Great Elm Capital Corp. Reports Increased Investment Income but Decline in Net Assets for Fiscal Year 2024

Great Elm Capital Corp. (GECC) reported a significant increase in its financial performance for the fiscal year ending December 31, 2024, with total investment income rising to $39.3 million, compared to $35.8 million in 2023. This increase was primarily driven by higher interest income, which grew from $28.9 million in 2023 to $31.5 million in 2024, reflecting the expansion of the company's debt portfolio. However, the company also faced challenges, as it recorded a net decrease in net assets resulting from operations of $3.6 million, down from a gain of $25.3 million in the previous year. The net asset value (NAV) per share decreased to $11.79 from $12.99, indicating a decline in the overall value of the company’s investments.

In terms of operational developments, GECC made strategic moves by forming a joint venture, CLO Formation JV, LLC, to invest in collateralized loan obligations (CLOs) and related warehouse facilities. This joint venture is expected to enhance the company's investment capabilities in the specialty finance sector. Additionally, GECC contributed investments to its subsidiary, Great Elm Specialty Finance, LLC (GESF), which is focused on providing various financing options to middle-market borrowers. This strategic shift aims to generate both revenue and cost synergies across its specialty finance subsidiaries.

The company also reported a notable increase in its total expenses, which rose to $26.5 million in 2024 from $23.0 million in 2023. This increase was largely attributed to higher interest expenses resulting from the issuance of new notes, including $56.5 million in 8.50% notes due 2029 and $41.4 million in 8.125% notes due 2029. The management fees paid to Great Elm Capital Management, LLC (GECM) also increased, reflecting the growth in the underlying management fee assets. Despite these rising costs, the company maintained compliance with its financial covenants, including an asset coverage ratio of approximately 169.7%.

Looking ahead, GECC has set a distribution rate of $0.37 per share for the quarter ending March 31, 2025, which will be paid in cash and is expected to be funded from distributable earnings. The company continues to focus on its investment strategy, which includes a mix of secured and senior secured debt instruments, as well as income-generating equity investments. However, the company remains cautious about market conditions and the potential impact of rising interest rates on its portfolio, as many of its debt investments are subject to variable rates. The management team is committed to navigating these challenges while seeking to enhance shareholder value through strategic investments and operational efficiencies.