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. Third Quarter 2021 Earnings Conference Call. Please note that all participants will be in the 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 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 BBC 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-GAAP measures to the most directly comparable GAAP 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, November 5, 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 third 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. Also joining us is Carmine Rossetti, who will be replacing Joe as our permanent CFO on November 8th. We want to thank Joe for his interim duties these past few quarters and welcome Carmine back to the Goldman team. I'll begin the call by providing a brief overview of our third quarter results before discussing the current market environment for private credit. 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 third quarter results. Overall, we're pleased to report another quarter of solid income generation for the portfolio. Net investment income per share was $0.63. Excluded in the impact of asset acquisition accounting in connection with the merger with MMLC, Q3 adjusted net investment income was $0.48 per share. Net asset value per share decreased slightly to $15.92 per share as of September 30th, a decrease of approximately 80 basis points from the end of the second quarter. Excluding the impact of the $0.05 special dividend we paid in September, the net asset value decline would have been 50 basis points. The September special dividend is the last of the three $0.05 per share special dividends that we paid in connection with the company's close of the merger with MMLC in Q4 of 2020. 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, 2021. If you look back the layers a bit further on the quarter, there are a few noteworthy dynamics worth highlighting and discussing. First, and at the risk of sounding a bit like a broken record, elevator repayments continued unabated this quarter. At $672 million, The repayments equaled 21% of the fair value of investments at the beginning of the quarter and were 2.4 times greater than last quarter, which itself was the previous high watermark for repayments in the company's nearly 10-year history. The repayments were diversified across the book, with the single largest repayment only amounting to less than 10% of the total. This is a somewhat remarkable level of portfolio turnover in a single quarter. There are a few takeaways I would offer from this unusual activity. First, I believe this repayment activity is a reflection of our focus on sectors and companies that continue to grow, perform well, and are therefore increasingly in investor favor. In an environment where M&A activity is high and equity valuations are rising, it's not surprising that high-quality companies are either being sold or graduating to a lower cost of capital. Next, I would note that relative to the beginning quarter portfolio composition, the repayments were skewed towards junior capital, which helped improve the seniority of the book. At quarter end, first lien investments represented 84% of the portfolio compared to 80% at the end of last quarter. Finally, I would note that despite the repayment activity, the quarter end leverage ratio stayed roughly flat at 0.91 times debt to equity. This was a noteworthy feat and a testament to the strength of the team and our origination platform. Given the competitive environment in which we are currently operating, the team did an excellent job maintaining the portfolio size without sacrificing investment quality. While registration yields were below repayment yields, the overall impact of the portfolio was muted as the yield at amortized cost this quarter was 8.3% compared to 8.4% at the end of Q2. Next, we know that investors are keenly focused on the supply chain disruptions and inflationary pressures that are currently impacting the economy broadly and performance of companies in certain sectors specifically. Thus far, we have observed modest overall impacts for our portfolio. as we have generally avoided lending to businesses and sectors such as manufacturing or retail, which we believe are most susceptible to part shortages and rising costs of commodities and shipping, for example. As you are aware, the main themes in our portfolio continue to be software, healthcare IT, healthcare services, and professional services. We are mindful that companies in these sectors can see margin pressure from labor inflation, which tends to be sticky as opposed to transitory. That said, strong companies in these sectors can also benefit from pricing power and the ability to pass on price increases resulting from the mission-critical nature of the value proposition they provide to customers in the case of technology companies and inelastic demand characteristics of non-discretionary healthcare services. We continue to monitor the impact of the current environment in our book and will keep you updated on any developments. Given the current environment, we are pleased that overall credit quality of the portfolio remains strong. Non-approval investments amounted to just 0.7% of the portfolio at cost and 0.1% at fair value. With that, let me turn the call over to John Yoder.

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-line senior secured loans. During the quarter, we made 27 new investment commitments amounting to $670 million. We originated $312 million in loans to 10 new portfolio companies and made $358 million of follow-on investments to existing portfolio companies, primarily to finance M&A activity. As Brendan mentioned, sales and repayment activity totaled $672 million, driven by the full repayment of investments in 16 portfolio companies. We continue to see a strong pipeline of new opportunities, and we're optimistic that we will achieve portfolio growth in the coming quarter, assuming the pace of repayments moderates to more normalized levels. Turning to portfolio composition, as of September 30th, 2021, total investments in our portfolio were 3.1 billion at fair value, comprised of 98.3% in senior secured loans, including 84.3% in first lien, 5.2% in first lien last out unit tranche, and 8.8% in second lien debt. We also had 1.6% in preferred in common stock. We have $402 million of unfunded commitments as of the end of the quarter, which brings total investments and commitments to just over $3.5 billion. As of quarter end, the company held investments in 111 portfolio companies operating across 37 different industries. The weighted average yield of our investment portfolio at cost at the end of the third quarter was 8.3% as compared to 8.4% at the end of the second quarter. The weighted average yield of our total debt and income-producing investments at cost decreased to 8.6% at the end of the third quarter from 8.7% at the end of the second 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 as compared to 5.9 times from the prior quarter. The weighted average interest coverage of the companies in our investment portfolio at quarter end was 2.5 times as compared to 2.6 times at the prior quarter. As of September 30, 2021, investments on non-accrual status increased slightly to 0.1% and 0.7% of the total investment portfolio at fair value and amortized cost, respectively. from 0.0% and 0.3% at the end of the second quarter. This modest increase is due to putting Chase Holdings on non-accrual. Finally, during the quarter, we exited our equity position in Hunter Defense Technologies. Hunter Defense is a provider of shelters and ancillary products used primarily by the US military in mobile troop deployments. The sale of the position generated a realized gain of $36 million. which resulted in a 1.54 times return on our investments since inception. Upon booking the realized gain, an unrealized gain was reversed. As a result, the net impact to NAV was not material in the current quarter. Let me now turn the call over to Joe to walk through our financial results.