CGBD - Earnings call transcript Q1 2021 | Carlyle Secured Lending, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the TCG BDC First Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your speaker host, Allison Rudary. Please go ahead.

Allison Rudary

Good morning and welcome to TCG BDC’s first quarter 2021 earnings call. Last night, we issued an earnings press release and detailed earnings presentation with our quarterly results, a copy of which is available on TCG BDC’s Investor Relations website.

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

Linda Pace

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

and like Joining Hennigan. established Officer, the me is we start strong to our on today Chief Boswell I our Tom call would Taylor highlighting our business. have Chief momentum the by in continued Financial Officer, Investment

quarter, later, continues importantly, and results Tom I financial which improve. detail to portfolio’s for our will Our And the credit solid. were profile

shareholders. $X.XX. income of dividend. of $X.XX dividend supplemental of per attractive the now forward, from confident to our and to net to investment a and continue quarter. includes recovery our are further and U.S. with expect we like total move strengthen and the $X.XX positioning we income the for $X.XX as alongside ability the away macroeconomic Overall, Going credit the base depths crisis to turn in common I’d generated financial that pleased health highlights in a the We of our current are the of will generate This declared dividend share we sustain

quarter up ended well our dividend. to noted value $X.XX an increased have we of a of $XX.XX, net since performance. increase per first $X.XX be the expect We earnings with marks NAV market excess from consecutive quarter last combination net of for to yields credit growth increase overall XXXX. of X%. This has more asset quarter value quarter our of before, XX%. of asset in importantly this stronger fourth since improving share base As was continue And the we Driving and then,

repurchased we of asset resulted value. asset accretion discount to net an of average in almost our Additionally, $X value. XX% common our $X.XX at This of stock of million net

We our be continue to repurchasers consistent active of shares.

to markets in we contraction. operate the last look sharp active. the to is broadly from of rapidly Turning continue environment be environment as investment the speaking, year forward, we And economic very recovering which

an strong focus in is where Despite We As have the the breadth opportunities. our Taylor landscape, value. focused provide new will experienced competitive differentiated exceptionally on close leveraging core middle markets expertise. to our the deal our that the advantages originate areas competitive area a both on quarter, in continue but markets markets deep those of robust, detail Carlyle still we business. credit markets And investment the adjacent to later, attractive and syndicated of accrue remain us broadly relative we from to pipeline compelling platform

great an selective. highly to Billy income Wright And and always, market our all throughout quality portfolio to our Directors Independent the would generation deal to be as which high I also Our to as experience a defensive, take board. moment of of allows be stable Billy credit diverse, predictable, funnel last of construct sourcing aim Director. like welcome quarter Board to who is cycles. we broad a us our and joined brings

Boswell. over Investment of as I benefit his the to Officer, Chief to now on key have expertise to we glad our Taylor continue will deliver shareholders. objectives it for are We our hand our

Taylor Boswell

Linda. you, Thank

of our global Conversely, of the some we as last lockdowns as household As we inputs which the usual, decelerating, European economic of the this the have distribution, themes develop which based upon current economies. X% a phase show post-pandemic the GDP its across year. proprietary fiscal boost signs significantly economy from massive Keeping X% I U.S. income with quarter is China, expected in comments perspectives, XXXX, back macroeconomic improved In second our which confidence generated grew contraction. up sharp expected, quick by accelerating of evidencing year, of will and data is across again growth begin with positive but is Carlyle’s of solidly divergence reopening on footprint. latter in catch to vaccine out. on the stimulus, still

most versus significant income the XXXX sensitive both XXXX data in categories. Our spending growth and suggests

fundamental with a borrowers. this based portfolio, vast the for investment Of operating XX% majority course, strong U.S. backdrop our establishes a of

especially seen incidences with As These sector. in understandable, increased to result have of and pockets inflation combining has of the capacity decisions shortages, progressed, price demand generate the often offline industrial conservative pent-up globally, but management XXXX. of capacity are spikes the ultimately we take overly constraints to in year

monitoring markets we to effectiveness as offered long-term life the astonishing these which yield we new actions, syndicated and continued management pass-through this portfolio, other with both However, alike. is strong substitution, price of active investors fact. execution high have issue Liquid policymakers, inflation. and an transitory, asset is broadly year-to-date, the reason here. likelihood we with input view extremely time, rate today’s quarters remained by performance. of extremely the support low to In are on for posting record, also a these attractive balance of and borrowers markets low at classes increases environment, most all interest credit obvious The In leverage busiest expect both their runaway finance the will mechanisms,

change, near-term they see not if these we are operating catalyst about a effectively we not concerned market persistent. do conditions for While prove to

