SLR HC BDC Sees Capital Growth Amidst Unrealized Losses

TL;DR

**SLR HC BDC is growing its asset base, but watch out for those unrealized losses dragging down NAV per unit.**

AI Summary

SLR HC BDC LLC reported a net increase in unitholders' capital from operations of $1,545 thousand for the nine months ended September 30, 2025, a decrease from $2,396 thousand for the same period in 2024. Total investment income decreased to $6,167 thousand for the nine months ended September 30, 2025, from $6,549 thousand in the prior year, primarily due to a reduction in interest income from non-controlled/non-affiliated investments from $6,437 thousand to $5,921 thousand. Net investment income, however, increased to $1,988 thousand from $1,866 thousand, driven by a significant reduction in incentive fees from $447 thousand to $172 thousand. The company experienced a net change in unrealized loss on investments of $444 thousand for the nine months ended September 30, 2025, a reversal from a $528 thousand unrealized gain in the prior year. Total assets grew to $86,703 thousand as of September 30, 2025, from $73,594 thousand at December 31, 2024, largely due to an increase in investments at fair value to $83,405 thousand from $70,321 thousand. Unitholders' capital increased to $33,048 thousand from $27,568 thousand, supported by $6,000 thousand in contributions from unitholders during the nine months ended September 30, 2025. Net asset value per unit slightly decreased to $21.55 from $21.99.

Why It Matters

SLR HC BDC LLC's growth in total assets and unitholders' capital, despite a dip in net income and a significant unrealized loss, signals a mixed outlook for investors. The increase in net investment income, driven by lower incentive fees, suggests improved operational efficiency or a shift in fee structure, which could be positive for long-term returns. However, the substantial unrealized loss on investments, reversing a prior year's gain, indicates potential volatility in its portfolio, primarily concentrated in the healthcare sector. This could impact future distributions and net asset value, especially in a competitive BDC landscape where consistent performance is key for attracting and retaining capital.

Risk Assessment

Risk Level: medium — The company reported a net change in unrealized loss on investments of $444 thousand for the nine months ended September 30, 2025, a significant shift from a $528 thousand unrealized gain in the prior year. This indicates increased volatility and potential impairment within its investment portfolio, which is heavily concentrated in the healthcare sector (46.9% in Health Care Providers & Services).

Analyst Insight

Investors should scrutinize the drivers behind the $444 thousand unrealized loss and the concentration in healthcare. Consider if the increased unitholder contributions and asset growth are sustainable given the investment performance. Monitor future filings for trends in investment valuations and sector-specific risks.

Financial Highlights

debt To Equity

N/A

revenue

$6,167K

operating Margin

N/A

total Assets

$86,703K

total Debt

N/A

net Income

$1,988K

eps

$21.55

gross Margin

N/A

cash Position

N/A

revenue Growth

-5.8%

Revenue Breakdown

Key Numbers

• $1,545K — Net Increase in Unitholders' Capital from Operations (Decreased from $2,396K in prior year period.)
• $6,167K — Total Investment Income (Decreased from $6,549K in prior year period.)
• $1,988K — Net Investment Income (Increased from $1,866K in prior year period.)
• $444K — Net Change in Unrealized Loss on Investments (Reversed from a $528K gain in prior year period.)
• $86,703K — Total Assets (Increased from $73,594K at December 31, 2024.)
• $33,048K — Total Unitholders' Capital (Increased from $27,568K at December 31, 2024.)
• $21.55 — Net Asset Value Per Unit (Decreased from $21.99 at December 31, 2024.)
• 46.9% — Investment Concentration (Percentage of total investments in Health Care Providers & Services.)
• $6,000K — Contributions from Unitholders (For the nine months ended September 30, 2025.)
• $172K — Incentive Fees (Decreased from $447K in prior year period.)

