CGBD - Earnings call transcript Q4 2020 | Carlyle Secured Lending, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the TCG BDC, Inc. Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to your speaker host today, Allison Rudary. Please go ahead.

Allison Rudary

to Fourth welcome Call. XXXX and morning, TCG Quarter BDC's Earnings Good which TCG night, press quarterly with of earnings issued results, available and copy Last an presentation release we website. Investor BDC's Relations detailed earnings a is on our

involve undue we is made future Following call our question-and-answer These session investors. webcast, website. should available today on inherent over and Pace. any guarantee differ time. those a reliance Any hold update for our that turn will indicated. and on report Risk placed a annual statements on and at may the do be risks analysts not Form no on I'll the performance, forward-looking are call remarks statements TCG institutional be current XX-K statements forward-looking today, Chief being BDC expectations This Officer, not materially in management from assumes replay our will cause and them. obligation to including based identified that to And section results our Linda those Factors that, Executive of could to with uncertainties, actual

Linda Pace

Thank XXXX call on fourth to our thank Good quarter everyone, for this joining discuss morning, you, you Allison. us results. and

X fortifying credit Boswell; with today portfolio, balance and Tom our are declared Carlyle. share. me how investment generated of origination trajectory very total sheet our net our portfolio of of company common shareholders with relationship were our in We degree and managing XXXX; in per focus our and and quarterly Officer, environment; approach throughout we successful high I'll the Taylor a second, our XXXX performance Chief Overall, of the We benefit of income current the sustained on exit positive income our $X.XX share prospects my leveraging our confidence a a our our detailed Investment entering Financial And generation. results remarks capabilities. Joining fundamental and per Officer, dividend we to quarter. investment Chief and our Hennigan. momentum solid another and had volatile first, from for finally, year, areas: $X.XX today

a recurring each will dividend share with $X.XX of You our amount excess supplemental combined in provides a of which per dividend quarterly per fixed base this quarter dividends, total earnings policy $X.XX. $X.XX for quarter, share of was recall, for

As Tom Loan X.X% excess rebounding by dividend but increased more market performance. to in in earnings asset of importantly, coming Net will later, to improved, detail $XX.XX quarters. we continue valuations yields, just from our not base well per the improving $XX.XX. value credit driven again forecast share quarter-over-quarter

We also net resumed of our last share stock. This value. resulted $X.XX to quarter, shares repurchasing million common our asset in repurchase program X of accretion

our strategy of remain valuation, we macroeconomic shares. an with acquirers While map underlying to stock's in portfolio, have With repurchase approached active towards an we our our positive we recent expect for positive at continued migration. underway recovery offer opportunity and consistency always performance eye XXXX our credit

in depths in we capital attractive extremely in actions a our last quickly M&A of pleased we're call, year. of rebounding briskly positions has CGBD time, recovered the proved origination robust previewed our to deal short access that proactive portfolio XXXX new period and market of and back the half the the quarter the in Much environment, fourth market with an from to As our demand crisis. of last be

be risk-adjusted we attractive see opportunistic where are areas lien maintained the new about have seeing momentum other excited and positioned far us. returns. of in are our Currently, front in transactions thus are and the quantity and in core activity first in favorable we of same year We well opportunities the markets both quality and to

of of our sustainable defensive and income portfolio the As our generation construction for our asset both investment to always, on pursuit approach shareholders. we remain in selection objective, focused core

broader to us to being a and of I our shareholders Finally, the the want from accrue part few of that advantages platform. Carlyle just competitive highlight

offers origination platform our a First, highly differentiated proposition.

of As highly the scaled our coordination while of selective our us breadth and product our factors capital also in our be to allow offerings funnel, sourcing wide investments in our diversifying base risk portfolios.

