Willow Tree Capital's Net Assets Soar on Robust Investment Income

TL;DR

**Willow Tree Capital is leveraging up and growing fast, but watch that debt pile.**

AI Summary

Willow Tree Capital Corporation reported a significant increase in net assets and investment income for the six months ended June 30, 2025. Total investment income from non-controlled, non-affiliated investments surged to $31,969 thousand for the six months ended June 30, 2025, compared to zero in the prior year period. Net investment income reached $12,370 thousand, and the net increase in net assets resulting from operations was $15,220 thousand. The company's total assets grew substantially to $732,486 thousand as of June 30, 2025, from $507,969 thousand at December 31, 2024. This growth was primarily driven by an increase in investments at fair value to $677,156 thousand from $490,462 thousand, and a rise in cash and cash equivalents to $44,466 thousand from $8,107 thousand. Borrowings also increased significantly to $400,081 thousand from $242,746 thousand, indicating increased leverage. The company issued $50,000 thousand in common stock and received $24,299 thousand in contributions in advance during the six-month period. Net asset value per share increased to $16.38 from $15.76.

Why It Matters

This 10-Q filing reveals Willow Tree Capital's aggressive growth strategy, marked by a substantial increase in investment activity and leverage. For investors, the significant rise in net asset value per share to $16.38 and strong investment income signals potential for capital appreciation, but also highlights increased debt. Employees and customers of the portfolio companies, primarily in private debt across various sectors, could see continued stability or expansion due to this capital injection. The broader market impact is limited given the private nature of most investments, but it reflects ongoing demand for private credit, intensifying competitive pressures for similar investment vehicles.

Risk Assessment

Risk Level: medium — The company's borrowings increased significantly to $400,081 thousand as of June 30, 2025, from $242,746 thousand at December 31, 2024, representing a 65% increase. This substantial increase in leverage, while funding growth, also elevates interest and borrowing expenses to $13,558 thousand for the six months ended June 30, 2025, posing a medium risk if investment returns falter or interest rates rise further.

Analyst Insight

Investors should closely monitor Willow Tree Capital's debt-to-equity ratio and the performance of its private debt portfolio. While the growth in net assets and investment income is positive, the increased leverage warrants caution; assess the quality and diversification of their underlying investments to ensure sustainable returns.

Financial Highlights

debt To Equity

1.34

revenue

$31.97M

operating Margin

38.7%

total Assets

$732.49M

total Debt

$400.08M

net Income

$15.22M

eps

$0.75

gross Margin

N/A

cash Position

$44.47M

revenue Growth

+N/A%

Revenue Breakdown

Key Numbers

• $31.97M — Total Investment Income (Increased from $0 for the six months ended June 30, 2024, to $31,969 thousand for the six months ended June 30, 2025.)
• $15.22M — Net Increase in Net Assets from Operations (Increased from $0 for the six months ended June 30, 2024, to $15,220 thousand for the six months ended June 30, 2025.)
• $732.49M — Total Assets (Increased by 44% from $507,969 thousand at December 31, 2024, to $732,486 thousand at June 30, 2025.)
• $400.08M — Borrowings (Increased by 65% from $242,746 thousand at December 31, 2024, to $400,081 thousand at June 30, 2025.)
• $16.38 — Net Asset Value Per Share (Increased from $15.76 at December 31, 2024, to $16.38 at June 30, 2025.)
• $13.56M — Interest and Borrowing Expenses (Increased from $0 for the six months ended June 30, 2024, to $13,558 thousand for the six months ended June 30, 2025.)
• 20,401,739 — Common Shares Outstanding (As of August 13, 2025, indicating significant share issuance.)

Key Players & Entities

• Willow Tree Capital Corporation (company) — registrant
• SEC (regulator) — Securities and Exchange Commission
• Willow Tree Capital Corp Advisors LLC (company) — Adviser
• $31,969 thousand (dollar_amount) — total investment income for six months ended June 30, 2025
• $12,370 thousand (dollar_amount) — net investment income for six months ended June 30, 2025
• $15,220 thousand (dollar_amount) — net increase in net assets from operations for six months ended June 30, 2025
• $732,486 thousand (dollar_amount) — total assets as of June 30, 2025
• $400,081 thousand (dollar_amount) — borrowings as of June 30, 2025
• $16.38 (dollar_amount) — net asset value per share as of June 30, 2025
• June 30, 2025 (date) — end of quarterly period

