CCAP - Earnings call transcript Q3 2020 | Crescent Capital BDC, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2020 Crescent Capital BDC Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference may be recorded. I'd now like to hand the conference over to your host today, Dan McMahon, Head of Investor Relations. Please go ahead, sir.

Daniel McMahon

to conference BDC, call. welcome XXXX, September and earnings quarterly morning, Crescent Inc.'s Capital XX, Good Please that note Crescent Capital BDC, Inc. to call. referred company be as BDC, Crescent may or throughout the CCAP, the

differ our of today's SEC. the the otherwise XXXX. should referenced with the figures Investor filed September third Any XX, noted, and under rebroadcast quarter this issued Relations XX, conjunction throughout section, future Before I'd are forward-looking earnings all number results that update forward-looking will the quarter market may involve Exchange and remarks is during and reviewed from presentation, and September the of filings Yesterday, earnings Actual such strictly forward-looking unauthorized Unless any in we available contain statements The the this call performance for including number be the not and statements remarks those statements Statements is CCAP's a of than XX-Q as mentioned facts with the like materially of on Please presentation remind any Securities which and an to property XXXX. be described prepared release call call may from of other Commission. press as forward-looking form statements. yesterday in in today's and begin, statements. or The a closed, website its time call historical those uncertainties. made results after ended CCAP the this listeners ended risks to call a prohibited. in the is during of the posted CCAP. Form that company's to company guarantees time third result performance made note constitute assumes are of company's for may with obligation factors no of in

As is purposes. a replay being call for reminder, this recorded

Lombard, Gerhard CCAP; Jason. of With Chief Jason to Chief that, Executive CCAP. Officer like today's I'd to and on Breaux, call will over be now Financial Speaking of Officer it turn

Jason Breaux

results, morning, for healthy. the the finish investment our advisor. third highlights activity thank Dan. and a other in transaction for Sun the and are our families quarter by continued reviewing safe begin Life you, remarks We from third call and and and your interest joining recently more today's Good CCAP you and Thank in I'll and on everyone, Gerhard hope with discuss quarter quarter detail. third results will between for call. your you external financial our our appreciate then earnings few announced us today

highlights X. few a which are with begin Let's summarized from Slide the quarter, on

to attrition income was walk our QX, a nearly In quarter $X.XX we of by Coupled increase specific first share, NAV terms Gerhard net third investment third in driven increased experienced and of $X.XX dividend. the X.X% CCAP's increase bridge share more net through change the we in reported we've primarily per the but reported net our the companies. portfolio in NAV XX% of first asset depreciation, lien with per after-tax share NAV the per quarter. in recovered unitranche value now the XX% unrealized earnings, covering will in quarter $XX.XX. detail to

total and existing less of at with ended investments costs companies total portfolio. investment challenges investments Our cost XX our carried snapshot investment of priority always the versus significant size the protecting an of is despite XX% presented. With March back loans. million XX.X% with are we portfolio year by of XX, the XX performance, has end than third of value across fair be on of quality average quarter portfolio. portfolio its and as XXX and the top $XXX X% the quarter value getting the of of of the will the a presentation at our our of this We Slides provide and portfolio comforted par at

secured investments senior primarily Our consist loans. and first of lien unitranche lien first

are equity-backed XX% as portfolio sponsor-backed the with XX% debt line and portfolio industry the date We have in primarily industries and of nondiscretionary our private demonstrated like across September care XX%, and many investing businesses XX, respectively. and commercial characteristics. software services, companies. We representing health industries and was with essential services quarter, or in services, XX fair as of value, our to professional of quarters. services, and at XX% well are of lend these to consistent exposures last X prior largest In companies diversified equipment resilient provide and

portfolio focus Our cumulatively no energy, to positioned the which of of cyclical retailing represent travel quarter aviation value X% with and approximately modest exposure to led including fair transportation, on has exposure. end, constructing a portfolio's as defensively industries, or

scheduled approximately represented investment principal PIK For debt quarter payments. value, and XXX interest investments income the of XXX third debt interest quarter, companies, year-to-date total X% investment of for portfolio the at fair our out and representing full total made of periods. XX%

of Let's ratings. portfolio turn which XX, a investment provides to our Slide snapshot performance

of average value compared Our to of portfolio XX.X% companies X risk receive, at and our modestly X rated ratings last of as the improved portfolio percentage and grade can X.X% investments, the portfolio quarter. the weighted quarter, fair versus to increased best last XX.X%

on and our nonaccrual quarter of we X.X% had end, X.X% respectively. investments debt value, status, in fair portfolio total and at representing of companies As X investments cost

