Goldman Sachs BDC (GSBD) 8 Nov 192019 Q3 Earnings call transcript

Good morning. This is Ian, and I'll be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs BDC, Inc.

Third Quarter 2019 Earnings Conference Call. Please note that all participants will be in a listen-only mode until the end of the call when we will open up the line for questions.

the to turn now will call Ms. over I Relations Sachs BDC. Schneider, Head Goldman Investor of Katherine at Katherine, begin you may your conference.

Thanks, Ian. Good morning, everyone.

today's materially, statements forward-looking time today's control. as result what actual condition the forward-looking are without is Goldman those uncertain from begin Inc. our may The including cast future events the from company's we call, in number Sachs outside their a like described regarding differ, company's would may audio Before and rebroadcast nature, by to factors, our of not company's to a consent. listeners of beliefs that financial copyright This indicated These of remarks results of statements. include and in and that, material may be possibly statements is BDC, represent or SEC I duplicated, remind the those filings. time company's reproduced

section. November company supplemental These replay which release closed, press issued www.goldmansachsbdc.com, market Resources This earnings filed call in the under SEC. found be be our recorded can presentation, with should company's after for earnings Form Investor page the website on the at the Yesterday, of an home a both posted and XX-K conjunction with yesterday being is conference X, the reviewed XXXX, today, the documents purposes. of

McGovern, Goldman Sachs of CEO BDC, turn Brendan I'll to that, over With call the Inc.

for our Good joining Thank quarter for and conference you us you, Katherine. call. morning, thank everyone earnings third

will greater investment and discuss providing handing agenda the finally, open As to before some financial our Lamm an before for closing Jon conclude From with usual, And call, it results. remarks by discuss we results activity our Jonathan overview quarter I'll in of our terms in I'll to metrics line the over start detail. Yoder Q&A. third portfolio for of the there,

return per equated net on So an XX.X% investment with resulted NOI and XXX% income annualized to dividend coverage share of $X.XX QX common of that, in equity.

shareholders after as per announced December board of per a XXXX. yesterday, of on value a XX, we on yield asset net record market the closed to our declared at end to QX. of the dividend equates based XX.X% $X.XX As payable dividend share share This

investment a activity; portfolio robust markets by backdrop, private Moving characterized well a execution team. on significant quarter activity, this by was continued to as as solid reflecting the capital

and $XXX $XXX the million to portfolio of loans repayment commitments different diversified portfolio composition companies. existing QX a new Repayment quarter, goals. with by continue of shape full X XX balance, to origination X previously the enabled coupled and made us by totals we consistent of portfolio million investment During of to portfolio portfolio nearly companies. companies one-fifth with driven stated Repayment the

asset the mix more toward improved we senior First, loans.

in one-third were junior were All of investments. comprised first-lien investments. exclusively originations over repayments New capital almost

investments of and As of a execution reposition portfolio the the investments in from continuing investments. during senior increased the result, percentage our to into the more to quarter, portfolio capital XX% first-lien junior away the strategy

able we've with strategy. execute the pace pleased are We which been the at to

just six portfolio ago. investments For quarters total context, XX% were first-lien the of

Second, reduce to we continue single-name concentrations.

older which relief, payment our co-investment of cross-allocate loans now we allows quarter a to to vintage of across received the prior these receipt X full made were exempted All This us investments investments. platform.

the XX% the result, of the of portfolio size significantly the XX% our a At top portfolio total loans from investments represented XXXX. end obtaining than were of new As significantly at older the relief. these of average down on QX, co-investment larger end loans XX since to added

we that activity Finally, this improved quarter overall believe credit quality.

turn and just discussions. in value we placed was accrual off we've non-accruals prior XXXX. in Notwithstanding was chose X.Xx quarter, X% investment mark repaid to in portfolio greater with policy that discussed our quarters, which the and at at ultimate largest GSBD Communications, of X.X% was in money fact Loan consistent portfolio this few cost than ago prior QX a the that fair earned Our NPS X% nonaccrual repayment on IRR we length NCS company and say total of its quarter-end interest transaction. the they're were At the accrual quarters multiple per a on the respectively. built

opportunities asset Average down the coverage towards interest did mix portfolio debt this assets concentrated assets vintage spreads. but by of measured exacerbated senior of investments fund to our dynamic, improve company we over senior by loans downward by low yields quarter, higher-yielding repayments our quarter-to-quarter, earlier upon the Canada's EBITDA and see net metrics higher related consistent received were as unwind credit yielding come Portfolio and into stable We to ratios. that portfolio's rotating with time having to do LIBOR. directly planned shift of trajectory the

which In will generation. concentration addition, single-name contribute the income our less our to the into first-lien portfolio higher, provides somewhat positively success debt ratio to in more with investments to equity shifting opportunity move

turn to it Yoder. me let that, over With Jon

right, All Thanks, Brendan. great.

