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Completed the first quarter operating as a Business Development Company (BDC), expanding investment flexibility beyond real estate-backed cannabis loans.
Shifted focus toward the lower middle market to capture an 'exceptional vintage' created by larger lenders moving upmarket to support existing portfolios.
Targeting cash-flowing operating businesses with $5 million to $50 million in EBITDA, a segment management believes offers superior risk-adjusted returns.
Achieved net fundings of $39.1 million in Q1, driven by $90 million in new non-cannabis commitments offset by $41.2 million in cannabis loan repayments.
Emphasizing strong credit quality through the use of financial covenants, such as cash flow measures and fixed charge coverage ratios, rather than the covenant-light structures common in larger deals.
Maintaining a robust active pipeline of over $1.5 billion in potential deals across healthcare, consumer, manufacturing, and services sectors.
Expects overall portfolio yields to shift toward the low double-digit range as the company prioritizes higher-quality borrowers and sponsors over higher-yielding cannabis assets.
Intends to redeploy capital from cannabis loan paydowns and non-accrual liquidations into performing lower middle market credits to support current income.
Anticipates that federal rescheduling of cannabis could improve asset values and recovery prospects for non-accrual loans, though the primary growth focus remains non-cannabis lending.
Plans to utilize available dry powder and an expanded $80 million credit facility for deployment throughout 2026, though specific timing remains subject to market conditions.
Authorized a $5 million share buyback program as a flexible tool for capital allocation and enhancing long-term shareholder value.
Reported three loans currently on non-accrual status, with a focus on maximizing recovery through liquidations and legal remedies.
Expressed the intention to exercise rights and remedies against Justice Grown following a maturity default on 05/01/2026., targeting collateral including cultivation facilities and dispensaries in New Jersey and Pennsylvania.
Received a $6.2 million paydown from the Debbie Holdings receivership during Q1, bringing total recoveries from that credit to $20.8 million.
Expanded the senior secured revolving credit facility to $80 million, with a potential accordion feature to reach $100 million.
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Management is pursuing all rights and remedies under the credit agreement, including shareholder and parent guarantees, to obtain maximum value from the collateral.
The company declined to predict specific outcomes due to the early stage of the litigation process.
Yields are expected to trend toward the low double digits, representing a decrease from historical cannabis-related yields.
Management believes the lower yields are offset by significantly improved borrower quality and the presence of experienced private equity sponsors.
Rescheduling is viewed as a positive for the industry by eliminating 280E tax liabilities and potentially increasing the value of medical cannabis assets.
Despite these tailwinds, the company remains committed to diversifying into the less competitive and more economically attractive general lower middle market.
New investments include a revenue recovery business for retail suppliers (STAT) and a healthcare benefits platform for hourly employees.
These deals exemplify the strategy of backing cash-flowing businesses in niches with high growth potential or unfilled market needs.
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