Goldman Sachs BDC, Inc. (GSBD) - Q3 2019 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2019. Goldman Sachs BDC, Inc. is a closed-end management investment company regulated as a Business Development Company (BDC) and a Regulated Investment Company (RIC). The Company focuses on lending to U.S. middle-market companies through secured debt (first lien, unitranche, second lien) and select equity investments. The portfolio consists of 102 portfolio companies as of the reporting date.
Key Financial Metrics
| Metric | Q3 2019 (Three Months) | YTD 2019 (Nine Months) | YTD 2018 (Nine Months) |
|---|---|---|---|
| Total Investment Income | $36.86 million | $111.79 million | $110.76 million |
| Net Investment Income (After Tax) | $18.97 million | $60.34 million | $60.46 million |
| Net Realized & Unrealized Gains (Losses) | $(10.07) million | $(33.27) million | $(4.94) million |
| Net Increase in Net Assets from Operations | $8.90 million | $27.25 million | $54.94 million |
| Earnings Per Share (Basic & Diluted) | $0.22 | $0.68 | $1.37 |
| Net Asset Value (NAV) per Share | $16.98 (End of Period) | $16.98 (End of Period) | $18.13 (End of Period) |
| Total Debt (Carrying Value) | $727.74 million | $727.74 million | $659.10 million |
| Cash and Cash Equivalents | $11.10 million | $11.10 million | $4.65 million |
| Asset Coverage Ratio | 193% | 193% | 206% |
Material Changes vs. Prior Period
- Portfolio Yield Decline: The weighted average yield on the total portfolio decreased to 8.3% (amortized cost) and 8.9% (fair value) from 9.5% and 10.1% respectively in the prior year. This was primarily driven by lower LIBOR rates on variable-rate debt and the liquidation of the Senior Credit Fund.
- Realized Losses: The Company recorded significant net realized losses of $41.15 million for the nine months ended September 30, 2019, compared to a gain of $1.78 million in the prior year. Key drivers included:
- Exchange of debt for equity in ASC Acquisition Holdings, LLC (loss of $24.72 million).
- Exchange of debt for equity in Country Fresh Holding Company Inc. (loss of $8.41 million).
- Full exit from NTS Communications, Inc. (loss of $7.21 million).
- Expense Increases: Interest and other debt expenses increased to $27.85 million (YTD 2019) from $18.33 million (YTD 2018) due to higher average borrowings under the Revolving Credit Facility and the issuance of additional Convertible Notes in 2018.
- Senior Credit Fund Liquidation: In May 2019, the Company completed the liquidation of the Senior Credit Fund, LLC. The Company received its pro-rata share of senior secured loans ($215.10 million at amortized cost) and cash, which were integrated into the main portfolio.
Guidance, Outlook, and Risks
- Dividend Policy: The Board declared a quarterly distribution of $0.45 per share on October 30, 2019, payable January 15, 2020. The Company maintains an "opt-out" dividend reinvestment plan.
- Capital Resources: The Company has a $795 million Revolving Credit Facility with $216.2 million available as of September 30, 2019. It also has $155 million in Convertible Notes due 2022. The Company has a stock repurchase plan authorized for up to $25 million, though no repurchases were made in the period.
- Interest Rate Risk: Approximately 97.9% of performing debt investments bear floating interest rates. The Company is exposed to the potential phase-out of LIBOR after 2021, which may require renegotiation of credit agreements and could impact yields.
- Non-Accrual Status: Non-accrual investments decreased significantly to 1.4% of the portfolio (amortized cost) from 8.3% in the prior year, reflecting the exit of distressed assets like NTS Communications.
Investor Verification Checklist
- Realized Loss Drivers: Verify the specific terms and future outlook for the equity positions received in exchange for debt in ASC Acquisition Holdings and Country Fresh.
- LIBOR Transition: Assess the Company's strategy for transitioning floating-rate loans away from LIBOR post-2021 and the potential impact on portfolio yields.
- Debt Maturity Profile: Review the maturity schedule of the Revolving Credit Facility (due 2023) and Convertible Notes (due 2022) to ensure refinancing capacity.
- Unfunded Commitments: Confirm the Company's liquidity position relative to $93.38 million in unfunded loan commitments as of September 30, 2019.
- NAV vs. Market Price: Note the trading discount/premium; as of period end, the market price was $20.09 compared to a NAV of $16.98.