TCG BDC, Inc. (together with its consolidated subsidiaries, “we,”
“us,” “our,” “TCG BDC” or the “Company”) (NASDAQ:CGBD) today
announced its financial results for its third quarter
ended December 31, 2017.
Selected Financial Highlights
(dollar amounts in
thousands, except per share data) |
December 31, 2017 |
|
September 30, 2017 |
Total investments, at
fair value |
$ |
1,967,531 |
|
|
$ |
1,964,117 |
|
Total assets |
2,021,383 |
|
|
2,013,475 |
|
Total debt and notes
payable |
833,946 |
|
|
849,770 |
|
Total net assets |
$ |
1,127,304 |
|
|
$ |
1,124,353 |
|
Net assets per
share |
$ |
18.12 |
|
|
$ |
18.18 |
|
|
|
For the three month periods
ended |
|
|
December 31, 2017 |
|
September 30, 2017 |
Total investment
income |
|
$ |
49,510 |
|
|
$ |
42,648 |
|
Net investment income
(loss) |
|
26,516 |
|
|
25,080 |
|
Net realized gain
(loss) and net change in unrealized appreciation (depreciation)
on investments |
|
467 |
|
|
463 |
|
Net increase (decrease)
in net assets resulting from operations |
|
$ |
26,983 |
|
|
$ |
25,543 |
|
|
|
|
|
|
Basic and diluted per
weighted-average common share: |
|
|
|
|
Net investment income
(loss) |
|
$ |
0.43 |
|
|
$ |
0.41 |
|
Net realized gain
(loss) and net change in unrealized appreciation (depreciation)
on investments |
|
0.01 |
|
|
— |
|
Net increase (decrease)
in net assets resulting from operations |
|
$ |
0.44 |
|
|
$ |
0.41 |
|
Weighted-average shares
of common stock outstanding—Basic and Diluted |
|
62,143,344 |
|
|
61,840,100 |
|
Dividends declared per
common share |
|
$ |
0.49 |
|
|
$ |
0.37 |
|
Fourth Quarter 2017 Highlights(dollar amounts
in thousands, except per share data)
- On February 26, 2018, our Board of Directors declared a
quarterly dividend of $0.37 per share, which is payable on April
17, 2018 to stockholders of record as of March 29, 2018;
- Net investment income for the three month period
ended December 31, 2017 was $26,516,
or $0.43 per share, as compared to $25,080,
or $0.41 per share, for the three month period
ended September 30, 2017;
- Net realized gain (loss) and net change in unrealized
appreciation (depreciation) on investments for the three month
period ended December 31, 2017 was $467,
or $0.01 per share, as compared to $463, or
$0.00 per share, for the three month period
ended September 30, 2017; and
- Net increase in net assets resulting from operations for the
three month period ended December 31,
2017 was $26,983, or $0.44 per share, as
compared to $25,543, or $0.41 per share, for the
three month period ended September 30, 2017.
Portfolio and Investment Activity(dollar
amounts in thousands, except per share data, unless otherwise
noted)
As of December 31, 2017, the fair value of our investments
was approximately $1,967,531, comprised of 107 investments in 90
portfolio companies/investment fund across 28 industries with 57
sponsors. This compares to the Company’s portfolio as
of September 30, 2017, as of which date the fair
value of our investments was approximately $1,964,117, comprised of
108 investments in 92 portfolio companies/structured finance
obligations/investment fund across 29 industries with 59
sponsors.
