Goldman Sachs BDC, Inc.

Good morning. This is Dennis, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs BDC Inc. Third Quarter 2020 Earnings Conference Call. Please note that all participants will be in listen-only mode until the end of the call, when we will open up the line for questions. Before we begin today's call, I would like to remind our listeners that today's remarks may include forward-looking statements. These statements represent the company's belief regarding future events that, by their nature, are uncertain and outside of the company's control. The company's actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements as a result of a number of factors, including those described from time to time in the company's SEC filings. This audio cast is copyrighted material of Goldman Sachs BDC Inc. and may not be duplicated, reproduced, or rebroadcast without our consent. Yesterday, after the market closed, The company issued an earnings press release and posted a supplemental earnings presentation, both of which can be found on the homepage of our website at www.GoldmanSachsBDC.com under the Investor Resources section. These documents should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC. This conference call is being recorded today, Friday, November 6, 2020, for replay purposes. I'll now turn the call over to Brendan McGovern, Chief Executive Officer of Goldman Sachs BDC.

Thank you, Dennis. Good morning, everyone, and thank you for joining us for our third quarter earnings conference call. I am joined on the call today by John Yoder, our Chief Operating Officer, and Jonathan Lamb, our Chief Financial Officer. I will begin the call by providing an overview of our third quarter results, including commentary on the performance of our portfolio, and how we've navigated the economic uncertainty resulting from the COVID health crisis. I'll also provide a recap of our recently completed merger with our previously affiliated business development company, Goldman Sachs Middle Market Lending Corp, which we refer to as MMLC. John Yoder will then discuss our portfolio activity in more detail before turning the call over to Jonathan Lamb to walk through our financial results. Finally, I'll conclude with some closing remarks before we open the line for Q&A. So with that, let's get to our third quarter results. Q3 net investment income per share was 45 cents on after-tax net investment income of $18.2 million. Our GAAP earnings per share was 80 cents, which reflected both the solid net investment income generated during the quarter, as well as net gains in our investment portfolio. The net gains reflected continued improvement in underlying portfolio company performance, coupled with a tightening of market spreads. Net asset value per share increased to $15.49 per share as of September 30th, an improvement of 2.3% from the end of the second quarter. As we announced after the market closed yesterday, our board declared a 45 cent per share dividend payable to shareholders of record as of December 31st, 2020. This equates to an annualized dividend yield of 11.6% based on net asset value per share at the end of Q3. Furthermore, our Board declared special dividends aggregated to $0.15 per share, which will be payable in three $0.05 per share installments to shareholders of record on each of February 15, 2021, May 14, 2021, and August 16, 2021. Recall that these special dividends were first approved last December when the initial merger with MMLC was announced. Next, I'd like to take a moment to reflect on the overall state of the portfolio. As all of you are aware, It has now been over seven months since the beginning of the COVID-19 health crisis, which caused unprecedented social and economic disruption across the globe as government mandated lockdowns put tremendous stress and strain on businesses. Against this extraordinary backdrop, we are extremely pleased with the performance and resilience of our investment portfolio. We want to share some further insights and observations that evidence the strength of the portfolio. First, revenue at our portfolio companies increased by over 2% year over year based on the most recently available data, despite the broad economic upheaval and broader contraction of economic activity. We attribute this solid performance to our focus on high-quality businesses in durable and dynamic sectors of the economy, such as technology, business services, and certain areas of healthcare that have non-discretionary demand drivers, coupled with strong management performance at our portfolio companies. We have observed that healthy companies with forward-looking owners and management teams have capitalized on long-term expansion opportunities in this environment, primarily through M&A, which has further solidified leadership positions. Net debt to EBITDA at our portfolio companies ticked up modestly quarter over quarter, but at 5.7 times, still remains consistent with historical levels. Furthermore, weighted average interest coverage, a measure of cash flow coverage of debt service, remains very healthy at 2.6 times. We know that investors are keenly focused on loan amendment activity as an indicator of any portfolio stress. We did observe that loan amendment activity was elevated in Q3 compared to historical levels. That said, however, the majority of amendments were granted to companies that are performing well, but are seeking technical relief, in many cases to pursue the accretive M&A transactions I described earlier. This dynamic is giving rise to growth in our pipeline of attractive investment opportunities, which we are well positioned to pursue. In those instances where companies are seeking covenant relief to manage the business impact from the health crisis, we have generally been successful in negotiating for junior equity capital to come into the businesses to support both liquidity and debt service. In Q3, seven of our portfolio companies received commitments of new junior capital, evidencing the confidence that business owners have in the enterprise value and future prospects of these businesses, as well as the safety and stability of the more senior portions of the capital structures where we invest. Presently, among the 110 companies in our portfolio, just one company is out of compliance with covenants. In addition, we continue to observe that our portfolio companies have the wherewithal to remain current on their cash obligations to us. And as a result, payment in kind, or PIC income, represented just 5.3% of total income during the quarter. We believe the demonstrated ability for our portfolio companies to meet their interest obligations in cash is a testament to their underlying health and durability, and bodes well for credit performance. During the quarter, no new investments were placed on non-accrual and total non-accruals were de minimis at 0.1% of fair value and 0.9% at cost at quarter end. Next, I'm delighted to announce that on October 12, 2020, GSBD completed its previously announced merger with MMLC. We believe the transaction delivered significant benefits to all stakeholders. For example, The transaction increased GSBD's portfolio yield at cost while at the same time reducing the percentage of non-accrual assets. With $3.5 billion of assets, the company has significant scale, which we believe delivers benefits to all stakeholders, including enhanced access to diversified sources of funding to further strengthen our balance sheet position. To that end, perhaps the greatest benefit of the merger was the substantial deleveraging that occurred. As of the closing date of the transaction, GSBD's net debt-to-equity ratio was just 0.93 times, down from 1.29 times at the end of the third quarter. As a result of this deleveraging, the company is now well-positioned to patiently deploy incremental capital and increase net investment income in the current environment. Finally, in connection with the completion of the merger, our Board of Directors has reauthorized and amended the company's 10b-501 plan. The amended plan increases the buyback loss of the station to $75 million from $25 million previously, subject to certain conditions. With that, let me turn it over to John Yoder.

