Goldman Sachs BDC, Inc.

Good morning. This is Jamaria, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs BDC Incorporated fourth quarter and year end 2021 earnings conference call. Please note that all participants will be in listen-only mode until the end of the call when we will open a line up 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 Incorporated 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.goldmansaxbdc.com under the Investor Resources section, and which includes reconciliations of non-GAAP measures to the most directly comparable GAAP measures. These documents should be reviewed in conjunction with the company's annual report on Form 10-K filed yesterday with the SEC. This conference call is being recorded today, Friday, February 25th, 2022, for replay purposes. I'll now turn the call over to Brendan McGovern, Chief Executive Officer of Goldman Sachs BDC.

Thank you, Jamaria. Good morning, everyone, and thank you for joining us for our fourth quarter earnings conference call. I'm here today with John Yoder, our Chief Operating Officer, and Carmine Rossetti, our Chief Financial Officer. I'll begin the call by providing a brief overview of our fourth quarter results and before discussing the current market environment in more detail. I'll then turn the call over to John to describe our portfolio activity before we hand it to Carmine to take us through our financial results. And finally, we'll open the line for Q&A. So with that, let's get to our fourth quarter results. Overall, we're pleased to report another quarter of solid income generation for the portfolio. Net investment income per share was 56 cents. Excluding the impact of asset acquisition accounting in connection with the merger with MMLC, Q4 adjusted net investment income was 48 cents per share. Net asset value per share decreased slightly to $15.86 per share as of December 31st, a decrease of approximately 38 basis points from the end of the third 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 March 31st, 2022. Looking back, 2021 was a remarkable year in many respects to the private credit space broadly, and GSBD specifically, as the loose monetary policy environment fueled a strong economic recovery and record investment activity. As we discussed extensively over the past several quarters, last year was marked by record repayment activity as the company saw more than 45% of its portfolio the 2020 year-end turnover in 2021. Despite this unusual repayment activity, the team managed to grow the company's investments at fair value by over 7% year-over-year, which is a testament to the platform's outstanding origination capabilities and hustle over the past year. In addition, our investment activity was highly focused on the top of the capital structure, and as a result, our first lien exposure increased by about 700 basis points from year-end 2020, ending at about 85% of the total portfolio at the end of 2021. With this improvement in lien type, we believe it's prudent to target a funded debt-to-equity ratio of about 1.25 times. For much of the year 2020, our leverage ratio hovered well below this target at about 1 times as we balanced the wave of repayments with sensible investment activity in an overall competitive environment. We were pleased to see the leverage ratio tick higher in Q4, with ending an average debt to equity of 1.16 times and 1.04 times, respectively. In this environment of elevated repayment and investing activity, our focus has been on maintaining a high-quality book with attractive credit characteristics, which we believe will serve the company well in the long term. We maintain our historical focus on middle market origination. as the median EBITDA of the companies in our book stayed relatively constant at just under $40 million. Our focus on smaller companies allowed us to maintain strong document standards, as we made only one covenant-light loan during the year, which was a follow-on investment to a company that has performed well and has seasoned within our portfolio. That said, the combination of high portfolio turnover in the current competitive market environment, coupled with a higher mix of first-line assets, did put pressure on yields during the year. Q4 rejuvenation yields were 7.5%, which compares to 7.7% over the course of 2021, reflecting continued competition for high-quality assets. In addition, the weighted average net debt to EBITDA ratio of our portfolio companies moved higher to 6.4 times at year-end 2021, compared to 6 times at the end of 2020, reflecting a trend toward lower-leveraged portfolio company exposures being refinanced into new deals during the quarter. On last quarter's call, we discussed the inflationary trends that continue to mark the current environment. Thus far, inflationary pressures have not caused significant stress to our portfolio companies, which we believe is a reflection of our focus on high-quality companies with value-added products and services that provide a modicum of price and power in the current environment. We are observing, however, that macroeconomic inflationary pressures are creating pronounced interest rate volatility. The yield on the 10-year note currently stands at almost 2% versus 1.5% at the beginning of the year. At the same time, three-month LIBOR has more than doubled to 50 basis points from the 21 basis points we saw at the beginning of the year, and the forward curve is projecting three-month LIBOR at 1.9% by the end of the year. Most economists are predicting seven to nine interest rate hikes by the Fed over the coming year. In light of the changing environment, we want to highlight a few points. 99.4% of our portfolio was in floating rate assets as of the end of the year, typically with LIBOR floors of around 1%. Next, we have been actively managing our debt stack, and at year end, more than half of our liability structure was in fixed rate notes. As a result of this asset liability profile, we would initially expect some pressure on net interest margins as the front end of the curve ticks higher, but the contractual LIBOR floors on our assets causes yields to remain stable. However, once the liability exceeds those floors, all other things being equal, the rising rate environment should be a tailwind to net interest margins as asset yields move higher while the majority of our liability costs remain fixed. And finally, turning to asset quality. Non-accrual investments increased to 2.5% and 1.8% of the portfolio cost and fair value, respectively. The increase was a result of the addition of one of our investment inconvenience to the non-accrual list. As we have discussed previously, Convene has been impacted by the reduction in demand for shared meeting space in the COVID environment, but has benefited from capital support from its owners. We placed the investment on non-full this quarter, as we expect to monetize this position this quarter at a discount to our claim value. We don't expect this monetization to have a meaningful impact to NAV, and we would seek to recycle the proceeds back into other income-producing loan assets. With that, let me turn it over to John Yoder.

Great. Thanks, Brendan. 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 remained focused on first lien senior secured loans. During the quarter, we made 32 new investment commitments amounting to $723 million. We originated $461 million in loans to 13 new portfolio companies, and made $262 million of follow-on investments to existing portfolio companies, primarily to finance M&A activity. As Brendan mentioned, sales and repayment activity, while below last quarter's record, remained elevated, totaling $296 million driven by the full repayment of investments in seven portfolio companies. Turning to portfolio composition, as of December 31st, 2021, Total investments in our portfolio were $3,478,000,000 at fair value, comprised of 97.5% in senior secured loans, including 84.7% in first lien, 4.7% in first lien last out unit tranche, and 8.1% in second lien debt, as well as a negligible amount in unsecured debt and 2.5% in a combination of preferred and common stock and warrants. We also had $442 million of unfunded commitments as of December 31st, bringing total investments and commitments to $3.920 billion. As of quarter end, the company held investments in 121 portfolio companies operating across 38 different industries. The weighted average yield of our investment portfolio at cost at the end of Q4 was 7.9%, as compared to 8.3% as of the end of the third quarter. The weighted average yield of our total debt and income producing investments at cost decreased to 8.4% at the end of Q4 from 8.6% at the end of Q3. 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 6.4 times at quarter end as compared to six times from the prior quarter. The weighted average interest coverage of the companies in our investment portfolio at quarter end was 2.5 times, which is flat with the prior quarter. As of December 31st, 2021, investments on non-accrual status increased to 1.8% and 2.5% of the total investment portfolio at fair value and amortized cost, respectively, up from 0.1% and 0.7% as of the end of the third quarter. Again, as Bernie mentioned, this is due to putting convene on non-accrual status. I will now turn the call over to Carmine to walk through our financial results. Thank you, John.