KBDC - Earnings call transcript Q4 2024 | Kayne Anderson BDC, Inc.

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Operator

Hello, and welcome to Kayne Anderson BDC, Inc.'s Fourth Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to turn the conference over to Terry Hart, Chief Financial Officer of KBDC.

Terry Hart

Good morning, and welcome to Kayne Anderson BDC, Inc.'s Fourth Quarter 2024 Earnings Call. Today, I'm joined by Doug Goodwillie and Ken Leonard, co-CEOs of KBDC; as well as Frank Karl, Senior Vice President of KBDC.

we available remarks, questions. take prepared our will to be your Following

of reliance placed call Such not our current and estimates future investments, risks, undue which statements. include historical other company, and not opinions prospective involve and and and factors, current portfolio our are industry, not Today's are beliefs other statements forward-looking and expectations, to difficult to guarantees unknown facts, our and statements but may are based subject statements These thereon. and performance forward-looking known rather assumptions. and are control factors, and risks, These projections our our should predict. beyond uncertainties are the our be on uncertainties of about some

differ important or recent Actual factors. statements. and to materially the forward-looking do obligation to Any expressed should for ask most to today the company's no from any SEC in forward-looking risk those We the forward-looking forecasted placed statements update you assumes refer with not time. made results future any filings not statements undue them. company be at reliance on The performance, guarantee may

our are Our and XX-K supplemental section earnings kaynebdc.com. at on earnings the Financial presentation of release, website available

turn Now to I'd like the Ken to over call Leonard.

Kenneth Leonard

KBDC's during over you, Thank more financial and Terry on our quarter of provide on results the our you, results to voice then performance. discusses joining the for a and conditions before thank Terry, overview activity current short call before investment start and some detail. in us everyone, portfolio Hart today. with I'll I'd discussing market makeup financial like

a generated of pleased income to the share $X.XX investment During net $X.XX and of net quarter, report that per we're we income share. fourth

our distributed special the of the our per around of dividend of share of a $X.XX the latter which dividend, time declared IPO. $X.XX quarter, regular was and we During

income. held reminder, a spillover $X.XX of share at As approximately per year-end XXXX, KBDC

the which of period, fourth fourth favorably made made quarter million, funded. total investment of funded. XX the compares activity was million quarter our million of across middle private $XXX in commitments XXXX, of $XXX We $XXX commitments $XXX of million the of new during was which where we to Turning market to This XXXX. businesses different

million million. In existing $XXX commitments or during partially we funded. fundings of funded Again, fourth compares of the partially in $XX Combined, were of to fourth XXXX, of our favorably addition, million. funded unfunded million quarter fourth $XXX XXXX were the or commitments our unfunded Compared were where existing quarter. $XX fundings gross made quarter funded XXXX, quarter the of this where to

We the had million but million up of the the in still repayments around fourth $XX quarter investments. during of from only X% That's period. average funded of XXXX, $XXX

that's no the fundings, in of $XXX During portfolio over the with broadly of $XX loan the broadly plan, million. syndicated fourth experienced to new the and year. plan our line loan portfolio a to portfolio syndicated wind million repayments approximately continue down We for course our of repayments quarter, total

$XX million. was quarter third When above increase still our debt-to-equity ratio X.XXx, quarter but activity, debt-to-equity This of to XXXX range for X target X.XXx. ratio to funding our considering our repayment fundings funded and deployment in of net all X.XXx, the increased below

composition. Turning to our portfolio

value XX, XXX of December funded companies investments. of representing billion portfolio fair As KBDC's $X portfolio includes individual

delayed $X.X comprised of of excess loans a We total revolvers commitments have of term million $XXX another draw and mix for of unfunded commitments unfunded billion. in

on final since closing or is XX, $XXX originations process in fundings, XXXX, very a has start the Of note, KBDC to evidencing million XXXX. additional an of closed strong December for

quarters one ability of our track since our to over on largest in KBDC's is XXXX inception continued portfolio quarter scale XXXX, time. first fact, its be origination In to evidencing

diversified watch list, approximately average XX%, our XXXX, investments position built loan represent XX, in coverage leverage our also with X.Xx only portfolio December LTV X.Xx, interest conservatism our where average We've XX of portfolio. size XX% of of practice As fair had KBDC's our structuring. of of investments of top of investments weighted a on evidencing value in excluding X.X% and and portfolio, of

