Strong dealflow for Golub’s BDC in Q2

The US lender’s business development company has been doing most of its deals with repeat sponsors and borrowers via unitranche loan deals.  

Golub Capital’s BDC reported strong origination activity in the second quarter with new origination commitments totaling $401.4 million. In the first half of 2015, more than half of the new deals made were with repeat borrowers. And 90 percent of the transactions were with repeat sponsors, said David Golub (pictured), chief executive of the BDC and president of Golub Capital, speaking on the BDC’s earnings call last week (6 August).

“If we look at the mix of origination, we continue to focus on one-stop investments. The mix this quarter was 78 percent one stops, 13 percent traditional senior secured, 8 percent in the senior loan fund and 1 percent in equities,” Golub said. “Credit quality continues to be very strong, non-accruals were only 0.2 percent of total investments at fair value at the end of the quarter and over 90 percent of our investments have an internal risk rating of four or five, our highest ratings,” he added. The BDC now has made loans to 157 distinct companies with an average size of $9.4 million.

The BDC and Golub Capital overall, are continuing to focus on senior loans and avoiding junior debt. “We are not moving out the risk curve. We’ve said for several quarter that we view mid-market junior debt in today’s environment to be downright unattractive. We continue to hold that belief and we remain focused on our strategy of some standing now of focusing on first lien senior secured loans and one-stops,” Golub said. “From a sponsors’ perspective they [one-stops] are just a better mouse trap. We anticipate that’s going continue to be the case for the foreseeable future,” he continued.

The BDC also posted healthy financials. Its investment portfolio at fair value rose to $1.57 billion as of 30 June from $1.42 billion at the end of the prior quarter. Total assets went to $1.64 billion from $1.5 billion over the same periods. Net asset value per share came in at $15.74 in the second quarter, compared to $15.61 in the first quarter. Net investment income also rose to $15.2 million as of 30 June, from $13.75 million as of 31 March. The BDC’s board declared a quarterly distribution of $0.32 per share payable on 29 September.