Golub Capital BDC (GBDC) 9 Feb 232023 Q1 Earnings call transcript

Hello everyone and welcome to GBDC's December 31st 2022 Quarterly Earnings Call.

Before we begin, I'd like to take a moment to remind our listeners that remarks made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Statements other than statements of historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in GBDC's SEC filings.

For materials we intend to refer to on today's earnings call, please visit the Investor Resources tab on the homepage of our website, which is www.golubcapitalbdc.com and click on the Events Presentations link.

also our is Investor in release section. Resources earnings available website on the Our

this being call reminder a As is recorded.

of With that, David Officer to call the GBDC. I'm pleased Golub, to Chief turn over Executive

Chief us and everybody, joined Ericson, Benton, Greg Officer; thanks Chief joining Cashman, Golub Financial Hello Lending today. who Group. Matt Officer; Heads for by I'm Chris Operating and our our Capital's Direct

on strategy providing are backed is you equity lien companies For who new been, to to our middle-market has those sponsors. loans focus since and by secured investment first inception, senior private resilient to it of GBDC, strong healthy, partnership-oriented are that

we we referring presentation during Yesterday, quarter and posted the an for the call earnings to this today. our press our be issued presentation release We'll XXXX ended December XX, on earnings website.

As an going quarter, calls headlines that follow new agenda off new has overview. we're and and a with for me leading these agenda with with last to

with headlines. saw quarter me strong Let We and for net consistent and growth quarter. it generally the solid in was trends. investment the our last credit was income start with discussion stable GBDC's performance

of What high our has I've period outlook. for uncertainty. last changed that a in macro the we're said is unusually

why think to by this, easing how now we're I uncertainty think on mean Golub I I'm later growth we think and Capital what muddling good muddling that for is going we're stay period growth. to in, we're and of and can a I BDC. likely in, to it, be elaborate responding

questions. remarks detail. And and come financial going go the in for and make and statements the back are Chris quarter I'll Matt take to that, some closing After finally, through

quarterly to presentation to I intend we equity few the we want next also file in, mention weeks. Before investor that over jump our

on it presentation additional that and hope information on find for You'll this GBDC quarter, plan a each updating We mentioned that we you'll Golub useful us quarter. source a on I new is Capital. recall last of

in of performance primarily equity XXXX. NII equates for by driven September $X.XX summary share increased with per adjusted of base was to by start spreads. let's quarter on XX% in to per rates rising NII The share increase share and XX%. Adjusted XXth, the a return Okay, the quarter. ended per by NII adjusted higher $X.XX an This from

you'll coverage record and the last GBDC's think quarter the share adjusted rates come to we raise I'll dividend dividend call Now, earnings quarter's decision in higher recall XX/XX/XXXX, last earnings by NII led for closing forward its we in going We remarks. XXX%, that power the quarter $X.XX GBDC's higher think from share. ended my GBDC's increase increase we're GBDC's This materially how to validate have quarterly per our believe XX% earnings decision increased thinking dividend. power. to about to base per dividend spreads ratio those and back of to the

GBDC's Credit were in Realized portfolio remained credit trends generally low. losses stable.

seen we've losses. incremental In some than pattern gains fact, net since in the losses. of co-investments did per more had capital the inception. incremental spread for $X.XX unrealized see as drove quarter GBDC's that We realized is consistently This GBDC gain on widening quarter some offset realized share and a equity a

and healthy two and big companies three. growing, are that rating But I'll encouraging, generally categories more picture performance deterioration uptick uptick in in expected, in small and few and show one, a borrowers had detail is on number in also borrowers and small our is As minutes. you in give small of quite we the of this in percentage a some performance reflected remains this performance credit a portfolio non-accruals credit a the

performance Overall, our quite view GBDC's fiscal solid. in is that was QX

moments logic few that outlook. shift to Ericson the Benton seem future Before a financial for the unpack Chris we focus walk quarter results, want through a the fully talk just I It that to implications last the before a bit odd our and this investors our The call on. about ended, and we're about our change and outlook but changed may earnings issues you Matt has for should there's talk focused approach. and focused key we that for has reason on be that since think our is

behavior our unusually of uncertainty. the about economy key vectors last of themes and I that powerful of there a were and other volatile in unusual we we're talked rates, that directions said plausible range One meant the where that an difficult consumer predict – we vectors were going. an inflation, to the different period. Ukraine rising war. there thought about we commodity belief different changing very period high talked number the year in were wide how impacting that moving it unusually of was prices, energy were post-pandemic, was We interest coming for scenarios these And I was

