TCG BDC, Inc. Announces First Quarter 2020 Financial Results and Declares Second Quarter 2020 Dividend of $0.37 Per Share
05/05/2020 - 04:00 PM
NEW YORK, May 05, 2020 (GLOBE NEWSWIRE) -- TCG BDC, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “TCG BDC” or the “Company”) (NASDAQ: CGBD) today announced its financial results for its first quarter ended March 31, 2020.
Linda Pace, TCG BDC’s Chief Executive Officer, said, "The world continues to deal with an unprecedented health and economic crisis, and our thoughts are with all front line workers. TCG BDC has performed very well during the early stages of this crisis. In the month of April we have acted proactively and decisively, pursuing select asset sales and raising preferred equity on attractive terms. These actions help to both bring our net financial leverage back in-line with our targeted range and also reinforce the flexibility of our balance sheet as we manage through a highly uncertain environment. As a result, we remain in a strong position to both support our portfolio and to invest in new opportunities.”
100%; border-collapse:collapse !important;">Selected Financial Highlights (dollar amounts in thousands, except per share data) March 31, 2020 December 31, 2019 67%; width:67% ; min-width:67% ;">Total investments, at fair value 1%; width:1% ; min-width:1% ;">$ 14%; width:14% ; min-width:14% ;">2,024,277 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;">$ 14%; width:14% ; min-width:14% ;">2,123,964 1%; width:1% ; min-width:1% ;"> Total assets 2,126,826 2,187,533 Total debt 1,262,960 1,177,832 Total net assets $ 798,534 $ 956,471 Net assets per share $ 14.18 $ 16.56
100%; border-collapse:collapse !important;"> For the three month periods ended March 31, 2020 December 31, 2019 67%; width:67% ; min-width:67% ;">Total investment income 1%; width:1% ; min-width:1% ;">$ 14%; width:14% ; min-width:14% ;">50,545 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;">$ 14%; width:14% ; min-width:14% ;">53,465 1%; width:1% ; min-width:1% ;"> Net investment income (loss) 23,972 25,377 Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities (145,072 ) 1,459 Net increase (decrease) in net assets resulting from operations $ (121,100 ) $ 26,836 Basic and diluted per weighted-average common share: Net investment income (loss) $ 0.42 $ 0.43 Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments and non-investment assets and liabilities (2.57 ) 0.02 Net increase (decrease) in net assets resulting from operations $ (2.15 ) $ 0.46 Weighted-average shares of common stock outstanding—Basic and Diluted 57,112,193 58,784,971 Regular dividends declared per common share $ 0.37 $ 0.37 Special dividends declared per common share $ — $ 0.18
First Quarter 2020 Highlights
Net investment income for the three month period ended March 31, 2020 was $23,972, or $0.42 per share, as compared to $25,377, or $0.43 per share, for the three month period ended December 31, 2019; 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 March 31, 2020 was $(145,072), or $(2.57) per share, as compared to $1,459, or $0.02 per share, for the three month period ended December 31, 2019; Net increase (decrease) in net assets resulting from operations for the three month period ended March 31, 2020 was $(121,100), or $(2.12) per share, as compared to $26,836, or $0.46 per share, for the three month period ended December 31, 2019; During the three month period ended March 31, 2020, the Company repurchased and extinguished 1,455,195 shares of the Company's common stock pursuant to the Company's previously announced $100 million stock repurchase program at an average cost of $11.00 per share, or $16,003 in the aggregate, resulting in accretion to net assets per share of $0.14; and On May 4, 2020, the Board of Directors declared a quarterly dividend of $0.37, which is payable on July 17, 2020 to stockholders of record on June 30, 2020. Portfolio and Investment Activity
As of March 31, 2020, the fair value of our investments was approximately $2,024,277, comprised of 138 investments in 110 portfolio companies/investment fund across 28 industries with 63 sponsors. This compares to the Company’s portfolio as of December 31, 2019, as of which date the fair value of our investments was approximately $2,123,964, comprised of 136 investments in 112 portfolio companies/investment fund across 28 industries with 63 sponsors.