As of December 31, 2017 and September 30, 2017,
investments consisted of the following:
|
December 31, 2017 |
|
September 30, 2017 |
Type—% of Fair
Value |
Fair Value |
|
% of Fair Value |
|
Fair Value |
|
% of Fair Value |
First Lien Debt
(excluding First Lien/Last Out) |
$ |
1,293,641 |
|
|
65.75 |
% |
|
$ |
1,259,983 |
|
|
64.15 |
% |
First Lien/Last Out
Unitranche |
237,635 |
|
|
12.08 |
|
|
230,667 |
|
|
11.74 |
|
Second Lien Debt |
246,233 |
|
|
12.51 |
|
|
268,783 |
|
|
13.69 |
|
Structured Finance
Obligations |
— |
|
|
— |
|
|
2,585 |
|
|
0.13 |
|
Equity Investments |
17,506 |
|
|
0.89 |
|
|
13,552 |
|
|
0.69 |
|
Investment Fund |
172,516 |
|
|
8.77 |
|
|
188,547 |
|
|
9.60 |
|
Total |
$ |
1,967,531 |
|
|
100.00 |
% |
|
$ |
1,964,117 |
|
|
100.00 |
% |
The following table shows our investment activity for the three
month period ended December 31, 2017:
|
Funded |
|
Sold/Repaid |
Principal
amount of investments: |
Amount |
|
% of Total |
|
Amount |
|
% of Total |
First Lien Debt |
$ |
171,724 |
|
|
60.96 |
% |
|
$ |
(131,771 |
) |
|
45.58 |
% |
Second Lien Debt |
50,239 |
|
|
17.83 |
|
|
(74,854 |
) |
|
25.89 |
|
Structured Finance
Obligations |
— |
|
|
— |
|
|
(11,750 |
) |
|
4.06 |
|
Equity Investments |
3,562 |
|
|
1.26 |
|
|
— |
|
|
— |
|
Investment Fund |
56,200 |
|
|
19.95 |
|
|
(70,750 |
) |
|
24.47 |
|
Total |
$ |
281,725 |
|
|
100.00 |
% |
|
$ |
(289,125 |
) |
|
100.00 |
% |
Overall, total investments at fair value increased by 0.2%, or
$3,414, during the three month period ended December 31,
2017 after factoring in repayments, sales, net fundings on
revolvers and delayed draws and net change in unrealized
appreciation (depreciation).
Total investments at fair value held by Middle Market Credit
Fund (“Credit Fund”) increased by 19.6%, or $161,644, during the
three month period ended December 31, 2017 after
factoring in repayments, sales, net fundings on revolvers and
delayed draws and net change in unrealized appreciation
(depreciation). As of December 31, 2017, Credit Fund had total
investments at fair value of $984,773, which was comprised 99.4% of
first lien senior secured loans and 0.6% of second lien senior
secured loans at fair value. All investments in the Credit Fund
portfolio were floating rate debt investments with an interest rate
floor.
As of December 31, 2017, the weighted average
yields for our first and second lien debt investments on an
amortized cost basis were 8.62% and 10.44%, respectively, with a
total weighted average yield of 8.86%. Weighted average yields
include the effect of accretion of discounts and amortization of
premiums and are based on interest rates as of December 31,
2017. As of December 31, 2017, on a fair value basis,
approximately 1% of our debt investments bear interest at a fixed
rate and approximately 99% of our debt investments bear interest at
a floating rate, which primarily are subject to interest rate
floors.
As part of the monitoring process, our Investment Adviser has
developed risk policies pursuant to which it regularly assesses the
risk profile of each of our debt investments and rates each of them
based on the following categories, which we refer to as “Internal
Risk Ratings”:
Internal Risk Ratings Definitions
Rating |
|
Definition |
1 |
|
Performing—Low
Risk: Borrower is operating more than 10% ahead of the
base case. |
|
|
2 |
|
Performing—Stable Risk: Borrower is operating
within 10% of the base case (above or below). This is the initial
rating assigned to all new borrowers. |
|
|
3 |
|
Performing—Management Notice: Borrower is
operating more than 10% below the base case. A financial covenant
default may have occurred, but there is a low risk of payment
default. |
|
|
4 |
|
Watch
List: Borrower is operating more than 20% below the base
case and there is a high risk of covenant default, or it may have
already occurred. Payments are current although subject to greater
uncertainty, and there is moderate to high risk of payment
default. |
|
|
5 |
|
Watch
List—Possible Loss: Borrower is operating more than 30%
below the base case. At the current level of operations and
financial condition, the borrower does not have the ability to
service and ultimately repay or refinance all outstanding debt on
current terms. Payment default is very likely or may have occurred.
Loss of principal is possible. |
|
|
6 |
|
Watch
List—Probable Loss: Borrower is operating more than 40%
below the base case, and at the current level of operations and
financial condition, the borrower does not have the ability to
service and ultimately repay or refinance all outstanding debt on
current terms. Payment default is very likely or may have already
occurred. Additionally, the prospects for improvement in the
borrower’s situation are sufficiently negative that impairment of
some or all principal is probable. |
Our Investment Adviser’s risk rating model is based on
evaluating portfolio company performance in comparison to the base
case when considering certain credit metrics including, but not
limited to, adjusted EBITDA and net senior leverage as well as
specific events including, but not limited to, default and
impairment.
