CCAP - Earnings call transcript Q4 2024 | Crescent Capital BDC, Inc.

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Operator

Thank you for standing by. My name is Janine, and I will be your lead operator for today's call.

At this time, I would like to welcome everyone to the Q4 Crescent Capital BDC, Inc. Earnings Conference Call. Instructions]. [Operator

turn go to ahead. now Minister Head call Please Relations. the will Dan, over of I

Daniel McMahon

XXXX Please Good BDC, Inc. BDC and XX, or Inc.'s and may Fourth Conference morning, welcome as throughout Quarter Year to be referred the ended CCAP, Capital company that Crescent note Crescent to Capital Earnings BDC, Call. Crescent December call. the

and of may I'll reminders. and company's Comments such the those reason, statements SEC course listed any important contain risks start webcast made including expressed for and some this in subject its with begin, call uncertainties. we actual filings. Before differ conference to results in are forward-looking materially those statements over The forward-looking could from

forward-looking a The information company XXXX, and earnings quarter Presentation after issued reviewed fourth statements. the the or past website in SEC. at filed press not note is with conjunction the of company for company's assumes should future the market performance that posted year the www.crescentpdc.com. be yesterday market no also with December obligation results. such XX, its guarantee IR release any Please section XX-K its Form of and a the Yesterday, closed, to presentation ended to update

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

Officer, be Lombard. Chief Speaking on President, Financial Executive and call today's Gerhard Chief Henry CCAP's will Officer, Jason Chung; Breaux;

With turn that, Jason. over I'd now to like to it

Jason Breaux

touch follow all with on and and you highlighting start everyone, for Hello, our fourth call Dan. thank on portfolio. investment some our that us. you, results, joining by Thank our today's thoughts quarter approach I'll

fourth $X.XX of the of into annualized fourth XXXX. $X.XX to XX%. quarter NII and the earnings, return quarter in of per which share, translates equity of an quarter in $X.XX In The compares $X.XX on prior we reported terms NII

of lower than NII impacted roughly as lower were the where at portfolio points quarter's fourth XXXX XXX XXXX. end as nonrecurring Gerhard end levels of were of income by a this the of touch We at investment in the was impact results, will base basis decline on. driven the lower quarter's This yield rates they Additionally, quarter

base in NII our at We the of coverage fourth inception, base that well XXX% is prioritized dividend and since our excess coverage note dividend we have in CCAP's quarter.

asset net marks. in unrealized On $XX.XX $X.XX value quarter, primarily was decreased our share Our by basis, NAV to year-over-year the in X.X%. per per a down driven changes share

of XX the companies discuss to XXX the approximately year the and ended at Please investment diversified portfolio. highly our portfolio. X.X% fair and of XX the billion presentation, of Slides gears approximately shift certain with $X.X highlights average investment of Let's of total size of across turn portfolio We characteristics portfolio. an which a value with investments

portfolio we credit of well previous borrowers Our XX% top as risk believers believe XX credit modulating position largest in the size, through served which in cycles. present we represented are has

portfolio year-end, deliberately We lien at the investment first collectively that of primarily fair representing consists have an value quarter. prior from XX% the of unchanged portfolio maintained at loans

noncyclical categorizations. on diversified remain efforts industries industry We across investing continue to and XX focus broad our well

shows fundamental entirely Our have to supported we portfolio. been of performance by Overall, sponsor-backed performance of year-end. of as and ratings. investments private with equity almost our XX, debt Please our are sponsors portfolio with Slide XX% companies which pleased internal trends the well-capitalized turn in the

X.X quarter-over-quarter. remains of grade stable portfolio average weighted Our

value. expectations, above the our side performing that underwriting at X slide, at of continue that or the the X investments On our right-hand lion's share and portfolio represent XX% to names representing or see rated of are you'll fair

We potential investments. I don't in philosophy until there moving their warrant the experiencing want for middle investment quarter-over-quarter a example, Where that space that a rated stress on X process at value. wait challenges XX% our marked before would names rating lending be down of is In do an we an to of which companies. or covenant chart, less combined not, in X% tenure we focus. risk our cost represents de portfolio X investment increase with believe watch list, lower and added that collectively yellow seven headwinds remains slow continue rated at portfolio breach anticipating robust and the We be than drive for minimis to The may be our proactive our core the CCAP. scale. strong the to and credit market segment X was the did direct focus fair of QX, see basis. of obstacles will our is investments portion our performance heightened and that to We

lead companies. stringent focus continue to of our the underwriting strong transactions flow generating and documentation We cash our majority drive on maintain

has All this average. of today has led nonaccruals portfolio industry to that below the a

of X.X% respectively. fair at value cost, debt and total of X.X% As of nonaccruals investments represented year-end,

our quarter CCAP Moving declared of a on XXXX or share. XX. its regular XX, XXXX, record April base dividend been stable of quarterly stockholders per since dividend in dividend March payable is on of inception $X.XX to to regular This increasing first as dividend. paying We has XXXX.

