Goldman Sachs BDC drives strong Q3 earnings

The business development company’s assets by fair value have grown to $1.146 billion, up 39 percent year-on-year.

Net investment income for Goldman Sachs business development company (BDC) was $0.57 per share, the firm reported in its third quarter results.

Earnings at the BDC rose roughly 29 percent during the three months to 30 September 2015, from $0.44 for the quarter ended 30 June.

The company announced a fourth quarter dividend of $0.45 per share bringing total dividends for 2015 to $1.80 or an annualised dividend yield of 9.3 percent of book value.

Net origination totalled $145.6 million, a 14.1 percent increase of the investment portfolio over the quarter. Gross origination stood at $203.5 million. 

The BDC didn’t book much new business through its senior credit fund during the quarter. Activity was “relatively muted” with just $5 million in add-on loans to two existing portfolio companies, Brendan McGovern, chief executive officer and president of the BDC, said on a call discussing the results. 

“Notwithstanding the market volatility that persisted through much of the quarter, borrowers were stubborn in acknowledging the new pricing environment,” he said. 

“The new issue market offered comparatively little risk premium for the super senior loans that the senior credit fund generally targets,” he continued. 

However, so far in the fourth quarter, the company has seen better pricing and structures, he added.
The fair value of the portfolio now stands at $1.15 billion, up 39 percent year-on-year from $824.4 million. 

Outstanding debt amounts to $447 million. The company amended and extended its senior revolving credit facility prior to the third quarter ending. Interest on the facility reduced from Libor plus 2.25 percent to Libor plus 1.75 percent. The maturity was extended by one year to November 2020. The revolver includes an accordion facility that allows the company to borrow up to $1 billion. The effect should increase net interest margin for shareholders, management said.

Net assets at the BDC were $704 million. The average debt to equity ratio grew to 0.58x during the third quarter compared to 0.35x through the second quarter. 

The BDC has lent to 40 portfolio companies operating in 27 different industries. The portfolio has a fair value of $1.2 billion and a current yield of 11.1 percent. First-lien debt makes up 36.7 percent of the portfolio, first-lien, last out-unitranche debt accounts for 26.6 percent while another 29.9 percent of assets are second-lien. Another 3.8 percent is invested in the company’s Senior Credit Fund. The remainder is invested in preferred stock and common stock. The weighted average leverage of the portfolio is 4.4x.

The Goldman Sachs Senior Credit Fund, which is valued at around $285.5 million and has a current yield of 6.6 percent, has investments in 20 portfolio companies. It is a solely senior secured strategy and first lien debt makes up 97.7 percent of the fund. The weighted average leverage of those investments stood at 3.3x.

The net asset value per share was $19.38, slightly down on the NAV of $19.46 for the second quarter.