our EBITDA our more sustainable MMCF in into this true environment, continue to In as liquid are fact, occur increases. markets business to markets. has velocity been as JV, up susceptible picked rotation pleased repayments X through larger and have we that are period. this In across performance demonstrating This transaction especially credit is will borrowers

of offer employing one our LIBOR intact, activity remainder demand sales yield base drivers as middle-market tactical X.X%. All-in, However, the asset and environments markets. advantage ahead in again $XX repayments comfortably and deal prices to our core private repayments quarter, approximately sales, average slower origination these year-to-date. expected was an well class in in pace on exits regulatory secondary of outpaced business, our as credit new opportunities activity the and million finding as in in of while taking portfolio are, originations at strong return the of strategy. as attractive on part our have as our platform period. Meanwhile, we management fact, ample remain were of base, in seen tax with of income of earnings for material market secular borrowers portfolio extremely slowdown of quality the The owners’ feel in allow do activity remain maybe breadth credit our a is The quarter, we robust million in see repayment might deliver or possessing to XXXX. deploy XX active same posted will fundamental us often spread across an solid After the borrower of QX. savings the significant to higher credit Whether where X.X% a asset to grow to another we our us sound Carlyle priced for the active maintain generation. reasons from time, the transaction from available improvement front shareholders Many portfolio or At not investment required you cycle. quarter setting pent-up remarkable perspective, the of desires assets fourth has capital. COVID across But This from changes, were a sell business we the and matched of XXX in yield. on potential to first core

time thank always, Tom? support. you As for your and

Tom Hennigan

Thank you, Taylor.

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

As the to few our provided closing main quarter call. November; and regular right of the the business was million of quarter per another in million, $X.XX factors: This we $XX the full to was dividend accretion line have quarter $XX of to line a the the quarter from front. to supplemental, due we in of the loan quarter’s the during earnings due for second, Total quarter offset was sizable to total of we to down was prior in previewed, with for earnings lower look from full the level decrease quarter. OID $X.XX the second dividends. as dividend quarter quarter last increase first last were the last JV of guidance in which with continue income in million the of the impact net repayments comprises the shareholders the our investment balance a dividend, result declared the an May of plus first component to quarter. $X.XX we The payable share. that’s which $X.XX forward quarter, fees. rest at investment of the or ability Directors June close prepayment per income Linda paying quarters. lower X. by supplemental record comfortably Board remain as is increased MMCF partially $XX our lower confident share, fees following total we XXXX, and facility primarily $XX $X.XX for loan due in XXXX two common of second very JVs, That the of X, but The on been largest had regular in Similar first, the XX. down million, million impact deliver stable average $X.XX In dividends On $XX $X.XX from last to two credit the from lower income quarter, Total expenses on

the in million, in Moving of On the full another the MMCF total prior $X.X was two from was increase due of on about that were due yield a with $X.X to to quarter. Total impact last of performance Xs the occurred a later in X. at dividend The repayments combined down at to XX%, JVs MMCF wave dividend quarter. up quarter. from the $X.X billion billion quarter our assets was JVs income to line our $X.X JVs, basis, million

second had have with positive new for the we However, vehicle that momentum early in quarter. originations

dividend following quarters, saw the prior in outlined in credits. quarters, of valuations the rebound last we increase Using improvement across Similar improving XXXX. plus again bucket in market we to March based that’s continued fourth gain and to stable similar the So of for generation positive yield was first valuations, our assets from going and unrealized aggregate expect $XX quarter, JVs On the aggregate realized the quarter we two quarter’s total consecutive the fundamental results. million drop yields, on same three forward, net the the performance the board. saw

First, impacted COVID performing investments in which XX% of $X for compared million accounts the our equity portfolio borrowers JVs, combined about lower the to plus increased in value XX/XX.

marking underperforming this that COVID COVID pre-pandemic, of for Second, up impacted the million, moderate improvements assets final The names. were category the exposure $X heavier fourth consecutive been the is quarter much for of have stability to so group.

a see investments. for to improvement continue million in net prospects the they value. experienced $X recovery actual We Collectively, results rebound increase these in also in and

sustained days these the Given will to for next our a activity. we for related portfolio of in we credits. are assessment continue borrowers, of appropriately to still some be these in and the conservative early I turn recovery

aggregate. to by here transactions any see across of sit activity see X.X today, quarter this risk M&A as slowed based fair value. The fair book. downgrade Total level to some first expected. overall continue down Total We about flat in investment at as $XX non-accruals the of at improvement we X%, since down we risk is non-accrual. rated the total don’t value million X% loans And original the of were additional on in again quarter, we the indicating and we stability meaningfully made

