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Golub BDC’s one-stop loans outstrip other instruments

The vehicle posted healthy financials amid an otherwise tumultuous quarter.

The Golub Capital BDC (GBDC) reported that it continues to focus on one-stop loans in its portfolio. The instrument made up 72 percent of Golub’s $156 million in new investment commitments in the first quarter.

The rest went to: traditional senior loans (24 percent), the senior loan fund joint venture (3 percent) and equities (1 percent). Of the total $1.6 billion portfolio, the firm has $1.2 billion invested in one-stops.

Golub runs a suite of “Golub One Loan Debt” (GOLD) facilities, a proprietary type of unitranche product that the firm uses across the BDC and its broader $15 billion mid-market lending platform.

When leading large deals, the firm will often syndicate part of the facility to other lenders, though BDC chief executive David Golub has continued to voice a preference for senior loans at a time when it’s prudent to be more careful around credit.

Overall, the BDC showed healthy financials for the quarter, at a time when many other firms’ earnings were dragged down by a volatile market. Net investment income after excise tax was $16.9 million, compared with $15 million in the fourth quarter last year. Assets also grew slightly to $1.66 billion from $1.64 billion over the same timeframe.

The Golub BDC reported limited unrealised losses of $2.7 million or $0.05 per share for the quarter, stemming primarily from an investment in Avatar, a healthcare company that was marked up in Q4, as it was expected to be sold imminently.

Some negative developments later delayed the sale and the BDC had to mark the position down in Q1, Golub explained. Net asset value (NAV) declined slightly to $15.85 per share in Q1 from $15.89 per share at the end of last year, driven primarily from the mark-down in Avatar.

“We have had a lot of dramatic twists and turns in liquid credit markets in calendar Q1, but GBDC's performance remained pretty good or pretty boring,” Golub said speaking on the BDC’s earnings call Friday (6 May).

Echoing other executives on recent earnings calls, he said it was “a tale of two quarters,” where it began with a significant slowdown in deal activity and widening spreads, but finished with a strong recovery and stabilisation. Golub said he’s not sure whether that stabilisation will last but is still choosing to focus on the safer end of the market, namely senior secured loans.

“Looking forward, some commentators think we are going to see a return to the January, February volatility and others think that the March, April stability is here to stay. I am not sure. But I think our capital is well positioned for either environment,” Golub said.