SOURCE: Carlyle BDC

Carlyle BDC

November 07, 2017 16:30 ET

TCG BDC, Inc. Announces Third Quarter 2017 Financial Results and Declares Fourth Quarter 2017 Dividend of $0.37 Per Share

NEW YORK--(Marketwired - Nov 7, 2017) - 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 September 30, 2017.

Selected Financial Highlights

         
(dollar amounts in thousands, except per share data)   September 30, 2017   June 30, 2017
Total investments, at fair value   $ 1,964,117   $ 1,719,473
Total assets     2,013,475     1,759,761
Total debt and notes payable     849,770     602,547
Total net assets   $ 1,124,353   $ 1,113,743
Net assets per share   $ 18.18   $ 18.14
             
       
    For the three month periods ended  
    September 30, 2017   June 30, 2017  
Total investment income   $ 42,648   $ 38,744  
Net investment income (loss)     25,080     21,448  
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments     463     (5,947 )
Net increase (decrease) in net assets resulting from operations   $ 25,543   $ 15,501  
               
Basic and diluted per weighted-average common share:              
Net investment income (loss)   $ 0.41   $ 0.47  
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments     --     (0.13 )
Net increase (decrease) in net assets resulting from operations   $ 0.41   $ 0.34  
Weighted-average shares of common stock outstanding--Basic and Diluted     61,840,100     45,977,943  
Dividends declared per common share   $ 0.37   $ 0.37  
               

Third Quarter 2017 Highlights
(dollar amounts in thousands, except per share data)

  • On November 7, 2017, our Board of Directors declared a quarterly dividend of $0.37 per share, which is payable on January 17, 2018 to stockholders of record as of December 29, 2017;
  • Net investment income for the three month period ended September 30, 2017 was $25,080, or $0.41 per share, as compared to $21,448, or $0.47 per share, for the three month period ended June 30, 2017;
  • Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments for the three month period ended September 30, 2017 was $463, or $0.00 per share, as compared to $(5,947), or $(0.13) per share, for the three month period ended June 30, 2017;
  • Net increase in net assets resulting from operations for the three month period ended September 30, 2017 was $25,543, or $0.41 per share, as compared to $15,501, or $0.34 per share, for the three month period ended June 30, 2017; and
  • On July 5, 2017, the Company issued a total of 454,200 shares of its common stock pursuant to the exercise of the underwriters' over-allotment option in connection with the June 2017 initial public offering ("IPO"). Net of underwriting costs and $0.37 per share dividend declared by the Company's Board of Directors on June 20, 2017, the Company received additional cash proceeds of $7,983.

Portfolio and Investment Activity
(dollar amounts in thousands, except per share data, unless otherwise noted)

As of September 30, 2017, 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. This compares to the Company's portfolio as of June 30, 2017, as of which date the fair value of our investments was approximately $1,719,473, comprised of 101 investments in 86 portfolio companies/structured finance obligations/investment fund across 29 industries with 59 sponsors.
As of September 30, 2017 and June 30, 2017, investments consisted of the following:

             
    September 30, 2017     June 30, 2017  
Type--% of Fair Value   Fair Value   % of Fair Value     Fair Value   % of Fair Value  
First Lien Debt (excluding First Lien/Last Out)   $ 1,259,983   64.15 %   $ 1,091,706   63.50 %
First Lien/Last Out Unitranche     230,667   11.74       178,372   10.37  
Second Lien Debt     268,783   13.69       250,765   14.58  
Structured Finance Obligations     2,585   0.13       2,597   0.15  
Equity Investments     13,552   0.69       10,722   0.62  
Investment Fund     188,547   9.60       185,311   10.78  
  Total   $ 1,964,117   100.00 %   $ 1,719,473   100.00 %
                           

The following table shows our investment activity for the three month period ended September 30, 2017:

