GSBD - Earnings call transcript Q1 2020

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Operator

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

First Quarter 2020 Earnings Conference Call. [Operator Instructions].

call, remarks like may today's listeners remind begin today's that include we I to would our Before forward-looking statements. the are of represent by statements company's future regarding These events their nature, company's uncertain the outside and control. belief that, time condition filings. factors, The differ, from from including those statements those possibly in of result to may as company's described indicated and a is with a materially, SEC results forward-looking actual the financial company's what number time of

Sachs Goldman consent. BDC, and audiocast is of This or our material be not without reproduced Inc. duplicated, copyrighted may rebroadcast

issued Yesterday, filed supplemental after should be the Resources yesterday an which the market XX-Q earnings conjunction both at in presentation, reviewed our release closed, can a Investor the the www.goldmansachsbdc.com posted of These found company's the Form on company with homepage section. and documents of with SEC. be press the earnings website under

Tuesday, XXXX, conference recorded XX, for call May purposes. today, replay being is This

Officer McGovern, the turn now I'll Executive call Sachs to Brendan BDC. Chief of over Goldman

Brendan McGovern

Thank joined our you, first call. and Chief Lamm, thank Officer; conference you Officer. quarter Financial today earnings Good for I'm and joining Operating us for the Jon Yoder, our call Jonathan by our morning, Chief on Dennis. everyone,

Yoder detail. Lamm to quarter with by over to then overview detail providing it Jon results I'll environment and begin the discuss Jonathan call comments more of results, our our current our in respect regarding and potential will walk in an environment financial before implications forward. investment more to going first the including portfolio COVID-XX, portfolio our the turning through for the

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

your safety Sachs health ones. of like all would best send everybody all call to morning, this this and listening wishes of to to BDC and for beginning at loved our us Goldman the of Before

sanitation fire of the -- want at and many work workers deepest pharmacy employees, paramedics the stay hospital police, workers, the and the to day essential staff and send thanks others to all doctors, rest around allows and us also including supermarket safely our and and all home. to frontline to stay world, whose nurses, We every home

grateful professionalism extraordinary inspiring entire team supports you the like courage Goldman of the and that BDC. resilience to I'd for the to We acknowledge of manages are Sachs example Sachs and Goldman your and dedication.

everything While not surprising, able nevertheless was watch our from this this reality and to reality shareholders' on which do to to of investment team of maintaining light to it this and proud be part focus single to shift absorb seamlessly the capital. manage was team. environment. Goldman economic speed the working Sachs I'm new unwavering we colleague extraordinary amazing unprecedented very underwrite the every of home in We at while our

our we that shareholders communicate As to X over revaluating pandemic we And the own it Can you last unfolded COVID-XX months, Sachs know Goldman portfolios. the are me? hear transparently. GSBD you quickly priority therefore, information to -- and about made their have has a

Operator

can hear we you. Yes,

Brendan McGovern

Great.

profile liquidity as hope estimated warranted. an net helped we our our better the today estimates that on XX estimated the pleased your net we first income have provided our we operating a you and value. additional the March noticed, communications investment release likely and asset you these sheet. estimated communications I within on As squarely including that XX, that that and GSBD, look issued quarter provide update April results ranges forward am that to report to investment announced balance understand in We On press first portfolio, results we are providing shareholder we quarter provided. of

its The results. income dividend company an during after of on QX fully quarter our income tax get let's per share that, first million. net with covered investment investment $X.XX income. to quarter the was $XX.X investment net once with So again

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

of escalated During portfolio the expected the quarter, companies of on fair all and as status but of X.X% our end that from of We their very investments economic to XXXX results disruption at course of fair payments, given the these are the X% end quarter. at of X QX believe interest XXX XXXX. that made nonaccrual as the declined QX over the value the solid value

global the we Golden GSBD in long-standing management of strength areas. has in a of key Sachs of position the that focus manage believe anticipation on in pandemic, risk a put platform didn't certainly do we by number a While imparted GSBD

liquidity. is First

X/X As the companies the up to in loan balance focus of pandemic sheets. on the into began impact In early came of own world March, approximately commitments around undrawn shore to we asked portfolio, were fund drawing our than commitments of We liquidity to outstanding and unfunded more balance continue on our remaining maintain amount an all quarter. obligations in ample the well these total commitments. excess during had in to our unfunded cash satisfy sheet

strength. sheet balance is Second

This to mix to our unsecured near Equally collateral Importantly, unsecured toward with mix have debt on currently unsecured funding outstanding end, availability for mature credit notes is next of lenders. XX% quarter than of more upon The due these repay maturity. is provides in significant and facility in XXXX. term. notes maturity scheduled importantly, satisfy convertible us as in debt XX% debt, We secured our revolving excess weighted scheduled million sufficient secured is $XXX in to obligations our our the with of of our none obligations.

