Golub Capital BDC, Inc. Declares Fiscal Year 2018 Third Quarter Distribution of $0.32 Per Share and Announces Fiscal Year 2018 Second Quarter Financial Results

NEW YORK, May 7, 2018 /PRNewswire/ — Golub Capital BDC, Inc., a business development company (NASDAQ: GBDC), today announced its financial results for its second fiscal quarter ended March 31, 2018.

Except where the context suggests otherwise, the terms “we,” “us,” “our,” and “Company” refer to Golub Capital BDC, Inc. and its consolidated subsidiaries. “GC Advisors” refers to GC Advisors LLC, our investment adviser.

SELECTED FINANCIAL HIGHLIGHTS

(in thousands, expect per share data)

March 31, 2018

December 31, 2017

Investment portfolio, at fair value

$

1,759,807

$

1,723,372

Total assets

$

1,816,033

$

1,807,327

Net asset value per share

$

16.11

$

16.04

Quarter Ended

March 31, 2018

December 31, 2017

Investment income

$

36,897

$

36,450

Net investment income

$

18,528

$

18,511

Net gain (loss) on investments

$

4,504

$

2,804

Net increase in net assets resulting from operations

$

23,032

$

21,315

Earnings per share

$

0.39

$

0.36

Net gain (loss) on investments per share

$

0.08

$

0.05

Net investment income per share

$

0.31

$

0.31

Accrual for capital gain incentive fee per share

$

0.01

$

0.01

Net investment income before capital gain incentive fee accrual per share (1)

$

0.32

$

0.32

(1) As a supplement to U.S. generally accepted accounting principles (“GAAP”) financial measures, the Company has provided this non-GAAP financial measure. The Company believes that this non-GAAP financial measure is useful as it excludes the accrual of the capital gain incentive fee, including the portion of such accrual that is not contractually payable under the terms of the Company’s investment advisory agreement with GC Advisors. (the “Investment Advisory Agreement”). As of March 31, 2018, the capital gain incentive fee accrued by the Company in accordance with GAAP is $7.2 million, of which $0.0 million was payable as a capital gain incentive fee pursuant to the Investment Advisory Agreement as of March 31, 2018. Any payment due under the terms of the Investment Advisory Agreement is calculated in arrears as of the end of each calendar year or upon termination of the Investment Advisory Agreement. The Company paid a $1.2 million capital gain incentive fee calculated in accordance with the Investment Advisory Agreement as of December 31, 2017. The Company did not pay any capital gain incentive fee under the Investment Advisory Agreement for any period ended prior to December 31, 2017. Although this non-GAAP financial measure is intended to enhance investors’ understanding of the Company’s business and performance, this non GAAP financial measure should not be considered an alternative to GAAP.

Second Fiscal Quarter 2018 Highlights

  • Net increase in net assets resulting from operations for the quarter ended March 31, 2018 was $23.0 million, or $0.39 per share, as compared to $21.3 million, or $0.36 per share, for the quarter ended December 31, 2017;
  • Net investment income for the quarter ended March 31, 2018 was $18.5 million, or $0.31 per share, as compared to $18.5 million, or $0.31 per share, for the quarter ended December 31, 2017;
  • Net investment income for the quarter ended March 31, 2018, excluding a $0.8 million accrual for the capital gain incentive fee under GAAP, was $19.3 million, or $0.32 per share, as compared to $19.2 million, or $0.32 per share, excluding a $0.7 million accrual for the capital gain incentive fee under GAAP, for the quarter ended December 31, 2017;
  • Net gain on investments for the quarter ended March 31, 2018 was $4.5 million, or $0.08 per share, as compared to a net gain of $2.8 million, or $0.05 per share, for the quarter ended December 31, 2017; and
  • Our board of directors declared on May 4, 2018 a quarterly distribution of $0.32 per share payable on June 28, 2018 to stockholders of record as of June 8, 2018.