             
    Funded     Sold/Repaid  
Principal amount of investments:   Amount   % of Total     Amount     % of Total  
First Lien Debt   $ 273,245   86.31 %   $ (47,470 )   69.43 %
Second Lien Debt     29,250   9.24       (12,500 )   18.28  
Structured Finance Obligations     --   --       --     --  
Equity Investments     1,500   0.47       --     --  
Investment Fund     12,600   3.98       (8,400 )   12.29  
Total   $ 316,595   100.00 %   $ (68,370 )   100.00 %
                           

Overall, total investments at fair value increased by 14.2%, or $244,644, during the three month period ended September 30, 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 2.85%, or $22,842, during the three month period ended September 30, 2017 after factoring in repayments, sales, net fundings on revolvers and delayed draws and net change in unrealized appreciation (depreciation). As of September 30, 2017, Credit Fund had total investments at fair value of $823,129, which was comprised 99.6% of first lien senior secured loans and 0.4% 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 September 30, 2017, the weighted average yields for our first and second lien debt investments on an amortized cost basis were 8.30% and 10.37%, respectively, with a total weighted average yield of 8.61%. Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of September 30, 2017. As of September 30, 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 September 30, 2017 and June 30, 2017:

             
    September 30, 2017     June 30, 2017  
    Fair Value   % of
Fair
Value
    Fair Value   % of
Fair
Value
 
(dollar amounts in millions)                    
Internal Risk Rating 1   $ 75.1   4.27 %   $ 41.9   2.76 %
Internal Risk Rating 2     1,376.0   78.20       1,150.8   75.67  
Internal Risk Rating 3     187.7   10.67       182.5   12.00  
Internal Risk Rating 4     84.1   4.78       127.5   8.38  
Internal Risk Rating 5     36.6   2.08       18.1   1.19  
Internal Risk Rating 6     --   --       --   --  
Total   $ 1,759.5   100.00 %   $ 1,520.8   100.00 %
                         

As of September 30, 2017 and June 30, 2017, the weighted average Internal Risk Ratings of our debt investment portfolio were 2.2 and 2.3, respectively.

Consolidated Results of Operations
(dollar amounts in thousands, except per share data)

Total investment income for the three month periods ended September 30, 2017 and June 30, 2017 was $42,648 and $38,744, respectively. This $3,904 net increase was primarily due to an increase in interest income from our debt portfolio and an increase in interest income and dividend income from Credit Fund, partially offset by a reduction in other income, during the three month period ended September 30, 2017.

Total expenses (net of management fee waiver) for the three month periods ended September 30, 2017 and June 30, 2017 were $17,568 and $17,296, respectively. This $272 net increase during the three month period ended September 30, 2017 was primarily attributable due to an increase in management fees as a result of an increase in investments, partially offset by a decrease in professional fees.

During the three month period ended September 30, 2017, the Company recorded a net realized gain and change in unrealized appreciation of $463. 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 September 30, 2017, the Company had cash and cash equivalents of $35,149, notes payable (before debt issuance costs) of $273,000, and secured borrowings outstanding of $578,769. As of September 30, 2017, the Company had $204,231 of remaining commitments and $136,664 available for additional borrowings on its revolving credit facilities, subject to leverage and borrowing base restrictions. In September 2017, the aggregate amount of the commitments under the Credit Facility were increased by $100,000 from lenders.

Dividend

On November 7, 2017, our Board of Directors declared a quarterly dividend of $0.37 per share, which is payable on January 17, 2018 to stockholders of record as of December 29, 2017.

Conference Call

The Company will host a conference call at 10:00 a.m. EST on Wednesday, November 8, 2017 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)
             