leverage third briefly trade expectations August In global as to muted. over average formation these more evidence quarter developments growth lead precipitously that general, further prices. outflows experienced rate was on flight weighed of can turned healthy an cuts and market to long which and In markets loan industries, increased interesting yields and certain the funds inverted markets discipline. think backdrop in tensions syndicated the we to activities. Investor cautious So regarding fell run bid provoked loan in loan safety. Broadly treasury are our CLO and presented slowing a particular while stress sentiment of should and

get remarks, larger early mentioned year away from decision the shift very portfolio time. some strategic to to cautious last our were junior And juniors debt. We pleased repaid this we quarter been Brendan We've for his debt as two of investments. in the made from quite remaining

quarter, multi-year total concentrations, name assets, the just from the portfolio co-investment of XXXX. name This the our some single-name At durability reducing X% to to single repaid. size the effort portfolio X.X% of average in our the positions our enhance down of prior continued largest quarter is our implementing end position order also by January as of single of were in

sum activity this that our of will fears origination with the portfolio further this if the believe addition, In quarter, pass. durable cash be that on expect drove market businesses we fact, in repayment sentiment resilient in which strong quarter come the focuses profiles, flow we do to

some the I'll quarter. activity turn to specific for

new investment of investments. million $X.X commitments were floating XX.X% New $XXX.X were commitments and These as unfunded first existing fundings lien X net investment commitments. and the companies was were XX was commitments companies. previously rate million portfolio portfolio activity Brendan and and million which of Sales fundings $XXX.X debt by respectively, which of it repayment investment $XXX.X million in different portfolio new include of new mentioned X investments and full repayment driven companies. was across committed elevated in

loans, at of Regarding fair end secured XX.X% debt at in senior X.X% unit the in stock. value X.X% and billion as includes as composition; preferred and portfolio and out first common quarter, in of all debt well in tranche the $X.XXX last lien lien, first comprised second in XX.X% were investments portfolio which XX.X% X% our lien unsecured

$XX.X as to $X.XXXX bringing unfunded had commitments investments million commitments XX, also billion. at and September We of total

XXX at at X.X% at across down of portfolio of was third of yield XXX at of quarter end our As as end quarter. weighted end of end our cost average investments of cost income-producing weighted The was of X.X% had debt total second X.X% and compared the the at quarter, the second the to quarter. investment the the investments company from companies. third average portfolio at quarter-end; the The the yield X.X%, the

older This vintage quarter-over-quarter decline by quarter. was decline and driven investments in from higher-yielding the during LIBOR in exit equal parts some the the

portfolio to quality; Turning stable overall performance credit improved companies to of quarter-over-quarter. was our slightly

of portfolio weighted In companies X.Xx non-investment which was interest quarter of the at is down X.Xx the investment prior end average the quarter. modestly debt the portfolio The at end, to X.Xx at coverage fact, average up quarter X.Xx. which the the of in was was companies from our weighted net second EBITDA from

to I'll through results. walk financial Jonathan our now over call turn to the

total ended of and $XXX million. of We value outstanding XXXX of assets million third of the net billion, debt John. investments at Thanks, quarter $X.XXX fair with portfolio $XXX

income the to quarter. as per Our was $X.XX prior net $X.XX Earnings investment the in compared were which quarter. share from was $X.XX prior unchanged per share

for debt quarter, prior was ratio available X.XX reinvestment toward the in of X.XX at versus with During end quarter the quarter. Much a our occurred third our to the equity the We debt X.XXx the liquidity ratio QX QX. end providing of ample versus X.XXx with company of ended average the equity activity of repayment to

investment Turning $XX.X from down last $XX.X to total third quarter. million, which income was quarter statement; income for our the was million the

lower While balance was decline the were income. largely assets average of quarter-over-quarter, the in quarter-over-quarter income interest to income-producing up related prepayment attributed our

to prior relative repayments Brendan protection prepayment vintage repayments this related although we elevated the mentioned, where had on this were of quarter already older had As majority expired. loans quarters, income quarter's

have of amount a remaining Additionally, be discount older lower vintage unamortized upon prepayment. accelerated a loans to

