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TCG BDC, Inc. Announces Third Quarter 2020 Financial Results and Declares Fourth Quarter 2020 Regular Dividend of $0.32 Per Common Share and Special Dividend of $0.04 per Common Share
NEW YORK, Nov. 04, 2020 (GLOBE NEWSWIRE) -- TCG BDC, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “TCG BDC” or the “Company”) (NASDAQ: CGBD) today announced its financial results for its third quarter ended September 30, 2020.
Linda Pace, TCG BDC’s Chief Executive Officer said, "Our portfolio continued to perform well with no new non-accruals during the third quarter and we are delivering on our goal to provide attractive income generation for our shareholders. Our loan book and our balance sheet are both well positioned for us to successfully navigate a highly uncertain macroeconomic landscape in the year ahead.”
Selected Financial Highlights
| (dollar amounts in thousands, except per share data) | September 30, 2020 | June 30, 2020 | |||||
| Total investments, at fair value | $ | 1,948,173 | $ | 1,907,555 | |||
| Total assets | 2,008,387 | 1,958,634 | |||||
| Total debt | 1,074,806 | 1,035,799 | |||||
| Total net assets | $ | 895,222 | $ | 883,304 | |||
| Net assets per common share | $ | 15.01 | $ | 14.80 | |||
| For the three month periods ended | ||||||||
| September 30, 2020 | June 30, 2020 | |||||||
| Total investment income | $ | 42,784 | $ | 45,275 | ||||
| Net investment income (loss) | 21,234 | 21,692 | ||||||
| Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities | 12,374 | 34,466 | ||||||
| Net increase (decrease) in net assets resulting from operations | $ | 33,608 | $ | 56,158 | ||||
| Per weighted-average common share—Basic: | ||||||||
| Net investment income (loss), net of preferred dividend | $ | 0.36 | $ | 0.38 | ||||
| Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities | 0.22 | 0.61 | ||||||
| Net increase (decrease) in net assets resulting from operations attributable to common stockholders | $ | 0.58 | $ | 0.99 | ||||
| Weighted-average shares of common stock outstanding—Basic | 56,308,616 | 56,308,616 | ||||||
| Regular dividends declared per common share | $ | 0.32 | $ | 0.37 | ||||
| Special dividends declared per common share | $ | 0.05 | $ | — | ||||
Third Quarter 2020 Highlights
(dollar amounts in thousands, except per share data)
- Net investment income for the three month period ended September 30, 2020 was $21,234, or $0.38 per share, ($20,378, or $0.36 per common share, net of the preferred dividend) as compared to $21,692, or $0.39 per share ($21,138, or $0.38 per common share, net of the preferred dividend), for the three month period ended June 30, 2020;
- Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities for the three month period ended September 30, 2020 was $12,374, or $0.22 per share, as compared to $34,466, or $0.61 per share, for the three month period ended June 30, 2020;
- Net increase (decrease) in net assets resulting from operations for the three month period ended September 30, 2020 was $33,608, or $0.58 per common share, as compared to $56,158, or $0.99 per share, for the three month period ended June 30, 2020; and
- On November 2, 2020, the Board of Directors declared a regular quarterly common dividend of $0.32 plus a special dividend of $0.04, which are payable on January 15, 2021 to common stockholders of record on December 31, 2020.
Portfolio and Investment Activity
(dollar amounts in thousands, except per share data, unless otherwise noted)
As of September 30, 2020, the fair value of our investments was approximately $1,948,173, comprised of 146 investments in 114 portfolio companies/investment fund across 28 industries with 63 sponsors. This compares to the Company’s portfolio as of June 30, 2020, as of which date the fair value of our investments was approximately $1,907,555, comprised of 142 investments in 111 portfolio companies/investment fund across 28 industries with 63 sponsors.
