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CLOSED · 08:25 ET
Market ClerkRecap
Sun Nov 1 · markets closed1 signal on Oct 31129 insider buys this week · $10BCIRO short report next: Nov 15The week ahead

GLAD

GLADSTONE CAPITAL CORP
NASDAQ
18.97
−0.16 −0.84%
USD · close Oct 30
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Work order
73
PASS · shorts 73
Insiders, 90 days
0
no open-market filings in 90 days
Congress, 90 days
0 / 0
no disclosures naming it
Big money
0 / 15
none of the tracked funds disclose it
Calls on record
0
nobody we score has called it yet
MKT CAP $428.6MP/E —DIV YIELD 10.23%FCF YIELD —REV TTM —NET INCOME $48.2M −35.8%NET CASH —52W 16.55 – 21.45SEC XBRL · TTM TO Invalid Date

How GLAD rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025
Text kept
72%
of sentences unchanged
Added
143
new sentences
Dropped
59
sentences removed
Length
+3,563
words, now 23,824

New in FY2025

  • These factors include: • changes in interest rates and credit spreads and the effects of inflation on us and our portfolio companies; • the availability of credit, including the price, terms, and conditions under which it can be obtained; • the quality, pricing, and availability of suitable investments and credit losses with respect to our investments; • the ability to obtain accurate market-based valuations; • investment values relative to the value of the underlying assets; • default rates on the loans underlying our investments and the amount of related losses; • prepayment rates, delinquency rates and the timing and amount of servicer advances; • competition; • the actual and perceived state of the economy and capital markets generally; • amendments or repeals of legislation, or changes in regulations or regulatory interpretations thereof, and transitions of government, including uncertainty regarding any of the foregoing; • the national and global political environment, including government shutdowns, war, armed conflicts, foreign relations and trading policies; • the impact of potential changes to the Code; and • the attractiveness of other types of investments relative to investments in lower middle market companies generally.
  • Tariffs may adversely affect us or our portfolio companies.
  • Existing or new tariffs imposed on foreign goods imported by the U.S. or on U.S. goods imported by foreign countries could subject us or our portfolio companies to additional risks.
  • Among other effects, tariffs could increase the cost of production for certain of our portfolio companies or reduce demand for their products, which could affect their results of operations.
  • We cannot predict whether, or to what extent, any tariff or other trade protections may affect us or our portfolio companies.
  • If interest rates increase, the operating performance of certain of our portfolio companies may be affected by increasing debt service obligations and, therefore, may affect our results of operations.
  • In addition, to the extent that increases in interest rates make it difficult or impossible to make payments on outstanding indebtedness to us or other financial sponsors or refinance debt that is maturing in the near term, some of our portfolio companies may be unable to repay such debt at maturity and may be forced to sell assets, undergo a recapitalization or seek bankruptcy protection.
  • We use a combination of equity and long-term and short-term borrowings to finance our investment activities.
  • As a result, a portion of our income depends upon the spread between the rate at which we borrow funds and the rate at which we loan these funds.
  • As of September 30, 2025, based on the total principal balance of debt investments outstanding, our portfolio consisted of approximately 86.9% of loans at variable rates with floors and approximately 13.1% at fixed rates.
  • As of September 30, 2025, we did not have any hedging arrangements, such as interest rate hedges, in place.
  • As of September 30, 2025, our loans to B+T Group Acquisition, Inc., Edge Adhesives Holdings, Inc., and WB Xcel Holdings, LLC were on non-accrual status with a cost basis of $ 28.8 million, or 3.6 % of the cost basis of all debt investments in our portfolio, and a fair value of $ 13.0 million, or 1.7 % of the fair value of all debt investments in our portfolio.
  • Our NAV would be adversely affected if fair values at which we record of our investments are higher than the values that we ultimately realize upon the disposal of such securities.
  • For the year ended September 30, 2025, we received unscheduled repayments of investments totaling $252.7 million.
  • As of September 30, 2025, we had investments in 55 portfolio companies, of which our five largest investments comprised approximately $ 196.5 million, or 22.9 % of our total investment portfolio, at fair value.
  • Beyond our regulatory and income tax diversification requirements as well as Credit Facility requirements, we do not have fixed guidelines for industry concentration and our investments could potentially be concentrated in relatively few industries.
  • As of September 30, 2025, our largest industry concentrations of our total investments at fair value were in healthcare, education, and childcare companies, representing 31.8%; diversified/conglomerate manufacturing companies, representing 23.6%; and diversified/conglomerate service companies, representing 17.7%.