We of a also announced series dividends. special

have apply supplemental our this NII we a that of test measurement supplemental excess declared distribution we to not the our quarter. Given dividend,

remarks. both over QX portfolio. our on the latter of in activity investment now I'd to additional the turn Henry part details to prepared market, Henry? our provide and to will like discuss Gerhard it the

Henry Chung

economic and to rate the driven pick an Thanks, to Jason. by quarter, upbeat continued activity a fourth borrowing lower up combination of base Deal due outlook. in cuts costs

We we've continue private for factors in will These growth first and beyond, deal a dry that from of the distribution. that other are the are resulting seen activity in powder, coupled quarters. several to flow half a overall momentum the LBO outlook, private equity increase more monitoring partners we demand volumes limited growing are year with through that we will recent for for believe environment the favorable up and equity M&A and pick regulatory LBO anticipating available

believe of speed market a benefits execution true our continue sponsors proposition and the a certainty and direct including of delivers structures. developing We to compelling the lower partner in to as core our spoke capital and ability to serve given expertise, the for lending value in flexibility middle and

we was side Slide million, highlight recent to fourth can XX, deployment turn see lien which of $XXX XX% the in Please Gross investments. you activity. where as left-hand page, totaled our in on the the first quarter of

spread XX points. totaling new During the private approximately XXX new were quarter, These companies average closed loans equity-backed investments $XX million. weighted investments platform with of basis a to we

million opportunities These and average cushions new investments investments XXXX our M&A borrower remaining million repayments, to million the $XXX as the value we weighted came a to source saw our and universe. approximately well-capitalized of and existing of portfolio incremental capital refinancing for in from levels net The continue quarter back loan We add-on to within significant borrowers our deployment with gross fund of XX%. strong compares fourth for high existing The exits, $XXX was to accretive equity of million were companies. in resulting approximately the deployment in $XX $XX in opportunistic sales aggregate in quarter.

XX. back broader look to the to Turning Please Slide portfolio.

the represented that came line of chart to quarter-over-quarter securities see in the top the at primarily at down of due impact XX.X%, includes can to This by weighted costs reduction dark yield base You the our blue equity income-producing of the metric a average income-producing rates. investments.

structure year-over-year XX, liability December compares value floating XX% a with well compared rate average our our to average and revenue based quarters. drawn our no floating XX floors. debt EBITDA in X improved prior XX% basis our X.Xx perform were interest investments of to which of floor fair The growth. debt investment to with portfolio investment of and As to weighted rate and the X.Xx Overall, at of as continues with year-end weighted average at points, on coverage companies X.Xx portfolio the weighted

calculation a the latest annualized on is reminder, base this each quarter. rate As based

terms managing the as revolver aggregate approximately of operating portfolio of In was fixed year-end. across of costs, available capacity XX%

address companies liquidity. the positioned cash balance aggregate well flows portfolio available sheet our charges in with So operating and remained to fixed

And the amount relationships with well-established equity to of invested it continues companies. large we benefit from private have partnered Most long-standing our the portfolio we portfolio of Our underwrite XX%. know and approximately it at is With multiple transactions. over equity of to that whom substantial Gerard. is the weighted by time that, with and turn applied now had average loan-to-value to in in have firms will I

Gerhard Lombard

everyone. hello, and Henry, Thanks,

impact per As reflect to Jason net the that full compared impact quarter the equal, rate the interest decline cuts noted, prior the million for of of the Recurring $XX.X our quarter the quarter-over-quarter, fourth $XX.X income $XX.X of income fourth $X.XX compared share quarter. million It's for Total per from prior for million expect fourth interest of the share worth the all $XX.X of rate reflecting to in for declined share for of and in further quarter cuts. quarter. income investment per quarter $X.XX $X.XX else to QX fourth to we XXXX. million investment XXXX to quarter noting Fed income

of consists income from had as million high quarter's call. refinancing and accelerated $X.X quarter-over-quarter. activity million last income onetime noted $X.X income, investment CCAP's stock We to QX, accelerated levels common of nonrecurring which amortization, abnormally dividends we OID from on fee decreased prepayment during and

