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Golub Capital BDC, Inc. Declares Fiscal Year 2019 Third Quarter Distribution of $0.32 Per Share and Announces Fiscal Year 2019 Second Quarter Financial Results

NEW YORK, May 8, 2019 /PRNewswire/ -- Golub Capital BDC, Inc., a business development company (GBDC), today announced its financial results for its second fiscal quarter ended March 31, 2019.

Except where the context suggests otherwise, the terms "we," "us," "our," and "Company" refer to Golub Capital BDC, Inc. and its consolidated subsidiaries. "GC Advisors" refers to GC Advisors LLC, our investment adviser.

 

SELECTED FINANCIAL HIGHLIGHTS








(in thousands, expect per share data)





March 31, 2019


December 31, 2018

Investment portfolio, at fair value

$

1,955,013



$

1,918,479


Total assets

$

2,039,608



$

1,979,807


Net asset value per share

$

15.95



$

15.97







Quarter Ended


March 31, 2019


December 31, 2018

Investment income

$

41,805



$

39,411


Net investment income

$

20,056



$

19,817


Net gain (loss) on investments and foreign currency

$

(2,268)



$

(1,378)


Net increase in net assets resulting from operations

$

17,788



$

18,439






Earnings per share

$

0.29



$

0.31


Net gain (loss) on investments and foreign currency transactions per share

$

(0.04)



$

(0.02)


Net investment income per share

$

0.33



$

0.33


Accrual for (reversal of) capital gain incentive fee per share

$

(0.01)



$

(0.01)


Net investment income before capital gain incentive fee accrual per share (1)

$

0.32



$

0.32






(1) As a supplement to U.S. generally accepted accounting principles ("GAAP") financial measures, the Company has provided this non-GAAP financial measure. The Company believes that this non-GAAP financial measure is useful as it excludes the accrual of the capital gain incentive fee, including the portion of such accrual that is not contractually payable under the terms of the Company's investment advisory agreement with GC Advisors (the "Investment Advisory Agreement"). As of March 31, 2019, the capital gain incentive fee accrued by the Company in accordance with GAAP is $4.4 million, none of which was payable as a capital gain incentive fee pursuant to the Investment Advisory Agreement as of March 31, 2019. Any payment due under the terms of the Investment Advisory Agreement is calculated in arrears as of the end of each calendar year or upon termination of the Investment Advisory Agreement. The Company paid a capital gain incentive fee in the amount of $1.6 million and $1.2 million calculated in accordance with the Investment Advisory Agreement as of December 31, 2018 and 2017, respectively. The Company did not pay any capital gain incentive fee under the Investment Advisory Agreement for any period ended prior to December 31, 2017. Although this non-GAAP financial measure is intended to enhance investors' understanding of the Company's business and performance, this non GAAP financial measure should not be considered an alternative to GAAP.

 

Second Fiscal Quarter 2019 Highlights

  • Net increase in net assets resulting from operations for the quarter ended March 31, 2019 was $17.8 million, or $0.29 per share, as compared to $18.4 million, or $0.31 per share, for the quarter ended December 31, 2018;
  • Net investment income for the quarter ended March 31, 2019 was $20.1 million, or $0.33 per share, as compared to $19.8 million, or $0.33 per share, for the quarter ended December 31, 2018;
  • Net investment income for the quarter ended March 31, 2019, excluding a $0.7 million reversal for the capital gain incentive fee under GAAP, was $19.4 million, or $0.32 per share, as compared to $19.3 million, or $0.32 per share, excluding a $0.5 million reversal for the capital gain incentive fee under GAAP, for the quarter ended December 31, 2018;
  • Net loss on investments and foreign currency for the quarter ended March 31, 2019 was $2.3 million, or $0.04 per share, as compared to a net loss of $1.4 million, or $0.02 per share, for the quarter ended December 31, 2018; and
  • Our board of directors declared on May 7, 2019 a quarterly distribution of $0.32 per share which is payable on June 28, 2019 to stockholders of record as of June 7, 2019.

