Pearl Diver Credit Company Inc.

Good morning and welcome to Pearl Diver Credit Company's third quarter earnings conference call. The question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. Is it my pleasure to introduce Chandraji Chakraborty. Thank you, you may now begin.

Good day, ladies and gentlemen. Thank you for standing by. Pearl Diver Credit Company refers participants on this call to the investor webpages for the press release, investor information, and filings with the ACC for discussion of the risks that affect the business. Pearl Diver Credit Company specifically refers participants to the presentation furnished today with the ACC and to remind participants that some of the comments may contain forward-looking statements and as such be subject to risks and uncertainties which if they materialize could substantially affect results. References made to the section titled forward-looking statements in the company's press release for the period from IPO on July 18th to September 30th, 2024, which is incorporated herein by reference. We note forward-looking statements, whether written or oral include, but are not limited to, Pearl Diver Credit Company's expectations or predictions of financial and business performances and conditions as well as the competitive and industry outlook. Forward-looking statements are subject to risks, uncertainties, and assumptions which they materialize could substantially affect results and as such, these statements do not guarantee performance. Pearl Diver Credit Company does not give any such assurances and is under no obligation and expressly disclaims any obligation to update, alter, or otherwise revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law. In addition, historical data pertaining to the operating results and the performance indicators applicable to Pearl Diver Credit Company are not necessarily indicative of results to be achieved in the successive periods. I will now turn the call over to Indranil Basu, Chief Executive Officer of Pearl Diver Credit Company.

Thank you to everyone joining us today for your interest in Pearl Diver Credit Company and welcome to our first earnings call as a public company. We'd like to invite you to download our investor presentation from our website which provides additional information about the company and our portfolio. With me today is our Chief Financial Officer, Chandrajit Chakraborty, and after our prepared remarks, we'll open it up to any questions. I am pleased to report that Pearl Diver Credit Company delivered solid period results reflecting the strength of our investment strategy, robust post-IPO balance sheet, and the successful execution of our strategic initiatives. Since this is our first call as a public company and some of you may be hearing our story for the first time, I'd like to spend a few minutes to highlight our value proposition, our compelling differentiating features, and why we are excited about our long-term growth potential. Pearl Diver Credit Company is an externally managed closed-end investment company with a primary investment objective of maximizing our portfolio's total return with a secondary objective of generating a high current income. We seek to achieve our investment objectives by investing primarily in equity and junior debt branches of collateralized loan obligations, or CLOs, that are securitizations of diverse portfolios of sub-investment grade, senior-secured, floating rate corporate debt issued by a large number of distinct US companies across several industry sectors. Our portfolio of CLO investments, as of September 30th, is diversified across 40 unique CLO equity positions. The underlying corporate loan portfolios within these CLOs are managed by over 25 distinct CLO managers. Across our CLOs, the underlying loan portfolios consist of approximately 1,200 unique loans spread over 30-plus industry sectors. Pearl Diver Credit Company is well diversified across various CLO manager styles, balancing conservative CLO managers with liquid portfolios and others who capitalize on higher loan spreads through less liquid holdings. Our largest manager exposure is 10.9%, while the largest single CLO equity position is only 4.7%. With 40 positions spread across different manager strategies evenly spread over different durations, from some short-duration CLO equity to newly-issued longer-duration CLO equity, there is no significant concentration in any single CLO. We believe the portfolio is well diversified and not overly exposed to idiosyncratic risk. Additionally, our largest single corporate obligor exposure is limited to just 70 basis points. Pearl Diver Credit Company is advised by Pearl Diver Capital, a specialist CLO-only investment manager with an experienced investment team and a proven track record in the CLO investment space. Founded in 2008, Pearl Diver Capital has grown to become a major player in the CLO markets with approximately 2.8 billion of assets under management. Pearl Diver takes a unique approach to CLO investing by combining data science and machine learning techniques with traditional fundamental corporate credit analysis and cash remodeling of assets in its investment process. As a specialist CLO-only investment manager, Pearl Diver is able to take an independent, unconflicted approach to investing in CLOs. Together, these qualities and capabilities position us well to effectively manage and capitalize on opportunities within the CLO equity market. Using our proprietary data lakes and machine learning algorithms, we are able to optimize our portfolio to preserve NAV, minimize credit losses, and generate strong risk-adjusted returns. Our investment philosophy centers on active portfolio management, emphasizing capital preservation while pursuing attractive risk-adjusted returns for our shareholders. To summarize, our underwriting of CLOs is founded on three key pillars. Number one, fundamental credit analysis of corporate loans inside CLOs. Number two, a machine learning and data science-based quantitative approach to identify relative value and achieve efficiencies in origination, trading, portfolio balancing, and risk management. And finally, number three, extensive deal-structuring experience and relationship-driven market access. Pearl Diver Trade Company predominantly invests in CLO equity. Historically, CLO equity investors have experienced strong risk-adjusted returns, along with high quarterly cash distributions. These cash distributions are driven by the spread between the interest income received from the underlying loans inside CLOs and the interest payable to the CLO liabilities issued. Primary CLO issuance this year has remained healthy, and our expectations are for 2024 to end with total gross new CLO issuance of between $140 to $150 billion. The reduction in the Fed rates is gradually unlocking the path for new primary loan issuances driven by increased M&A activity. Lower overall rates are also conducive to better free cash flow coverage at the underlying company level. Going forward, lower base rates should be positive for loan fundamentals, although tails are likely to remain elevated due to idiosyncratic distress. With that, I now turn the call over to Chandraseet for a more detailed review of our financial highlights of the quarter.

Thanks, Indranil, and hello again, everyone. As Indranil mentioned, for the period from our IPO on July 18th through September 30th, we delivered investment income of $3.9 million, or 58 cents per share. For the period from July 18th to September 30th, we recorded net unrealized gain on investments of half a million dollars, or eight cents per share. Total expenses for the period were $1.2 million, or 18 cents per share. Now moving to our balance sheet. As of September 30th, 2024, total assets were $137.6 million, and total net assets were $136.3 million, resulting in a net asset value per share of $20.05. Available liquidity consisting of cash was approximately $3.4 million, and the company had no leverage as of September 30th, 2024. We distributed our 22 cents per share dividend in August, and in September, and will distribute another 22 cents per share dividend in October. In summary, we believe our strong and prudently managed investment portfolio positions us well to deliver attractive, risk-adjusted returns to our shareholders. I'll now turn it over to our CEO, Indranil Basu.

Thanks, Shantarjeet. We're excited about the present opportunities in the CLO market, which continue to grow each year. Fundamentally, we believe that CLOs provide investors with an efficient way to access the senior-secured corporate loan asset class, and can offer an attractive risk-return profile across various credit cycles. Our successful transition to the public markets is a testament to our overall strength, the Pearl Diver brand, the expertise of our team, and the confidence of our investors. I'd like to extend my heartfelt appreciation to our dedicated team, our strategic partners, and our new shareholders for their support. We're excited about the road ahead, and look forward to building a long-term relationship with you as we grow and evolve as a public company. With that, we thank you for your time, and open up the call to Q&A. Mr. Operator?

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