  • As of September 30, 2025, we had $0 in borrowings, at cost, outstanding under our Credit Facility, which provides for maximum borrowings of $ 320.0 million, with a revolving period end date of October 31, 2027 (the “Revolving Period End Date”).
  • Additionally, we are required to maintain (i) a minimum net worth (defined in our Credit Facility to include any outstanding mandatorily redeemable preferred stock) of $500.0 million plus 50.0% of all equity and subordinated debt raised after June 23, 2025 less 50% of any equity and subordinated debt retired or redeemed after June 23, 2025, which equates to $ 581.0 million as of September 30, 2025, (ii) asset coverage with respect to “senior securities representing indebtedness” of at least 150% (or such percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act), and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code.
  • If our Credit Facility is not renewed or extended by the Revolving Period End Date, all principal and interest will be due and payable on or before October 31, 2029.
  • Subject to certain terms and conditions, our Credit Facility may be expanded to a total of $ 400.0 million pursuant to an accordion feature.
  • Furthermore, if we issue common stock at below NAV per common share, any non-participating stockholders will be subject to dilution, as described below.
  • Because we are constrained in our ability to issue debt or senior securities for the reasons given above, we may at times be dependent on the issuance of equity as a financing source.
  • If we raise additional funds by issuing more common stock, the percentage ownership of our common stockholders at the time of the issuance would decrease and our existing common stockholders may experience dilution.
  • As of September 30, 2025, we incurred leverage through the Credit Facility, the Series A Preferred Stock, the 5.125% Notes due 2026 (the “2026 Notes”), the 2027 Notes, the 7.75% Notes due 2028 (the “2028 Notes”), and the 2030 Convertible Notes.
  • The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns on our portfolio, net of expenses.
  • The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing in the table below.
  • Assumed Return on Our Portfolio (Net of Expenses) (10.0) % (5.0) % 0.0 % 5.0 % 10.0 % Corresponding return to common stockholder (A) ( 23.83 ) % ( 14.42 ) % ( 5.00 ) % 4.41 % 13.83 % _____________ (A) The hypothetical return to common stockholders is calculated by multiplying our total assets as of September 30, 2025 by the assumed rates of return and subtracting all interest on our debt to be paid during the 12 months following September 30, 2025, and then dividing the resulting difference by our total net assets attributable to common stock as of September 30, 2025.
  • Based on $907.6 million in total assets, $0 drawn on our Credit Facility (at cost), $150.0 million in our 2026 Notes payable (at cost), $50.0 million in our 2027 Notes payable (at cost), $57.0 million in our 2028 Notes payable (at cost), $149.5 million in our 2030 Convertible Notes payable (at cost), $21.6 million in our Series A Preferred Stock (at cost), and $482.0 million in net assets, each as of September 30, 2025.
  • Based on an aggregate outstanding indebtedness of $428.1 million at cost as of September 30, 2025 and the effective annual cash interest rate of 5.6 % as of that date, our investment portfolio at fair value would have had to produce an annual return of at least 2.8 % to cover annual interest payments on the outstanding debt.
  • For the year ended September 30, 2025, we recognized $ 0.4 million of OID income and the unamortized balance of OID investments as of September 30, 2025 totaled $ 0.2 million.
  • As of September 30, 2025, we had nine investments which had a PIK interest component and we recorded PIK interest income of $ 5.0 million during the year ended September 30, 2025.
  • We collected $ 7.2 million in PIK interest in cash for the year ended September 30, 2025.
  • Risks Related to Our External Management We are dependent upon our key management personnel and the key management personnel of the Adviser, particularly David Gladstone and Robert L.
  • Our chief executive officer, chief financial officer and treasurer, and the employees of the Adviser do not spend all of their time managing our activities and our investment portfolio.
  • We are particularly dependent upon David Gladstone and Robert L.
  • The incentive fee structure that has been implemented under the Advisory Agreement may cause the Adviser to invest in high-risk investments or take other risks.
  • Our OID investments totaled $49.0 million as of September 30, 2025, at cost.
  • As of September 30, 2025, our Board of Directors has approved the following types of co-investment transactions: • Our affiliate, Gladstone Commercial, may, under certain circumstances, lease property to portfolio companies that we do not control.
  • Risks Related to the 2027 Notes and 2030 Convertible Notes (collectively, the “Notes”) The Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have incurred or may incur in the future and rank pari passu with, or equal to, all outstanding and future unsecured indebtedness issued by us and our general liabilities (total liabilities, less debt).

and 103 more.