Portfolio and Investment Activities

As of March 31, 2019, the Company had investments in 211 portfolio companies with a total fair value of $1,883.3 million and had investments in Senior Loan Fund LLC ("SLF") with a total fair value of $71.7 million. This compares to the Company's portfolio as of December 31, 2018, as of which date the Company had investments in 212 portfolio companies with a total fair value of $1,849.6 million and investments in SLF with a total fair value of $68.9 million. Investments in portfolio companies as of March 31, 2019 and December 31, 2018 consisted of the following:

 



As of March 31, 2019


As of December 31, 2018



Investments


Percentage of


Investments


Percentage of

Investment


at Fair Value


Total


at Fair Value


Total

Type


(In thousands)


Investments


(In thousands)


Investments

Senior secured


$

248,468



12.7

%


$

256,796



13.4

%

One stop


1,579,720



80.8



1,537,583



80.2


Second lien


9,434



0.5



9,434



0.5


Subordinated debt


609



0.0

*


652



0.0

*

LLC equity interests in SLF


71,742



3.7



68,915



3.6


Equity


45,040



2.3



45,099



2.3


Total


$

1,955,013



100.0

%


$

1,918,479



100.0

%










*

Represents an amount less than 0.1%.

 

The following table shows the asset mix of our new investment commitments for the three months ended March 31, 2019:

 


For the three months ended March 31, 2019


New Investment




Commitments


Percentage of


(In thousands)


Commitments





Senior secured

$

9,962



8.6

%

One stop

104,169



89.7


Subordinated debt

23



0.0

*

LLC equity interests in SLF

1,750



1.5


Equity

207



0.2


Total new investment commitments

$

116,111



100.0

%





*

Represents an amount less than 0.1%.

 

Overall, total investments at fair value increased by 1.9%, or $36.5 million, during the three months ended March 31, 2019 after factoring in debt repayments, sales of securities, net fundings on revolvers and net change in unrealized gain (loss).

For the three months ended March 31, 2019, the weighted average annualized investment income yield (which includes interest and fee income and amortization of capitalized fees and discounts) and the weighted average annualized income yield (which excludes income resulting from amortization of capitalized fees and discounts) on the fair value of earning portfolio investments in the Company's portfolio were 9.2% and 8.8%, respectively.

Consolidated Results of Operations

Total investment income for the quarters ended March 31, 2019 and December 31, 2018 was $41.8 million and $39.4 million, respectively. This $2.4 million increase was primarily attributable to an increase in London Interbank offered Rate ("LIBOR") and an increase in the average earning investment balance.

Total expenses for the quarters ended March 31, 2019 and December 31, 2018 were $21.7 million and $19.6 million, respectively. This $2.1 million increase was primarily attributable to a increase in incentive fee expense and higher interest and other debt financing expenses caused by an increase in the weighted average of outstanding borrowings.

During the quarter ended March 31, 2019, the Company recorded a net realized loss of $1.9 million and recorded net unrealized depreciation of $0.4 million. The net realized loss was primarily due to a realized loss recognized on the restructure of one portfolio company investment which was partially offset by a realized gain on the sale of one portfolio company equity investment. The net unrealized depreciation was primarily due to the reversal of unrealized appreciation associated with the sale of portfolio company investments coupled with the decrease in market prices on several middle-market debt and equity investments.

Liquidity and Capital Resources

The Company's liquidity and capital resources are derived from the Company's debt securitizations (also known as collateralized loan obligations, or CLOs), U.S. Small Business Administration ("SBA") debentures, revolving credit facilities and cash flow from operations. The Company's primary uses of funds from operations include investments in portfolio companies and payment of fees and other expenses that the Company incurs. The Company has used, and expects to continue to use, its debt securitizations, SBA debentures, revolving credit facilities, proceeds from its investment portfolio and proceeds from offerings of its securities and its dividend reinvestment plan to finance its investment objectives.

