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 BDC, Inc. Second Quarter 2021 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 conditions 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.goldmansaxbbc.com under the Investor Resources section and which include Reconciliations of Non-Gap Measures to the Most Directly Comparable Gap Measures. 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, August 6, 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 second quarter earnings conference call. With me on the call today is John Yoder, our Chief Operating Officer, and Joe DiMaria, our Interim Chief Financial Officer. I'll begin the call by providing a brief overview of our second quarter results, and I'll hit on some platform highlights to give you a sense of how the team is navigating the current market environment. I'll then turn the call over to John to describe our portfolio activity in more detail. And finally, Joe will take us through our financial results before we open the line for Q&A. So with that, let's get to our second quarter results. Net investment income per share was $0.57. Excluding the impact of asset acquisition accounting in connection with the merger with MMLC, Q2 adjusted net investment income was $0.48 per share, reflecting a continuation of strong operating trends in the business. Net asset value per share increased to $16.05 per share as of June 30th, an improvement of approximately 30 basis points from the end of the first quarter. Against an accommodative overall market backdrop, the NAV increase resulted from ongoing stable to improving performance in our portfolio companies, offset slightly by the impact of the $0.05 per share special dividend paid during the quarter. As we announced after the market closed yesterday, our Board declared a $0.45 per share dividend payable to shareholders on record as of September 30, 2021. The last of the three $0.05 per share special dividends we declared in November of 2020 will be paid on September 15th, 2021 to shareholders of record as of August 16th, 2021. On our last earnings conference call in May, we described a healthy and overall active market environment that was characterized by strong capital markets activity as the economy continued to rebound from the depths of the COVID-19 health crisis. Notably, we anticipated a continuation of elevated prepayment activity in our portfolio, as our favorite sector exposures, such as software, healthcare technology, and healthcare services, have demonstrated resilience throughout the pandemic. And as a result, names in our portfolio are ripe targets in an active M&A and refinancing environment. Indeed, this repayment trend did continue in Q2. For the third consecutive quarter, GSBD experienced a new high watermark for repayment activity, which amounted to $277 million of market value across 12 different portfolio companies this quarter. Fortunately, our powerful origination engine has largely kept pace during this active repayment environment. Gross originations for the first half of the year represented record levels for the company. And notably, as we look at our forward pipeline, we expect to resume balance sheet growth in the back half of the year, moving closer to more normalized net debt to equity ratios from this quarter end level of 0.91 times. In this competitive environment, we are extremely focused on maintaining investment discipline. For example, and consistent with our history, none of our investment activity this quarter was in so-called covenant life structures. Furthermore, in certain positions where we were the incumbent lender, we opted not to roll into new deals that did not meet our standards for risk-reward characteristics, sometimes based on rate and other times based on structure and document integrity. From time to time, companies in our portfolio grow to a size and scale that allows them to access the lower cost of capital and looser terms often associated with the syndicated markets. In these scenarios, we've generally opted to recycle the capital back into our platform, trusting that our market presence and reach will enable us to originate new loans to middle market businesses that do meet our criteria. As evidence of our discipline, yields on new originations this quarter of 8.1% were roughly equivalent to repayment yields of 8.2%. Furthermore, and despite the significant growth of our platform's overall capital base over the last several years, we have maintained our focus on direct originations to middle market businesses, and we have generally avoided competition with syndications. I'd note that the median EBITDA of a company in our portfolio this quarter was $38 million, evidence of our continued focus on the part of the market that we currently believe offers the best value proposition for our stakeholders. We believe this discipline has and will continue to bear fruit. Asset quality at GSBD remained strong. There were no new non-accruals in the quarter, and overall non-accruals represented 0.0% and 0.3% of the total investment portfolio at fair value and amortized cost, respectively. Suffice to say, we are keeping our eye on the long-term prospects of the business and opting to focus on high-quality businesses with capital structures and stewardship that we believe can withstand a variety of market environments. Switching gears and moving to the personnel front, we disclosed and informed 8K on July 19th that Carmine Rossetti will become this company's chief financial officer effective November 2021. Carmine previously served as GSBD's principal accounting officer from May 2017 to March 2020, and we are extremely excited to welcome him back to the organization. I'd like to thank Joe DiMaria for his focus and diligence as the interim CFO over the past several months. Clearly, the business has not skipped a beat as we await Carmine's start date, which is a testament to Joe and his capabilities. With that, let me turn it over to John Yoder.

All right. Thanks, Brendan. As Brendan mentioned, the continued strong capital markets environment during the quarter enabled the team to again be active on the new origination front. Our new investment commitments remain focused on first lien senior secured loans in covenanted structures. During the quarter, we made 16 new investment commitments amounting to $369 million, six of which were to new portfolio companies and 10 that were to existing portfolio companies. As Brennan mentioned, sales and repayment activity totaled $277 million, driven by the full repayment of investments in 12 portfolio companies. Turning to portfolio composition, at the end of the quarter, Total investments in our portfolio were just under $3.2 billion at fair value, comprised of 96.8% in senior secured loans. This included 80.1% in first lien, 4.4% in first lien last out unit tranche, and 12.4% in second lien debt, as well as a negligible amount in unsecured debt and 3.1% in preferred and common stock. We also had $377 million of unfunded commitments as of the end of the quarter, which brought total investments and commitments to just over $3.5 billion. As of the quarter end, the company had 114 portfolio companies operating across 37 different industries, and the weighted average yield of our investment portfolio at cost at the end of the quarter was 8.4%, which was the same as at the end of the first 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 the portfolio was 5.9 times at quarter end, which is a slight improvement from six times at the end of the last quarter. The weighted average interest coverage of the companies in our investment portfolio was 2.6 times, again, a slight improvement from the 2.5 times at the end of the prior quarter. As of June 30th, Investments on non-accrual status decreased to 0.0% and 0.3% of the total investment portfolio at fair value and amortized cost respectively, down from 0.3% and 0.7% as of the end of Q1. This decline in non-accruals is primarily a result of the repayment of our investment in GK Holdings. On June 11th, GK Holdings consummated a merger with a competitor in conjunction with incremental capital from a SPAC. As a result, GSBD received partial repayments on both first lien and second lien positions and received past due interest on the first lien position. In addition, GSBD rolled a portion of the existing loan into a new loan to the combined company, which is called Skillsoft, in a deleveraged structure. Subsequent to quarter end, Skillsoft refinanced its capital structure and repaid that remaining loan. So as a result of these transactions, we have fully exited our investment. And while we're never pleased to place an investment on non-accrual, we do think that this transaction is a demonstration of the care and effort that we put into our underperforming positions. In this case, our recovery on this investment allowed us to earn an IRR of approximately 6% since inception on our investment to GK Holdings, which began in 2015. I'll now turn the call to Joe to walk through our financial results.