CCAP - Earnings call transcript Q4 2021 | Crescent Capital BDC, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Fourth Quarter and Full Year 2021 Crescent Capital BDC, Inc. Earnings Conference Call. [Operator Instructions] Please be advised today's conference may be recorded. [Operator Instructions] I'd now like to hand the conference over to your host today, Dan McMahon, Head of Investor Relations. ahead. go Please

Dan McMahon

referred welcome and and call. Capital Inc.'s today's may BDC note or Crescent Good company the ended to December quarter throughout be Inc. BDC, year Crescent conference as XX, fourth CCAP, that BDC morning, call. Capital Crescent to XXXX, Please earnings

actual of any in statements and obligation including forward-looking some forward-looking uncertainties. Before conference its may webcast call with not that such Comments could future are in any to or guarantee over SEC and update The important results statements for statements. results. risks no reason, assumes subject begin, performance company's those from note we also start the materially made information past The company listed and contain reminders. Please such I'll those course filings. this differ market to forward-looking of expressed a

to income Regulation financial The adjusted financial per investment by useful conference company it's reconciliation as adjusted this as this be can to accompanying measures A to presentation results income the share During share, slide of most defined income investment investment the for of NII method we one non-GAAP call. because call, G, regarding GAAP uses adjusted investors NII such certain information believes per that discuss operations. and or condition per financial measure per its SEC performance measure provides share the net comparable net directly may found net company in share.

the fourth year its its XX-K posted press measure be www.crescentbdc.com. Relations section market release. yesterday may XXXX, website Form with presentation after found conjunction SEC. company's be with issued a also in addition, Investor earnings should filed closed, the earnings In Yesterday, the ended reconciliation presentation to and quarter in reviewed at of the our XX, the the The release December for of and this a company

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

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

Jason Breaux

Good fourth for call Dan. review investing morning, Gerhard full our on some your today. CCAP. provide quarter you, it color Thank activity, and our provide turn thank highlights, and continued to and positioning current joining review over interest We I'll our our year results portfolio financial some earnings everyone, in detail. to in appreciate then you more and

to year. fourth results. income year. strong Slide a So per the the you'll We X, and full our $X.XX per reported of let's share summary adjusted quarter We and net generated turn quarter the for full share for for results begin. Please $X.XX investment see where financial of

origination investment $X.XX incentive year. full capital income the financial inclusive unrealized the we and the the was accrued and a investments share a GAAP annual net reflect capital our fourth quarter the quarter. $X.XX for gains-based since of our year. less $X.XX noncash fee realized basis, Our the strongest three fourth results activity million for $XXX fee to to in Similar new changes and expense with related for million $XXX last inception quarterly On incentive This per per than accrued was gains net losses. the expense for and gains-based quarter expense and share, of quarters,

as ended year payable. on end agreement. expense each And of of As the fiscal the December our a XX, no XXXX, gains, incentive only at advisory gains year reminder, the investment capital payable fees based fiscal capital is were end

Turning our back results. to

year. economic for stockholders When we X.X% the increased this for our return a share growth our per year. value you asset with the NAV generated combine XXXX, total dividends paid net Our during XX.X% for

portfolio of since ended an investment XXX than to Slides of We the investments size the which our portfolio nearly presentation, provides with across billion with current a the and shift now average inception XX and largest of companies less $X.X value portfolio. portfolio. Let's gears of snapshot at total X% turn year of XX fair with the

our Our unitranche collectively as the diversified in inflation fair believe remain our sponsor-backed of of market-leading XX% primarily companies and on and strong flow to view, and industries as and companies, of first free And our continue has private focus almost avoid well our in year-end. exclusively loans, of debt portfolio XX% senior high lend chain issues. are, cash in the segments supply XX at portfolio more lien margins impacted secured representing economy consists by with investment positioned year-end. we equity-backed value of recent industries companies to portfolio of portfolio resilient to across generation with that We negatively

last revenue XX-month of of a invest the seen portfolio all companies EBITDA sectors we that have primary our growth majority we the in and As result, in. across

the year. portfolio dollar, principal on debt XXX our over made For is representing approximately and And approximately outlined Slide represented continued interest at payments. portfolio strong total companies, nonaccrual XX, an mark on total income more above XX% investments the ratings debt $X.XX average investment fourth X% investment quarter, scheduled for trends with our XX%. the fair value, and today performance out of are XX% of interest Two levels. of XXX of investment PIK debt marked positive credit full of

