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 first quarter
ended March 31, 2018.
Selected Financial Highlights
(dollar amounts in
thousands, except per share data) |
March 31, 2018 |
|
December 31, 2017 |
Total investments, at
fair value |
$ |
1,913,459 |
|
|
$ |
1,967,531 |
|
Total assets |
1,990,655 |
|
|
2,021,383 |
|
Total debt and notes
payable |
798,968 |
|
|
833,946 |
|
Total net assets |
$ |
1,131,857 |
|
|
$ |
1,127,304 |
|
Net assets per
share |
$ |
18.09 |
|
|
$ |
18.12 |
|
|
|
For the three month periods
ended |
|
|
March 31, 2018 |
|
December 31, 2017 |
Total investment
income |
|
$ |
47,483 |
|
|
$ |
49,510 |
|
Net investment income
(loss) |
|
25,130 |
|
|
26,516 |
|
Net realized gain
(loss) and net change in unrealized appreciation (depreciation)
on investments |
|
(4,041 |
) |
|
467 |
|
Net increase (decrease)
in net assets resulting from operations |
|
$ |
21,089 |
|
|
$ |
26,983 |
|
|
|
|
|
|
Basic and diluted per
weighted-average common share: |
|
|
|
|
Net investment income
(loss) |
|
$ |
0.40 |
|
|
$ |
0.43 |
|
Net realized gain
(loss) and net change in unrealized appreciation (depreciation)
on investments |
|
(0.06 |
) |
|
0.01 |
|
Net increase (decrease)
in net assets resulting from operations |
|
$ |
0.34 |
|
|
$ |
0.44 |
|
Weighted-average shares
of common stock outstanding—Basic and Diluted |
|
62,504,465 |
|
|
62,143,344 |
|
Dividends declared per
common share |
|
$ |
0.37 |
|
|
$ |
0.49 |
|
|
|
|
|
|
|
|
|
|
First Quarter 2018 Highlights(dollar amounts in
thousands, except per share data)
- On May 2, 2018, our Board of Directors declared a quarterly
dividend of $0.37 per share, which is payable on July 17, 2018 to
stockholders of record as of June 29, 2018;
- Net investment income for the three month period
ended March 31, 2018 was $25,130,
or $0.40 per share, as compared to $26,516,
or $0.43 per share, for the three month period
ended December 31, 2017;
- Net realized gain (loss) and net change in unrealized
appreciation (depreciation) on investments for the three month
period ended March 31, 2018 was $(4,041),
or $(0.06) per share, as compared to $467, or
$0.01 per share, for the three month period
ended December 31, 2017; and
- Net increase in net assets resulting from operations for the
three month period ended March 31,
2018 was $21,089, or $0.34 per share, as
compared to $26,983, or $0.44 per share, for the
three month period ended December 31, 2017.
Portfolio and Investment Activity(dollar
amounts in thousands, except per share data, unless otherwise
noted)
As of March 31, 2018, the fair value of our investments was
approximately $1,913,459, comprised of 104 investments in 87
portfolio companies/investment fund across 28 industries with 56
sponsors. This compares to the Company’s portfolio as
of December 31, 2017, as of which date 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.
