CGBD - Earnings call transcript Q4 2017 | Carlyle Secured Lending, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the TCG BDC Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the floor over to Daniel Harris, Head of Investor Relations. sir. ahead, go Please

Daniel Harris

with Good Relations full-year welcome night, XXXX press on earnings an Karen. of a fourth is which we TCG quarter earnings available presentation detailed and and earnings BDC’s release quarterly morning, you, results, to copy Investor and TCG BDC’s issued our website. Thank call. Last

on be website. our today, forward-looking not guarantee current we do differ results webcast for call based placed other XX-K statements investors. risks institutional and and is forward-looking BDC assumes is statements should remarks SEC the no of will identified inherent involve being session performance the our in our that not prohibited. management today actual Following those at future and TCG any This uncertainties, Factors could them. a form and available and on to webcast will time. BDC, Any to including replay analysts any strictly made and those update is This and unauthorized hold a materially obligation on any any call property TCG statements filings Risk from in question-and-answer be are broadcast indicated. and These undue of expectations section reliance cause

Lastly, it past With over results. Officer, performance turn Hart. does not that, to Executive I’ll guarantee future Michael our Chief

Michael Hart

everyone some than President, and Head review without Risk a a you I’m financial increasingly Last our Officer, joining team. our for We of Hennigan; loan $X well and original more fully thank an year as for us some deviating the of as largest the successfully for I’ll the growth was vehicles. year Jeff of Parekh, credit offering morning, members then Grishma first for Tom billion Chief Originations, Rathi for fourth on accomplishments including Venu and of by year joined such begin highlighting today call. by over despite the way market. in emerged We our IPO Dan. CFO; quarter the our IPO, the that transformational our All stretching was Levin; Good in achieved paved achieved results. of of our earnings the years. original the Thank management the you, and in for team, our business. ramped entities our our two $X or transaction portfolio challenging net originated from our billion theses investment across our excess BDC other

eclipsed $X We I the investors. continued the to the who which to aspects the professionals, to scale investment moment all returns founders and during all importantly, to efforts billion would these fourth strong, so venture, this quarter. thank of mark And delivery like a Carlyle our our joint have our most to of in take senior loan supported of consistent goals, investment continued to hard achieve since have who business work our resulted inception.

had once continued released components to our business of activity which deliver quarter We consistent and of results. PSP, our the quarter. the full-year coming with valuations We results straightforward solid and previous largely our a $X.XX venture saw the strong overall for movement in of solid we with share increasing our organic from origination in Yesterday, earnings. In growth XXXX are increase portfolio fourth net in the bottom-line. income of all another Turning financial contribution and and performance results. is scaling again We its benefited joint with senior credit loan quarter level per further portfolio. quarter loan from of our had $X.XX high-quality I’m any shareholders investment performance quarter. pleased in that per share, we to compared our to absence regard, transparent The real during report fourth to

a paid For $X.XX strong year, pay share. per share. of are regular given, during of fourth And in special $X.XX of quarter, the to the the we a BDC continued we performance position per the a dividend dividend

asset $X.XX earnings per per value for of share have our a as Excluding regular $X.XX our by $X.XX share. quarter increased would the dividend, share our exceeded per special net dividend of

XXst. of NAV the a As special dividends XX a shareholders result for yield $XX.XX the share decline $XX.XX at represent year. September our to as X.X% dividend, from per to of combine December The

And As I risk portfolio mentioned, internal from weighted quarter-over-quarter. a stable remains with remaining our the credit we of standpoint. quarter a flat quality average rating had benign valuation the X.X, of

extremely The face that this of activity as origination investors detail. specifically was its selection quarter activity additional will the state to the the that to but the leverage are the market, it doing market, extent. now also the and not the dynamic to origination only of with to spreads I’d that, and dynamic. impact competitive to continues as we to investment asked this with quarter, our colleagues being With and provide My in know, However, an competitive EBITDA greater on our overall like color in call challenges. without structures turn not Grishma over we’re our underwriting and relates discuss affecting what

Grishma Parekh

Thanks, Mike.

and mind deep leveraging a another borrowers strong highly whom branded deploy with across partnering capital and Portfolio credit additional X/XX. with the construction executives We our the our supporting focus and to XX% the we as In as proven slightly by expertise quarter. particularly ecosystem, year-end, tools remains and of careful from of top loans stuck quality maintaining about XX% lien accounted BDC on within and Carlyle team. up they as discounted diverse market which highest leveraging to have investing firm. grow continued [ph] relationships by of we long, by the management portfolio portfolio company the continue financing operating and private of of in We seek first for unique fundamental origination a our short, while we equity have we challenges manner, measured, sector addressed sponsors delivered

