- Earnings call transcript Q3 2022

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Operator

Good day and thank you for standing by. Welcome to the Crescent Capital BDC, Inc.’s Third Quarter Ended September 30, 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Dan McMahon, Head of Investor Relations. ahead. go Please

Dan McMahon

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

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

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

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

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

With and President turn Breaux; over will Gerhard like be Senior Financial today’s Officer, and on Chief I’d CCAP’s Lombard; to Chief Chung. Jason to Executive Speaking call that, Henry now Officer, President, Jason. it Vice

Jason Breaux

our our current Thanks, thank continued highlight and on cover results, Dan. Hello call. third discuss for I’ll interest recent and backdrop. We and our results more your in quarter the CCAP. activity, in provide Today, some will investing Then our earnings you will appreciate market portfolio, current Henry Gerhard our financial thoughts review detail. everyone, joining

of of and Please investment their color the will grow and more you’ll income results. inception on. The as begin. relates which fees our a a net appreciation. third total basis, was capital to yield revenue, for of and So turn a summary Gerhard per in on provide since investment We continues income unrealized $X.XX income where our third dollars see On $X.XX incentive based our non-cash let’s quarter X, gains to reversal per quarter difference share. share. share level our both per and both capital of absolute a income related Total recurring net adjusted net GAAP highest Slide reached realized investments investment percentage investment to reported $X.XX total

the ended reflect equity the wider percent the markets leverage within to asset spreads the took as market Majority during finance compared X.X% at quarter. volatility we prior down quarter. losses net quarter per the value and as unrealized the of Our relates $XX.XX share to credit to persisted in third decline

the approximately wrote which one-third will down investment touch Alcentra in NAV of that we contributed a legacy on zero-cost Additionally, his decline, Henry basis comments.

leading have they portfolio has to the operating a flow companies inflation, to created many many remains As on pressure and our through this, general market of certain the demand. generation. our the cash an increasingly solid maintain cost resulting while has And to able been complex the from given anticipate softening rates slowdown margins healthy margin high our companies raise Despite fight increases certain Reserve continued have for Federal environment companies focus volatility resilient to largely fundamental pass as of costs, industries and in experienced date input to with and increases free strong in labor profitability. performance

the Given Crescent, growing diversified our We with environment making investment uncertain our of over we an opportunity take advantage presentation, $X.X our investing of and to the portfolio. plus track turn the at in credit feel highlight with the of set of XXX average years largest quarter than the years and billion inception that to which record well through of at presents. private portfolio since across COVID seven first CCAP companies since positioned XX navigate nearly size it Please investments of investment portfolio. total X% fair Slides XX less ended portfolio and value macro our XX with

operational periods with XX% first representing across and of sponsor-backed strengthen lien at their the debt prior Our for loans believe and to value industries companies financial and the first investment we long-term diversified volatility. And from which is to our in heightened companies portfolio secured generally well XX% of We consist creation, collectively to remain companies that senior fair continue exclusively our during equity in valuable end. lien private quarter unitranche partners portfolio primarily support particularly equity-backed almost as portfolio XX% private of of quarter. up XX portfolio value continues of provide to lend

payments, mark principle investment quarter, of our on with marked $X.XX approximately the For XX. of our average an and more value today debt XXX debt outlined trends dollar fair portfolio credit XX% Two debt companies total representing [ph]. of the $X.XX third of on above full is investments at XX% XXX are over investment interest out portfolio Slide made scheduled

performance strong nonaccrual and Continued ratings levels. low

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

had fair now Henry I’d status four on total nonaccrual like in at activity. end, to our to companies discuss portfolio turn of X.X% respectively. we investments As QX over our X.X% value to it and representing cost investment Henry? of debt investments quarter and

