Goldman BDC predicts US mid-market capital flow may ease

In Goldman Sachs BDC’s fourth-quarter earnings call, chief operating officer John Yoder said there were signs of money moving into risk-free assets.

Acknowledging strong levels of M&A and refinancing, and “significant capital accumulation” for private equity and private debt, Goldman Sachs Asset Management (GSAM) chief operating officer John Yoder said that, in the face of pressure on spreads and terms, “there are early signs” that the flow of capital “may be reversing” into risk-free assets.

“More capital is going into risk-free assets and that could moderate the flow into the US domestic mid-market,” said Yoder. “We are stable and well positioned if appetite reverses,” he added. GSAM is the investment adviser to Goldman Sachs BDC, which targets investments of $10 million to $75 million in US mid-market companies.

Brendan McGovern, chief executive officer and president of GSAM, hailed “another solid quarter” as the BDC produced net investment income for the quarter of $0.47 per share, equating to an annualised net investment income yield on book value of 10.4 percent.

The BDC announced a first-quarter 2018 dividend of $0.45 per share and said new commitments and fundings in the previous quarter reached $141.6 million and $126.4 million respectively. Sales and repayments totalled $42.8 million, resulting in net funded portfolio growth of $83.6 million.

The Senior Credit Fund, which is the BDC’s largest investment – at more than 7 percent of total investments on a fair value basis – delivered a 12.0 percent return on investment during 2017. The fund, which focuses on narrowly syndicated loans in the upper mid-market, now has positions in 34 names in 18 industries.

During the period, the BDC exercised a right to increase the size of its revolving credit facility from $620.0 million to $695.0 million, and extended the maturity date to February 2023.