current Total as decrease quarter-end offset value a to during fees, higher shares the to QX were at exceeded due investment compared outstanding. accumulated that in for had borrowings was undistributed the incentive quarter. were driven dividends. million the equates by has company ended quarter. third with resulting million expenses by share The investment net We This expenses in from income to to million prior $XX.XX per from asset as $XX.X prior quarter-over-quarter, $XX quarter, down share at compared quarter. $XX.X per net higher primarily which partially Expenses interest $XX.XX in on $X.XX net income the our average

it return I'll Brendan. to that, back With

closing, the landscape. net investors, while to We portfolio income, in quarter on growing diversification for the middle strong In QX to simultaneously continues long be attributes to company Jonathan. investment we well-positioned the was type. our lean for and term solid advantage secondly continue opportunities take and feel market Thanks, produce of a as strengthening

forward As open the managing look over privilege continuing We behalf for always, the of to remainder we With hard that you up let's your for again, your to on thank year. the capital. of questions. work

[Operator comes Fargo O'Shea Instructions] the question Your Wells Fin? Finian of line from Securities. form first

for me on. Hi, having good morning. Thanks

front. more towards a on peers question there. a than the I of there's lot and a the remarks The top Just of know moving on end first impact little couple the parts seems your of lines your a LIBOR

as have season and have side, vintage floors a been you are would surely be the you pretty at profile on trending the looking You you better more XX But - think about talk talked where for prepays. they've up. but for would what the that a about impact next so you has Can you? slowly I steps thought floor recent top-line

question answer on this floors quarter was the it of look the matter want we LIBOR general totality think make at X. our I if part it. impact mentioned, the Because move of to in to around - the you last of and side Jonathan sure a LIBOR. yield I of we half asset probably is as about the consistently reasonably portfolio say, would the the

the I given So where in point with be to are today, continue think we basis we'll next XX exposed LIBOR there. that

get think this had one time we be get going did I most much to be to general, of [indiscernible] private industry. to one the be From that'll That where in consistent was that our - better able the time, to I might consistent think our you network with participants. I across we is but transaction transaction quarter we think market floor. wealth profile

for there. you Thank color the

do a of a hearing therefore, you case, for there's perhaps the along, we're Or about underway? and certainly that I'm on shift assuming bit opening time, EBITDA platform Your in there the sure I talked and Private expected? terms size think the What company But especially view? let's up growth, hole is sweet if market say backdrop say. take it flow. road frame spot? is end, the you part, that a deal helps. larger sort your in that's some Now you issuer down and that of currently sustains portfolio for

that private out Yes. seeing really you're some I - for here. and the What normally opportunities would touch markets question, otherwise you're the we good in deals some of that credit, [ph]. indicated type a is a little been have the pulling Obviously well are coming believe is are with bit

like think things. particularly that public - and reported less those typically lower know, been the types would that are having - then it's lower accommodating I profiles of markets companies higher garner ratings, capital you and So, for leverage

the are least, assistance. capital those companies those And some so and a moment of at number into so at - of otherwise private private seeking - some

I leading know, don't particularly expect it. you You know, we're I we're think monitoring to - I that don't - not the there not we're active. or sort we're, charge expecting - be of

know, you is credit is higher strategy see - want return get a can us you're the when value we're to to of that offering important our lower market. that we syndicated here in it to is what you that than this think was investors proposition doing I - protection kind is credit, what private ultimately better broadly

old, markets, in seem so to But participants in credit are a - covenant to it's otherwise credit spread be the the sort doesn't and is like replicating would fairly adding And of value low public been that light our available have private really the what investors. terms. in same

not public So really that we something available that going just that, evidence it good attractive are thinking want spreads you that would feel get in I'm is until that what and are there's on. terms to into. saying better that like know, that what's I'm doesn't than you strong markets, stretch can

is - market, of focused $XX to million focused think pretty we're the know, the what on EBITDA find you core business. being, time the $XX middle we continued the For pretty million

the EBITDA companies. of, It's in range. kind average of around our of consistent. - look portfolio Pretty $XX $XX You weighted the at that middle million, right right

