Golub Capital BDC, Inc. (GBDC)

F4Q2010 Earnings Call Transcript

December 13, 2010 1:00 pm ET

Executives

David Golub – CEO

Ross Teune – CFO

Analysts

Christopher Harris – Wells Fargo Securities

Troy Ward – Stifel Nicolaus

Bill Oldman [ph] – Harbridge Rye Fund [ph]

Jim Young – West Family

Presentation

Operator

Good afternoon. Welcome to the Golub Capital BDC September 30, 2010 quarterly and fiscal year-end earnings conference call.

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Before we begin, I’d like to take a moment to remind our listeners that remarks made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than the statements of historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward looking statements as a result of a number of factors, including those described from time-to-time in the Golub Capital BDC filings with the Securities and Exchange Commission.

For a slide presentation that we intend to refer to on the earnings conference call, please visit the Events and Presentations link on our homepage of our website, www.golubcapitalbdc.com and click on the investor presentation link to find the September 30, 2010 investor presentation. Golub Capital BDC’s earnings release is also available on the company’s website in the Investor Relations section.

I’ll now turn the call over to David Golub, Chief Executive Officer of Golub Capital BDC. Please go ahead, sir.

David Golub

Thanks, Sharon. Good afternoon, everybody; and thanks for joining us today. I hope you’ve been able to review the earnings release and our investor presentation that we’ve posted on our website. I’m joined today by Ross Teune and Sean Coleman. As we described in press release this morning, Ross Teune has been elected our new Chief Financial Officer. Ross has been with us at Golub Capital for a number of years now. He was previously Senior Vice President of Finance and has been involved in a whole variety of investor reporting at Golub Capital and has been very involved with the company since its IPO, working closely with Sean.

Prior to joining Golub Capital, Ross held senior finance roles at Antares Capital, at Heller, and at KPMG. Sean, who is also here with me, Sean is going to continue as a Managing Director of our Investment Advisor, focusing on origination and underwriting of new investments.

I just want to start off by saying I am very excited to bring Ross’ talent to the company and I want to thank Sean for his extraordinary efforts in connection with the IPO and our early success.

So the format for today’s call is as follows; I am going to start with brief overview of our September 30

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quarter and I am going to talk about the current market environment. Then Ross is going to summarize the financial results for the quarter. Then I am going to come back with an update on our SBIC license and make some brief concluding remarks and then we’re we are going to open up the line for Q&A.

So with that, let me get started. I am pleased to report that we had a solid quarter. The company generated EPS of $0.35 for the quarter ended September 30, 2010. That’s up from $0.29 earned for the June 30

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quarter.

Few points to highlight about the quarter, new business was very strong. This is consistent with some comments that I made on our last earnings call. New investment commitments for the quarter were 83.7 million, up very significantly from the June 30

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quarter. Second highlight, credit quality remains very strong with only a few exceptions, we’ve seen portfolio companies continue to improve from a credit perspective, despite a muddling U.S. economic recovery.

We continue to achieve strong momentum in new originations. We’ve made these comments in our press release. Given our closings to date in the December 31 quarter as well as our pipeline of deals under letter of intent, we’re confident that new deal originations for the 12/31 quarter is going to be higher than the September 30

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quarter.

Key drivers of this, I discussed on our last call I made, they remain the key drivers now in terms of what’s causing the acceleration in new deal activity. First off, the economic recovery while muddling, is helping most companies achieve more predictable and in most cases higher levels of EBITDA. Second factor is that private equity firms are eager to do new deals, some of them have sat on the sidelines for the last couple of years, others have expiring capital commitments that they want to spend before they expire. Third factor is there is a large backlog of sellers, many of whom missed the window a little over two years ago, and over the course of the last two years really only four sellers have hit the market. So we’ve got a significant backlog of sellers who are interested in selling companies now.

And the fourth factor is there is a large pipeline of middle market leverage loans that mature over the next couple of years, many are going to seek to refinance in the next 6 to 12 months. Moody’s just recently presented a piece of work, talking about the pull-forward effect of facilities that are coming due where you’ve got for example a revolver that’s due in 2012 and a term loan that’s associated with it that’s due in 2013 or 2014, and their point was that more often than not companies involved are going to seek to refinance their overall balance sheet in 2012 rather than waiting until the maturity dates of the carry past-due term loans. We are seeing that same kind of phenomenon in the middle market now, we anticipate we’ll see more of it next year.

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