As of March 31, 2020 and December 31, 2019, investments consisted of the following:
100%; border-collapse:collapse !important;"> March 31, 2020 December 31, 2019 Type—% of Fair Value Fair Value % of Fair Value % of 47%; width:47% ; min-width:47% ;">First Lien Debt (excluding First Lien/Last Out) 1%; width:1% ; min-width:1% ;">$ 11%; width:11% ; min-width:11% ;">1,478,357 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;"> 11%; width:11% ; min-width:11% ;">73.02 1%; width:1% ; min-width:1% ;">% 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;">$ 11%; width:11% ; min-width:11% ;">1,585,042 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;"> 11%; width:11% ; min-width:11% ;">74.63 1%; width:1% ; min-width:1% ;">% First Lien/Last Out Unitranche 56,408 2.79 78,096 3.68 Second Lien Debt 275,055 13.59 234,532 11.04 Equity Investments 29,323 1.45 21,698 1.02 Investment Fund 185,134 9.15 204,596 9.63 Total $ 2,024,277 100.00 % $ 2,123,964 100.00 %
The following table shows our investment activity for the three month period ended March 31, 2020:
100%; border-collapse:collapse !important;"> Funded Sold/Repaid Principal amount of investments: Amount % of Total Amount % of Total 47%; width:47% ; min-width:47% ;">First Lien Debt (excluding First Lien/Last Out) 1%; width:1% ; min-width:1% ;">$ 11%; width:11% ; min-width:11% ;">75,510 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;"> 11%; width:11% ; min-width:11% ;">23.01 1%; width:1% ; min-width:1% ;">% 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;">$ 11%; width:11% ; min-width:11% ;">(97,185 1%; width:1% ; min-width:1% ;">) 1%; width:1% ; min-width:1% ;"> 11%; width:11% ; min-width:11% ;">33.72 1%; width:1% ; min-width:1% ;">% First Lien/Last Out Unitranche — — (19,273 ) 6.69 Second Lien Debt 86,109 26.24 (15,232 ) 5.29 Equity Investments 10,500 3.20 — — Investment Fund 156,000 47.55 (156,500 ) 54.30 Total $ 328,119 100.00 % $ (288,190 ) 100.00 %
Overall, total investments at fair value decreased by 4.7% , or $99,687, during the three month period ended March 31, 2020 after factoring in repayments, sales, net fundings on revolvers and delayed draws and net change in unrealized appreciation (depreciation).
As of March 31, 2020, the weighted average yields for our first and second lien debt investments on an amortized cost basis were 7.35% and 9.92% , respectively, with a total weighted average yield of 7.74% . Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of March 31, 2020. As of March 31, 2020, on a fair value basis, approximately 0.8% of our debt investments bear interest at a fixed rate and approximately 99.2% 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, decreased by 3.8% , or $47,656, during the three month period ended March 31, 2020 after factoring in repayments, sales, net fundings on revolvers and delayed draws and net change in unrealized appreciation (depreciation). As of March 31, 2020, Credit Fund had total investments at fair value of $1,199,183, which comprised 98.2% of first lien senior secured loans and 1.8% of second lien senior secured loans at fair value. As of March 31, 2020, approximately 1.8% of Credit Fund's debt investments bear interest at a fixed rate and approximately 98.2% 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”:
100%; border-collapse:collapse !important;">Internal Risk Ratings Definitions 4%; width:4% ; min-width:4% ;"> 1%; width:1% ; min-width:1% ;"> 95%; width:95% ; min-width:95% ;"> 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 March 31, 2020 and December 31, 2019:
100%; border-collapse:collapse !important;"> March 31, 2020 December 31, 2019 Fair Value % of Fair Value Fair Value % of Fair Value (dollar amounts in millions) 47%; width:47% ; min-width:47% ;">Internal Risk Rating 1 1%; width:1% ; min-width:1% ;">$ 11%; width:11% ; min-width:11% ;">38.6 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;"> 11%; width:11% ; min-width:11% ;">2.13 1%; width:1% ; min-width:1% ;">% 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;">$ 11%; width:11% ; min-width:11% ;">39.2 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;"> 11%; width:11% ; min-width:11% ;">2.07 1%; width:1% ; min-width:1% ;">% Internal Risk Rating 2 1,392.5 76.94 1,501.4 79.12 Internal Risk Rating 3 205.8 11.37 132.9 7.00 Internal Risk Rating 4 96.6 5.34 159.0 8.38 Internal Risk Rating 5 32.6 1.80 65.2 3.43 Internal Risk Rating 6 43.8 2.42 — — Total $ 1,809.8 100.00 % $ 1,897.7 100.00 %
As of March 31, 2020 and December 31, 2019, the weighted average Internal Risk Rating of our debt investment portfolio was 2.3 and 2.3, respectively.
