Crescent Capital BDC(US:CCAP)2023-08-08 16:00PART I FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements, management's analysis of financial condition, market risk disclosures, and internal controls Financial Statements This section presents the unaudited consolidated financial statements, including assets, operations, and investment schedules, with accompanying notes Consolidated Statements of Assets and Liabilities This statement details the company's financial position, including assets, liabilities, and net assets, as of specific reporting dates Consolidated Statements of Assets and Liabilities (in thousands) | Metric | As of June 30, 2023 (unaudited) | As of December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $1,624,623 | $1,302,878 | | Total Investments, at fair value | $1,581,130 | $1,263,000 | | Cash and cash equivalents | $21,462 | $17,067 | | Total Liabilities | $898,818 | $690,337 | | Debt (net of deferred financing costs) | $859,167 | $654,456 | | Total Net Assets | $725,805 | $612,541 | | Net Asset Value per share | $19.58 | $19.83 | Consolidated Statements of Operations This statement outlines the company's revenues, expenses, and net income for the reported periods Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total investment income | $46,741 | $26,774 | $86,023 | $53,154 | | Total net expenses | $26,169 | $11,241 | $48,008 | $25,484 | | Net investment income | $20,572 | $15,533 | $38,065 | $27,670 | | Net realized and unrealized gains (losses) | $1,413 | $(16,399) | $(8,515) | $(12,306) | | Net increase (decrease) in net assets | $22,580 | $(890) | $30,357 | $15,319 | | Net increase (decrease) in net assets per share | $0.61 | $(0.03) | $0.87 | $0.50 | Consolidated Schedule of Investments This schedule provides a detailed breakdown of the company's investment portfolio by type and geographic region Portfolio Composition by Investment Type (at Fair Value) | Investment Type | As of June 30, 2023 ($ millions) | Percentage | As of Dec 31, 2022 ($ millions) | Percentage | | :--- | :--- | :--- | :--- | :--- | | Senior Secured First Lien | $445.5 | 28.1% | $301.0 | 23.8% | | Unitranche First Lien | $955.0 | 60.4% | $824.1 | 65.2% | | Senior Secured Second Lien | $57.2 | 3.6% | $60.9 | 4.8% | | Equity & Other | $48.9 | 3.1% | $44.9 | 3.6% | | LLC/LP Equity Interests | $54.6 | 3.5% | $13.8 | 1.1% | | Other Debt | $25.5 | 1.3% | $32.1 | 2.6% | | Total Investments | $1,581.1 | 100.0% | $1,263.0 | 100.0% | Portfolio Composition by Geography (at Fair Value) | Geographic Region | As of June 30, 2023 ($ millions) | Percentage | | :--- | :--- | :--- | | United States | $1,398.2 | 88.5% | | United Kingdom | $62.6 | 4.0% | | Canada | $37.1 | 2.3% | | Australia | $19.1 | 1.2% | | Other | $64.1 | 4.0% | | Total Investments | $1,581.1 | 100.0% | Notes to Consolidated Financial Statements These notes provide essential details and explanations supporting the consolidated financial statements - On March 9, 2023, the Company completed its acquisition of First Eagle Alternative Capital BDC, Inc. (FCRD), accounted for as an asset acquisition, with total consideration of $129.5 million allocated to the acquired assets and assumed liabilities197306309 - The Company's debt facilities include a $500.0 million SPV Asset Facility, a $385.0 million SMBC Corporate Revolving Facility, and various unsecured notes, with total debt outstanding of $867.1 million and $314.5 million available for borrowing as of June 30, 2023267269273 - As of June 30, 2023, the Company had sixteen investments across eight portfolio companies on non-accrual status, representing 2.2% of total debt investments at cost and 1.7% at fair value221 Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the company's financial condition, investment activities, and operational results, including portfolio growth and liquidity Portfolio Investment Activity This section details changes in the investment portfolio, including fair value, number of companies, and new investment activity - As of June 30, 2023, the investment portfolio's fair value was $1,581.1 million, an increase from $1,263.0 million at year-end 2022, with investments in 187 companies, up from 1294547 - For the six months ended June 30, 2023, new investments at cost totaled $67.1 million, while proceeds from investments sold or repaid were $82.5 million, excluding $335.0 million of assets acquired in the First Eagle (FCRD) Acquisition47 Portfolio Quality Indicators | Metric | As of June 30, 2023 | As of Dec 31, 2022 | | :--- | :--- | :--- | | Weighted avg. yield on income producing securities (at cost) | 11.7% | 10.8% | | Percentage of debt bearing a floating rate (at fair value) | 98.6% | 98.8% | | Non-Accrual Debt Investments (% of total debt at fair value) | 1.7% | 1.2% | - As of June 30, 2023, 86.4% of the portfolio at fair value was rated '2' (performing as expected), and 11.4% was rated '3' (performing below expectations)52 Results of Operations This section analyzes the company's financial performance, including investment income, expenses, and net asset changes Summary Statement