FAQ

Risk Factors

• Increased Leverage [high — financial]: Borrowings increased by 65% from $242.75M to $400.08M. This substantial increase in debt amplifies financial risk, as higher interest expenses ($13.56M for the period) can strain profitability and increase the sensitivity of net asset value to market fluctuations.
• Investment Value Fluctuations [medium — market]: The company's total assets are heavily weighted towards investments at fair value ($677.16M out of $732.49M). A net change in unrealized appreciation of $2.85M was recorded for the period, but significant unrealized depreciation could negatively impact net assets and net asset value per share.
• Dependence on Adviser Fees [low — operational]: While not explicitly detailed as a risk, the structure of management and incentive fees suggests a reliance on the Adviser's performance. Changes in fee structures or Adviser performance could impact net investment income.
• Compliance and Reporting [medium — regulatory]: As a capital corporation, Willow Tree is subject to various financial regulations. Non-compliance or changes in regulatory frameworks could lead to fines, sanctions, or operational disruptions.

Industry Context

Willow Tree Capital Corporation operates in the investment management sector, which is characterized by intense competition and a need for strong performance to attract and retain capital. The industry is sensitive to interest rate environments and overall market sentiment. Companies like Willow Tree often utilize leverage to enhance returns, but this also magnifies risk.

Regulatory Implications

As a financial services entity, Willow Tree is subject to regulatory oversight. Changes in accounting standards, capital requirements, or investment regulations could impact its operations and profitability. The significant increase in borrowings may also attract closer scrutiny regarding leverage ratios and risk management practices.

What Investors Should Do

1. Monitor leverage levels and interest coverage ratios.
2. Analyze the drivers of investment income growth.
3. Evaluate the impact of market volatility on investment portfolio.
4. Assess the growth in net asset value per share.

Key Dates

• 2025-06-30: Six months ended June 30, 2025 — Period of significant growth in investment income, net assets, and total assets, alongside a substantial increase in borrowings.
• 2025-06-30: Consolidated Statement of Assets and Liabilities — Shows total assets of $732.49M and total liabilities of $433.56M, with net assets of $298.92M.
• 2025-06-30: Consolidated Statement of Operations — Details $31.97M in investment income and $15.22M net increase in net assets from operations.
• 2024-12-31: As of December 31, 2024 — Represents the prior year-end baseline for comparison, showing significantly lower assets ($507.97M) and borrowings ($242.75M).

Glossary

PIK interest income

Payment-in-kind interest income, where interest is paid in the form of additional debt or equity rather than cash. (Contributed $1.52M to investment income for the period, indicating a non-cash component of earnings.)

Net assets

The total value of an investment company's assets minus its liabilities. It represents the net worth of the company available to shareholders. (Increased to $298.92M from $235.49M, reflecting operational growth and positive investment performance.)

Net asset value per share

The net asset value of a company divided by the number of outstanding shares. (Increased to $16.38 from $15.76, indicating an increase in shareholder value.)

Non-controlled, non-affiliated investments

Investments in entities where the company does not have control or significant influence, and is not affiliated with the investee. (The primary source of the company's investment income ($31.97M for the period).)

Distributable earnings (loss)

The cumulative earnings of the company that are available for distribution to shareholders. (Increased from $1.196M to $11.006M, showing a significant accumulation of earnings.)

Year-Over-Year Comparison

Compared to the prior year period, Willow Tree Capital Corporation has demonstrated a dramatic increase in financial activity. Total investment income has surged from $0 to $31.97M, leading to a net increase in net assets from operations of $15.22M. Total assets have grown by 44% to $732.49M, primarily due to a significant rise in investments and cash. However, this growth has been accompanied by a substantial 65% increase in borrowings to $400.08M, indicating a more leveraged financial structure and a corresponding rise in interest and borrowing expenses from $0 to $13.56M.

