Crescent Capital: Strong Cash Flow And The Right Quality For Remaining Bullish

Core Viewpoint - Crescent Capital (CCAP) has shown strong performance in Q2 2024, with improved portfolio quality and reduced leverage, leading to a positive outlook despite a slight decline in net investment income per share [1][3][4] Financial Performance - Q2 2024 net investment income per share was $0.59, a decrease of $0.04 from the previous quarter but an increase of $0.03 compared to the same period last year [3] - The decline in net investment income was primarily due to the normalization of non-recurring income, which had been unusually high in Q1 2024 [3] - CCAP's net asset value per share grew to $20.30, the highest since Q2 2022, and the company paid a base dividend of $0.42 per share along with a supplemental dividend of $0.09 per share, resulting in an annualized yield of 11.1% [3][4] Portfolio Quality - The weighted average portfolio grade remained at 2.1, with 89% of investments rated one and two, indicating strong quality [3] - CCAP maintained a low non-accrual position at 0.9% of the portfolio fair value, which is considered solid within the BDC segment [3] - Approximately 90% of CCAP's portfolio investments are in first lien loans across 20 non-cyclical sectors, supported by well-capitalized private equity sponsors [3] Market Position and Outlook - CCAP is well-positioned to grow its portfolio while maintaining high-quality standards, with expectations for stable or slightly growing net investment income results [3][4] - Middle market loan volume increased nearly 20% in the first half of 2024 compared to the second half of 2023, driven by refinancing activity [3] - CCAP deployed $119 million in Q2 2024, offsetting $73 million in exits, while maintaining quality standards with a weighted average loan-to-value of 31% [3] Debt Profile - CCAP has a back-end loaded debt maturity profile, with no debt maturities due until 2026, allowing for competitive pricing of loans and accretive spreads [3]