Portfolio and Investment Activities

As of March 31, 2018, the Company had investments in 189 portfolio companies with a total fair value of $1,664.8 million and had investments in Senior Loan Fund LLC (“SLF”) with a total fair value of $95.0 million. This compares to the Company’s portfolio as of December 31, 2017, as of which date the Company had investments in 190 portfolio companies with a total fair value of $1,631.8 million and investments in SLF with a total fair value of $91.6 million. Investments in portfolio companies as of March 31, 2018 and December 31, 2017 consisted of the following:

As of March 31, 2018

As of December 31, 2017

Investments

Percentage of

Investments

Percentage of

Investment

at Fair Value

Total

at Fair Value

Total

Type

(In thousands)

Investments

(In thousands)

Investments

Senior secured

$

198,138

11.3

%

$

193,459

11.2

%

One stop

1,403,395

79.7

1,380,000

80.1

Second lien

9,435

0.5

9,435

0.6

Subordinated debt

62

0.0

*

60

0.0

*

LLC equity interests in SLF

94,991

5.4

91,591

5.3

Equity

53,786

3.1

48,827

2.8

Total

$

1,759,807

100.0

%

$

1,723,372

100.0

%

* Represents an amount less than 0.1%.

The following table shows the asset mix of our new investment commitments for the three months ended March 31, 2018:

For the three months ended March 31, 2018

New Investment

Commitments

Percentage of

(In thousands)

Commitments

Senior secured

$

27,383

19.8

%

One stop

106,456

76.9

LLC equity interests in SLF

3,062

2.2

Equity

1,519

1.1

Total new investment commitments

$

138,420

100.0

%

Overall, total investments at fair value increased by 2.1%, or $36.4 million, during the three months ended March 31, 2018 after factoring in debt repayments, sales of securities, net fundings on revolvers and net change in unrealized gain (loss). Total investments at fair value held by SLF decreased by 8.5%, or $23.8 million, after factoring in debt repayments, sales of securities, net fundings on revolvers and net change in unrealized gain (loss).

For the three months ended March 31, 2018, the weighted average annualized investment income yield (which includes interest and fee income and amortization of capitalized fees and discounts) and the weighted average annualized income yield (which excludes income resulting from amortization of capitalized fees and discounts) on the fair value of earning portfolio investments on the Company’s portfolio were 8.8% and 8.2%, respectively.

Consolidated Results of Operations

Total investment income for the quarters ended March 31, 2018 and December 31, 2017 was $36.9 million and $36.5 million, respectively. This $0.4 million increase was primarily attributable to an increase in London Interbank offered Rate (“LIBOR”) and an increase in the average earning investment balance. These increases were partially offset by a decline in dividend income from equity investments, excluding our investment in SLF.

Total expenses for the quarters ended March 31, 2018 and December 31, 2017 were $18.4 million and $17.9 million, respectively. This $0.5 million increase was primarily attributable to higher interest and other debt financing expenses caused by an increase in the weighted average of outstanding borrowings and an increase in LIBOR.

During the quarter ended March 31, 2018, the Company recorded a net realized loss of $0.6 million and recorded net unrealized appreciation of $5.1 million. The net realized loss was primarily due to the write off of one non-accrual portfolio company investment which was partially offset by the sale of an equity investment. The net unrealized appreciation was due to the reversal of unrealized depreciation associated with the write off of the portfolio company investment coupled with the rise in market prices on several middle market debt and equity investments.

Liquidity and Capital Resources

The Company’s liquidity and capital resources are derived from the Company’s debt securitizations (also known as collateralized loan obligations), U.S. Small Business Administration (“SBA”) debentures, revolving credit facilities and cash flow from operations. The Company’s primary uses of funds from operations include investments in portfolio companies and payment of fees and other expenses that the Company incurs. The Company has used, and expects to continue to use, its debt securitizations, SBA debentures, revolving credit facilities, proceeds from its investment portfolio and proceeds from offerings of its securities and its dividend reinvestment plan to finance its investment objectives.

