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

NEW YORK, Feb. 6, 2019 /PRNewswire/ -- Golub Capital BDC, Inc., a business development company (GBDC), today announced its financial results for its first fiscal quarter ended December 31, 2018.

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)





December 31, 2018


September 30, 2018

Investment portfolio, at fair value

$

1,918,479



$

1,782,841


Total assets

$

1,979,807



$

1,835,552


Net asset value per share

$

15.97



$

16.10







Quarter Ended


December 31, 2018


September 30, 2018

Investment income

$

39,411



$

40,428


Net investment income

$

19,817



$

20,266


Net gain (loss) on investments and foreign currency

$

(1,378)



$

(4,363)


Net increase in net assets resulting from operations

$

18,439



$

15,903






Earnings per share

$

0.31



$

0.26


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

$

(0.02)



$

(0.08)


Net investment income per share

$

0.33



$

0.34


Accrual for capital gain incentive fee per share

$

(0.01)



$

(0.02)


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 December 31, 2018, the capital gain incentive fee accrued by the Company in accordance with GAAP is $6.7 million, of which $1.6 million was payable as a capital gain incentive fee pursuant to the Investment Advisory Agreement as of December 31, 2018. 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 $1.2 million, calculated in accordance with the Investment Advisory Agreement as of December 31, 2017. 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.

 

First Fiscal Quarter 2019 Highlights

  • Net increase in net assets resulting from operations for the quarter ended December 31, 2018 was $18.4 million, or $0.31 per share, as compared to $15.9 million, or $0.26 per share, for the quarter ended September 30, 2018;
  • Net investment income for the quarter ended December 31, 2018 was $19.8 million, or $0.33 per share, as compared to $20.3 million, or $0.34 per share, for the quarter ended September 30, 2018;
  • Net investment income for the quarter ended December 31, 2018, excluding a $0.5 million reversal for the capital gain incentive fee under GAAP, was $19.3 million, or $0.32 per share, as compared to $19.5 million, or $0.32 per share, excluding a $0.8 million reversal for the capital gain incentive fee under GAAP, for the quarter ended September 30, 2018;
  • Net loss on investments and foreign currency for the quarter ended December 31, 2018 was $1.4 million, or $0.02 per share, as compared to a net loss of $4.4 million, or $0.08 per share, for the quarter ended September 30, 2018; and
  • Our board of directors declared on February 5, 2019 a quarterly distribution of $0.32 per share which is payable on March 28, 2019 to stockholders of record as of March 7, 2019.

Portfolio and Investment Activities

As of December 31, 2018, the Company had investments in 212 portfolio companies with a total fair value of $1,849.6 million and had investments in Senior Loan Fund LLC ("SLF") with a total fair value of $68.9 million. This compares to the Company's portfolio as of September 30, 2018, as of which date the Company had investments in 199 portfolio companies with a total fair value of $1,711.8 million and investments in SLF with a total fair value of $71.1 million. Investments in portfolio companies as of December 31, 2018 and September 30, 2018 consisted of the following:

 



As of December 31, 2018


As of September 30, 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


$

256,796



13.4

%


$

231,169



13.0

%

One stop


1,537,583



80.1



1,430,196



80.2


Second lien


9,434



0.5



9,435



0.5


Subordinated debt


652



0.0

*


251



0.0

*

LLC equity interests in SLF


68,915



3.6



71,084



4.0


Equity


45,099



2.4



40,706



2.3


Total


$

1,918,479



100.0

%


$

1,782,841



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 December 31, 2018:

 


For the three months ended December 31, 2018


New Investment




Commitments


Percentage of


(In thousands)


Commitments





Senior secured

$

40,956



20.2

%

One stop

157,017



77.3


Equity

5,098



2.5


Total new investment commitments

$

203,071



100.0

%





 

Overall, total investments at fair value increased by 7.6%, or $135.6 million, during the three months ended December 31, 2018 after factoring in debt repayments, sales of securities, net fundings on revolvers and net change in unrealized gain (loss).

For the three months ended December 31, 2018, 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 9.1% and 8.6%, respectively.

Consolidated Results of Operations

Total investment income for the quarters ended December 31, 2018 and September 30, 2018 was $39.4 million and $40.4 million, respectively. This $1.0 million decrease was primarily attributable to a decline in SLF dividend income for the first fiscal quarter, which was partially offset by an increase in interest income from an increase in average investments.