portfolio positioning. is Third

an pressures. cyclical construction on market underwrite on domiciled outstanding. secured first will U.S. is loan which philosophy exposed economic believe recession a always while the loans is are senior portfolio, each loan based companies to occur the that been to less focused lien philosophy investment middle our assumption This permeates Our has we that of to

energy, to and care hospitality software, the that providers and services, that we retail. IT have technology more exposure sectors sectors outbreak, care the direct limited media have health services. travel, been has such restaurants, by impacted Instead, are portfolio our services, to and largest resilience, health and result, a to namely most As exposures interactive expect as COVID-XX

believe balance profile, recovery our environment, value in portfolio are aware uncertain. liquidity are of sheet is of we sources this and that strength we that economic keenly positioning significant While timing an the

to team these working owners is an disruption. management Our and focus for their period sponsors of key plan respective bringing companies our portfolio the and extraordinary for with teams of extended product and

creativity, and to changing meet have time demonstrating this preferences. needs We've encouraged they their speed parties thoughtfulness been of to the of as bear and adapt planning customers' brought in Businesses that are remarkable all by process the uncertainty.

of done much out, much the to has and While also pandemic been prepare adapt. remains play to to

Jon affiliated to believe Goldman Corp., more detail prior the environment, proposed business to shareholders portfolio I to are merger to significant company, which turning we calls, the Before On announced -- of Lending the Market investment it merger of as on to benefits described proposed the what development provide refer want with MMLC. previously and we to we have merger our GSBD. provide the Sachs the on our an over update Middle

an benefits including significantly stand-alone be accretive since greater higher remain merger of last the including: announced the diversification; income scale, portfolio expectation merger net benefits GSBD; with While share greater yield cost single overall most portfolio an December, access a the of including and changed improvement and diversified was and to funding and liquidity. investment per in trade increased sources, improved merger when metrics, GSBD's environment economic will those were as as name was they that has compelling today announced, the compared to synergy

for However, agreement December and that closely conditions the to due the volatility asset of the Boards X, that shares specified of maintaining and requires for GSBD's meet to XXXX. GSBD value. continue MMLC of shareholders of regarding merger to outstanding to The receive a value financial and the of of COVID-XX, unable will in -- GSBD merger stock MMLC price as transaction. we precipitated MMLC's be condition net have are respective monitor market the merger is market today, in closing outside dialogue our our We excess each date the by

update as will to sure shareholders warranted. provide regarding to We any be the merger

contact continue opportunities. remain and Nevertheless, staying to prudent are for investment going existing disciplined to capital. investments with close also all and apply new portfolio with we companies addition look sponsors, financial our to investment new our to we in our In approach

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

Jon Yoder

dramatically All solid, operating our was right. of portfolio last March. course, environment Thanks, the The few the during performance companies Brendan. weeks quarter financial changed but the during of generally of

when made and We quarter, notwithstanding all by their that, interest our the are were XXX the the at majority that end due well is portfolio our X a of noteworthy pandemic the but the of because the uncertainty a borrowers, very are reeling. payments. significant payments interest companies first quarter This of and of underway time for community pleased fear financial the markets significant particularly was expected end financial grip

that generally classes. primarily in the of portfolio, asset XX% companies in the credit of recognition value marked the decline portfolio solid in a performance during net Notwithstanding observed value of the quarter, asset in of investment resulted during approximately our comparable we fundamental down the wider This we quarter. spreads markdown

on or subsequent soon second to predict of the quarter too at QX will While end, be asset credit to value. impact credit it tightened quarter certainly spreads where have end spreads is to the net our speculate any to

activity the quarter. investment for specific to Turning

the companies. companies in of lien comprised new investments. new were fundings portfolio million new $XX.X including investment quarter, existing $XX.X million across debt The prior fundings new investment During commitments. commitments $XX.X unfunded portfolio were XX% commitments respectively, and investment were and commitments net X of X first and million, The

of The well and seen outbreak to we environment. current been new companies that activity have have since mid-March activity have significant positioned a perform deal M&A in we in of very believe number are completed decline the the since general. Now we with that in small transactions COVID-XX,

to allows financing company a to leading terms. example, to solution wider provides investments These new that we that generally recently digitally. had a meaningfully colleges, content deliver For provided spreads and universities educational primary schools tighter students and software

are opportunities rare, growth we so We significant the in to expect these term. investment anticipating near relatively portfolio currently not be

During the portfolio investments million, in had repayments companies. of sales primarily the quarter, the $XX.X X by and repayment full company driven of

