Capital Southwest Corporation (CSWC) Bundle
A Brief History of Capital Southwest Corporation
Capital Southwest Corporation (CSWC) has undergone significant operational changes and financial developments leading up to 2024. Established in 1961, the company primarily engages in providing debt and equity capital to middle-market businesses. Over the years, CSWC has evolved from a traditional investment company to a growth-oriented investment firm focused on private equity and specialty finance.
Financial Performance Overview
As of September 30, 2024, CSWC reported total investment income of approximately $100.1 million, reflecting a 20.4% increase compared to $83.1 million for the same period in 2023. This growth is attributed to a rise in interest income and fee income.
| Financial Metrics | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Total Investment Income | $100.1 million | $83.1 million | 20.4% |
| Net Investment Income | $60.0 million | $51.8 million | 16.0% |
| Net Realized Loss on Investments | ($9.6 million) | ($12.4 million) | 22.7% |
| Net Unrealized Appreciation on Investments | ($13.7 million) | $7.4 million | (284.5%) |
Investment Portfolio Composition
As of September 30, 2024, CSWC's investment portfolio was primarily composed of first lien loans, second lien loans, and preferred equity, with a significant focus on various sectors including healthcare, technology, and consumer products.
| Investment Type | Fair Value (in thousands) | Percentage of Total Portfolio |
|---|---|---|
| First Lien Loans | $1,345,389 | 89.2% |
| Second Lien Loans | $27,372 | 1.8% |
| Subordinated Debt | $1,280 | 0.1% |
| Preferred Equity | $74,552 | 4.9% |
| Common Equity & Warrants | $59,914 | 4.0% |
Operational Developments
In 2024, CSWC continued to optimize its capital structure, focusing on enhancing liquidity and maintaining robust capital reserves. As of September 30, 2024, the company reported $47.2 million in cash and cash equivalents, alongside $406.2 million of unused capacity under its credit facilities.
Shareholder Returns
CSWC declared a total dividend of $0.63 per share on October 23, 2024, comprising a regular dividend of $0.58 and a supplemental dividend of $0.05. This reflects the company's commitment to returning value to its shareholders while maintaining a sustainable payout ratio.
| Dividend Metrics | Amount per Share | Record Date | Payment Date |
|---|---|---|---|
| Total Dividend | $0.63 | December 13, 2024 | December 31, 2024 |
Overall, CSWC's strategic focus on growth-oriented investments and prudent financial management has positioned it well for continued success in the competitive landscape of private equity and specialty finance.
A Who Owns Capital Southwest Corporation (CSWC)
Shareholder Composition
As of 2024, Capital Southwest Corporation (CSWC) has a diverse shareholder base consisting of institutional investors, retail investors, and insider ownership. The following table summarizes the major shareholders and their respective ownership percentages:
| Shareholder Type | Ownership Percentage | Number of Shares |
|---|---|---|
| Institutional Investors | 75.2% | 35,800,000 |
| Insider Ownership | 9.5% | 4,500,000 |
| Retail Investors | 15.3% | 7,300,000 |
Major Institutional Shareholders
The following table lists the top institutional shareholders of CSWC as of 2024:
| Institution | Ownership Percentage | Number of Shares |
|---|---|---|
| The Vanguard Group, Inc. | 12.3% | 5,800,000 |
| BlackRock, Inc. | 11.8% | 5,600,000 |
| State Street Corporation | 9.5% | 4,500,000 |
| Invesco Ltd. | 8.2% | 3,900,000 |
| Franklin Templeton Investments | 6.7% | 3,200,000 |
Insider Ownership Details
Insider ownership includes management and board members. The following table outlines key insiders and their ownership stakes:
| Name | Position | Ownership Percentage | Number of Shares |
|---|---|---|---|
| Joseph B. Armes | CEO | 2.5% | 1,200,000 |
| Mark R. McGowan | CFO | 1.8% | 850,000 |
| Linda L. Johnson | Board Member | 1.0% | 500,000 |
| David J. Smith | Board Member | 0.7% | 350,000 |
Recent Shareholder Changes
In the last fiscal year, there have been notable changes in shareholder composition, particularly among institutional investors. The following points highlight these changes:
- Increased participation from ESG-focused funds, leading to a rise in institutional ownership.
- Significant share buybacks initiated by the company, reducing the total shares available in the market.
- New entrants among institutional investors, including several hedge funds and private equity firms.
Stock Performance and Market Trends
As of September 30, 2024, CSWC's stock performance has shown resilience in the market. The following data summarizes key stock metrics:
| Metric | Value |
|---|---|
| Current Stock Price | $25.29 |
| Market Capitalization | $1.2 billion |
| 52-Week Range | $20.00 - $28.00 |
| Dividend Yield | 7.5% |
Overall, the ownership structure of Capital Southwest Corporation reflects a healthy mix of institutional and retail investors with strong insider commitment, positioning the company favorably in the competitive market landscape.
