Nuveen Churchill Direct Lending Corp.

Greetings. Welcome to the Neveen Churchill Direct Lending Corporation's conference call. At this time, all participants will be in listen-only mode. The question and answer session will follow the formal presentation. If anybody today should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll now turn the conference over to Alona Gornick. Alona, you may now begin your presentation.

Good afternoon and welcome to Naveen Churchill Direct Lending Corp., or NCDL's, fourth quarter and full year 2023 earnings call. Today, I'm joined by NCDL's Chairman, President, and CEO, Ken Kencel, and Chief Financial Officer and Treasurer, Shai Vichness. Following our prepared remarks, we will be available to take your questions. Today's call may include forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors, and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather based on current expectations, estimates, and projections about the company, our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. These statements are not guarantees of future performance and are subject to risk, uncertainties, and other factors, some of which are beyond our control and difficult to predict. Actual results may differ materially from those expressed or forecasted in the forward-looking statements. We ask that you refer to the company's most recent filings with the SEC for important risk factors. Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. The company assumes no obligation to update any forward-looking statements at any time. Our earnings release, 10-K, and supplemental earnings presentation are available on the investor relations section of our website at ncdl.com. Now, I'd like to turn the call over to Ken.

Thank you, Ilona, and thank you, everyone, for joining us on our first earnings call as a publicly traded company. For those of you who are new to our platform in NCDL, I would begin today's call with a brief overview of our company. I will then provide an overview of NCDL's strategy and the overall market environment before turning the discussion over to Shai. I am pleased to share that we closed out 2023 well positioned to capitalize on market momentum in the year ahead. NCDL reported solid fourth quarter results supported by growth in our net asset value per share, strong investment activity, and an attractive dividend yield. The company delivered a total annualized dividend yield of 12% for the fourth quarter and a full year dividend yield of 13.3%. We ended the year with over 400 million of liquidity and favorable leverage levels, which position us to drive yield growth by selectively investing in new assets. Shai will provide more color on the portfolio, investment activity and financial results later in the presentation. Before discussing NCDL in greater detail, I want to provide a breakdown of our corporate structure. and highlight our unique investment approach and differentiated sourcing model that we bring to the direct lending space. Churchill Asset Management is the exclusive U.S. middle market private credit manager for TIAA and Nuveen. TIAA, our parent company and largest investor, is among the highest rated insurance companies in the U.S. and one of the largest private credit investors in the world with a 50-year history Newveen is TIAA's asset manager, and Churchill sits within Newveen's $1.2 trillion asset management business. Churchill and Archmond, our European sister company, comprise Newveen Private Capital, a scaled global investment platform that invests over $15 billion annually in leading middle market companies in the U.S. and Europe. Churchill is a strategically integrated middle market private capital platform. Collectively, we manage approximately $50 billion of committed capital with over 170 dedicated professionals and over 450 portfolio companies on behalf of over 300 institutional investors globally, along with a growing number of retail investors as we bring our institutionally validated platform to the broader public investor universe. For 2023, we were proud to be recognized by KBRA DLD as the most active direct lender in the U.S. Importantly, underpinning all of our direct investment activity in senior lending, junior capital, and equity co-investments is our significant commitment to U.S. middle market private equity funds and our involvement with those funds as a trusted advisory board member. Today, Churchill has commitments to approximately 300 leading U.S. middle market private equity funds and sits on over 225 advisory boards. Over 70% of our private equity fund commitments are to top quartile sponsors. The power of these LP commitments gives us many distinct advantages, including a sourcing advantage and an information advantage, which we believe ultimately provides the highest quality deal flow to our investors. Naveen Churchill Direct Lending is our flagship private credit BDC, which began investing nearly four years ago and successfully completed its IPO on the New York Stock Exchange on January 25th. Our $1.6 billion investment portfolio is highly diversified with 179 companies, and our top 10 positions accounted for only 12.5% of the entire portfolio at ERN. With an average annual EBITDA of our portfolio companies of $73 million, our focus is on traditional U.S. middle market companies that are large, market-leading businesses with a solid history of financial performance. We are focused exclusively on private equity-backed businesses, which benefit from the capital support and capabilities provided by leading private equity firms. First lien loans make up 87% of the portfolio, along with a small mix of junior debt and equity co-investments. Importantly, 86% of our debt investments have at least one financial maintenance covenant in place. Looking at key credit metrics, the NCDL portfolio has net total leverage of only 5.2 times and a very strong interest coverage ratio of 2.3 times, which is reflective of our selective and conservative investment approach, which I will provide more detail on shortly. There are several key differentiators that position us for continued future growth. First, we believe NCDL offers a highly attractive and differentiated investment opportunity, investing alongside a premier institutional private credit manager. back by a large-scale global asset management franchise. Importantly, we believe we are one of the largest BDCs focused on the core middle market, insulating investors from the volatility and competitive dynamics at play in the syndicated loan market. Second, we are among the most diversified BDCs in the marketplace. We've constructed a balanced portfolio by sponsor, position, size, and industry. This has been our disciplined approach for the last 18 years, and it's proven to be critical to our successful long-term track record. Third, our origination and sourcing model is highly differentiated, driven by our strong private equity LP relationships with firms that our investment team has worked and invested with for nearly 20 years. It has driven strong deal flow and the ability to maintain a high level of Investment Selectivity. And lastly, we have a rigorous investment process focused on downside protection and overall credit quality. Key criteria we look for in our underwriting includes identifying companies with leading market positions and high barriers to entry, which is very important for establishing pricing power and higher margins. Communication and a culture of no surprises are the two biggest tenets of our monitoring framework and Churchill's credit culture. We are consistently meeting as a team to discuss the portfolio, and we truly believe that outcomes are driven by our proactive portfolio management approach. Before I pass the call over, I want to address what we are seeing in the current market environment. We see strong fundamental market dynamics across the private credit market today. M&A activity increased significantly in the second half of 2023, but we closed out the year with a very strong fourth quarter. Private equity sponsors are increasing their level of activity as we enter 2024. This is leading to attractive investment opportunities for scaled managers with valuable dry powder. Private credit is positioned to show continued strong growth despite the recent improvement in the syndicated loan market. In Q4, direct lending middle market LBO volume was eight times higher than syndicated loan volume, as private equity firms continue to see the benefits of private credit solutions. Leading private credit managers with scale and differentiated sourcing can offer private equity sponsors speed, certainty, flexibility, confidentiality, and large hold sizes. Moreover, given the current higher rate environment, Only the best performing companies are being put up for sale today. As a result, purchase multiples in the core middle market have remained consistently strong at 11 to 12 times EBITDA. Increasing deal activity with higher quality businesses, improved terms and pricing for direct lenders, and more conservative capital structures have made private debt an even more attractive asset class today. and all signs point to continued strong momentum in 2024. We expect increased clarity around interest rates and potential rate cuts later in the year to lead to an even more active M&A environment. And with interest rates still at elevated levels, we believe senior lending will maintain its highly attractive risk return profile, but in a more manageable environment for portfolio companies. With that, I'll pass the call over to Shai.