Outside of credit of and market investments specific first our associated structured. sponsors. with private well our investments the portfolio, private portfolio equity in lien by XX% is middle backed securities are of our are statistics XX% very invested our

covenants. investments our the financial utilizes all where and first-lien funding are middle rate, Additionally, our borrowings. investments X of our liability, floating market that debt floating-rate our private vast XXX% mirrors have of of majority

to well fair very total investments out of performed of positions X debt X.X% nonaccrual, has representing portfolio date, only with at only Our on value XXX.

average we this We investments. yield weighted value our in been approximately with have of portfolio achieved upside our of syndicated few invested as investments. the relative securities, approximately portfolio XX% such built for fair syndicated competitors rotate broadly spread on conservative broadly these positioned yield of next of out healthy we that lower This quarters with a portfolio in has over the spreads XX.X% have to

and the is a stable, economy. end slower focus U.S. on industry Finally, growing market portfolio by our diversified with segments of

the see our industries of the presentation, care largest portfolio. representing earnings As our health in products, are providers and and largest food containers services, packaging, total only can distribution, you commercial with XX.X%

of book. class The that chain well, an performing to of the decades our multiple continue supply substantial times loan perform economic our associated vast COVID-XX, this extremely the geopolitical to quality inflationary uncertainty, asset during and of majority should market and respect periods recent is including has quality, pressures insulated during conflicts our we're pleased rates. are private credit and is over perspective even with reference and distress, and middle investments increased in most credit well of as well overall see bumpier our it as disruptions, portfolio. We With

of one on portfolio. X.X% value fair position total added we quarter, our which nonaccrual, the market of In represents the

As mentioned, that X.X% our our of to brings total of portfolio. nonaccruals value fair

least enjoyed market fourth feel of relative quarters. Sponsor relatively the the X the up Broadly, XXXX. activity market middle to versus XX% robust to Turning last X at we levels of to in volumes fourth were the XXXX, of market conditions. quarter quarter

XXXX. up X driver in were to versus M&A volumes We in loan fiscal has from substantial year sponsor market to activity been volumes transact, XX% moving the over community X years. a middle prior rebounding XXXX, equity this uptick lower believe private the For

KBDC's existing of portfolio of private middle over XXX points. SOFR has approximately market investments weighted spread average basis a

basis XXX points. compression, over middle our we've some most spread had the reviewing market and to we're private approximately spread today investments points, a an in market While basis of seen new transactions of SOFR XXX of XXX XXXX have average

good of that range. here continue the in half risk-adjusted as that encouraged we today, upper opportunities we We're sit lending see to very

by predict In the loan can signs have addition, no some go spreads driven one in that stabilize, spreads while will in seen part where future, to volumes. accelerating begun we've

With it to Hart over turn fourth to that, KBDC's quarter XXXX discuss I'll financial Terry results.

Terry Hart

Thanks, Ken.

Let's first results review operations. of

net $X.XX excise the quarter, compared during to income net fourth quarter, earned prior the taxes, was $X.XX per $X.XX the in compared share we share investment and $X.XX, third per or to excluding quarter. income of During $X.XX

quarter. during placing income income fourth the the for were the fourth partially Sundance reductions driven additions quarter $XX.X prior the investment the $X.X offset impact status of quarter. by reduction to investment by million million to the and decrease Total was net to to These on nonaccrual SOFR during in The compared the primarily million portfolio quarter. was as $XX.X

to reference interest the to and X.X% only for interest. noting decrease It's portfolio lower our was XX% related over yield of rate, that the that to income worth quarter PIK related of

during a Additionally, million approximately result of realization of we had of OID the activity. fourth as quarter, $X.X accelerated amortization

to on fund million facilities $XX.X investment were quarter fourth tax expense to borrowings from during The the the million resulting income $X.X quarter. higher credit expense prior the for undistributed activity primarily expenses related million to was on additional compared and Total excise for our quarter. of $XX.X interest increase

in our May basis fee our instituted connection waiver IPO, Kayne reminder, XXXX, XX, a on that full XX, a a through Anderson of expired base income-based As and fees of management XXXX. with waiver incentive point December XX fee

on of million fourth had unrealized compared and $X.X an the on of the we equity in of sale original of to quarterly gains the offset quarter. unrealized unrealized had portfolio gains extent, realized the million During value on gain $X.X $X.X of of to prior a co-investment quarter, fair lesser we origination were during net result quarter, million The of and the our upfront a by investments. of some fees discounts, partially in activity gains issue amortization changes a the