of months the inflation already a has likely narrowed a Occupancy today this costs, still energy But a than muddling period for to and declining. few that their growth range compared in All changed low deep muddling think prices, and pretty bit slimmer has stayed has be And period. uncertainty. considerably. three There's recent the odds of our likely fair that recession strikingly, all behavior period less interest many a look much peaks. the generally of view in consumer unemployment means of sustained shows to that we’ll growth, of near have ago. in a I increased scenarios six feared. the of has rate odds far are show In The data and plausible decelerated last commodity they're months months rates

we our does First, going spike gives doing? of our how GBDC see to outlook are already in or GBDC? or GBDC's investors we this see conviction higher XXXX some see what about writedowns And has answers we losses view reversals three more net-net, The in are of ask imply us will a portfolio changed taken? that it credit Second, writedowns, questions: XXXX? to So going In three questions the to is critical us. third, for frequently

I'm three to Cashman first the the then to on questions. going I answer I'll of third to and Greg the each is team going want with question. Matt tag second Benton drill these take down one.

these was and inflation So a the prior profit well. The portfolio from Golub is Capital true QX, Both positive QX sectors ably the strong a surprise. industrials QX is reflect across doing? revenue for borrowers Median portfolio prior consumer, few are strong how numbers the technology. two Middle growth different the doing adapting margin. exceeded question, first We results which and growth showed Report healthcare, the four quarters. was The calendar quarters the growth published all think sharply calendar consistent we when profit QX, that growth the with to a a headwinds and that weeks our we started lot and exceeded spring. lower. track: accelerated this from by our stayed This calendar and in significant Median revenue calendar levels ago, growth was in Market profit median expectations

I'm then think describe the way to think Second Cashman in in Greg question: spike two to a question. will parts. I I a I'm to to this through walk we answer to question. want see answer bad credit what take And I the what a to is question going going better is ask losses? way

It'd some could the question bad the to understand in involves be with shortcut. to question way fact easy prepare quantitative to great if we answer set metrics. a The some people quick of try. And answer or

days many these them that look I to interest peers, are showing average don't our charts but mean of of pick coverage ratios. on some at

different using Sometimes rates interest show coverage or kind about also they they what instructive. to ratios sound underlying EBITDA. assumptions of company these declining happens chart, This rising

not. I think Let through me walk you why they're

EBITDA expense. First, interest interest divided coverage by is

change what's talking EBITDA, Are and now, the measure? EBITDA, a or to are go-forward flawed. credit period about in None measures But or free EBITDA? go-forward of some flow. really want cash straightforward. we generate uncertainty like capacity Sounds EBITDA, all one really Particularly or adjusted in what other GAAP agreement we which is to address power and we're measure, earnings these rapid

the What's address really base Are curve? interest measure, you the hedges expense is to problematic. Again, your of go-forward this net the factoring in we also place? that approach is period? want in may in over expense, factoring interest caps which borrower you doesn't denominator, Are next years. or what hedges The forward have several

assumes what competition. likely all equal how And Assuming worsening problem assumes It or need ceteris greater those else Another But to do equal. pressures What those worry all to paribus. or rising We equal. pressures borrower know want else kinds rarely begs of else is all we wage this want really is whether to is surprises? know conditions raw surprises questions. are like is critical all about? analysis we the facing material

change. they couldn't told COVID-XX. fourth The analysis. good this ones with vividly We wouldn't. saw good problem during this lockdowns teams have owners which is fourth manage to and analysis business sensitivity management which a There’s well would and problem companies that adapt you A

on problem. And borrower. never finally average what weakest, I the borrower, money money correct, on call Good tail. all their the lose of impact went statisticians analysis it get about lose average tells you you if on this just Even measurements through your biggest they the the their lenders

and Golub whole. ratio Capital's I average lending portfolio had GBDC's times Golub I But at don't direct of whole can as coverage direct you lending a approximate Capital's average right this X.X tell a think now anything. XXXX interest XX, weighted a that tells portfolio you as weighted honestly December

tested more to consistent there an used. the approach better how But produced we've XX good over approaches. premium of at are and want is approach than through I returns heart Well, about years. excelled tell think a What's I that we've approach? business And that time. multiple cycles It's over it's multiple are we've approach an the maybe you

