The New York-based business development company also declared its first shareholder distribution of the year, payable in late April.

May 14, 2026

Willow Tree Capital Corporation, a Maryland-incorporated business development company focused on middle-market lending, reported a sharp jump in net investment income for the first quarter of 2026, as a larger and more fully deployed investment book translated into stronger interest revenue.

For the three months ended March 31, 2026, the externally managed BDC generated total investment income of roughly $21.8 million, up from $14.6 million in the same period a year earlier. Net investment income climbed to about $10.0 million, compared with $5.6 million in the prior-year quarter, an increase of roughly 77 percent. On a per-share basis, net investment income reached 41 cents, up from 37 cents.

Despite that operating improvement, the net increase in net assets resulting from operations was a more modest $8.1 million, versus $7.5 million a year earlier, after the company absorbed approximately $1.9 million of net unrealized depreciation. Management attributed the decline in fair values to wider credit spreads across the private credit market, along with company-specific performance factors that pulled down the marks on certain debt holdings. Per share, the operating result came in at 34 cents, compared with 50 cents a year earlier, when the portfolio recorded unrealized appreciation rather than depreciation.

A larger, fully U.S. portfolio

At quarter-end, the investment portfolio stood at approximately $899.0 million in fair value, up from $884.4 million at the close of 2025. The book is invested across 54 portfolio companies, the same count as at year-end, with an aggregate amortized cost of $893.2 million. All investments are classified as U.S. private debt, and unless otherwise indicated, loans are first lien obligations.

During the quarter, Willow Tree Capital added 10 new investments representing $24.9 million in commitments and received full repayments from two borrowers totaling $17.1 million. That activity was notably more measured than a year earlier, when the company committed roughly $142.6 million across 11 new investments as it built out its book following its formation transactions. No investment realizations occurred during the most recent quarter.

The portfolio carries a weighted average stated interest rate of 9.2 percent and a weighted average maturity of 3.9 years, slightly down from 9.3 percent and 4.1 years at year-end 2025. Industry exposure remains concentrated in:

• Health Care Providers and Services — 26.4 percent of fair value
• Commercial Services and Suppliers — 16.1 percent
• Diversified Consumer Services — 10.1 percent
• Financial Services — 8.7 percent
• Insurance — 7.2 percent

Aerospace and Defense, Software, Professional Services, and Energy Equipment and Services round out the more meaningful sector weights. Credit quality remained stable on the company’s internal four-point rating scale: roughly 99.7 percent of the portfolio at fair value carried a Grade 2 rating, indicating stable and performing positions, while approximately 0.3 percent sat at Grade 3, signaling weakening trends without expected principal loss. No investments were rated Grade 1 or Grade 4.

Capital structure, leverage, and liquidity

Net assets ended the quarter at approximately $421.1 million, up from $387.6 million at year-end 2025. Net asset value per share, however, edged down to $16.05 from $16.11, reflecting the impact of unrealized depreciation and capital activity during the quarter. As of May 13, 2026, the company had 26,654,360 shares of common stock outstanding.

The asset coverage ratio rose to 185.7 percent at quarter-end from 173.0 percent at year-end, comfortably above the 150 percent threshold required for BDCs under the Investment Company Act of 1940. The improvement reflected net repayments on the company’s credit facilities and equity raised during the period.

Borrowings during the quarter flowed through two facilities:

1. The Amended and Restated Credit Facility with Ally Bank, expanded in late December 2025 from $500 million to $575 million, had $475.6 million drawn at quarter-end and matures on November 8, 2029. The December amendment also lowered applicable spreads, added a new subsidiary as borrower, and permitted purchases of loans in euros and British pounds. Pricing is based on Term SOFR or Daily Simple SOFR plus 2.00 percent annually, down from the 2.50 percent spread that previously applied.
2. A separate Subscription Line, with $51.7 million in commitments maturing on November 6, 2026, carried $15.98 million in borrowings at quarter-end.

Cash on the balance sheet stood at $27.1 million at March 31, 2026, modestly lower than the $27.6 million held at the close of 2025. Operating activities provided $13.2 million of cash during the quarter, while financing activities consumed $13.7 million, largely reflecting net repayments of $39.6 million across the two facilities, offset by $27.5 million of new equity issued.

First quarterly distribution declared

Willow Tree Capital made its first distribution declaration of the year on March 12, 2026, setting a payment of 40 cents per share with the same record date and a payment date of April 27, 2026. The total declared distribution amounted to roughly $9.8 million, which was unpaid at quarter-end and recorded as a distribution payable. No distributions were declared during the comparable 2025 period, when the company was earlier in its post-merger build-out.

The company maintains an opt-out dividend reinvestment plan, under which shareholders who do not affirmatively decline have their distributions reinvested into additional common stock rather than received in cash. During the first quarter, the plan issued approximately 465,930 shares with a total value of $7.7 million in connection with a January 26, 2026 distribution. In a subsequent-events note, the company disclosed that it issued an additional 419,089 shares on April 27, 2026, tied to the late-April distribution payment.

Operating cost growth and fee structure

Total operating expenses rose to $11.8 million in the quarter, up from $9.0 million a year earlier. Interest and borrowing costs were the largest line item at $8.0 million, an increase of about 26 percent driven by a roughly $189.1 million rise in average debt outstanding, partially offset by a 109 basis-point decline in the weighted average interest rate.

Management fees rose to $1.2 million from $0.7 million on a higher net asset base, while investment-income incentive fees climbed to $1.4 million from $0.8 million as pre-incentive fee net investment income more meaningfully exceeded the company’s 1.50 percent quarterly hurdle rate. The company also recorded a $0.2 million reversal of previously accrued capital gains incentive fees, reflecting the hypothetical-liquidation accrual methodology applied under GAAP.

Looking ahead, management reiterated that available borrowing capacity, unfunded investor capital commitments, and anticipated cash flow from operations should be sufficient to support operations for at least the next twelve months.