Goldman Sachs Private Credit Sees Capital Boost Despite Income Dip

TL;DR

**Goldman Sachs Private Middle Market Credit II is shrinking its portfolio but improving operational efficiency, making it a cautious hold for now.**

AI Summary

Goldman Sachs Private Middle Market Credit II LLC reported a net increase in members' capital from operations of $65.033 million for the nine months ended September 30, 2025, a significant improvement from $41.922 million for the same period in 2024. Total investment income decreased to $158.182 million for the nine months ended September 30, 2025, down from $222.350 million in 2024, primarily due to a reduction in interest income from non-controlled/non-affiliated investments from $195.483 million to $134.950 million. Total expenses also saw a substantial decrease, falling from $110.235 million to $74.196 million, largely driven by lower interest and other debt expenses, which dropped from $86.292 million to $47.322 million. The company experienced a net realized loss of $4.347 million for the nine months ended September 30, 2025, a considerable improvement from a $111.645 million loss in the prior year. Net change in unrealized depreciation from non-controlled/non-affiliated investments was $4.559 million, compared to appreciation of $42.619 million in 2024. Total investments at fair value decreased from $2,087,081 thousand at December 31, 2024, to $1,643,780 thousand at September 30, 2025. Net asset value per unit declined from $79.27 to $75.81 during the same period.

Why It Matters

This 10-Q reveals a mixed but ultimately positive trend for Goldman Sachs Private Middle Market Credit II LLC, with a notable increase in net capital from operations driven by expense reductions and improved realized gains, despite a drop in investment income. For investors, the decline in NAV per unit from $79.27 to $75.81 and the significant reduction in total investments at fair value from $2.087 billion to $1.643 billion warrant close attention, suggesting a shrinking portfolio. The competitive landscape for private credit remains intense, and the ability to manage expenses and realize gains effectively, as demonstrated here, is crucial for maintaining investor confidence and market position.

Risk Assessment

Risk Level: medium — The company's total investments at fair value decreased significantly from $2,087,081 thousand at December 31, 2024, to $1,643,780 thousand at September 30, 2025, indicating a substantial reduction in its asset base. Additionally, the net asset value per unit declined from $79.27 to $75.81, reflecting a decrease in underlying value for unitholders. These factors, combined with a decrease in total investment income, suggest potential challenges in growth and asset management.

Analyst Insight

Investors should closely monitor future filings for signs of portfolio stabilization or growth, as the current trend indicates a shrinking asset base. While expense management has improved net capital from operations, the decline in NAV per unit and total investments suggests a need for caution. Consider holding existing positions but deferring new investments until a clear strategy for asset growth emerges.

Financial Highlights

debt To Equity

0.70

revenue

$158.182M

operating Margin

N/A

total Assets

$1.878B

total Debt

$731.880M

net Income

$65.033M

eps

$4.70

gross Margin

N/A

cash Position

$70.486M

revenue Growth

-28.9%

Revenue Breakdown

Key Numbers

• $65.033M — Net increase in members' capital from operations (Increased from $41.922M in 2024 for the nine months ended September 30)
• $158.182M — Total investment income (Decreased from $222.350M in 2024 for the nine months ended September 30)
• $74.196M — Total expenses (Decreased from $110.235M in 2024 for the nine months ended September 30)
• $47.322M — Interest and other debt expenses (Decreased from $86.292M in 2024 for the nine months ended September 30)
• $4.347M — Net realized loss (Improved from a $111.645M loss in 2024 for the nine months ended September 30)
• $1,643,780K — Total investments at fair value (Decreased from $2,087,081K at December 31, 2024)
• $75.81 — Net asset value per unit (Decreased from $79.27 at December 31, 2024)
• 13,854,750 — Common units outstanding (Consistent as of September 30, 2025, and December 31, 2024)
• $1.18 — Basic and diluted earnings per unit (For the three months ended September 30, 2025, down from $1.89 in 2024)
• $4.70 — Basic and diluted earnings per unit (For the nine months ended September 30, 2025, up from $3.03 in 2024)

Key Players & Entities

• Goldman Sachs Private Middle Market Credit II LLC (company) — Registrant
• SEC (regulator) — U.S. Securities and Exchange Commission
• Goldman Sachs Asset Management, L.P. (company) — Investment Adviser
• $65.033 million (dollar_amount) — Net increase in members' capital from operations for nine months ended September 30, 2025
• $41.922 million (dollar_amount) — Net increase in members' capital from operations for nine months ended September 30, 2024
• $158.182 million (dollar_amount) — Total investment income for nine months ended September 30, 2025
• $222.350 million (dollar_amount) — Total investment income for nine months ended September 30, 2024
• $75.81 (dollar_amount) — Net asset value per unit as of September 30, 2025
• $79.27 (dollar_amount) — Net asset value per unit as of December 31, 2024
• $1,643,780 thousand (dollar_amount) — Total investments at fair value as of September 30, 2025