$X.XX investment $X.XX quarter Our of share per for or net net and the losses. earnings per by fourth share income $X.XX realized GAAP was net offset of income of was XXXX unrealized as

As value was of of stockholders' in million, December $XX.XX. net resulting per asset XX, share equity $XXX our

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

dates facility October debt SMBC we and million capital terms we pushing quarter's the of the maturity maturity out a call, the noted decreasing from size were the revolver, In extend to last that manner. to our XXXX. I our stack in $XXX amended $XXX of December and to evaluating On from the in strategies XXXX million December, measured

of of broken new priced February notes million unsecured XXXX and senior into senior notes February million unsecured due we $XX of million Additionally, due notes $XXX tranches, XXXX. $XX senior two unsecured down

slide, side As prior the in $XXX total was you the debt or of quarter. now a can right-hand the committed million matures figure XXXX, that XX% see on XX% of in

with we're progress pleased here. So our

month. average weighted This down declines. due this interest base does on X.XX% which to our stated as rate rate not unsecured of in the year-end, was borrowings The cost primarily notes, borrowing X.XX% new reflect prior funded the the total on quarter from

from and of ratio a leverage This inside to activity to debt-to-equity our of maintaining $XX up while investment fund of within in deployment we base target $XXX quarter's have further borrowing subject million ratio range our prior which other billion, net as equivalents to cash brought quarter debt-to-equity year-end, With range. million and to cash and in the X.Xx capacity, sufficient $X.XX target X.Xx. leverage restrictions positive undrawn is stated X.XXx our liquidity

Board our a per of declared XXXX, As of taxable income. share. series We've $X.XX to a of regular per has dividends also dividend related Jason cash the special announced noted, for first quarter $X.XX undistributed $X.XX share

will framework and The noting well. as be March cumulative supplemental quarter's dividend has as per share paid paid earnings. for remains CCAP payable Since that in QX of first the on that, worth supplementals. for June with of this third pay respectively. $X.XX cap Jason measurement remarks. mid-XXXX, framework effect the like for It's it second not back And and CCAP supplemental announcing excess to XX test variable turn to existing vatable I'd September, our XX% in special dividend will closing in this exceeded

Jason Breaux

Gerhard. Thanks,

given view attractive environment equity of an forward more around we powder environment operating positive the portfolios significant for indicators economic the amount for a more sidelines, and the Key remain broader as As near-term XXXX, of aging the activity. base remainder and healthy. over suggests private to look believe stability making. regulatory rates, a market we M&A dry in outlook we which increased deal on conducive we're LBO relatively

cash capital rates free and of apply service to across believe stay We underwriting on continue performance debt robust accelerate a the disciplined our to flow generation focus growing managers as elevated. dispersion returns with coverage. and We credit preservation continue strong will

that look forward CCAP side this continue dispersion and delivering spectrum, on be quarters on and will Crescent come. to in to believe we performance right the to We of

the you today call questions. forward open our with of we joining for with connecting that, line And for look thank can to operator, many you always, soon. As and we

Operator

[Operator Instructions].

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

Robert Dodd

week any those that? themes were too then -- common there if there other areas of it, And say of late. in be the names, to not and ask So couple But any starting the about become you just about any want were portfolio? you related visible drove to seven want any of questions right? I increase assets, you added to the proactive a that

Jason Breaux

Robert, it's Jason.

I think paying the seven indicators. industry attention they challenges. we or say are potential to have all close That of I would new thematic names, said, sort company specific

Henry, maybe, comment I that? on think to you want

Henry Chung

that additional Yes. I'd few challenged. a There's certainly that themes have we we handful been color to of that say a bit on. more we want a are noticing just there's subsectors found provide some quite

One been keeping a markets norms. yet dynamic but I'd line compression another across There's close of that broader within that pressures is in have been packaging. close companies eye a them returned on that been top third-party say, in that to, keeping on, we trends freight end There's that's destocking deal we're is that as specific eye the certainly a logistics. just that some some industry have the subsector, created whole on a certain rates hasn't historical

kind focused on have been businesses more what seeing early-stage to impacted at tech, med bit in just quite by the that to biotech a then rates kind development. given particularly whole, indexed of is And last there. end are Those we're that a sectors customers as of access subsector we're the capital

say broadly, last here note what are as the that portfolio. a those watch user or on the and collectively than added companies that smaller whole, keeping in I quarter product indexed were will businesses that the more watch I'd what they with list service isn't to X new X% close is we those that are necessarily on. noticing the of for this list So that taking names are recover list eye less leave traditionally to watch this about than in as to the the a the The we're the event watch certainly or that you with the are list, consumers end seen we've of longer are overall. subsectors historically

more exhibiting certainly across are of that are than say portfolio. what those I'd longer the seeing we broadly So a kind

