PennantPark Floating Rate Capital Ltd.

For the quarter ended June 30, core and GAAP net investment income were $0.26 per share. Investment income included $59 million of interest income, $6.2 million of dividends from joint ventures, and $0.8 million of other income. Operating expenses included $25 million of interest and debt expense, $12.9 million of base management and incentive fees, and $2.3 million of G&A. Net realized and unrealized change on investments was a loss of $18.3 million. NAV per share was $10.26 versus $10.47 last quarter, and debt-to-equity was 1.56x at quarter end, improving to 1.5x after quarter end. For guidance, management said it expects PSSL II to grow from $390 million today to more than $1 billion over the next 12 to 18 months, and it expects elevated M&A activity and repayments in the back half of the year.

Art Penn framed the quarter as proof of a stable, conservatively underwritten platform with earnings covering the dividend. He emphasized the firm’s strength in government services and defense, saying the sector has been resilient through different administrations and remains a key source of differentiated deal flow. He also pointed to the recent Aechelon/Shield AI realization as validation of the strategy and said the company will keep leverage low while aiming to preserve capital and support a durable dividend.

Rick Allorto said quarter-end GAAP and core NII were $0.26 per share and walked through the income and expense mix, including $59 million of interest income, $6.2 million of JV dividends, $25 million of debt expense and $12.9 million of management and incentive fees. He noted NAV of $10.26 per share versus $10.47 last quarter and explained that the main unrealized depreciation came from a write-down on nonaccrual name KNS, plus a write-down in Athletico Holdings. He also said leverage was 1.56x at quarter end and 1.5x after quarter end, within the target range of 1.4x to 1.6x.

Analysts focused on whether rising rates and a potentially tougher credit environment could pressure government services names, and management responded that the sector has historically been extraordinarily resilient, with durable federal demand and meaningful contract visibility. Questions also centered on higher funding costs and whether the stock’s valuation and leverage should lead to capital allocation changes; management said the business is balancing leverage, the two JVs, and NII optimization, while keeping PFLT prudently levered. On credit quality, management said amendments are relatively light and that the remaining issues are mainly from a post-COVID vintage, which they estimated at roughly 10% to 15% of the portfolio.