First Eagle Alternative Capital BDC (FCRX) 5 Nov 212021 Q3 Earnings call transcript

Good morning and welcome to the First Eagle Alternative Capital BDC Inc. Earnings Conference Call for Third Fiscal Quarter ended September 30, 2021. It is my pleasure to turn the call over to Sabrina Rusnak-Carlson, our First Eagle Alternative Capital BDC Inc. Ms. Rusnak-Carlson you may begin.

operator. you, Thank thank and joining us. Good you morning for

Chris me Jen First of today’s Wilson, are on call Flynn, Eagle Treasurer. Chief Officer President Accounting Joining our and Alternative Credit; and

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

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

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

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

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

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

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

X.XX We at from to the increase QX of up times QX. continue X.X to leveraging end up

long have times. We communicated move term our X.X previously closer our target plan of to to leverage

target to X.X diversify pipeline continue quarter. As to environment portfolio ability in our X.X. portfolio of ratio from times leverage target we the the increasing on by ratio the of to X.X our Based we have believe we continue end today, leverage the our deal to the we are stabilized hit lending and

flat at was essentially book quarter this per share. During value $X.XX

change saw quarter During per appreciation equity appreciation or the and of share, this unrealized a per unrealized $XXX,XXX, decrease the primary QX of stock the share we closed of have Subsequent from last market we quarter end to of approximately share end, public the the as the night. improve tax position of was to quarter this the to XX% share, net $X.XX contributor the price and $X.XX through XX% of price a change with end approximately declined QX. or and seen

Wheels the net and typing broader benefit the attributed $X.XX the decreases unrealized change were spreads in value contribute offset unrealized [Aerotech] across primarily portfolio share appreciation portfolio and $X.XX share depreciation per to by continued change a will Up. quarter. taxes appreciation per on the unrealized Additionally, for companies, this during performance of America $X.XX due of a to of The

performing Companies continue no to to many to There portfolio we there not continued of Consistent continued the maintain progress to on the QX. quarter. rebounded with to QX made expectations. distributed perform portfolio Loadmaster COVID-XX to returned the or loans businesses commercialize optimistic are of and market impacted and and a and for and in in in have during fully to good we that profiles. COVID we EBITDA company about non-accruals the levels well Therm have Plasma with impact yet any into improve As the OEM portfolio, add the consummated pre-COVID most the only continues portfolio existing amid nonaccrual. in portfolio levels. delve pandemic, the instances amendments we the be revenue liquidity At liquidity QX been continue is not to technology exceeded Overall did deals deeper have believe we transaction great the in repositioning. significant line new

X.X% principal the remaining represented deferred be of contingent certain used in was to the payments annual and As the service years. XX are These for all milestones, of our the concentrated will including businesses. form repaid four operating several was consideration minimum position end Igloo costs. at other the with largest debt for BDC at reminder, holding a these October. certain upon The the equity years payments and portfolio cover of payments that in September retained our was

equity year Our ASH and position one plus all to earn out. accrued a

our remaining in positions of With is the in Igloo repayment held XXXX. last the concentrated the of OEM portfolio credit early the XX

investments with and pleased proceed our to progress with us to plan this equity these a confidence increase gives are legacy We in on leverage.

in entire over eight deployment active new investment program quarter direct FCRD. in of FCRD of $XXX XX the which investments very investments of also part additional power million level overall Eagle are direct portfolio on XX the platform being pace the companies allocated quarter. market, the an lending across the the are $X.X million We of during totaling lending made First not making of were add the million, to platform. deal also This but activity speaks only new

repayments During the two with that at penalties. for included were quarter par prepayment debt

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

of about environment we be to our macro capital are the continue our selective and investment in mindful committee We decisions. where very deploy

Jen. diversify grow that, over With is goal to to our Our investment XXXX continue I’ll and as in beyond. the BDC call to continues to a approach turn

morning And everyone. good

and start investment First with portfolio highlights. some off we’ll

had investments As eight we totaling active with million blended of several an at and Chris quarter new X.X%. mentioned, follow yield XX on a

the cash premiums. notable realizations and health proceeds repayments lien USA, of prepayment our four generating women’s Additionally, XX.X first Systems, including ABC PDFTron million Intermediate positions Finxera we had and of legal through services

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

didn’t This XX% on prior our and X.X% costs as in The X% holding of second portfolio like other in an equity a value, The investments income As average respectively. and invested the on OEM. lien, any We in QX. is held second investment lien equity and reminder, the remaining X.X% of during Logan X% was in in Total non-accruals and percentage was portfolio including producing non producing based first debt sub-debt was and the cost a our BDC at for weighted with fair assets. including line yield lien quarter. restructured JV and QX. additional place nonaccrual income portfolio it Logan on

address we’d Now, the financials like the for third to quarter.