Key Financial Figures

• $0.01 — had 20,401,739 shares of common stock, $0.01 par value per share, outstanding. Tab

Filing Documents

• wt-20250630.htm (10-Q) — 2530KB
• exhibit311ceocertificate-q.htm (EX-31.1) — 32KB
• exhibit312cfocertificate-q.htm (EX-31.2) — 31KB
• exhibit321-ceocertificatio.htm (EX-32.1) — 20KB
• exhibit322cfocertification.htm (EX-32.2) — 20KB
• 0001944831-25-000031.txt ( ) — 10554KB
• wt-20250630.xsd (EX-101.SCH) — 45KB
• wt-20250630_cal.xml (EX-101.CAL) — 45KB
• wt-20250630_def.xml (EX-101.DEF) — 183KB
• wt-20250630_lab.xml (EX-101.LAB) — 515KB
• wt-20250630_pre.xml (EX-101.PRE) — 367KB
• wt-20250630_htm.xml (XML) — 2768KB

- Financial Information

Part I - Financial Information 3 Item 1. Consolidated Statements of Assets and Liabilities as of June 30, 2025 (unaudited) and December 31, 2024 3 Consolidated Statements of Operations for the three and six months ended June 30, 2025 (unaudited) and June 30, 2024 (unaudited) 4 Consolidated Statements of Changes in Net Assets for the three and six months ended June 30, 2025 (unaudited) and June 30, 2024 (unaudited) 5 Consolidated Statement of Cash Flows for the six months ended June 30, 2025 (unaudited) and June 30, 2024 (unaudited) 6 Consolidated Schedule of Investments as of June 30, 2025 (unaudited) and December 31, 2024 7

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 17 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 35 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 50 Item 4.

Controls and Procedures

Controls and Procedures 51

- Other Information

Part II - Other Information 52 Item 1.

Legal Proceedings

Legal Proceedings 52 Item 1A.

Risk Factors

Risk Factors 52 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 52 Item 3. Defaults Upon Senior Securities 52 Item 4. Mine Safety Disclosures 52 Item 5. Other Information 52 Item 6. Exhibits 53

Signatures

Signatures 54 i Table of Content s

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements regarding the plans and objectives of management for future operations. Any such forward-looking statements may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," "target," "goals," "plan," "forecast," "project," other variations on these words or comparable terminology, or the negative of these words. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that the projections included in these forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors, including the factors discussed in Item 1A entitled "Risk Factors" in Part I in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, Item 1A entitled "Risk Factors" in Part II of this Quarterly Report on Form 10-Q and elsewhere in this Quarterly Report on Form 10-Q. The following factors are among those that may cause actual results to differ materially from our forward-looking statements: Our future operating results; Our business prospects and prospects of our portfolio companies; The ability of our portfolio companies to achieve their objectives; Changes in political, economic, or industry conditions, the interest rate environment, the imposition of tariffs or conditions affecting the financial and capital markets; Our contractual arrangements and relationships with thi

Financial Information

Part I. Financial Information

Financial Statements

Item 1. Financial Statements WILLOW TREE CAPITAL CORPORATION Consolidated Statement of Assets and Liabilities (in thousands, except share and per share amounts) Assets As of June 30, 2025 As of December 31, 2024 (unaudited) Investments, at fair value: Non-controlled, non-affiliated investments (cost of $ 672,388 and $ 488,544 at June 30, 2025 and December 31, 2024, respectively) $ 677,156 $ 490,462 Cash and cash equivalents 44,466 8,107 Deferred financing costs 6,526 5,274 Dividends and interest receivable 4,081 3,052 Receivable for investments sold 98 224 Receivable from Adviser — 460 Prepaid expenses 159 390 Total assets $ 732,486 $ 507,969 Liabilities Borrowings $ 400,081 $ 242,746 Contributions received in advance 24,299 — Interest payable 6,089 2,850 Incentive fees payable 962 — Management fees payable 913 435 Payable for investments purchased 50 13,657 Loans sold under agreement to repurchase — 11,641 Accrued expenses and other liabilities 1,169 1,150 Total liabilities $ 433,563 $ 272,479 Commitments and contingencies (see Note 7) Net assets Common stock, $ 0.01 par value, 200,000,000 shares authorized, 18,253,180 and 14,940,044 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively $ 183 $ 149 Additional Paid in Capital 287,734 234,145 Distributable earnings (loss) 11,006 1,196 Total net assets $ 298,923 $ 235,490 Total liabilities and net assets $ 732,486 $ 507,969 Net asset value per share $ 16.38 $ 15.76 The accompanying notes are an integral part of these unaudited financial statements. 3 Table of Content s WILLOW TREE CAPITAL CORPORATION Consolidated Statement of Operations (Unaudited) (in thousands, except share and per share amounts) For the three months ended June 30, For the six months ended June 30, 2025 2024 2025 2024 Investment income: From non-controlled, non-affiliated investments: Interest income $ 16,371 $ — $ 30,090 $ — PIK interest income 789 — 1,519 —

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View this 10-Q filing on SEC EDGAR