Total expenses for the quarters ended December 31, 2018 and September 30, 2018 were $19.6 million and $20.2 million, respectively. This $0.6 million decrease was primarily attributable to a decrease in incentive fee expense, which was partially offset by higher interest and other debt financing expenses caused by an increase in the weighted average of outstanding borrowings.

During the quarter ended December 31, 2018, the Company recorded a net realized loss of $2.0 million and recorded net unrealized appreciation of $0.6 million. The net realized loss was primarily due to the loss on the sale of one equity investment and the write-off on a separate equity investment. The net unrealized depreciation was primarily due to the reversal of unrealized appreciation associated with the sale and write-off of the two portfolio company equity 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 December 31, 2018, the Company had cash, cash equivalents and foreign currencies of $13.0 million, restricted cash, cash equivalents and foreign currencies of $40.7 million and $993.5 million of debt and other short-term borrowings outstanding. As of December 31, 2018, the Company had $72.8 million of remaining commitments and $44.8 million available for additional borrowings on its senior secured revolving credit facility with Wells Fargo Bank, N.A. (the "Wells Fargo Credit Facility"), as lender and administrative agent, subject to leverage and borrowing base restrictions. As of December 31, 2018, through our small business investment company licensees, we had $37.5 million of SBA debenture commitments, of which $9.5 million was available to be drawn, subject to customary SBA regulatory requirements.

On November 1, 2018, the Company entered into an amendment to the documents governing its credit facility with Morgan Stanley Bank, N.A., which increased the borrowing capacity from $300 million to $450 million (the "MS Credit Facility I"). The other material terms of the MS Credit Facility I were unchanged.  On November 16, 2018, we issued $408.2 million in notes through a debt securitization that were structured as follows:

 

Tranche

Rating

(S&P/Fitch)

Par Amount

($mm)

Interest Rate

Class A Notes

AAA/AAA

$

327.0


3-Month LIBOR + 1.48%

Class B Notes

AA/NR

61.2


3-Month LIBOR + 2.10%

Class C-1 Notes

A/NR

20.0


3-Month LIBOR + 2.80%

Total Notes Issued(1)


$

408.2









(1)      

Term debt securitization are also known as CLOs and are a form of secured financing incurred by the Company, which is consolidated by the Company and subject to the Company's overall asset coverage requirements. The Class C-2 Notes, Class D Notes, and Subordinated Notes issued in the debt securitization were retained by the Company and are eliminated in consolidation.

 

The reinvestment period for the debt securitization ends on January 20, 2023 and the notes mature on January 20, 2031. A portion of the proceeds were used to repay all outstanding borrowings on the MS Credit Facility I in full and the agreements governing this facility were terminated.

On February 1, 2019, Golub Capital BDC Funding II LLC ("Funding II"), a direct, wholly-owned, consolidated subsidiary of the Company, entered into a new credit facility, (the "MS Credit Facility II"), with Morgan Stanley Senior Funding, Inc., as the administrative agent, in which the lenders have agreed to extend credit to Funding II in an aggregate principal amount of up to $200.0 million. The scheduled maturity date of the MS Credit Facility II is February 1, 2024 unless there is an earlier termination or event of default.

During the revolving period of the MS Credit Facility II, which will continue through February 1, 2021 unless there is an earlier termination or event of default, borrowings under the MS Credit Facility II will bear interest at the applicable base rate plus 2.05%. Following expiration of the revolving period, the interest rate on outstanding borrowings under the MS Credit Facility II will reset to the applicable base rate 2.55% for the remaining term of the MS Credit Facility II. The base rate under the MS Credit Facility II is (i) the one-month LIBOR, with respect to any advances denominated in U.S. dollars or U.K. pound sterling, (ii) the one-month Euro Interbank Offered Rate with respect to any advances denominated in euros, and (iii) the one-month Canadian Dollar Offered Rate with respect to any advances denominated in Canadian dollars.

In connection with entry into the MS Credit Facility II, all outstanding borrowings under the Wells Fargo Credit Facility were repaid on February 4, 2019, following which the Wells Fargo Credit Facility was terminated. Obligations under the Wells Fargo Credit Facility would have otherwise matured on September 21, 2023.