I'll hand in approach the our Greg to detail. explain floor to

credit I last earnings I processes response There environment. to in challenging David. our one enhanced on the can substitute approach sentence. credit that we analysis. is in mentioned call Thanks for summarize monitoring our granular no quarter's

the of One can of from we offense period XXX-plus that the professionals over we of key that we when the rough a summer, scale defense. like one some investment our started benefits is to hit deploy our

as pivot potential of underwriting portfolio We Then can one. we we vulnerabilities. by deals identify resources the did to new one each vulnerable for and companies from the that scouring assess

we summer, middle Golub last market loan Capital's starting Specifically, portfolio. company-by-company entire evaluated

key Our on risk analysis factors. six focused

have may from portfolio issues for potential who base companies liquidity we First, a flow increased looked cash rates. or of

cost as contracting Second, we well meant power. look closely margins. pricing This to as susceptible looking companies operating for at drivers,

looked Third, recession resistance. at we

recessions with than Some companies accounts to falling working in growth of revenues, payable in look capital, are vulnerabilities. for companies and susceptible similar others. more We risk deterioration material

stronger or tension economic areas geopolitical we to weakness, customers or vulnerability companies as of for US and in dollar or a material such with China. Fourth, to look Europe suppliers

be not might at credits in looked realized levels of we EBITDA that Fifth, high practice. with adjustments

issues look And finally, companies. for at with in or other material businesses revenues. amounts We software our we transactional looked investments specific non-recurring high-margin, to of

From end We completed the preceded summer. phases. screen different initial three of our there, in work our around the

In Direct call I'll of this phase group Team one, Golub a Head our short. consisting Capital's working leadership of Workouts. group for Underwriting myself, leadership and our of Co-Heads working DL formed Lending

credits above. portfolio We DL the developed in further risk DL factors them of discussion. number leadership teams each and review set initial resiliency mentioned. that magnitude an to on template that submitted of deeper of risk a for based detail credits on proprietary Deal memo and prioritized six key the completed the I memo and for outlined for factors a resiliency probed prioritized dives I Leadership

completed teams wave In by a for deal considered selected which of a phase lower submitted resiliency Leadership, we two, that second but were DL credits priority. and memo portfolio

teams addition, phase model a for completed credits robust than in XXX prioritize more In to resiliency order us three. help for deal

teams deal from Leadership completed credits wave three memo a DL two. selected and based the a for phase resiliency phase In that third on submitted resiliency of models

time. each deep-dive modeled determined across priorities one exposure and to a were more portfolio in further XX three, at two and to analysis phases be two screened one, companies of total, further underwent companies with key and phase potential or a for this In portfolio XX bottoms-up not factors analysis risk

we what did. That's

learned. to-date. We learnings had let's about what talk two Now, work from our we key

of us detail. but analysis tail the the level led surprising. we portfolio encouraging conclude to in analyzed our differently, of our resiliency saw portfolio is companies First, in small. majority of not vulnerable companies that Encouraging, substantial Put in we an

companies process the focuses and very we on underwriting Our to. about lend resiliency selective we're

to Based that on a mentioned portfolio them monitoring determined that of moment ago XX our analyses, analysis. for prioritized not XX we companies did of results require I dive enhanced deep we to We did XX the at future. time. better enhanced that this identify in benefit in the could position monitoring a some determine remaining address and from put vulnerability portfolio the ourselves companies potential

were middle XX Capital's reminder, loan Golub a entire selected these portfolio. market from As companies

value GBDC's mitigate and company-specific companies XX/XX/XX. constitute held XXX-plus the of the and seven size portfolio to of of of We investment GBDC's this around portfolio investment in of these X% how For illustrates risks granularity are context, borrowers diversification. us through as fair at portfolio enables believe

take teams of increase to error borrowers. full. intensively. borrowers materially is said monitoring In but quite a identify moment we to that In and currently to general, be work are to we're explain credit in GBDC line those we concluded Having management portfolio borrowers monitoring margin more of to with we're about this, vulnerable early, borrowers us me underperforming risk sponsors our a in pay higher Let for overall performing the to how back expect them the expectations, these to think to companies at prospectively. seek and of general, we proactive these with part approach

You March COVID-XX may process and a screening portfolio hit we subset enhanced went a that monitoring. XXXX, when recall for prioritizing in similar of for the through vulnerability

honed had restaurants, relatively become dental such care exposure we believe analysis care. to significant industry explained COVID-XX, in expect eye necessarily of sub-segments subset that the the We and this on portion the didn't portfolio we impaired. Our of portfolio in as to

who subsequent similar monitoring GBDC credits to portfolio necessary hold of In review. to thought recovered generally more if detection companies we’re the quarters, recent portfolio as in intervention. time early and actively devote more at the a these early same of it fact, prudent result a was We view our and we resources

brings me not second were were there themes This common learning, our to borrowers monitoring. the for XX key that among enhanced designated

examples few with factors us a you outlook for these get of comfortable helped give me that Let borrowers. the

truly add-backs validated we First, EBITDA one-off. that were

reflected coverage LTM had growth ratios for that we financials, not that in recent forward and to drivers fully acquisitions. expect improve example, Second, saw we going been

had were Fourth, in Third, been reducing available we cash credible identified hedges base to cost And not impact realized. rates. interest yet synergies operating temporary savings of fifth, address was that liquidity fully shortfalls. and flow rate place, higher ample the

they'll point become tests when these take underwriting, whether reiterate adjustments real reflect believe in are off in sensitivity we care the analyses a we adjustments. assess don't sense To stress forward roll earlier, mitigants EBITDA EBITDA earnings we We test and made and actual especially formulaic that the power.