Consolidated Results of Operations
Total investment income for the three month periods ended March 31, 2020 and December 31, 2019 was $50,545 and $53,465, respectively. This $2,920 net decrease during the three month period ended March 31, 2020 was due to a decrease in interest income primarily due to lower LIBOR, a decrease in income recognized from the acceleration of OID due to lower repayments, and lower total income from Credit Fund.
Total expenses for the three month periods ended March 31, 2020 and December 31, 2019 were $26,573 and $28,088, respectively. This $1,515 net decrease during the three month period ended March 31, 2020 was primarily attributable to a decrease in credit facility fees, base management fees and incentive fees, partially offset by an increase in interest expense.
During the three month period ended March 31, 2020, the Company recorded a net realized loss and change in unrealized depreciation on investments of $147,260. T his was primarily driven by higher market spreads related to the COVID-19 pandemic, as well as other changes in other inputs utilized under our valuation methodology, including, but not limited to, enterprise value multiples, leverage multiples and borrower ratings, and the impact of exits.
Liquidity and Capital Resources
As of March 31, 2020, the Company had cash and cash equivalents of $65,525, secured notes payable (before debt issuance costs) of $449,200, secured borrowings outstanding of $701,609, and senior unsecured notes of $115,000. As of March 31, 2020, the Company had $261,391 of remaining unfunded commitments and $127,329 available for additional borrowings under its revolving credit facilities, subject to leverage and borrowing base restrictions.
On May 5, 2020, the Company announced it had issued $50 million in Series A Convertible Preferred Stock, purchased by an affiliate of The Carlyle Group, Inc. The primary use of proceeds from the issuance will be to pay down outstanding debt. The Series A Convertible Preferred Stock pays dividends, at the Company’s option, at a rate of either 7% (to the extent paid in cash) or 9% (to the extent paid in kind). The Series A Convertible Preferred Stock is convertible beginning six months after the closing date into shares of the Company’s common stock at an implied conversion price of $9.50, or 57% above the current 30-day VWAP. The Series A Convertible Preferred Stock may be redeemed at the option of the Company after 3 years, or in the event of certain other events. Holders of the Series A Convertible Preferred Stock may request redemption after seven years, and such redemption may be satisfied - at the Company’s option - in either shares of common stock or other consideration.
Dividend
On May 4, 2020, the Board of Directors declared a quarterly dividend of $0.37, which is payable on July 17, 2020 to stockholders of record on June 30, 2020.
Conference Call
The Company will host a conference call at 11:00 a.m. EDT on Wednesday, May 6, 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.