As of March 31, 2018, the Company had cash and cash equivalents of $5.9 million, restricted cash and cash equivalents of $42.5 million and $835.2 million of debt outstanding. As of March 31, 2018, the Company had $63.3 million of remaining commitments and $63.3 million available for additional borrowings on its senior secured revolving credit facility with Wells Fargo Bank, N.A., as lender and administrative agent, subject to leverage and borrowing base restrictions. As of March 31, 2018, through our licensees, we had $37.5 million of SBA debenture commitments, of which $9.5 million was available to be drawn, subject to customary SBA regulatory requirements.

On May 4, 2018, the Company’s Board of Directors declared a quarterly distribution of $0.32 per share, payable on June 28, 2018 to holders of record as of June 8, 2018.

Related Party Stock

During the first calendar quarter of 2018, the Golub Capital Employee Grant Program Rabbi Trust (the “Trust”) purchased approximately $7.2 million, or 396,099 shares, of our common stock, for the purpose of awarding incentive compensation to employees of GC Advisors LLC and its affiliates.

Portfolio and Asset Quality

GC Advisors regularly assesses the risk profile of each of the Company’s investments and rates each of them based on an internal system developed by Golub Capital and its affiliates. This system is not generally accepted in our industry or used by our competitors. It is based on the following categories, which we refer to as GC Advisors’ internal performance ratings:

Internal Performance Ratings

Rating

Definition

5

Involves the least amount of risk in our portfolio. The borrower is performing above expectations, and the trends and risk factors are generally favorable.

4

Involves an acceptable level of risk that is similar to the risk at the time of origination. The borrower is generally performing as expected, and the risk factors are neutral to favorable.

3

Involves a borrower performing below expectations and indicates that the loan’s risk has increased somewhat since origination. The borrower may be out of compliance with debt covenants; however, loan payments are generally not past due.

2

Involves a borrower performing materially below expectations and indicates that the loan’s risk has increased materially since origination. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 180 days past due).

1

Involves a borrower performing substantially below expectations and indicates that the loan’s risk has substantially increased since origination. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 1 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we anticipate will be recovered.

Our internal performance ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments.

The following table shows the distribution of the Company’s investments on the 1 to 5 internal performance rating scale at fair value as of March 31, 2018 and December 31, 2017:

March 31, 2018

December 31, 2017

Internal

Investments

Percentage of

Investments

Percentage of

Performance

at Fair Value

Total

at Fair Value

Total

Rating

(In thousands)

Investments

(In thousands)

Investments

5

$

219,056

12.4

%

$

137,146

8.0

%

4

1,362,836

77.4

1,411,330

81.9

3

174,033

9.9

170,010

9.9

2

2,702

0.2

3,720

0.2

1

1,180

0.1

1,166

0.0*

Total

$

1,759,807

100.0

%

$

1,723,372

100.0

%

* Represents an amount less than 0.1%.

Conference Call

The Company will host an earnings conference call at 11:00 a.m. (Eastern Time) on Tuesday, May 8, 2018 to discuss the quarterly financial results. All interested parties may participate in the conference call by dialing (800) 736-4610 approximately 10-15 minutes prior to the call; international callers should dial (212) 231-2911. Participants should reference Golub Capital BDC, Inc. when prompted. For a slide presentation that we intend to refer to on the earnings conference call, please visit the Investor Resources link on the homepage of our website (www.golubcapitalbdc.com) and click on the Quarter Ended 3.31.18 Investor Presentation under Events/Presentations. An archived replay of the call will be available shortly after the call until 1:00 p.m. (Eastern Time) on June 7, 2018. To hear the replay, please dial (800) 633-8284. International dialers, please dial (402) 977-9140. For all replays, please reference program ID number 21887410.