coming market and roll believe a off across believe middle won't some key prove driver we won't company’s In performance. the that fact, be dispersion adjustments increased period will and to and show the real, manager be we this of will

up So, to from takeaways our work sum to-date. key

granular the We will for us experience. our continue expectation in period. they will credit a generally realized performing the okay and that Nothing is plan to today, our losses closely findings than we is These the small detailed to these leads that are perform. historical of portfolio Our be believe coming to bounds generally outside borrowers analysis more subset usual. even that well-positioned companies showed that of identified monitor

process. Two accomplished. and of I've becomes hone do as and in to don't is ongoing It What described We'll declare this the look more an We analysis detail once mission well. experience scale available. final continue portfolio takes at thoughts. data part to today our

we're to realistic And XXX% not goal. That's going not right. be a

management But to risk, make detect surprises. are. teams are always discussions there is and more with to to higher them sponsors borrowers then have at goal a be which early and our Our There how of resilient. about will

to informed this We'll floor Matt. hand to environment. that, challenging continue the the portfolio you keep about With I'll throughout over

or already mentioned take taken? more Craig. write-downs we David the Will write-downs, of key earlier. see has some question we will to GBDC reversals see I'm third Thanks, going that

by start me setting Let context.

was XX-month compares last despite loan frame. aggregate the returns down performed GBDC bonds time LSTA the year high was X.X%, environment. over a index XX%, income has bumpy fixed favorably well, Trailing investment calendar ROE traditional Over The and which very were was X.X%. down index to Bloomberg yield XX.X% same down the

extent by about depressed and mark-to-market credit of and of widening to which function credit QX largely were a unrealized X.X% up NAV added QX, $X.XX a on share, were of per a calendar of basis in a losses lesser this concerns. returns QX, nine-month Our as period X/XX/XX. for or to function market-wide write-downs Net spreads

same GBDC amounting XX Importantly, gains the NAV. realized X.X% of basis net had period or over X/XX to points

think $X.XX investors losses? should the about loss about as how So an net share per think unrealized of way to it One is embedded reserve.

net This look performance rating per slide for on slide on $X.XX the of breaks categories. investments our share Let's the depreciation X the XX/XX/XXXX earnings period of presentation. nine-month internal at ending unrealized based down

performing and than represent better the You'll are that underwriting. expected four loans recall five that categories or at as expected highest

majority They for cumulative chart of the portfolio categories fall $X.XX into shows investments represented the vast on investments gold four unrealized share. that XX% five the Critically, as XX.X% incurred XX/XX/XX. and the five. our of in or since and X/XX, categories The in per four accounted box of losses of

back you at five If likely reserve embedded sizable $X.XX time. share categories are to repaid to very this based over par. that a of currently pay you'd think has we in as most us do, attributable experience, recapture will four be think to and GBDC GBDC our per loss differently, on Put expect we loans loans we believe

calling to loss need to to at The essentially asks turn on high reserve. experience GBDC's analysis and slide the X. future loss slide historical be GBDC's would we're through let's eat Second, experience to embedded looks how realized historical actual compared losses what

XX-month GBDC's shows at the depicts on portfolio our nine-month starting three of took unrealized size the right-hand X.X% per are nine-month cumulative chart. XX/XX/XXXX we net you period the GBDC's walk period This the NAV period. about The ever ending the actual loss bar XX-month share unrealized realized period totaled through of XX/XX/XXXX. worst net the means bar This NAV The experience. XX-month over of ending for that that that left-hand losses. worst-ever Let losses me X.X% for of times $X.XX of write-downs

in And from likely realized coming quarters. write-downs bear GBDC net last gains, mind, think is the prior annual We the GBDC not XX takeaway see has over of both months this average since in that to reversals recorded is inception, and losses. analysis

a to kick the With quarter to Chris more walk in for the presentation earnings for bit I'll come and and shift ask GBDC's detail. I'll that through focus back us later. off let's things results

