Chicago Atlantic BDC, Inc. Liquidation Value

Chicago Atlantic BDC, Inc. (LIEN) is an externally managed BDC focused on senior secured loans to cannabis-related businesses. As of December 31, 2025, the Statement of Assets and Liabilities reports total assets of $342.0M against total liabilities of $38.6M, yielding reported net assets (NAV) of $303.4M ($13.30/share). Under the liquidation lens, the recovery posture is materially positive — but the asset base is overwhelmingly composed of Level 3 fair-valued loan investments with no active secondary market, which introduces significant execution risk in a forced liquidation scenario.

Asset side: The dominant asset is the loan portfolio carried at fair value of $333.3M (tax cost basis $332.2M), representing approximately 97% of total assets. These are senior secured loans to cannabis operators — a sector with federal illegality overhang, limited acquirer pool, and illiquid secondary markets. Under a forced liquidation, recoveries on this portfolio would be highly uncertain; a 10-15% haircut from fair value is a reasonable base case (per the standard BDC distressed-sale discount), implying liquidation proceeds of $283-300M from investments. Cash of $2.9M recovers at par. Other assets (interest receivable $3.2M, other receivables $1.8M, prepaid $0.8M) are largely collectible at near face value. Gross liquidation proceeds on assets: approximately $290-307M under a moderate stress scenario.

Liability side at face value: Total liabilities of $38.6M consist primarily of the revolving credit facility ($25.0M drawn), distributions payable ($7.8M), management fee payable ($1.4M), accrued professional fees ($0.5M), excise tax payable ($0.1M), and deferred financing costs offset. The credit facility (entered February 2025, maturity March 2028) carries approximately $25.0M outstanding; no other long-term debt is disclosed.

Recovery to equity: Net liquidation recovery at face-value liabilities vs. haircut assets approximates $251-269M, implying per-share recovery of $11.00-$11.80 against current NAV of $13.30 — a 11-17% shortfall to book. This is primarily driven by the illiquidity discount on the loan portfolio, not by leverage (debt-to-equity is modest at approximately 8% of NAV).

Change since prior filing: The prior filing (10-Q for 9 months ended September 30, 2025) reflected the entity mid-year with approximately $22.8M shares outstanding and similar portfolio composition. The current 10-K adds a full year view, discloses the revolving credit facility ($25M drawn vs. $100M capacity) entered February 2025, and confirms NAV erosion from $13.20 (March 31, 2024 year-end) to $13.30 (December 31, 2025), with the improvement modest net of $1.36/share in distributions paid. Tax basis net unrealized depreciation widened from ($3.2M) at March 31, 2025 to ($3.0M) at December 31, 2025 — a slight improvement but the gross depreciation pool remains $4.8M. Filing discusses accrued PIK income, uncrystallized capital gain incentive fees, and distributable earnings book-tax differences in MD&A/notes but these are not separately XBRL-tagged beyond the tags provided.