New non-accruals cause dip in Goldman BDC’s earnings

The non-accrual investments included a first-lien loan to a pipe manufacturer that was hurt by low oil prices.

Goldman Sachs BDC saw a dip in its net income and net asset value per share last quarter, according to its fourth-quarter earnings release.

The firm’s total investment income for the quarter was $30.5 million, down from $34 million last quarter, or $0.50 per share versus $0.51 per share respectively, the release shows.

During the earnings call on Wednesday, Jonathan Lamm, chief financial officer, said the decrease in income last quarter was mostly due to the decline in prepayment income and the classification of two investments as non-accrual status.

The first non-accrual investment was a first lien loan to Iracore, a pipe manufacturer primarily for oil and gas, which failed to pay its coupon in December after taking a beating from a fall in oil prices, Brendan McGovern, chief executive officer, said on the call.

“We’re aiming to attain a meaningful stake in [Iracore] that could enable us with the opportunity to recoup our initial investments, should the operating environment improve,” McGovern noted.

The second investment to be put on non-accrual status was a loan to Washington Inventory Services, which collects data on companies’ inventories, after the company experienced “margin pressure” from high labour costs. “We are actively engaged with [WIS] and its advisors and are focused on obtaining a favourable outcome for our investments,” he added.

One investment the GSBD previously put on non-accrual, Texas-based fiber-optic broadband service provider NTS Communications, after the firm worked with private equity sponsor Tower Three Partners to put additional capital into the company. GSBD put NTS on non-accrual in the first half of 2016.

On top of the slight dip in total investment income, GSBD’s NAV per share also dropped from the third to fourth quarter, moving from $18.58 at the end of September to $18.31 at the end of December. Both figures are down from the BDC’s NAV at the end of 2015, which was $18.97.

Sales and repayments totaled $55.9 million over the quarter, the earnings announcement also showed. That is down from the total from third quarter of $108 million, as Private Debt Investor reported.

The firm also grew the investment portfolio of its Senior Credit Fund to $480 million, comprised of investments in 37 portfolio companies operating across 22 different industries as of 31 December, according to the earnings release.