of Operations (in millions) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total investment income | $46.7 | $26.7 | $86.0 | $53.2 | | Total net expenses | $26.1 | $11.2 | $48.0 | $25.5 | | Net investment income | $20.6 | $15.5 | $38.0 | $27.7 | | Net realized and unrealized gains (losses) | $1.4 | $(16.4) | $(8.4) | $(12.3) | | Net increase (decrease) in net assets | $22.6 | $(0.9) | $30.4 | $15.3 | - Interest income for the six months ended June 30, 2023, increased to $79.0 million from $48.5 million in the prior year period, driven by a rise in benchmark rates, the FCRD Acquisition, and organic portfolio growth86 - Interest and other debt financing costs for the six months ended June 30, 2023, increased to $27.6 million from $12.0 million in the same period of 2022, due to higher average debt outstanding and a higher weighted average cost of debt89 Net Investment Income Reconciliation (in millions, except per share) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | GAAP net investment income | $38.0 | $27.7 | | Per Share | $1.09 | $0.90 | | Capital gains based incentive fee | - | $(2.1) | | Adjusted Net Investment Income (Non-GAAP) | $38.0 | $25.6 | | Per Share | $1.09 | $0.83 | Financial Condition, Liquidity and Capital Resources This section assesses the company's financial health, including cash position, debt facilities, and compliance with financial covenants - As of June 30, 2023, the company had $21.5 million in cash and cash equivalents and $314.5 million of undrawn capacity on its credit facilities, subject to borrowing base limitations32 - The company was in compliance with its asset coverage requirements and all financial covenants of its credit facilities as of June 30, 2023, with an asset coverage ratio of 183%33355 Total Debt Summary (in millions) | Debt Facility | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | SPV Asset Facility | $231.1 | $233.0 | | SMBC Corporate Revolving Facility | $339.4 | $241.8 | | 2023 Unsecured Notes | $50.0 | $50.0 | | 2026 Unsecured Notes | $135.0 | $135.0 | | 2026 Unsecured Notes - FCRX | $111.6 | $0.0 | | Total Debt | $867.1 | $659.8 | - The weighted average cost of debt increased to 6.73% as of June 30, 2023, from 6.23% as of December 31, 2022, with the combined weighted average interest rate for the six months ended June 30, 2023, at 6.82%, up from 3.71% for the same period in 20222 Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, including valuation, interest rate, and currency risks, and strategies for mitigation - The company's investments are primarily in illiquid debt and equity of private companies, which are valued in good faith by the Adviser, creating valuation risk as the determined fair value may differ from the value realized in a sale362 Annualized Impact of Hypothetical Interest Rate Changes (in millions) | Basis Point Change | Change in Net Interest Income (1) | | :--- | :--- | | Up 100 basis points | $10.5 | | Up 50 basis points | $5.2 | | Down 50 basis points | $(5.2) | | Down 100 basis points | $(10.5) | - To mitigate currency risk from foreign-denominated investments, the company uses foreign currency forward contracts, with notional exposure to contracts in GBP, EUR, CAD, AUD, and SEK as of June 30, 2023370 Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of June 30, 2023 - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023371 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023374 PART II OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, equity sales, defaults, and other corporate disclosures Legal Proceedings The company is involved in routine legal proceedings not expected to materially impact its business or financial condition - The company is involved in legal proceedings in the normal course of business, but management does not anticipate these will have a material impact381 Risk Factors This section references risk factors from the annual report, emphasizing systemic banking sector risks and their potential adverse effects - Significant risks related to financial institution stability are highlighted, referencing the failures of Silicon Valley Bank and Signature Bank in March 2023 and potential market-wide adverse effects376383 Unregistered Sales of Equity Securities and Use of Proceeds Sun Life initiated a $20 million share purchase program post-merger, acquiring 164,561 shares for $2.4 million by June 30, 2023 - Sun Life initiated a share purchase program to support the company's stock post-merger, purchasing 164,561 shares for $2.4 million at an average price of $14.73 per share as of June 30, 2023384 Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None385 Other Information Company executives adopted Rule 10b5-1 trading plans on May 15, 2023, for stock purchases commencing in August 2023 - Company executives, including the CEO and CFO, adopted Rule 10b5-1 trading plans on May 15, 2023, for the purchase of company stock, with purchases expected to begin in August 2023386 Exhibits This section lists all exhibits filed as part of the quarterly report, including agreements and certifications