Robert Dodd

on got I and appreciate Got on cost contracting I from thoughts exposure those you that. mean anything potential have or exposure just I mean, it. there? color. that you a of government preliminary risk kind relative or tariffs on your following have cutting, like any your gauge what's in

Jason Breaux

down Thanks, to here. premature lot It's It's definitely specifics, seems we're of thinking a every a spending the but it tried that We've a in of Jason do to meaningful little day. probably impact reality, terms in a an specific U.S. into bit certainly on portfolio our become think thinking topic time into about in be Robert. news about tariffs has if exposure. companies. I to get drill

So on maybe -- you to touch maybe Henry, that as well. want

Henry Chung

start tariff Yes. of it. I'll the with piece

And we've So looking say, I'd sold of broader material what portion for sourcing really suppliers. basis. are are where companies a the goods much of looked cost we're this, a from they more at at

look roughly a industry you at a it at service-oriented based our three whole. from of of suppliers. categorization of So percentage how That, kind as do procure today, portfolio, foreign portfolio looking our materials is on given that if around just value small pretty fair XX% categorizations

question that of is within also portfolio than is that's where user around part product total majority government. or we software, of in agency companies of X%. that a of But government the where of less our overall the a your there dynamic Dodge, at primary that directly the end service. is The terms we second that looked from revenue sector present drive the the On have

agencies. of we're broader to at that want in I'd overall, as and of that both say as tariff seeing of kind this So the the actions well underscore fronts, some of overall the really the both looking we're exposure government on -- those potential side I reduction has portfolio to minority on a

Robert Dodd

color there I appreciate spreads more I mean, if One portfolio, and of undergone And has it, has repricing spreads. Stable. that. brought there's tighter, it's next are in repricing price market been the on back the et risk cetera. you call portfolio it. you some book the that spreads what over months. do XX not market sort yet? of where could think potentially above that But business a will, in today, activity, much the be Got how our

Gerhard Lombard

that does To more remains risk the come I broader repricing off anemic because I throughout historical the saw to fruition, of the levels. start And I'll think repricing last year. really new event return dynamic, think LBO extent we volumes, I to it's folks are think dynamic in on front. not that, to commenting Yes. all activity by expecting generally which it on, deal heightened that a LBO the the function

So I'd a I the certainly question, bit seen new repricing egg front, from on year. what the to would say we've do we last see volumes it's subside come if of where dynamic LBO of a little kind back and expect chicken

sluggish portfolio. we zone, kind However, in it's be continue see do if the likely we'll repricing to overvalue of that

to what's So deals. broadly it's more be I really think a of just corollary going happening broadly, with the

Jason Breaux

as in there jump I'll Robert. well,

I think deployed needs factor wealth market is seeing capital certainly is the lot a in flows raised away environment the space being repricing dynamic get non-traded a the on That billion to managers we billion into would right generally of $X the in to of dollars generally fundraising side. that of the a and hundred month. define market, million couple the segment market upper that of that sort $X that a and of of north you as EBITDA. are targeting mid plays When

today. that think of about We into the are that's market XX% coming the flows

larger at Because the is as concentrated, flows alternative size. in So loan as pressure I as upper that about certainly the those about concentrated it's of and get -- issuers think and it the end have syndicated market. more when we of broadly think you think where they the they middle

Operator

of Our Mickey from the Ladenburg. next line question Schleien comes from

Mickey Schleien

down your high losses just what questions quarter. gains of and realized hoping you already asked. unrealized least could drove at for the lot good I level, at the a break was A Yes. and

Jason Breaux

Mickey. Thanks,

pickup On nonaccruals had the related. movers We unrealized did we as side, watch individual a list have well. certainly some in

some some Gerhard, had in names. other have color movement isolated for any we So do making on you that?

Gerhard Lombard

into made significant, question. this Yes, heading really is prepared bucket. the slight It's rated movers comments the attributable It's we of There to I'd look some unrealized that at a the remarks, call. are three kind no which did individually a of Mickey. good we in the material increase say, on assets. in

define rated I So -- increase to about as what X There's X, increase. about what we higher and of a $XX really a watch unrealized want saw the really The sp, we million drove risk X migration million watch-list credit is perspective. names, deterioration. say, $XX versus individual list or the quarter-over-quarter, from that's

Operator

from last Johnson comes question from the of Paul KBW. Our line

Paul Johnson

On iLending, from Lake, Originated acquisitions? those the this Merkle, investments legacy are new those Mann Or Crescent nonaccruals quarter, are investments?