Tech, placed off nonaccrual one For came investment, no were on loans the nonaccrual. and new of quarter, Southern

X X Southern we position from Tech a resulting to Our performance realized $X.X in a September, in million in we equity And hold. subordinated realized the gain. rating position our on was a upgraded

portfolio we to which We progress. will value the of made nonaccrual help with QX. our as and and investments end, MCS, remaining come investment result have restructured in work their maximize of companies off to a the X sponsors Subsequent quarter closely our continue in to successfully

our to Slide X. please activity, Moving investment to turn

follow-ons, and X $X deployment gross We $XX totaling this on than with lower QX, activity million. X levels million Following respectively. totaling quarter closed average in $XX and million, investments origination up picked new

coming were at of and investments basis OIDs private the term and commitments. with of to each from loans XXX funding and With balance existing new DDTL between X% X% floor, All draw point a X%. LIBOR the equity-backed or delayed our revolver loan spreads, X XXX

In addition, million these transactions. gross The deployment repayments attractive, for million XX% in remain averaging compares $XX levels loan-to-value exits, $XX in and sales aggregate the in quarter. to

new the profile we've October quarter deployment Given and investments leverage our closed Since traditional several of fourth X, million an add-on the modest on opportunities. our floors These with capital. $XX lien funded investments. and X powder, approximately are equity-backed the active all unitranche well, in loans, been dry we've LIBOR as first high-quality other or for characteristics underwriting new QX aforementioned in totaling X investment, comparable X private and spreads, of with existing X X to

We second one investment. also lien loan made

on now Slide color on like transaction Group and continue some Life Crescent Looking shift And the platform forward, to recently XX. attractive Sun gears we to Please that mandate. broader participate new Capital advisor, continue fit our the and see we'll Crescent to of LP, our provide within new alongside external investments between an opportunities. all pipeline turn to I'd Crescent. announced or

global Toronto, investment has platform, been years. Canada-based insurance Sun for recent management trillion operations under financial its XX services Management, in alternative As primarily in and background, a firm, acquisitive scaling in $X Life Sun Life its SLC nearly capabilities. and assets With markets in is wealth management known globally,

to of option Life on a entered pursuant with you which definitive As acquire XX% interest acquire Crescent Crescent Crescent, Sun in and October into X in many aware, agreement years. call put would remaining in are XX, interest a to approximately a life Sun economic the

Crescent current Upon a unchanged transaction, is dividend it We'll The maintaining Management. of cost full agreement investments term, the from transaction as form approval, efficient continue can the all for expected will consummation with to of will the Slide responsible the CCAP on most for and is of and and focus advisory our of the other always continuity terms initial will same of the SLC remain CCAP, investment you strategies is consistent And fee same a advisor remain of X-year important that as exception the shareholder that we same To structure, processes with us, policy. proven consummation Following to this operations on part the structure team executing to see investment aspect team. transaction provides today our to commitment best-in-class XX. advisory be Crescent. investment of subject to and Crescent have.

and further forward benefits the capital access this borrower position access our our coverage. transaction the As our will summarized on corporate We're enhancing enable to improving sponsor relevance to look providing needed XX, market continue second, bring. institutional finally, greater transaction it resources will and us markets; we to reach; very and Slide about excited and global augmenting financial strengthen believe scale by: further to first, our competitive and to

to demonstrated already up to stockholders, this closing its by the of secondary has the having we market with it advised Life the the which million end alignment will us of intends following CCAP purchase Sun in of stock time, occur Importantly, expect transaction, CCAP over $XX that year.

secured I unsecured share it on aggregate And to closed were allows intentionally has the we X.XX% notes second us touch XXXX; us XX.X July. lockup to structure, updates: of of diversify October July more from principal agreed public our The to utilization share $XX capital the X shares. late XX, to meaningfully to issuance financing sources, announced dividend XXXX. million quarter $X.XX X/X I million second on issued quarterly our to XX.X XX, normal closings declared expiration Recall, we approximately fourth float due separate under turn manage October notes of lower on funding in million for on Before $XX CCAP's revolving Gerhard, million increasing initially the cash more over senior our want in provides quick helps few $XX the The of first, and million unsecured per to our with flexible occurred a second, Board a a expense. our of notes issue finally, interest amount facilities.