We stack BDC top the time capital volatility producing we have where risk-adjusted believe see we and withstand the in and has shareholders. market a to to our quarter-over-quarter pressure of focus deliberate at returns attractive same been the consistent of while economic the built opportunities. front is potential to and reflection best continue Our

XX commitments quarter, the $XXX totaling we approximately During new made million. fourth

origination enterprise loans. our activity also downside our was the were is split value BDC Our protection commitments of of fairly the loan the JV. that position evenly XX% secured exists across to of and portfolio. investments lien reflective significant value these senior in and first The

the too. These that the reflection is records, For generate business and have these new model, are real This XX%. of long robust but substantial quality purchase company’s was resilient lending businesses of the a investments, multiples partially today’s flow. also loan-to-value track cash underscores

XX volumes sponsors, about investments private of to XX% covenant. fourth quarter, of our have financings, covenant quarter our continues VP of maintenance And XX% financial XX% dividend while and acquisition clients portfolio the investments were our we and for which the ballooned, support During financings with light recaps business. in and were equity closed of the opportunistic buyouts

Our floating in investment entirely LIBOR. to benefitting portfolio an continues are be a from we rate most increase and

quarter. yield on about lien the overall was and X.X%, costs, the XXst, As of second XX average on up December yield for prior lien based increased offset amortized about first loans The quarter. overall investments second our X.X% lien points from debt first basis weighted increasing assets lower those during to XX.X% to the lien repaid X.X% LIBOR at was yields higher due was that newly yield the flat compared The as by for primarily loans LIBOR. to booked on from

characteristics. to brokerage mix of were portfolio. continued the be two insurance Healthcare and our defensive their Our largest non-cyclical sectors and to nature highlights of the industry drawn

of the year, that conservative the and on tech-enabled and software technology, focus resources to companies made Over course services a we added vertical.

portfolio our Shifting with at competitive PSP. comprises been about quarter-over-quarter. The portfolio BDC a was growth XX% as robust billion X% industry of to of Our focus JV and gears expertise $X.X XXst. has December the and true differentiator. stands Net

mezzanine to room JV, from have portfolio we scale When the total to our of call sales advantage and saw the and Officer. discuss dividend I’ll loan substantial JV, core companies we believe continue to loans sheet. billion re-price yields. We million, the billion loan the Chief Tom Hennigan, Tom were environment be $X.X $XXX over accretive including balance And repayment JV do, to turn the $X.X of at borrower-friendly our take their that shortly. quarter. the and will Risk recapitalize up repayments December increased XXst, will as to last highly excluding it investment finally, We our

Tom Hennigan

Grishma. was credit of the quarter. stable Thanks this performance portfolio again Overall

one total at the rating the on the of watch internal stable those remained the transactions, Total And of the which about risk portfolio percentage fair of on or flat. while of up at As a modestly worse portfolio rated a number on Mike this watch portfolio, ticked X.X. rating as non-accruals non-accrual scale, X the position our list remained risk internal steps. weighted percentage noted, of value, is list X% as remained steady borrowers average

of terms metrics. In credit

values portfolio the revenue EBITDA higher was on for was but modest to offset in investments. net additional regards Similar rest the was across quarter had In the remained existing growth net benefited unrealized aggregate of offset mid-X And quarter. of of times over portfolio. market experienced realized in total increases over last from leverage up Our We stable leverage course Valuations to XX% for improvement range. portfolio new spreads. modestly markdown by and net gain tightening annualized our in across from valuations, portfolio and by Quest, continued the XXXX. again the quarter, this an in the leverage Product

was X.XX X/XX. On our from the as down debt-to-equity front, of slightly XX/XX, financing ratio times

at liquidity of will targeted over quarter, higher quarter, highlighted we into we new investments. about million to we our of loans visibility of provide hurdle. the While which remained current of in end our first X.XX, that held the repayments Last ratio have south $XXX priced our X.XX debt-to-equity adequate $XXX for saleable yield of range

expect With end at natural be the running market half current course, to of amount that we first about by quarter. the repaid the