Jason Breaux

One of Crescent. the three was

other two were pull. legacy The

Paul Johnson

of Okay. the new these a there's where nonaccruals investments names, Crescent talking The investments. terms mean, And the like of then, the and kind stake I deals does controlling loans? adviser these Are crescent-led in these majority has have. maybe in watchlist of about X-rated that

Henry Chung

The the this originated Crescent of Henry. into majority they and we names list is tranches watch are both. The are that or control -- are the that majority Yes. on either age

I think of percentage what acquired assets. is which question, the the other these are side of

this value watch are I'm be through were around going So First Eagle. of basis assets, are fair XX% roughly acquired putting both just to that list the assets on and Alcentra a and

Paul Johnson

What exited? you that it there Mickey's loss driver a on said And helpful. if this It realized Was realized loss catch there crystallized. in on on like was the big I just But question, was didn't was That's anything fairly the quarter? portion. then looked the end. it Okay.

Gerhard Lombard

Yes.

primary of the CECO. nonaccrual the So company was restructuring that portfolio a quarter there the last driver was

realized restructuring unrealized from We result, position. to quarter. a and that incurred a related in slipped the a loss to that as there So realized completed

where then of new a more mark at of below basis point fourth a kind is of at I just number large investments saw of say kind out kind Okay. core quarter lower kind some the are in phenomenon that kind now And today the of XXX, of was the at of XXX Would I investments this you where quarter, market this several looking spread. spreads XXX below of lower Or spread. were funded where maybe middle pushing market? a of a that's mean,

Henry Chung

it's seems our for the looking X% just was quarter investments the spread the say kind in be whole, latter, least handle. where for specifically, it as certainly right at to are that QX at QX, a around weighted we of I'd of average

have still to seeing certainly today, been that priced within think come band several that. than with pricing where are continuing are line over I where we we're are that hold seen We've discipline in deals we lower the that that have market. our So we middle core quarters. within last And tighter the deals

more deal core of of get I XXX and larger spectrum below that's space, more think borrowers the kind of within that also more new and some that touch threshold. the certainly, capital it's are size relevant that But particularly larger are kind indicative, market where tranches the see for middle size upon of a you'll us of to coming

Jason Breaux

Paul, Jason. it's

think The other when the that, that I add the we is is. smaller would thing just tightened to and terms we generally tighten leverage structure, about issuer that

spread. And into with so which the lower looks market stretching that capital too in a $XX But we segment, the done with we're we're time for million are EBITDA, bid like seeing traditional that deep high $XX mid- It are represented of Xs lien in the QX when stack. transactions companies first deployment. market terms lower of XX% certainly the most or million of in about getting in lower of to more riding the middle -- not leverage

Paul Johnson

Got helpful. very That's it.

that, there curious, guess, changing businesses, businesses. there any mean, I manufacturing Is of opportunity as a well all? type You potential I primarily of I'm good change thoughts and of portfolio tariffs, tariffs, for portfolios for been focused the business also at broadly, all more on private on in pretty the in your heavy as exposure credit have gave traditionally, also I terms I'm with exposure, services some there. mean, does opportunity CapEx the just way, But discussions type yourself curious, information

Henry Chung

this other a -- very if businesses Henry from inception, Jason capital in I going that need But the focused charge speaking we has really CapEx and of away can is we've thoughts. kind fixed for he or back to heavy and on they this service. doesn't the And underlying there how we is whether procured whether in that the to flow or cash tariffs -- much dynamic -- materials portfolio debt an and of have from we where change don't. where chime is our shied our companies are reasons think a broad domestically, that really have service environment are

So continue I we're just to our even in to going what their stick in think of see you'll to knitting the are is what in terms how models we're operating focused, are. of this environment businesses where capitalized, terms

more see U.S. necessarily don't that capital across needs and broadly opportunities businesses higher economy, there may there. have though domestic even I be macro the more heavier And requirements CapEx the us or leaning into

Operator

closing Thank remarks. action. CEO, you. the Breaux That concludes turn I back our for our Jason to trading call now will

Jason Breaux

forward speaking interest everyone, Okay. your continued you, you Well, all to We your look for questions thank with and CCAP. on soon.

Operator

concludes today. conference for That call our

You may disconnect. now

Crescent Capital BDC (CCAP) 20 Feb 252024 Q4 Earnings call transcript