Carlyle Secured Lending, Inc.

Company Overview

Business Model: Carlyle Secured Lending, Inc. is a closed-end, externally managed, non-diversified management investment company regulated as a Business Development Company (BDC) and a Regulated Investment Company (RIC). Its primary objective is to generate current income and, to a lesser extent, capital appreciation through secured debt investments in U.S. middle market companies. The core strategy involves direct origination of secured debt instruments, including first lien senior secured loans (stand-alone, first lien/last out, unitranche) and second lien senior secured loans. A minority of assets are allocated to higher-yielding investments such as unsecured debt, subordinated debt, equities, and structured products, primarily targeting companies whose debt is rated below investment grade.

Market Position: The company operates within the U.S. middle market, estimated to be a $1,950+ billion market. Carlyle Direct Lending, the company's origination arm, sources nearly 100% of its investments, evaluating approximately 1,500 opportunities annually with a closing rate of less than 5%. The market is highly competitive, with numerous participants including public and private funds, other BDCs, commercial and investment banks, collateralized loan obligations (CLOs), commercial finance companies, and private equity and hedge funds, many of which possess substantially greater financial, technical, and marketing resources.

Recent Strategic Developments:

• 2015-1 Debt Securitization Refinancing: On July 2, 2024, the company refinanced its existing debt securitization with $410.0 million in new notes and loans (2015-1N Debt).
• Middle Market Credit Fund, LLC Commitment Increase: On February 11, 2026, capital commitments to the joint venture with Credit Partners USA LLC were increased from $175.0 million to $250.0 million for each partner.
• Middle Market Credit Fund II, LLC Acquisition: On February 11, 2025, Carlyle Secured Lending, Inc. acquired Cliffwater Corporate Lending Fund's remaining interest in the joint venture, making Credit Fund II a wholly owned subsidiary, with a $140.0 million cash contribution.
• Preferred Stock Exchange: On March 27, 2025, 2,000,000 shares of cumulative convertible preferred stock were exchanged for 3,004,808 common shares, based on a $50.0 million liquidation preference.
• CSL III Merger: On March 27, 2025, Carlyle Secured Lending, Inc. acquired Carlyle Secured Lending III, issuing 18,935,108 common shares to former CSL III shareholders. The total purchase price was $317.5 million.
• Structured Credit Partners JV, LLC Formation: On December 23, 2025, a new joint venture was established with Carlyle Credit Solutions, Inc. and Sixth Street entities. Each Carlyle SCP Member has initial capital commitments of up to $150.0 million, totaling $600.0 million for all SCP Members. The JV had not commenced operations as of December 31, 2025.

Geographic Footprint: As of December 31, 2025, the investment portfolio's fair value was primarily concentrated in the United States (88.1%), with international exposure including Canada (4.3%), United Kingdom (4.1%), France (1.1%), Italy (1.1%), Luxembourg (0.5%), Ireland (0.3%), Spain (0.3%), Australia (0.2%), and Sweden (0.0%).

Financial Performance

Revenue Analysis

Profitability Metrics:

• Operating Margin (Net Investment Income / Total Investment Income): 39.4% (2025), 45.3% (2024)
• Net Margin (Net Increase in Net Assets / Total Investment Income): 27.4% (2025), 38.3% (2024)

Investment in Growth:

• Strategic Investments: The company completed the CSL III Merger with a total purchase price of $317.5 million in 2025. It also contributed $140.0 million in cash to acquire the remaining interest in Credit Fund II in 2025.

Business Segment Analysis

The company operates through a single operating and reporting segment. However, it engages in significant investment activities through joint ventures and investment funds.

Middle Market Credit Fund, LLC

Financial Performance:

• Fair Value: $163.6 million (Dec 31, 2025), $182.6 million (Dec 31, 2024)
• Dividends Declared: $20.5 million (2025), $22.0 million (2024)
• Annualized Dividend Yield: 15.3% (2025), 11.4% (2024)

Product Portfolio:

• Primarily invests in senior secured loans of middle market companies.
• As of December 31, 2025, the portfolio included $978.8 million (par) in senior secured loans across 55 portfolio companies.
• 100.0% of the portfolio was floating rate.
• 3.8% of the portfolio (by fair value) had Payment-in-Kind (PIK) provisions.

Market Dynamics:

• As of December 31, 2025, 2 loans were on non-accrual status, representing $6.3 million in fair value.

Structured Credit Partners JV, LLC

Financial Performance:

• Formed December 23, 2025, and had not commenced operations or received capital contributions as of December 31, 2025.

Product Portfolio:

• Will primarily invest in broadly syndicated loans.