As of September 30, 2020 and June 30, 2020, investments consisted of the following:
| September 30, 2020 | June 30, 2020 | ||||||||||||
| Type—% of Fair Value | Fair Value | % of Fair Value | Fair Value | % of Fair Value | |||||||||
| First Lien Debt (excluding First Lien/Last Out) | $ | 1,344,575 | 69.01 | % | $ | 1,316,786 | 69.03 | % | |||||
| First Lien/Last Out | 78,616 | 4.04 | 78,127 | 4.10 | |||||||||
| Second Lien Debt | 287,659 | 14.77 | 278,623 | 14.61 | |||||||||
| Equity Investments | 32,987 | 1.69 | 31,756 | 1.66 | |||||||||
| Investment Fund | 204,336 | 10.49 | 202,263 | 10.60 | |||||||||
| Total | $ | 1,948,173 | 100.00 | % | $ | 1,907,555 | 100.00 | % | |||||
The following table shows our investment activity for the three month period ended September 30, 2020:
| Funded | Sold/Repaid | ||||||||||||
| Principal amount of investments: | Amount | % of Total | Amount | % of Total | |||||||||
| First Lien Debt (excluding First Lien/Last Out) | $ | 60,468 | 99.41 | % | $ | (36,191 | ) | 99.31 | % | ||||
| First Lien/Last Out | — | — | (246 | ) | 0.68 | ||||||||
| Second Lien Debt | — | — | (4 | ) | 0.01 | ||||||||
| Equity Investments | 358 | 0.59 | — | — | |||||||||
| Investment Fund | — | — | — | — | |||||||||
| Total | $ | 60,826 | 100.00 | % | $ | (36,441 | ) | 100.00 | % | ||||
Overall, total investments at fair value increased by 2.1%, or $40,618, during the three month period ended September 30, 2020 after factoring in repayments, sales, net fundings on revolvers and delayed draws and net change in unrealized appreciation (depreciation).
As of September 30, 2020, the weighted average yields for our first and second lien debt investments on an amortized cost basis were 7.08% and 9.23%, respectively, with a total weighted average yield of 7.44%. Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of September 30, 2020. As of September 30, 2020, on a fair value basis, approximately 0.9% of our debt investments bear interest at a fixed rate and approximately 99.1% of our debt investments bear interest at a floating rate, which primarily are subject to interest rate floors.
Total investments at fair value held by Middle Market Credit Fund, LLC (“Credit Fund”), which is not consolidated with the Company, increased by 2.7%, or $33,412, during the three month period ended September 30, 2020 after factoring in repayments, sales, net fundings on revolvers and delayed draws and net change in unrealized appreciation (depreciation). As of September 30, 2020, Credit Fund had total investments at fair value of $1,291,412, which comprised 97.7% of first lien senior secured loans and 1.8% of second lien senior secured loans at fair value. As of September 30, 2020, 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 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 | Borrower is operating above expectations, and the trends and risk factors are generally favorable. | |
| 2 | Borrower is operating generally as expected or at an acceptable level of performance. The level of risk to our initial cost bases is similar to the risk to our initial cost basis at the time of origination. This is the initial risk rating assigned to all new borrowers. | |
| 3 | Borrower is operating below expectations and level of risk to our cost basis has increased since the time of origination. The borrower may be out of compliance with debt covenants. Payments are generally current although there may be higher risk of payment default. | |
| 4 | Borrower is operating materially below expectations and 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 by more than 120 days. It is anticipated that we may not recoup our initial cost basis and may realize a loss of our initial cost basis upon exit. | |
| 5 | Borrower is operating substantially below expectations and the loan’s risk has increased substantially since origination. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. It is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit. | |
Our Investment Adviser monitors and, when appropriate, changes the investment ratings assigned to each debt investment in our portfolio. Our Investment Adviser reviews our investment ratings in connection with our quarterly valuation process. The following table summarizes the Internal Risk Ratings of our debt portfolio as of September 30, 2020 and June 30, 2020:
| September 30, 2020 | June 30, 2020 | ||||||||||||
| Fair Value | % of Fair Value | Fair Value | % of Fair Value | ||||||||||
| (dollar amounts in millions) | |||||||||||||
| Internal Risk Rating 1 | $ | 38.8 | 2.27 | % | $ | 37.3 | 2.23 | % | |||||
| Internal Risk Rating 2 | 1,201.4 | 70.22 | 1,145.7 | 68.46 | |||||||||
| Internal Risk Rating 3 | 380.8 | 22.26 | 412.4 | 24.65 | |||||||||
| Internal Risk Rating 4 | 48.9 | 2.86 | 36.8 | 2.20 | |||||||||
| Internal Risk Rating 5 | 40.9 | 2.39 | 41.3 | 2.47 | |||||||||
| Total | $ | 1,710.9 | 100.00 | % | $ | 1,673.5 | 100.00 | % | |||||
As of September 30, 2020 and June 30, 2020, the weighted average Internal Risk Rating of our debt investment portfolio was 2.3 and 2.3, respectively.
