Goldman Sachs BDC (GSBD) 21 Feb 202019 Q4 Earnings call transcript

Good morning. This is Dennis, and I'll be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs BDC, Inc. Fourth 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, Dennis. 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. February 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 XX, 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 Officer Jon our Good joining by on Thank quarter Jonathan for Chief call joined and call. year you Financial our Officer. Operating us earnings the you, Katherine. Yoder, conference end am Chief Lamm, I morning, thank everyone and fourth and XXXX today

to which proposed our walk portfolio overview year Lamm on results including results, to an Jon discuss fourth it and Corp in with before more Middle we begin quarter the Jonathan call investment GSBD our refer to I'll activity MMLC. of Yoder then turning of Sachs as over Lending by will Goldman an through Market update financial detail. the providing merger full and

line for I'll closing Finally, with some conclude Q&A. we open the remarks before

that investment income for year our on the let's quarter or share So bringing results. XXXX. for start fourth full equity with common with return XX.X% for share at $X.XX per NII to was QX $X.XX net

investment the Our and year XXX% income our XXX% dividend by net covered XXXX. the quarter full during for

As we announced to yesterday, Board payable as per dividend shareholders of after our March of the record a XXXX. market declared closed XXst, share $X.XX

net results quarterly of believe This the a on for asset equates financial at XX.X% We to yield and shareholders. per QX. full-year our dividend strong are these end of share based value that

and of of Looking the XXXX, strategy. back quarter of on fourth we saw our the several execution steady facets continuation full year the a

our bond to with our in mix. inaugural proceeds Earlier we coupon $XXX this a On and leverage month, improvements liability repay of increased investment our These and facilitated our the were our improvements secured also over credit came offering offering. the asset portfolio toward X.XX% used under The borrowings million in the executed facility. we loans we shift platform senior diversification. to more past mix origination year have portfolio overall attributes side, significantly turn institutional in

result GSBD commenced a of GSBD's overlaps diversified Since BDC investment the borrowing. may our in we familiar participated affiliated in private with the MMLC. MMLC of investment that has offering of that And cost formation alongside operations its with to a program finally vehicle our of December The affiliated is our portfolio XX% over transaction, be MMLC the with common XXXX. increasing debt with portfolio. which who overall more Xth, MMLC financial flexibility GSBD toward our Those announced improved merger without funding not on mix of unsecured proposed you

compelling of the like reiterate GSBD transaction. believe merger why reasons such the five a key would we is --the key to and I MMLC

to expect GSBD's asset highly per we value to the First, be merger net share. accretive

As is over per to Xth, transaction XXXX, disclosed the the net with on filed asset January in proxy value joint X% result share. statement accretion expected SEC the in to GSBD's

MMLC income short combination and accretive the per GSAM's expect the primarily to be expect in to cap term, In variable the investment accretion NII both net to with share an long short the the to by be we delivered Second, we investment term. add per on drive incentive long NII income asset fees we growth. share to producing additional to part assets the transaction. will expect the agreed as GSAM allow increased value portfolio that the and term, net of us to In grow

in metrics status. transaction in cost the in overall in results a investments yield increase an and portfolio Third, an on of nonaccrual the amortized reduction portfolio the we the including on that percentage improvement believe at

GSBD's size increased the the to portfolio. should offers combined M&A risks overlaps facilitate institutional all the And access without portfolio with the that and markets. debt greater XX% of company benefits scale typical MMLC's over diligence accompany Fourth, fifth, transaction of due since these

preliminary Following exact typically GSBD proxy statement months predict. to in to a review difficult early starts timing in several This with process is takes so December, SEC SEC joint the the the transaction complete, that of filed comment January. a announcement filing with and the

of on current stockholder the proposed of XXXX to MMLC GSBD our hold expect and based for in expectations, However, a we merger. vote meeting to each QX on

the they approval anticipate forward obtain providing shortly thereafter. We closing from to this basis, of look progress. both on updates future would merger we the status we shareholder If transaction as

detail. activities who that With the Jon our Yoder in me investment discuss to greater turn for quarter portfolio let will over it

