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TCG BDC, Inc. Announces Third Quarter 2019 Financial Results and Declares Fourth Quarter 2019 Dividend of $0.37 Per Share

NEW YORK, Nov. 05, 2019 (GLOBE NEWSWIRE) -- TCG BDC, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “TCG BDC” or the “Company”) (CGBD) today announced its financial results for its third quarter ended September 30, 2019.

Selected Financial Highlights

(dollar amounts in thousands, except per share data)

September 30, 2019

June 30, 2019

Total investments, at fair value

$

2,126,688

$

2,075,614

Total assets

2,225,990

2,172,756

Total debt

1,202,739

1,095,563

Total net assets

$

978,601

$

1,026,592

Net assets per share

$

16.58

$

17.06


For the three month periods ended

September 30, 2019

June 30, 2019

Total investment income

$

55,779

$

56,867

Net investment income (loss)

26,755

27,971

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments

(35,744

)

(18,214

)

Net increase (decrease) in net assets resulting from operations

$

(8,989

)

$

9,757

Basic and diluted per weighted-average common share:

Net investment income (loss)

$

0.45

$

0.46

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments

(0.60

)

(0.29

)

Net increase (decrease) in net assets resulting from operations

$

(0.15

)

$

0.16

Weighted-average shares of common stock outstanding—Basic and Diluted

59,587,941

60,596,402

Regular dividends declared per common share

$

0.37

$

0.37

Special dividends declared per common share

$

$

0.08

Third Quarter 2019 Highlights
(dollar amounts in thousands, except per share data)

  • Net investment income for the three month period ended September 30, 2019 was $26,755, or $0.45 per share, as compared to 27,971, or $ 0.46 per share, for the three month period ended June 30, 2019;

  • Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments for the three month period ended September 30, 2019 was $(35,744), or $(0.60) per share, as compared to $(18,214), or $(0.29) per share, for the three month period ended June 30, 2019;

  • Net increase (decrease) in net assets resulting from operations for the three month period ended September 30, 2019 was $(8,989), or $(0.15) per share, as compared to $9,757, or $0.16 per share, for the three month period ended June 30, 2019;

  • During the three month period ended September 30, 2019, the Company repurchased and extinguished 1,168,383 shares for $17,167; and

  • On November 4, 2019, the Board of Directors declared a quarterly dividend of $0.37, which is payable on January 17, 2020 to stockholders of record on December 31, 2019.

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

As of September 30, 2019, the fair value of our investments was approximately $2,126,688, comprised of 141 investments in 110 portfolio companies/investment fund across 28 industries with 63 sponsors. This compares to the Company’s portfolio as of June 30, 2019, as of which date the fair value of our investments was approximately $ 2,075,614, comprised of 135 investments in 106 portfolio companies/investment fund across 28 industries with 63 sponsors.

As of September 30, 2019 and June 30, 2019, investments consisted of the following:

September 30, 2019

June 30, 2019

Type—% of Fair Value

Fair Value

% of
Fair Value

Fair Value

% of
Fair Value

First Lien Debt (excluding First Lien/Last Out)

$

1,447,303

68.05

%

$

1,442,698

69.51

%

First Lien/Last Out Unitranche

213,492

10.04

209,201

10.08

Second Lien Debt

232,135

10.92

203,187

9.79

Equity Investments

30,657

1.44

29,142

1.40

Investment Fund

203,101

9.55

191,386

9.22

Total

$

2,126,688

100.00

%

$

2,075,614

100.00

%

The following table shows our investment activity for the three month period ended September 30, 2019:

Funded

Sold/Repaid

Principal amount of investments:

Amount

% of Total

Amount

% of Total

First Lien Debt (excluding First Lien/Last Out)

$

139,276

58.77

%

$

(137,674

)

83.10

%

First Lien/Last Out Unitranche

25,045

10.57

Second Lien Debt

39,500

16.67

(9,498

)

5.73

Equity Investments

683

0.29

Investment Fund

32,500

13.71

(18,500

)

