First Eagle Alternative Capital BDC, Inc.

Good morning and welcome to First Eagle Alternative Capital BDC Incorporated Earnings Conference call for its third fiscal quarter ended September 30th, 2021. It is my pleasure to turn the call over to Sabrina Rusnak-Carlson of First Eagle Alternative Capital BDC Incorporated. Ms. Rusnak-Carlson, you may begin.

Thank you, Operator. Good morning and thank you for joining us. Joining me on today's call are Chris Flynn, President of First Eagle Alternative Credit, and Jen Wilson, our Chief Accounting Officer and Treasurer. Before we begin, please note that statements made on this call may constitute forward-looking statements within the meaning of the Securities Act of 1933 as amended. Such statements reflect various assumptions by First Eagle Alternative Capital BDC concerning anticipated results that are not guarantees of future performance and are subject to known and unknown uncertainties and other factors that could cause actual results to differ materials from such statements. The uncertainties and other factors are in some way beyond management's control and include factors including the section entitled Risk Factors in our most recent annual report on Form 10-K, as updated by our quarterly report on Form 10-Q, and our periodic and other filings with the Securities and Exchange Commission. Although we believe that The assumptions on which any forward-looking statement are based on are reasonable. Any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be incorrect. You should not place undue reliance on these forward-looking statements. First Eagle Alternative Capital BDC undertakes no duty to update any forward-looking statements made herein unless required by law. All forward-looking statements speak only as of the date of this call. Our earnings announcements and 10Q were released yesterday afternoon, copies of which can be found on our website along with a Q3 earnings presentation that we may refer to during this call. A webcast replay of this call will be available until November 15, 2021, starting approximately two hours after we conclude this morning. To access the replay, please visit our website at www.feacbdc.com. With that, I'll turn the call over to Chris.

Thanks, Sabrina. Good morning, and thank you for joining on our earnings call today. I'll provide an overview of our third quarter results, some portfolio highlights, and then Jen will discuss our portfolio and financial results in more detail. Let's begin with the quarter. Net investment income for the third quarter was $0.11 per share compared with our $0.10 per share dividend this quarter and $0.09 per share of NII and Q2. We continue to increase leverage in Q3 up to 1.13 times, up from 1.1 at the end of Q2. We have previously communicated our plan to move closer to our long-term leverage target of 1.2 times. As we continue to diversify the portfolio and the portfolio is stabilized, we are increasing our target leverage ratio from 1.2 to 1.3. Based on our deal pipeline and lending environment today, we continue to believe we have the ability to hit our target leverage ratio of 1.2 times by the end of the quarter. During this quarter, book value was essentially flat at $6.50 per share. During the quarter, we saw a change in unrealized depreciation net of tax of $700,000, or $0.03 per share. Our equity position in wheels up was the primary contributor to this decrease this quarter, with a change in unrealized depreciation of $0.05 per share, as the public share price of the stock declined approximately 33% from the end of Q2 to the end of Q3. Subsequent to quarter end, we have seen the share price improve approximately 15% through the market close last night. Additionally, Aerotech and Marical contribute a $0.02 per share change and unrealized appreciation during this quarter. These decreases were offset by a change in that unrealized appreciation across the broader portfolio of $0.05 per share due to continued performance of the portfolio companies, tightening spreads, and the benefit for taxes on unrealized appreciation of $0.01, primarily attributed to the value of wheels up. As we delve deeper into the portfolio, we believe there have been a great deal of progress made, and we continue to be optimistic about the portfolio repositioning. Overall, the portfolio continues to perform well amid the continuing impact of the COVID-19 pandemic. Revenue and EBITDA levels and liquidity for most COVID-impacted businesses in the portfolio continue to improve, and in many instances have returned to or exceeded pre-COVID levels. Companies that have not yet fully rebounded continue to maintain good liquidity profiles. There are no significant amendments to existing loans in Q3. Consistent with Q2, we did not add any new non-accruals during the quarter. Loadmaster is the only portfolio company on non-accrual. At OEM, the plasma thermo transaction we consummated in Q4 to commercialize the distributed technology to the market is performing in line with expectations. As a reminder, the principal consideration was in the form of deferred payments for several years. These payments are contingent upon certain milestones, including minimum annual payments for the first four years and will be used to service our debt and cover certain operating costs. The BDC retained all the equity in these remaining businesses. EGLU, our other concentrated position, which represented 5.5% of the portfolio and was the largest holding at September 30th, was repaid at the end of October. Our equity position and all accrued trash plus a one-year earn-out. With the repayment of EGLU, OEM is the last remaining credit of the 14 concentrated positions held in our portfolio in early 2018. We are pleased with our progress on exiting these legacy investments, and this gives us confidence to proceed with a plan to increase leverage. We are very active in the quarter, making 33 new investments across the entire direct lending platform, totaling over $615 million, of which 34 million are eight new portfolio investments companies were allocated to FCRD. This pace of deployment not only speaks to the overall level of deal activity in the market, but also the power of being part of the First Eagle direct lending platform. FCRD also made an additional $8.5 million add-on investment during the quarter. During the quarter, there were four debt repayments at par, of which two included prepayment penalties. Our direct lending pipeline remains strong, and the BDC continues to benefit from the deal flow generated by First Eagle's approximately $5 billion direct lending platform. The growth of the platform allows the BDC to hold a more diversified portfolio with a number of positions up from 45 in Q1 of 2018 to 68 this quarter, while less allowing First Eagle to provide more capital to middle market companies. Since the beginning of the pandemic, First Eagle's direct lending platform has remained robust, and we expect it to continue to provide us with attractive investment opportunities. We continue to be very selective about where we deploy our capital and and are mindful of the macro environment in our investment committee decisions. Our goal is to continue to diversify our investment approach as the BDC continues to grow in 2001 and beyond. With that, I'll turn the call over to Jen.