Great. Thanks Brendan.

in GDP middle companies of US environment gains which United continues States broadly created from. is deal-making has in with The the the remains loans very in and We has steady that continue a This in a to States. United of backdrop historically of active environment, us economy produce investment sized unemployment choose our strategy operate low. supportive to operating to investment originating an to presented opportunities market turn lot directly

our investments course platform, of including new $XXX originated the team approximately across GSBD. of During million $X.X XXXX, for our billion

XX companies. commitments companies existing new investment portfolio These new were across portfolio and XX

GSBD's year-over-year. and number GSBD's portfolio in be this that less maintained of consolidation we've a the of lien focus are in credit investments portfolio I activity increase year-over-year loans would XX% to balance materially from cyclical first The the result named businesses on inclusive environment by durable XX to strong, on to companies nearly of fund our we senior percentage to also of XX% in of the pressures. XXX. increase the single increased that our emphasize from a That's continues sheet, XX% we operating while impacted invested As believe for strategy diversity. our in total

for investment So specific let's to turn activity the quarter.

instruments. included portfolio companies and of new seven of the XX million six respectively investments XXX% floating by were were repaid. in of investments which portfolio investment fundings our full unfunded quarter were $XX.X investment investment These driven Several commitments million in net New were fundings across portfolio new $XXX.X vintage exits companies. commitments million rate existing and $XXX.X previously commitments. Sales commitments lien that and million, older new this approximately first or debt repayment repayment of $XXX.X and totaled companies. fully activity from of

together small as a company multiple investments company because as margin a In was repaid a in of We avenues originated of company well first back made optimization loan called acquisition lien our and that equity the out we This had believe addition investment we opportunities. with these, to growth, were investment to that Continuum. XXXX. we an in the

in was investments our the make our sale that selectively While in equity investment good of connection we investment certain opportunities equity drive X.Xx investment. a overall how think small, returns. equity is small multiple lending resulted the to of a company attractive We on this example with

and the of in Comprised stock. XX.X% first lien, investments in at loans in XX.X% of lien and lien as composition, in X.X% end preferred unsecured portfolio were common secured XX.X% in including as year total $X,XXX.X last of out X.X% in X.X% as debt and second our portfolio Regarding well fair the million first value. unitranche senior debt

had $XX.X also total million unfunded XXst bringing commitments We investments to million. as of commitments December $X,XXX.X in of

company our to single in As The compared at at been earlier; of quarter. end transpired This As exposure yield quarter, of fourth compared the name across primarily fourth end end companies total fourth at X.X% investments of X.X% years. Brendan portfolio as as the decline quarter to during pleased our cost diversify company's income-producing the at to investments were third of in had XXX weighted the that average average in of end, the recent was yields the debt the at our weighted third quarter. portfolio the costs the of ability portfolio the with investment mentioned end X.X% XXX The slight we've LIBOR quarter. is to very attributable the the at X% decrease quarter of

net coverage versus overall our companies was EBITDA the debt quarter of performance underlying companies of investment to flat X.Xx quarter-over-quarter. turning Now at the quality. The quarter. the of at average our in quarter. was end was investment was companies interest stable third prior quarter the credit from X.Xx which portfolio weighted end end of in the portfolio the at X.Xx weighted The average portfolio The to

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

XXXX debt net We million Jon. quarter at of $XXX billion; Thanks of fourth fair entered total the with of assets $XXX and outstanding of $X.XX value million. portfolio investments

share the quarter. prior to $X.XX from equal were Our which $X.XX per was net was per $X.XX investment Earnings income the share up prior quarter.

