Crescent Capital BDC, Inc. (CBDC) - Q2 2019 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2019. Crescent Capital BDC, Inc. is a closed-end, non-diversified management investment company organized as a Business Development Company (BDC) and a Regulated Investment Company (RIC). The Company focuses on lending to middle-market companies through secured and unsecured debt and related equity investments. As of the reporting date, the Company had 16,245,796 shares of common stock outstanding.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 |
|---|---|---|
| Total Investment Income | $23,974,086 | $14,061,933 |
| Net Investment Income (After Tax) | $14,204,889 | $6,884,243 |
| Net Increase in Net Assets from Operations | $17,373,024 | $5,116,935 |
| Net Asset Value (NAV) per Share | $19.75 | $19.93 (End of Period 2018) |
| Total Investments (Fair Value) | $624,905,395 | $493,341,724 |
| Total Debt (Carrying Value) | $266,597,017 | $235,707,992 |
| Cash and Cash Equivalents | $9,040,419 | $9,211,691 |
| Asset Coverage Ratio | 2.18 to 1 | 2.07 to 1 |
Material Changes vs. Prior Period
- Portfolio Growth: Total investments at fair value increased by approximately $131.6 million (26.7%) from December 31, 2018, driven by new investment commitments of $204.2 million during the six-month period.
- Income Growth: Net investment income increased by 106% year-over-year, primarily due to the larger portfolio size (average portfolio increased from $346.9M to $551.1M) and dividend income from new investments in GACP II and the Senior Loan Fund.
- Expense Increases: Total expenses rose to $13.8 million (net of waivers) from $8.8 million in the prior year period. Interest and credit facility expenses increased to $6.0 million due to higher average debt balances ($243.4M vs $159.3M) and a slight increase in the weighted average interest rate (4.53% vs 3.93%).
- Fee Waivers: The Advisor waived all income incentive fees for the period (down from $0.6M in the prior year) and waived approximately $2.1M in management fees, consistent with the agreement to waive fees prior to a Qualified IPO.
- Capital Activity: The Company issued common stock for gross proceeds of $56.0 million during the six months ended June 30, 2019.
Outlook, Risks, and Unusual Items
- Pending Acquisition: On August 12, 2019, the Company entered into a definitive agreement to acquire Alcentra Capital Corporation in a cash and stock transaction. The deal is expected to close in Q4 2019, subject to shareholder and regulatory approvals. Upon completion, the Advisor has agreed to reduce the management fee from 1.5% to 1.25% and increase the incentive fee hurdle from 6% to 7%.
- Senior Loan Fund: The Company invested $27.5 million in the CBDC Senior Loan Fund, LLC, which holds a portfolio of senior secured debt. This investment is valued at $26.8 million as of June 30, 2019.
- Non-Accrual Status: As of June 30, 2019, one portfolio company with three investment positions was on non-accrual status, representing 2.0% of total investments at cost and 1.0% at fair value.
- Key Risks: The filing highlights risks related to the Alcentra Acquisition, potential fluctuations in quarterly results, economic recessions, credit market developments, and the illiquidity of private credit investments.
Investor Verification Checklist
- Verify the status and expected closing timeline of the Alcentra Capital acquisition and its impact on future fee structures.
- Review the composition of the Senior Loan Fund portfolio and the Company's exposure to this unconsolidated entity.
- Monitor the non-accrual portfolio (currently 1.0% of fair value) for any further deterioration or write-downs.
- Confirm the Asset Coverage Ratio remains above the 2.0 to 1.0 threshold required by the Investment Company Act of 1940.
- Assess the sustainability of the dividend payout ($0.41 per share for Q2) relative to the Net Investment Income generated.