Crescent Capital BDC(US:CCAP)2025-11-13 18:00Financial Data and Key Metrics Changes - The company reported net investment income (NII) of $0.46 per share, unchanged from the prior quarter, resulting in an annualized NII yield of 9.5% [5][20] - Net asset value (NAV) decreased to $19.28 per share as of September 30, down from $19.55 per share as of June 30, primarily due to unrealized and realized losses from certain portfolio companies affected by tariffs [5][20] Business Line Data and Key Metrics Changes - The investment portfolio totaled approximately $1.6 billion at fair value, with 187 companies, and an average investment size of about 0.6% of the total portfolio [7] - The portfolio consists primarily of first-lien loans, representing 90% of the portfolio at fair value [7] - The weighted average yield of income-producing securities at cost remained stable at 10.4% [14] Market Data and Key Metrics Changes - The macroeconomic environment in the U.S. remains resilient, with expectations of near-term growth in loan activity due to recent Federal Reserve rate cuts and clarity on tariff policies [6] - The company has no exposure to recent bankruptcies, indicating a focus on governance by working with established private equity sponsors [6][8] Company Strategy and Development Direction - The company is focused on strong cash flow generation, tight EBITDA definitions, and enhanced monitoring rights to proactively manage the portfolio [6] - The board declared a regular dividend of $0.42 per share for the fourth quarter, representing a 9% and 12% annualized dividend yield based on NAV and stock price, respectively [8][24] - The company anticipates that a lower base rate environment may gradually reduce portfolio yields and pressure net investment income, but believes it is well-positioned to address these challenges [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term prospects of the company, citing a strong capital structure and diversified portfolio [25] - The company noted that while tariff impacts have been identified, the overall portfolio remains resilient, with most borrowers experiencing steady revenue and EBITDA growth [17][18] Other Important Information - The company ended the quarter with a net debt to equity ratio of 1.20 times, providing flexibility for portfolio growth [10] - The weighted average interest coverage of the companies in the investment portfolio was stable at 2.1 times, indicating strong earnings durability [14] Q&A Session Summary Question: What is the probability of maintaining NII coverage of the dividend at 100% or more? - Management believes that available levers will allow them to cover the base dividend with NII in the near term, with potential for increased non-interest-related income [27][28] Question: Has the ability of exposed companies to handle tariffs deteriorated? - Management indicated that overall, companies have responded well to tariff pressures, although two specific companies have shown a need for a longer recovery period [30][32] Question: What is the state of competition in the lower-middle market? - Management acknowledged spread compression in the market but emphasized that they are still able to secure high-quality transactions with appropriate risk-adjusted returns [34][36] Question: What drove the increase in spreads on new investments? - The company has maintained new origination spreads around 500 over SOFR, driven by a mix of incremental activity from existing portfolio companies and opportunities in specific market segments [41][42] Question: Are there any non-recurring items in earnings this quarter? - Management confirmed that there were no significant non-recurring items, with core interest income representing the majority of total revenue [51]