Golub Capital BDC, Inc. ( GBDC)

Q1 2011 Earnings Call

May 6, 2011 11:00 AM ET


David Golub – CEO

Ross Teune – CFO


Joel Houck – Wells Fargo

Dean Choksi – UBS

Troy Ward – Stifel Nicolaus

Jaunty Rogers [ph] – Janney Capital Markets

David Miyazaki – Confluence Investment Management



Good afternoon. Welcome to the Golub Capital BDC Inc. March 31, 2011 quarterly earnings conference call.

Before we begin, I would 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, Inc.’s 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’s link to find the March 31, 2011 investor presentation. Golub Capital BDC’s earnings release is also available on the company’s website in the Investor Relations section.

As a reminder this conference is being recorded Friday May 6, 2011. I will now turn the call over to David Golub, Chief Executive Officer of Golub Capital BDC. Please go ahead.

David Golub

Thanks very much. Good morning, everybody and thanks for joining us today. I have with me Ross Teune our Chief Financial Officer. I hope you’ve been able to take a look at our earnings release in our investor presentation it’s posted on our website we’re going to look forward to some portions of that presentation over the course of the call today. I’m going to start by providing an overview of the March 31, 2011 quarterly financial results. I am also going briefly discuss what we’re seeing in the current market environment, Ross is going to take you through our quarterly financial results in more detail and then I’m going to come back and provide some reflections on our first year being a public company before opening the floor for questions.

So with that let me get started. For the quarter ended March 31, 2011 as expected financial results were we’re much study if you goes it’s compared to the quarter ended 12 31, 2010. New deal activities flowed repayments remained relatively high and this is a combination which limited our growth in total investments. This is very much in keeping with our expectations you’ll recall in our last call I talked about how deal activity in the early part of this calendar year it’s slow down after a very busy quarter ending December 31, 2010.

So, highlights for the quarter EPS was $0.33 per share down a penny from $0.34 per share last quarter net investment income was $0.29 per share again down a penny from last quarter. We had another quarter of what I like to call negative credit losses what I mean by that is that is that net realized and unrealized schemes on investments there are about $0.04 this year same as last quarter this is our third straight quarter of having positive net realized and unrealized gains on portfolio investments. Our net asset value accordingly when up a little bit when up to 1475 per share for the end of the quarter up from 1474 at the end of the prior quarter this is our fourth consecutive quarter in which we increased NAV per share.

Let me shift now and give you some color on the current market environment and what we’re seeing in terms of economic trends. Let me talk first about deal flow. We've seen a very significant increase in deal flow over the last two months March, April and we expect new originations and growth in total investments to be robust in the quarter ended June 30th. Why is that well to be the increase in deal flows the result a couple of things it’s a pickup in middle market M&A activity and it’s also a pickup in opportunistic re-financings and in dividend recaps. To give you a data point on this during the month of April we invested over $32 million in new middle market deals that’s the same pieces are robust December 31, 2010 quarter.

Moving on to a second element deal pricing in the structure. This been a lot written in the media and the press about how in liquid credit markets we’ve seen such strong inflows into high yield bunds in prime refunds that the liquidity it’s what high-yielding broadly-syndicated loan markets toward tighter spreads and higher leverage. I think I recently read that the high yield market average new issue is now between 6.5% and 7% in yield remarkable level. The middle markets been insulated from these trends but it’s not immune, new middle market transactions we’re seeing traditional senior debt pricing now in the 450 to 600 range that’s down about 50 basis points we’re seeing LIBOR flows in the 125 to 150 range and that’s down a little bit maybe 25 basis points. We’re seeing the main pricing in the 12 to 13% range again that’s down about 50 basis points in some cases in some cases up to a point.

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