100%; border-collapse:collapse !important;"> TCG BDC, INC. CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (dollar amounts in thousands, except per share data) March 31, 2020 December 31, 2019 (unaudited) (unaudited) ASSETS Investments, at fair value 67%; width:67% ; min-width:67% ;">Investments—non-controlled/non-affiliated, at fair value (amortized cost of $2,007,160 and $1,960,755, respectively) 1%; width:1% ; min-width:1% ;">$ 14%; width:14% ; min-width:14% ;">1,826,422 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;">$ 14%; width:14% ; min-width:14% ;">1,897,057 1%; width:1% ; min-width:1% ;"> Investments—controlled/affiliated, at fair value (amortized cost of $240,167 and $240,696, respectively) 197,855 226,907 Total investments, at fair value (amortized cost of $2,247,327 and $2,201,451, respectively) 2,024,277 2,123,964 Cash and cash equivalents 65,525 36,751 Receivable for investment sold 15,655 6,162 Deferred financing costs 4,026 4,032 Interest receivable from non-controlled/non-affiliated investments 10,406 9,462 Interest and dividend receivable from controlled/affiliated investments 6,350 6,845 Prepaid expenses and other assets 587 317 Total assets $ 2,126,826 $ 2,187,533 LIABILITIES Secured borrowings $ 701,609 $ 616,543 Notes payable, net of unamortized debt issuance costs of $2,849 and $2,911, respectively 446,351 446,289 Senior Notes 115,000 115,000 Payable for investments purchased 24,345 — Interest and credit facility fees payable 6,100 6,764 Dividend payable 20,824 31,760 Base management and incentive fees payable 12,333 13,236 Administrative service fees payable 98 77 Other accrued expenses and liabilities 1,632 1,393 Total liabilities 1,328,292 1,231,062 NET ASSETS Common stock, $0.01 par value; 200,000,000 shares authorized; 56,308,616 and 57,763,811 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively) 563 578 Paid-in capital in excess of par value 1,093,250 1,109,238 Offering costs (1,633 ) (1,633 ) Total distributable earnings (loss) (293,646 ) (151,712 ) Total net assets $ 798,534 $ 956,471 NET ASSETS PER SHARE $ 14.18 $ 16.56
100%; border-collapse:collapse !important;"> TCG BDC, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (dollar amounts in thousands, except per share data) (unaudited) For the three month periods ended March 31, 2020 December 31, 2019 Investment income: From non-controlled/non-affiliated investments: 66%; width:66% ; min-width:66% ;">Interest income 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;">$ 14%; width:14% ; min-width:14% ;">41,465 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;"> 1%; width:1% ; min-width:1% ;">$ 14%; width:14% ; min-width:14% ;">44,945 1%; width:1% ; min-width:1% ;"> Other income 2,344 1,279 Total investment income from non-controlled/non-affiliated investments 43,809 46,224 From controlled/affiliated investments: Interest income 3,236 3,241 Dividend income 3,500 4,000 Total investment income from controlled/affiliated investments 6,736 7,241 Total investment income 50,545 53,465 Expenses: Base management fees 7,386 7,702 Incentive fees 5,086 5,383 Professional fees 667 866 Administrative service fees 106 97 Interest expense 12,179 12,026 Credit facility fees 590 1,295 Directors’ fees and expenses 96 84 Other general and administrative 411 400 Total expenses 26,521 27,853 Net investment income (loss) before taxes 24,024 25,612 Excise tax expense 52 235 Net investment income (loss) 23,972 25,377 Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments: Net realized gain (loss) from: Non-controlled/non-affiliated investments (1,697 ) (20,685 ) Currency gains (losses) on non-investment assets and liabilities (150 ) 33 Net change in unrealized appreciation (depreciation) on investments: Non-controlled/non-affiliated (117,042 ) 38,808 Non-controlled/affiliated — (6,607 ) Controlled/affiliated (28,521 ) (7,745 ) Net change in unrealized currency gains (losses) on non-investment assets and liabilities 2,338 (2,345 ) Net realized gain (loss) and net change in unrealized appreciation (depreciation) (145,072 ) 1,459 Net increase (decrease) in net assets resulting from operations $ (121,100 ) $ 26,836 Basic and diluted earnings per common share $ (2.12 ) $ 0.46 Weighted-average shares of common stock outstanding—Basic and Diluted 57,112,193 58,784,971
About TCG BDC, Inc. $5.9 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
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