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

We commitments total XX, $XX.X investments $X.XXX million and bringing also as March commitments billion. of to of had unfunded

X.X% companies portfolio yield at at in compared at investment income-producing the end end yield of in our our quarter the at the first during the total LIBOR. different the The industries. had quarter. quarter. at of to of The quarter of the average yields attributable decline the across primarily to quarter decline of cost fourth and operating was as XX X.X% the the of of weighted portfolio the fourth X% The end As end, was XXX the X.X% average at compared company debt weighted investments cost quarter as to was end first

higher. However, has our portfolio floor majority a vast of the or LIBOR of X%

fourth The The the quarter credit end Turning fourth coverage was weighted debt-to-EBITDA of X.Xx quality. of X.Xx portfolio of investment at quarter. the quarter average end at to the X.Xx X.Xx end our compared companies portfolio at in the interest the of to weighted at investment in end our versus average quarter. was companies net the

Let me Jonathan financial call walk results. now to our the through turn to

Jonathan Lamm

Jon. Thanks,

a the our improve we quarter, of number actions sheet balance took profile. to During

amended First, XXXX extend the X.XXX% favorably February from final our interest plus rate stated plus XXXX. we facility revolving and reduce from maturity to date credit agreement February LIBOR senior X% to secured to LIBOR the to

under interest February XX, XXXX of amount million comes our no repay the preserving maturities partially We million XXXX, of senior This due due used $XXX XXXX, of revolving secured while our until the a of with principal a X.XX%. us Second, public bearing revolving fixed left unsecured closed rate sale convert from credit at $XXX in notes on aggregate near-term facility. to proceeds notes almost in action our offering availability credit we and facility.

balance added Third, excess with balance time the liquidity to unfunded our of excess we our a our sheet in on being. obligations cash goal of sheet maintaining for

of cash our million. end equivalents investment commitments $XX.X result, sheet we of of million balance had cash unfunded approximately the of and a as on QX against $XX.X As

Turning to our results. operating

the earnings share per $X.XX the depreciation per $X.XX, change per quarter income Our prior to net $X.XX. prior result of quarter. investment share of compared our as to Loss primarily was was of share the compared $X.XX a in in of portfolio net unrealized

Our The total by investment with associated QX. was $XX primarily down income fee We $XX.X quarter. for an million early ended the the of repayment the to quarter-over-quarter, a reflecting for in for from the million decrease first with which million, exit driven in was prior $XX.X Expenses $XX.X absence fees compared quarter net was million expenses were quarter the of primarily quarter. down as quarter. last incentive

the by During as at unrealized current $XX.X compared Jon per depreciation environment undistributed to QX. accumulated net the a asset and X.Xx on net from debt Brendan share quarter, million income of had that has to to $XX.XX that investment all our discussed with the We related to per spilled was much the $XX.XX in replace of if share quarter widening dividend the The taxable at earlier. of new credit NII investments, ended X.XXx exceeded company net higher in primarily current of believe the shares result cost prior driven quarter, years, that to spreads amount. equity historically. had value cost undistributed we end ending investment of to $X.XX end as with we equity the income versus the QX resulting as of issuing prior tax relative over small on into of to is This excise XXXX outstanding. equates from the pay spillover our we price the net form Consistent a

I to back that, will it With turn Brendan.

Brendan McGovern

the puts environment. while closing, pleased in position that long-standing solid challenges, current environment In focus risk we on to Jonathan. a withstand current management Thanks, our are unique poses the us

to the on with the At the sponsors focused value for through portfolio and challenging teams create are time. unique careful to our watch we're companies financial opportunities of We working navigate shareholders. time, our this management same keeping for

we as always thank especially capital are open always, you, As of to work the us for environment. your of through hearing you from and privilege all managing this

up line open for let's Dennis, questions. the that, With

Operator

[Operator Instructions].

is Securities. The from of O'Shea Finian first question line the Fargo Wells with

Finian O'Shea

is well. doing everyone hope I

NAV perhaps, merger or understanding the question provisions, Boards' NAV interest the the First they market on do understand now as any I have somehow respective changed pending are still around on have you if proposed merger right And ways things? have shareholders' you do rework merger, that the color provisions, conditions and say satisfy want work to there don't to interest, they but can, that? the

Brendan McGovern

refresh let X.XXXX regarding maybe And hope me you Yes. in December you're of doing Fin. year. back And, One, this deal background everybody's share you is would glad the a ratio each memory outstanding. that from MMLC And the we exchange the well. way to little and hear and give last whereby structured context. yes, announced transaction, just for is issue there's a fixed shares GSBD to

very fixed GSBD deliver exchange above a attractive underlying its accretive was GSBD the a Usually, still on that's do significant had announced, a be done to outcome at for a basis. for way NAV-for-NAV unusual was transaction deal MMLC. companies so recall, merge. the premium are And transactions that to to very NAV, Fin, so ratio when somewhat to but But was able a it trading deal, these NAV