Consolidated Results of Operations
(dollar amounts in thousands, except per share data)
Total investment income for the three month periods ended September 30, 2020 and June 30, 2020 was $42,784 and $45,275, respectively. This $2,491 net decrease during the three month period ended September 30, 2020 was primarily due to a decrease in interest income from a lower investment balance during the third quarter, and lower income recognized from amendment activity.
Total expenses for the three month periods ended September 30, 2020 and June 30, 2020 were $21,550 and $23,583, respectively. This $2,033 net decrease during the three month period ended September 30, 2020 was primarily attributable to a decrease in interest expense.
During the three month period ended September 30, 2020, the Company recorded a net realized and unrealized gain on investments of $14,831, primarily driven by tightening market yields resulting in increases in fair value.
Liquidity and Capital Resources
(dollar amounts in thousands, except per share data)
As of September 30, 2020, the Company had cash and cash equivalents of $37,088, secured notes payable (before debt issuance costs) of $449,200, secured borrowings outstanding of $513,332, senior unsecured notes of $115,000, and convertible preferred equity of $50,000. As of September 30, 2020, the Company had $449,668 of remaining unfunded commitments and $244,952 available for additional borrowings under its revolving credit facilities, subject to leverage and borrowing base restrictions.
Dividends
On November 2, 2020, the Board of Directors declared a regular quarterly common dividend of $0.32 plus a special dividend of $0.04, which are payable on January 15, 2021 to common stockholders of record on December 31, 2020.
On September 30, 2020, the Company declared and paid a cash dividend on the Preferred Stock for the period from July 1, 2020 through September 30, 2020 in the amount of $0.423 per preferred share to the holder of record on September 30, 2020.
Conference Call
The Company will host a conference call at 11:00 a.m. EST on Thursday, November 5, 2020 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, 2020 | June 30, 2020 | ||||||||
| (unaudited) | (unaudited) | ||||||||
| ASSETS | |||||||||
| Investments, at fair value | |||||||||
| Investments—non-controlled/non-affiliated, at fair value (amortized cost of $1,840,796 and $1,808,731, respectively) | $ | 1,737,044 | $ | 1,692,073 | |||||
| Investments—controlled/affiliated, at fair value (amortized cost of $233,131 and $239,618, respectively) | 211,129 | 215,482 | |||||||
| Total investments, at fair value (amortized cost of $2,073,927 and $2,048,349, respectively) | 1,948,173 | 1,907,555 | |||||||
| Cash and cash equivalents | 37,088 | 29,916 | |||||||
| Receivable for investment sold | 74 | 53 | |||||||
| Deferred financing costs | 3,651 | 3,749 | |||||||
| Interest receivable from non-controlled/non-affiliated investments | 12,791 | 10,873 | |||||||
| Interest and dividend receivable from controlled/affiliated investments | 5,754 | 5,589 | |||||||
| Prepaid expenses and other assets | 856 | 899 | |||||||
| Total assets | $ | 2,008,387 | $ | 1,958,634 | |||||
| LIABILITIES | |||||||||
| Secured borrowings | $ | 513,332 | $ | 474,386 | |||||
| 2015-1 Notes payable, net of unamortized debt issuance costs of $2,726 and $2,788, respectively | 446,474 | 446,413 | |||||||
| Senior Notes | 115,000 | 115,000 | |||||||
| Payable for investments purchased | — | 61 | |||||||
| Interest and credit facility fees payable | 3,405 | 4,532 | |||||||
| Dividend payable | 20,830 | 21,379 | |||||||
| Base management and incentive fees payable | 11,473 | 11,572 | |||||||
| Administrative service fees payable | 85 | 129 | |||||||
| Other accrued expenses and liabilities | 2,566 | 1,858 | |||||||
| Total liabilities | 1,113,165 | 1,075,330 | |||||||
| NET ASSETS | |||||||||
