Crescent Capital BDC(US:CCAP)2023-08-10 20:04Financial Data and Key Metrics Changes - The company reported record net investment income of $0.56 per share for Q2 2023, up from $0.54 per share in the prior quarter, reflecting a 3.7% increase [6] - Total investment income increased to $46.7 million, a 19% rise from $39.3 million in the previous quarter [16] - GAAP earnings per share for Q2 2023 was $0.61, compared to $0.24 per share in the prior quarter [17] - Net asset value per share increased to $19.58, up 1% from $19.38 in the previous quarter [6][17] Business Line Data and Key Metrics Changes - The weighted average portfolio grade improved to 2.1 from 2.2 last quarter, with 87% of the portfolio rated 1 and 2, up from 85% [8][80] - The weighted average interest coverage ratio remained stable at 1.7x, reflecting the latest base rates [13][52] - The weighted average loan-to-value at the time of underwriting was approximately 41% [14] Market Data and Key Metrics Changes - The company noted that LBO volume has picked up despite overall economic uncertainties [9] - Direct lending gained share from the syndicated markets, with approximately 85% of new issue LBO financing in the U.S. completed by direct lenders in Q2 [78] - The weighted average yield of income-producing securities increased from 11.4% to 11.7% quarter-over-quarter, driven by rising base rates [79] Company Strategy and Development Direction - The company maintains a defensively positioned portfolio with a focus on downside protection and lower risk of loss [7] - The investment strategy emphasizes lending to private equity-backed companies, with 98% of the debt portfolio in sponsor-backed companies [7] - The company plans to implement a variable supplemental dividend program to balance total distributions while preserving NAV stability [31][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's performance and the ability to navigate current economic challenges [36] - The company anticipates a potential decline in rates in the first half of 2024, which could impact the BDC sector's earnings profile [60] - Management highlighted the strong liquidity position with $315 million of undrawn capacity, positioning the company well for future investments [18] Other Important Information - The company declared a quarterly cash dividend of $0.41 per share and a supplemental cash dividend of $0.08 per share [40] - The debt-to-equity ratio was reported at 1.19x, down from 1.23x in the prior quarter [39] Q&A Session Summary Question: How has the integration of the FCRD acquisition performed? - Management indicated that the diligence conducted prior to the acquisition has largely checked out, with initial performance meeting expectations [21][44] Question: What is the company's outlook on dividend policy? - Management emphasized a long-term view on dividend stability and the benefits of the supplemental dividend framework [24][49] Question: What is the current weighted average loan-to-value for the portfolio? - The company confirmed that the weighted average loan-to-value at origination was 41% and is currently around 70% [25][50] Question: What is the long-term outlook for the Logan JV? - Management conducted thorough diligence on the joint venture and expressed confidence in its structure and performance [69]