As of March 31, 2018 and December 31, 2017, investments
consisted of the following:
|
March 31, 2018 |
|
December 31, 2017 |
Type—% of
Fair Value |
Fair Value |
|
% of Fair Value |
|
Fair Value |
|
% of Fair Value |
First Lien Debt
(excluding First Lien/Last Out) |
$ |
1,242,310 |
|
|
64.92 |
% |
|
$ |
1,293,641 |
|
|
65.75 |
% |
First Lien/Last Out
Unitranche |
233,564 |
|
|
12.21 |
|
|
237,635 |
|
|
12.08 |
|
Second Lien Debt |
217,707 |
|
|
11.38 |
|
|
246,233 |
|
|
12.51 |
|
Equity Investments |
18,812 |
|
|
0.98 |
|
|
17,506 |
|
|
0.89 |
|
Investment Fund |
201,066 |
|
|
10.51 |
|
|
172,516 |
|
|
8.77 |
|
Total |
$ |
1,913,459 |
|
|
100.00 |
% |
|
$ |
1,967,531 |
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows our investment activity for the three
month period ended March 31, 2018:
|
Funded |
|
Sold/Repaid |
Principal
amount of investments: |
Amount |
|
% of Total |
|
Amount |
|
% of Total |
First Lien Debt
(excluding First Lien/Last Out) |
$ |
65,783 |
|
|
54.39 |
% |
|
$ |
(117,619 |
) |
|
68.38 |
% |
First Lien/Last Out
Unitranche |
1,231 |
|
|
1.02 |
|
|
(394 |
) |
|
0.23 |
|
Second Lien Debt |
25,582 |
|
|
21.15 |
|
|
(53,990 |
) |
|
31.39 |
|
Equity Investments |
500 |
|
|
0.41 |
|
|
— |
|
|
— |
|
Investment Fund |
27,850 |
|
|
23.03 |
|
|
— |
|
|
— |
|
Total |
$ |
120,946 |
|
|
100.00 |
% |
|
$ |
(172,003 |
) |
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall, total investments at fair value decreased by 2.7%, or
$54,072, during the three month period ended March 31,
2018 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 10.7%, or $105,575, during the
three month period ended March 31, 2018 after
factoring in repayments, sales, net fundings on revolvers and
delayed draws and net change in unrealized appreciation
(depreciation). As of March 31, 2018, Credit Fund had total
investments at fair value of $1,090,348, 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 interest rate
floors.
As of March 31, 2018, the weighted average
yields for our first and second lien debt investments on an
amortized cost basis were 9.01% and 10.82%, respectively, with a
total weighted average yield of 9.24%. Weighted average yields
include the effect of accretion of discounts and amortization of
premiums and are based on interest rates as of March 31, 2018.
As of March 31, 2018, on a fair value basis, approximately
0.8% of our debt investments bear interest at a fixed rate and
approximately 99.2% 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 March 31, 2018 and December 31,
2017:
|
March 31, 2018 |
|
December 31, 2017 |
|
Fair Value |
|
% of Fair Value |
|
Fair Value |
|
% of Fair Value |
(dollar amounts in
millions) |
|
|
|
|
|
|
|
Internal Risk Rating
1 |
$ |
66.3 |
|
|
3.91 |
% |
|
$ |
73.7 |
|
|
4.15 |
% |
Internal Risk Rating
2 |
1,324.3 |
|
|
78.20 |
|
|
1,399.6 |
|
|
78.74 |
|
Internal Risk Rating
3 |
142.1 |
|
|
8.39 |
|
|
170.2 |
|
|
9.57 |
|
Internal Risk Rating
4 |
134.6 |
|
|
7.95 |
|
|
103.3 |
|
|
5.81 |
|
Internal Risk Rating
5 |
26.3 |
|
|
1.55 |
|
|
30.7 |
|
|
1.73 |
|
Internal Risk Rating
6 |
— |
|
|
— |
|
|
— |
|
|
— |
|
Total |
$ |
1,693.6 |
|
|
100.00 |
% |
|
$ |
1,777.5 |
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2018 and December 31, 2017, the weighted
average Internal Risk Rating of our debt investment portfolio was
2.3 and 2.2, respectively.
Consolidated Results of Operations(dollar
amounts in thousands, except per share data)
Total investment income for the three month periods ended
March 31, 2018 and December 31, 2017 was $47,483 and $49,510,
respectively. This $2,027 net decrease was primarily due to a
decrease in interest income and other income from our debt
portfolio and a decrease in interest income from Credit Fund,
partially offset by an increase in dividend income from Credit
Fund, during the three month period ended March 31, 2018.
Total expenses for the three month periods ended March 31,
2018 and December 31, 2017 were $22,353 and $22,994, respectively.