Gone since FY2024

  • These factors include, among other things: • changes in interest rates and credit spreads and the effects of inflation on us and our portfolio companies; • the availability of credit, including the price, terms, and conditions under which it can be obtained; • the quality, pricing, and availability of suitable investments and credit losses with respect to our investments; • the ability to obtain accurate market-based valuations; • investment values relative to the value of the underlying assets; • default rates on the loans underlying our investments and the amount of related losses; • prepayment rates, delinquency rates and the timing and amount of servicer advances; • competition; • the actual and perceived state of the economy and capital markets generally; • amendments or repeals of legislation, or changes in regulations or regulatory interpretations thereof, and transitions of government, including uncertainty regarding any of the foregoing; • the national and global political environment, including war, armed conflicts, foreign relations and trading policies; • the impact of potential changes to the Code; and • the attractiveness of other types of investments relative to investments in lower middle market companies generally.
  • As interest rates increase, the operating performance of certain of our portfolio companies has been affected by increasing debt service obligations and, therefore, may affect our results of operations.
  • In addition, to the extent that further increases in interest rates make it difficult or impossible to make payments on outstanding indebtedness to us or other financial sponsors or refinance debt that is maturing in the near term, some of our portfolio companies may be unable to repay such debt at maturity and may be forced to sell assets, undergo a recapitalization or seek bankruptcy protection.
  • We anticipate using a combination of equity and long-term and short-term borrowings to finance our investment activities.
  • As a result, a portion of our income will depend upon the spread between the rate at which we borrow funds and the rate at which we loan these funds.
  • As of September 30, 2024, based on the total principal balance of debt outstanding, our portfolio consisted of approximately 93.9% of loans at variable rates with floors and approximately 6.1% at fixed rates.
  • As of September 30, 2024, we did not have any hedging arrangements, such as interest rate hedges, in place.
  • As of September 30, 2024, our loans to B+T Group Acquisition, Inc.
  • (“B&T Group”), Edge Adhesives Holdings, Inc.
  • (“Edge Adhesives”), and WB Xcel Holdings, LLC (“WB Xcel”) were on non-accrual status with a cost basis of $ 28.3 million, or 4.1 % of the cost basis of all debt investments in our portfolio, and a fair value of $ 12.8 million, or 1.9 % of the fair value of all debt investments in our portfolio.
  • Our NAV would be adversely affected if the fair value of our investments are higher than the values that we ultimately realize upon the disposal of such securities.
  • For the year ended September 30, 2024, we received unscheduled repayments of investments totaling $124.2 million.
  • As of September 30, 2024, we had investments in 49 portfolio companies, of which our five largest investments comprised approximately $ 232.7 million, or 29.2 % of our total investment portfolio, at fair value.
  • Beyond our regulatory and income tax diversification requirements, we do not have fixed guidelines for industry concentration and our investments could potentially be concentrated in relatively few industries.
  • As of September 30, 2024, our largest industry concentrations of our total investments at fair value were in diversified/conglomerate service companies, representing 22.5%; diversified/conglomerate manufacturing companies, representing 20.1%; and aerospace and defense companies, representing 19.2%.
  • As of September 30, 2024, we had $70.6 million in borrowings, at cost, outstanding under our Credit Facility, which provides for maximum borrowings of $ 293.7 million, with a revolving period end date of October 31, 2025 (the “Revolving Period End Date”).
  • Additionally, we are required to maintain (i) a minimum net worth (defined in our Credit Facility to include any outstanding mandatorily redeemable preferred stock) of $325.0 million plus 50.0% of all equity and subordinated debt raised after May 13, 2021 less 50% of any equity and subordinated debt retired or redeemed after May 13, 2021, which equates to $ 418.8 million as of September 30, 2024, (ii) asset coverage with respect to “senior securities representing indebtedness” of at least 150% (or such percentage as may be set forth in Section 18 of the 1940 Act, as modified by Section 61 of the 1940 Act), and (iii) our status as a BDC under the 1940 Act and as a RIC under the Code.
  • If our Credit Facility is not renewed or extended by the Revolving Period End Date, all principal and interest will be due and payable on or before October 31, 2027.
  • Subject to certain terms and conditions, our Credit Facility may be expanded to a total of $350.0 million pursuant to an accordion feature.
  • Furthermore, if we have to issue common stock at below NAV per common share, any non-participating stockholders will be subject to dilution, as described below.
  • Because we are constrained in our ability to issue debt or senior securities for the reasons given above, we are dependent on the issuance of equity as a financing source.
  • If we raise additional funds by issuing more common stock, the percentage ownership of our common stockholders at the time of the issuance would decrease and our existing common stockholder may experience dilution.