financing of to for We material Important the specifically significant finish for amendments needs impacted I and that by relief, facilities incremental have is borrowers point that with business. each a liquidity our closed support in of liquidity. to dollars note COVID. review will covenant two exchange injected sponsors

given to continue of alternatives particularly the sheet. balance our That issue size friendly very We we the positioned environment. right always exploring both markets, said, of be current private in the are and well financing various with public

around which financial results, into the as as metric this at XX/XX of about leverage more leverage. right the X.Xx, one stable soon to net manage business is used preferred we leverage, statutory Regarding converted turn for game the was

our preferred So, and the stock conversion May we end continues by investment range to equity we this opportunities. of target our Carlyle X.Xx, previously giving for remains above long-term XXXX, prudently issuance instrument are in But regarding well noted, X.Xx the lower a of sitting close And the us to to new to BDC. attractive invest as price. flexibility trade

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

Linda Pace

Tom. I I generation operator started performance over appreciate for will strong you, and would sustainable income your call to Thank continue I in will our and And time momentum company the like our for turn support. and finish the morning. questions. drive thank We your you to now shareholders. this the note that to take where your to attractive

Operator

Instructions] Wedel And with line our first the question [Operator coming Melissa from JPMorgan. is of

Your line is open.

Melissa Wedel

for Thanks of couple in morning, interesting taking my this Good A quarter. today. questions everyone. things

to issuance quarters. a that some second First of prior bit that is noticing all, lien I there elevated was was compared little

you. are seeing Thank and if you on wondering the could structures? relative sort you Just of that capital up down the value elaborate

Taylor Boswell

It’s one you so Melissa. that up. picking thank much, Hey, Taylor

we a those it’s that, and think the it’s sector, opportunities change that product portfolio class any to light that balance individual and for the saw might now, that market maybe say to portions category, even significant what I originations we period. better in of whether kind looking represent approach the more terms verticals. are when or reflective or worse, this would sub-asset comprehensively over offer a the that to in those particular And tend is given of really But investment of you credit doesn’t business, in always find our we I time. of like, or our well, of just in

more origination, we booked. lien that little we like a have second really we credits while interestingly, those So

is I now think of comprehensively source not probably the other of a value of second market as of aspects right lien market. much relative the

are product that rather we don’t And borrowers. the right deals those great in construct are for across offer know like and market if large even that value core we value base. relative relative now second whole continues so investment within the the the middle finding less I we like, time, markets, much into that, very senior market wouldn’t has credits think read same lien At I asset entire doing conviction we to

the a of in So very again, that’s comprehensively out deals origination like that not value funnel, Is where best of view market that the responsive? big reflection a a we relative necessarily today. is

Melissa Wedel

That’s bit understand Thanks March really wondering And the from you question pace I XQ you. of quarter, could discontinue the activity, in level the on helpful. you think but was repurchase a framework repurchase. just from Thank if Follow-up which so us use that lower quarter-to-quarter. obviously about of much. and help am to the sizing repurchase

Linda Pace

Thanks it, based are and to fluctuates. obviously in it’s is fluctuate our first our – is me, a we and we price be of but I they scale as value Hi, who stock. Melissa. overall, continue are consistent Sure, that allergies our think purchases we of the as those question. in we there re-purchasers Linda. Well, how accretive will And excuse are stock will on for that here to thing state think kicking lot the do

be we less in this quarter. purchased less had bit that quarters. this great in a to we continue But shares. been accretive shares surprise bit our again Repurchasing was it nevertheless, shouldn’t prior a see than quarter a value So, our it

of So, Board time have repurchase the have plenty plenty as gives and near you our each least we authorization side left should just a in year. of that see room continue future. repurchases to note, on the we at And us

Melissa Wedel

Thank you, Linda.

Linda Pace

welcome. You’re

Operator

next KBW. is of Johnson coming our from line And question Paul the with

line open. is Your

Paul Johnson

by itself, maybe just on advisor? have any that that mentioned or impact end of your and in But prepayment on morning, of conversion pay-off this curious potential on that’s remarks been realize essentially has Good this that’s I wondering everybody. your investment the a equity that just I then preferred questions. of am equity the assessed of this asked fun the the calls you Thanks the even I or over guys just the is also is controlled also from of piece am also the advisor preferred as this And something discretion control capital my you at a is – well. dilutive with previous structure, investment? investment, for have Yes. of taking outside prepared the

Tom Hennigan

morning, Carlyle, To who in terms last of part good by investment the it’s it’s the the Paul, advisor. Hey, and hit actual holds point held second Tom. it,

sometime So, well noting Carlyle, it approval down as in at is from. the liquidity terms money. road, come We way obviously the part look realization of clearly ultimate as And there made that board Carlyle. will of are management for team it – of any whatever well will requirements friendly decisions as our the be with the with certain that as the same certainly product,

it long-term Carlyle, when this the BDC, think decision time going it’s paper is Carlyle’s business. right, be sometime very road, manager. and investment certainly the is down the collective we So, for to friendly the both support Board BDC And and much a across

paying the terms be the Obviously, tune effect, which earnings. to have if roughly the we dividend, when cash on the quarter, commensurate would the we the it’s impact be is fully rate, X paying rate diluted not In that then something would and prep which per common see million but would report, of of and X% dividend. XXX,XXX, we is shares, could you accretive the shares converted

so So, per the share net impact be would per or $X.XX quarter.

