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Crescent Capital BDC(CCAP) - 2024 Q4 - Earnings Call Transcript
CCAPCrescent Capital BDC(CCAP)2025-02-20 19:50
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Financial Data and Key Metrics Changes - The company reported a net investment income (NII) of 0.55pershareforQ42024,downfrom0.55 per share for Q4 2024, down from 0.64 in the prior quarter and 0.61inQ42023,reflectingadeclineduetolowerinvestmentportfolioyieldandnon−recurringincome[6][26]−Thenetassetvalue(NAV)persharedecreasedby0.61 in Q4 2023, reflecting a decline due to lower investment portfolio yield and non-recurring income [6][26] - The net asset value (NAV) per share decreased by 0.22 to 19.98,withayear−over−yeardeclineof0.319.98, with a year-over-year decline of 0.3% [8][28] - Total investment income for Q4 was 46.4 million, compared to 51.6millioninthepriorquarter[26]BusinessLineDataandKeyMetricsChanges−Theinvestmentportfolioconsistedofapproximately51.6 million in the prior quarter [26] Business Line Data and Key Metrics Changes - The investment portfolio consisted of approximately 1.6 billion across 185 companies, with 90% in first lien loans [9][10] - The weighted average yield of income-producing securities at cost decreased to 10.9% [22] - Non-accruals represented 0.9% of total debt investments at fair value, below the industry average [15] Market Data and Key Metrics Changes - Deal activity increased in Q4 due to lower borrowing costs and a favorable economic outlook, with gross deployment totaling 127million[17][19]−Theweightedaverageloan−to−valueofnewinvestmentswas38127 million [17][19] - The weighted average loan-to-value of new investments was 38%, indicating a strong equity cushion [20] Company Strategy and Development Direction - The company continues to focus on non-cyclical industries and maintain a diversified portfolio, with a proactive approach to managing investments [11][14] - The management anticipates increased M&A activity due to favorable conditions, including significant private equity dry powder and a conducive regulatory environment [35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic indicators and the potential for stability in near-term base rates, which could positively impact LBO activity [35][36] - The company remains committed to disciplined credit underwriting and capital preservation [36] Other Important Information - A regular dividend of 0.42 per share was declared for Q1 2025, with special dividends also announced [15][33] - The company has sufficient liquidity with 338millionofundrawncapacityand338 million of undrawn capacity and 39 million in cash equivalents [32] Q&A Session Summary Question: What drove the increase in pre-dated assets? - Management noted that the seven new names added to the watch list had specific company challenges, with attention to thematic or industry indicators [40][41] Question: What is the exposure to tariffs and government contracting? - Management indicated that approximately 12% of the portfolio sources materials from foreign suppliers, and less than 5% derives revenue from government contracts [48][49] Question: What were the drivers of realized and unrealized gains and losses? - The increase in unrealized losses was attributed to a slight increase in three-rated assets and a pickup in non-accruals [65] Question: Are the new non-accruals Crescent originated investments? - One of the three new non-accruals was Crescent originated, while the other two were legacy investments [70] Question: What is the current market spread situation? - Management noted that the weighted average spread of investments was around 500 basis points, with some transactions in the mid to high fours [76][80]