First Eagle Alternative Capital BDC (FCRX) 6 Aug 212021 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the First Eagle Alternative Capital BDC Inc. Q2 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. now today hand Sabrina would to conference I speaker your Rusnak-Carlson. Instructions] like the to over [Operator Thank you. Please go ahead.

President call Thank you, us. Chris Credit; today's joining Wilson, and our you thank Eagle Chief Flynn, and are Accounting Jen operator. Good With morning, me and of Alternative First Treasurer. Officer for on

assumptions statements. please in Act the the forward-looking various factors XX-K and statements annual begin, and and other most the factors meaning First and of on our Securities and periodic within statements such by actual known section report statements as by and The of in uncertainties on Such some XX-Q this our our unknown could and Form Exchange quarterly beyond we future subject are include and results Capital Risk anticipated Before filings Securities are Alternative to made note that the factors control with included entitled the XXXX amended. recent Commission. uncertainties to not other performance constitute on BDC call that management's the other materially results in Eagle may guarantees reflect concerning ways Form updated of that differ Factors are as report from cause

based Although based inaccurate. be And we any on those which those believe are also could that the assumptions incorrect. prove to as statements the forward-looking are forward-looking of statements on assumptions could on result, assumptions reasonable, be any a

reliance not place undue You these on statements. forward-looking should

statements speak date of forward-looking no to any forward-looking made Capital of statements herein. the undertakes Alternative All as BDC duty Eagle this call. First only update

the replay presentation of QX I'll be this released at conclude be XX, Chris. were XX-Q website on please With we during our that, A refer can and which to earnings call may morning. two along available we webcast website visit until XXXX www.feacbdc.com. the this call. found with after this will access over announcement August yesterday afternoon, turn to approximately of our earnings hours starting copies To the replay that call Our

and on in Sabrina. financial our will provide us joining portfolio morning, results some portfolio discuss highlights an and detail. earnings Good On Thanks, call, our thank Jen results in call. for I'll overview and of the second today's you quarter our more and

with begin income compared Net for share was the with per and results Let's a $X.XX dividend $X.XX our of the share investment quarter. $X.XX per in for QX. NII quarter

of and NII to the portfolio as QX $X.XX impact portfolio in our In the of complete reminder, the to portfolio, in As management share in our stabilization to now into QX. exiting is effect contributed leverage positions. the of per complete. the was non-core a improvement reposition of XXXX and which fee by continue end ended derisking to remaining provided from increased the of concentrated the we times reposition X.X waiver by at went we up and times waiver shareholders adviser This light substantially the The X.XX reduce QX.

today, X.X lending turns. we communicated closer on we per share At deal ratio the previously ability $X.XX long-term year. the quarter. Based move and to an end have remain hit plan the target earnings the are assuming our all of target that We level, our we to conditions by our our the the of increase same, next to leverage targeting to environment to pipeline leverage have believe

to the increase. per this share by quarter QX at book to X% book key the end end $X.XX from We share During value highlight approximately think value this $X.XX the important QX. of the at is per to of increased contributors

We were positive loan in portfolio. $XXX than syndicated remain impact venture. very $X.XX Non-accruals in value This this with had our Logan's Logan joint the improvement the lifted share a overall names quarter. million XX credit QX. of in quality the less the across of broadly pleased in continued per X% as the First market on the holdings NAV Logan

in experienced an holds equity Wheels $X.XX together the Up The a of as parts well. value continued Jane other in improvements which increases the IPO Second, share. contributed position of performance Matilda portfolio BDC and at

improvement performance the $X.XX Lastly, the in rest a the equal to overall the with I resulted the appreciation tightening per together mentioned earlier, spread of for in market portfolio in portfolio further share. net

our perform COVID-impacted portfolio expectations. or portfolio of and market in existing and to Now were continue yet proceeding not businesses quarter. in OEM Revenue that delve we not to the QX amid amendments the portfolio. profiles. two returned the liquidity significant with company concentrated impact Therm for into levels continue non-accruals let's required for the OEM, the Loadmaster to to continue At No most rebounded technology in portfolio loan well levels. continuing the companies the Companies to any is in in deeper many new with Igloo the pandemic. Consistent and the EBITDA both line Overall, have transaction into liquidity pre-COVID commercialize Plasma consummated continue of maintain on non-accrual. instances the positions QX, improve exceeded perform portfolio QX. fully distribute that well. remaining did we add have to only and good is the and

form positions as be Igloo to June the XXth. investment X% position represents marked that a is in at last including certain the with was of transitional short-term the first BDC the portfolio spread of positions the transaction. As operating by our debt upsized These are connection we a that debt and we is equity the company all and payments will impact $XXX,XXX cover used position several the of well, and in was principal XXXX. continued two payments in sale retained in concentrated In holding portfolio provide business. four quarter capital costs. the years have in to the the continues this remaining early our strong perform annual The tightening. service These equity represent we par planned, first reflecting and The as reminder, held minimal loan QX, position the largest over payments for years. XX certain deferred in the consideration written to upon up performance contingent the milestones of