Henry Chung

Thanks, seven close to our term delayed loan on was we XX was recent totaling Slide third Growth page, with senior million total, unitranche million can which highlight see the investments of secured activity. on In on million, respectively first $XX over lien quarter follow and nine where investments. $X turn deployment draw revolver and $XX you million and and the remaining we as from coming hand $XX new Jason. the the XX% back activity. of side Please in on left

basis were fees new with All or investments loans and average of LIBOR of a or the equity-backed SOFR approximately private XXX floors, spread OIDs points. attractive weighted

venture, levels $X.X highlighting committed of which of for that the from exits, the million winding loan-to-value It worth approximately Crescent breadth in inclusive XX% a our over are sales platform. attractive about addition, The check down. repayments in for In of across deals transactions gross this the of total and highlighting joint million quarter. $XX closed $XX also million of is aggregate CCAP’s remain the averaging the aforementioned Crescent size compares represented to X% billion process deployment accounts the we new $XX of total in commitment quarter capital return liquidating

to of market more at the in today activity year has our for total by of right this you’ll Moving from XX% increase our of execution first to equity remaining XX% the of our design it to a portfolio. percentage allows see prominent unitranche to even investment page, ago top to private sponsors, the that led becoming the offer as us enabled side liens a capital us environment, opportunity This especially to our stack. is enhance greater certainty and yield hand

the see hikes. on income XX, Federal producing Slide can average at that the to securities weighted increased yields over X.X% meaningfully Reserve’s you interest rate the X.X% quarter-over-quarter the Turning cost from yield of

our benefit the floors. As no us our in interest average XX% with debt floating to to XX% investments case item. points, with base line fair of which at growth rate floating income quarter value liability the compares of situates floor as XX our or is floors our rates well from rate the average with in above XX, increases basis structure of weighted September This

an As as is item our Southern or worth Institute Alcentra our Technical STI, cost his comments, zero. merger at highlighting a portfolio it investment which of Jason basis the through relates to in during noted acquired we

of Following our the the to in investment. the initial merger, had course resulted increase positive $X proceeds zero-cost of over that developments close due the several We realizing on above portfolio investment the basis positive over performance. cash our value fair total company million us

share backed this or due value impacted reduction we down company, of in quarter. zero drove recent one-third $X.XX This asset per reduced position value. to this that regulatory portfolio of However, net changes the the quarter’s fair approximately unrealized to the

over a minute it Gerhard to spend turn results in on acquisition Eagle announced to our of First to our more I BDC. I discuss wanted Before detail,

On portfolio improved scale to the We positioning, call, investment enhanced we expect income accretion, strategic transaction in public merit October. the reviewed the net early in hosted investment and capacity. including

floating third their sponsored lien and earlier in loans senior investments. rate first results this reported of XX% secured, and XX% XX% with quarter Eagle First backed, their invested week book debt

We complementary highly to continue portfolio to a adding are believe that we CCAP.

September represent the Eagle in non-core First of as with that, First Gerhard. to of XX originated to we and be approximately directly over X% now a CCAP what portfolio to and opportunities particularly forma to to the continue lien pro for we the investments. work relates it We team, believe first Eagle I will will close that as deemed conjunction or near-term portfolio investments it turn combined rotation provide X% With

Gerhard Lombard

good Henry, Thanks, and everyone. morning

for $XX.X investment investment $XX X%. of for of an to representing quarter. approximately of for $X.XX we’ve the $X.XX prior quarter increase of compares net to million the the per third quarter. prior for share The income highest per adjusted figure quarterly quarter, Total reported third inception share compares Our since million XXXX income the

income accelerated PIK of years. million now growing recurring dividends base at portion and replaced in continues Importantly, by We $XX.X from This ultimately interest recurring investment a form the of realization record related OID total investment non-recurring recurring income fees, yield a has yield Crescent’s consider what originated close this income, from last our investment generated been amortization that over by comprised driven the investment revenue $XX.X I’d to portfolio income. from figure two also assets. quarter-over-quarter XX%, of related to of unused income, fees quarter’s That income for portfolio. the represent of to and X% amortization revenue for the Alcentra of up total note the modest accounted and income of approximately income million income. PIK was we XX% rising significant rates us

income larger producing bank our revenue to And lien investing loan due continue We first net tailwinds to of broadly focused because expand venture. largely expect we’re from portfolio. to largely unitranche and a our out Alcentra growth joint in margin assets, rates legacy rising syndicated in having in rotated interest names and

generate a We interest high expect income. quality revenue of to of primarily top-line consisting