slight million only JV And call, had $XXX our as by level, used JV, forward. equity credit JV prior support Regarding Outstanding of under we provides facilities. capacity successfully should reduction quarter’s as as last not the quarter. highlighted those during of debt partial our unused going CLO the $XXX BDC. also total future we existing CLO and it our a At facilities additional The repay to of the of XX/XX, XX/XX but of in were to commitments versus growth including debt debt returns meaningfully provided was JV, proceeds December first the facilities. financing million, CLO closed approximately mezzanine loan our at enhance repayment

and million compared by to $X the higher so the of income X/XX, meaningful million Turning The waiver JV drivers the interest fee to quarter, Total income increase expenses million, management scale management for to course of accretion growth fee loans, was for X% on fee the fourth growth were the up on threefold: quarter, LIBOR; based the investment from in from million over quarter. fees higher in quarter due the on $XX ended driven removal versus of X.X% growth financial and the Net second, and premiums primarily assets. increased about vehicle. The outstanding waiver. the were higher dividend third interest largely quarter. income, fourth as we effective income of increase results First, average higher and the increasing management call investments continue primarily to to average other amendment from repaid on ended third, that with $XX $XX positions OID higher from fees; in the third

in from for share. on On quarter. bridge I year-end. noted, $X.XX But million In per share, of outstanding net XX increase $XX.XX as at of increased NAV comfortably the quarter you’ll core expense income or at was we per earnings. addition, in presentation, a quarter X/XX and The borrowings was dividend find to during both for quarter increase the and the covering $XX.XX the page regular $XX had to investment our the quarter result for average end a $X.XX Mike down of about NAV earnings an the due interest $X.XX LIBOR. strong

would special the $X.XX. $X.XX, of absent NAV have increased dividend otherwise So, by

equates quarterly NAV Excluding per And on dividend to approximately based special $X.XX we year-end, annualized X.X%. $X.X yield million which at undistributed the had in net share. income, dividend, the was investment

OID which was dividend Regarding the XX% north fourth and JV higher by down the JV equity in fee on from quarter, income XX%, returns, third of than the accelerated in quarter our normal aided achieved about was repayments. and yield

‘XX of quarter CLO JV of yield in to With a the XX% our and of capital, closing first the JV significant overall reduction the first the level in level. back above we cost see at expect the

further some provide will color Levin on Jeff the Next, environment. current market

Jeff Levin

possible. at credit Thanks, strong want driven with into of High-quality combined a marketplace tight the opportunities volatility entrance the have market; strong move no leverage investment in and find either issuance, markets exception. markets, market as is to strategy despite tight increasing overall CLO extremely be there as by continue middle market. leveraged and to class are of was seek aren’t the earlier being credit loan general deployment new to This Tom. borrower-friendly investment in to opportunities. wherever They not a year create discuss in by with markets re-priced originate all-time drive fund the I managers loan very and increasingly capital didn’t purchase lenders documents there record themselves the or tightening Overall, saw record short the across in broader an refinanced, sponsors are need and equity finance has credit address XXXX and just to environment dividend firms, our valuable terms. or markets multiples continued harder to ways credit finance prices private equity paid and the good month being direction, much really looser say, raising. overall liquidity are. near extremely ever. to the to asset Despite differentiate formation recaps this to highs, opportunistic period credits in leveraged being being spreads, We

conviction, what a that costly uncover platforms. equally investment when In a sector our deep XX% lenders markets fourth particular leads Carlyle we help one, were of the the often, market extremely navigate knitting competitors industry mistake. supports Conversely, results to occurs. and environment and due-diligence Most of current discovering of network to investment, may dislocation a could whenever noted, is first like will the market resources wide our Carlyle on and other months. that have given broader exhaustive issue smaller the stuck quarter our or potential engaged an relative significant through dynamic operate resources our to the differentiated are us in current Grishma lien in As level also our avoiding middle better critical. in with not credit we and during passing resources These that enhanced an business be vast The investments our have to process as a due-diligence the process. Carlyle been asset be

we we in Providing generate scale financing class. will origination to continue as full asset finance this leverage are the the While to returns be to a our continues sponsor market, tight strong way extremely optimize way terms. optimal in risk-adjusted in to influenced solutions

of and to documentation structures We maximizing the with lending our along to co-invest and raise pricing marketplace ensure to continue our and base. our TCG influence increasing capital strategically direct well-equipped BDC, our in These terms. across is the broader platform capital pools can right private ability incremental scale capital business relevance

than heavily anchored already is portfolio our in aware, most more first BDCs. are you other As lien loans

continued we first far of for activity been for with on origination of have the generate The have will well-positioned capital quarter, in the of yield. to of first new XXXX into selective XXXX. Thus the sake credit stretch and are we months not couple So, investment trends quality preservation. extremely

joining underwriting sectors for like standards. increasingly with and for partnering please sponsors process line highly focus Operator, rigorous you open will We of in the Company. call for the continued the industry due diligence today’s everyone on our to maintain the will support right and and questions? the thank We right would