This $641 net decrease during the three month period ended
March 31, 2018 was primarily attributable to a decrease in
management fees as a result of an decrease in investments, a
decrease in incentive fees, and a decrease in professional
fees.
During the three month period ended March 31, 2018, the
Company recorded a net realized loss and change in unrealized
depreciation of $(4,041). This was primarily due to net change in
unrealized depreciation 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 March 31, 2018, the Company had cash and cash
equivalents of $45,610, notes payable (before debt issuance
costs) of $273,000, and secured borrowings outstanding of
$527,865. As of March 31, 2018, the Company had $285,135
of remaining commitments and $178,258 available for additional
borrowings on its revolving credit facilities, subject to leverage
and borrowing base restrictions.
Dividend
On May 2, 2018, our Board of Directors declared a quarterly
dividend of $0.37 per share, which is payable on July 17, 2018 to
stockholders of record as of June 29, 2018.
Conference Call
The Company will host a conference call at 8:00 a.m. EDT on
Friday, May 4, 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)
|
|
|
|
|
March 31, 2018 |
|
December 31, 2017 |
|
(unaudited) |
|
|
ASSETS |
|
|
|
Investments, at fair value |
|
|
|
Investments—non-controlled/non-affiliated, at fair value
(amortized cost of $1,704,235 and $1,782,488, respectively) |
$ |
1,695,287 |
|
|
$ |
1,779,584 |
|
Investments—non-controlled/affiliated, at fair value
(amortized cost of $16,516 and $16,273, respectively) |
17,106 |
|
|
15,431 |
|
Investments—controlled/affiliated, at fair value (amortized
cost of $200,101 and $172,251, respectively) |
201,066 |
|
|
172,516 |
|
Total
investments, at fair value (amortized cost of $1,920,852 and
$1,971,012, respectively) |
1,913,459 |
|
|
1,967,531 |
|
Cash and
cash equivalents |
45,610 |
|
|
32,039 |
|
Receivable for investment sold |
14,925 |
|
|
7,022 |
|
Deferred
financing costs |
3,441 |
|
|
3,626 |
|
Interest
receivable from non-controlled/non-affiliated investments |
6,163 |
|
|
5,066 |
|
Interest
and dividend receivable from controlled/affiliated investments |
6,630 |
|
|
5,981 |
|
Prepaid
expenses and other assets |
235 |
|
|
76 |
|
Total
assets |
$ |
1,990,655 |
|
|
$ |
2,021,383 |
|
LIABILITIES |
|
|
|
Secured
borrowings |
$ |
527,865 |
|
|
$ |
562,893 |
|
2015-1
Notes payable, net of unamortized debt issuance costs of $1,897 and
$1,947, respectively |
271,103 |
|
|
271,053 |
|
Payable
for investments purchased |
16,919 |
|
|
9,469 |
|
Due to
Investment Adviser |
104 |
|
|
69 |
|
Interest
and credit facility fees payable |
5,513 |
|
|
5,353 |
|
Dividend
payable |
23,150 |
|
|
30,481 |
|
Base
management and incentive fees payable |
12,552 |
|
|
13,098 |
|
Administrative service fees payable |
125 |
|
|
95 |
|
Other
accrued expenses and liabilities |
1,467 |
|
|
1,568 |
|
Total
liabilities |
858,798 |
|
|
894,079 |
|
|
|
|
|
NET
ASSETS |
|
|
|
Common
stock, $0.01 par value; 200,000,000 shares authorized; 62,568,651
shares and 62,207,603 shares issued and outstanding at March 31,
2018 and December 31, 2017, respectively |
626 |
|
|
622 |
|
Paid-in
capital in excess of par value |
1,179,432 |
|
|
1,172,807 |
|
Offering
costs |
