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1. Company Snapshot

1.a. Company Description

OFS Capital Corporation is a business development company specializing in direct and fund investments as well as add-on acquisitions.It provides flexible capital solutions primarily through debt capital and to a lesser extent, minority equity investments serving the needs of U.S.-based middle-market companies across a broad array of industries.It does not invest in operational turnarounds or start-up businesses.


For direct, it specializes in debt and structured equity investments, recapitalizations and refinancing, management and leveraged buyouts, acquisition financings, shareholder liquidity events, growth capital, independent sponsor transactions, ESOPs, and minority investments in the lower middle market companies.It invests in the aerospace and defense, business services, consumer products and services, food and beverage, health care services, specialty chemicals, transportation and logistics, value added distribution, franchising, and industrial and niche manufacturing sectors.The firm invests in companies based in United States.


It seeks to invest between $5 million and $35 million, revenues between $10 million and $200 million, annual EBITDA more than $5 million, and Enterprise value between $10 million and $500 million.The firm seeks to invest in companies with debt investment values between $5 million and $25 million.The fund uses senior secured, unitranche loans, first-lien, second-lien, subordinated/ mezzanine loans, warrants, and preferred equity securities and common equity securities.


It prefers to take a minority as well as majority stake in the investments made.It also co-invests with its partners for additional capital.

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1.b. Last Insights on OFS

OFS Capital Corporation's recent strength is driven by its attractive 18.5% distribution yield, potentially enticing income-seeking investors. The company's investment strategy, focused on CLO equity and debt securities, aims to provide current income and capital appreciation. Although management expenses are high, the potential for significant returns may outweigh these concerns. With a strong distribution yield and investment strategy, OFS Capital Corporation is well-positioned to attract investors seeking income and growth opportunities.

1.c. Company Highlights

2. OFS Capital Corporation's Q3 2025 Earnings: A Mixed Bag

OFS Capital Corporation reported net investment income of $0.22 per share for the third quarter of 2025, a decline from $0.25 per share in the prior quarter, primarily due to higher interest costs from refinancing existing bonds. The actual EPS came in slightly lower than analyst estimates of $0.23. The company's net asset value (NAV) at September 30 was $10.17 per share, down from $10.91 per share in the prior quarter, largely driven by markdowns on equity investments.

Publication Date: Nov -24

📋 Highlights
  • Net Investment Income Decline: Fell to $0.22/share (Q3 2025) from $0.25/share (Q2 2025) due to higher interest costs from bond refinancing.
  • NAV Reduction: Dropped to $10.17/share (Q3 2025) from $10.91/share (Q2 2025), driven by equity markdowns (e.g., Pfanstiehl at $78.5M) and CLO depreciation.
  • Debt Refinancing: Raised $69M unsecured public bond and $25M private note to strengthen capital position and enhance operational flexibility.
  • Distribution Adjustment: Quarterly distribution cut to $0.17/share (8.8% annualized yield) to align with lower NII and preserve capital.
  • Loan Portfolio Stability: Maintained 88% first-lien senior secured loans across 57 issuers, with $370.2M total investments.

Credit Portfolio Stability

The company's credit portfolio is considered stable, with one loan placed on non-accrual status and one loan taken off non-accrual status during the quarter. Efforts to monetize the minority equity position in Pfanstiehl, valued at approximately $78.5 million, are ongoing, which could improve net investment income and reduce concentration risk.

Debt Refinancing and Capital Position

The company completed a $69 million unsecured public bond offering and a private placement of a $25 million unsecured note, maturing in 2028 and 2029, respectively, as part of its debt refinancing plan. This refinancing has strengthened the company's capital position and enhanced operational flexibility, as noted by Bilal Rashid, Chairman and Chief Executive Officer.

Valuation and Dividend Yield

With a Price-to-Book Ratio of 0.47, the stock appears to be undervalued relative to its book value. The Dividend Yield stands at 28.57%, indicating an attractive return for income-seeking investors. Analysts estimate revenue growth at 0.5% for next year, which may impact the stock's valuation. The regulatory asset coverage ratio was 157%, a decrease of 3 percentage points from the prior quarter.

Portfolio Composition and Yield

The company's loan portfolio remains predominantly composed of first and second lien senior secured loans, with 88% of loan holdings in first lien positions. The weighted average performing investment income yield decreased modestly to 13.3%. The company has $370.2 million in investments across 57 unique issuers, indicating a diversified portfolio.