11.17

Total

$

237,004

100.01

%

$

(165,672

)

100.00

%

Overall, total investments at fair value increased by 2.5%, or $51,074, during the three month period ended September 30, 2019 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, LLC (“Credit Fund”), which is not consolidated with the Company, decreased by 4.4%, or $57,873, during the three month period ended September 30, 2019 after factoring in repayments, sales, net fundings on revolvers and delayed draws and net change in unrealized appreciation (depreciation). As of September 30, 2019, Credit Fund had total investments at fair value of $1,270,328, which comprised 98.3% of first lien senior secured loans and 1.7% of second lien senior secured loans at fair value. As of September 30, 2019, approximately 1.7% of Credit Fund's debt investments bear interest at a fixed rate and approximately 98.3% of investments in the portfolio were floating rate debt investments, which primarily are subject to interest rate floors.

As of September 30, 2019, the weighted average yields for our first and second lien debt investments on an amortized cost basis were 8.65% and 10.62%, respectively, with a total weighted average yield of 8.88%. The weighted average yields for our new first and second lien debt investments for the quarter on an amortized cost basis was 9.43%. The weighted average yields for our first and second lien debt investments that repaid during the quarter on an amortized cost basis was 7.73%. Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of September 30, 2019. As of September 30, 2019, on a fair value basis, approximately 0.3% of our debt investments bear interest at a fixed rate and approximately 99.7% 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, 2019 and June 30, 2019:

September 30, 2019

June 30, 2019

Fair Value

% of
Fair Value

Fair Value

% of
Fair Value

(dollar amounts in millions)

Internal Risk Rating 1

$

92.5

4.89

%

$

49.7

2.68

%

Internal Risk Rating 2

1,402.9

74.12

1,431.2

77.15

Internal Risk Rating 3

184.4

9.74

123.1

6.64

Internal Risk Rating 4

187.6

9.91

197.2

10.63

Internal Risk Rating 5

24.5

1.29

46.3

2.49

Internal Risk Rating 6

1.0

0.05

7.6

0.41

Total

$

1,892.9

100.00

%

$

1,855.1

100.00

%

As of September 30, 2019 and June 30, 2019, the weighted average Internal Risk Rating of our debt investment portfolio was 2.3.

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

Total investment income for the three month periods ended September 30, 2019 and June 30, 2019 was $55,779 and $56,867, respectively. This $1,088 net decrease was due to a decrease in income recognized from the acceleration of OID and prepayment fees from prepayments from our investment portfolio partially offset by an increase in interest income, during the three month period ended September 30, 2019.

Total expenses for the three month periods ended September 30, 2019 and June 30, 2019 were $29,024 and $28,896, respectively. This $128 net increase during the three month period ended September 30, 2019 was primarily attributable to an increase in interest expense as a result of an increase in average outstanding borrowings, partially offset by lower incentive fees.

During the three month period ended September 30, 2019, the Company recorded a net realized loss and change in unrealized depreciation of $35,744. This was primarily driven by changes in various inputs utilized under our valuation methodology, including, but not limited to, enterprise value multiples, 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, 2019, the Company had cash and cash equivalents of $70,281, notes payable (before debt issuance costs) of $449,200, and secured borrowings outstanding of $756,511. As of September 30, 2019, the Company had $236,489 of remaining unfunded commitments and $111,455 available for additional borrowings under its revolving credit facilities, subject to leverage and borrowing base restrictions.

Dividend

On November 4, 2019, the Board of Directors declared a quarterly dividend of $0.37, which is payable on January 17, 2020 to stockholders of record on December 31, 2019.