is at for net increased ended QX we the to QX. the to quarter Interest recognize X from related QX income prepayment one portfolio. million and an in QX. respect increased approximately the related in as relatively such The With to had investment of from million by and small interest debt slightly over JV line, as quarter was down improvement amortization add other to a perspective, to QX company amendment primarily XXX,XXX income a During QX to related investment the quarter from continue time from in for XXX,XXX XXX,XXX gain fees X.X of million we were XXX,XXX leverage income million arranger we expenses new Total equity other interest was Dividend realized increase million net X.X primarily times. X.X items increase in with flat ratio Logan X.X driven below income coupon an a of accelerated the From and X.XX to $XXX,XXX. approximately income of dividends. fees. for to OID. premium the Included names

of target With turn to credit Chris. back our have year We over and continue towards the capacity on call times ample increase that, grow leverage our facility borrowing end. by I’ll the to to X.X

this Thanks, Jen. is FCRD. Overall, quarter another stable for

improvements quality credit, steady and deliver to our most to to continue enhance results leverage, positive companies. utilize recorded portfolio in We ability

increase made in are meet also our we operator dividend now Q&A. with confident strong to call derisking in activity legacy to exceed portfolio additional profile or in like current for We leverage over level. I to several it’s to our remains and to respect would the but our progress positions. Origination the ability a remaining turn prudently the position

question First from Raymond James. of Matt the Jaden Instructions] line comes [Operator from

taking morning questions. Good and appreciate my you

the on maybe me for one First capital structure.

XXXX now are notes. a issuance unsecured higher high that maybe level can like on the color revisiting than the looks redeemable and give Any plans So kind cost the notes you at for that of XXXX market?

were refinance sheet the the is Obviously, this this year. obtained balance it. early improved Matt the portion appreciate We Thanks we to grade as able Chris. of the investment Yes. bonds rating, we’ve

rate We look on continue current strong. the based market market the at remains to our

and So finish the out. we’ll obviously as XX-Q get up into our we consideration quarter that take

Got me on it. for OEM. Maybe one take

of sounds to it be somewhat going it’s a So process. like

complete that legacy when could process roll of beyond or of years a terms kind fully OEM the just XXXX to books In we rotation. the off maybe see

had now. I’d and end the Yes. at a on performance some discussions question, like the but to do to right wish see great now. year better extent I there’s that I bit right a it’s a to longer stand answer the But investment see structured, if dated we too that’s cash in we as sooner convert for to the early and that where a would have based That’s Probably not a tell but can, you. position to Matt. early will a the way we of we to we’re

just the XX of one was just function in Got me a more for noise Any deployment one of kind so like repayment looks yields. housekeeping down and matter it. a Logan within not were quarter-over-quarter. JV yields Last bips

of more I of it’s market where just now. a function right the think is

the a aggressive. the out. COVID was pre-COVID, market step for bit gapped pretty hit When market back You first

tighter slightly other are As at areas. I in probably today, say levels we’re back pre-COVID

the So it’s of market. the just a function competitiveness overall of

me. Got appreciate That’s time. it it. I for the

appreciate you. we Matt Thank it.

Our from next question comes Johnson from KBW. the Paul of line

that on to Is remaining point Good you’re the at Thanks my questions. stills just still as guys currently? that morning, where or you a inside looking guys. JV. are Hey, kind the that of for I’m wondering, stabilized, it’s at has I few think taking just there’s some of something JV, this commitments grow maintain

it’s we Look, return shareholder. think attractive an for the

as relates manager buckets. the our asked it also XX% to We

the portfolio capacity. created some started As again, grow, to it’s incremental

to to makes BDC So Logan finance more to Logan also to but I on ways only efficient a the extent sheet you trying we’re equity the out contributed I balance incremental also see the say balance sheet, sense. could higher to capital ROE. some think not drive return the figure

consistent growth we do we’re should on bonds, with be to BDC, we’ve only based could Logan. we’re not that but potentially what hear ROE we stable only a now what again, able lower done higher we’ve for a consistent cost the on, theme focused to So but balance also also, of not is financing, going that a sheet, drive with got the

it. then the on Igloo repayment. And Got

me exit in didn’t catch but I there with ideas in if associated remarks, fees quarter. Forgive repayment any or your this were fourth

dated protection. were There beyond the investment. We well call It were long was not. a

portfolio. a business And that investment guessing you to of are the probably allowed probably out it. get was Got that refinance, I’m

[Operator would conference hand Chris to back Flynn. the At this to Instructions] time, like I

February Thank early then. appreciate to We you or free of support you, full before out and and questions with to if have look Jen forward you to in our late me year our any an results. operator. reach the March shareholders providing update Feel

conference today’s for participating. Thank concludes This calls. you

disconnect. may now You