during $XXX on in across legacy our are with this investments. leverage. million, We par, the exiting were of an quarter. additional gives making lending two And during debt We with which new premium quarter plan Separately, progress quarter. the increase platform FCRD. was companies follow-on to a XX made these prepayment our active investment to in million of pleased us allocated million portfolio with $XX this there investments new were comfort at very proceeding direct plus totaling prepayments investments FCRD $X the

number First in to it Since direct of QX quarter. BDC platform benefit BDC more continues hold by opportunities. the from has Our pipeline Eagle's the lending allows the robust us XX of with of First positions flow remained $X to and direct billion growth generated lending platform and from up, deal investment attractive a XX remains continue to pandemic, diversified with overall the direct The the to expect the beginning provide lending of XXXX Eagle's the to strong, portfolio this we platform.

We and mindful we macroeconomic our continue the our capital. be are on of we committee And environment of investment to where very decisions. all deploy selective and

turn portfolio diversify With grow the to Jen. call I'll investment into XXXX we to approach, continue to is our beyond. and that, goal BDC's over the Our as

Great. and some with everyone. good I'll Thank start highlights. you, portfolio morning investment Chris off and

of yield prepayment proceeds X.X%. Chris Intermediate $XX As XX Whitney first in our quarter cash premium. of million new a including realizations at an repayment active and Technology follow-on And million investments, Brown mentioned, blended Inc., had $XX.X we notable also totaling Bradley had with & two positions and generating Communication the lien several of through we

senior June in of up million, JV. Logan secured of XX% at was $XXX in It invested portfolio million first XXth, our As debt, QX. XX% and $XXX was from the the at end valued lien

As QX. The the average OEM. on second sub held remaining including in BDC's the holdings, investment lien, invested prior equity-like based Logan X.X%, is and the with in XX% yield costs of is equity line restructured assets. debt weighted and other on the non-income portfolio Logan This X% a was income-producing and second our lien and portfolio quarter. first in in debt quick was in The including reminder, lien producing JV

As investments during mentioned, additional and non-accrual fair at X.X% portfolio cost QX. our we of percentage didn't and on place value were any a Total Chris respectively. non-accruals at as X.X%,

the for Now to the I'd financials second like address quarter.

million. the approximately to realized $XXX,XXX income with we of With May were by a and increased, of closed Total for net the for are a our respect pay lowering were in names priced capital. The continue remainder interest bonds refinancing During the used as fees $X.X $X.X income, Proceeds quarter, with notes. down well XXXX costs. we notes. $XXX,XXX, QX. related million the increased XXXX. loss connection facility the unsecured from issuance on to par respect from on Interest our resulted $X.X $X X.X of the other up in of adjustment ratio extinguishment bonds, With and with million. redemption not offering, we paid a increase included million credit public The from the we to XXXX the million our which facility. approximately and payment at recognized our quarter the interest financing our $X.X value to second at of revolving and credit expenses X.XX% for in $X.X bonds the redeem from debt bonds ample reflects perspective approximately the the on in totaling of we overall From to to XXXX repayments incremental bonds debt management $X.X were added $XXX,XXX. was of new $XXX,XXX to QX quarter in dividends. from JV flat to due primarily which as prior were unamortized grow the three Coupon of equal target our primarily our new million to and difference QX facility to premiums million credit QX approximately investment debt income fee deferred and increase QX the due ended in Logan are in capacity mature cost the line, OID. was to borrowing the at escrows the callable call $XX for the is the of the QX certain we to and income benefited This redeem prepayment some $XXX,XXX years. related towards our of losses of $XXX,XXX to debt, leverage partially to million to X.X callable the amount Included portfolio We debt-to-equity back-end related Dividend leverage investment net and to with refinance between the also as of below $X.X items million quarter-over-quarter The times. on accelerated of pleased impact amortization to X% to from protection. relatively carrying times the related extinguishment

With of of as debt, March were to XXXX the refinancing we points basis June our able to weighted X.XX% reduce of the by XX. XX as cost of from XX X.XX% average bonds,

continue our reduce to XXXX to will back evaluate callable. bonds become Chris. of turn to as opportunities further especially capital cost over I We our the that call With

Thanks Jen. NAV results delivered We another portfolio positive in operating quality. FCRD. and steady solid quarter is Overall companies. We at again this most improvements recorded for credit

in increase the our put additional prudently remains made our respect legacy also in position We or activity in positions. to strong confident Origination with exceed level. profile meet several de-risking to us a remaining to leverage we and dividend ability our to portfolio are progress

I over the now questions. any we'll to operator back call think turn the for

from Omega first Your Family Instructions] question Office. [Operator the with line Lee Cooperman comes of

and I secure you -- questions of everybody's Hope answered is $X.XX. feel healthy. safe comfortable the morning. you've at dividend guess Good which that one I just my is

Correct.

X.X% is secure? at comfortable you how is the I trying XX% at a feel repurchasing real stock mean, beat I'm to out figure I NAV and assume that discount Okay. to NAV? deploying $X.XX capital of

do. We

Yes.