time you have Harris, investment Many utilizes on will Shareholder expertise any our type, of not Please or her last delivers regarding Additionally, reach should on at investor Allison allow company, have improves team, to providing Carlyle, Rudary, CGBD and questions for her Relations Head that to me working company. the quickly, our us execution the negotiation which introduce us Allison, performance. due platform and we're our form platform it Dan now from advantages specific know industry, and best-in-class investment BDC's shareholders. is of who a consistently insights geography the structuring. Whether foundation valuable excited to do our deep-embedded you Allison of as here experience asset diligence, covering including a to out hesitate And late year. with our our side, our sell joined

now Let Taylor Investment Chief me hand our call to Officer, Boswell. over the

Taylor Boswell

I'll a comment industries recent from be comments inputs develop our at credit today I'll dispersion past characterized on and and length current activity quick having Carlyle's to Linda. evolution by upon macroeconomic economic begin across global our discussed you, continues geographies. in across based portfolio Overall, substantial global Thank origination we footprint. After in with calls, perspectives, which quarters. on my focus activity that,

wider in the it induced between gaps has While that losers. been affects equally, and pandemic categories winners no created recession spending far has downturn than usual unprecedented

and we but fueled of macro with we and broadly Stimulus the demand just rebound, most conditions yield in high scanned where execution to markets some the facilitated preliminary Our quarter loans, the about X.X%. risk, to larger-than-expected thus remains a balanced A supply. always, In in overall of thanks fiscal U.S. with vaccinations. by price GDP and broader see since crisis, that consistent wins year-to-date have inflation of mistakes paper That data across strong slowed box beginning all increasingly which stimulus reopening outstripping paramount, markets, selection suggests aroused concerns constructive more have certainly but is but far, inflation both have prospects syndicated paid pressures, economists liquidity U.S. credit as continue meaningfully buoyant credit economy, backdrop evidence the overall aggressive prices leverage markets. year, see has opportunities growth XXXX, somewhat for of in said, out individual for private with finance recovered of and see this the first conditions.

leading an active in the totaled same which $XXX This deployment million yield. syndicated stepping in investments which an the repayments quarter environment, sponsor in to executing mentioned, presidential into Linda fourth transactions across X.X% on as fourth transactions comfortably Notably, heavily outpaced dislocated core an quarter attractive period, at our complex the for X.X% existing in add-ons yield. our capitalized XX the average the active As finance at extremely well unique was platform. million We deployed $XXX strengths strategy, approximate of asset-backed originations we our market borrowers, election. as the new were closing prior activity

more Our origination diversifying expansive underlying portfolio's footprint allow selective be capabilities factors. execution risk the us credit and concurrently while broad to

the time. material expect to over benefit shareholders our We accrue of both to

to same leverage year. those continue this We strengths

robust set capital wide investing value upper syndicated subsectors private our Currently, seeing into technical core swath to are as we conditions operate. the credit markets which tactically attractive in in allocate of the middle proposition. the we constrained individual across market middle market Looking in opportunity investments best the most relative

our expect has capable the the of With been our deliver platform, as to However, of we value access in opportunity to to highly regardless case finance in dynamic. leveraged of credit benefits always the markets, remain the relative in we which migrates. confident direction location be ability

that Turning portfolio In to the where and and in said, have, prior total from exposures expect those active X That repayments. And would management increase, our sustainability portfolio comfortable they MMCF basis, to assets X. the from decreased environment, X them M&A in MMCF quarter. on of focus an we particularly distributions perspective, remain normally one cumulative vehicles. to MMCF a from on we

a quarter I favorably, the expected. played on quick quarters. make comment as out in several of and we discussed The credit, Finally, which last fourth depth each should have

While we had positive recovery. transaction, Again, our migration appropriately new sufficient no risk with for we fundamentals, continue bridge ratings MMCF valuation their solid leave conservative in credit coming constructive progression to X accounting our to the and that well risk, valuation have combined liquidity portfolio's largely the positioned performance the to approach, COVID-impacted addressed quarters. experienced we and remain us this to quarter, portfolio. feel demand believe borrowers vigilant deliver We nonaccruals, in on problems our have continue to

support. for always, Tom? time As thanks your and

Thomas Hennigan

Taylor. you, Thank

a I detail on balance sheet fourth So further I'll earnings, of provide quarter our now our portfolio and the then positioning. begin with review

