Carlyle Secured Lending(US:CGBD)2025-05-07 16:00Financial Data and Key Metrics Changes - In Q1 2025, the company generated GAAP net investment income of $0.40 per share and adjusted net investment income of $0.41 per share, reflecting a decline of approximately $0.04 per share from the prior quarter due to tighter yields and increased non-accruals [7][13] - The net asset value (NAV) as of March 31 was $16.63 per share, down from $16.80 per share as of December 31 [7] - Total investment income for the first quarter was $55 million, consistent with the prior quarter, while total expenses increased to $33 million primarily due to higher interest expenses [12] Business Line Data and Key Metrics Changes - The company added approximately $180 million in organic originations to its portfolio during the quarter, despite muted sponsor M&A activity [7] - The total size of the portfolio increased from $1.9 billion to $2.5 billion, bolstered by the merger with CSL3 and the consolidation of Credit Fund II [8] Market Data and Key Metrics Changes - The broadly syndicated and private credit markets remained competitive, with recent volatility around tariffs posing a near-term headwind to overall capital markets and M&A activity [8][9] - The company estimates that less than 5% of its portfolio has material direct exposure to tariffs, indicating minimal potential direct risk [9] Company Strategy and Development Direction - The strategic merger with CSL3 is expected to improve liquidity and reduce costs while maintaining the existing investment strategy due to the near 100% overlap between the portfolios [10] - The company is focused on overall credit performance and diversification, continuing to deploy and increase the size of its portfolio [10] Management's Comments on Operating Environment and Future Outlook - Management noted that while the portfolio remains resilient, there is a focus on sourcing transactions with significant equity cushions and conservative leverage profiles [21] - The company anticipates a strong pipeline of transactions heading into Q2, despite a near-term slowdown in overall activity [36] Other Important Information - The Board of Directors declared a second-quarter dividend of $0.40 per share, representing an attractive yield of about 11% based on the recent share price [14] - The company has $0.85 per share of spillover income generated over the last five years, providing comfort in maintaining the base dividend [14] Q&A Session Summary Question: On the credit fund, what does the dividend look like going forward? - Management indicated that the nominal value outstanding for the credit fund is expected to be flat in the near term, with overall NII being roughly neutral due to higher ROE on a lower capital base [26] Question: Is there any asset rotation expected post-merger? - Management confirmed that the overall yield from the merged portfolio is lower, resulting in a reduction of about 15 basis points for CGBD, with selective rotation of lower spread assets planned [32] Question: How does the company plan to manage portfolio leverage? - The target leverage is set at 1.1, with expectations to reach this range over the next couple of quarters, supported by a strong pipeline of transactions [36] Question: How will spillover income support the dividend? - Management stated that while there are uncertainties, the intention is to remain consistent with the dividend, assessing the situation on a quarter-by-quarter basis [44]