As of March 31, 2019, the Company had cash, cash equivalents and foreign currencies of $5.8 million, restricted cash, cash equivalents and foreign currencies of $70.3 million and $1,051.2 million of debt and other short-term borrowings outstanding. As of March 31, 2019, the Company had $23.5 million of remaining commitments and $23.5 million available for additional borrowings on its senior secured revolving credit facility with Morgan Stanley Senior Funding, Inc. (the "Morgan Stanley Credit Facility"), as lender and administrative agent, subject to leverage and borrowing base restrictions. As of March 31, 2019, through our small business investment company licensees, we had $53.0 million of SBA debenture commitments, of which $12.5 million was available to be drawn, subject to customary SBA regulatory requirements.

On May 7, 2019, our board of directors declared a quarterly distribution of $0.32 per share which is payable on June 28, 2019 to holders of record as of June 7, 2019.

Portfolio and Asset Quality

GC Advisors regularly assesses the risk profile of each of the Company's investments and rates each of them based on an internal system developed by Golub Capital and its affiliates. This system is not generally accepted in our industry or used by our competitors. It is based on the following categories, which we refer to as GC Advisors' internal performance ratings:




Internal Performance Ratings

Rating


Definition

5


Involves the least amount of risk in our portfolio. The borrower is performing above expectations, and the trends and risk factors are generally favorable.

4


Involves an acceptable level of risk that is similar to the risk at the time of origination. The borrower is generally performing as expected, and the risk factors are neutral to favorable.

3


Involves a borrower performing below expectations and indicates that the loan's risk has increased somewhat since origination. The borrower may be out of compliance with debt covenants; however, loan payments are generally not past due.

2


Involves a borrower performing materially below expectations and indicates that the loan's risk has increased materially since origination. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 180 days past due).

1


Involves a borrower performing substantially below expectations and indicates that the loan's risk has substantially increased since origination. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 1 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we anticipate will be recovered.

Our internal performance ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments.

The following table shows the distribution of the Company's investments on the 1 to 5 internal performance rating scale at fair value as of March 31, 2019 and December 31, 2018:

 



March 31, 2019


December 31, 2018

Internal


Investments


Percentage of


Investments


Percentage of

Performance


at Fair Value


Total


at Fair Value


Total

Rating


(In thousands)


Investments


(In thousands)


Investments

5


$

116,854



6.0

%


$

107,807



5.6

%

4


1,644,156



84.1



1,612,115



84.0


3


176,088



9.0



178,529



9.3


2


17,899



0.9



20,012



1.1


1


16



0.0

*


16



0.0

*

Total


$

1,955,013



100.0

%


$

1,918,479



100.0

%



*

Represents an amount less than 0.1%.

 

Conference Call

The Company will host an earnings conference call at 1:00 p.m. (Eastern Time) on Thursday, May 9, 2019 to discuss the quarterly financial results. All interested parties may participate in the conference call by dialing (800) 894-8917 approximately 10-15 minutes prior to the call; international callers should dial (212) 231-2901. Participants should reference Golub Capital BDC, Inc. when prompted. For a slide presentation that we intend to refer to on the earnings conference call, please visit the Investor Resources link on the homepage of our website (www.golubcapitalbdc.com) and click on the Quarter Ended 03.31.2019 Investor Presentation under Events/Presentations. An archived replay of the call will be available shortly after the call until 3:00 p.m. (Eastern Time) on June 8, 2019. To hear the replay, please dial (800) 633-8284. International dialers, please dial (402) 977-9140. For all replays, please reference program ID number 21920675.

