PFX

PhenixFIN Corp. 10-Q Summary: Quarter Ended June 30, 2026

Business Context and Reporting Period

PhenixFIN Corporation (PFX) is an internally-managed, non-diversified closed-end management investment company regulated as a Business Development Company (BDC) under the Investment Company Act of 1940. The company invests primarily in senior secured loans, private equity, and other investments in privately-held U.S. companies. This report covers the quarterly period ended June 30, 2026, and the nine-month period ended on that date.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability: Net increase in net assets from operations improved significantly to $4.22 million for the three months ended June 30, 2026, compared to a net decrease of $1.50 million in the same period in 2025. This was driven by a $1.82 million net unrealized gain in the current quarter versus a $9.28 million unrealized gain in the prior year, offset by a $12.0 million realized loss in the prior year versus a $0.41 million realized gain in the current year.
• Investment Portfolio: Total investments at fair value decreased slightly to $301.6 million from $302.3 million at September 30, 2025. The portfolio composition remains heavily weighted toward Equity/Warrants (54.6% of fair value) and Senior Secured First Lien Term Loans (39.6%).
• Expenses: Total operating expenses decreased by 12.5% to $4.38 million for the three months ended June 30, 2026, compared to $5.00 million in the prior year period. Interest and financing expenses declined primarily due to borrowing at lower floating rates on the Credit Facility.
• Debt Structure: The company redeemed its $1.66 million 2028 Promissory Note in December 2025. As of June 30, 2026, outstanding debt consists of $57.5 million in 2028 Notes and $90.0 million drawn on the Revolving Credit Facility.

Guidance, Outlook, and Risks

• Leverage Policy Change: On May 4, 2026, the Board of Directors approved the application of the Modified Asset Coverage Requirements under the 1940 Act. Effective May 4, 2027, the minimum asset coverage ratio will decrease from 200% to 150%, potentially allowing for increased leverage.
• Share Repurchases: The company continues its share repurchase program. Through June 30, 2026, it has repurchased 791,236 shares for approximately $32.3 million. Approximately $2.7 million remains authorized under the program.
• Dividends: A special dividend of $0.07 per share was declared on May 5, 2026, and paid on May 28, 2026. The company intends to distribute substantially all taxable income to maintain Regulated Investment Company (RIC) status.
• Risks: The filing highlights risks associated with leverage, interest rate fluctuations (64.7% of the income-bearing portfolio is floating rate), and the valuation of Level 3 assets (unobservable inputs), which comprised $245.6 million of the portfolio. Geopolitical instability and market volatility are also cited as potential risks to portfolio valuations.

Investor Verification Checklist

• Asset Coverage Ratio: Verify the impact of the approved reduction to 150% asset coverage effective May 2027 on future borrowing capacity and risk profile.
• Level 3 Valuations: Review the significant unobservable inputs used to value the $245.6 million in Level 3 assets, particularly the market yields and EBITDA multiples applied.
• Non-Accrual Status: Confirm the status of the investment in NVTN LLC, which includes a $7.6 million cost basis investment on non-accrual status with a fair value of $0.0 million.
• Debt Maturities: Monitor the $57.5 million 2028 Notes and the $100 million Credit Facility (maturing April 2030) for refinancing needs and interest rate exposure.
• Unfunded Commitments: Assess the liquidity impact of $10.6 million in unfunded commitments to eight portfolio companies.