will daily a rising higher associated higher pending currently during experiencing. base that are our the borrowing one cost costs and increases fourth Eagle Form our additional there further to We more which from higher revenue want our rates reset in who quarter, versus rate quarter having scale to This portfolio sheet environment higher impact of a the acquisition have the benefits expect on debt outstanding of upside rate of partially immediate reset and interest beneficial virtue fourth combined the provided we examine balance these else XX% of fourth Holding quarter in NII about the interest sensitivity means to we provide as between rate portion fourth income the modesty to on by and with accretion on translate or offset quarterly delay Generally additional impact by a asset synergies XX-Q monthly is all details First from of financing higher with of equal, quarter for those side should of movements base [indiscernible] BDC. the our costs. potential quarter during the approximately impacts. the rates XXXX this projected to quarter’s potential base with basis

quarter to Turning prior to back third earnings, per the earnings XXXX which share our resulting $X.XX, net of operations for decrease minus $X.XX in net this per compares share quarter. minus quarter’s the GAAP assets or from for

approximately At investments share billion Positive net realized earnings share distinction our volatile per the September $X.XX asset highlight modest of was fair XXXX our is a losses reflection unrealized GAAP by impacted environment. compared highest net Our investment final of portfolio up September million of a mark-to-market XX% dividend. roughly and in reviewed quarters STI’s resulting with million losses growth equity impact XX, credit share unrealized leading categories. and fourth as NAV $X.XX $XXX $X.X the as and end declined of quarter to September to in believe the but of the in value our of market XX, per the or curating stockholders $XX important and not XXXX. credit or and portfolio shareholders investments quarter net million $X per this evidenced offset And deployment to internal of was view our as our rating million $XXX rated consistent $XX.XX at quality quarter-over-quarter. in on widening is two spread dynamic with per on quarter share, $XXX in as well ratings NAV this on $XX.XX our for $XX.XX environments, is quarter’s special order rather third for XXth, the of total large of We in remainder our share ultimately at portfolio, our third per an partially value This which by portfolio million marks. prior we this portfolio included one

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

September stated end. low modestly X.XX of our borrowings end of interest range. X.XX% debt-to-equity As is up at the times XX, rate on target The X.XX XX total June our average our weighted of was as and times ratio on quarter from

secured full our facilities. lead deployment demanded by will attractive We be priced expect that term near activity

see had a base XXXX. restrictions, maturities our notes right the debt July end, of to cash As capacity borrowing of this in there of and with hand we years XXXX. year $XXX of undrawn you low perspective equivalents. side subject $XXX million no X.XX% we a million level over have leverage the as slide, the are and next After of remaining that, million few maturity unsecured on and related no can until liquidity cash and maturities $XX to From in other quarter maturities

wind joint the proceeds some continued liquidity. venture incremental expected down from provide Additional our for will

XX, cash our as Jason the back declared for XXXX, on fourth record for like $X.XX Finally, closing share And of stockholders XXXX. per January XXXX be December which paid with of a dividend, will board remarks. to quarter to to that, quarterly I’d XX, it of turn

Jason Breaux

Gerhard. you, Thank

ahead. the that positioned remains continue We and to economic CCAP well believe navigate to market uncertainty

we further widening volatility during While created our as opportunities the market lean spread and the to into do potential ability dislocation. feel progresses. for We periods current cycle anticipate about good portfolio and of attractive our

I remark of portfolio want believe the to and P&I representing XXX First please XXX just to at made say make transaction. in due in XX% wanted in We’ll maintaining XXX said that can While implemented. go investments and like to all remarks. happy of Thanks. that would your companies questions may standards that our time just debt the value open before of I course total continued earlier today. for We support we same I payments scheduled up ongoing clarifying you to Eagle debt third investment understand operator, we limited take your XXX the of I thank that rigorous With out quarter. Q&A. start of ahead underwriting full And certain be be and to one the answers we’ve with over always please fair my operator, open for the out questions. Q&A. you line

Operator

time. turn to Thank CEO over president queue Jason Instructions] showing in call the I’d [Operator closing and at you, the to Breaux, remarks. Mr. questions like for I’m this sir. no back

Jason Breaux

We this we of call today. thank Thank and support attention and your forward soon. appreciate CCAP your We you you, with for you look speaking all to joining Operator.

Operator

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

now may disconnect. You

Crescent Capital BDC (CCAP) 10 Nov 222022 Q3 Earnings call transcript