 

 

Golub Capital BDC, Inc. and Subsidiaries




Consolidated Statements of Financial Condition




(In thousands, except share and per share data)





March 31, 2019


December 31, 2018

Assets

(unaudited)


(unaudited)

Total investments at fair value (amortized cost of $1,952,719 and $1,915,841,
respectively)

$

1,955,013



$

1,918,479


Cash and cash equivalents

5,635



12,706


Foreign currencies (cost of $207 and $296, respectively)

207



296


Restricted cash, cash equivalents and foreign currencies (cost of $70,310 and
$40,708, respectively)

70,308



40,703


Interest receivable

7,418



6,349


Other assets

1,027



1,274


Total Assets

$

2,039,608



$

1,979,807






Liabilities




Debt

$

1,051,173



$

971,814


Less unamortized debt issuance costs

4,938



3,796


Debt less unamortized debt issuance costs

1,046,235



968,018


Other short-term borrowings (proceeds of $0 and $21,719, respectively)



21,687


Interest payable

9,851



7,128


Management and incentive fees payable

15,017



15,494


Accounts payable and accrued expenses

2,192



2,456


Accrued trustee fees

78



70


Total Liabilities

1,073,373



1,014,853






Net Assets




Preferred stock, par value $0.001 per share, 1,000,000 shares authorized, zero
 shares issued and outstanding as of March 31, 2019 and December 31, 2018




Common stock, par value $0.001 per share, 100,000,000 shares authorized,
 60,587,403 and 60,422,239 shares issued and outstanding as of March 31,
 2019 and December 31, 2018, respectively

61



60


Paid in capital in excess of par

956,508



953,681


Distributable earnings

9,666



11,213


Total Net Assets

966,235



964,954


Total Liabilities and Total Net Assets

$

2,039,608



$

1,979,807






Number of common shares outstanding

60,587,403



60,422,239


Net asset value per common share

$

15.95



$

15.97


 

 

Golub Capital BDC, Inc. and Subsidiaries





Consolidated Statements of Operations





(In thousands, except share and per share data)







Three months ended



March 31, 2019


December 31, 2018



(unaudited)


(unaudited)

Investment income



Interest income


$

41,661



$

38,850


Dividend income


19



39


Fee income


125



522







Total investment income


41,805



39,411







Expenses





Interest and other debt financing expenses


10,636



9,784


Base management fee


6,594



6,439


Incentive fee


3,066



1,983


Professional fees


666



588


Administrative service fee


663



699


General and administrative expenses


124



101







Total expenses


21,749



19,594







Net investment income


20,056



19,817







Net gain (loss) on investments





Net realized gain (loss) on investments and foreign currency
 transactions


(1,861)



(1,978)


Net change in unrealized appreciation (depreciation) on
 investments and foreign currency translation


(407)



600







Net gain (loss) on investments


(2,268)



(1,378)







Net increase in net assets resulting from operations


$

17,788



$

18,439







Per Common Share Data





Basic and diluted earnings per common share


$

0.29



$

0.31


Dividends and distributions declared per common share


$

0.32



$

0.44


Basic and diluted weighted average common shares outstanding


60,429,580



60,176,619


 

ABOUT GOLUB CAPITAL BDC, INC.

Golub Capital BDC, Inc. ("Golub Capital BDC") is an externally-managed, non-diversified closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. Golub Capital BDC invests primarily in one-stop and other senior secured loans of U.S. middle market companies that are often sponsored by private equity investors. Golub Capital BDC's investment activities are managed by its investment adviser, GC Advisors LLC, an affiliate of the Golub Capital group of companies ("Golub Capital").

ABOUT GOLUB CAPITAL

Golub Capital is a market-leading, award-winning private debt platform with over $30 billion of capital under management. Golub Capital's Middle Market Lending business specializes in delivering reliable, creative and compelling financing solutions to U.S. middle market companies backed by private equity sponsors. The Middle Market Lending team has particular domain expertise in select industries, including software, technology services, healthcare, consumer and restaurant and retail. The firm's credit expertise also forms the foundation of its Late Stage Lending business and its Broadly Syndicated Loan investment program. Across its activities, Golub Capital nurtures long-term, win-win partnerships that inspire repeat business from its private equity sponsor clients and investors. Founded in 1994, Golub Capital today has over 400 employees and lending offices in Chicago, New York and San Francisco. For more information, please visit golubcapital.com.

FORWARD-LOOKING STATEMENTS

This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission. Golub Capital BDC, Inc. undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

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