Cion Investment Corp. Engages in Secondary Market to Take Advantage of ‘Significant Discounts,’ Focuses on ‘Lightly Syndicated’ Loans, but Signs Also Point to Regular-Way Private Credit

Relevant Documents:
Octus’ BDC Database
Octus’ Coverage of New Mountain Finance Corp’s Secondary Auction

New Mountain Finance Corp.’s announcement of offering up to $500 million of private credit loans out of its portfolio has created a buzz around the market that more direct loans could be for sale. While data is sparse over the size of the current secondary market for private credit, and virtually no lenders discuss trades, Octus has examined the activities of one fund, Cion Investment Corp., which has been more open about its secondary market activities.

The vast majority of transactions that Cion Investment Corp. has engaged in are for “lightly syndicated loans.” However, Octus has identified some potential transactions involving more regular-way direct loans that are held by a limited number of lenders, not rated by one of the major ratings agencies and do not appear to be listed on market data sites such as IHS or Solve.

Cion Investment Corp. discussed its strategy of buying illiquid loans in the secondary market on its second-quarter 2024 call, stating: “We also continued our highly selective focus on secondary investments where we see attractive risk-return profiles or the opportunity to acquire lightly syndicated first lien loan tranches at significant discounts to par due to technical reasons where we expect to have active roles in the processes that drive the refinancing or restructuring of the investments.”

Management added during its first-quarter 2025 call that it continues to see opportunities to “take advantage of technical or tactical dislocations in the lightly syndicated loan market that may arise during periods of volatility,” and stated that the company sees “the greatest risk-adjusted returns while still preserving [a] conservative first lien focus in the middle market.”

Most of the companies Cion Investment identified are in the “lightly syndicated” category, often middle-market loans with limited holders. On its second-quarter 2024 call, Cion listed four loans to companies that it purchased in the secondary markets: Avison Young, AHF Products, JP Intermediate and PH Beauty. While small, all of these loans are rated and considered part of the syndicated market.

However, consistent with Cion’s comments about reasons to acquire these loans, after Cion’s purchase, half of these companies experienced a capital event. JP Intermediate, or Juice Plus, exchanged first lien debt into new debt and common equity during the third quarter, according to OFS Capital Corp., and PH Beauty sold its BYOMA skincare segment, resulting in sizable proceeds that the company will use to pay down debt, according to Moody’s.

As shown below, Cion Investment increased the principal of its JP Intermediate loans in the second quarter of 2024, the fourth quarter of 2024 and again in the second quarter of 2025.
 

In addition to these “lightly syndicated” loans, it appears that Cion Investment Corp. might have also purchased more regular-way private credit with limited lenders and not listed on other market sites. Our belief is based on reported changes in BDC portfolios.

A list of secondary activity that Cion Investment highlighted on its calls for the quarters from the second quarter of 2024 through the first quarter of 2025 is shown below. Subsequent to the first quarter, Cion Investment started grouping secondary activity with all new funding, making it hard to distinguish. Companies in red indicate that Cion Investment sold some of its holdings.
 

Hollander Intermediate could be an example of secondary activity for direct loans. As shown in the table below, from the third quarter of 2024 to the fourth quarter of 2024, Cion Investment, BCP Investment Corp and TCW Direct Lending all increased the principal of Hollander Intermediate, a supplier of bedding products, and WhiteHorse Finance, Silver Capital Holdings and Goldman Sachs BDC all exited their positions.
 

As proof that the three funds exited their positions, each reported realized losses in the fourth quarter. Interestingly, implied market prices from the reported realized losses indicate sale prices of about 41 cents. However, as shown above, funds that increased their holdings marked loans between 87 cents and 98 cents.
 

According to S&P’s LoanX database, Hollander is a borrower under a $275 million term loan issued in 2022. Therefore, the three BDCs listed above own a considerable amount of the outstanding principal.

Specific capital activities are unclear. However, it is possible that the company has engaged in certain capital activities since Cion’s, BCP’s and TCW’s additional acquisitions of loans to Hollander. In the first quarter, funds reported new equity interests in the company, which is now branded Live Comfortably Inc., though no value was ascribed to the common units. TCW Direct Lending VII said that it partially disposed of its holdings in the first quarter.

Hollander merged with Keeco in 2022, and the combined company rebranded to Live Comfortably in February. The merger was in part financed by an ABL facility led by BMO. The rebrand coincided with a “carve-out transaction” of fashion bedding and window segment Simply Interior Homes. Hollander/Keeco is owned by Centre Lane Partners.

In the third quarter of 2025, Cion Investment listed a number of investments, including “secondary” purchases. “Our Q3 investment activity consisted of a co-lead investment in one new portfolio company metric and incremental add on investments and secondary purchases in existing portfolio companies, including Avison Young, Synnex, Community Tree Services, David’s Bridal, Invincible Boats, IMW, ID Hill, Lab Gear, Juice Plus, Precision Medical, STATinMED and Technical Air Support.” As noted above, the company did not distinguish between secondary purchases and new or add-on investments in new securities. However, STATinMED could have been a secondary purchase from other funds.

As shown below, Cion Investment Corp. increased the principal held in STATinMED in the third quarter by over $6 million. Capital Southwest Corp. reduced the principal it held by $7.6 million. Capital Southwest did not report the realized loss specific to Hollander but instead reported a total realized loss in the quarter of $7.656 million related to debt investments. Prior to Capital Southwest’s disposition, its loans to STATinMED were marked at zero.
 

STATinMED is a medical technology company owned by Ancor Capital Partners.

Other secondary purchases by Cion Investment during the third quarter, according to increased principal reported in its third-quarter 2025 10-Q, include Avison Young and INW Manufacturing.

In addition to STATinMED, Cion Investment also reported increasing its investment in Community Tree Services. However, according to Octus’ BDC Database, no other BDC reports exposure to Community Tree Service, making it difficult to determine whether Cion’s purchase was via the secondary market.

Oxford Square Capital, during its third-quarter call, also mentioned focusing on the secondary market for leveraged loans, stating that it “will continue to focus both on the primary and secondary market for leveraged loans” but has had a recent ”focus more on the secondary market and more on situations where it’s less sort of liquid credits in the secondary market that – where we can capture a bit more spread.” However their activity appears focused on broadly syndicated loans. In the third quarter, the BDC increased its principal holdings in Global Tel Link by approximately $5 million.