FAQ

Risk Factors

• Investment Value Fluctuation [high — financial]: Total investments at fair value decreased from $2,087,081 thousand at December 31, 2024, to $1,643,780 thousand at September 30, 2025. This 21.2% decline indicates potential market volatility impacting the fund's asset base.
• Decreasing Net Asset Value Per Unit [medium — financial]: The net asset value per unit declined from $79.27 at December 31, 2024, to $75.81 at September 30, 2025. This 4.3% decrease suggests a reduction in the underlying value of the fund's holdings per unit.
• Reduced Investment Income [medium — financial]: Total investment income for the nine months ended September 30, 2025, was $158.182 million, a decrease from $222.350 million in the prior year. This 28.9% drop is largely due to lower interest income from non-controlled/non-affiliated investments.
• Increased Realized Losses [medium — financial]: The company experienced a net realized loss of $4.347 million for the nine months ended September 30, 2025, compared to a loss of $111.645 million in the prior year. While an improvement, the realized losses still represent a drag on performance.
• Unrealized Depreciation [medium — financial]: There was a net change in unrealized depreciation of $4.559 million from non-controlled/non-affiliated investments for the nine months ended September 30, 2025, contrasting with an appreciation of $42.619 million in the prior year. This shift indicates a negative movement in the fair value of certain investments.
• High Debt Levels [medium — financial]: Total debt stood at $731.880 million as of September 30, 2025, down from $1,000.612 million at December 31, 2024. While reduced, the significant debt load can increase financial risk and impact profitability.
• Interest Rate Sensitivity [medium — market]: The significant decrease in interest income from non-controlled/non-affiliated investments suggests sensitivity to interest rate movements or changes in the credit quality of underlying borrowers. The reduction in interest and other debt expenses from $86.292M to $47.322M also points to a changing interest rate environment or deleveraging.
• Management and Incentive Fees [low — operational]: Management fees were $12.342 million and incentive fees were $11.476 million for the nine months ended September 30, 2025. While incentive fees increased from $7.398 million in the prior year, they are still subject to performance and can impact net returns to members.

Industry Context

The middle market credit sector is characterized by providing debt financing to companies that are too large for traditional bank loans but too small for public debt markets. This segment often offers higher yields due to increased risk. Key trends include increased competition from direct lenders, evolving regulatory landscapes, and sensitivity to macroeconomic factors like interest rates and economic growth.

Regulatory Implications

As a private credit fund, Goldman Sachs Private Middle Market Credit II LLC is subject to various regulations concerning investment management, disclosure, and investor protection. Changes in financial regulations, particularly those affecting private funds or credit markets, could impact operations, compliance costs, and investment strategies.

What Investors Should Do

1. Monitor investment performance closely.
2. Evaluate the impact of reduced debt levels.
3. Assess the trend in Net Asset Value per Unit.
4. Understand the drivers of improved net increase in members' capital.

Key Dates

• 2025-09-30: Nine months ended September 30, 2025 — Reported a net increase in members' capital of $65.033 million, a significant improvement from $41.922 million in the prior year, despite lower investment income.
• 2025-09-30: As of September 30, 2025 — Total investments at fair value decreased to $1,643,780 thousand from $2,087,081 thousand at December 31, 2024, indicating a reduction in the fund's asset base.
• 2025-09-30: As of September 30, 2025 — Net asset value per unit decreased to $75.81 from $79.27 at December 31, 2024, reflecting a decline in per-unit value.
• 2024-12-31: As of December 31, 2024 — Total investments at fair value were $2,087,081 thousand and net asset value per unit was $79.27.
• 2024-09-30: Nine months ended September 30, 2024 — Reported a net increase in members' capital of $41.922 million and total investment income of $222.350 million.

Glossary

Non-controlled/non-affiliated investments

Investments in entities where the reporting company does not have control or significant influence, and is not affiliated. (This category represents the largest portion of the company's investments and is the primary driver of investment income and its fluctuations.)

Non-controlled affiliated investments

Investments in entities where the reporting company does not have control but has significant influence, or is otherwise affiliated. (These investments also contribute to investment income, though to a lesser extent than non-controlled/non-affiliated investments.)

Payment-in-kind income

Interest income that is not paid in cash but is instead added to the principal balance of a loan. (This type of income is recognized by the company, contributing to total investment income, and can affect cash flow timing.)

Distributable earnings (loss)

The cumulative earnings or losses of the company that are available for distribution to members. (A negative distributable earnings balance indicates that the company has distributed more capital than it has earned cumulatively, impacting members' capital.)

Net asset value per unit

The value of a company's net assets divided by the number of outstanding units. (This metric reflects the per-unit value of the company's holdings and is a key indicator of performance for investors.)

Common units outstanding

The total number of common units issued and held by investors. (This number is used in calculating per-unit metrics like net asset value and earnings per unit.)

Incentive fees

Fees paid to the investment manager based on the performance of the fund, typically above a certain hurdle rate. (These fees represent a significant expense and directly impact the net returns available to members.)

Deferred financing costs

Costs incurred in obtaining debt financing that are amortized over the life of the debt. (These represent an asset on the balance sheet that is gradually expensed over time.)

