Chicago Atlantic BDC (LIEN) Q3 2024 earnings summary

Executive summary

• Completed acquisition of a loan portfolio (reported as $219.6M and $273M in different sources), rebranded as Chicago Atlantic BDC Inc. (LIEN), and became the only publicly traded BDC focused on cannabis lending, with net assets rising to $302 million and 28 portfolio companies as of October 1, 2024.

• The joint venture between Chicago Atlantic and Silver Spike/Chicago Atlantic Loan Portfolio, LLC, brought new leadership and expanded the investment strategy beyond cannabis and health and wellness sectors.

• The platform has closed over $2.3 billion in loans since inception and maintains an active pipeline of $559 million across 39 potential borrowers.

• All current portfolio loans are senior-secured, with 79% floating rate and nearly all featuring interest rate floors.

• Management remains focused on providing capital to high-quality operators in underserved sectors, leveraging origination and underwriting experience for risk-adjusted returns.

Financial highlights

• Gross investment income for Q3 2024 was $3.2 million, up from $2.9 million in Q3 2023.

• Net investment income excluding acquisition expenses was $2.4 million ($0.39/share), compared to $1.6 million ($0.26/share) last year; net investment income for Q3 2024 was $0.0 million due to $2.4 million in transaction expenses.

• Net assets at quarter-end were $82.5 million, with a net asset value per share of $13.28.

• Portfolio is now five times larger and significantly more diversified post-acquisition, with net assets rising to $302 million as of October 1, 2024.

• Transaction expenses related to the Loan Portfolio Acquisition were $2.4 million for Q3 and $5.07 million for the nine months ended September 30, 2024.

Outlook and guidance

• Additional expenses expected in Q4, but not at the magnitude of Q3; management expects less transaction-related expenses going forward.

• Quarterly dividend per share is expected to be higher than the prior dividend, with an update to be provided after board approval.

• Management anticipates improved returns as leverage is added and capital is deployed, with growth opportunities in both cannabis and non-cannabis sectors.

• The company is exploring various financing options and maintains an active investment pipeline of $559 million.

• Continued state-level cannabis legalization and bank pullback in middle markets are expected to drive new lending opportunities.