our in other received were a lockup at of subject approximately Corporation stockholders time million Alcentra the acquisition, XXX% who to connection the with on XX.X of shares X. shares than stockholders, our those pre-listing on Alcentra Capital outstanding February reminder, a listing As CCAP

shares on X, February XXXX. final The freely up of tradable become locked third will tranche and

February, with in the true public While constructed. value in with we've pleased the our current view, since does we stock we continue investors have our dialogue reflect listing portfolio not are the of to price have had the and

trading an investors contribute daily to and enhanced over broader a float institutional universe stock time, greater that more relevant to expect We easily transact. average volume in of CCAP will, for allow

will I believe and million create began to $X turn employee purchase purchasing over which total to brings demand additional a approximately shares in on the Additionally, additional Sun and stock. mid-October, cover the commitments that program, details commitment Life's CCAP second quarter. now will XXbX-X Crescent stock we in it Gerhard to employee Gerhard?

Gerhard Lombard

turn Thank well you, realized statement, I and as financial NAV and income Please X, Slide our and will as where leverage can our performance you highlights. liquidity. review to find Jason. highlights, unrealized activity

tightening share, Separately, of X spreads thus $X.XX third attributable broadly invests dividend of from For share our was taxes the unrealized experience first income pool our per benefited share. gains which on of in the loans bank net performing investments diversified third $X.XX on change Fair of the unrealized approximately the net quarter net credit marks in BSL from exceeding per quarter, in value the by of XX% in to investment quarter. recovery and joint was gains points, a change lien approximately syndicated largely third $X.XX. debt per increased venture, The came investments.

LIBOR. million quarter, of from third portfolio was a The $X.X $XX.X $X.X interest inclusive by taxes, in $X.X nonrecurring the fair the of costs quarter million total million previous in the in previous to to in primarily decrease compared $XX.X borrowing For higher a in resulting million, offset from decrease CCAP's from was operating other costs other and paid-in-kind million million $XX.X investment income, and income. were of value, aggregate dividend from $X Net income total due $XX.X down income in due investment to income. income million to quarter, from primarily due a decrease expenses, growth million the comprised

increase net against share. to per asset compared income Moving Please a quarter. Walking quarter per per $X.XX end $XX.XX, the share share X% an balance over dividend net Reported of we or $X.XX net to was $X.XX per Slide contains prior from added the turn just sheet. to at asset components, the through the of value bridge. which X, share value investment

value NAV the of and of million offset $XX mentioned by change million increased and in the at quarter of As per realized net by $XXX deployment, unrealized appreciation, of was $XXX driver from with QX. before, repayments million Investments coupled $XX of depreciation, taxes, fair $X.XX share the X% unrealized to million million as net $XX was and primary gross sales. in principal

Turning to XX. Slide

As our debt XX yield floor our and on average points September a end. weighted at of average investments quarter-over-quarter, interest approximately rate the basis income-producing amortized had of at quarter an XX% was of floating X.X%, cost reached at XX, securities LIBOR unchanged bear

right-hand of to balance Slide Please side our Moving sheet. to turn the XX.

to borrowing Our undrawn debt debt SPV Asset and million XXXX. capital outstanding largely leverage, restrictions. across over perspective, quarter is Corporate principal other as the and and unsecured amount of XX% with supported From had liquidity $XXX.X longer-dated financing, Revolving a subject end, by of base notes June of maturing our we base after capacity Facilities, of

ratio X.XXx debt-to-equity XX. was of June X.XXx as compared September at XX to reported Our

compliance each cushion coverage of covenants debt and terms to significant continue to asset be We arrangements of XXX%. in a our ratio and regulatory of with our have the

paid to our XX, XXXX, the to remarks. As share, dividend payable fourth consistent quarterly Jason the which like mentioned, stockholders of of back is $X.XX January dividend December third of regular in with that, XXXX. it for Directors record Jason The to of declared XX, quarter. cash With I'd Board on turn per dividend closing is as a quarter regular