Matt. Thanks

we $X.XX which four, slide NII share, an on quarter-over-quarter increased per per to to of represents adjusted Turning return adjusted $X.XX see by GBDC's NII share equity XX%.

earlier, structure. per in NII by GBDC's David described interest increasing As base low GBDC's cost portfolio adjusted funding the increase impact driven of the was share and primarily rates of on

In preferred included generated NII share in and forward. on accrued equity moving be will quarter addition, $X.XX investments the per dividends certain approximately during adjusted

year The gains an XXXX was over that income accrual that taxable as in approximately expect of result we was differences favorable adjusted per offset partially to by for tax time. by increase spillover income driven income to and book-to-tax of or temporary distributions calendar short-term excess excise NII share reverse of $X.XX a realized

GBDC by on per loss unrealized of factors share depreciation unrealized certain gains offset sale from of depreciation This the spread isolated a credit $X.XX widening and companies. per on primarily equity investments. $X.XX, share partially had of combination realized realized and an was portfolio adjusted net unrealized of to due

volatility was context of as EPS a $X.XX per economic view performance and the and share. solid market Adjusted the uncertainty. in We this

of a NII. take adjusted details quickly to two around provide to moment want I components Now additional

payments. the to excise incur excise made tax approximately $X.X $X.XX minimize of per Historically, First, or share. decision to tax million sought an we've we

calendar fact to income the spillover that related short-term balance exchange foreign out hedges stability felt that driven on Our this more was decision over reverse spillover of paying NAV we by a meaningful than will the that was on the calendar expect this income gains to We XXXX. of large distribution ultimately primarily of was portion taxable meaningful year beneficial a XXXX year versus a one-time special over portion reverse.

within year dividends component evaluated This moving of unrealized was will adjusted on investments investment net appreciation. reached our felt equity we component $X.XX XXXX it share which preferred consistent that is per which adjusted NII the be industry our size for a with This of recognizing practices. accrue forward. large recognized appropriate dividends income, to these calendar and portfolio previously practice a we were added NII of to continuing enough Second, in

One are are as other – structured approximately these equates collected here to income income. non-cash our would X.X% majority comment upon and or dividends of overall redemption make that the I PIK generally investment of and preferred

NAV Turning $XX.XX declined $XX.XX to slide share. to per share X.X% X you can per from that quarter-over-quarter see

Let's the components. walk through

per And the in of by offset just dividends. per As adjusted share $X.XX per came paid and of investments. loss unrealized net company $X.XX I a gain Adjusted net from the per mentioned, a on realized was share, NII of change depreciation NII $X.XX share. $X.XX share was appreciation to finally,

new remained exits XX. We slightly and slide change our investments. slide fundings our delayed and fairly growth of value turn in fair the activity primarily prior origination the exceeding to net with quarter. mix commitments, Net and investments for shown quarter-over-quarter, originations. slide funds increased the in sales investment consistent This loan The to of summarizes due term quarter of asset middle the draw

spreads increased of and on weighted at bottom assets rate prior XX over the rates a weighted XXX new by points slide, X.X% this wider from the average the of basis investments on increased new to higher investments The spreads quarter originations. X.X%. from by Looking base quarter points combination basis the average on

GBDC's shows XX overall mix. portfolio Slide

one stop As continuing to loans type you breakdown consistent investment can see with remained of represent the value. at quarter-over-quarter, the fair portfolio XX% portfolio around by

remain approximately XX highly average obligor, basis portfolio XX Slide of points. shows by diversified size that with investment an GBDC's

and positioned what loans resilient comprised lien, of XX, secured be floating industries. XXXX, defensively in of investment believe to first As we portfolio our December XX% senior was of rate

to last really GBDC’s interest rate balance highlights sensitive explored nature the of as rising we environment in XX, detail slide sheet. the asset Turning quarter,

of which basis debt, from contrast cost fees By increased by the points, with is start line, teal line, of and rising includes income investment interest XXX blue XX the only primarily increased rates. discounts. investment the our points. income dark Let’s basis our amortization yield yield, GBDC's which

Our fixed the cost by rate have factors, coupon billion prior basis XX benefits of Combining net our of that meaningfully X.X%. spread, notes these and the points gold debt unsecured are investment average weighted $X.X our of quarter. increased from line, weighted average a two over

discuss for rates. I'll GBDC positioned Matt? higher now is to it Matt turn how back over to

slide Thanks, The NII key XX, positive tailwinds the continue base Chris. earnings that adjusted we've quantified from to is On of benefit GBDC's potential impact higher on period. share two power. key per stands to takeaway NII rates GBDC's in the coming

lag The portfolio about market base first sees another the the there's rates that full you. in Said chart cases. the this tailwind those our change and is a base loans in per on demystify rates when a rates, once between higher happens in to after reset quarter base when of help those base our is rates increase. for attempt way, The benefit dynamic slide quarter actually this GBDC higher which

for GBDC actually investments see SOFR than rate As or was the average chart, on the the market less quarter ended earned the at its quarter. of can LIBOR you the meaningfully rates end on XX/XX

