Steele Creek Capital Expands CLO Strategy

Following a year of repositioning, the BDC restructured debt vehicles, refined its fee structure, and leaned into CLO investments for enhanced yield.

March 26, 2025

Portfolio Realignment and Credit Facility Transition

Steele Creek Capital wrapped 2024 with a leaner portfolio, a new credit facility, and a more targeted investment strategy. The firm—an externally managed business development company—continued to prioritize high-yield fixed income, especially in the syndicated loan and CLO markets, while stepping away from legacy financing arrangements.

As of December 31, Steele Creek’s investment portfolio stood at $121.6 million in fair value across 190 investments, down from $138.5 million and 205 positions the prior year. The move reflects a deliberate shift in positioning, partly driven by liquidity in the leveraged loan market and a focus on refining the capital structure.

One of the key changes: a full transition from its prior credit facility with BNP Paribas to a new $80 million facility with Bank of America. The new vehicle—Steele Creek Capital Funding II, LLC—was established in August and fully funded by mid-October. By year-end, $73.3 million was drawn. The structure carries a term SOFR-based rate, plus 1.50%, and offers updated terms on unused balances.

The older vehicle, Steele Creek Capital Funding I, is now in wind-down mode. It held no investments at year-end and will close after remaining accounts are reconciled.

A Sharper Focus on CLOs

Steele Creek continues to invest across syndicated loans, mezzanine debt, and structured products. But CLOs have become a central part of the strategy—particularly in the junior and equity tranches. These instruments are designed to withstand interest rate shifts and can deliver strong risk-adjusted income. With pricing dislocations across the credit markets, the firm is leaning into CLOs as a source of consistent performance.

The investment team focuses on first-lien and second-lien secured loans, with most investments rated below investment grade. These holdings are typically floating rate and come with varying levels of covenant protection. At year-end, the portfolio leaned toward sectors like:

• Finance: 14.6%


• Business services: 14.1%


• Healthcare: 9.5%

The company’s CLO strategy rests on a combination of bottom-up credit analysis and structured finance expertise. The team evaluates each CLO across three levels: underlying loan quality, deal structure, and collateral manager performance. These layers are reviewed through internal models and validated against third-party data sources.

Operations Backed by a Deep Bench

Steele Creek is externally managed by Steele Creek Investment Management, a Moelis Asset affiliate. That partnership provides access to legal, compliance, and operational support, in addition to the core investment team of 11 professionals. Portfolio decisions are made by an eight-person investment committee that requires a supermajority—including Moelis representation—for any new position.

The advisory and administration agreements were renewed in August. As part of the fee structure, management fees are based on the fair value of investments. The advisor has also committed to waiving incentive fees if needed to support a 6% annualized distribution, until a future liquidity event is triggered.

That approach gives shareholders exposure to the firm’s core strategies—while aligning fees to performance in the interim.

Limited Liquidity, But Share Repurchases Ongoing

Steele Creek doesn’t offer daily liquidity, but it does operate a quarterly share repurchase program. As of December 31, roughly 1 million shares had been tendered and repurchased. This structure offers some liquidity to shareholders, while still allowing the firm to focus on longer-term credit opportunities.

The company remains structured as a regulated investment company (RIC) and distributes a majority of its income to maintain that status. In 2024, Steele Creek also made adjustments to reflect income recognition from structured and deferred-interest positions—ensuring compliance with both RIC and excise tax requirements.

Positioning for What’s Ahead

Looking ahead, Steele Creek is positioned to keep capital active in high-yield, floating-rate credit. The shift to a new credit facility, combined with refined internal processes and a focused investment strategy, gives the company a foundation to navigate credit market volatility and execute across its core themes.

In a year that brought changes across portfolio composition, financing, and sector allocations, the firm stayed aligned with its investment mandate: targeting income through fixed income instruments, with flexibility to pursue structured credit and equity-like exposure where the opportunities make sense.

With capital deployed, CLO exposure increasing, and fee structures aligned to performance, Steele Creek enters 2025 with a more streamlined platform and a clear direction.