Our Investment Adviser monitors and, when appropriate, changes
the investment ratings assigned to each debt investment in our
portfolio. In connection with our quarterly valuation process, our
Investment Adviser reviews our investment ratings on a regular
basis. The following table summarizes the Internal Risk Ratings of
our debt portfolio as of December 31, 2017 and
September 30, 2017:
|
December 31, 2017 |
|
September 30, 2017 |
|
Fair Value |
|
% of Fair Value |
|
Fair Value |
|
% of Fair Value |
(dollar amounts in
millions) |
|
|
|
|
|
|
|
Internal Risk Rating
1 |
$ |
73.7 |
|
|
4.15 |
% |
|
$ |
75.1 |
|
|
4.27 |
% |
Internal Risk Rating
2 |
1,399.6 |
|
|
78.74 |
|
|
1,376.0 |
|
|
78.20 |
|
Internal Risk Rating
3 |
170.2 |
|
|
9.57 |
|
|
187.7 |
|
|
10.67 |
|
Internal Risk Rating
4 |
103.3 |
|
|
5.81 |
|
|
84.1 |
|
|
4.78 |
|
Internal Risk Rating
5 |
30.7 |
|
|
1.73 |
|
|
36.6 |
|
|
2.08 |
|
Internal Risk Rating
6 |
— |
|
|
— |
|
|
— |
|
|
— |
|
Total |
$ |
1,777.5 |
|
|
100.00 |
% |
|
$ |
1,759.5 |
|
|
100.00 |
% |
As of December 31, 2017 and September 30, 2017, the
weighted average Internal Risk Ratings of our debt investment
portfolio were 2.2.
Consolidated Results of Operations(dollar
amounts in thousands, except per share data)
Total investment income for the three month periods ended
December 31, 2017 and September 30, 2017 was $49,510 and
$42,648, respectively. This $6,862 net increase was primarily due
to an increase in interest income from our debt portfolio, an
increase in other income from higher prepayment fees resulting from
full paydowns on select investments, and an increase in interest
income and dividend income from Credit Fund during the three month
period ended December 31, 2017.
Total expenses (net of management fee waiver) for the three
month periods ended December 31, 2017 and September 30,
2017 were $22,994 and $17,568, respectively. This $5,426 net
increase during the three month period ended December 31, 2017
was primarily attributable due to an increase in management fees as
a result of an increase in investments and termination of the fee
waiver and an increase in interest expense as a result of an
increase in LIBOR.
During the three month period ended December 31, 2017, the
Company recorded a net realized gain and change in unrealized
appreciation of $467. This was primarily due to net change in
unrealized appreciation on our debt investments from changes in
various inputs utilized under our valuation methodology, including,
but not limited to, market spreads, leverage multiples and borrower
ratings, and the impact of exits.
Liquidity and Capital Resources(dollar amounts
in thousands, except per share data)
As of December 31, 2017, the Company had cash and cash
equivalents of $32,039, notes payable (before debt issuance
costs) of $273,000, and secured borrowings outstanding of
$562,893. As of December 31, 2017, the Company had
$250,107 of remaining commitments and $164,647 available for
additional borrowings on its revolving credit facilities, subject
to leverage and borrowing base restrictions.
Dividend
On February 26, 2018, our Board of Directors declared a
quarterly dividend of $0.37 per share, which is payable on April
17, 2018 to stockholders of record as of March 29, 2018.
Conference Call
The Company will host a conference call at 9:00 a.m. EST on
Wednesday, February 28, 2018 to discuss these quarterly financial
results. The call and webcast will be available on the TCG BDC
website at tcgbdc.com. The call may be accessed by dialing +1 (866)
394-4623 (U.S.) or +1 (409) 350-3158 (international) and
referencing “TCG BDC Financial Results Call.” The conference call
will be webcast simultaneously via a link on TCG BDC’s website and
an archived replay of the webcast also will be available on the
website soon after the live call for 21 days.