Great. Thanks, Brendan. So to pick up on some of the comments you made, we are certainly pleased with the stability and resilience demonstrated by our portfolio under adverse economic conditions over the past several months. In part, this strong performance can be attributed to a notable and deliberate shift in our asset composition towards more senior first lien loans over the past several years. To recap our portfolio statistics at quarter end, total investments in our portfolio were $1,431,000,000 at fair value, which is comprised of 93.2% in senior secured loans, including 75.5% in first lien, 2.4% in first lien last out unit tranche, and 15.3% in second lien debt, as well as 0.5% in unsecured debt, and 6.3% in preferred common stock and warrants. We also had just under $60 million of unfunded commitments as of September 30th, bringing total investments and commitments to $1,490.4 million. As of quarter end, the company had 110 portfolio companies operating across 38 different industries. The weighted average yield on our investment portfolio at cost at the end of the third quarter was 7.7% as compared to 7.5% at the end of the second quarter. The weighted average yield of our total debt and income-producing investments at cost remained at 8.3% at the end of the quarter. During the quarter, we made five new investment commitments, four of which were to new portfolio companies and one of which was to an existing portfolio company, totaling $11.6 million. In addition, we received $24.7 million in repayments, which was driven primarily by the full repayment of investments in two portfolio companies. Overall, both sales and repayment activity was relatively muted this quarter. As previously discussed, new asset origination was constrained during the quarter as we were operating at the high end of our target leverage ratio going into the merger with MMLC. As we look forward, we see significant incremental operating flexibility afforded by the deleveraging that resulted from that merger transaction. And as Brennan mentioned, we expect to be patient and thoughtful going forward as we deploy new capital into new investments. Similarly, while repayment activity slowed significantly during the depths of the crisis, we do anticipate an increase in repayments consistent with the general uptick of transaction activity that we've experienced in private markets in recent months. Already in the fourth quarter, we've received full repayments of two portfolio companies, and a third portfolio company called GK Holdings has agreed to merge with one of its competitors in conjunction with the sale of the combined company to a SPAC. GK Holdings had been an underperforming asset And as part of this SPAC transaction, we expect to receive a nearly full recovery of our first lien claim. And the recovery on our second lien claim, we expect to be significantly in excess of our mark as of the third quarter. As a result, we marked up the investment value prior to the closing of our merger on October 9th. And we expect this transaction to close in early Q1 of 2021. I will now turn the call over to Jonathan to walk through our financial results. Thanks, John.