    September 30, 2017     June 30, 2017  
    (unaudited)     (unaudited)  
ASSETS            
  Investments, at fair value                
    Investments--non-controlled/non-affiliated, at fair value (amortized cost of $1,769,297 and $1,529,962, respectively)   $ 1,760,611     $ 1,520,997  
    Investments--non-controlled/affiliated, at fair value (amortized cost of $15,935 and $15,117, respectively)     14,959       13,165  
  Investments--controlled/affiliated, at fair value (amortized cost of $186,801 and $182,601, respectively)     188,547       185,311  
  Total investments, at fair value (amortized cost of $1,972,033 and $1,727,680, respectively)     1,964,117       1,719,473  
  Cash and cash equivalents     35,149       28,159  
  Receivable for investment sold     --       --  
  Deferred financing costs     3,734       3,629  
  Interest receivable from non-controlled/non-affiliated investments     4,892       4,358  
  Interest and dividend receivable from controlled/affiliated investments     5,528       3,996  
  Prepaid expenses and other assets     55       146  
  Total assets   $ 2,013,475     $ 1,759,761  
LIABILITIES                
  Secured borrowings   $ 578,769     $ 331,597  
  2015-1 Notes payable, net of unamortized debt issuance costs of $1,999 and $2,050, respectively     271,001       270,950  
  Payable for investments purchased     --       4,996  
  Due to Investment Adviser     102       118  
  Interest and credit facility fees payable     4,792       3,830  
  Dividend payable     22,888       22,720  
  Base management and incentive fees payable     9,986       9,132  
  Administrative service fees payable     100       120  
  Other accrued expenses and liabilities     1,484       2,555  
  Total liabilities     889,122       646,018  
                 
NET ASSETS                
  Common stock, $0.01 par value; 200,000,000 shares authorized; 61,859,848 shares and 61,405,648 shares issued and outstanding at September 30, 2017 and June 30, 2017, respectively     619       614  
  Paid-in capital in excess of par value     1,166,599       1,158,621  
  Offering costs     (1,588 )     (1,560 )
  Accumulated net investment income (loss), net of cumulative dividends of $191,773 and $168,885 at September 30, 2017 and June 30, 2017, respectively     (280 )     (2,472 )
  Accumulated net realized gain (loss)     (33,081 )     (33,253 )
  Accumulated net unrealized appreciation (depreciation)     (7,916 )     (8,207 )
  Total net assets   $ 1,124,353     $ 1,113,743  
NET ASSETS PER SHARE   $ 18.18     $ 18.14  
                 
   
TCG BDC, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(dollar amounts in thousands, except per share data)  
(unaudited)  
   
    For the three month periods ended  
    September 30, 2017     June 30, 2017  
Investment income:            
From non-controlled/non-affiliated investments:                
  Interest income   $ 34,684     $ 30,526  
  Other income     1,318       4,046  
  Total investment income from non-controlled/non-affiliated investments     36,002       34,572  
From non-controlled/affiliated investments:                
  Interest income     834       --  
  Total investment income from non-controlled/affiliated investments     834       --  
From controlled/affiliated investments:                
  Interest income     3,012       2,372  
  Dividend income     2,800       1,800  
  Total investment income from controlled/affiliated investments     5,812       4,172  
Total investment income     42,648       38,744  
Expenses:                
  Base management fees     6,999       5,657  
  Incentive fees     5,321       5,361  
  Professional fees     361       1,153  
  Administrative service fees     184       165  
  Interest expense     5,922       5,738  
  Credit facility fees     521       529  
  Directors' fees and expenses     121       131  
  Other general and administrative     472       448  
Total expenses     19,901       19,182  
  Waiver of base management fees     2,333       1,886  
  Net expenses     17,568       17,296  
Net investment income (loss)     25,080       21,448  
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments:                
Net realized gain (loss) from:                
  Non-controlled/non-affiliated investments     172       (202 )
Net change in unrealized appreciation (depreciation):                
  Non-controlled/non-affiliated     279       (7,089 )
  Non-controlled/affiliated     976       1,210  
  Controlled/affiliated     (964 )     134  
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments     463       (5,947 )
Net increase (decrease) in net assets resulting from operations   $ 25,543     $ 15,501  
Basic and diluted earnings per common share   $ 0.41     $ 0.34  
Weighted-average shares of common stock outstanding--Basic and Diluted     61,840,100       45,977,943  
Dividends declared per common share   $ 0.37     $ 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 GMS 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 September 30, 2017, TCG BDC has invested approximately $3.4 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.