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

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

investment Please to Slide turn back XX. Moving to activity. our

left-hand the activity in side quarter first on $XXX active $XXX gross $XX or investments. date private follow-on a of we told, of were with The from we and weighted points. page, average basis XXX equity-backed XX% X.XX% closed between million and and coming our All most to loan remaining XX XXX XX the revolver with with the new lien majority and totaling XX million was on investments term secured had the loans between draw senior respectively, XX spread Focusing vast LIBOR deployment. and million, in and basis All new unitranche $XX million OIDs X.X% investments delayed of and of approximately points, floors activity.

of for XX the commitments across to new averaging repayments loan-to-value those to platform. roughly for levels total in in remain The addition, CCAP's aggregate also the that the our It's compares worth the In transactions. $X highlighting of check million deals deals nearly size about breadth these attractive, $XXX billion represented and quarter. deployment highlighting XX% $XXX exits, XX% new million committed aforementioned sales gross in Crescent,

of the percentage On activity you'll our from becoming that us before page, it offer few increase has our stack. see portfolio. This the surety over unitranche over and Gerhard. of XX% as of by yield more prominent to the right-hand turn the to side I enhance to execution year, sponsor XX% us the enables to at a community greater even capital more total of lien opportunity of the led our while remaining to A design first it course net updates investment to allows the top is

shares in offering inclusive we million proceeds. November, ultimately X.X First, for total $XX of equity greenshoe listing, follow-on public since completed million in first issuing approximately our the

we to our to gain portfolio backdrop further deployment to additional active prudent continue highlighted, grow and was I the investing time. over believe previously it capacity Given believe that

with investors. stock's also volume closing, trading enhanced a the of broader offering the meaningfully our allowing Importantly, daily since has liquidity, average for improving universe

expenses time cost We CCAP's also believe a base. across that and cost opportunities capital to of will operating additional to synergies further generate over via scale ability available optimize and size the asset for fixed wider us spread are

As to of stockholder outlined underwriters' via NAV continued and payment cover our time the fee. its its history discount at alignment payment announcement, investment supplemental to the the of adviser of

the to will powder expect operations end venture, venture down from summer. course, Masterland, Fund, of approximately Second, run we Crescent additional Senior capital CBDC process the the redeploy of was begun by us broadly monetization private with dry first its an down loans, joint fully entity originated in currently expect to higher-spread a Loan $XXX directly in lien opportunities. we've and million invested provide which activity commenced credit of the wind into Proceeds XXXX. the we with has which which pool winding syndicated joint The

first as of record declared which per paid $X.XX a quarterly XXXX. be cash Finally, stockholders share XX, to of for will dividend, Board of quarter XXXX, March XXXX, our on the April XX,

March Additionally, of XXXX, X, dividend the March of series cash XXXX. four of share second in a previously $X.XX special on declared will as to record stockholders paid per XX, be

to provides of uplift some on basis. the of a tax it Gerhard special income on the by I'll efficiency drag our spillover With modest the annualized quarter. enhance eliminating for series that, reminder, dividends additional now turn capital over a to our to cover on As excise ROE details an which serves Gerhard?

Gerhard Lombard

morning, good everyone. and Jason, Thanks,

adjusted to $X.XX for investment prior XXXX. fourth compares of share the for quarter the of income XXXX $X.XX the net quarter quarter for Our per and $X.XX of fourth

a of when income quarter-over-quarter the the component a increase $X.XX relates which the $X.XX, of prior the $X.XX We as assets lower $XX.X Dividend QX. . of for distribution with per QX. compares $X.X primarily the to share fourth Our to $X.X or in GAAP due was to approximately million quarter earnings was a of fourth levels net $XX.X tax XXXX. down quarter million in resulting million quarter quarter Total of investment quarter. from amortization quarter from million $X.X and OID compares of XXXX also accelerated last versus this operations for fourth decrease income in The discount recognized quarter. in XXXX company income third of share QX prior for the per interest per net compared quarter portfolio for million for to share

recurring million quarter. the million, value Jason yield-related stockholders' investments. relatively the and from gains our immaterial special were of decline This which helped driver the realized $X.X XX% the million X.X% million primary unrealized year and dividend fair in deployment, with in total to offering per fueled $XX value $XXX driven by of $XX.XX ever, billion, $XXX.X accelerated a the our equity net million On a in was gains $XXX an share drive during of coupled increase December the paid per quarter basis, on end grew net that XXXX. compared at last excluding and year resulting million was $X.XX or in amortization, total XXXX December share for as to At $XX $XXX primarily nearly income, which in $XX.XX our asset in fourth interest in realized of QX Importantly, most the increase asset the fourth of net net at from in for represents was end XX, The $XX.XX value December the at approximately was million QX. quarter discussed. revenue, per QX. to active share $XX portfolio growth investments or XXXX. Net per XX, share by equity was our unrealized NAV