Additionally, investments equity we tax $X.X million had held in expense on income subsidiary. deferred unrealized of related gains taxable our to

total $X.XX of and assets were As December billion. $X.X XX, net assets billion were

$XX.XX asset net our unchanged date, that value was per share. at of As

being flat $X.XX we During including share, $X.XX special higher dividends were realized the our in per of per quarter, operations, and paid resulting results dividend unrealized X $X.XX of first share of our per than share, NAV gains, and regular fourth quarter-over-quarter. of

end ratio we outstanding end is and third $XXX debt-to-equity X.XXx, was of the the of quarter. debt million at fourth the At increase quarter, an of which the our from X.XXx had

mentioned, Ken second to since of achieving quarter steadily in our portfolio the of we first the prudently. be we this origination up the such XXXX is low end level of to quarter one grow range inception, our XXXX. third shaping robust continue of or activity, will and X.XXx most to debt-to-equity Xx As that of With target quarter

X.X%. and facility credit our maturity the fourth we to we decrease amended increase facilities, quarter of XXXX, improving of and the borrowings, to the credit SOFR utilization corporate pricing to During date plus continued facility our extend

resulting amended SPV facilities credit the over our net increase maturity of The capacity be the each to extend beneficial higher and reduction year. we both utilization credit dates, to facilities facility. interest to origination February, and balance costs on rate In should the investment decrease the our income of robust from borrowing

to facilities range, notes low leverage facility opportunistically unsecured we as additional debt-to-equity forward, increase we plan the credit Looking provide capacity. credit end achieve of our and issue to our target on

XXXX provide a dividend In $X.XX share of record to related of February a Board quarter thoughts shareholders on Directors our our On closing, XXXX. the first declared like per XX, for I'd to distributions. March XX, of of to few regular

dividends These distribution in per first March $X.XX in previously and In addition, our will of December share of XXXX. follow distribution XXXX. the we June special share of XXXX distributing of be $X.XX X special per also declared of

earned were release out excess special price support stock around These established help the lockup XXXX. to in and dates distributions income share pay

shareholders dividends, net be XX, fourth undistributed approximately to be of to income through in amount, expected share paid investment this per remainder the $X.XX remaining Of XXXX. will of out distributed with X per quarter our special was the share. As December the $X.XX

achieve above broadly the Further, loans. timing our of leverage is middle-market throughout net portfolio lower-yielding modest fully will more our when to coverage excess middle strategic our ramp dividend continued anticipate yield market relatively reflecting the our syndicated reflect operating portfolio income ranges out target base rotation believe dividend, of loan we with the investments investment a KBDC leverage We XXXX, and at accurately its and operations total in dividend invested into target, loans. our steady-state of

operator, that, questions. please open With for the line

Operator

question line [Operator Instructions] America. the from first Hewett of today Derek of Bank from Your comes

Derek Hewett

of the does that syndicated end the the that that terms quarter target achieve In during loan this or that at of third year, portfolio? included expectation low near quarter second either the the you'll forecast? Is leverage your broadly in include rotating

Douglas Goodwillie

assumes his you Doug this QX commitments at for Thank presentation, the That in Ken million $XXX It and are over established we funded as XXXX. investing that of we're pace to just million Goodwillie. think, date, close another the for mentioned Derek, question. I in of $XXX in QX. for process that we've thus far To is we does are, not.

robust the and that early QX to target QX, the that latest, would achieve end with of QX. at so towards into the or expect pipeline ratio we And

Derek Hewett

Okay. or you exposure types corporates. kind kind kind And either from of for risk portfolio [ then of assessed of economy borrowers old is have of tariffs, my follow-up of question doge-related especially the is, since ] your types the more

