Crescent Capital BDC(US:CCAP)2022-08-11 18:49Financial Data and Key Metrics Changes - Adjusted net investment income for Q2 2022 was reported at $0.41 per share, compared to $0.42 per share in the prior quarter [22] - GAAP net investment income for Q2 2022 was $0.50 per share, reflecting a noncash reversal of capital gains-based incentive fees [8] - Net asset value per share decreased to $20.69, down over 2% from $21.18 in the previous quarter, primarily due to unrealized losses from wider credit spreads [9][26] Business Line Data and Key Metrics Changes - The portfolio consisted of nearly $1.3 billion in investments across 137 companies, with an average investment size of less than 1% of the total portfolio [12] - Senior secured first lien and unitranche first lien loans represented 88% of the portfolio at fair value, up from 86% in the prior quarter [13] - 136 out of 137 debt investment portfolio companies made full scheduled principal and interest payments, with 91% of the debt investments marked above $0.95 on the dollar [14] Market Data and Key Metrics Changes - 98.7% of debt investments at fair value were floating rate, with a weighted average floor of 83 basis points [19] - The weighted average yield on income-producing securities increased to 8.3%, up from 7.5% in the prior quarter [28] - The debt-to-equity ratio was 1.03x, up from 0.97x at the end of Q1 2022, but still below the long-term target range [29] Company Strategy and Development Direction - The company maintains a disciplined credit selection approach focused on capital preservation, which has led to a diversified portfolio [11] - The strategy includes increasing the proportion of unitranche first lien loans to enhance yield opportunities while remaining at the top of the capital stack [17] - The company expects to benefit from rising interest rates, with projections indicating a potential increase in annual earnings by approximately $0.20 per share for a 100 basis point rise in short-term rates [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the complex operating environment due to market volatility and inflation, but noted that portfolio companies have largely maintained solid margins [10] - There is uncertainty regarding deal flow for the remainder of the year, influenced by macroeconomic factors and potential market volatility [42] - The company remains optimistic about navigating economic uncertainty and is positioned to capitalize on attractive opportunities during periods of dislocation [32] Other Important Information - A quarterly cash dividend of $0.41 per share was declared for Q3 2022, consistent with the previous quarter [31] - The company is in the process of winding down a joint venture, with expectations to distribute remaining proceeds by the end of the year [18] Q&A Session Summary Question: Comments on spreads and new originations - Management indicated that spreads in private markets have widened, with new originations potentially reflecting higher spreads in Q3 [35] Question: Credit quality and inflation impact - Management noted some margin pressure in certain companies but did not observe meaningful credit deterioration overall [37][39] Question: Future M&A activity expectations - Management expressed uncertainty regarding deal flow, dependent on macroeconomic conditions, but noted potential for continued private market activity if the economy softens moderately [42] Question: Market dynamics and competition - Management highlighted that the closure of syndicated markets could create opportunities for private credit, with expectations of improved deal quality during volatile periods [49]