Key Highlights

  • Net asset value per share fell to $7.38 at September 30, 2026, from $8.41 at June 30, 2026.
  • Net Investment income was $0.05 per share, against a distribution of $0.17 per share.
  • Total investment income was $5.9 million, versus $10.6 million in the third quarter of 2025.
  • Total Debt fell to $154.4 million from $185.8 million at June 30, 2026.
  • A $0.17 fourth quarter distribution was declared on October 27, 2026.

Net asset value drops $1.03 per share in one quarter

OFS Capital (NASDAQ:OFS) is an externally managed Business Development Company that invests mainly in middle market loans, structured finance securities and equity. In its Quarterly Report for the period ended September 30, 2026, it said net asset value per share fell from $8.41 at June 30, 2026 to $7.38, a decline of about 12.2% on a calculated basis.

The company attributed the quarterly fall primarily to a net loss on investments of $0.89 per share and to its $0.17 quarterly distribution exceeding net investment income of $0.05 per share. The net decrease in net Assets from operations was $11.5 million, or $0.86 per share, compared with $5.3 million, or $0.40 per share, a year earlier.

Investment income halves from last year as interest income shrinks

Total investment income was $5,938 thousand, compared with $10,551 thousand in the third quarter of 2025 and $6.8 million in the prior quarter. The company said the sequential decline reflected lower interest income, partly offset by non-recurring fee income.

Total expenses before the base management fee Waiver were $5.4 million, down from $7.6 million. Net investment income was $719 thousand, compared with $2,940 thousand, or $0.05 per share versus $0.22.

Realized losses and Pfanstiehl markdown drive the investment loss

The net loss on investments was $11.9 million, made up of a realized loss of $7.8 million and net unrealized Depreciation of $4.1 million.

Unrealized depreciation reflected a $6.8 million decline in the common Equity investment in Pfanstiehl Holdings, a global manufacturer of high purity pharmaceutical ingredients. That single holding was valued at $87.7 million, or 34.8% of the total portfolio at Fair Value and 88.7% of net assets. Non-accrual loans had a fair value of $23.4 million, or 9.3% of total investments.

A $52.3 million transaction and a new lawsuit follow quarter end

On October 5, 2026, a Subsidiary that holds the Pfanstiehl shares admitted a third party investor that acquired about 56.62% of its limited Partnership interests. The investor paid $52.3 million, all of which was distributed to OFS Capital, and the subsidiary is no longer wholly owned. The company estimated a long-term Capital Gain of about $47 million for tax purposes, expected to be fully offset by capital loss carryforwards.

On October 26, 2026, Pfanstiehl Holdings filed a complaint in the Delaware Court of Chancery challenging the transaction and seeking, among other claims, a declaration that it is void under the governing stockholder agreement.

Leverage drops to $154.4 million while the distribution holds at $0.17

Total debt fell by $31.4 million in the quarter, including the Redemption of $20.0 million of 7.50% unsecured notes due July 2028 and net repayments of $11.4 million under a Credit facility. Asset coverage was 164%, above the 150% minimum.

The board declared a $0.17 per share distribution payable on January 7, 2027 to holders of record on December 18, 2026. With net investment income at $0.05 per share this quarter, how the Pfanstiehl proceeds and the pending lawsuit affect Earnings and net asset value is the main thing to watch.