Douglas Goodwillie

tariff moment, you to the risks, across relevant obviously obviously think those I today. all assess need also portfolios, at risk

don't that many what we call are risk. invested the companies have We stroke pen of with

of there's to funding where government cash So lot as a the flow. a element key

companies is business. that where I government the the evaluate risk a as funding ] us, doge relatively is very And source of again, we few portfolio, key there's think for the minimal. [ So

Frank Karl

is Frank. this And

some address of previously to just the think obviously I tariffs. forward around though, these both in with think name days sort news the of feels moving I some like few topics, communicated tariffs, clearly, for the last the uncertainty of game,

top we clearly think specifically new X of about think I on underwriting. first, mind tariffs ways: in

of much we're much that very tariff-impacted I will a So seen that careful of way note are, say, not being transactions let's there. importers in -- way from we've the countries.

the market back think sort I is pulling a of bit.

business exposure with to to a seller a bring market. now, that If you're sort right of hard

complete substantial just more is COGS, a did we our of of What the we COGS, low our X/X second, analysis than borrowers again, not something it's from at portfolio then China; on all, Mexico. imports Of these, where bar XX%, into exposure. at a have had for more than from vast And bar, of another, looking XX% reasonable of low like flex then found of KBDC's example. the fixed-price ability which, large is some and it, and customers, They're all level call of nearly they XX% with portfolio, XX% again, imports majority, pricing. or Canada contracts to COGS,

few We we're also invested directly. XXXX, saw where of the were very businesses this in impacted

Of and uncertainty tariffs and course, unpredictability. trade wars create

here. if positioned around focused ours all the that portfolio the conservative is secured like some is see even lumpiness senior well to But U.S. hard way in So think corner. do there we loans

Douglas Goodwillie

doge to spending in -- directly of to are -- come to are question. care, funding other I relying that Medicaid the government -- of question tried derivative hit from be funding. And Derek, government fund want it don't the dismissive and programs all. at where on kind in care like on head of I into health And Yes. [ ] the health be They think businesses something that into would of terms second

And of it and care services. health relatively always X% level second ] down portfolio could and risk risk. that daily the occur in us, think going our the that and do. And reimbursement portfolio monthly doge But in some to [ for a get have assess low there's portfolio providers you And roughly any as that, typically be to companies within in to is have think when I monitor I potentially what continuing we're on in basis Washington. changes we risk

Operator

are question Paul have And -- a no Johnson Instructions] of do last-minute further KBW. I the apologize, [Operator line there from we from

Paul Johnson

those, up or curious that pressure at I'm have this kind improved bands leverage of activity, and from refinancing all new how market multiples have the covenants year well the heavy with just terms around of Just of as held last as to kind kind more year? continued the those

Douglas Goodwillie

us. Doug been consistent is Goodwillie relatively has Leverage again. this Paul, for

As at sub-Xx XXXX, our investment for we new looked activity.

weighted the quarter average Xx. first around this at look we As again, right of year, still

So been leverage has consistent. very

As recall, may vintage. tends the Paul, to us, you for by that be case, vintage

very ] has with of but Xs, period more a it's or in our price. value where it's strategy. the consistent [ bit in where seen part You do Where what lending been the may one X.Xs low have that's a we a we've movement of on

has as been I disciplined on mid-market leverage and to think leverage but also LTV. the relates pretty it structure just not

a in closer of were in think To XXXX. XXX XXXX presentation quarter X% that spreads XXXX. below we've been in I his has far of thus last around in What part Ken the Closing year give around mentioned earlier, feel, you seen to fees slightly first the XXX. year, for the it

the more something our to XX- seen on market That you in relatively if muted you XX-month of XX in a mid-market the effect a and to consider lending said, broadly So you that during market, to give, think to has bit would XX seen basis price. what the same which period from will, points period, over syndicated if where we've time the I market. of have that is upper been

Operator

back call for over remarks. question-and-answer our turn closing session. to concludes I now the that will And Doug

Douglas Goodwillie

you. Thank

everyone much. earnings May. the and continued forward our So KBDC. strong with that, Thank first just continued a thank their to look like time you on I'd call to in We interest in and to next very for call quarter

Operator

for This call. you conference participation. concludes your today's Thank

disconnect. now may You

Kayne Anderson BDC (KBDC) 4 Mar 252024 Q4 Earnings call transcript