Nuveen Churchill Direct Lending Corp.

Hello and welcome to the Neveen Churchill Direct Lending Corp. first quarter 2024 earnings call. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the conference over to Alona Gornick, Senior Investment Strategist. Please go ahead, Alona.

Good morning, and welcome to Naveen Churchill Direct Lending Corp.'s first quarter 2024 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 are 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 risks, 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, 10-2, 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 Kenneth.

Thank you, Ilona, and thank you, everyone, for joining us on the call today. In the first quarter, we completed our IPO to list NCDL on the New York Stock Exchange. As such, we understand that some of you may be new to our platform. Welcome to both existing and future investors. We are thrilled that you're here with us today. Today, I'm going to provide a brief snapshot of our performance in the quarter. I think it worthwhile to briefly cover who we are at NCDL, what our strategy is, and the broader investment environment that we are operating in. Then I'll turn it over to Shai for more detailed discussion of our performance. I'm pleased to share that we've delivered a strong start to the year that carries on the momentum since our last call. NCDL reported solid first quarter results. supported by strong net investment income performance, growth in net asset value, robust investment activity, and an attractive first quarter dividend representing an annualized dividend yield of 9.9%. Now we will briefly cover our corporate structure, which demonstrates Churchill's longstanding focus on financing and investing in leading U.S. middle market companies. Our differentiated investment approach and a unique sourcing model that seeks to partner with best-in-class private equity sponsors in the middle market. Churchill Asset Management is the exclusive U.S. middle market private capital 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 of investing in the private markets. Naveen is TIAA's asset manager, and Churchill sits within Naveen's $1.2 trillion asset management business. Churchill is a strategically integrated middle market private capital platform, and collectively we manage approximately $50 billion of committed capital. Key to our strategy is our significant commitment to U.S. middle market private equity funds, for many of which we sit on their fund advisory boards. This focus underpins all of our direct investment activity in senior lending, junior capital, and equity co-investments. Today, Churchill has commitments to over 300 leading U.S. middle market private equity funds and sits in over 240 advisory boards. Over 70% of our private equity fund commitments are to top quartile sponsors. These LP relationships provide a number of distinct advantages. including a deal sourcing advantage and an information advantage, which ultimately contribute to high-quality deal flow for our investors. The Veen Churchill Direct Lending Corp. is our flagship private credit BDC, which began investing over four years ago and successfully completed its IPO on the New York Stock Exchange on January 25th. Our $1.8 billion investment portfolio is highly diversified. With 195 portfolio companies and our top 10 portfolio positions accounted for only 12.6% of the entire portfolio at quarter end. With an average annual EBITDA of our portfolio companies of 77 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 89 percent of the portfolio, along with a small mix of junior debt and equity co-investments. In fact, 85 percent of our investments across strategies have at least one financial maintenance covenant in place. Looking at key credit metrics, NCDL's core middle market portfolio has net total leverage of only 4.8 times and a very strong interest coverage ratio of 2.2 times for first lien loans, reflecting our selective and conservative investment approach. There are several important factors that differentiate us and position us for continued future growth. First, NCDL's corporate structure that I've just described is a real strength. By investing alongside a premier institutional private credit manager and with the backing of a large-scale global asset management franchise, we believe NCDL offers an attractive and unique investment opportunity. Second, we believe we are one of the largest BDCs focused on the core middle market. Our consistent dedication to this space helps to insulate investors from the volatility and competitive dynamics currently at play in the broadly syndicated loan market. Third, we are among the most diversified BDCs in the marketplace. We have constructed a balanced portfolio by sponsor, position size, and industry. This has been our disciplined approach for the last 18 years and it has proven to be critical to our successful long-term track record. Fourth, our origination and sourcing model is highly differentiated. Our strong private equity LP relationships are grounded in the fact that our investment team has worked and invested with many of these firms for nearly 20 years. In turn, these partnerships drive strong deal flow and have allowed us to maintain a high level of Investment Selectivity. And lastly, we have a rigorous investment process focused on overall credit quality. As we underwrite, we look for companies with leading market positions and high barriers to entry, which are very important for establishing pricing power and higher margins. Moreover, we are mindful of the higher interest burden facing both our existing portfolio companies as well as new borrowers, something that influences our conservative, and more. And should rates come down sooner than expected, the new deals we're underwriting in this environment will look even more attractive. Once we've made an investment, we remain proactive in how our teams manage portfolios. Communication in a culture of no surprises are two of the biggest qualities we value in our approach. Before I pass the call over to Shai, I want to talk a little bit about what we are seeing in the current market environment. In the first quarter, the broadly syndicated loan market returned in full force. As a result, larger companies gained greater access to a broader range of financing options than they had available to them in the prior 18 months. This led to renewed competition between the public debt markets and the banks that underwrite those deals and the direct lenders that focus primarily on the upper middle market. This competition drove a material tightening and spread in the upper middle market. We at NCDL, however, have remained somewhat insulated from this dynamic, given our primary focus on the core middle market, where the limited number of larger scale direct lenders and the relationship-based nature of the market have made the impact more muted. With all-in yields in the core middle market still in the 11 percent range, we believe the risk-adjusted returns in our target market remain very attractive and are still wide relative to historical averages in the asset class. When deciding between options, sponsors will be faced with an execution tradeoff. Cheaper pricing, and many more. and confidentiality while maintaining the historical 100 to 200 basis point premium in pricing. And overall, M&A activity remained solid in the first quarter as price discovery began to unlock deal activity, with private equity firms eager to put dry powder to work, make distributions and drive exits for their LPs. While deal flow increased in the first quarter, quality was more mixed. as companies that were sidelined are now being sold or refinanced in the liquid credit markets. As a result, star activity and credit discipline are absolutely key. We expect the balance of 2024 to be more the same against the backdrop of higher for longer interest rates. As we navigate the evolving credit landscape, we believe NCDL is well positioned for success. Our focus as a leading private credit provider to the core middle market enables us to be more insulated from the pricing and structural pressures and overall market volatility faced by direct lenders that are more focused on the upper middle market or BSL market. Our scale and over 300 private equity LP relationships have combined to position us as a lender of choice to the private equity community and drive significant deal flow. enabling us to remain very disciplined and selective in our approach with total leverage, sponsor equity contributions, and underlying structural protections in our investments remaining very stable. And finally, our large and growing portfolio of over 450 U.S. middle market companies continues to drive significant refinancing and growth financing opportunities with companies that have a proven track record of financial performance, and others. We are committed to maintaining a high level of discipline and selectivity as we evaluate our strong ongoing pipeline of investment opportunities. And now I'll hand it over to Shai.