So obviously, the MMLC since in value at world December. would has below given where trades, the negotiated lot the would exchange GSBD NAV. the of a MMLC's be Today, value, market that consideration ratio, get changed

not So being closing overall. an the deals 'XX deal, around important with shareholders to to is dilutive that, that which meet Act today concepts wouldn't condition be we based to on able precedent

back all with a look December, all transaction I'm all still applies. benefits way So being handful back said, discussed we step situation and the when in of and that you, that you strategic of the Fin, totality, that sure times, the at in

a per the liquidity the overall improve. the of think construction and for very example, portfolio for portfolio better environments, GSBD through the very potentially as be that's well. in environment So then when as tough big of also BDC a a more being yield opportunity. in improve very which think the environment. scale, be in The the access certainly importantly, you benefit a liquidity would talked I at And this more will metrics would environment, current of has NII to sell sources, in metrics They having this with MMLC diversified about funding is getting would larger sources, MMLC MMLC. benefit for to available lot, the get attractive diverse this we've bigger, lens, share a would funding GSBD, benefits That without, certainly events about

yes, So, here today, sit had as we Board meetings. through our obviously, we, come

to those They recognize both dialogue all I transaction. think with continue benefits a to GSAM other. Boards with both picture and each maintain big

if there's And the warranted leave posted We'll so regarding if Fin. I changes can that, to we here. update be transaction you anything sure it as at keep think any or

Finian O'Shea

enough. waivers the any transaction, just those GSBD is that you schedule? on this And fee related there time... a Fair reminder to Or independent for on still proposed are

Brendan McGovern

of are been there's all all merger that change no those -- kind Yes, of to those part and there's the of agreement, of -- are agreement. been yes, merger

all apply waivers course would through of the XXXX. those continue to So fee

Finian O'Shea

doesn't merger But reverse? they do if happen, the

Brendan McGovern

way merger There's the so start Well, at provisions XXXX. to That's or called by which termination basically again, until looking the date is structured concept not something December has we're kick of the to really today. a outside document in. happen

to so to term, short change which fee have or anything reason change in no the think that that no And waivers. would would the we to dynamic, cause expectation us

Finian O'Shea

your -- you're how looking investment they're sure. Can Are assume on back deleverage? And to new to us question dial I you'd any total going one to from Okay. you in on and a investments? position, at really you are Or mindful Or on it to going here. strategy? leverage give you grade color be bit -- you of just want on your final touch for investment keep me. warning

Brendan McGovern

When issue to lot it benefits think I we I grade-rated at financial look, press question, to the releases talked how the about When highlights a unsecured a to and And you look this, about able of secured environment, corporate, the that think secured current you yes, us. really we're runway investment your access and Fin. pledge important comfortable capitalized. a of during be of unsecured being So you good you debt the lot your gives in market the quarter, whom collateral, early in the about is flexibility Having both reminding them there's to the debt a to generally means your capitalization. to provide very of lens structure, in and be where -- stability through having covenants capital transactions. lender, there's the them those is ones think to lender is position the in benefit being what having want

lenders be as secured we that's in. to our covered very So our almost here good sit by Xx collateral, position over so are today, a

of When we the rating what assets strategy articulated by where a endeavor adding now virtue to leverage high we issue the and, course, NAV. of bonds, end a articulated quarter a and couple operating of down we're marking get at in the of we the

And that it's want certainly do companies. to And high new there's be make for The support to of prudent. some so we our sure and bar we portfolio course, capital is smart think if thoughtful any of investments. necessary, to available,

and And we available. we're because they're with just take the with in very in higher-yielding position opportunities agencies, up capitalization to so a leverage, to take on overall, think overall good that context, wouldn't new opportunistic, expect we our

that organic is give would they'll here. deleveraging. more opportunity That be hope Our us that

are mindful. So want new certainly I in a very in be bar unique balanced investments. very, environment. any quite We to And the will approach, thoughtful and operating it's a be for think high Fin. case, We

Operator

have Do time, further this at appear questions. to no closing And be there Instructions]. [Operator any remarks? you

Brendan McGovern

quarter that certainly means we job that. did Thank our the talking shareholders, suppose we priority you, a nice of to I did and a put on Dennis. throughout

attention. if reach So to we any you to team. additional time out do and appreciate directly please everybody's the do have questions, And hesitate don't

So with that, Dennis, call. we can the close

Operator

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

may disconnect. now You

Goldman Sachs BDC (GSBD) 12 May 202020 Q1 Earnings call transcript