TCG BDC, INC.CONSOLIDATED STATEMENTS OF
ASSETS AND LIABILITIES(dollar amounts in
thousands, except per share data)
|
December 31, 2017 |
|
September 30, 2017 |
|
|
|
(unaudited) |
ASSETS |
|
|
|
Investments, at fair value |
|
|
|
Investments—non-controlled/non-affiliated, at fair value (amortized
cost of $1,782,632 and $1,769,297, respectively) |
$ |
1,779,584 |
|
|
$ |
1,760,611 |
|
Investments—non-controlled/affiliated, at fair value (amortized
cost of $16,273 and $15,935, respectively) |
15,431 |
|
|
14,959 |
|
Investments—controlled/affiliated, at fair value (amortized cost of
$172,251 and $186,801, respectively) |
172,516 |
|
|
188,547 |
|
Total
investments, at fair value (amortized cost of $1,971,015 and
$1,972,033, respectively) |
1,967,531 |
|
|
1,964,117 |
|
Cash and
cash equivalents |
32,039 |
|
|
35,149 |
|
Receivable for investment sold |
7,022 |
|
|
— |
|
Deferred
financing costs |
3,626 |
|
|
3,734 |
|
Interest
receivable from non-controlled/non-affiliated investments |
5,066 |
|
|
4,892 |
|
Interest
receivable from non-controlled/affiliated investments |
42 |
|
|
|
Interest
and dividend receivable from controlled/affiliated investments |
5,981 |
|
|
5,528 |
|
Prepaid
expenses and other assets |
76 |
|
|
55 |
|
Total
assets |
$ |
2,021,383 |
|
|
$ |
2,013,475 |
|
LIABILITIES |
|
|
|
Secured
borrowings |
$ |
562,893 |
|
|
$ |
578,769 |
|
2015-1
Notes payable, net of unamortized debt issuance costs of $1,947 and
$1,999, respectively |
271,053 |
|
|
271,001 |
|
Payable
for investments purchased |
9,469 |
|
|
— |
|
Due to
Investment Adviser |
69 |
|
|
102 |
|
Interest
and credit facility fees payable |
5,353 |
|
|
4,792 |
|
Dividend
payable |
30,481 |
|
|
22,888 |
|
Base
management and incentive fees payable |
13,098 |
|
|
9,986 |
|
Administrative service fees payable |
95 |
|
|
100 |
|
Other
accrued expenses and liabilities |
1,568 |
|
|
1,484 |
|
Total
liabilities |
894,079 |
|
|
889,122 |
|
|
|
|
|
NET
ASSETS |
|
|
|
Common
stock, $0.01 par value; 200,000,000 shares authorized; 62,207,603
shares and 61,859,848 shares issued and outstanding at December 31,
2017 and September 30, 2017, respectively |
622 |
|
|
619 |
|
Paid-in
capital in excess of par value |
1,172,807 |
|
|
1,166,599 |
|
Offering
costs |
(1,618 |
) |
|
(1,588 |
) |
Accumulated net investment income (loss), net of cumulative
dividends of $222,254 and $191,773 at December 31, 2017 and
September 30, 2017, respectively |
2,522 |
|
|
(280 |
) |
Accumulated net realized gain (loss) |
(43,548 |
) |
|
(33,081 |
) |
Accumulated net unrealized appreciation (depreciation) |
(3,481 |
) |
|
(7,916 |
) |
Total net
assets |
$ |
1,127,304 |
|
|
$ |
1,124,353 |
|
NET ASSETS PER
SHARE |
$ |
18.12 |
|
|
$ |
18.18 |
|
TCG BDC, INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(dollar amounts in thousands, except per
share data)(unaudited)
|
|
For the three month periods
ended |
|
|
December 31, 2017 |
|
September 30, 2017 |
Investment
income: |
|
|
|
|
From
non-controlled/non-affiliated investments: |
|
|
|
|
Interest
income |
|
$ |
40,243 |
|
|
$ |
34,684 |
|
Other
income |
|
2,626 |
|
|
1,318 |
|
Total
investment income from non-controlled/non-affiliated
investments |
|
42,869 |
|
|
36,002 |
|
From
non-controlled/affiliated investments: |
|
|
|
|
Interest
income |
|
381 |
|
|
834 |
|
Total
investment income from non-controlled/affiliated investments |
|
381 |
|
|
834 |
|
From
controlled/affiliated investments: |
|
|
|
|
Interest
income |
|
3,420 |
|
|
3,012 |
|
Dividend
income |
|
2,840 |
|
|
2,800 |
|
Total
investment income from controlled/affiliated investments |
|
6,260 |
|
|
5,812 |
|
Total
investment income |
|
49,510 |
|
|
42,648 |
|
Expenses: |
|
|
|
|
Base
management fees |
|
7,473 |
|
|
6,999 |
|
Incentive
fees |
|
5,625 |
|
|
5,321 |
|
Professional fees |
|
938 |
|
|
361 |
|
Administrative service fees |
|
139 |
|
|
184 |
|
Interest
expense |
|
7,816 |
|
|
5,922 |
|
Credit
facility fees |
|
430 |
|
|
521 |
|
Directors’ fees and expenses |
|
88 |
|
|
121 |
|
Other
general and administrative |
