The externally managed BDC saw its net asset value per share fall more than 25% year over year as non-accrual loans and unrealized depreciation weighed heavily on results.

March 16, 2026

Hancock Park Corporate Income, Inc., a Chicago-based business development company focused on middle-market lending, reported significant deterioration in its financial position for the fiscal year ended December 31, 2025, driven by steep investment losses and a shrinking portfolio.

The company’s net asset value per share dropped to $7.65 from $10.21 at the end of 2024, representing a decline of roughly 25%. The BDC, which is managed externally by OFS Capital Management, posted a net decrease in net assets resulting from operations of approximately $2.9 million for the year, a sharp reversal from the $1.3 million net increase recorded in 2024.

Investment Losses Drive Decline

The primary driver behind the deterioration was a net loss on investments totaling approximately $3.9 million. That figure consisted of roughly $810,000 in realized losses and about $3.1 million in net unrealized depreciation across the portfolio. Losses on the loan portfolio accounted for approximately $3.2 million of the total, while Structured Finance Securities contributed an additional $764,000 in unrealized depreciation.

By year end, the company had placed loans to two portfolio companies on non-accrual status, with those investments carrying an aggregate fair value of roughly $1.04 million — representing about 3.5% of total investments at fair value. This marked a notable shift, as the company had no non-accrual loans at the close of 2024.

Revenue Pressures Mount

Total investment income fell to approximately $4.5 million from nearly $6.0 million in the prior year, a decrease of roughly $1.5 million. The decline was attributed to a smaller interest-bearing portfolio and the impact of lower benchmark rates following Federal Reserve interest rate cuts. The weighted-average performing income yield on interest-bearing investments declined to 12.2% from 13.9% in 2024.

Net investment income came in at approximately $1.0 million, down from $1.7 million in 2024 and $2.2 million in 2023, reflecting the combined pressure of lower revenue and persistent operating costs. On a per-share basis, net investment income fell to $0.63 from $0.97 the prior year.

Total operating expenses decreased modestly to roughly $3.5 million from $4.4 million, helped by lower interest expense and reduced incentive fees paid to OFS Advisor. Interest expense fell to about $1.26 million as the daily-average outstanding debt balance declined and costs on the company’s variable-rate credit facility decreased. Incentive fees dropped sharply to approximately $150,000 from $428,000 a year earlier.

Distribution Cuts and Capital Returns

The company reduced its distributions to stockholders during 2025, declaring $0.67 per share compared to $1.02 per share in each of the two prior years. Notably, the company estimated that approximately 14.9% of its 2025 distributions represented a return of capital rather than ordinary income — a first after two consecutive years of distributions composed entirely of ordinary income.

Monthly per-share distribution amounts were cut from $0.06 in the first three quarters to $0.04375 in the final quarter. In early 2026, the board declared further reduced distributions of $0.0167 per share for January and February, signaling continued pressure on distributable income.

Shrinking Asset Base

The company’s total assets fell to approximately $30.4 million from $38.8 million, while total net assets declined to about $11.5 million from $17.0 million. Shares outstanding decreased to roughly 1.51 million from 1.66 million as the company continued its quarterly tender offer program, repurchasing approximately 158,000 shares during the year at prices reflecting declining NAV.

The investment portfolio at fair value totaled approximately $29.8 million at year end, compared to $36.1 million a year earlier. First lien debt remained the largest component at roughly 61% of fair value, followed by second lien debt at about 20% and Structured Finance Securities at approximately 18%.

Portfolio concentration remained elevated, with the ten largest investments representing nearly 50% of the total portfolio at fair value and about 129% of net assets. Three industries — health care, manufacturing, and information — accounted for approximately 48% of the debt and equity investment portfolio.

Leverage and Liquidity Pressures

Outstanding debt totaled $17.65 million, consisting of a $15 million unsecured note maturing in November 2026 and $2.65 million drawn on the Banc of California credit facility. Asset coverage stood at 165%, above the 150% regulatory minimum, though the margin has narrowed as portfolio values have declined.

The company amended its credit facility multiple times during 2025 and early 2026, progressively reducing the maximum commitment amount from $15 million to $7.5 million while also lowering financial covenants including minimum tangible net asset value and minimum quarterly net investment income thresholds. In January 2026, the maturity date was extended to February 2028.

With approximately $494,000 in cash and $4.85 million in unused credit facility capacity at year end, the company faces the challenge of refinancing or repaying the $15 million unsecured note due later in 2026. Management indicated this obligation could be addressed through amendments, refinancing with new senior securities, or selling portfolio investments, though it acknowledged that most investments are illiquid Level 3 assets and forced sales could result in significant losses.

Outlook and Governance Changes

The termination of the expense support agreement with OFS Advisor effective January 2025 removed a historical cushion that had helped maintain distribution levels above earned income, adding further pressure to the company’s ability to sustain payouts.

Jeffrey Cerny, the former chief financial officer, retired effective March 31, 2025, and was replaced by Kyle Spina, who had previously served as chief accounting officer. Richard Ressler continues to chair all investment committees through OFS Advisor.

In March 2026, the company commenced a tender offer to purchase up to approximately 16,000 shares at net asset value, and indicated it expects to increase the annual repurchase rate to approximately 4% of weighted-average outstanding shares going forward.