Year-Over-Year Comparison

Compared to the prior year's nine-month period, Goldman Sachs Private Middle Market Credit II LLC has seen a substantial decrease in total investment income, falling from $222.350 million to $158.182 million, primarily due to lower interest income from its core investments. However, total expenses have also decreased significantly, from $110.235 million to $74.196 million, largely driven by reduced interest and debt expenses. This expense management, coupled with a significant reduction in net realized losses (from $111.645 million to $4.347 million), has led to a notable improvement in the net increase in members' capital from operations, rising from $41.922 million to $65.033 million. The overall investment portfolio has shrunk, with total investments at fair value decreasing from $2,087,081 thousand to $1,643,780 thousand, and consequently, the net asset value per unit has declined from $79.27 to $75.81.

Filing Documents

• ck0001772704-20250930.htm (10-Q) — 8245KB
• ck0001772704-ex31_1.htm (EX-31.1) — 27KB
• ck0001772704-ex31_2.htm (EX-31.2) — 26KB
• ck0001772704-ex31_3.htm (EX-31.3) — 27KB
• ck0001772704-ex32_1.htm (EX-32.1) — 9KB
• ck0001772704-ex32_2.htm (EX-32.2) — 8KB
• ck0001772704-ex32_3.htm (EX-32.3) — 8KB
• 0001193125-25-277541.txt ( ) — 28607KB
• ck0001772704-20250930.xsd (EX-101.SCH) — 1575KB
• ck0001772704-20250930_htm.xml (XML) — 8244KB

Financial Statements (Unaudited)

Financial Statements (Unaudited) 4 Consolidated Statements of Financial Condition 4 Consolidated Statements of Operations 5 Consolidated Statements of Changes in Members' Capital 6 Consolidated Statements of Cash Flows 7 Consolidated Schedules of Investments 8 Notes to the Consolidated Financial Statements 23 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 41 ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 53 ITEM 4.

Controls and Procedures

Controls and Procedures 53 PART II. OTHER INFORMATION 54 ITEM 1.

Legal Proceedings

Legal Proceedings 54 ITEM 1A.

Risk Factors

Risk Factors 54 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 54 ITEM 3. Defaults Upon Senior Securities 54 ITEM 4. Mine Safety Disclosures 54 ITEM 5. Other Information 54 ITEM 6. Exhibits 54

SIGNATURES

SIGNATURES 56 2 Table of Contents CAUTI ONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by the use of forward-looking terminology such as "may," "will," "should," "expect," "anticipate," "project," "target," "estimate," "intend," "continue" or "believe" or the negatives of, or other variations on, these terms or comparable terminology. You should read statements that contain these words carefully because they discuss our plans, strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters. We believe that it is important to communicate our future expectations to our investors. Our forward-looking statements include information in this report regarding general domestic and global economic conditions, our future financing plans, our ability to operate as a business development company ("BDC") and the expected performance of, and the yield on, our portfolio companies. There may be events in the future, however, that we are not able to predict accurately or control. The factors listed under "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2024, as well as any cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. The occurrence of the events described in these risk factors and elsewhere in this report could have a material adverse effect on our business, results of operations and financial position. Any forward-looking statement made by us in this report speaks only as of the date of this report. Factors or events that could cause our actual results to differ from our forward-looking statements may emerge from time to time, and it is not possible for us to predict all of the

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS Goldman Sachs Private Middle Market Credit II LLC Consolidated Statements of Financial Condition (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 of $ 1,616,708 and $ 2,045,971 ) $ 1,572,444 $ 2,006,266 Non-controlled affiliated investments (cost of $ 78,751 and $ 78,439 ) 71,336 80,815 Total investments, at fair value (cost of $ 1,695,459 and $ 2,124,410 ) $ 1,643,780 $ 2,087,081 Investments in affiliated money market fund (cost of $ 148,322 and $ 84,647 ) 148,322 84,647 Cash 70,486 27,340 Interest and dividends receivable 12,250 17,732 Deferred financing costs 3,055 5,353 Other assets 204 564 Total assets $ 1,878,097 $ 2,222,717 Liabilities Debt $ 731,880 $ 1,000,612 Interest and other debt expenses payable 13,565 19,968 Management fees payable 4,024 4,153 Incentive fees payable 75,464 63,988 Distribution payable — 32,132 Accrued expenses and other liabilities 2,813 3,535 Total liabilities $ 827,746 $ 1,124,388 Commitments and contingencies (Note 7) Members' capital Preferred units ( 0 units issued and outstanding) $ — $ — Common units ( 13,854,750 and 13,854,750 units issued and outstanding as of September 30, 2025 and December 31, 2024) 1,263,752 1,313,752 Distributable earnings (loss) ( 213,401 ) ( 215,423 ) Total members' capital $ 1,050,351 $ 1,098,329 Total liabilities and members' capital $ 1,878,097 $ 2,222,717 Net asset value per unit $ 75.81 $ 79.27 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 Table of Contents Goldman Sachs Private Middle Market Credit II LLC Consolidated Statements of Operations (in thousands, except unit and per unit amount

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