Crescent Capital BDC, Inc.

Good day and thank you for standing by. Welcome to the fourth quarter and full year 2021 Crescent Capital BDC, Inc. Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star, then 1 on your telephone keypad. Please be advised, today's conference may be recorded. If you require operator assistance during the call, please press star, then 0. I'd now like to hand the conference over to your host today, Dan McMahon, Head of Investor Relations. Please go ahead.

Good morning, and welcome to Crescent Capital BDC, Inc.' 's fourth quarter and year-ended December 31st, 2021 earnings conference call. Please note that Crescent Capital BDC, Inc. may be referred to as CCAP, Crescent BDC, and or the company throughout today's call. Before we begin, I'll start with some important reminders. Comments made over the course of this conference call and webcast may contain forward-looking statements and are subject to risks and uncertainties. The company's actual results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in its SEC filings. The company assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not a guarantee of future results. During this conference call, we may discuss certain non-GAAP measures as defined by SEC Regulation G, such as adjusted net investment income, or NII, per share. The company believes that adjusted NII per share provides useful information to investors regarding financial performance because it's one method the company uses to measure its financial condition and results of operations. A reconciliation of adjusted net investment income per share to net investment income per share, the most directly comparable GAAP financial measure, can be found in the accompanying slide presentation for this call. In addition, a reconciliation of this measure may also be found in our earnings release. Yesterday after the market closed, the company issued its earnings press release for the fourth quarter and year ended December 31st, 2021, and posted a presentation to the investor relations section of its website at www.crescentbdc.com. The presentation should be reviewed in conjunction with the company's form 10-K filed yesterday with the SEC. As a reminder, this call is being recorded for replay purposes. Speaking on today's call will be Jason Breaux, Chief Executive Officer of CCAP, and Gerhard Lombard, Chief Financial Officer of CCAP. With that, I'd now like to turn it over to Jason.