You been know living. - quarter-over-quarter, we're where - that's not that's we've kind in of

don't of can traditional know moment, But again, was there that so lot really the better markets execution larger you I suddenly sort that became a anticipate obvious transactions. that's just capital any unless attractive, terms than at true. don't And I it of that get in change,

that there, Thank of that second, A - on context One, you that Supply, part one small for able stock, valuation update if based provide? so then rotate your market the Thanks. you're from any vault sorry, common And I move be, to obviously that's to accretive pathway this may. quarter. declining? earnings; Animal would into is company your question just more, that or on broad-based name to

a you We the in restructuring. Yes. talked know, about a bunch this recent past, one

in paper, our didn't but general so of So down, non-encompassing doing can the agree, quarter, focus would outcomes. We so a bag. best in with this with that rotate say consolidation portfolio that some some that optimize a other one of, is be – volumes excited a - this to the really past. put the I mixed that increasingly of that are in there distributing industry would But that I with think say to synergistic, we in way products terms currently hold, on that, taking respect company coming hand, place hand, doing headwinds On there. we'll would lowered described bit a industry that's bit the certain heard a on there's opportunities potential, want here, little I you've

- the specifically and be nothing terms And be you're you the So something at overall we're could when know, consolidation. know, producing that, of think know, yet. course, we look forthright ran locating of know, an in situations, when types path that continue some given this quickly about quite between, is, know, there's during aware balance quite about optimistic, of describing into just in we'll think be of trajectory the think we're industry and with and you could that report And versus you That you And, the trends this as but position more hopeful with that all these an income in time. optimizing. opportunity, here, that. I perhaps the there And of here. descriptive to you if I investment,

That's Thank for you me. the from all color there.

of Dodd your And question comes line James. from Robert next the Raymond from

Hi, guys.

like is you've mean, obviously, a at up rotation through firstly Looking the in the gone lot. portfolio, I

primarily the or versus reduced, portfolio. be more. this where to that marks a in big not of side were, Yet at surprisingly, look They be lien year I seemed the exposure junior seem particularly You've to quarter. second when ago the the

much color you any are longer be ones Obviously the give the you cetera, well us etcetera, that how the can refinance there's So side, can are ones lien adverse any selection? problematic. stick with on if the that relatively encourage and to to more in second et ones easiest doing

quarter. us give of some side relative the of the left what's quality on book, you junior marks color light some particularly this could on So, the the in - of

the Robert, question. Yes, appreciate

well. was a - the think NPI, remarks vintage vintage. actually you're which an I - at observation terribly this fair the you but - think earlier with which large, describing at look I aren't yes, quarter, as one When this XXXX biggest

think, is, we there, auto that company own that investment Secondly, bigger auto made and, at a that's those type precision I it's exposure. our business, parts,

mark evaluation a the as company. I specific you taking that's been, is There's in that this very company pretty sort the I what's think at function that actually management you within know much, industry. So impact business. is sits read investment know, that of impacting when the significant we changes other that industry We [indiscernible] bigger in missteps. place Yes, wouldn't that anything specific would look of at go-around that, parts a I'd some, of that say look business,

the we're things large company's there. of proposition on value of that's around market at unusually force of bit the company trends actually think scale. sales some knew profile pretty And also, the Yes, and reorganization. branded that missteps business. that We size little a fund. bit for of business. in going stable looking of Nothing, a bigger impact an stabilizing little It's senior cleaning fundamental management The the it's The through of know, supplies. a end our terms permanently the business, basically the earnings you to credit I

outcome one know, at And move it's But that for a is. I into opportunistically. longer so secondly you back say position, going bit would final lien respect term, marked, You're optimism that's it look where to opted where that ways and more to the investment. with we

it that that don't across more there's the think, to we you. Robert, point portfolio much would I

activity vintage John older was those would that for our prepared quarter in and be remarks. Vetco's, some Much repayment example, second to in his fact, of lien comes of one mind. investments, this In

sort actually quality. we're portfolio quite pleased when So the look at the quarter-over-quarter you of

as those the portfolio about older ventures lien type - and the one talked of also improving pretty investments significantly many same discussion, significant at this repaid also hand, on we overall quarter. concentration; improving a were degree the So in the actually into time,

and other like existing if know, portfolio, of about. the that you cleanliness, will, vintage in you feels So, the words, the

you liable. I a I like because repayments that looks fees that, earnings perhaps third fourth it. got end the I that about the to of Okay, higher. hypothetically, that. the with at, quarter, portfolio, Add on the stable in If starting look incentive can, obviously, late question, where you're wordings you the in cover so a the anybody a to if on are if off lot this in the on your a may term be appreciate of is at question lower occurred fourth color pipeline near wouldn't quarter based so a know, the runway. where, Add it position dividend And quarter. of NII quarter, the quarter

to So to lower tea your earn portfolio my size when's give it, on there's the can cetera. rate to your up and leverage, going point, us back pipeline et about yields get view, more term, think any don't you to ability ramp long any the mean, but color questions the happen? it I I

do about next We're projection going certainly not quarter. Robert to

more skewed continued just deals. again. highly, book speaks market. quite commentary, along from being be bit to continues We teams. think a questions hear but pipeline portfolio I is We All towards doing not that management portfolio optimized XX with said, activity, We they're for in a the I of well companies. portfolio within The will of into is the off our the - companies goes I this portfolio the new think to lot with. diversified, new this we've you well we've team benefit, of get got growth gave in concern that happy calculation different quarter. the be a terms lot following closing through If perspective that of highly Yes, your quarter what of good of Most line. all something the on some position from business, and been answer think you other getting model