Okay.

stock your making best rather new loans? buy back alternative be So wouldn't to than

place. the in increase It's the act obviously. the to ultimate us it. stability to we BDC Yes trying size a have I'm the Lee. in And do But for maintain goal again portfolio. of here not is decrease program a balancing some

I why correct. that's created mathematically But that program that. can think and and it's stock you're option those. that we'll $XX as in the that of layered weigh we buy a we It's doing we again, million by consider

currently have you right? Yes. But it not have you're You - not used to...

quarter. it That's We didn't use correct. last

Right.

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ways. You can two going size gain

You grow internally we a basically lower capital can or to could with more BDC. towards merge What's of successful attitude try cost your larger that?

Lee. listen So

the weren't clean able pursuing manager First attractive access types we was our sheet strategically proactive us to we The put to can larger Eagle a sheet, of where balance of a we be partner. to and gain those One were is opportunities. reasons a of that joining balance in fact to we until up up asset why more ended position in a bigger

balance to and make value have having higher what to discussions portfolio try the the types Now can to clean, have on we'll ROE the cost we and those manage continue we continue will If sense find do extent the back focus a effect now again we like to to on sense. and the dividend. to debt investments. of is come is and And which right that feel which good sheet lowering they growth in to relative the our to don't control of support they side start continue make ability capital

all at and could us. small. growth is for that of of just a something It's them. trying we've find of all too not take lot ever the again a we're recognize front looking And disagreed So We considering been in BDC options of that with. they right different to we're avenues options. That's matter

a to I would to occur. was that obvious but share us complex, obvious and you shrinking get is me it's at NAV better as the if well. a transaction it's cap discount price to know in ever think a I the would big end sure I'm But to

too a We're large Lee. shareholder

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Perfect. Appreciate Thanks call. Lee. the

Your Raymond Robert James. the line with Instructions] comes from question of Dodd next [Operator

Hi guys.

some Sorry the there's morning. one I missed prepared this in remarks because

So you've obvious up of refinanced some steps? I give we still balance I I I at on mean point. debt started could you debt that. the -- cost you on likely Do cost that be? the fixing think you what Can where term you capital -- color any mentioned of long think that potential the pricing go? obviously But there's would target if any the are focusing that's the think now. us you and like would sheet do and Because obviously term capital done. mean debt some have the plans on stack? there the debt just not did you future refinancings, you could next imminent I What debt lower And color particularly longer be expensive a on structure -- what refinancing. the the or the do have that mean know the debt pricing for mean But you of for better reasons. obviously what

substantially win. Thanks, Appreciate at was Robert. called beginning the lowered investment grade big of bonds debt. question. Yes. getting and action cost the Obviously, year took the immediately and of the the We a status our

we've today based going types out very, got think in position very the rates continue set current market not BDCs predict As be another to what you to me see that future of those strong. right in are for October, can our to on conditions to market filings, bond Probably the October. be callable financings and for are but bonds of I

I execute So my levels. as be would here expectation today to or sit at very similar

Logan. you're you the and debt we cost the and also that -- the debt made the finance unsecured comment how regarding it's we just bonds. BDC of Another just is facility It's how not right finance

we diversified XX. you to you up we've missed I secured the remarks, prepared I guess, XX in As you names portfolio, grow senior continue low to from if gone said those but remember more think

be want structure, your drive inside costs will create and dividend that down upside Logan that have as first the this point a we some the we Our would highly we feel then the significant BDC That's you on ROE get how target finance which that to will those low to coverage. hopefully and where a diversified portfolio situation we inside both lien XXs. to continued bring optionality higher a into have to

Got it. There couple… Yes. you. Thank are

We the was equation couldn't side the asset equation until debt fix the stable. of the side of

going significantly that forward. we and reduce debt come Now back the stable, that's can

se. -- I for rating is there questions buyback rating with and apply agencies buying you mean BDCs investment-grade basically agencies mean as the aren't the any refinancing? the the any conceptually dynamic and are Understood. well is rating, -- stock? mean pressure back one rating aren't there of least buybacks. at stock blocked generally But from I Was don't the per obvious questions of between fans plans generally I the on

is I'll balancing a as Block word. the just right it describe not act.

look will our investment-grade extremely our opinion priority. for an was get at getting us that rating the shareholder in the our and QX and of and was we As reducing debt you for if valuable, cost

just you we to the take of same in we've investment of you're bonds we've of stock hopefully and goal account. right It's that a to able of capital, maintaining at cost refinanced we'll debt. portion significant into and balance do our Now trying lower one October. to received that not that -- have our the be grade buying cost are reducing back item a But the

into items if account these will. multiple calculations take as back you do You've you and got to sit

Thank it. Got you.

Thanks, Robert.

over speakers at now for further remarks. to back questions the I any there the turn this time. no closing And call will are

We shareholders support operator. reach with to the we you, Thank on of out forward me third November results. to free quarter Feel look providing in you if have update you. you Thank then. questions early to appreciate before and any Jen an our our or

now call. you your today's This and may for disconnect. concludes you Thank conference participation