Thank you, Dan. Good morning, everyone, and thank you for joining our earnings call today. We appreciate your continued interest in CCAP. I'll provide some fourth quarter and full year highlights, review our investing activity, provide some color on our current portfolio and positioning, and then turn it over to Gerhard to review our financial results in more detail. So let's begin. Please turn to slide six, where you'll see a summary of our results. We reported strong financial results for the fourth quarter and full year. We generated adjusted net investment income of 43 cents per share for the quarter and $1.89 per share for the full year. Our financial results reflect the strongest quarterly and annual origination activity since our inception, with 280 million of new investments for the fourth quarter and 647 million for the year. Similar to the last three quarters, we accrued a capital gains-based incentive fee expense related to changes in net realized and unrealized gains and losses. This non-cash expense was less than one cent per share for the quarter. On a GAAP basis, our fourth quarter net investment income per share, inclusive of the accrued capital gains-based incentive fee expense, was $0.42 and $1.67 for the full year. As a reminder, the capital gains expense is only payable at the end of each fiscal year end based on our investment advisory agreement. And as of the fiscal year ended December 31, 2021, no capital gains incentive fees were payable. Turning back to our results, our net asset value per share increased 6.2% for the year. When you combine this NAV growth with our dividends paid during 2021, we generated a 14.7% total economic return for our stockholders for the year. Let's now shift gears and turn to slides 13 and 14 of the presentation. which provide a snapshot of the current portfolio. We ended the year with our largest portfolio since inception, with nearly $1.3 billion of investments at fair value across 134 portfolio companies, with an average investment size of less than 1% of the total portfolio. Our investment portfolio consists primarily of senior secured first lien and Unitronch loans, collectively representing 85% of the portfolio at fair value as of year-end, and we remain well diversified across 18 industries and continue to lend almost exclusively to private equity-backed companies, with 99% of our debt portfolio in sponsor-backed companies as of year-end. We believe our focus on market-leading companies with strong margins and high free cash flow generation in resilient industries has positioned our portfolio to avoid segments of the economy that that are, in our view, more negatively impacted by recent inflation and supply chain issues. As a result, we have seen last 12-month revenue and EBITDA growth in the majority of our portfolio companies across all of the primary sectors that we invest in. For the fourth quarter, 121 out of our 123 debt investment portfolio companies, representing over 99% of total debt investments at fair value, made full scheduled principal and interest payments. And PIC interest represented approximately 3% of total investment income for the year. 94% of our debt investment portfolio today is marked above 95 cents on the dollar, with an average mark of approximately 99. Two more positive credit trends are outlined on slide 17. Continued strong performance ratings and non-accrual levels. Our weighted average portfolio grade of 2.1 was unchanged as compared to last quarter, and the percentage of risk-rated 1 and 2 investments, the highest ratings our portfolio companies can receive, increased to 91.0% of the portfolio at fair value as compared to 89.4% last quarter. As of year-end, we had investments in three portfolio companies on non-accrual status, representing 1.6%, and 1.2% of our total debt investments at cost and fair value, respectively. Moving to our investment activity, please turn back to slide 15. Focusing on the left-hand side of the page, we had our most active quarter to date, with $280 million in gross deployment. The vast majority, or 89% of activity, was in senior secured first lien and unit tranche investments. All told, we closed on 17 new and 14 follow-on investments, totaling $177 million and $47 million, respectively, with the remaining $56 million coming from revolver and delayed draw term loan activity. All 17 of the new investments were private equity-backed loans, with LIBOR floors between 50 and 100 basis points, OIDs between 1.75% and 2.5%, and a weighted average spread of approximately 600 basis points. In addition, loan-to-value levels remain attractive, averaging roughly 40% for these transactions. The $280 million in gross deployment compares to $152 million in aggregate exits, sales, and repayments in the quarter. It's also worth highlighting that CCAP's total commitments for the 17 aforementioned new deals represented about 12% of the nearly $2 billion check size committed to those new deals across Crescent, highlighting the breadth of our platform. On the right-hand side of the page, you'll see that over the course of the year, our net investment activity has led to Unitron's first liens becoming a more prominent percentage of our total portfolio. This increase from 42% to 59% is by design significant, as it allows us to offer even greater surety of execution to the sponsor community and enables us to enhance our yield opportunity while remaining at the top of the capital stack. A few more updates before I turn it over to Gerhard. First, in November, we completed our first follow-on public equity offering since listing, ultimately issuing 2.7 million shares inclusive of the green shoe for approximately 58 million in total proceeds. Given the active deployment backdrop I previously highlighted, we believed and continue to believe that it was prudent to gain additional investing capacity to further grow our portfolio over time. Importantly, the offering has also enhanced our stock's liquidity, with average daily trading volume improving meaningfully since the closing, allowing for a broader universe of investors. We also believe that additional size and scale will generate opportunities for us to further optimize CCAP's cost of capital over time. And cost synergies are available via the ability to spread fixed operating expenses across a wider asset base. As outlined at the time of announcement, our investment advisor continued its history of stockholder alignment via its supplemental payment to cover the discount to NAV and payment of the underwriter's fee. Second, we've begun the process of winding down CBDC Senior Loan Fund, a joint venture with Masterland which commenced operations in 2019. The joint venture, which was invested in an approximately 300 million pool of first lien broadly syndicated loans, has run its course and we currently expect to fully wind down the entity by the end of the summer. Proceeds from the monetization activity will provide us with additional dry powder capital, which we expect to redeploy into directly originated higher spread Crescent private credit opportunities. Finally, for the first quarter of 2022, our board declared a 41 cent per share quarterly cash dividend, which will be paid on April 15, 2022 to stockholders of record as of March 31, 2022. Additionally, the second in a series of four previously declared $0.05 per share special cash dividends will be paid on March 15, 2022, to stockholders of record as of March 4, 2022. As a reminder, the series of special dividends serves to enhance our capital efficiency by eliminating some of the excise tax drag on our spillover income, which provides for a modest ROE uplift on an annualized basis. With that, I'll now turn it over to Gerhard to cover additional details on the quarter.