a a by fourth offset loan increase we quarter our million to of lower the $XX of loan the provided a This in new first a assets OID dividend share in the and prior higher at normalized plus of $XX average an increase balance, the per the at to by for from $X.XX partially from level had dividends million, due prior primarily stemming XX. a share, level income On increase income decrease which flat March quarter net we fee previewed, was is generation. investment shareholders of million. in up $X.XX income Total originations income the business The of $X.XX February in was XXXX total record the quarter from impressive new on of in As the payable total Board and fees were quarter last JVs. interest income the X declared as the quarter common from contribution This Linda investment of repayments, of supplemental, few comprising to for of from Directors invested $X.XX couple prepayment a resulted million, another the general factors: quarters. an close quarter. driven XX, accretion $XX was the dividends expenses exceeding regular of $XX JV. or guidance Total versus for of per

rest we've pay to able the the plus last few deliver pay sizable to supplementals, to forward we remain of regular look $X.XX line in continue we $X.XX our As confident the with quarters. to dividend comfortably very the in ability been XXXX,

by On heavy growth muted MMCF Moving to flat up were XX%. total performance activity the X, earnings increase at our of combined income at repayment X the was about at JVs of total about driven yield dividend $X.X X. versus billion. was million, dividend Total was on the assets The XX% $X.X a basis, asset by quarter, prior JVS. while our MMCF addition was over while

quarters, Looking and forward, a we X. MMCF coming see as JVs generation full from dividend assets, in for the contribution adjusted quarter X of stable aggregate yield from the

net realized market March the $XX gain positive consecutive to in in credit. quarter rebound yields, third continued the we the On on quarter, momentum buckets the of was same based total the drop aggregate plus our the XXXX. increase saw I've valuations and improving Similar for valuations, the benchmark in prior outlined saw of the we unrealized board. quarters, quarters, across X million following last Using improvement

plus names consecutive XX% COVID-impacted have X/XX. quarter to lower about accounts our underperforming equity or COVID The $X performing of up also in improvement. which of that been the investments combined compared First, $X increase the pre-pandemic, portfolio, assets were a have million, some marking JVs, in third million value for stability exposure, which the

the Our gains. was our Hydrofarm heavier a category investment COVID-impacted the is The quarter, successful key par moderate at exit driver. mid-XXs in of valued in final last to

of XXXX, about in third The made transactions business by see decreased net relatively momentum and Building activity Total value, it's aggregate. X%, flood from during we down from turn on the I'll believe a non-accruals value. to and in given based into $X some inched security With in of wave of central both by that restructurings the lenders fair both we now think behind impact, debt the our quarter end, in to holding and achieve In on the and cases, of some with instruments. $XX quarter with equity a hold assessment used X% the you'll to from the due conservative now while Taylor's X/XX. and majority proceeds direct $X to our somewhat from the and cases successful of amendments the finish was better While value billion early be activity. recoveries. the credits, leverage travel primarily JV level segments. closed from and leverage, particularly fair still X.X manage of we is limited million increase positioned the the preferred primarily we since in X.X% we largely continue was us. debt that's The quarter assumes from down outstanding to portfolio related facilities downgrade we these aerospace we're is I'll comments, indicating positive to X.Xx. business, in driven Statutory to of risk second metric billion to across next liquidity. rated we equity, down Total debt second as book. was see review in financing the approximately X.X% prudent superior of experienced $X.X investments the converted was reduction is to the of and investment at million total The closing fourth services to under the risk net financial X.Xx, which net down X.X November.

quarter, offers flexibility closed close used end a of macro comfort our incremental the us in X.X%. case in us to repay like to proceeds in the invest experienced This provides of also of those unsecured any target the In environment, sitting million of the year, fourth X.X lower $XX we're to twists our So one to we legacy-secured unexpected and opportunities. notes of of also we last range with an We and retire attractive financing prudently on new facilities. coupon X.Xx.

simplified now as trading Carlyle long-term instrument financing preferred the regarding we issuance of a our above the previously, But both the is in quarter. equity and And this our May well fortified structure XXXX, conversion stock remains BDC. by So investment during for price. we've noted our

intention So to some no there remarks. convert. Linda currently that, is back over closing for to With

Linda Pace

and how volatile extraordinarily Thanks, team such a Taylor, through no high-risk other. year proud was environment. Tom. a XXXX of and market Tom I navigated like are the

operator begin the we line earnings like I'd for are today, our time the confident questions. our sheet we in positioning the and outlook. for your support Thank portfolio, of you to XXXX, As all balance and to open and ask

Operator

Before would Q&A quick we TCG a begin CFO, like Tom to comments. our process, add Hennigan, few BDC's

Thomas Hennigan

note. quick one Yes, operator. you, Thank

just X on an our fair basis. As JVs. you highlight all-in value earnings in may X both Page increase published include have on of those on I we seen and our to presentation, the figures, XX/XX cost investments yields our want

would the to were increase JVs, that you prior be closer If consistent XX basis exclude actually to is points. quarter-over-quarter X the method. The with

highlight to that. want Just

figures to we the questions. We move And near you, to expect comparable issue term. can Thank now in operator.