Capital Commitments:

• Carlyle Secured Lending, Inc. has initial capital commitments of up to $150.0 million.
• Total initial capital commitments for all partners are up to $600.0 million.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: In 2025, the company repurchased 1,095,791 shares for approximately $13.9 million, resulting in $0.06 NAV accretion. From January 1, 2026, through February 23, 2026, an additional 1,130,267 shares were repurchased for approximately $14.0 million, also resulting in $0.06 NAV accretion.
• Dividend Payments: Dividends declared on common shares were $1.65 per share in 2025 and $1.87 per share in 2024. A quarterly common stock dividend of $0.40 per share was declared on February 18, 2026, payable April 16, 2026.
• Dividend Yield: 13.2% (2025), 10.4% (2024) based on year-end market prices.
• Future Capital Return Commitments: The Stock Repurchase Program, authorized until November 5, 2026, was increased by $100.0 million to $300.0 million on February 18, 2026.

Balance Sheet Position:

• Cash and Equivalents: $76.5 million (Dec 31, 2025), $56.6 million (Dec 31, 2024). Restricted cash balances were $31.5 million (2025) and $26.9 million (2024).
• Total Debt: $1,543.7 million (Dec 31, 2025), $978.4 million (Dec 31, 2024).
• Credit Rating: The 2015-1N Debt tranches include AAA, AA, and Single A ratings.
• Debt Maturity Profile (Contractual Payment Obligations as of Dec 31, 2025, in thousands):
  • Less than one year: $75,327
  • 1-3 years: $788,333
  • 3-5 years: $680,000
  • More than 5 years: $1,543,660
  • Key debt instruments include a Credit Facility (maturity March 12, 2030), 2030 Notes (due February 18, 2030), 2031 Notes (due February 15, 2031), and 2015-1N Debt (maturity July 1, 2036).

Cash Flow Generation:

• Operating Cash Flow: $(204.6) million (2025), $104.3 million (2024).
• Cash Conversion Metrics: Unfunded commitments to fund delayed draw and revolving senior secured loans totaled $431.6 million as of December 31, 2025, up from $179.2 million in 2024.

Operational Excellence

Production & Service Model: Carlyle Secured Lending, Inc. operates an externally managed model, with Carlyle Global Credit Investment Management L.L.C. serving as the Investment Adviser. The Investment Adviser is responsible for direct origination of nearly 100% of investments, sourcing approximately 1,500 opportunities annually. The Investment Adviser also acts as the valuation designee, with a third-party valuation firm providing positive assurance on portions of the Middle Market Senior Loans and equity investments portfolio quarterly.

Supply Chain Architecture: Not applicable in the traditional sense for an investment company.

Key Suppliers & Partners:

• Investment Adviser: Carlyle Global Credit Investment Management L.L.C.
• Administrator: Carlyle Global Credit Administration L.L.C.
• Sub-administrator & Custodian: State Street Bank and Trust Company
• Joint Venture Partners: Credit Partners USA LLC (Middle Market Credit Fund, LLC), Carlyle Credit Solutions, Inc., Sixth Street Partners, LLC, Sixth Street Lending Partners, Sixth Street Specialty Lending, Inc. (Structured Credit Partners JV, LLC).

Facility Network: The company has no direct employees and is externally managed, thus it does not maintain its own facility network. Its principal executive offices are located at One Vanderbilt Avenue, Suite 3400, New York, New York 10017.

Operational Metrics:

• Portfolio Turnover: 62.1% (2025), 27.9% (2024).
• Weighted Average Yield on Total Debt and Income Producing Investments (amortized cost): 10.1% (Dec 31, 2025), 11.7% (Dec 31, 2024).
• Non-Accrual Investments: 1.8% of the portfolio by cost and 1.2% by fair value (7 investments) as of December 31, 2025.
• Weighted Average Internal Risk Rating: 2.1 (Dec 31, 2025 and 2024).

Market Access & Customer Relationships

Go-to-Market Strategy: The company employs a direct origination strategy for secured debt instruments. Its Investment Adviser utilizes a multi-channel origination model to identify investment opportunities through a network of over 250 private equity firms, financial institutions, other middle market lenders, strategic relationships, financial advisors, and experienced management teams.

Customer Portfolio: The company's primary customer base consists of U.S. middle market companies, defined as those with approximately $25.0 million or greater of EBITDA, typically supported by financial sponsors. Many of these portfolio companies are controlled by private equity firms.

Geographic Revenue Distribution: While specific revenue distribution by geography is not provided, the investment portfolio's fair value as of December 31, 2025, was predominantly in the United States (88.1%), indicating a strong domestic focus for its income generation.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: Carlyle Secured Lending, Inc. operates in the U.S. middle market lending sector, a substantial market valued at over $1,950 billion. This market is characterized by intense competition.

Competitive Positioning Matrix: Not explicitly stated in the filing.

Direct Competitors

Primary Competitors: The company faces competition from a diverse group of entities, including public and private funds, other Business Development Companies (BDCs), commercial and investment banks, Collateralized Loan Obligations (CLOs), commercial finance companies, and private equity and hedge funds. Many of these competitors are significantly larger and possess greater financial, technical, and marketing resources.

Emerging Competitive Threats: Not explicitly stated in the filing.

