Great Elm Taps New CEO, Boosts NII Amid NAV Decline

PALM BEACH GARDENS, Fla. – May 04, 2026 – Great Elm Capital Corp. (NASDAQ: GECC) announced a major leadership transition and a mixed bag of first-quarter financial results, signaling a strategic pivot aimed at shoring up investor confidence amidst a volatile market. The business development company (BDC) appointed its Executive Chairman, Jason Reese, as the new Chief Executive Officer, while reporting a significant boost in net investment income (NII) largely driven by a management fee waiver. This positive news was tempered by a decline in the company's net asset value (NAV), raising questions about the underlying health of its portfolio.

A New Captain at the Helm

In a significant move, GECC’s Board of Directors appointed Jason Reese to the role of CEO, succeeding Matt Kaplan. The transition comes just two months after Reese was named Executive Chairman, a move intended to bring "seasoned credit investment experience and active management oversight" to the firm. Reese, who also serves as Chairman and CEO of Great Elm Group, Inc. (NASDAQ: GEG), the parent of GECC's investment adviser, will not receive direct compensation from GECC for his new role. Matt Kaplan will remain with the firm as a Portfolio Manager.

"I am honored to step into the role of CEO of GECC," Reese stated in the company's announcement. "In my first few months as Executive Chairman, I have focused on executing a clear mandate: Strengthening oversight, protecting shareholder value, and reinforcing accountability across the platform."

Reese’s immediate actions and public statements suggest a focus on disciplined underwriting, rigorous portfolio oversight, and enhanced transparency. He pointed to the progress made during the quarter as a reflection of this commitment, highlighting a portfolio with less than 1% of investments on non-accrual status, a figure he noted was a "stark contrast to our peers."

The Tale of Two Metrics: NII Growth vs. NAV Decline

GECC’s first-quarter financials present a complex picture for investors. The company reported a 13% quarter-over-quarter increase in net investment income to $5.0 million, or $0.36 per share. However, this growth was not driven by a surge in underlying investment returns. Total investment income actually fell to $9.5 million from $12.6 million in the prior quarter, partly due to the "uneven cadence" of cash flows from its collateralized loan obligation (CLO) investments.

The primary driver behind the NII jump was a significant, shareholder-friendly gesture from its investment adviser, Great Elm Capital Management (GECM). The adviser waived all accrued incentive fees through the second quarter of 2026, including a $2.8 million waiver that directly benefited the first quarter's bottom line. Without this waiver, the NII picture would have been substantially different.

Juxtaposed against the NII growth is a concerning decline in the company's net asset value. NAV per share fell to $7.74 as of March 31, 2026, down from $8.07 at the end of 2025. The company attributed this drop to $5.7 million in net realized and unrealized losses, driven primarily by mark-to-market volatility and unrealized depreciation in certain investments, including its CLO joint venture. This highlights the portfolio's sensitivity to broader credit market fluctuations.

High Yields and Buybacks: A Bet on Value?

In a bid to return value to shareholders, GECC's board declared a second-quarter cash distribution of $0.25 per share. Based on the stock's closing price on May 1, 2026, this equates to a striking 18% annualized dividend yield. While attractive for income-seeking investors, the sustainability of such a high yield, particularly when the company's NAV is declining, will be a key area of scrutiny. The distribution represents a 12.9% annualized yield on the company's NAV, a metric that may offer a more conservative view of the return.

Further bolstering its shareholder return strategy, GECC has been actively repurchasing its own stock. Under a $10 million program authorized in late 2025, the company has bought back approximately 0.1 million shares at an average price of $4.98. This represents a substantial 36% discount to its March 31 NAV, an accretive use of capital that directly benefits remaining shareholders. Approximately $9.5 million remains available under the buyback authorization.

The combination of the incentive fee waiver, the high dividend, and the discounted share repurchases signals a concerted effort by the new leadership to demonstrate alignment with shareholders and a belief that the company's stock is undervalued. "The Manager's decision to waive all accrued and unpaid incentive fees through the second quarter of 2026 demonstrates alignment with GECC shareholders," Reese commented.

De-Risking the Balance Sheet

Amidst the leadership and performance shifts, GECC has made significant strides in strengthening its financial foundation. The company proactively addressed its near-term debt obligations by calling or repurchasing all $57.5 million of its GECCO notes due in June 2026. This strategic move eliminates any funded debt maturities until 2029, providing the company with significant financial flexibility and a clearer runway for operations.

As of the end of the first quarter, GECC maintained a strong liquidity position, with approximately $10 million in cash, full availability of its $50 million revolving credit facility, and a portfolio of liquid assets. The company's asset coverage ratio, a key measure of leverage for BDCs, improved to 161.8%, remaining comfortably above the 150% regulatory minimum. This fortified balance sheet positions GECC to navigate the "historically tight spread environment" and be selective in its capital deployment while still expanding its private credit pipeline.

With a new CEO setting a course for greater accountability and a balance sheet de-risked from near-term maturities, Great Elm Capital Corp. is at a crossroads. The challenge for Jason Reese and his team will be to translate these strategic shifts and shareholder-friendly gestures into sustainable growth in both net investment income and, crucially, the underlying value of the company's assets.