Key Players & Entities

• SLR HC BDC LLC (company) — registrant
• $1,545 thousand (dollar_amount) — net increase in unitholders' capital from operations for nine months ended Sep 30, 2025
• $2,396 thousand (dollar_amount) — net increase in unitholders' capital from operations for nine months ended Sep 30, 2024
• $6,167 thousand (dollar_amount) — total investment income for nine months ended Sep 30, 2025
• $6,549 thousand (dollar_amount) — total investment income for nine months ended Sep 30, 2024
• $444 thousand (dollar_amount) — net change in unrealized loss on investments for nine months ended Sep 30, 2025
• $528 thousand (dollar_amount) — net change in unrealized gain on investments for nine months ended Sep 30, 2024
• $86,703 thousand (dollar_amount) — total assets as of Sep 30, 2025
• $73,594 thousand (dollar_amount) — total assets as of Dec 31, 2024
• $21.55 (dollar_amount) — net asset value per unit as of Sep 30, 2025

FAQ

Risk Factors

• Investment Portfolio Performance [high — financial]: The company's financial performance is directly tied to the performance of its investment portfolio. A net change in unrealized loss on investments of $444 thousand for the nine months ended September 30, 2025, compared to a $528 thousand unrealized gain in the prior year, indicates a deterioration in investment values.
• Dependence on Interest Income [medium — financial]: Total investment income decreased to $6,167 thousand from $6,549 thousand, primarily due to a reduction in interest income from non-controlled/non-affiliated investments. This highlights a significant reliance on interest-generating assets.
• Net Asset Value Fluctuation [medium — financial]: The net asset value per unit slightly decreased to $21.55 from $21.99. This can impact investor confidence and the perceived value of their holdings.
• Investment Concentration [medium — operational]: The company has 46.9% of its total investments in Health Care Providers & Services. This concentration exposes the company to sector-specific risks.
• Reduced Capital Growth from Operations [medium — financial]: Net increase in unitholders' capital from operations decreased to $1,545 thousand from $2,396 thousand. This slowdown in organic capital growth could limit future investment capacity.

Industry Context

The Business Development Company (BDC) sector, particularly those focused on healthcare, operates in a dynamic environment. Companies like SLR HC BDC LLC provide crucial capital to healthcare businesses, which often require specialized financing due to regulatory complexities and long development cycles. The industry is sensitive to interest rate changes, regulatory shifts impacting healthcare providers, and the overall economic climate affecting investment returns.

Regulatory Implications

As a BDC, SLR HC BDC LLC is subject to regulations under the Investment Company Act of 1940. Compliance with these regulations, including asset coverage requirements and reporting obligations, is critical. Changes in healthcare policy or financial regulations could impact the company's investment strategy, portfolio composition, and overall profitability.

What Investors Should Do

1. Monitor investment portfolio performance and concentration.
2. Analyze the drivers of reduced investment income.
3. Evaluate the impact of unitholder contributions.
4. Assess the trend in Net Asset Value per Unit.

Key Dates

• 2025-09-30: Nine months ended September 30, 2025 — Reporting period for the current 10-Q, showing a decrease in net increase in unitholders' capital and a net change in unrealized loss on investments.
• 2024-09-30: Nine months ended September 30, 2024 — Prior year comparative period, showing higher net increase in unitholders' capital and an unrealized gain on investments.
• 2025-12-31: As of December 31, 2024 — Prior year-end balance sheet comparison point, showing lower total assets and unitholders' capital.

Glossary

BDC

Business Development Company. A type of closed-end investment company created to invest in small and medium-sized businesses and provide them with management expertise. (SLR HC BDC LLC operates as a BDC, indicating its investment strategy and regulatory framework.)

Net Investment Income

The income generated from a company's investments minus its operating expenses, excluding any capital gains or losses. (Increased to $1,988K, driven by reduced incentive fees, indicating improved operational efficiency in generating income from core investments.)

Unrealized Gain/Loss

The change in the market value of an investment that has not yet been sold. It represents potential profit or loss. (A shift from a $528K gain to a $444K loss highlights volatility and potential downward pressure on asset values.)

Net Asset Value (NAV) per Unit

The market value of a company's assets minus its liabilities, divided by the number of outstanding units. (A slight decrease to $21.55 per unit suggests a marginal decline in the underlying value of the company's investments relative to its liabilities.)

Incentive Fees

Fees charged by investment managers based on the performance of the investments, often above a certain hurdle rate. (A significant reduction from $447K to $172K positively impacted net investment income, suggesting either lower performance or a change in fee structure.)

