DBRS, Inc. (Morningstar DBRS) confirmed the Long-Term Issuer Rating and Long-Term Senior Debt credit rating of CION Investment Corporation (CION or the Company) at BBB (low).
The trend on the credit ratings remains Stable. The Company's Intrinsic Assessment (IA) was maintained at BBB (low), while its Support Assessment is SA3, meaning timely systemic support is not expected, resulting in CION's final credit ratings positioned in line with its IA.
KEY CREDIT RATING CONSIDERATIONS
The credit ratings confirmation is supported by CION's established franchise as a medium-sized business development company (BDC) with an experienced management team that has worked together through several business and economic cycles. Earnings generation remains acceptable, supported by relatively decent investment yields, although elevated levels of non-cash payment-in-kind (PIK) income remain a credit rating constraint. The credit ratings also consider CION's moderate risk profile, supported by a primarily sponsor-backed first lien senior secured loan portfolio and acceptable levels of non-accruals. While CION's improved mix of unsecured debt is a positive for the credit ratings, capitalization has weakened with a gross leverage ratio of 1.41x as of Q3 2025.
The Stable trend considers Morningstar DBRS' view that CION will continue to generate solid operating results despite the ongoing uncertainty surrounding the U.S. economic outlook, supported by a moderately sized investment portfolio. Although earnings are expected to be pressured from lower base rates, Morningstar DBRS anticipates this will be offset by an increased level of refinancing activities among portfolio companies.
CREDIT RATING DRIVERS
A sustained improvement in gross leverage, combined with strengthened profitability metrics and reduced levels of PIK interest income and non-accruals would lead to a credit ratings upgrade. Conversely, the credit ratings would be downgraded if net leverage were to exceed the Company's target range for a sustained period or if there was a material increase in amended PIK interest income. A material increase in non-accrual investments or sustained losses that significantly reduces the Company's capital buffer to regulatory requirements would also result in a credit ratings downgrade.
CREDIT RATING RATIONALE
Franchise Strength Building Block Assessment: Good/Moderate
CION has a well-established franchise that is supported by its long tenure in the industry and sufficient scale to compete effectively in the private credit landscape. CION is externally managed by CIM, which is a joint venture between CION Investment Group, LLC (CIG) and Apollo Investment Management (AIM), an Apollo Global Management (Apollo) subsidiary. CION's investments are predominately to sponsored backed middle market companies with EBITDA of $75 million or less. The Company focuses on first lien, senior secured loans sourced as club investments with a network of similar partners with deep, long-standing relationships which have been proven to be recurring and scalable. Additionally, CION utilizes a joint venture (JV) partnership with an affiliate of EagleTree Capital, LP to pursue debt and equity opportunities, such as special situation loans and junior investments. As of Q3 2025, CION's investment portfolio totaled $1.74 billion at fair value, slightly lower than $1.75 billion at Q3 2024. The portfolio consisted of 91 companies across 23 distinct industries with an average EBITDA of $58.1 million and average weighted leverage of 5.15x.
Earnings Power Building Block (BB) Assessment: Moderate
The Company's earnings generation capacity is acceptable, supported by relatively decent investment yields and a moderately sized investment portfolio which consists of mainly floating rate investments that generate consistent investment income. For 9M 2025, the Company generated a net income of $20.5 million, down 28.0% year-over-year (YoY), driven by higher realized and unrealized losses of $54.3 million compared to $48.7 million in 9M 2024, along with slightly lower total investment income. Total investment income totaled $187.0 million, down from $194.5 million in the prior year due to lower base rates. PIK income remains elevated and totaled 20.5% of total investment income, which Morningstar DBRS views negatively. However, this concern is mitigated as majority of PIK is in place for structural reasons to incrementally enhance yields and less due to credit deterioration at the portfolio companies. With credit spreads compressing due to increased direct lending competition and lower base rates, the Company's gross annual portfolio yield lowered to 9.3% at Q3 2025, down from 10.9% at Q3 2024. Morningstar DBRS expects BDC earnings to be pressured by lower base rates heading into 2026, but will likely be offset by a higher level of refinancing activities.
Risk Profile Building Block (BB) Assessment: Good/Moderate
CION's risk profile is considered moderate. As CION often is not in a lead-arranger role, it has limited discretion in shaping restructuring terms or outcomes for problematic credits. However, this potentially elevated credit risk is balanced by CION's long-standing partnership approach it has held with other lenders in resolving underperforming investments. Additionally, the investment portfolio is predominantly comprised of senior secured first lien investments and is well diversified across 91 companies in 23 different industries, which limits portfolio concentrations. As of Q3 2025, the investment portfolio was comprised of 80% first lien investments, including the first lien loan to the JV (2.6% of total first lien investments), 19.4% equity, including equity to the JV (5.4% of total equity investments), 0.4% unsecured debt investments and 0.2% collateralized securities and structured products. Credit performance has also historically been solid. However, non-accruals did increase to 4.1% of the investment portfolio at cost at Q3 2025 from 3.4% in Q3 2024. Additionally, over 99% of the portfolio companies are sponsored backed, reducing credit risk.
Funding & Liquidity Building Block (BB) Assessment: Moderate
CION's funding profile has improved with the recent unsecured issuances and is now fairly diverse with good amounts of unsecured funding. Of the total $1.1 billion debt outstanding at Q3 2025, unsecured debt comprised approximately 63% of the Company's total debt. We view the sizeable unsecured debt mix positively as it unencumbers the balance sheet, increasing the Company's financial flexibility. Debt maturities are well-laddered through 2029 and the nearest maturities are the $125 million of unsecured notes maturing in February 2026 and the $115 million of unsecured notes maturing in August 2026, however both notes are in the process of being refinanced. Liquidity is sufficient, considering the relatively low unfunded commitments of $48.7 million as of September 30, 2025, compared with available capacity on the credit facilities of $100.0 million and $106.3 million of cash and short-term treasuries.
Capitalization Building Block (BB) Assessment: Moderate
Capitalization has weakened, with a gross leverage ratio (debt-to-equity) of 1.41x (net leverage ratio of 1.28x) at Q3 2025. However, the Company's net leverage ratio is still in line within the Company's net leverage target of 1.25x to 1.30x and gross leverage is within the regulatory limit of 2.0x. At current levels, the Company still has a sufficient cushion to the regulatory limit of 2.0x to absorb potential losses from non-accrual positions. At Q3 2025, Morningstar DBRS estimates that CION would need to incur losses of $226.3 million, or approximately 13.0% of its investment portfolio at fair value, to breach the buffer to the ACR. As a regulated investment company (RIC), the Company is required to distribute 90% of its ordinary income as dividends for tax purposes, and this structural inability to retain organic capital to support balance sheet growth is a rating constraint for the BDC industry.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196
Notes:
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is the Global Methodology for Rating Non-Bank Financial Institutions (September 05, 2025) https://dbrs.morningstar.com/research/462007. In addition Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196 in its consideration of ESG factors.
The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.
The primary sources of information used for these credit ratings include Morningstar, Inc. and Company Documents.
Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings was of satisfactory quality.
The credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.
For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS's trends and credit ratings are under regular surveillance.
For more information on this credit or on this industry, visit dbrs.morningstar.com.
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