Goldman Sachs BDC, Inc.

Good morning. This is Austin Neary, a member of the Investor Relations Team for Goldman Sachs BDC, Inc., and I would like to welcome everyone to the Goldman Sachs BDC, Inc. Fourth Quarter 2023 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.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, Thursday, February 29th, 2024, for replay purposes. I'll now turn the call over to Alex Chee, Co-Chief Executive Officer of Goldman Sachs BDC, Inc.

Thank you, Austin. Good morning, everyone, and thank you for joining us for our fourth quarter and 2023 fiscal year-end earnings conference call. I'm here today with David Miller, our Co-Chief Executive Officer, Tucker Green, our Chief Operating Officer, and Stan Medyshevsky, our Chief Financial Officer. I'll begin the call by providing an update on the Goldman Sachs private credit platform before providing a brief overview of our fourth quarter results and then discuss the current market environment in more detail. I'll then turn the call over to David and Tucker to describe our portfolio activity and performance before handing it off to Stan to take us through our financial results. And then finally, we'll open the line for Q&A. So with that, I'd like to provide a brief update of the Goldman Sachs private credit platform and the positive impact on GSBD of being part of it. We're proud to announce that next week marks the second anniversary of our platform integration process. This endeavor brought all of Goldman Sachs' private credit origination and underwriting capabilities, as well as various pools of capital with track records that stretched back over 28 years under a single roof within our asset management business. As you may recall, historically, our BDC complex, including GSBD, operated as a separate and distinct platform on the public side of the house that was walled off from the rest of the firm and could not take full advantage of being part of the Goldman Sachs ecosystem. In these two short years, GSBD has been able to take advantage of the full origination capabilities of the broader private credit platform and its scale, enhance our infrastructure, and improve upon our underwriting capabilities. I'd like to highlight a few examples. Amidst the volatile market and muted deal environment, the Goldman Sachs private credit platform remained active, deploying $12 billion in 2023. The Direct Lending Americas platform comprised the majority of the activity with over $6 billion deployed. Furthermore, taking advantage of the broader scale and origination capabilities, GSBD served as agent or lead lender on well above the majority of its new deals in 2023. Second, the team has spent the past two years actively upgrading GSBD's portfolio quality. As a point of reference, in the fourth quarter of 2021, just prior to the integration, GSBD had 89.3% at fair value in first lien senior secured loans, whereas as of the fourth quarter of 2023, that figure stood at 95.3% at fair value. At the same time, in the fourth quarter of 2021, second lien loans comprised 8.2% of the portfolio at fair value versus the fourth quarter of 2023, where second liens made up only 1.9% at fair value. This is a result of actions we've discussed in previous quarters, whereby repayments in junior lien positions have allowed us to redeploy capital into attractive opportunities higher up in the capital structure, and we proactively took marks on legacy junior positions. Finally, our integration has allowed for the significant expansion of our overall deal funnel to provide more proprietary and unique direct lending opportunities for GSBD. For example, since 2004, Goldman Sachs Private Credit has been the leading lender to the middle market wireless power sector, deploying close to $7 billion of capital with no losses to date. During the quarter, the Goldman Sachs private credit platform served as a lead arranger on a senior security facility to SkyWay. Founded in 2005, SkyWay is a Florida-based wireless power operator with 445 powers in its portfolio. The facility continues a longstanding Goldman Sachs relationship with the SkyWay team, which began with the financing of the SkyWay's first portfolio in 2011 before its sale to American Tower. followed by the financing of multiple subsequent TAR portfolios, including the current one. This is but one example of a new set of investment opportunities made available to GSBD resulting from our integration efforts. Harrington is another example of an investment in the quarter where GSBD utilized the scale of the broader senior direct lending platform to provide a commitment for the entire facility that allowed the sponsor to win the asset, and we served as lead arranger. Harrington, is a California-based specialty distributor of precision, fluid-controlled products across a variety of industry sectors. We are proud that we've been able to capitalize on the thesis that we communicated to our shareholders and lenders when we integrated GSBD, and we remain committed to leveraging the broader private credit platform for the benefit of GSBD shareholders in the quarters and years ahead. As we announced after the market closed yesterday, our board declared a first quarter 45-cent per share dividend payable to shareholders of record as of March 28, 2024. This marks the company's 36th consecutive quarter of a $0.45 per share dividend, totaling $16.20 per share since our IPO, excluding the special dividends we paid in 2021 post the merger with MMLC. Net asset value was $14.62 per share as of December 31, 2023. This increase was primarily attributable to net investment income exceeding our quarterly dividend, partially offset by net realized and unrealized losses for the quarter. We had previously expressed confidence that deal volumes would increase as the year progressed, and the trend indeed continued in the fourth quarter as it did in the third quarter. During the fourth quarter, we reviewed more than 150 investment opportunities across our Direct Lending Americas platform and deployed capital at strong levels, as David will expand upon in a bit. While we acknowledge that recent deal volumes have improved from recent lows in the past several quarters, we've also witnessed greater competition in the direct lending space, resulting in spread tightening over the past several months. We anticipate that as the overall deal environment improves, supply demand for private credit will align to support spread premiums and tighter lending terms in line with historical private credit underwriting experience. At the same time, it's worth considering that while the broadly syndicated loan market is also reopened, although primarily for near-term refinancings, this is a dynamic that's more impactful to the upper middle market, the larger cap segments, whereas GSBD is more focused on the core of the middle market. With that, let me turn it over to my co-CEO, David Miller.

Thanks, Alex. During the quarter, we originated $166.2 million in new investment commitments to 14 new, and four existing portfolio companies. Sales and repayment activity totaled $224 million, primarily driven by the full repayment and exit of investments in seven portfolio companies. In particular, as we continue to upgrade the quality of the portfolio, we are pleased with the full repayment of one junior lien position and exit of two equity positions, which will allow us to continue redeploying capital into new first lien-oriented opportunities. Turning to portfolio composition. As of December 31st, 2023, total investments in our portfolio were $3.4 billion at fair value, comprised of 97.2% in senior secured loans, including 91.1% in first lien, 4.2% in first lien last out unit tranche, and 1.9% in second lien debt. as well as a negligible amount in unsecured debt and 2% in a combination of preferred and common stock and warrants. As of quarter end, the company held investments in 144 portfolio companies operating across 38 different industries. The weighted average yield of our investment portfolio at cost at the end of Q4 was 11.8% as compared to 11.6% from the prior quarter. The weighted average yield of our total debt and income-producing investments at amortized cost remained at 12.6% at the end of Q4. I will now turn the call over to Tucker Green to discuss our overall credit quality.