BCP Investment Corp. – Deleveraging, Software Marks, and the Buyback Calculus
The BDC continues to shrink its balance sheet and improve credit quality, but software valuations still weigh on NAV – and management keeps choosing buybacks over new deployment.
BCIC · Earnings Call · 2026-08-07
Still under the weight of software
BCP Investment Corp. (BCIC) turned in another quarter of slow, deliberate progress: deleveraging, a slightly cleaner non-accrual list, and a fresh consolidation of its revolver structure. But the story remains dominated by software. The CEO made a point of trying to draw a line under it: “Software is now less than 13% of our portfolio... almost all of it is mission-critical with structural protections.” — Edward Goldthorpe, Chief Executive Officer · 2026-08-07 Yet the quarter's NAV still fell to $14.49 per share from $15.60, with unrealized markdowns again driven by software and software-exposed credits. This is not a new theme — in the prior quarter the company said the same thing: “I do not see a big wave of software sales over the next 12 months.” — Ted Goldthorpe, Chief Executive Officer · 2026-05-08 The persistence of these marks is worth scrutinizing. The company claims the bulk of the pain is taken, but the software sector continues to face a wide repricing. As the CIO noted, the B-rated loan index improved modestly, but software spreads widened further — a few hundred basis points wide of the broader index. The portfolio is now carrying a blended price of 88.6% of par on non-accrual names, and the implied par recovery would add 24% to NAV. That is a large assumption.Leverage grind and the revolver shuffle
The balance sheet did improve. Par borrowings dropped by $56 million to $286 million, asset coverage rose to 162%, and gross leverage fell to 1.6x. The company amended and upsized its KeyBank facility after the quarter-end, using it to refinance and retire the JPMorgan Great Lakes revolver. This is another step in the “proactive liability management” the team keeps referencing. “We also continue to enhance our capital structure through proactive liability management.” — Edward Goldthorpe, Chief Executive Officer · 2026-08-07 The non-accrual count fell from 9 to 7 companies, and the amortized cost percentage dropped from 6.2% to 5.7%. But the fair value percentage actually ticked up as the portfolio shrank. The non accrual status improvements are real, but they are incremental. The resolution of two positions drove a $10.5 million realized loss, which was largely already reflected in prior NAV.The buyback calculus
The most consistent strategic stance is the preference for buybacks over new deployment. Management has been explicit across quarters. This quarter, the CEO said: “It just makes a lot more sense for us to buy our stock back where it trades versus deploying new capital.” — Edward Goldthorpe, Chief Executive Officer · 2026-08-07 The same logic was expressed in Q1: “it is more accretive for us to basically take the liquidation and buy back stock.” — Ted Goldthorpe, Chief Executive Officer · 2026-03-06 The math is understandable — the stock trades at about half of book value. But the buyback is only possible up to a limit, and it doesn't stem the NAV decline. Software exposure might be shrinking, but the marks are still flowing through. The distribution is barely covered by core investment income ($0.27 per share vs. a $0.27 base distribution), leaving no room for error.The Credit Facility restructuring consolidates borrowing into a cheaper, longer-dated facility, which is sensible. But the real test is whether the portfolio can generate enough par recovery to offset the ongoing software depreciation. The company's own stress test — a 10% default / 70% recovery — would add $2.57 per share, but that's predicated on the remaining book performing.We are not relying on a market-wide recovery in M&A transaction activity. Our focus is on the opportunities we are sourcing directly and on the pipeline we've built in our core market.