Jason Breaux

Gerhard. Thanks,

this our activity selectively investments Overall, results we pleased continue hard current new pursuing with our both portfolio We to origination attractive quarter. to financial are work of opportunities. and protect while

strategy same. remains our the to future, the Looking

generate focusing to focus continue while capital optimize on strong performance will earnings into opportunities stream of and to our attractive deploying a preservation portfolio recurring We on capital.

that support. operator, enhanced for and that, our stockholders. provide line for excited questions. the will opportunities would please We with to like are of confidence about your continued partnership all our Sun for the you with and Life thank And it open We

Operator

[Operator Instructions].

comes Our from of Dodd Robert first question line the James. Raymond with

Robert Dodd

of off easy couple a questions. I start one guess I'll have I first. with the

the mentioned, this perpetually -- Is tough obviously, Gerhard, to where we to should the Is that quarter structurally some anything income, and coming I mean, it quarter. predict. is zero? be that it portfolio seen there just volatile, anything event can was the we've in contributed expect down, random this number be On other obviously than it there happened you historically? be lower Or numbers essentially to it was of it it a that to -- it's X

Gerhard Lombard

fees. Yes. Robert, example, structural. income other I'd P&L represents so consent nothing say on and fees, amendment the generally for structuring nonrecurring nonyield-related fees revenue,

So of that that, fees COVID-related in of and that ways number, on enhance we large of charge are did that see the off a There don't third second Having trailed that we number debt in amendments investment. quarter nonmonetary the always large second quarter. said we a the can quarter quality amendments. number drove a

economics better so higher and the prepayment or So of enhanced covenants, tighter terms in spreads on. and form

low into unusually likely during to that we due amendments of proactively entered the fact second have identified QX other did correct, quarter. an and are level most the You income,

we will what specific of just other However, quarters income. have that is be, the income will nonrecurring. expect of for hard It's other that to future some level given a level predict this quarter, mostly do

Robert Dodd

Got it. Got it.

BDC? expect with Sun When Crescent, the those extremely obviously, there intention announced, back them, others. of any there platform. additional some about Sun was So an expanding was when we into asset mentioned, large And on was -- -- to talk Life can would Life or Obviously, put the deal, it be opportunities if was there some is products. or

most we to term, lien time, appropriate, next portfolio? new change expect it's what BBC now, might could quarter, that's right I lack better the vanilla, from over and for expect would it's, first of for how But that going obviously, you could Some -- unitranche, plain the part. not not given but evolve life relationship? How be mean, might Sun some be. that the to

Jason Breaux

-- as existing we We're suspect in question. strategies, the of excited seed to capital very million for out the areas. anchor we Thanks the I $XXX on can funds well. the both of transaction. time discussed The will course over new play about be Jason. that it's used Robert, are as remarks, seed

obviously As not yet of now, the transaction closed. has

of that sure XX can to say sort core than that the remain in for we I to much a methodical not have over at I'm So the us. there's other of certainly, years will grown Crescent point capital yield say this sort discipline always credit, I last on way, And think and on focusing preservation. continue and

going mentioned not we've the could do last pursuit. be what years. we done what of base, an You asset astray we're and XX area far that too from But for certainly

Robert Dodd

the appreciate -- same. stock intend to given where one -- the Has more, for obviously, would as BDC, I is the doing a could be has to buy Board the as are price? the the Sun well just trading, in open support providing program the to If On stock it. which contemplated can. NAV -- employees accretive it. Board if Got -- I market, Life obviously traditional buyback

Jason Breaux

Yes. level. believe certainly in initial that spring, time. employee that that we thing at was evaluate We in original to do the the at point I plan the impacted do. continually not we plan company The would that was back say terminated when

option company-funded as our investors and the in feel So one well continue in being will waivers shareholders. the future. permanent the and favorably evaluate given plan to later aligned certainly to the restructure the we We structure that Street, of viewed a the that continue broader should And buyback be place of effect the with we best-in-class. take implementing obviously, expense believe by

Operator

back would the for I like Jason questions. further Breaux call any to further Instructions]. [Operator are now There to remarks. no turn

Jason Breaux

appreciate call. greatly CCAP's you. thank speaking interest and for everyone, support joining with look forward you and you, Okay. third quarter Thank We all soon. Great. to your Operator, earnings

Operator

Ladies gentlemen, Thank participation. concludes your call. this today's and for conference you

now disconnect. You may

Crescent Capital BDC (CCAP) 8 Nov 202020 Q3 Earnings call transcript