3. NewsRoom

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Trying To Give A Credit Rating For OFS Credit Company

Nov -22

Source: seekingalpha.com

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OFS Credit Company Executes Master Repurchase Agreement

Nov -04

Source: businesswire.com

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Critical Contrast: Apollo Global Management (NYSE:APO) vs. OFS Credit (NASDAQ:OCCI)

Nov -01

Source: defenseworld.net

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OFS Capital (OFS) Q3 2025 Earnings Call Transcript

Oct -31

Source: seekingalpha.com

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OFS Capital Corporation Announces Third Quarter 2025 Financial Results

Oct -30

Source: businesswire.com

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OFS Capital Corporation Announces Date for its Third Quarter 2025 Earnings Release and Conference Call

Oct -28

Source: businesswire.com

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OFS Credit: I Would Only Consider Short-Term Preferreds

Oct -23

Source: seekingalpha.com

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OFS Credit: Dividend Is No Longer Supported By Earnings

Oct -09

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.50%)

6. Segments

Investment and Related Activities

Expected Growth: 10.5%

Growing demand for financing solutions among middle-market companies, increasing need for debt and equity securities, and OFS Capital's expertise in originating and managing investments drive growth in this segment.

7. Detailed Products

Middle Market Loans

OFS Capital Corporation provides middle market loans to companies with annual revenues between $10 million and $500 million, offering financing solutions for acquisitions, recapitalizations, and refinancings.

Unitranche Loans

OFS Capital Corporation offers unitranche loans, which combine senior and subordinated debt into a single loan, providing a simplified capital structure for middle market companies.

Second Lien Loans

OFS Capital Corporation provides second lien loans, which offer additional financing to companies with existing first lien debt, providing access to capital for growth initiatives.

Equity Co-Investments

OFS Capital Corporation makes equity co-investments alongside private equity sponsors, providing additional capital for acquisitions and growth initiatives.

SBIC Loans

OFS Capital Corporation provides SBIC (Small Business Investment Company) loans, offering financing solutions for small businesses with annual revenues up to $50 million.

8. OFS Capital Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for OFS Capital Corporation is moderate, as there are alternative investment options available to investors, but the company's diversified portfolio and expertise in middle-market lending mitigate this risk.

Bargaining Power Of Customers

The bargaining power of customers is low, as OFS Capital Corporation's investment products are tailored to meet the specific needs of its clients, and clients have limited negotiating power.

Bargaining Power Of Suppliers

The bargaining power of suppliers is moderate, as OFS Capital Corporation relies on a diverse range of suppliers for its investment products, but the company's scale and reputation mitigate this risk.

Threat Of New Entrants

The threat of new entrants is low, as OFS Capital Corporation's established brand, expertise, and regulatory compliance requirements create barriers to entry for new competitors.

Intensity Of Rivalry

The intensity of rivalry is high, as OFS Capital Corporation operates in a competitive industry with several established players, and the company must continually innovate and differentiate its products to maintain market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 70.66%
Debt Cost 4.82%
Equity Weight 29.34%
Equity Cost 12.75%
WACC 7.15%
Leverage 240.88%

11. Quality Control: OFS Capital Corporation passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
OFS Capital

A-Score: 6.8/10

Value: 6.8

Growth: 6.8

Quality: 5.8

Yield: 10.0

Momentum: 4.0

Volatility: 7.7

1-Year Total Return ->

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Monroe Capital

A-Score: 6.8/10

Value: 6.1

Growth: 5.7

Quality: 7.1

Yield: 10.0

Momentum: 3.0

Volatility: 8.7

1-Year Total Return ->

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SuRo Capital

A-Score: 6.3/10

Value: 7.5

Growth: 1.0

Quality: 9.3

Yield: 7.0

Momentum: 9.5

Volatility: 3.7

1-Year Total Return ->

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Stock-Card
OFS Credit

A-Score: 6.2/10

Value: 4.8

Growth: 5.8

Quality: 7.2

Yield: 10.0

Momentum: 1.5

Volatility: 7.7

1-Year Total Return ->

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BNY Mellon Strategic Municipals

A-Score: 6.1/10

Value: 5.4

Growth: 4.1

Quality: 5.5

Yield: 7.0

Momentum: 4.5

Volatility: 10.0

1-Year Total Return ->

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Logan Ridge Finance

A-Score: 5.3/10

Value: 6.5

Growth: 5.8

Quality: 2.4

Yield: 6.0

Momentum: 1.5

Volatility: 9.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

5.28$

Current Price

5.28$

Potential

-0.00%

Expected Cash-Flows