with the prior equity to to debt ended quarter. our the equity a of versus X.XXx quarter, fourth ratio debt We X.XXx versus average X.XXx the QX. the of quarter end During at X.XXx in ratio was

statement. the income to Turning

quarter-over-quarter by total ratio million as from expenses equity $XX.X driven decrease quarter, in Net quarter the fourth decrease LIBOR. debt a the Expenses income to LIBOR. were a the for the interest million primarily lower quarter, down was the last of and average by in as debt lower expenses Our well as which to fourth investment in from in quarter compared were $XX.X was average down million the borrowings the and other prior million for $XX.X quarters. result in driven as decrease $XX.X

undistributed a all believed into excise our per partially remarks. higher Jon in depreciation relative end, as Continuum to QX company had in on to to share equates per the form prior of offset from NII the by income from in ended his value investment the spillover dividends. spilled net the XXXX net to taxable on unrealized Consistent we at income we with a in investments, years, this net the at there's equities. by undistributed over select cost of million issuing shares driven We tax, that investment $XX.XX $X.XX price exceeded share quarter, of much small outstanding. resulting the The new $XX.X realized This asset $XX.XX has as pay prior of quarter with compared that mentioned the current accumulated gain cost

end, on company's the an have quarter to balance of we been sheets. side active Subsequent right the

offering debt institutional As Brendan company inaugural mentioned February. the earlier, in its conducted

XXth, the Our notes our February execution. very notes was were of XXX X.XX%. credit our priced The spread issuance points pricing we to at At offering level on X-year pleased closed secured able rate as with at and XXXX to same basis US this the price at Treasuries. The debt nearly fixed we facility. unsecured level, revolving were a

the overall financial flexibility. addition attractively tag, were In companies exposure diversify further we and to the price to in to increase our funding able mix company's also enhance

the We pleased that report rating XXXX. investment in company received grade are Moody's from a of second January BAAX to

the Fitch minus rating reaffirmed. addition, investment In company's was BBB grade from

LIBOR XXX amendment now has reduce plus XXXX. the two in our on our the basis XXX.X date credit launched points spread an with recently to company And to from ratings, lenders facility revolving maturity facility to the basis points. LIBOR extend we As plus our IG

amendments certain facility to subject to expected are credit closing of conditions. the close These items and February the other end among are for by

believe company's As a result these funding strengthened. profile materially we and will sheet actions, the balance be of financing

turn that With Brendan. will I it to back

are Thanks year pleased our QX Jonathan. full and in execution closing, behalf our for on In we shareholders the of with XXXX.

to look attractive middle be positioned GSBD year, take market to advantage continues coming believe in to As opportunities the lending of we forward the we well landscape.

XXXX. With capital to managing open work behalf As continuing over on always, course forward for your privilege of that, we questions. to for Dennis, the hard look let's and you the line of up the thank we your

Instructions] [Operator

line questions with O'Shea the Your from first go ahead. of Wells Fargo Securities. Finian Please

Good Thanks for taking question. morning. my

private being Understanding you either Just commitment. a Continuum the mostly market Do deal few parts first on at is historically. Acquia. you these twice non transactions core sponsor large in of middle market how your others back mix strategy the to the town, of viewed your the connect see sponsor, your sponsors looking

you're there looking interested it has investing now? in in your or is what me sort this of in So thinking just one-off --the a is and shift at deals what you're

I'm strategy. crack. a change take at I'll joining. our well. There's Jon for sure thanks has Brendan Finn. Hey, Finn, as no all, comments in

$XX The metrics; when matures. where portfolio underlying of I to construction in from a the the in to time at of we've a loan under made consistent quite company our EBITDA. size in portfolio look company here. ourselves you find do time portfolio million we've been that think average is grows and We circumstances a

mentioned one company connect It in them a the You to is which Jon was this your acquired Continuum. called we've in That's by back loan had --sorry we a had that XXXX. of in nice questionnaire another portfolio going mentioned, about very wise. Continuum.

amount into a new heads-up the that So on we did lead basis roll lender loan a small with there.

continuing and the decided the one by to great had strong, company. in describe situation a in industry, benefit a of great where would a being sponsor. exposure of investment it just in years perform that competitor We it as a is context many participate company we to with profitable I So a in space a of very the very great watching merged