The is rates levels that second the tailwind forward recent based and Fed the XX/XX the will embedded from curve. further on increase base expectations in decisions

we in bit floating-rate points. basis per had approximately this rate all for quarter is the if the the adjusted been The increased GBDC's today's all looks end. level NII the else a adjusted analysis. rate XXX have XX/XX average actual of was been a on at right $X.XX the scenario, average this basis share XXX GBDC's ended note would assets XX/XX. three-month for bar the per to NII LIBOR of estimate its in quarter points, what rate per share LIBOR of LIBOR Please leftmost at shows $X.XX On In XX% The share. NII we above would bar that have equal, based adjusted liabilities and assumed quarter quarter,

results. line GBDC's to momentum through flowed has think already that yet just that per higher occurred not share GBDC's NII of a bottom from is have built-in The we base but rates lot

NII for existing from on are of We In example, aren't or assuming investments our activity wider amendment likely further view payoffs. spreads drivers increased those upside.

on details the like You'll GBDC's further. down see additional in drill XX-Q you'd to Form if sensitivity asset

look to increased on XX credit because Let's closer two can of quality addition one XX, Slide compared was to offset you the move Slide disposition investments of X investment number of non-accrual the a take at as XX X/XX. by of from metrics. X non-accrual investments. This and the new XX/XX see On to non-accrual and is

of non-accrual Additionally, at the to increased portfolio of our on investments the fair percentage measured X/XX/XX value X.X%. modestly total X.X% from quarter from

rating only underwriting. performing are which or as expected have XX, earlier, XX% have at Over strong investments been or higher, four than rating and Slide as consistent better two and expected are mentioned of internal On internal performance with levels. stable which they performance and an on of means internal pre-COVID-XX ratings expectations investments David underwriting performance have of an or of X.X% below lower, means they performing materially

We're structure. ended cover We million GBDC's going detail We dry slide of our back to on the on $XXX embedded past unrestricted slides want skip is its funding unsecured other revolver from key over-collateralized Slide metrics. meaningfully before have it believe value corporate financial XX. powder almost quarter These and XX. the and I by cash, unused with GBDC has through commitments our in meaningful Advisor. more statements, revolver XX undrawn to provided The history Slide handing David to last dividend

have ratio in Our not and the majority of of which fixed GAAP debt and X.XX cash, funding XX% unsecured these average did times. unrestricted rate notes, the of XXXX. rate. was swap maturities is out notes in form as We coupon XXXX of floating X.X% debt-to-equity of these with net of to issued our XX/XX, a weighted

for of believe debt cost believe among meaningful was XXXX is BDCs. is we the average advantage. a funding X.X%, group weighted structure XX, the traded publicly of our peer lowest which in ended Our quarter December our competitive We

to back it I'll remarks closing David over Q&A. and for turn

we've healthy Matt. last GBDC's times have in sum perspective. elevated quarter it and is matters many raised for nine excess several well run NII performance long realized we in from as Adjusted losses avoiding our was The once what ended performing a recent months, was it's generally last of To the again up, in before, well reported the solid. recently quarters, but losses. Unrealized quarter and in credit and net share And per dividend. Thanks, strong really was the gains. realized most been is said for December XX the the portfolio

what We've do in a review we scale that names how of taken a very takes quite through undertook early against risks to credit you small closely. to to year continue critical mitigate we a always and on and this was It of last the monitor limiting how of early risks plan thorough detection we of intervention factors experience subset key today risk for are believe and well. honed believed we losses. those that to portfolio range We've

keep that last losses and low I again. unrealized approach we'll before realized it's reverse. mean the going believe said a sponsors a not I with approach about realistic early goal. prior periods, taken and teams What risk that Greg of mean Consistent borrowers to try have has be worked losses identify how to large be This management I it going Now by the then we've we'll make discussions right. is more portion to months to again are our We're them right. to work able see once with to do XXX% work? That's to and over higher that nine not resilient. credit and