Conference Call

The Company will host a conference call at 8:30 a.m. EST on Wednesday, November 6, 2019 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, 2019

June 30, 2019

(unaudited)

(unaudited)

ASSETS

Investments, at fair value

Investments—non-controlled/non-affiliated, at fair value (amortized cost of $1,986,926 and $1,912,346, respectively)

$

1,893,216

$

1,840,979

Investments—non-controlled/affiliated, at fair value (amortized cost of $0 and $14,270, respectively)

6,607

20,925

Investments—controlled/affiliated, at fair value (amortized cost of $241,705 and $225,701, respectively)

226,865

213,710

Total investments, at fair value (amortized cost of $2,228,631 and $2,152,317, respectively)

2,126,688

2,075,614

Cash and cash equivalents

70,281

62,324

Receivable for investment sold

5,725

14,854

Deferred financing costs

4,687

4,869

Interest receivable from non-controlled/non-affiliated investments

11,561

8,289

Interest receivable from non-controlled/affiliated investments

11

Interest and dividend receivable from controlled/affiliated investments

6,951

6,652

Prepaid expenses and other assets

97

143

Total assets

$

2,225,990

$

2,172,756

LIABILITIES

Secured borrowings

$

756,511

$

649,397

Notes payable, net of unamortized debt issuance costs of $2,972 and $3,034, respectively

446,228

446,166

Payable for investments purchased

11

Due to Investment Adviser

142

228

Interest and credit facility fees payable

7,680

7,563

Dividend payable

21,825

27,082

Base management and incentive fees payable

13,726

13,846

Administrative service fees payable

66

128

Other accrued expenses and liabilities

1,200

1,754

Total liabilities

1,247,389

1,146,164

NET ASSETS

Common stock, $0.01 par value; 200,000,000 shares authorized; 59,013,476 and 60,181,859 shares issued and outstanding at September 30, 2019 and June 30, 2019, respectively

590

602

Paid-in capital in excess of par value

1,126,845

1,144,000

Offering costs

(1,633

)

(1,633

)

Total distributable earnings (loss)

(147,201

)

(116,377

)

Total net assets

$

978,601

$

1,026,592

NET ASSETS PER SHARE

$

16.58

$

17.06


TCG BDC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands, except per share data)
(unaudited)

For the three month periods ended

September 30, 2019

June 30, 2019

Investment income:

From non-controlled/non-affiliated investments:

Interest income

$

47,118

$

47,224

Other income

1,756

2,266

Total investment income from non-controlled/non-affiliated investments

48,874

49,490

From non-controlled/affiliated investments:

Interest income

446

384

Total investment income from non-controlled/affiliated investments

446

384

From controlled/affiliated investments:

Interest income

2,459

3,243

Dividend income

4,000

3,750

Total investment income from controlled/affiliated investments

6,459

6,993

Total investment income

55,779

56,867

Expenses:

Base management fees

8,016

7,913

Incentive fees

5,710

5,933

Professional fees

534

600

Administrative service fees

61

165

Interest expense

13,538

13,032

Credit facility fees

545

671

Directors’ fees and expenses

88

88

Other general and administrative

483

434

Total expenses

28,975

28,836

Net investment income (loss) before taxes

26,804

28,031

Excise tax expense

49

60

Net investment income (loss)

26,755

27,971

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments:

Net realized gain (loss) from:

Non-controlled/non-affiliated investments

(10,909

)

1,410

Controlled/affiliated investments

(9,091

)

Net change in unrealized appreciation (depreciation) on investments:

Non-controlled/non-affiliated

(22,343

)

(14,204

)

Non-controlled/affiliated

(48

)

(345

)

Controlled/affiliated

(2,850

)

4,016

Net change in unrealized currency gains (losses) on non-investment assets and liabilities

406

Net realized gain (loss) and net change in unrealized appreciation (depreciation)

(35,744

)

(18,214

)

Net increase (decrease) in net assets resulting from operations

$

(8,989

)

$

9,757

Basic and diluted earnings per common share

$

(0.15

)

$

0.16

Weighted-average shares of common stock outstanding—Basic and Diluted

59,587,941

60,596,402

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 September 30, 2019, TCG BDC has invested approximately $5.3 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

Lindsey Lennon

+1-212-813-4527
daniel.harris@carlyle.com

+1-202-729-5038
lindsey.lennon@carlyle.com