Crescent Capital BDC(CCAP) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported adjusted net investment income of $0.53 per share for Q2 2021, an increase from $0.46 in both the prior quarter and the same quarter of 2020 [18] - The net asset value per share increased approximately 3.7% in Q2 to $20.98, marking the highest value since the company's inception [9][20] - GAAP earnings for Q2 2021 were $1.16 per share, compared to $0.76 in Q1 2021 and $2.00 in Q2 2020 [18] Business Line Data and Key Metrics Changes - The investment portfolio at fair value increased to approximately $1.1 billion across 130 portfolio companies, with an average investment size of less than 1% of the total portfolio [11] - The gross deployment in Q2 totaled $121 million, with 97% in senior secured first lien or unitranche first lien investments [14] - The weighted average yield on income-producing securities at amortized cost was 7.8%, slightly down from 7.9% in the prior quarter [21] Market Data and Key Metrics Changes - The company noted an increase in competition in the market, which has resulted in some pressure on spreads, but demand for large direct lending solutions remains strong [13] - The percentage of risk-rated 1 and 2 investments increased to 88.1% of the portfolio at fair value, compared to 87.6% in the previous quarter [12] Company Strategy and Development Direction - The company aims to leverage its competitive advantages and the full Crescent platform to deliver attractive risk-adjusted returns for shareholders [24] - The focus remains on first lien and unitranche solutions, with a strong preference for flexibility of capital and long-term partnerships with sponsors [13] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook for the overall economy in the second half of the year, anticipating continued demand rebound [24] - The majority of portfolio companies have returned to normalized operating levels, indicating strong credit performance [24] Other Important Information - The Board declared a quarterly cash dividend of $0.41 per share for Q3 2021, consistent with the previous quarter [17][22] - The company has $220 million of undrawn capacity as of quarter-end, providing significant liquidity [22] Q&A Session Summary Question: Tax distribution from Southern Technical - Management confirmed that the tax distribution is offset by a corresponding tax expense and that future distributions will depend on taxable income generated by the portfolio company [26][27] Question: Expectations for deployments and repayments - Management is optimistic about deployment opportunities, noting increased volumes in the middle market and a healthy pipeline, while also acknowledging elevated repayment activity [28][29] Question: Components of total return and LIBOR floors - Management indicated that while there is some pressure on LIBOR floors, most terms have held steady, and they expect to maintain competitive terms [30][31]