Lafayette Square USA BDC: NAV $14.49, payout falls to $0.28

What this vehicle is

Lafayette Square USA is a private BDC: it is not listed, it is not a platform you can open an account with, and its shares were sold in a private offering under Rule 506(c) of Regulation D, “which permits offers and sales of securities to verified accredited investors” (10-K, accession 0001628280-26-020991). It describes itself as lending to middle-market businesses located in or employing Working Class American communities, and it uses two SBA-licensed subsidiaries for long-term fixed-rate leverage. Its fiscal year ends December 31.

The dividend: what $0.28 really replaces

The September 8-K says the board “declared a distribution to stockholders in the amount of $0.28 per share”, payable on or around November 4, 2026 to holders of record on September 29, 2026, an “annualized distribution yield of approximately 7.7%”. The yield is the declared amount divided by the prior quarter-end NAV and multiplied by four, so $0.28 over $14.49 gives 7.7% (our arithmetic). The 8-Ks of earlier quarters show that $0.28 has been the regular part since September 2024.

Read the table from the right: the total paid has fallen from $0.35 to $0.28 in three quarters while the regular part never moved. A holder who budgeted around the 9%-plus figures the company published for 2025 is now looking at 7.7%, and a holder of 100,000 shares receives $28,000 for the quarter instead of $33,000, a $5,000 difference (our arithmetic). The 8-K gives no reason for dropping the supplemental, and we do not infer one beyond the numbers below.

Is the $0.28 covered?

On the company's own per-share measure, net investment income has covered distributions every year, within 4%. The new information is the last row. The 4.9 million shares sold in the second quarter were outstanding for only part of it, so the quarter's $0.342 flatters the run-rate. If second-quarter income of $10.1 million were spread across the 34.3 million shares now outstanding, it would be $0.296 a share (our arithmetic), enough for $0.28 but not for $0.33. That is the arithmetic that fits the September decision; the company does not say it. Income will move with deployment of the $154.8 million of cash the fund held at June 30 (a government money market fund yielding 3.59%), with the interest on the new notes, and with credit.

Two cautions. Net investment income includes non-cash income: PIK interest was 3.7% and PIK dividends 2.9% of second-quarter investment income, 6.6% together or about $1.6 million (our arithmetic). And on a total-return basis the picture is weaker: the first-half bridge below shows NAV falling $0.32 a share.

The same gap shows in dollars. First-half distributions of $18,901 thousand exceeded the $8,401 thousand net increase in net assets from operations (0.44 times, our arithmetic), so the balance sheet line “distributable earnings (losses)” moved from +$554 thousand to -$9,946 thousand, a swing of $10,500 thousand that equals the difference exactly. That line is an accounting residual, not a tax figure: the tax character table shows all $18,901 thousand paid in the half-year, and all $34,708 thousand paid in 2025, as ordinary income, with no return of capital.

Capital calls: new money came in at $14.72, above NAV

Two things stand out. First, the June 2026 call was the largest the fund has made in this period and used up the commitments: closed commitments rose $71.6 million in the second quarter (our subtraction) and none is uncalled. Further equity needs new commitments or the DRIP, which issues new shares. Second, the 10-Q gives one date and 4,886,588 shares for the second quarter, while the Form 8-K filed June 30, 2026 says the company sold “approximately 2.0 million shares” for “approximately $29.4 million” on June 26. The 10-Q's share total fits the share count (29,407,040 shares at the April 23 record date plus 4,886,588 is 34,293,628, against 34,293,627 reported), so we use the 10-Q, but the two filings do not describe the same sale in the same way. The $14.72 average was 1.6% above the June 30 NAV of $14.49 (our arithmetic); the drawdown price follows the most recent NAV set by the board.

Leverage: $595 million of debt, and $80 million more

Debt over net assets fell in the first half only because $93.3 million of equity came in; the debt itself rose $23.0 million, all on the bank facility, which ended June with $18 thousand of its $300 million unused. The 150% asset coverage floor is not close: the company reports 236.7%, and the SBA debentures are excluded from the test under an SEC exemptive order. The new notes are what fills the gap that a fully drawn bank line and fully called equity leave.

Annual interest on the new notes is $6.59 million, a blended 8.24% (our arithmetic: $2.0 million at 7.82% plus $78.0 million at 8.25%), or about $0.19 a share a year on the June 30 share count. That is above the 5.89% average cost of the whole debt stack and below the 11.3% weighted average yield on the portfolio at fair value. The notes are general unsecured obligations guaranteed by a subsidiary, the rate can rise by up to 2.00 percentage points if the notes lose an investment-grade rating and a secured debt ratio is breached, and the 8-K says the proceeds are for “general corporate purposes”. Whether they repay the bank line is not stated; the third-quarter debt table will show it.