So overall approach in all change here. no to at we're the what doing

the only sponsors The larger is sponsor on Finn, for larger that a side and with add we've increasingly I some these funds larger years, of other for key thus raising the Yes. are thing and lot obviously going that and companies. to that, of larger --well worked would

targeting results middle the strategy. but long trust targeting and not think very If Brendan growing changing know a And be result selective some probably occasionally as opportunities we are it's the Brendan that it with origination. --that's upper in deals market, their funds now size deal of participate worked given the sponsor of we're size they're that we're as so time not, for a is from larger that we that's But that I said, get not of not so can of might agree the where doing we in. our with that not We're flow our growing a companies.

you. a run. is of know it. bit but I portfolio little like good couple start how stock Thank it's preferred this I'll Okay. some a it's works; with I common obviously questions. to a a-- --this looks guess one. Hunter just stock you a has been don't a Can element

I income think potential can almost can that horizon? there? and is first us doubled; there a remind holdings give And on any does I exit update pay you the you guess us

bit performance limitations recognize improving and we was a thXere's for an can This on can't vintage the Yes. was of that what which done, to investment initial here. to little I'll preferred amount you're amount earlier company's have and made back And positive say give right we some has it recoup time of context cadence but very there that that a that significant ongoing and business investment stock restructures. exposure allowed of taken been now. its performance a since was has the had significant us deal investment. We've that

I near But think I the this a income-producing hopefully to total this good today forward collectively is into working reinvest we imminent capital be here but well. for producing producing going to is name see us into with we to asset, and opportunities income, value think do amount the proceeds. Charlesbank for suffice at take We potential or sponsor income as non an we look exit a a save to initial So Again, assets put opportunity a that's speak and to in and nothing of what at that that transaction. income here. who have not investment as is say

So quite good here. a story

it's but you context I any you for sensitive IHS comment steep And on fairly know be on provide so quarter-to-quarter. drop things more then lien, second one. to the it'll was that Sure. Thank a

I'll one. Yes. this piece

call small reduce ultimately at of So is the $XX IHS cost collect have The healthcare the base. employees. cost They is I'll focused we workplace, on is made overall a goal position screening healthcare like for things help business the employers; million do for in XXXX. on-site They employee programs. to that we for data the back what

with the So bit has there's few challenging situation. more right business a becoming a pressures been recently it's lien customer more that unfolded some competitive second in of as a as a you're and losses

quarter down, put of overall it billion did the on this mark $X.X in relatively this but we portfolio. did small again So position context to the a nonaccrual

it follow, on it Is based this Okay. you And -- just there a on was say small customers to was that did may something loss? How couple say it just customer how extent a Are you severe one? the that?

couple say a offerings, competitive led losses. the the its little would there to these lagging overall there's a business have I renewal have customer pressures been company cadence of in to a There's of the which a of been and peers period. where some bit has

than has otherwise So that quicker expected. through one some come might have

we the so that dynamic it speed the last and been course quarter down significantly to respect with And the that's through marked continued here.

but to in portfolio. that contain in And exposure the quite here something a overall the we terms investment our again so context closely your of is, this quite monitor small is context here of

question Your ahead. next from Please line Dodd with go of Raymond Robert James. the

Hi. Guys.

there On you just of of EBITDA the obviously for the comment, particular quarter, to any touch. picked the area? us where related EBITDA to business was that there the-- deterioration portfolio, the origination? mix one repayment grow any So well at entirely up debt or did little was portfolio it there versus a can give But a was anything this in at

see. portfolio this Yes. turnover a that No. was you quarter function that tick Thanks typically up Robert. really of The

into reinvested And typically seeing result so company an are Those end a you then might that as the you'll deleveraging and new time in up loans. over make you know, investment proceeds when repayment.

up be terms continues I would quite down say no our looking in in overall changes higher We consistent. that's where risk for companies moving driving specific had the So of broader across steady portfolio EBITDA in there's or of the that quarter percentages to ratings specific. and the ratings. performance ticked company portfolio nothing major the the risk number

