Goldman Sachs BDC, Inc.

Good morning. This is Erica, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs BBC Inc. Fourth Quarter and Year-End 2020 Earnings Conference Call. Please note that all participants will be in a 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 these 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-K filed yesterday with the SEC. This conference call is being recorded today, Friday, February 26, 2021, for replay purposes. I will now turn the call over to Brendan McGovern, Chief Executive Officer of Goldman Sachs BDC.

Thank you, Erica. Good morning, everyone, and thank you for joining us for our fourth quarter and year-end 2020 conference. 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'll begin the call by providing an overview of our fourth quarter results, including commentary on the performance of our portfolio following the completion of the company's merger with Goldman Sachs Middle Market Lending Corp., or MMLC, which was completed on October 12, 2020. In addition, I'll offer some perspectives on the current state of the lending environment and the opportunity set we see before us today. John Mueller will then discuss our portfolio activity in more detail before turning it 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 fourth quarter results. Our Q4 net investment income per share was 59 cents on after-tax net investment income of $55.3 million. excluding the impact of asset acquisition accounting in connection with the merger with MMLC, adjusted net investment income per share was $0.48, reflecting solid income performance to support the company's dividend. Net asset value per share increased to $15.91 per share as of December 31st, an improvement of 2.7% from the end of the third quarter. The increase reflected continued improvement in the underlying portfolio company performance, coupled with ongoing market spread tightening. On October 12th, we closed our merger with MMLC, which resulted in a number of benefits to GSBD, which we have discussed at length in prior conference calls, including, first, a reduction of our net debt to equity ratio from 1.29 times to one time at year end. Next, the merger resulted in an overall improvement in GSBD's portfolio metrics, including an increase in portfolio yield at cost, from 7.7% to 8.4%, and an increase in single name diversification. Finally, as discussed, we expect the merger to be accretive to GSBD's net investment income per share, both in the short and long term, due in part to our previously announced variable incentive fee cap through 2021, as well as increased asset capacity resulting from the deleveraging. As we announced after the market closed yesterday, our board declared a 45 cent per share dividend payable to shareholders of record as of March 31, 2021. Further, the first of three installments of our special dividends aggregating to $0.15 per share will be paid on March 15, 2021 to shareholders of record on February 15, 2021. We will be paying the remaining two additional $0.05 per share installments to shareholders of record on May 14, 2021 and August 16, 2021, respectively. Additionally, during the quarter, our board of directors approved a new 10b-5-1 plan authorizing the repurchase of up to 75 million of GSBDC shares of common stock, subject to certain conditions, should the shares trade below NAV. Moving on to the market environment. During the quarter, the continued rebound in equity and credit markets spurred increased capital markets activities, including mergers and debt refinancings. This trend accelerated into year end aided by the improved economic sentiment resulting from the FDA approval of certain COVID-19 vaccines. Transaction activity increased dramatically from the lows of the COVID crisis, as buyers demonstrated confidence in economic growth prospects and increased their bids to meet seller demands on pricing. Lending opportunities proved to be robust in this environment, and as a result, GSBD had record origination activity during the quarter of $423 million, across an extremely diverse set of opportunities, which John will discuss in more detail. Repayment activity of over $250 million was also up sharply during the quarter, and we see this trend continuing in the current environment. As you are probably aware, the syndicated and investment-graded parts of the capital markets were particularly robust in Q4. As a result, we took the opportunity to actively strengthen our liability structure by issuing additional attractively priced unsecured debt at historically low levels for BDCs while also expanding our access to secured borrowings. Our $500 million unsecured note offering priced with a coupon of 2.875% and we increased capacity under our revolving credit facility from $795 million to $1.695 billion in Q4. We believe this refinancing activity situates the company well with diverse and deep sources of funding. Subsequent to the quarter end in January, Fitch reaffirmed our investment grade rating and revised our outlook from negative to stable. With that, let's turn it over to John Yoder.

Great. Thanks, Brendan. As Brendan mentioned, the very strong deal volumes during the quarter led to a record amount of new originations. All of our new investment commitments were in senior secured loans as we continue to maintain our focus on lending to sectors that exhibit strong growth despite the macroeconomic headwinds that are being caused by the pandemic. During the quarter, and excluding the names that we inherited as part of the MMLC merger, we made 22 new investment commitments, 13 of which were to new portfolio companies and nine to existing portfolio companies. This totaled $423 million. Meanwhile, net fundings of previously unfunded commitments were $9.1 million during the quarter. Sales and repayment activity totaled $252.7 million, driven by the full repayment of investments in six portfolio companies. We continue to expect strong deal activity going forward, though perhaps not quite at the same pace as what we saw in the fourth quarter. Regarding portfolio composition, as of December 31st, total investments in our portfolio were $3,243,000,000 at fair value. comprised of 96.5% in senior secured loans, including 78% in first lien, 4.4% in first lien last out unit tranche, 14.1% in second lien debt, as well as a negligible amount in unsecured debt, and 3.5% in preferred common stock and warrants. We also had $242.9 million of unfunded commitments as of December 31st, bringing total investments and commitments to $3,486,000,000. As of quarter end, the company had 123 portfolio companies operating across 39 different industries. The weighted average yield of our investment portfolio at cost at the end of the fourth quarter was 8.4% as compared to 7.7% at the end of the third quarter. This increase, as Brennan mentioned, was largely driven by the higher yields on the assets that we've obtained as part of the merger with MMLC. The weighted average yield on our total debt and income producing investments at cost also increased to 8.7% at the end of the fourth quarter from 8.3% at the end of the third quarter. So turning to credit quality. The underlying performance of our portfolio companies overall was stable quarter over quarter. The weighted average net debt to EBITDA of the companies in our investment portfolio was six times at quarter end versus 5.7 times at the end of the third quarter. The weighted average interest coverage of the companies in the portfolio at quarter end was 2.6 times, which was flat from the prior quarter. As of December 31st, investments on non-accrual status were just 0.3%, and 0.7% of the total investment portfolio at fair value and amortized cost, respectively. As we discussed last quarter, one holding, which is called GK Holdings, has agreed to merge with one of its competitors in conjunction with incremental capital from a SPAC. GK Holdings had been an underperforming asset, and as part of the SPAC transaction, we expect to receive a nearly full recovery of our first lien claim. and the recovery on our second lien claim is expected to be in excess of our third quarter end mark. We expect the transaction to close in the first half of 2021, subject to shareholder approval. However, since the amount of our recovery is now fixed pursuant to the terms of the transaction, we decided to put the investment on non-accrual until the acquisition is completed. Additionally, Another holding called Chase Industries, which is a second lien secured debt investment, is a non-accruing loan that was acquired as part of the merger with MMLC. I will now turn the call to Jonathan to walk through our financial results.