Year-Over-Year Comparison

Compared to the prior year period, SLR HC BDC LLC experienced a mixed financial performance. Total investment income saw a decrease to $6,167K from $6,549K, primarily due to lower interest income from non-controlled investments. However, net investment income improved to $1,988K from $1,866K, largely driven by a significant reduction in incentive fees. The company also reported a net change in unrealized loss on investments of $444K, a reversal from a $528K gain in the prior year, indicating a less favorable investment environment. Despite these challenges, total assets grew to $86,703K and unitholders' capital increased to $33,048K, supported by substantial unitholder contributions.

Filing Documents

• ck0001832148-20250930.htm (10-Q) — 3102KB
• ck0001832148-ex31_1.htm (EX-31.1) — 14KB
• ck0001832148-ex31_2.htm (EX-31.2) — 14KB
• ck0001832148-ex31_3.htm (EX-31.3) — 14KB
• ck0001832148-ex32_1.htm (EX-32.1) — 8KB
• ck0001832148-ex32_2.htm (EX-32.2) — 8KB
• ck0001832148-ex32_3.htm (EX-32.3) — 8KB
• 0001193125-25-264650.txt ( ) — 10371KB
• ck0001832148-20250930.xsd (EX-101.SCH) — 967KB
• ck0001832148-20250930_htm.xml (XML) — 2091KB

Financial Statements

Financial Statements Consolidated Statements of Assets and Liabilities as of September 30, 2025 (unaudited) and December 31, 2024 3 Consolidated Statements of Operations for the three and nine months ended September 30, 2025 (unaudited) and the three and nine months ended September 30, 2024 (unaudited) 4 Consolidated Statements of Changes in Unitholders' Capital for the three and nine months ended September 30, 2025 (unaudited) and the three and nine months ended September 30, 2024 (unaudited) 5 Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 (unaudited) and the nine months ended September 30, 2024 (unaudited) 6 Consolidated Schedule of Investments as of September 30, 2025 (unaudited) 7 Consolidated Schedule of Investments as of December 31, 2024 10

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 13 Report of Independent Registered Public Accounting Firm 30 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 31 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 40 Item 4.

Controls and Procedures

Controls and Procedures 41 PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 42 Item 1A.

Risk Factors

Risk Factors 42 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 42 Item 3. Defaults Upon Senior Securities 42 Item 4. Mine Safety Disclosures 42 Item 5. Other Information 42 Item 6. Exhibits 43

SIGNATURES

SIGNATURES 44 2 Table of Contents

FIN ANCIAL INFORMATION

PART I. FIN ANCIAL INFORMATION In this Quarterly Report, "Company", "we", "us", and "our" refer to SLR HC BDC LLC unless the context states otherwise. Item1. Financial Sta tements SLR HC BDC LLC Consolidated State ments of Assets and Liabilities (in thousands, except unit and per unit amounts) September 30, 2025 (unaudited) December 31, 2024 Assets Investments at fair value: Non-controlled/non-affiliated investments (cost: $ 82,873 and $ 69,345 , respectively) $ 83,405 $ 70,321 Cash 2,317 2,684 Interest receivable 941 581 Receivable for investments sold 3 6 Prepaid expenses and other assets 37 2 Total assets $ 86,703 $ 73,594 Liabilities Revolving credit facility due February 2028 (the "SPV Facility") ($ 35,000 and $ 26,250 face amounts, respectively, reported net of unamortized debt issuance costs of $ 408 and $ 481 , respectively. See note 5) $ 34,592 $ 25,769 Revolving credit facility due March 2026 (the "Subscription Facility") ($ 17,800 and $ 18,500 face amounts, respectively, reported net of unamortized debt issuance costs of $ 117 and $ 27 , respectively. See note 5) 17,683 18,473 Management fee payable (see note 3) 281 477 Incentive fee payable (see note 3) 180 515 Administration fee payable (see note 3) 16 14 Interest payable (see note 5) 692 658 Payable for investments purchased 49 — Other liabilities and accrued expenses 162 120 Total liabilities $ 53,655 $ 46,026 Commitments and contingencies (see note 6) Unitholders' Capital Common Unitholders' capital ( 1,533,694 and 1,253,582 units, respectively, issued and outstanding) 33,393 27,393 Accumulated distributable net earnings (loss) ( 345 ) 175 Total unitholders' capital $ 33,048 $ 27,568 Total liabilities and unitholders' capital $ 86,703 $ 73,594 Net asset value per unit $ 21.55 $ 21.99 See notes to consolidated financial stateme

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