Golub Capital BDC, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(In thousands, except share and per share data)

March 31, 2018

December 31, 2017

Assets

(unaudited)

(audited)

Investments, at fair value (cost of $1,738,586 and $1,707,273, respectively)

$

1,759,807

$

1,723,372

Cash and cash equivalents

5,868

5,750

Restricted cash and cash equivalents

42,488

71,380

Interest receivable

7,640

6,536

Other assets

230

289

Total Assets

$

1,816,033

$

1,807,327

Liabilities

Debt

$

835,200

$

828,300

 Less unamortized debt issuance costs

3,920

3,514

  Debt less unamortized debt issuance costs

831,280

824,786

Interest payable

2,662

6,132

Management and incentive fees payable

15,159

15,506

Accounts payable and accrued expenses

2,147

1,973

Payable for open trades

350

550

Accrued trustee fees

79

78

Total Liabilities

851,677

849,025

Net Assets

Preferred stock, par value $0.001 per share, 1,000,000 shares authorized, zero shares issued 
     and outstanding as of March 31, 2017 and December 31, 2017

Common stock, par value $0.001 per share, 100,000,000 shares authorized, 59,867,531 
     and 59,741,248 shares issued and outstanding as of March 31, 2018 and December 31, 2017, 
     respectively

60

60

Paid in capital in excess of par

944,318

942,179

Undistributed (over distribution of) net investment income

(976)

(387)

Net unrealized appreciation (depreciation) on investments

23,889

18,767

Net realized gain (loss) on investments

(2,935)

(2,317)

Total Net Assets

964,356

958,302

Total Liabilities and Total Net Assets

$

1,816,033

$

1,807,327

Number of common shares outstanding

59,867,531

59,741,248

Net asset value per common share

$

16.11

$

16.04

Golub Capital BDC, Inc. and Subsidiaries

Consolidated Statements of Operations

(In thousands, except share and per share data)

Three months ended

March 31, 2018

December 31, 2017

(unaudited)

(unaudited)

Investment income

Interest income

$

34,369

$

33,354

Dividend income

1,866

2,562

Fee income

662

534

Total investment income

36,897

36,450

Expenses

Interest and other debt financing expenses

7,906

7,714

Base management fee

5,929

5,930

Incentive fee

3,011

2,871

Professional fees

775

688

Administrative service fee

621

618

General and administrative expenses

127

118

Total expenses

18,369

17,939

Net investment income

18,528

18,511

Net gain (loss) on investments

Net realized gain (loss) on investments

(618)

481

Net change in unrealized appreciation (depreciation) on investments

5,122

2,323

Net gain (loss) on investments

4,504

2,804

Net increase in net assets resulting from operations

$

23,032

$

21,315

Per Common Share Data

Basic and diluted earnings per common share

$

0.39

$

0.36

Dividends and distributions declared per common share

$

0.32

$

0.40

Basic and diluted weighted average common shares outstanding

59,744,054

59,584,421

ABOUT GOLUB CAPITAL BDC, INC.

Golub Capital BDC, Inc. (“Golub Capital BDC”) is an externally-managed, non-diversified closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. Golub Capital BDC invests primarily in one stop and other senior secured loans of U.S. middle-market companies that are often sponsored by private equity investors. Golub Capital BDC’s investment activities are managed by its investment adviser, GC Advisors LLC, an affiliate of the Golub Capital group of companies (“Golub Capital”).

ABOUT GOLUB CAPITAL

Golub Capital is a nationally recognized credit asset manager with over $25 billion of capital under management. For over 20 years, the firm has provided credit to help medium-sized U.S. businesses grow. The firm’s award-winning middle market lending business helps provide financing for middle market companies and their private equity sponsors. Golub Capital’s credit expertise also forms the foundation of its Late Stage Lending and Broadly Syndicated Loan businesses. Golub Capital has worked hard to build a reputation as a fast, reliable provider of compelling financing solutions, and we believe this has inspired repeat clients and investors. Today, the firm has over 350 employees with lending offices in Chicago, New York and San Francisco. For more information, please visit www.golubcapital.com.

FORWARD-LOOKING STATEMENTS

This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission. Golub Capital BDC, Inc. undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

SOURCE Golub Capital