(1,633 |
) |
|
(1,618 |
) |
Accumulated net investment income (loss), net of cumulative
dividends of $245,404 and $222,254 at March 31, 2018 and December
31, 2017, respectively |
4,502 |
|
|
2,522 |
|
Accumulated net realized gain (loss) |
(43,677 |
) |
|
(43,548 |
) |
Accumulated net unrealized appreciation (depreciation) |
(7,393 |
) |
|
(3,481 |
) |
Total net
assets |
$ |
1,131,857 |
|
|
$ |
1,127,304 |
|
NET ASSETS PER
SHARE |
$ |
18.09 |
|
|
$ |
18.12 |
|
|
|
|
|
|
|
|
|
TCG BDC, INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(dollar amounts in thousands, except per
share data)(unaudited)
|
|
|
|
|
For the three month periods
ended |
|
|
March 31, 2018 |
|
December 31, 2017 |
Investment
income: |
|
|
|
|
From
non-controlled/non-affiliated investments: |
|
|
|
|
Interest
income |
|
$ |
39,328 |
|
|
$ |
40,243 |
|
Other
income |
|
895 |
|
|
2,626 |
|
Total
investment income from non-controlled/non-affiliated
investments |
|
40,223 |
|
|
42,869 |
|
From
non-controlled/affiliated investments: |
|
|
|
|
Interest
income |
|
379 |
|
|
381 |
|
Total
investment income from non-controlled/affiliated investments |
|
379 |
|
|
381 |
|
From
controlled/affiliated investments: |
|
|
|
|
Interest
income |
|
2,631 |
|
|
3,420 |
|
Dividend
income |
|
4,250 |
|
|
2,840 |
|
Total
investment income from controlled/affiliated investments |
|
6,881 |
|
|
6,260 |
|
Total
investment income |
|
47,483 |
|
|
49,510 |
|
Expenses: |
|
|
|
|
Base
management fees |
|
7,222 |
|
|
7,473 |
|
Incentive
fees |
|
5,330 |
|
|
5,625 |
|
Professional fees |
|
762 |
|
|
938 |
|
Administrative service fees |
|
186 |
|
|
139 |
|
Interest
expense |
|
7,815 |
|
|
7,816 |
|
Credit
facility fees |
|
525 |
|
|
430 |
|
Directors’ fees and expenses |
|
98 |
|
|
88 |
|
Other
general and administrative |
|
405 |
|
|
390 |
|
Total
expenses |
|
22,343 |
|
|
22,899 |
|
Net investment
income (loss) before taxes |
|
25,140 |
|
|
26,611 |
|
Excise
tax expense |
|
10 |
|
|
95 |
|
Net investment
income (loss) |
|
25,130 |
|
|
26,516 |
|
Net realized
gain (loss) and net change in unrealized appreciation
(depreciation) on investments: |
|
|
|
|
Net realized gain
(loss) from: |
|
|
|
|
Non-controlled/non-affiliated investments |
|
(129 |
) |
|
(3,968 |
) |
Net change in
unrealized appreciation (depreciation): |
|
|
|
|
Non-controlled/non-affiliated |
|
(6,044 |
) |
|
5,782 |
|
Non-controlled/affiliated |
|
1,432 |
|
|
134 |
|
Controlled/affiliated |
|
700 |
|
|
(1,481 |
) |
Net realized gain
(loss) and net change in unrealized appreciation (depreciation) on
investments |
|
(4,041 |
) |
|
467 |
|
Net increase
(decrease) in net assets resulting from operations |
|
$ |
21,089 |
|
|
$ |
26,983 |
|
Basic and diluted
earnings per common share |
|
$ |
0.34 |
|
|
$ |
0.44 |
|
Weighted-average shares
of common stock outstanding—Basic and Diluted |
|
62,504,465 |
|
|
62,143,344 |
|
Dividends declared per
common share |
|
$ |
0.37 |
|
|
$ |
0.49 |
|
|
|
|
|
|
|
|
|
|
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 March 31, 2018, TCG BDC has invested
approximately $3.8 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 |
Elizabeth Gill |
+1-212-813-4527 |
202-729-5385 |
daniel.harris@carlyle.com |
elizabeth.gill@carlyle.com |
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