  • As of September 30, 2024, we incurred leverage through the Credit Facility, the Series A Preferred Stock, the 2026 Notes, the 2027 Notes, and the 2028 Notes.
  • Assumed Return on Our Portfolio (Net of Expenses) (10.0) % (5.0) % 0.0 % 5.0 % 10.0 % Corresponding return to common stockholder (A) ( 21.55 ) % ( 12.92 ) % ( 4.29 ) % 4.33 % 12.96 % _____________ (A) The hypothetical return to common stockholders is calculated by multiplying our total assets as of September 30, 2024 by the assumed rates of return and subtracting all interest on our debt to be paid during the 12 months following September 30, 2024, and then dividing the resulting difference by our total net assets attributable to common stock as of September 30, 2024.
  • Based on $812.5 million in total assets, $70.6 million drawn on our Credit Facility (at cost), $150.0 million in our 2026 Notes payable (at cost), $50.0 million in our 2027 Notes payable (at cost), $57.0 million in our 2028 Notes payable (at cost), $8.7 million in our Series A Preferred Stock (at cost), and $470.9 million in net assets, each as of September 30, 2024.
  • Based on an aggregate outstanding indebtedness of $336.3 million at cost as of September 30, 2024 and the effective annual cash interest rate of 6.0 % as of that date, our investment portfolio at fair value would have had to produce an annual return of at least 2.5 % to cover annual interest payments on the outstanding debt.
  • For the year ended September 30, 2024, we recognized $ 0.4 million of OID income and the unamortized balance of OID investments as of September 30, 2024 totaled $ 0.6 million.
  • As of September 30, 2024, we had eight investments which had a PIK interest component and we recorded PIK interest income of $ 5.7 million during the year ended September 30, 2024.
  • We collected $ 0.2 million in PIK interest in cash for the year ended September 30, 2024.
  • Risks Related to Our External Management We are dependent upon our key management personnel and the key management personnel of the Adviser, particularly David Gladstone, Terry Lee Brubaker and Robert L.
  • Our chief executive officer, chief operating officer, chief financial officer and treasurer, and the employees of the Adviser do not spend all of their time managing our activities and our investment portfolio.
  • We are particularly dependent upon David Gladstone, Terry Lee Brubaker, and Robert L.
  • The management compensation structure that has been implemented under the Advisory Agreement may cause the Adviser to invest in high-risk investments or take other risks.
  • Our OID investments totaled $56.9 million as of September 30, 2024, at cost.
  • Brubaker, our chief operating officer, is the vice chairman and chief operating officer of the Adviser and Administrator.
  • As of September 30, 2024, our Board of Directors has approved the following types of co-investment transactions: • Our affiliate, Gladstone Commercial, may, under certain circumstances, lease property to portfolio companies that we do not control.
  • Risks Related to the 2026 Notes, 2027 Notes, and 2028 Notes (collectively, the “Notes”) The Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have incurred or may incur in the future and rank pari passu with, or equal to, all outstanding and future unsecured indebtedness issued by us and our general liabilities (total liabilities, less debt).
  • As of September 30, 2024, there was $70.6 million outstanding under the Credit Facility.
  • In particular, the terms of the indenture and the Notes do not place any restrictions on our or our subsidiaries’ ability to: • issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the value of the assets securing such debt, (3) indebtedness that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our subsidiaries, in each case, other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(2) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, which generally prohibit us from incurring additional debt or issuing additional debt or preferred securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% after such incurrence or issuance; • pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, including preferred stock and any subordinated indebtedness, other than, dividends, purchases, redemptions or payments that would cause our asset coverage to fall below the threshold specified in Section 18(a)(1)(B) as modified by Section 61(a)(2) of the 1940 Act or any successor provisions, giving effect to any no-action relief granted by the SEC to another BDC and upon which we may reasonably rely (or to us if we determine to seek such similar SEC no-action or other relief) permitting the BDC to declare any cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by Section 61(a)(2) of the 1940 Act in order to maintain the BDC’s status as a RIC under Subchapter M of the Code; • sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets); • enter into transactions with affiliates; • create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions; • make investments; or • create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
  • In addition, the indenture with respect to the 2028 Notes does not require us to make an offer to purchase the 2028 Notes in connection with a change of control or any other event whereas, under the terms of the respective indentures governing the 2026 Notes and the 2027 Notes, the holders of the 2026 Notes and the 2027 Notes, respectively, may require us to repurchase 100% of such notes upon the occurrence of a “Change of Control Repurchase Event,” which would occur upon certain changes of control that result in a downgrade in such notes below investment grade.

and 19 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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