Crescent Capital BDC, Inc. (CCAP) - Q3 2021 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2021. Crescent Capital BDC, Inc. is a Maryland corporation operating as a Business Development Company (BDC) and a Regulated Investment Company (RIC). The Company invests primarily in secured debt (first lien, unitranche, second lien) and unsecured debt, as well as related equity securities of private U.S. middle-market companies. The portfolio is managed by Crescent Cap Advisors, LLC.
Key Financial Metrics
| Metric | Q3 2021 (3 Months) | YTD 2021 (9 Months) | YTD 2020 (9 Months) |
|---|---|---|---|
| Total Investment Income | $25.48 million | $69.85 million | $56.83 million |
| Net Investment Income | $12.73 million | $35.14 million | $36.72 million |
| Net Increase in Net Assets (Operations) | $16.68 million | $70.80 million | $20.21 million |
| Net Asset Value (NAV) per Share | $21.16 | $21.16 | $19.07 (End of Period) |
| Total Investments (Fair Value) | $1.139 billion | $1.139 billion | $1.034 billion |
| Total Debt (Carrying Value) | $557.07 million | $557.07 million | $471.93 million |
| Cash and Cash Equivalents | $6.47 million | $6.47 million | $1.90 million |
| Asset Coverage Ratio | 205% | 205% | 225% |
Material Changes vs. Prior Period
- Portfolio Growth: Total investments at fair value increased by approximately $104.6 million (10.1%) from December 31, 2020, to September 30, 2021, driven by new originations totaling $367.7 million YTD 2021.
- Debt Expansion: Total debt increased by $85.1 million year-over-year. The Company issued $135 million in 2026 Unsecured Notes in the first half of 2021 and increased utilization on its SPV Asset Facility.
- Realized Gains: The Company recognized a significant net realized gain of $27.5 million on non-controlled affiliated investments in Q3 2021, primarily due to the sale of the Conisus, LLC position. This contributed to a total net realized and unrealized gain of $4.3 million for the quarter.
- Expense Management: Net expenses increased to $12.6 million for Q3 2021 compared to $6.3 million in Q3 2020, largely due to higher interest costs from increased leverage and the accrual of capital gains incentive fees ($0.76 million in Q3 2021 vs. $0 in Q3 2020).
- Fee Waivers: The Adviser continued to waive portions of management fees and income-based incentive fees. For the nine months ended September 30, 2021, total waivers amounted to $8.89 million ($3.10 million management fee waiver and $5.80 million incentive fee waiver).
Guidance, Outlook, and Risks
- Dividend Policy: The Company declared a regular quarterly dividend of $0.41 per share for Q3 2021. In November 2021, the Board declared a regular dividend of $0.41 for Q4 2021 and four special dividends of $0.05 per share to be paid in late 2021 and throughout 2022.
- Subsequent Events: On October 27, 2021, the Company entered into a new $300 million senior secured revolving credit facility with Sumitomo Mitsui Banking Corporation, replacing its previous $200 million facility with Ally Bank.
- Risk Factors: Key risks include the impact of rising interest rates on borrowing costs, the potential for defaults by portfolio companies, the transition from LIBOR to alternative reference rates, and the liquidity of private credit investments. The Company notes that 16.38% of its portfolio consists of non-qualifying assets as of September 30, 2021.
- Non-Accrual Status: As of September 30, 2021, two portfolio companies with three investment positions were on non-accrual status, representing 1.1% of total debt investments at fair value.
Investor Verification Checklist
- Fee Waiver Sustainability: Verify the duration and conditions of the management fee and incentive fee waivers, which significantly impact net investment income.
- Debt Maturity Profile: Review the maturity schedule of the $557 million debt portfolio, specifically the $135 million 2026 Unsecured Notes and the $50 million 2023 Unsecured Notes.
- Concentration Risk: Assess the impact of the top 10 portfolio companies, which represent a significant portion of the fair value, and the specific performance of the "Health Care Equipment & Services" sector (31.5% of portfolio).
- Unfunded Commitments: Note the $166.3 million in unfunded commitments as of September 30, 2021, and the Company's liquidity position to meet these obligations.
- NAV vs. Market Price: Compare the reported NAV of $21.16 against the market price (reported as $19.13 at period end) to assess the discount/premium to NAV.