCremains one of the few BDCs to trade consistently above NAV, a strategicadvantage. What we liked: •Adjusted NIIPS of $0.61matched consensus,and excluded $2.8M ($0.05/sh) of 1x costsassociated with departure of CSWC's CEO.•Strong portfolio growth & composition.The investment portfolio grew 21% Y/Y to $1.8B, with99% of debt investments first-lien senior secured and average exposure per company of 0.9%.•Equity portfolio upside.The $179M FV equity co-investment portfolio (10% of total) wasmarked at 142% of cost, with unrealized appreciation of $53.2M ($1/sh) up from $38.5M Y/Y.CSWC noted $20M of realized gains post quarter-end from two exits to support UTI balance.•Dividend strength.CSWC declared a stable $0.58 regular + $0.06 supplemental dividend forthe June quarter, and had $0.79/sh of UTI, which offers runway for continued supplementaldistributions. Mgmt stated its intent to maintain or increase the supplemental payout ratherthan one-off specials.•Strong liquidity and balance sheet.CSWC ended the quarter with $348M in case and undrawnrevolvers (1.9x unfunded commitments) and regulatory leverage of 0.89x (within the targeted0.85-0.95x). A recent $230M convert (5.125%) proactively refinanced 2026 bonds. CSWCreceived its second SBIC license and expects initial draws in F2Q26 (September quarter)•Operational efficiency.Operating leverage of 1.6% (adjusted for 1x costs) compared to atarget run rate of 1.4-1.5% by FY26 versus the BDC average of ~2.8%. NAVPS rose to $16.70from $16.59 Q/Q aided by accretive ATM equity issuance.•Resilient origination activity.$150M in commitments were made in the quarter and 100% ofnew debt originations were first-lien. The lower middle market remains competitive howeverCSWC leverages its deep PE relationships to win deals without needing to offer the highestpricing.•Stable credit performance.Non-accruals decreased to 1.7% (FV) from 2.7% Q/Q with one newnon-accrual that is now in bankruptcy and expected to be off the books in June. DSCR remainsrobust at 3.4x across the portfolio, which has an average LTV of 43%. Things to note: Matthew Hurwit, CFA * | Equity Analyst+1 (415) 229-1487 | mhurwit@jefferies.comJohn Hecht * | Equity Analyst(415) 229-1569 | jhecht@jefferies.com The Long View: Capital Southwest BDC Investment Thesis / Where We Differ •Internallymanagedstructurebetteralignsthegoalsofmgmtwithshareholders and has enabled realization of operational leverage.•Over the LT, CSWC is poised for portfolio growth given consistent accessto equity capital, stable leverage, robust B/S positioning, and historicallystrong credit performance.•CSWC has a strong track record of covering its base dividend with NOI andalso distributes supplementals when prudent.•Improving operational leverage and stable financial leverage (managedthrough ATM program) enable scalable cost structure and consistentoriginations activity, which supports NOI growth/dividend consistency.•Premium valuation to peers, driven by internally managed structure andhistory of execution. Downside Scenario,$20, -4% Base Case,$25, +19% Upside Scenario,$28, +34% •USeconomicdownturnisshort-livedwhileprudent underwriting limits NPAs.•Credit remains stable and orderly.•Marginexpansionandsustainableportfoliogrowth drive upward NOI pressure.•Net portfolio growth continues at sustainablepace.•Continued access to the equity capital markets.•Financial leverage remains stable.•Target Multiple: 1.5x NAV •US economy resumes growth with moderatinginflation.•Exposureto1st-liensecuredproductlimitsNPAs.•Realizationofembeddedupsideonequityinvestment portfolio.•Credit performance remains closer to recent,post-Pandemic averages.•Company continues the cadence of increasesin its supplemental/special dividend.•Larger-than-expected deal flow, greater balancesheet growth with modest leverage expansion.•Improving deal spreads.•Target Multiple: 1.7x NAV •USeconomyweakensfurther,pressuringNPAs.•Credit losses increase ahead of expectations,further pressuring margins/book value.•Deal flow softens and originations decline.•Base rate declines in tandem with softeningoriginations volumes.•Reduced access to equity capital markets.•Dividendunderpressureandthespecial/supplemental dividends cease.•Target Multiple: 1.2x NAV Sustainability Matters Catalysts •Top Material Issues: 1)Business Model Reliance.Ability to manage opportunities and risksfrom incorporating social, environmental, and governance into long-term strategy.2)EmployeeEngagement, Diversity & Inclusion.Culture and hiring practices that encourage a workforce thatencourages diversity and matches its talent base / clients.3)Data Security.Risks associ