Operator

question first of Securities. Bock Our Jonathan from the Fargo line Instructions] comes Wells [Operator with

Joe Mazzoli

morning. for Mazzoli Jonathan morning. Joe Good in this filling

middle first $XXX million that market the we funds. for credit securitization the you priced the see So, question,

under So, fund have credit $XXX sub million you facility. the about still

replace expect also the credit then So, do of market to you facility to support kind fund securitizations middle additional to revolving growth? the and future

Tom Hennigan

additional It’s Tom, strategy The warehouse use morning. then to JV continuing that and ramp good securitization. Hey, at to do is up one. take that I’ll facility the

do next approximately was then number that facility both we north last down $XXX did the time playbook, So, million our to we and see back of loans existing and facilities. securitization adequate where of have to repeat repay up the over the we’ll up of CLO ramp the when it

Joe Mazzoli

what as return very whose curious, assume management funds the percentage is -- on credit is so equity helpful. total of securitization there to That’s credit fee Thank I’m charges is a I and pay fund. because manage would the CGBD’s And Carlyle you. essentially reduce that the the securitization fees and this assets holders structures,

thinking of potentially the might expect coming other credit expenses statement quarters? that in So, the I’m to in kind the we income increase fund for

Tom Hennigan

by there no CGBD. our Yes. either taken, or CLO, fees Similar are to sheet by CG on-balance

no essentially it’s So, CLO. fees management

So, XX-XX leakage. JV partners. the CLO will between through JV No the distributed the the be of continue returns to two

Joe Mazzoli

certainly -- warehouse? one that’s Okay. Should the mezzanine next to about good down, And we there. is expect expect paid securitization again, we question the kind securitization use final Should maybe the the as just that helpful. That’s know, CGBD’s and to fund of very be priced? with to it’s loan that

Tom Hennigan

much We ramp back will then like as do credit we facility, anticipate ramp overtime that up that the and additional securitization. down other

Operator

Thank you.

Our Morgan. next of the JP Wedel question comes with from Melissa line

Melissa Wedel

to prepared today. Melissa quick Rick some quarter. of Hey, your comments guys. payments on in on question for first the A the clarify

the expected $XXX million with below $XXX roughly additional salable mentioned your million an $XXX priced million loans You was now of included or repayment hurdle that about right XXX? were in that

Tom Hennigan

The I made I’ll This was quarter. the is Tom. comment to million last $XXX clarify. reference

-- are for first where indeed repayments So, anticipated loans we anticipated at it’s its those playing the if quarter. right saying, exiting we’ve the we loans overlap previously first the now are course there that’s pipeline selling $XXX that potentially had the naturally expected repaying down our in is is as in I’m million that or out quarter.

Melissa Wedel

the incorporated that’s number? And into XXX it. all Got again

Tom Hennigan

Correct.

Operator

And the you. question [Ph] our of next Jim West Young comes Investments. Family Thank line from

Unidentified Analyst

professional Yes. bit from a realized Thank the you. Hi. quarter to the Could fees just that explain September about in the you little you quarter? increase December the

Venu Rathi

Hi. Venu This is Rathi.

as continuing terms quarter to get BDC, So, say, full -- we public a bit our, as this the a more fees. I second are the would of professional and we in little was clarity

we incurred of of little legal professional and onetime a a did fees fees. have So, couple bit

as component and other fees audit. audit the as corporate The internal tax fees the are of well

required are We comply to Sarbanes-Oxley. with

of these are So, major fees. the components the professional

look go QX, forward, we like we expenses. be -- estimate to of line As actual QX our fees I in with would say kind professional we

Operator

that I Thank question-and-answer to back And for session closing you. over our the concludes any call like for BDC today. would to turn comments. TCG

Michael Hart

you, We appreciate Karen. Thank today. your time

If you And call. do with next to free have talking Relations to follow-up any we Investor the call look feel after again you forward questions, quarter.

Operator

you participation conference. today’s program. have gentlemen, and your in Ladies conclude day. you Everyone a thank does for great now may And the disconnect. This

Carlyle Secured Lending (CGBD) 6 Mar 182017 Q4 Earnings call transcript