We three the trends. number a to movements of and small us. one-off mentioned out. broadly moved continue a really the in rating but see speaking rating across just the quarter that is companies this in a as coming portfolio had for That IHS And dynamic to healthy been already four we some

that of --I at of quite quite be point Yes. full. I guess on levered had the a And to vintage they older just deals this add that, And prepared sort their remarks, paid in to happen we in off Robert, mentioned couple companies. in low got lifecycle

one called make-whole So quite a we we'd for company been form because in expired. company strong make-whole refinanced end took had of that But levered. only protection as that effectively, long It refinancing that, soon did-- Artisan, frankly time reason it earlier a so a we very which had very time. hadn't by as quick and the the very, that got lot the call of we was to obligation we conservatively of the advantage of the

one other again and --now company company as it to think is legacy I the one timeframe. referred called was ER --another the The situation roughly buyer since that a Legacy name of in brand had where XXXX we but older was been vintage a

average you can older as and Brendan deals their lifecycle it have an but a low frankly just the --those And point in weighted a vintage couple your on overall impact when of de-levered was the mentioning, very in portfolio. when lever terms company are of are so lot that lose this at kind examples

of at but of high between the portfolios BDC Yes, before GSBD moving about of overlap the obviously limited MMLC that portfolio balance the you existed. the sheet of can the a but on and other assets were say GSBD there's on know transaction the understood. to level amounts some the I And there's put kind

a --remembered the portfolio --how a you meaningfully segment you you that what portion characterize, but get speaking right would those to materially? you're I there's when individual little of So ratings, Can is company of -- of business riskier asset. that any you have going kind you us legacy you that would doesn't risk do the Because the --could obviously what -- piece of relatively color two. a with some become give the on smaller will the combine from benefits think shrinking

kind the we're improve Yes. necessarily I point which the about. overall to what Robert dynamic that overall talking as of portfolio construction wouldn't

the a so MMLC, overall of think I when are issue bit XXX that which not in the numbers you number GSBD of there's pretty the that combine two it's assets together. you but X% right are companies little legacy a small

on at investments So for on there's say example of GSBD non-accrual. value MMLC fair a in today investments non-accrual has no and X%

for of transaction number forma be deal. pro So will the the that just nature given the halved

have that's So positive. of non producing handful a a We assets. do income

in I of Hunter one GSBD them that's question mentioned not in MMLC. only and as in Finn's

assets when None way you great income proportion but companies focus is benefit is something a And exclusively. and company I one too so those pro say another combined that that really there dramatic forma numbers will I be again combine there'll think or overall. get, two are would so nothing the I'd of a producing of on certainly the

And then Appreciate. if more I Got it. can. one

of income that's the obviously that will to requirement because $X.XX same there right? out spillover I GSBD, is the On any merger be close of has think expectation get kind MMLC to right if if of characteristics, going right any the or undistributed the distributed don't or that the

have requirements special it MMLC Right. of it no-- of income. There's are in there it at the of that order dividend not the any the meet we requirement we've any that's no issues the some earning you to XXXX out distribute effectively out requirement mentioned, with up has. prior to merger. where the pay it-- We but to respect order we has given no to spillover existence, RIC as a the project income in distribute to is the that out for would distributions of absent the us spillover meet that GSBD it's --given amount. to RIC RIC merger of in coming fact we're dividend significant would for were would the spillover been that have over now merger make its because that tax end cause our point a income will whatever to have GSBD GSBD. to Spillover on There's merger to

sort if merger file just to pass to we our return, when not at some time tax were of September, in of bumping some the limit for not in away. the up closing frame or date merger we'd spillover though given to fact would issue to that required the that And So forma later we're October pro spillover. that point we be against pay Effective that prior and we close goes that required be would year. the any that of

detail of want lot but you a had -- to Robert, the just So I there, make sure entire

of Q&A End

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

thank and Dennis call course us today. joining Thanks of everybody the for conference for Okay. you

As additional to or the the please hesitate meantime follow team. ups, enjoy always, any do reach don't out questions have weekend. And if in Thank you to your you.

Call. gentlemen, and for Earnings XXXX Conference Fourth Thank conclude Inc participation. this Goldman the you does your Quarter BDC Sachs Ladies

may You disconnect. now