Finally, context I we $X.XX higher dividend QX. of the going by dividend remarks. my in appropriate higher And are dividend per come think dividend when rates, share by earnings fiscal make I'd cost in our out-earned funds. quarterly be further We in said before, base closing as would we've to GBDC's both. promised topic the to very and We're evaluating a GBDC's or whether it spreads this the of increase and be to low driven higher or supplemental back

think to thinking we you but see, now, it's informed prudent wait progresses. For keep our as and we'll

open With that, questions. line let's the for

question Fargo our Instructions] first Thank We'll you. Wells Finian from [Operator Securities. take with O'Shea

now line open. Your is

Hi. Fin This today. for is Jordan on

question on documents. your a Just loan

could you just normal quarter. new like default PIK else or -- something on this interest characterize You about PIK something that's loans Is toggling? you this this? Maybe – spotted this X% some Is on entirely? of course if or spotted higher

the above, of Combination all of Jordan.

we component for seeing, loans optional an that PIK Golub in So portfolio, Growth particularly sponsors a PIK have our from or are demand component.

are more amendments, have companies. cases component under-priced to part And efforts that's a existing up as at where seeing. that were added couple levels you're creating loans to a without we part PIK get of of them were the what looking loans that bring of we cash So to drag on to there part of as

of full Chris. Okay. back to incentive the the That's if what's fall cushion And into -- question so fee quarter? BDC Did helpful. band? a this earnings the And back pay then the advisor the kind for before is what

full did to We I'll to back have pay a the hurdle and on fee get quarter well-above incentive this you rates. with X% Yes, number hi. that. we're the exact

you Thank Okay. me. so That’s much. it from

Okay.

Dodd we'll to with Raymond Robert James. go Next

Your now open. line is

about the analysis, gave You portfolio vulnerability cetera… et

question start your again? Robert, Can just Yeah. can again? you you just start

share normal is quarter third-party that with? into evaluating assist in analysis vulnerability the the How incremental fair loans per to fair of appropriate information the very what into each your goes that are tied the kind all you completed. was, above was values say normal presentation. they quarter? the over Yeah, and sorry. analysis valuation this any disclosure for with that much value of each analysis The helpful, the Or if consultant the is It's that

on valuation Phelps, do, does Houlihan Houlihan portfolio Lokey, just set reviewed & each in also the Lokey, of by for Golub we with an Capital are those valuations position respect cetera. group Kroll, quarter or that experts like So the to Duff et valuation third-party each to line, XX% work approximately has quarter internal context everyone and every

we with a information that the set is valuation The firms robust share of information.

significant that done last to before. COVID, went special through rapid a portion nothing began there's other it an We vulnerability we're our the of periods we've that analysis the of late the where the year to valuation sense Robert, that did resiliency that So changes with firms. redeploy we screen the not to portfolio we've to exercise during and change, sharing done we look it again we've identified. at during underwriters go the in do But that of prepare, summer is analysis, a looking be through we to in would analysis we that

firms question quarter. a information I the every So think as to valuation that's consistent both analysis opposed to answer provided episodically do the your it's is, with and is to that new it we

historic if appreciate rate Got non-accrual then not high And that. I it. I more, the kind of is mean, on by again. I can standards. on one industry credit, landscape your setting

the below know, About standards peak than relatively well. value, I that. it historically. was at to at just elevated in years by only standards for look you it’s But XX your cost, now, if the during I fair more historic this industry higher non-accrual your Historically than it's COVID. is level last well example, as So or been want the say

So give so objectively but normal us what is rate currently? and not assets color not to high that is compared any high, about can your -- why -- it you many what's more it's low the levels

percentage percentage percentage at on cost. value. you're at I cost. on I focused the fair at So on don't focus focused

it's we that's difference low time line fair non-accrual point a at think value, against the the look standards not I given -- with we of in by industry. as at It's of amount out that that a the taken already if a percentage at the vis-à-vis earnings. as our investments of it's hit And not history. we've have risk our

share to I more come back to to when the current we couple We elevated small. carrying percentage And more in is hope and of work value and some analysis back fair this and do going this with kind that's some pool do vis-à-vis We're have think be creating look to some is of value you. that at our with of a distortions relative able I on credits investments cost. go the those cost where

Okay. Appreciate it. you. Thank

And next we'll KBW. go Lynch to with Ryan

line Your is open. now

Good Hey. afternoon.