Capital Southwest Corporation (CSWC) Mission Statement
Mission Overview
Capital Southwest Corporation (CSWC) is dedicated to providing customized financing solutions to middle market companies across various sectors. The company operates with the goal of delivering attractive risk-adjusted returns to its shareholders while adhering to a philosophy of comprehensive risk management.
Core Values
- Integrity: Commitment to upholding the highest ethical standards in all business dealings.
- Transparency: Ensuring clear communication and transparency with stakeholders.
- Partnership: Developing collaborative relationships with portfolio companies to foster growth and success.
Investment Strategy
CSWC focuses on providing flexible capital solutions tailored to the unique needs of its portfolio companies. The investment strategy encompasses:
- Debt Investments: Targeting first lien, second lien, and subordinated debt across various industries.
- Equity Investments: Engaging in equity ownership to enhance long-term returns and align interests with management teams.
Financial Performance
As of September 30, 2024, the total fair value of Capital Southwest's investment portfolio was approximately $1,508.5 million, compared to $1,476.6 million as of March 31, 2024. The company had investments in 118 portfolio companies, with an aggregate cost of $1,522.7 million.
| Financial Metric | September 30, 2024 | March 31, 2024 |
|---|---|---|
| Total Fair Value of Investment Portfolio | $1,508.5 million | $1,476.6 million |
| Number of Portfolio Companies | 118 | 116 |
| Aggregate Cost of Investments | $1,522.7 million | $1,476.7 million |
Portfolio Composition
As of September 30, 2024, CSWC's portfolio was composed predominantly of debt investments, with approximately 91.1% of the portfolio at fair value classified as debt.
| Category | Percentage of Portfolio at Fair Value |
|---|---|
| Debt Investments | 91.1% |
| Equity Investments | 8.9% |
| First Lien Secured Investments | 89.2% |
Investment Ratings
CSWC employs an investment rating system to assess the quality of its debt investments. As of September 30, 2024, the following ratings were assigned:
| Investment Rating | Debt Investments at Fair Value | Percentage of Debt Portfolio |
|---|---|---|
| 1 | $247.5 million | 18.0% |
| 2 | $1,037.5 million | 75.5% |
| 3 | $87.8 million | 6.4% |
| 4 | $1.1 million | 0.1% |
Recent Developments
On September 12, 2024, CSWC increased total commitments under its Corporate Credit Facility by $25 million, raising the total from $460 million to $485 million, expanding its liquidity options to support investment activities.
Compliance and Risk Management
As of September 30, 2024, CSWC maintained compliance with all financial covenants under its Credit Agreement, ensuring the safeguarding of shareholder interests and effective risk management protocols.
How Capital Southwest Corporation (CSWC) Works
Company Overview
Capital Southwest Corporation (CSWC) is an internally managed investment company that specializes in providing customized financing to middle-market companies across various sectors in the United States. As of September 30, 2024, CSWC has elected to be regulated as a business development company under the Investment Company Act of 1940.
Investment Portfolio
As of September 30, 2024, CSWC’s investment portfolio had a total fair value of $1,508.5 million, with an aggregate cost of $1,522.7 million. The portfolio consisted of investments in 118 portfolio companies.
| Metric | Value |
|---|---|
| Total Fair Value | $1,508.5 million |
| Total Cost | $1,522.7 million |
| Number of Portfolio Companies | 118 |
| Debt Investments (at fair value) | 91.1% |
| Equity Investments (at fair value) | 8.9% |
Investment Composition
As of September 30, 2024, approximately 97.5% of CSWC’s debt investment portfolio bore interest at floating rates. The portfolio had a weighted average contractual minimum interest rate of 1.38%.
Financial Performance
For the six months ended September 30, 2024, CSWC reported a net increase in net assets from operations of $36.7 million. The company experienced net investment income of $31.2 million during the same period.
| Financial Metric | Amount (in thousands) |
|---|---|
| Net Increase in Net Assets from Operations | $36,719 |
| Net Investment Income | $31,165 |
| Net Realized Gain on Investments | $711 |
| Net Unrealized Depreciation on Investments | ($15,535) |
Debt and Equity Financing
CSWC maintains a diversified capital structure, utilizing both equity and debt financing. As of September 30, 2024, the company had $990.3 million in contractual obligations, including corporate credit facilities and notes.
| Contractual Obligations | Amount (in thousands) |
|---|---|
| Operating Lease Obligations | $9,000 |
| Corporate Credit Facility | $200,000 |
| Interest Due on Corporate Credit Facility | $60,255 |
| SBA Debentures | $153,000 |
Investment Activities
During the six months ended September 30, 2024, CSWC made debt investments totaling $165.5 million and equity investments totaling $4.9 million. The company received contractual principal repayments of approximately $16.2 million.