average XX. floating on to summarizes over Turning income-producing yield This rate Slide securities the our and debt investments. on graph the LIBOR weighted spread

amortized XX, at As to as yield and on XXXX, of prior cost average at the in securities XXXX. was our the quarter X.X% December X% December income-producing weighted X.X% XX, compared

of once bear Given that weighted floor we a have provides floors. an average investments interest our rate XX debt approximately our and average at interest points, for tailwind of business rate earnings XX.X% our a LIBOR rising basis reach a environment floating

basis Under approach, in same impact of per an for increase XXX of first incentive the that be existing our preservation expect waiver to negative as an a basis would approximately we share against fees. net we net floors, We the interest per income-based stockholders expect To up annual XXXX, net income once the interest QX our in of well of sheet after our reach point balance of lift. in XXX income will remains give example on of dividend. development point insulated the $X.XX of annual would assuming impact constant result $X.XX interest in share focused floors the average $X.XX illustrative incentive is fee fairly rates, increase because approximately increase the the the CCAP's income

Now I'm on to capitalization and liquidity. our Slide let's shift XX.

secured the was prior December upsizing credit by compared our during a our X.XXx, us of on out December proceeds we In higher million plus up to X.XXx from for into senior rate of from utilization The as X.XX% million quarter facility entered to while as the L simultaneously debt-to-equity the lines a the offering. XX As us ratio net October, a of average XXXX total X.XX% maturity new up SMBC, investment from to of equity to swapping $XXX allowed September lower as interest lever end a facility with resetting to with $XXX XXXX. plus and November at XXX.X deploy XX, credit activity revolving at facility, L facility refinancing coupled allowed our to revolving August the October XXX XX, weighted XXXX XXXX. the and borrowings on

that to up interest we We rate grow the weighted will expect lever average investment further as portfolio. decline the

on long-dated priced facilities. see a can attractively maturities the side well we with positioned you the As are rate of for environment floating rising rate our slide, on right-hand

Our is unsecured first notes which repaid XXXX penalty early in maturity of million can July maturing $XX be in XXXX. and without

JV, from XXXX. $XX subject down are Jason as some no $XXX borrowing for to equivalents. wind leverage, in million of as undrawn incremental provide From restrictions had there and that, million our perspective, until a year-end, Beyond and cash Expected liquidity. will liquidity of term proceeds capacity remaining maturities other cash the and mentioned, base of we

quarter Board Jason which quarter, the to $X.XX And in that, dividends consistent paid regular closing augmented of is a turn share by like remarks. four I'd dividend it per back Our of with of quarterly declared walked with the through. fourth special to the cash cash Jason dividend second Directors for fourth

Jason Breaux

dividends in of adjusted In excellent position in declaration an earn. by over net strong each the per off believe our for reflected income deployment year capped our is series quarter dividend The company investment CCAP, a was our and closing, XXXX from year fourth Gerhard. share, Thanks, of the quarter. this outpacing of special record resulting we the

strong. remains constructive the built increasing would We're the portfolio seeing person post-COVID teams. to selective have sectors set to continue support. high-quality for are approach of return thank environment please focus prospect this like financial excited of of and opportunity And in a ahead that, on sponsors with diverse we performance and investing Our a with we and believe of continued We defensive We and to in line on you for and the us, to credit management open and of more scale, frankly you at many confidence all operator, normalized year. a questions. your

Operator

first comes Our Dodd Instructions] Raymond Robert question from James. with [Operator

Robert Dodd

few a questions. So

that wind earnings? And at accretive plans this related, a Would different on somewhat there should I the be looking the that under to the be of down SLF, was slightly you different fund there wind within sort - kind have expect lower the of on new would plan. on straight So two loan the is Or SLF expectations mean First, are X, some than vehicle? a any just lending, return we of capital the at right? components. invested point, So BDC end just maybe secondarily, part to down strategy? approach right? to or then

Jason Breaux

question on venture. Jason. it's Robert, you Thank the the for joint

to Crescent On redeployed exposure yes, the your here to say we into once to would which first the second your the I it sort answer there, at the unconsolidated second moment, first think the would point. in relative or broadly syndicated loan. originate kind credit anticipate I say at joint point subsequent accretive a that of be was venture, opportunities was I this lien question your I primarily is, don't at that private ought venture that of question, joint

Robert Dodd

opportunities, market? if is segment it - the number how color could in portfolio well, - on obviously, of Then market, targeted you targeting if recently not billion on go And potentially has same us impact the Is appreciate of size the the same fund you've another, any, raised assets that - that. could a give BDC it credit the fund, targeted like what more the or when BDC? very at in the $X that names private if the different of that's could, any is I a into a the but think, BDC, that potential the Crescent Xx targeting a done of large Or I platform kind be previous there that. new the that? AUM, large anything increasing seeing