Operator

our first with from And coming the O'Shea Instructions]. of [Operator question Fargo. line Wells Finian

Finian O'Shea

First question on amendments. the

your with that, the us some Any how this one I think batch you amendments us, you for said portfolio to mostly portfolio. or is Can on of need of they that, behind chapter expand maintenance behind chapter that there? are that give presumably, in covenants with now date? hopefully they us, concluding EBITDA companies, COVID tripped how or color something rebounding like color

Taylor Boswell

Taylor the got line. you've Fin, on

answers As a you'd that wide range question. to there's across portfolio, of a diversified expect,

to in across think that this but of I think see outcomes how their the issues, the over, around recovering. not I things are subsectors teal borrowers that is the we what pretty portfolio generally, can is liquidity the bounded. that rather addressed in At and that the be have that our generally confidently crisis some portfolio point

that where a of us sectors found continued and have to consumer-oriented if number has feels amount. generally and recovered been it more of fair think there demand well stable below a periods, sort remains progression, as like but prior have the businesses the the but footing recovery I

travel and and those exposure perspective. those sectors. the to the more borrowers couple Again, last aerospace to start like recovery. more spaces the upward that severely little that sectors, from a are long then hopefully, that period you sufficient the having of you this in of into bridge what in impacted gives generally bottom think hopeful we've in finding borrowers we still couple again profitability that a of back these to period, down liquidity But feel of helpful? will. is I inflect sort Is you both in months are come But all a if time seeing, of a many we're of for are of seen context as and more some demand-impacted

Finian O'Shea

that, at money. the the back And range in pay convert? appreciate outcomes? again, so. longer I, the you, debt? instrument, you Does a it's happens follow-up now -- like What automatically it it much term a convert? although on does that's again, are of do Very of converts, Or maturity there a Or outline

Thomas Hennigan

Tom. it's Fin,

the maturity On convert, date. no there's

or are time are well both there issuer investor to the those So which convert. various the but redeem, as to optional the frames in able as obviously are option

of So instrument. maturity a the on there forced really date is in terms no action

Finian O'Shea

small healthy a supplemental. final special the expect just question you'll think Great. on of continue dividend. Tom, to outlined And clip a you that earn to I

It through restoring COVID supplemental sounds keep stabilized, to and or Or you like are so core Now and payout. we're current plan core is considering has your partially restoring forth. -- the dividend? the portfolio you perhaps

Thomas Hennigan

very couple and right level couple we results, anticipate that each delivering at about have last you that a as in We the continuing very confident the quarters. as paid last for $X.XX, we been of with certainly being regular good very and quarter. feel Fin, noted, now now, quarters, the additional feel $X.XX $X.XX consistent supplemental the of we've plus

Linda Pace

Fin, just in to remind jump and you.

So the investors if possible. and policy on just want change our the policy. to policy And being back, this you transparent We is intent don't consistent in as will. with really as new as

time. think you expect stay So to should some I like us for this quite

Finian O'Shea

Okay. quarter. on And congratulations the

Linda Pace

Thank you.

Operator

with Our next coming line of KBW. from question the Paul Johnson

Paul Johnson

as debt in the to do just all? if lien And increased And the for forward your how in addition that, questions. wondering, demand also portfolio? we do portfolio. or junior see potentially made your of move few congratulations, any cycle, of sort would you borrower to change, second the potentially at have good you a expect with you size I progress in I'm average

Taylor Boswell

Really, a Taylor. -- perspective, I million in north EBITDA platform platform across upmarket, that's broadly of elements the size marketplace. a $XX have we're different are is significant that all you? lets on fortunate way kind think of bunch the syndicated to participate participate when high-yield from from it's Yes, to into world actively us appropriate. How the the borrower of and our a Paul, aligned through

where live any perspective. in think the sub-segments we an in the value, core of I the may or where on So the time of they on will out over tack given probably margin the see EBITDA that from we But from averages about quarter, depending ourselves and portfolio relative are.

