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Carlyle Secured Lending(CGBD) - 2024 Q4 - Earnings Call Transcript
CGBDCarlyle Secured Lending(CGBD)2025-02-26 17:58
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Financial Data and Key Metrics Changes - The company generated net investment income of 0.47pershare,representinganannualizedyieldofover110.47 per share, representing an annualized yield of over 11% based on the December 31 NAV [11] - Total investment income for Q4 was 56 million, consistent with the prior quarter, primarily due to a higher average portfolio balance and increased dividends from joint ventures [18] - Total expenses were 31million,flatcomparedtothepriorquarter,asahigheraverageoutstandingdebtbalanceoffsetlowerinterestrates[18]−ThenetassetvalueasofDecember31was31 million, flat compared to the prior quarter, as a higher average outstanding debt balance offset lower interest rates [18] - The net asset value as of December 31 was 16.80 per share, down from 16.85pershareasofSeptember30[11]BusinessLineDataandKeyMetricsChanges−ThedirectlendingplatformachievedrecordhighsfordeploymentinbothQ4andthefullyearof2024,growingtheportfoliobyabout16.85 per share as of September 30 [11] Business Line Data and Key Metrics Changes - The direct lending platform achieved record highs for deployment in both Q4 and the full year of 2024, growing the portfolio by about 100 million in the quarter [12] - 94% of 2024 originations were in first lien investments, with an average loan to value under 40% [12] - The median EBITDA across the portfolio was 88million,indicatingstrongunderlyingperformance[15]MarketDataandKeyMetricsChanges−Thecompanymaintainedahighlydiversifiedportfoliowith189investmentsin135companiesacrossmorethan25industries,withaverageexposureinanysingleportfoliocompanybeinglessthan188 million, indicating strong underlying performance [15] Market Data and Key Metrics Changes - The company maintained a highly diversified portfolio with 189 investments in 135 companies across more than 25 industries, with average exposure in any single portfolio company being less than 1% of total assets [15] - Non-accruals were largely flat at 0.6% of total investments at fair value, indicating stability in credit quality [22] Company Strategy and Development Direction - The company proposed a strategic affiliate merger with Carlyle Secured Lending 3, expected to deliver increased scale and liquidity, eliminate preferred stock dilution, and reduce aggregate costs [13][28] - The company aims to optimize long-term earnings power and capacity of joint ventures, enhancing the earnings profile of the broader portfolio [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to leverage the broader Carlyle network to achieve maximum recoveries for underperforming borrowers [22] - The company is focused on increasing origination activity while prioritizing overall credit performance and maintaining a diversified portfolio [15][29] - Market demand for private credit remains strong, with a growing pipeline of new originations [28][29] Other Important Information - The board declared a total dividend of 0.45 per share for Q4, consisting of a base dividend of 0.40andasupplementaldividendof0.40 and a supplemental dividend of 0.05 [11][19] - The company received investment grade ratings from both Fitch and Moody's, allowing it to issue its first-ever institutional bond deal [14][25] Q&A Session Summary Question: Inquiry about the joint venture and future plans - Management indicated that the consolidation of MMCF 2 onto the balance sheet would free up non-qualifying asset capacity, and they anticipate ramping up the first joint venture with a new credit facility [34][35] Question: Clarification on tax line drop in Q4 - The tax line drop was attributed to a year-end true-up based on the year-end audit, with expectations for it to be in line with prior quarters [37][38] Question: Discussion on growth plans for the BDC - Management stated that the current focus is on capital deployment and completing the merger process, with future growth initiatives to be considered afterward [40] Question: Inquiry about fee income in Q4 - Fee income and OID acceleration were lower than historical averages, with an incremental dividend from the joint venture impacting the income line [44][45] Question: Dollar amount of incremental dividend related to the joint venture - The incremental dividend related to the joint venture was about $1.2 million, impacting net investment income by about two cents per share for the quarter [51]