Jason Breaux

we Those raised, that Yes. all a it's and of Thanks, our at about Crescent is lending certainly, that opportunities raise out. meaningful is here for Robert. the private strategy, core all highly to a capital are which as the clearly big pools Crescent the as core capital with syndicated what from you market Thank in we and well certainly getting while I and for we in lots competition markets of. sizing fragmented being we the middle for the a than opportunity away lots less But $XX exemptive a result calling about for institutional that those calling the we've strategy this EBITDA. would markets for some I muted we've tremendous with what in across BDC From call as end, million takes the a mid-market big standpoint, by set of I there's call on positive of view say you getting been might place companies syndicated as of advantage seen $XX opportunities. capital the upper to taken really BDC both the $XX a side. platform market. the lending are. feeder really did prospects sponsor more raised define We the in But and in direct the private as in that into market. on the and equity It's the from which are that, million seen that And platform, as since of focused to has but is the certainly or direct lower BDC share the given coverage million that. the we the the roughly middle our a marketplace, there relief is credit The from markets, and private competition strategy in sourced be standpoint, lower to Crescent that's co-invest strategies, marketplace It's of XXXX. been meaningful we're on into relevant Crescent important have end continue the participates a and scale sponsors say competition, would that grow believe expect, market private

all constructive BDC the we're for fundraise future forward. pleased going on very I the in and the prospects So think all, and

Robert Dodd

appreciate I it. can. more Got if I A that. couple

targeted private want the think about to and acquired, - post get then it through. us there tell on. On the anything and going is I mean It in - to about like of the it fell that Integra out was what's know call, much but that press, right? I sounds I back that you it's can business? Is disclose with some there you on quarter don't on companies,

Jason Breaux

X% you I position lien Integra will on this nonaccrual fair we that is Thank us. that a than situation of It point, that represents say in of did But on for Yes. small much there's place half more that fourth comment I that name. really can't for say value. less Robert. not It can second asking, specifically. on at specifically I the quarter.

Robert Dodd

Okay. moving did obviously you into valuation execute a I been obviously. other November. a mean mean, more but - the parts liquidity mean I that has in follow-on go of Final there valuations, promise. now, one, lot impact. I I there's is stock the

productive seem modest now anything anything might investing, incremental a but to that? done value a buyback that ask you that discussed - relatively stops one, considered, given maybe to beyond trading been any raised has is it plans to But like at of could Board equity, competency. a to kind just be meaningful just core even discount book. I add so mean, the which And obviously has it

Jason Breaux

stock including with Board kinds value about the and of topics, talk We Robert. our price. all regularly certainly this Thanks, the of

topics. we it think cheap our we shares that the price would where of those Life, should that can't I view year-end. a think buyback are about as certainly our types program. some in any plan, that owned implemented recall stock certainly parent our relative as be. I plans XX-K around in on on discussions But would of for and will Sun a - buyback with I regular I I we there's say to comment Board disclosure

Operator

from [Operator question We Bank with of have line Instructions] a Derek the America. Hewett of

Derek Hewett

also, Could you change leverage of that that you're range now And that is? remind target me collapsing venture? then what joint will your kind

Gerhard Lombard

take this question. is that I can Derek, Gerhard.

Our about when point of as a as levered. at We target X.Xx X.Xx estimate, more range leverage, closed to kind but that the think about a we it's X.Xx. than year a

land of we're in So kind relatively By lean portfolio function that range. think first that, senior target composition. the of I the that macroeconomic we with focus. mean But to as underlevered I range, secured kind relative we still of the to a backdrop, a strong lien where

looking of we think at I range at kind end comfortable would probably so today, the feel of the higher portfolio And the the versus lower.

the currently investment liquidity question, translate into sheet, additional - would that don't $XX on top with your I it capital committed as balance our times as of is capital, depending currently think be it's on leverage - target but available of we plus other x on redeployed that, become loan into would part XX second - of would and redeploy the whatever that the that that. changes million leverage, senior it unwinds that be opportunities. it that will be an The leverage given would target fund made certainly, unlevered And the

Operator

in Breaux closing to to remarks. the turn further at questions Jason queue no showing I'd I'm call this like time. for back

Jason Breaux

to you, support, Thank with for forward you appreciate continued operator. we and your you in soon. Okay. interest speaking and Thank call. look joining We the your all CCAP

Operator

This you concludes for call. today's Thank conference participating.

now disconnect. may You

Crescent Capital BDC (CCAP) 27 Feb 222021 Q4 Earnings call transcript