I So when tacking significant valve the in market rather change, the see we marketplace. rail don't moves think but ourselves around see a the

As with second comfortable comment yes, our regard to a from your high around we're question of right lien, book applies. general the construction perspective. level allocation now Same

little structure, You there X% value product the value to market. or opportunities would place it which lien in prevalent, What not be by where may markets this bigger the we being see relative bit larger as markets you liquid now. see market in tends borrowers environment, or more second served around in X% is, upmarket, because I aggressively quite extraordinary a bump here a is that relative is migrate tell right

So a going probably time. little but way, bit big participate markets see over across is other the in stability trend these this moment, the and we'll picture,

Paul Johnson

case. in the I'm looking new investments any But several pressure you we've very of this curious as appear quarter, Okay. experiencing the seen of middle sourcing? in and your the have so, and curious, schedule of color. any be to LIBOR but is your have market, just loans what over are the it previous last at terms if and good spreads yields months any It's declined tightened of of sort investments just that some of you're that your I'm the kind in on -- is in And or the floors doesn't then

Taylor Boswell

maybe we points. middle a are core rarely middle million book, are the EBITDA points, core But migration world, general again, basis market $XXX plus some floor market. the upmarket stability on to In our not. XX transactions, from floors in borrower, pressure and hot XX the seeing and basis a you In really perspective down particularly to

Paul Johnson

Congrats Okay. that's all quarter, for and good a again on me.

Taylor Boswell

Thanks.

Operator

Wedel with the question from of next JPMorgan. our line And Melissa coming

Melissa Wedel

with, actually. average your what is current I'd Could on like you last investments the your us tap on now? to right remind to to question debt start floor

Thomas Hennigan

going XX said, Most floor more not we're And of you And Tom. typical than the where the loans, portion transactions LIBOR It's LIBOR is of or XX loans as it's probably look lien -- X%. But loans upmarket. when there or points. more we're our floor likely basis -- where I book, have are first lien at second our average, it's those on -- majority and the -- those floor. a a vast large lower it's really

Melissa Wedel

Okay.

across the second XX to lien the across XX component? portfolio? So total Or

Thomas Hennigan

why Across that assumed the total in X%. portfolio, not weighted zeros and That's it's there. the that's with

at X%. have handful of floors points, a We or vast XX but basis majority

Taylor Boswell

was There LIBOR of floors and was a much meaningfully, for were in north X%, market a to moment of since the -- years then. when where their of a just there couple we was able as ago -- borrowers that seen drop haven't

positions there's book. so the a from of couple still that And legacy environment in

Melissa Wedel

Got it.

That's Okay. helpful.

clear activity, that were you pretty In terms I remain of active this in environment. you think

attractive opportunities. seeing some risk-adjusted You're

On the sizable of near -- do about you any 'XX? then that are And the thinking generally you side, you in how throughout remainder anticipate are repayments how term? the repayment

Thomas Hennigan

at sponsor I To think we in on quarter, a the And that couple potential had anticipate our or regular repayment limited of quarter. the up, repayments in our back that quarter, for first be we've of deals In are Melissa, you sale fourth and relatively quarter, the quarter, refinancing that front, more repayments on have we in looking prospective practically picked going repayments first we to, the fourth There's in portfolio forward. know may When I back look up regular from the quarter interesting. normalized and M&A repayments came the a we list. second was for in think back activity repayments. level the date, our went normalized third it's say, X. cadence

increase certainly XXXX. normalized from were and in level quarter of will the be first repayments, anticipate that what an we think of more rest I we XXXX

Operator

over further Linda time. I And like call to at to closing any I'm remarks. this back would the for no turn Pace showing questions

Linda Pace

and you hope Thank talk for Thanks us. you, you good is everyone quarter. wishes all and your for again. we'll well, operator, thank next And to I

Operator

and that our today. concludes for you participation. gentlemen, Thank Ladies your for conference

all You may disconnect.

Carlyle Secured Lending (CGBD) 24 Feb 212020 Q4 Earnings call transcript