Capital Southwest (CSWC) 15th Annual Midwest IDEAS Investor Conference summary

Business model and market focus

• Operates as an internally managed BDC, focusing on lower middle-market, first lien lending, primarily to private equity-backed transactions in founder- or family-owned businesses with $3–25 million EBITDA.

• 95% of deals are private equity-sponsored, with typical loan-to-value ratios of 25–50% and commitments up to $50 million.

• Co-invests minority equity alongside debt, maintaining a portfolio with 91% credit and 9% equity exposure.

• Portfolio is highly diversified, with 117 companies and an average hold size of $12.7 million.

• All deals include covenants, and the firm maintains a conservative risk profile with a focus on recession resilience.

Financial performance and capital structure

• Assets total $1.5 billion, with investment grade ratings from Moody’s and Fitch.

• Operating leverage has improved from 5% to 1.8% over eight years, supporting higher ROE and lower risk.

• Leverage stands at 0.75x, below the regulatory limit, and the company has $485 million in dry powder.

• Capital structure includes a $460 million credit facility, retail and institutional bonds, and an SBIC program with $153 million drawn and $22 million undrawn.

• Two bond maturities are due in 2026, with refinancing plans underway; cost of debt expected to rise short-term but normalize as rates decline.

Dividend policy and shareholder returns

• Pays regular, supplemental, and special dividends, with a strong bias toward capital distribution.

• Regular dividend recently increased to $0.58 per share, with supplemental dividends supported by $0.50 per share in undistributed taxable income.

• NII per share was $0.69 last quarter, expected to decrease to the low $0.60s due to refinancing.

• ATM equity program allows efficient, accretive capital raising, supporting growth without significant dilution.

• Total value creation driven by a diversified, first lien-heavy portfolio with an average yield of 13.3%.