On February 5, 2019, our board of directors declared a quarterly distribution of $0.32 per share which is payable on March 28, 2019 to holders of record as of March 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 December 31, 2018 and September 30, 2018:

 



December 31, 2018


September 30, 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


$

107,807



5.6

%


$

113,873



6.4

%

4


1,612,115



84.0



1,455,754



81.6


3


178,529



9.3



195,414



11.0


2


20,012



1.1



17,250



1.0


1


16



0.0

*


550



0.0

*

Total


$

1,918,479



100.0

%


$

1,782,841



100.0

%



*

Represents an amount less than 0.1%.

 

Conference Call

The Company will host an earnings conference call at 2:00 p.m. (Eastern Time) on Thursday, February 7, 2019 to discuss the quarterly financial results. All interested parties may participate in the conference call by dialing (800) 909-4147 approximately 10-15 minutes prior to the call; international callers should dial (212) 231-2938. 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 12.31.18 Investor Presentation under Events/Presentations. An archived replay of the call will be available shortly after the call until 4.00 p.m. (Eastern Time) on March 9, 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 21914687.

 

Golub Capital BDC, Inc. and Subsidiaries




Consolidated Statements of Financial Condition




(In thousands, except share and per share data)





December 31, 2018


September 30, 2018

Assets

(unaudited)


(audited)

Total investments at fair value (amortized cost of $1,915,841 and $1,780,652, respectively)

$

1,918,479



$

1,782,841


Cash and cash equivalents

12,706



5,878


Foreign currencies (cost of $296 and $159, respectively)

296



159


Restricted cash, cash equivalents and foreign currencies

40,703



39,668


Interest receivable

6,349



6,664


Other assets

1,274



342


Total Assets

$

1,979,807



$

1,835,552






Liabilities




Debt

$

971,814



$

845,683


Less unamortized debt issuance costs

3,796



2,934


Debt less unamortized debt issuance costs

968,018



842,749


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

21,687




Interest payable

7,128



4,135


Management and incentive fees payable

15,494



17,671


Accounts payable and accrued expenses

2,456



2,069


Accrued trustee fees

70



74


Total Liabilities

1,014,853



866,698






Net Assets




Preferred stock, par value $0.001 per share, 1,000,000 shares authorized, zero shares issued and outstanding as of December 31, 2018 and September 30, 2018




Common stock, par value $0.001 per share, 100,000,000 shares authorized, 60,422,239 and 60,165,454 shares issued and outstanding as of December 31, 2018 and September 30, 2018, respectively

60



60


Paid in capital in excess of par

953,681



949,552


Distributable earnings

11,213



19,242


Total Net Assets

964,954



968,854


Total Liabilities and Total Net Assets

$

1,979,807



$

1,835,552






Number of common shares outstanding

60,422,239



60,165,454


Net asset value per common share

$

15.97



$

16.10


 

 

Golub Capital BDC, Inc. and Subsidiaries





Consolidated Statements of Operations





(In thousands, except share and per share data)







Three months ended



December 31, 2018


September 30, 2018



(unaudited)


(unaudited)

Investment income



Interest income


$

38,850



$

37,334


Dividend income


39



2,235


Fee income


522



859







Total investment income


39,411



40,428







Expenses





Interest and other debt financing expenses


9,784



8,998


Base management fee


6,439



6,230


Incentive fee


1,983



3,655


Professional fees


588



553


Administrative service fee


699



616


General and administrative expenses


101



110







Total expenses


19,594



20,162







Net investment income


19,817



20,266







Net gain (loss) on investments





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


(1,978)



2,834


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


600



(7,197)







Net gain (loss) on investments


(1,378)



(4,363)







Net increase in net assets resulting from operations


$

18,439



$

15,903







Per Common Share Data





Basic and diluted earnings per common share


$

0.31



$

0.26


Dividends and distributions declared per common share


$

0.44



$

0.32


Basic and diluted weighted average common shares outstanding


60,176,619



60,011,707


 

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 nationally recognized, award-winning private debt platform with over $30 billion of capital under management. Golub Capital's Middle Market Lending business seeks to deliver 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 seeks long-term, win-win partnerships that it believes will inspire repeat business from its private equity sponsor clients and investors. Founded in 1994, Golub Capital today has over 350 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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