Competitive Response Strategy: Not explicitly stated in the filing.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: The company's investments are primarily in below investment grade debt, which is considered risky and speculative, often involving illiquid and covenant-lite loans. It is exposed to capital markets disruption, economic uncertainty, inflation, recessions, and declines in corporate debt prices. Technology Disruption: The company's increasing use of AI Technologies in its business and investment activities introduces risks related to dependence on these systems. Customer Concentration: The portfolio carries concentration risk due to its focus on middle market companies.

Operational & Execution Risks

Supplier Dependency: The company is dependent on its Investment Adviser, Carlyle Global Credit Investment Management L.L.C., and faces potential conflicts of interest. Geographic Concentration: While primarily U.S.-focused, the company has foreign securities exposure, which carries associated risks. Capacity Constraints: The company has significant unfunded commitments ($431.6 million as of December 31, 2025), indicating potential future funding needs and associated capital deployment risks.

Financial & Regulatory Risks

Market & Financial Risks: The company's common stock has historically traded at a discount to its Net Asset Value (NAV), and future sales of shares below NAV could dilute existing shareholders. It is exposed to leverage risks, prepayments, and risks associated with Original Issue Discount (OID) and Payment-in-Kind (PIK) interest. The 2030 Notes and 2031 Notes are unsecured and subordinated, and there is no active trading market for them. Interest rate fluctuations pose a significant risk, with a 300 basis point increase in interest rates estimated to increase net investment income by $18.1 million annually (as of Dec 31, 2025), while a 300 basis point decrease could reduce it by $15.8 million. Regulatory & Compliance Risks: Failure to maintain BDC or RIC status could result in adverse tax consequences. The company must comply with BDC regulations on capital, including maintaining a minimum asset coverage ratio of 150% (it was 175.6% as of Dec 31, 2025). It is also subject to changes in laws and regulations, restrictions on affiliate transactions, export controls, and data privacy regulations.

Geopolitical & External Risks

Geopolitical Exposure: The company is exposed to risks from force majeure events and tariffs. Trade Relations: Changes in trade relations and policies, including tariffs, can impact portfolio companies and investment performance. Sanctions & Export Controls: Compliance with sanctions and export controls can limit business activities and increase operational complexity.

Innovation & Technology Leadership

Research & Development Focus: Carlyle Secured Lending, Inc. utilizes and plans to expand its use of Artificial Intelligence (AI) Technologies across its business and investment activities. This includes leveraging AI for automation, investment identification, due diligence processes, and decision-making.

Intellectual Property Portfolio: The company holds a royalty-free license to use the name and mark "Carlyle" from CIM.

Technology Partnerships: Not explicitly stated in the filing.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: On February 18, 2026, Alex Chi was appointed Director and Chief Executive Officer, and Thomas Hennigan was appointed President, following the resignation of Justin Plouffe from these roles.

Board Composition: The Board of Directors consists of seven members, four of whom are Independent Directors. The Board, through its Audit Committee, oversees enterprise risk management, including cybersecurity. Carlyle’s Chief Information Security Officer (CISO), with over 20 years of experience, leads the cybersecurity program and provides annual status reports to the Audit Committee.

Human Capital Strategy

Workforce Composition: Carlyle Secured Lending, Inc. does not have any direct employees. Its President, Chief Financial Officer, Principal Accounting Officer, and Chief Compliance Officer are Partners of Carlyle and are retained by Carlyle Global Credit Administration L.L.C.

Talent Management: Not applicable as the company has no direct employees.

Diversity & Development: Not applicable as the company has no direct employees.

Regulatory Environment & Compliance

Regulatory Framework: Carlyle Secured Lending, Inc. is regulated as a Business Development Company (BDC) under the Investment Company Act of 1940 and has elected to be treated as a Regulated Investment Company (RIC) under Subchapter M of the Internal Revenue Code. The minimum asset coverage ratio applicable to the company was reduced from 200% to 150% effective June 7, 2018. As of December 31, 2025, the asset coverage ratio was 175.6%, and as of December 31, 2024, it was 183.2%. The company is also subject to the Sarbanes-Oxley Act of 2002.

Trade & Export Controls: The company is subject to export controls as a risk factor.

Legal Proceedings: As of December 31, 2025, and 2024, the company was not currently subject to any material legal proceedings.

Tax Strategy & Considerations

Tax Profile: To maintain its RIC status, Carlyle Secured Lending, Inc. must distribute at least 90% of its investment company taxable income annually. The company is subject to a 4% nondeductible federal excise tax if it fails to distribute at least 98% of its ordinary income, 98.2% of its capital gain net income, and any prior undistributed income. The company reported capital loss carryforwards of $252.0 million in 2025 and $199.7 million in 2024.

Insurance & Risk Transfer

Risk Management Framework: Carlyle Secured Lending, Inc. utilizes interest rate swaps as a risk transfer mechanism to economically hedge its fixed rate debt.