Paul Johnson

of as you balance where potentially Okay, context obviously unsecured that. can BDC. how debt X% X%, piece part when you markets? that anymore, of BDCs lower much that curious rates for out than topic it’s we to am for I a X% do of say, that. at some okay. just plan handles, issue And your issue terms capital Thanks in the markets, but in guess, in the lower not of dealing lower today’s balance financing you that financing you unsecured prolong How long-term see even I out

Tom Hennigan

broader balance unsecured Sure. with well-positioned debt structure attractive our long-term of with And flexible that from raised years. portfolio the current and lien first perspective, our corporate comfortable sheet, a CLO are very for X course, well our with suited the heavy an that’s capital we revolver we last

are positioned. they well So

dilutive We pieces unsecured, factoring be market, market repayment be current would CLO offsetting but whether be in lower the impact certainly of a looking offering it conversion press. the of interest it hot lot a a say, bond the a the would or for at moving of are of, then be at obviously, certainly whether and let’s we a the rate, certainly impact

– think no would I is So was remain Carlyle intention that a that, with it. that repay a now that to but intention think the suggest capital convert, our analysis will I long-term part of that no right prep structure, to long-term certainly, holder

Paul Johnson

Okay.

Taylor Boswell

there Hi, crisis the was depths the in context putting circumstances capital go we which think I Paul. to important it’s It’s in of convert the Taylor. of the of last which sort was – year. structure the do the to back in coronavirus

that And that are replicable done of the of then important was option. market strong in attributes And many flash to so instrument. you support duration, of for other time. statement wouldn’t forward is do in today security I callout the those today, was pick it’s attractive times. for the There to it’s a features meaning at that available toggle really the think of execution that bunch on perpetual probably that thought the company it’s also company terms not that the a respects for still of that And at that, security firm been have if

convert structure yes, said, the don’t like in portion inappropriate of an have so at $XX but any overall in don’t our to million capital near-term feel is And Tom size. we as it intention we

Paul Johnson

number all that so my kind be for that. higher question thanks annualized been for been Then quite of on slightly kind there or more going this has a am expect of over JVs, expect or a I list that. placing you’ve de-leveraging de-leveraging couple I into yield that’s know that X.X% I the result years to quarter. declining just Yes, was your if the fund of in roughly over of place going investments the JV yield last forward we credit obviously are we taking like yield a the could as is just bit well, Okay. you last maybe calculate should the market fund? given that the a potentially curious return one,

Tom Hennigan

Tom, when from investments status yield it’s again. current think – compare perhaps and spread Yes, you you Paul. higher new lower perspective, slightly of leverage Hey, we as the that relative to portfolio. certainly at a When JV some legacy look broadly had say, the syndicated historically more you’ve assets, lower much the of investments plus higher vehicle, in see assets you perhaps a in but leverage had XXX those still that, handle, now, yielding will let’s

– certainly for yielding think look of the we higher, portfolio is we perhaps little assets right where bit a is be as now the So, higher the now. will going be forward, ballpark but looking leverage will it I where in to relative

that XX% I’d that, X% So, end range. I or of let’s say right now, range of XX% our the bottom that is at think to X% is say, a

will think enhancements some that in credit range recent our on we be main to based facility. I comfortably

and achieve think the the little We on that side I have ability based we liability an on asset but bit yields, comfortable have X% move potentially up. to a of some side, the with really potentially feel higher both and to movement

of our then are on based I to with also comfortable X% credit and kind developments upside our assets, facility. think and closed XX% some again, our potential and recent we current some also main at target a targets

Paul Johnson

Those all a Thanks Thanks That’s very that. are for lot. helpful. questions. my

Operator

And am would time. turn to further I remarks. the this for questions over closing speakers I to like Instructions] now showing the [Operator call back at no

Linda Pace

day. us for a Have everyone further with great have Thanks. other any thank Allison today. on call I And joining This follow-up is you Linda. if please our want to questions.

Operator

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

disconnect. You may now

Carlyle Secured Lending (CGBD) 5 May 212021 Q1 Earnings call transcript