So to and into at portfolio ramps, of in sort terms getting down relative net we think the that variables of the investment day, worry. the G&A all have to portfolio one the end go is not the of

I it. appreciate you. Thank

comes Merrill of And America your the Lynch. line Hewett from Bank next question Derek of from

near products, two specific to it's over term Good seems given need sector will rolling months? or restructured next issue, investment to will the be the this everyone. three to to MPI and be off back shortly? books morning, Circling be, the that the maturity, a Given

Yes.

it's is company know, So, fluid a right a as we you now. in situation mentioned, sale Derek, process. The

today, mentioned, is down look I you I at the As when particular what we're looking mark think at valuations when coming - in quite you industry dramatically.

of of terms repayment. a outcomes, be variety It could It range it outcomes. the could So, be partial repayment. be, different full could of in a a

repay sector that In industry know, I would the event, think way company had you commentary. any this specific auto We quite, quite the to one other to a we're that exposure. was quarter. small about talking your

focus get based within really and businesses are. a which is of us the services, exactly as to to focus health get we care cycle. the we Even you is a business global exposure, this active the are literally would has think heard, part for most in away IT, on more be capital, to sector small. where do exposure of general intensive, like types you - repositioning contains to I on the do and where to look where industrial it where more areas in And the of capital be, we cyclical, one more of certainly be it matter quite would and have as from if quite, when And economic technology, much at only we it terms want be more been

rates rotation Or provide further point XX% little due more older will additional but pressure vintage you. in I benchmark vintage rate? thank yield? the we roughly color at on you older little Okay, bit loans, basis XX a realized a to from could And the could lower yield was to portfolio the to trend benchmark of decline closely then point, investments? see more due this

don't Derek, so. think I

portfolio look we of, know, you that brought to on of line top looks used the of factors on driving you sheet yielding today, all one our balance like remember, at If is where the that totality big loans the of, lower kind the venture, fund. joint not type And It senior our syndicated you our that credit mostly the deals market. in if remember was was with middle directly lower joint It our generally in be that originated was venture came strategy like nearly upper deals. spreads.

And the look we around on, on we just you that at so, recent right at portfolio in cost do today, being sheet. that consistent the you we of if the that the, - yields originating to know, legacy originations under balance quarters average that of from we've that it's been Compare yield from what took on pretty terms just are direct in X% and X%.

senior is, I to fund you seen opportunities originated of think some that, execute the rotate on credit one and of that assets know, those into and know, yielding, it senior you've old directly deals. the you have we – higher

change we So, you rate bit as can things course fluid. that's At throughout pretty has a of of sort to have moment, more environment know, pass. it the any here in further rates been that fight year. powerful they we they Obviously, have obviously, the the the But think to toggle a been stable. should come feels decreases

we maintain the decline here, you opportunities know, line there further potentially speaking, are just like to like, don't in of do face attractive top - that know, broadly I broadly you So, we even speaking feel feel in don't rates. think I

specific for investments. someone's I'd of vintage only Derek with one part your of future respect repayments add the to potential earlier question, to

this [indiscernible], - our a you'll exposure quarter, not look when there's you when think ton - that I think look remaining. think see there's I at and I at you of

yielding of be And higher - that continued getting so some those of to those we out wouldn't deals. repaid of some earlier, of trend that expect much

borne I quite brunt that, that clearly. this think our think show at I SOI we've examination point, would of the of

you Thank very Okay, great. much.

are this further at closing there no time, continue Instructions] remarks. [Operator questions. Please And any with

Thanks, thank Ian, conference joining of us and this everyone for course, you, for call.

here. you. you the any if Thank Team please out Management don't weekend. to to directly hesitate have reach always, questions, As your additional Enjoy

this Goldman gentlemen, the and does Ladies BDC conclude Sachs Inc.

XXXX Quarter for Conference Call. Earnings you Third your participation. Thank

disconnect. may You now