I of the well slides that the couple versus versus portfolio and kind discovered mark-to-market guys me of analysis the as recover. say, kind in as your let where really weaker the first you markdowns declines I put -- that come do resilient went and guys kind credits just could appreciate what over detail well, walk through First of of all in had have of you question potentially maybe kind

really great So analysis, appreciate that. really it's a

of On you that heightened seven those I think analysis just resilient there's when identified generally investments you that potential road. the but talked down in investments additional for the GBDC's the said today, you consist curious that weakness are portfolio. about I'm guys performing fine

Have conversations having process mentioned just from Can mitigants you positions detection you walk level, things strings you are you of a and already robust help early have guys And the to helps detection pull investment having early through, that's to and yet? identified this detection just also, a potential with are mitigant, the those sponsors you and that it higher started risk. investment struggle, the risky what of the early increase to does struggling? recovery of an some when start what can risk

lender Sure. we I lead almost on feedback the is Thanks, to and presentations the Ryan, Capital our information. one appreciate always Look positive Golub are the characteristics earnings in loans. of and the approach Thank of new unusual your new that's our you.

we're deal of. lender it's if in small over the a sole many typical group lead XX% and that in row. In we're We we’re, over -- for not a I bank XX% it's been the lender, think years a

a that larger do do in that in in market syndicated are where things to the in challenging broadly situations private market to very participant club. puts us the able to So the position even you're be in a or

to sponsor be deals with It and this know know decision-maker. they an thoughtful we've with. about we're a And and puts where most and And that in know with to the position conversations a in solutions. borrower there's that sponsor opportunity have they multiple with the creative we know is us and the cases we done

and know, both that sustaining together. and in strong to interested So an they do we so a ongoing relationship on continue positive basis business can know we we're

for involve in up in or sponsor couple our that business which talk our CapEx they with an putting it division When their cases have that the have. talk we're of not by in we the on error. down take That and We'll more borrowers and ways poorly or way we capital, of selling business, or mean putting concerns constant we're have with and on a of about steps that the with potentially might touch just company pieces slowing more might of a involve with or may all So for increase can discussions it's a sponsor. about, might small plan decreasing And or in our we context, expansion the concerned we'll some margin performing plans It's that it growing sponsors. about borrower companies. sale. a the companies;

teams. discussions and sponsors are monitoring are discussions And all we These that have management with with informed the we that by work do. regularly credit those

broadly I of think to this a a single collection being syndicated you reasonable that make lenders which lender a changes group where of group or frequently say to one a meaningful no to goes really because they're of is to that in have where and get even very have agree. sharp able a of agree so expectation won't doesn't market the the borrower maker, contrast lenders, large decision

different think It's works involved. where more benefit of more dynamic and have everybody we power setup it's purposefully it I very control. a Ryan. to So the a And

little those background kind of bit a helpful conversations. into and that's processes of Okay, and on color insight

weighted I question and of it how other were coverage you had up kind came that The talking is. and interest average the when valuable about

underlying the Capital look struggle, those You interest comments Golub at the that of kind marginal credits. borrower not it's you you of because an that maybe of quarterly all and approach and on it's going indicative a be results I true just of the the in Could when credit Altman be publish kind showing you But the about quarterly when may same your portfolio? basis look to it that it's aren't average say of take those not at borrowers because sort Index as performance the individual really helpful is kind average and Index the very metric basis. how weighted are helpful Altman to the Golub Capital being on average moving think not in going covered portfolio think a to good I your on general on trends really insight of give a

I'm index wondering to find But to thoughts I'd weighted just that. love average in this. hear about when on the curious your just be comments I'd helpful. really hear I you the said EBITDA, on context -- your

for. what depends it So using you're it

well is think I taken. point your

the whole, thinking think an indicator is a doing about I it's you're metric how using to useful. as of index create the If portfolio very as a

If as you're how indicator I index for useful. very at an don't looking it's is doing, the think the tail

and our discussions the think that one seeing source ratings. the best to investors migration I about Are contain are significantly portfolio more and two, rating performance the with which in in that seeing more portfolio are toward is I where of one risk emphasize is the like we of two -- underperforming. the those investments categories? tail two those information of categories we categories And things are significant

or you recessionary is would that kind a pre-recessionary of environment expect in migration. What credit

of quarter-over-quarter increases category high quarters historical repeatedly levels see by you'd and one to see are a series of over that and expect two You'd standards. credits

that index the is was to. show numbers say I portfolio-wide in encouraging. middle a alluding I portfolio are -- basis, not encouraging respect we And on tail, kind of that can ratings do market of And think they the in what performance the are the migration

I a appreciate the sense. That’s think for me makes and helpful today That’s I all lot time. Okay. of

I'm Instructions] remarks. further David I'll the back call turn for showing over closing any questions. [Operator no to or Golub additional

detailed thanks We their approach for to was portfolio time everybody and thank long your did some monitoring. particularly presentation to I you want to want for present just all very to this I a you. so credit know information the today. our Thank patience. about

that. So I on your patience appreciate

forward As you quarter. feel look again always any always also to to reach appreciate out your talking questions, and next partnership. have Should free

concludes call. conference today's This

disconnect. now may You