Carlyle BDC Q4 credit losses partially reversed with market rally

The firm said on its fourth-quarter earnings call that one-third of its losses have been recovered after it posted an EPS loss for the final three months of 2018.

TCG BDC ended the fourth quarter with a net investment income that more than covered its $0.37-a-share dividend, though the NII figure was more than offset by unrealized and realized credit losses.

The New York-based business development company, advised by The Carlyle Group, reported a NII of $29.41 million, or $0.47 per share, against losses of $0.49 a share, giving the firm a $0.02-a-share loss for the quarter. Some of those losses have been reversed though as the market rebounded.

Chief financial officer and chief risk officer Tom Hennigan said on the fourth-quarter earnings call: “If you look at the yields we track based on the recent yields, we estimate roughly one-third of the mark-to-market negative impact in the fourth quarter would be reversed, if we were to close the first quarter today.”

The firm posted a quarter of record originations with $328.11 million versus the $231.34 million originated in the third quarter and the $281.73 million originated in the fourth quarter of 2017. Some 73 new originations for the three months ending 31 December were first-lien.

Heavy repayments of $343.20 million offset the firm’s originations for the quarter. The repayments, chief executive Michael Hart said, were partially “idiosyncratic” and also a continuation of the spate of refinancing deals that have taken hold in the mid-market recently.

The firm’s loan book consists of 68.12 percent first-lien debt, 10.29 percent first-lien last-out unitranche loans, 9.07 percent second-lien debt and 1.25 percent equity investments.

The firm also has 11.27 percent of its investments in the Middle Market Credit Fund, a joint venture with PSP Investments. The partnership has around 97 percent first-lien debt, 2 percent first-lien last-out unitranche investments and 1 percent equity securities.