CION Investment (NYSE:CION) reported lower third-quarter earnings and net asset value as it reduced debt and sold loans, and said it expects a lower base distribution in 2027 to reflect a smaller income-producing portfolio.
Net investment income fell to $12.3 million, or $0.25 per share, from $14.2 million, or $0.29 per share, in the second quarter. Net asset value declined 2.7% to $13.20 per share from $13.57, primarily because of unrealized investment markdowns and distributions exceeding net investment income, executives said.
Co-CEO Michael Reisner said the earnings decline largely reflected strategic decisions rather than a broad deterioration in portfolio credit quality. CION made no new platform investments during the quarter, instead funding existing portfolio companies as it preserved cash to reduce leverage.
Debt reduction and loan sales
CION reduced balance sheet debt to $897 million from $1.17 billion during the quarter. Net debt to equity fell to 1.3 times from 1.52 times, below the approximately 1.35 times target management had previously provided.
The company repaid ILS 114.8 million of Israeli bonds at maturity and fully repaid and terminated its $200 million JPMorgan secured facility. Reisner said accelerated amortization of the facility’s remaining debt issuance costs reduced net investment income by approximately $0.03 per share.
CION also formed Senior Loan Fund Partners, an off-balance-sheet joint venture with an institutional partner. The venture purchased $180 million of CION’s first-lien loans at approximately 99.8% of par. President and Chief Investment Officer Gregg Bresner said total sales and repayments for the quarter were $256 million at a blended value above 99.6% of par.
Chief Financial Officer Keith Franz said the joint venture closed toward the end of September, so its effect on third-quarter earnings was minimal. He said CION received approximately $40 million to $50 million of equity in the venture, paying about 12%, and estimated the net earnings impact at “a couple of cents” in the fourth quarter.
During the quarter, CION made approximately $78 million in investment commitments across 11 existing portfolio companies, of which $72 million was funded. It also funded $11 million of previously unfunded commitments, Bresner said.
Distribution reset and buyback plans
CION maintained its fourth-quarter base distributions at a total of $0.30 per share, paid monthly at $0.10. It declared first-quarter 2027 distributions totaling $0.25 per share: $0.08 in each of January and February and $0.09 in March. The quarterly total is approximately 17% below the fourth-quarter level.
Reisner said the company expects to set base distributions at $0.25 per share per quarter in 2027. He cited the smaller earning portfolio following deleveraging and a selective approach to new platform deals while the company pursues share repurchases.
“We’d rather pay a distribution we are confident we can cover from core earnings than stretch to keep a level that depends on robust transaction activity,” Reisner said.
CION did not repurchase shares in the third quarter. Management said it expects the announced sale of Longview Power to a strategic acquirer to close in the fourth quarter of 2026 or the first quarter of 2027, subject to regulatory approval. Reisner said the company expects significant gains and enhanced liquidity from the sale, with its first priority being to seek a resumption of share repurchases.
Co-CEO Mark Gatto said proceeds from equity monetizations could support a combination of investments and share repurchases.
Portfolio credit and David’s Bridal
First-lien investments represented approximately 72% of the portfolio at quarter-end. Management expects that proportion to rise as it seeks to monetize equity positions, including Longview Power, which Reisner said represents more than 6% of the investment portfolio.
No investments were added to or removed from non-accrual status during the quarter. Non-accruals rose to 1.63% of the portfolio at fair value from 1.44% in the second quarter; Bresner said the increase was driven by the smaller total portfolio. He also said approximately 98% of the portfolio was risk-rated three or better.
Reisner identified David’s Bridal as CION’s largest exposure. Bresner said the retailer is separating its Pearl wedding-planning and marketplace platform from its physical retail operations. Pearl has signed a nonbinding letter of intent for a proposed combination with K&F Growth Acquisition Corp. II that values Pearl at a pro forma enterprise value of $350 million and contemplates a $75 million private investment in public equity.
The proposed transaction targets a first-half 2027 closing, subject to definitive agreements and closing conditions. Reisner cautioned that there is no assurance an agreement will be signed or that the transactions will close, but said a publicly traded portion could provide a path to reduce CION’s exposure over time.
About CION Investment (NYSE:CION)
CION Investment Corporation (NYSE:CION) is a closed-end, externally managed business development company (BDC) that provides financing to privately owned, middle-market companies. The company primarily seeks to generate current income and, to a lesser extent, capital appreciation by investing in the debt and equity securities of eligible businesses.
CION’s investment portfolio generally includes senior secured loans, subordinated debt, unitranche investments and, in select cases, equity or equity-related securities.