Unfunded commitments are drawn over time and some expire unused, so the $30.3 million is a stress comparison, not a forecast. It does show why the $80 million of notes arrived in the same week as a lower dividend.

The portfolio: 62 companies, 87% first lien, marks moving down

At June 30 the fund held $983.7 million at fair value across 62 portfolio companies (54 at December 31, 2025), against $995.7 million of cost. First-lien senior secured loans were 87.2% of fair value, equity 7.4% and preferred equity 4.8%. Floating-rate loans were 85.7% of performing debt, weighted average net debt to EBITDA was 3.6 times and interest coverage 2.6 times, with weighted average EBITDA of $25.1 million.

The Road & Rail line is the visible one. At June 30 it was carried at 86.0% of cost, 11.7% of net assets (our arithmetic), and its fair value, $58,169 thousand, is exactly the amount in the rating-4 bucket; we infer that this industry is that bucket but the filing does not say so. The largest single loan line in the schedule is a first-lien loan to 160 Driving Academy with $53.5 million of par carried at $44.4 million (8.9% of net assets), 83.0% of par (our arithmetic). The 2.5% non-accrual share is about $24.6 million at fair value (our arithmetic, from the rounded percentage). Nothing here shows a broken fund: 84.5% of the portfolio is still rated 2, and the 10-Q says no disposition in 2025 or the first half of 2026 came from credit deterioration or a distressed sale. It shows direction, and the third-quarter 10-Q will say whether the direction continues.

Fees and the cost of the structure

First-half management fees were $3.9 million and incentive fees $3.4 million, $7.3 million together or 15.6% of investment income (our arithmetic). Interest and financing was 57% of second-quarter expenses (our arithmetic) and the ratio of expenses to average net assets, interest included, was 12.39% for the half-year. Pre-incentive income is measured against a 1.25% quarterly hurdle; a Liquidity Event would raise the base fee from 0.75% to 1.0% of gross assets. None has been announced.

What a reader can do with this

• If you hold: read three lines in the third-quarter 10-Q, probably filed in early November 2026 (the June 10-Q was filed August 3, the September 2025 one on November 6): NAV per share against $14.49, net investment income per share on the larger share count against $0.28, and the non-accrual and rating-3-or-4 shares against 2.5% and 15.5%. The next dividend declaration came on December 19 last year.
• If you want out: there is no tender mechanism. The 10-K says shares may be transferred only with the company's consent and that an investor “must be willing to bear the economic risk of investment in the shares of Common Stock until we are liquidated”. Do not plan around a sale date.
• If you were offered a commitment: a drawdown is priced at the latest NAV, so the NAV trend above is the price you would pay, and commitments are called over time. Compare the 7.7% with the coverage table, not with the 9% of the 2025 notices.
• If you compare it with other private BDCs: our MSD Investment Corp. page and Fortress Private Lending Fund page read the same filings, and the non-traded BDC list ranks the registered funds. The BDC explainer covers the structure.
• Taxes: BDC income arrives mostly as ordinary dividends. See our estimated tax payments guide for REIT and BDC income and ask a tax professional about your own position.

FAQ

All figures are from Lafayette Square USA, Inc.'s SEC filings read on EDGAR on October 28, 2026: the Form 10-K for 2025 (accession 0001628280-26-020991), the Forms 10-Q for the quarters ended March 31, 2026 (accession 0001628280-26-032846), June 30, 2026 (accession 0001628280-26-051793) and September 30, 2025 (accession 0001628280-25-050299), the Forms 8-K that declare distributions (accessions 0001849089-24-000012, 0001849089-24-000026, 0001849089-24-000032, 0001849089-24-000042, 0001849089-25-000007, 0001849089-25-000017, 0001628280-25-043483, 0001628280-25-058662, 0001628280-26-046201 and 0001849089-26-000003), the Form 8-K of June 30, 2026 on the June 26 share sale (accession 0001628280-26-046161), the Form 8-K of June 9, 2026 on the annual meeting (accession 0001104659-26-071878) and the Form 8-K of September 30, 2026 on the Note Purchase Agreement (accession 0001104659-26-112360). The EDGAR index shows 223 filings and the last is the October 2, 2026 8-K. Ratios, percentage changes, sums, pro forma debt and coverage, per-share income on the June 30 share count, annual interest on the new notes and the liquidity comparison are our arithmetic and assume no repayment or change after June 30 except the new notes. This is analysis of public documents, not investment, legal or tax advice.