| Cumulative convertible preferred stock, $0.01 par value; 2,000,0000 shares authorized; 2,000,000 shares issued and outstanding as of September 30, 2020 and June 30, 2020 | 50,000 | 50,000 | |||||||
| Common stock, $0.01 par value; 200,000,000 shares authorized; 56,308,616 shares issued and outstanding at September 30, 2020 and June 30, 2020 | 563 | 563 | |||||||
| Paid-in capital in excess of par value | 1,093,250 | 1,093,250 | |||||||
| Offering costs | (1,633 | ) | (1,633 | ) | |||||
| Total distributable earnings (loss) | (246,958 | ) | (258,876 | ) | |||||
| Total net assets | $ | 895,222 | $ | 833,304 | |||||
| NET ASSETS PER COMMON SHARE | $ | 15.01 | $ | 14.80 | |||||
TCG BDC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands, except per share data)
(unaudited)
| For the three month periods ended | ||||||||||
| September 30, 2020 | June 30, 2020 | |||||||||
| Investment income: | ||||||||||
| From non-controlled/non-affiliated investments: | ||||||||||
| Interest income | $ | 34,789 | $ | 36,036 | ||||||
| Other income | 2,110 | 3,547 | ||||||||
| Total investment income from non-controlled/non-affiliated investments | 36,899 | 39,583 | ||||||||
| From controlled/affiliated investments: | ||||||||||
| Interest income | 135 | 192 | ||||||||
| Dividend income | 5,750 | 5,500 | ||||||||
| Total investment income from controlled/affiliated investments | 5,885 | 5,692 | ||||||||
| Total investment income | 42,784 | 45,275 | ||||||||
| Expenses: | ||||||||||
| Base management fees | 7,134 | 7,065 | ||||||||
| Incentive fees | 4,322 | 4,667 | ||||||||
| Professional fees | 937 | 678 | ||||||||
| Administrative service fees | 167 | 266 | ||||||||
| Interest expense | 7,291 | 9,443 | ||||||||
| Credit facility fees | 728 | 788 | ||||||||
| Directors’ fees and expenses | 86 | 121 | ||||||||
| Other general and administrative | 498 | 455 | ||||||||
| Total expenses | 21,163 | 23,483 | ||||||||
| Net investment income (loss) before taxes | 21,621 | 21,792 | ||||||||
| Excise tax expense | 387 | 100 | ||||||||
| Net investment income (loss) | 21,234 | 21,692 | ||||||||
| Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities: | ||||||||||
| Net realized gain (loss) from: | ||||||||||
| Non-controlled/non-affiliated investments | (209 | ) | (47,784 | ) | ||||||
| Currency gains (losses) on non-investment assets and liabilities | (11 | ) | 635 | |||||||
| Net change in unrealized appreciation (depreciation) on investments: | ||||||||||
| Non-controlled/non-affiliated | 12,906 | 64,082 | ||||||||
| Controlled/affiliated | 2,134 | 18,174 | ||||||||
| Net change in unrealized currency gains (losses) on non-investment assets and liabilities | (2,446 | ) | (641 | ) | ||||||
| Net realized and unrealized gain (loss) on investments and non-investment assets and liabilities | 12,374 | 34,466 | ||||||||
| Net increase (decrease) in net assets resulting from operations | 33,608 | 56,158 | ||||||||
| Preferred stock dividend | 856 | 554 | ||||||||
| Net increase (decrease) in net assets resulting from operations attributable to Common Stockholders | $ | 32,752 | $ | 55,604 | ||||||
| Basic and diluted earnings per common share: | ||||||||||
| Basic | $ | 0.58 | $ | 0.99 | ||||||
| Diluted | $ | 0.55 | $ | 0.94 | ||||||
| Weighted-average shares of common stock outstanding: | ||||||||||
| Basic | 56,308,616 | 56,308,616 | ||||||||
| Diluted | 61,571,773 | 59,547,482 | ||||||||
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 Inc. Since it commenced investment operations in May 2013 through September 30, 2020, TCG BDC has invested approximately $6.0 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, including the impact of COVID-19 on the business. 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 | Brittany Berliner |
| +1-212-813-4527 daniel.harris@carlyle.com | +1-212-813-4839 brittany.berliner@carlyle.com |