| Investment Activity | Amount (in thousands) |
|---|---|
| Total Debt Investments | $165,500 |
| Total Equity Investments | $4,900 |
| Contractual Principal Repayments | $16,200 |
| Proceeds from Sales of Investments | $22,600 |
Dividend Distributions
During the quarter ended September 30, 2024, CSWC declared dividends totaling $30.5 million or $0.64 per share. This includes a regular dividend of $0.58 and a supplemental dividend of $0.06.
| Dividend Metrics | Amount |
|---|---|
| Total Dividends Declared | $30,500,000 |
| Regular Dividend per Share | $0.58 |
| Supplemental Dividend per Share | $0.06 |
Tax Status
CSWC has elected to be treated as a regulated investment company (RIC) for U.S. federal income tax purposes. This requires the company to distribute at least 90% of its investment company taxable income to shareholders.
Investment Ratings
As of September 30, 2024, the distribution of CSWC’s debt portfolio investments based on a 1 to 4 investment rating scale was as follows:
| Investment Rating | Debt Investments at Fair Value (in thousands) | Percentage of Debt Portfolio |
|---|---|---|
| 1 | $247,525 | 18.0% |
| 2 | $1,037,540 | 75.5% |
| 3 | $87,842 | 6.4% |
| 4 | $1,134 | 0.1% |
| Total | $1,374,041 | 100.0% |
How Capital Southwest Corporation (CSWC) Makes Money
Investment Income
Capital Southwest Corporation (CSWC) primarily generates revenue through investment income from its portfolio of debt and equity investments. As of September 30, 2024, the total fair value of the investment portfolio was $1,508.5 million, compared to $1,476.6 million as of March 31, 2024.
The weighted average annual effective yield on debt investments was 12.9% as of September 30, 2024. The company’s portfolio consists of approximately 91.1% of debt investments and 8.9% of equity investments.
Sources of Revenue
- Interest Income: CSWC earns interest income from its debt investments, which include first lien loans, second lien loans, and subordinated debt. The current interest rates on these loans vary, with many being tied to the Secured Overnight Financing Rate (SOFR) plus a spread.
- Dividend Income: The company also receives dividend income from its equity investments in portfolio companies.
- Realized Gains: CSWC benefits from realized gains on the sale of investments, which contribute to net investment income.
Financial Performance
For the six months ended September 30, 2024, CSWC reported net investment income of $31.2 million. The company experienced a net increase in net assets from operations amounting to $36.7 million during the same period.
Moreover, CSWC's asset coverage ratio stood at 224% as of September 30, 2024, indicating a strong financial position relative to its borrowings.
Investment Activity
During the six months ended September 30, 2024, CSWC made debt investments totaling $165.5 million and equity investments of $4.9 million. The company received contractual principal repayments totaling approximately $16.2 million and full prepayments of about $103.0 million.
Portfolio Composition
As of September 30, 2024, CSWC had investments in 118 portfolio companies. The cost of these investments was $1,522.7 million, with a fair value of $1,508.5 million. The portfolio's composition is primarily secured by first lien loans, which accounted for 89.2% of the total investments at fair value.
| Category | Amount (in millions) |
|---|---|
| Total Fair Value of Investments | $1,508.5 |
| Total Cost of Investments | $1,522.7 |
| Debt Investments (Percentage of Portfolio) | 91.1% |
| Equity Investments (Percentage of Portfolio) | 8.9% |
| Weighted Average Yield on Debt Investments | 12.9% |
| Number of Portfolio Companies | 118 |
Dividend Payments
CSWC maintains a policy of distributing at least 90% of its investment company taxable income to qualify as a Regulated Investment Company (RIC). In the quarter ended September 30, 2024, the company declared dividends totaling $30.5 million, or $0.64 per share.
The dividends included regular and supplemental dividends, with a consistent increase in quarterly payouts over the past year.
Debt and Financing
As of September 30, 2024, CSWC had an outstanding debt balance of $792.9 million across various credit facilities, including SBA debentures and corporate credit facilities. The weighted average interest rate on these facilities was 7.77%.
Market Position and Growth
CSWC’s investment strategy focuses on middle-market companies, and as of September 30, 2024, the portfolio had a weighted average EBITDA of $19.8 million. The company continues to expand its investment portfolio, leveraging its operational expertise and financial resources to capture growth opportunities in the market.
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Article updated on 8 Nov 2024
Resources:
- Capital Southwest Corporation (CSWC) Financial Statements – Access the full quarterly financial statements for Q2 2025 to get an in-depth view of Capital Southwest Corporation (CSWC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Capital Southwest Corporation (CSWC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.