|
390 |
|
|
472 |
|
Total
expenses |
|
22,899 |
|
|
19,901 |
|
Waiver of
base management fees |
|
— |
|
|
2,333 |
|
Net
expenses |
|
22,899 |
|
|
17,568 |
|
Net investment
income (loss) before taxes |
|
26,611 |
|
|
25,080 |
|
Excise
tax expense |
|
95 |
|
|
— |
|
Net investment
income (loss) |
|
26,516 |
|
|
25,080 |
|
Net realized
gain (loss) and net change in unrealized appreciation
(depreciation) on investments: |
|
|
|
|
Net realized gain
(loss) from: |
|
|
|
|
Non-controlled/non-affiliated investments |
|
(3,968 |
) |
|
172 |
|
Net change in
unrealized appreciation (depreciation): |
|
|
|
|
Non-controlled/non-affiliated |
|
5,782 |
|
|
279 |
|
Non-controlled/affiliated |
|
134 |
|
|
976 |
|
Controlled/affiliated |
|
(1,481 |
) |
|
(964 |
) |
Net realized gain
(loss) and net change in unrealized appreciation (depreciation) on
investments |
|
467 |
|
|
463 |
|
Net increase
(decrease) in net assets resulting from operations |
|
$ |
26,983 |
|
|
$ |
25,543 |
|
Basic and diluted
earnings per common share |
|
$ |
0.44 |
|
|
$ |
0.41 |
|
Weighted-average shares
of common stock outstanding—Basic and Diluted |
|
62,143,344 |
|
|
61,840,100 |
|
Dividends declared per
common share |
|
$ |
0.49 |
|
|
$ |
0.37 |
|
About TCG BDC, Inc. TCG BDC is an
externally managed specialty finance company focused on lending to
middle-market companies. TCG BDC is managed by Carlyle Global
Credit Investment Management L.L.C., an SEC-registered investment
adviser and a wholly owned subsidiary of The Carlyle Group L.P.
Since it commenced investment operations in May 2013 through
December 31, 2017, TCG BDC has invested approximately $3.6
billion in aggregate principal amount of debt and equity
investments prior to any subsequent exits or repayments. TCG BDC’s
investment objective is to generate current income and capital
appreciation primarily through debt investments in U.S. middle
market companies. TCG BDC has elected to be regulated as a business
development company under the Investment Company Act of 1940, as
amended.
Web: tcgbdc.com CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS This press release may
contain forward-looking statements that involve substantial risks
and uncertainties. You can identify these statements by the use of
forward-looking terminology such as “anticipates,” “believes,”
“expects,” “intends,” “will,” “should,” “may,” “plans,” “continue,”
“believes,” “seeks,” “estimates,” “would,” “could,” “targets,”
“projects,” “outlook,” “potential,” “predicts” and variations of
these words and similar expressions to identify forward-looking
statements, although not all forward-looking statements include
these words. You should read statements that contain these words
carefully because they discuss our plans, strategies, prospects and
expectations concerning our business, operating results, financial
condition and other similar matters. We believe that it is
important to communicate our future expectations to our investors.
There may be events in the future, however, that we are not able to
predict accurately or control. You should not place undue reliance
on these forward-looking statements, which speak only as of the
date on which we make it. Factors or events that could cause our
actual results to differ, possibly materially from our
expectations, include, but are not limited to, the risks,
uncertainties and other factors we identify in the sections
entitled “Risk Factors” and “Cautionary Statement Regarding
Forward-Looking Statements” in filings we make with the Securities
and Exchange Commission, and it is not possible for us to predict
or identify all of them. We undertake no obligation to update or
revise publicly any forward-looking statements, whether as a result
of new information, future events or otherwise, except as required
by law.
Contacts:
Investors: |
Media: |
Daniel Harris |
Jordan DeJarnette |
+1-212-813-4527daniel.harris@carlyle.com |
+1-202-729-5025jordan.dejarnette@carlyle.com |
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