Golub Capital BDC reported positive financials in its fourth quarter earnings report, while many of its rivals are suffering mark-downs stemming from energy losses and equity and credit market headwinds.
The firm reported a net increase in net assets of $20.6 million or 40 cents per share as of 31 December, up from $19.5 million or 38 cents per share for the previous quarter.
Net investment income was flat at 29 cents per share, compared with 30 cents per share three months earlier. Net asset value (NAV) per share rose to $15.89 from $15.80 over the same period. This is the 14th consecutive NAV rise for the Golub business development company at a time when many other BDCs are reporting declines.
Talking about market conditions and opportunities, David Golub, president of Golub Capital and chief executive of the BDC, said the firm had not seen any material credit quality declines. Non-accruals were only slightly up as a percentage of total investments at fair value: they rose to 0.5 percent in Q4 from 0.4 percent in Q3.
“Due to continued solid credit performance and strong equity gains, we have generated positive net realised and unrealised gains which has resulted in an ROE of approximately 9.4 percent on average over the past five quarters and 10.1 percent for the quarter ended 31 December,” said chief financial officer Ross Teune.
Golub added that the firm’s growing asset base across its other funds has put it in a position to lead large deals and compete with major investment banks.
“Strong credit results put us in a position to play offence at a time when many others are going to be playing defence,” Golub said.
“Credit quality on our underlying borrowers remains very strong,” he added, saying that strategic decisions, including exiting riskier assets like CLO equity and putting less emphasis on cyclical industries or those with commodity or currency exposure, had served the firm well.
“When we’re in a market such as we are in right now, filled with volatility uncertainty, our ability to provide certainty of execution and size becomes very valuable to our private equity clients and that’s particularly true today in dealing with larger middle-market deals,” Golub said.
He added that reports estimate there are between $10 billion and $15 billion of hung broadly syndicated loan deals.
“Some large banks are literary closed for business right now due to these hung deals and inventory overhang,” he said.
Going into 2016, he is continuing to see a trend of Golub winning deals that in the past might have gone to larger competitors and banks.
The firm has $15 billion in assets under management across its other funds, while the BDC runs about $1.6 billion.