Release Date: February 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Crescent Capital BDC Inc (CCAP, Financial) reported a net investment income (NII) of $0.55 per share, translating to an annualized NII return on equity of 11%.
- The company maintained a high dividend coverage, with NII covering 131% of the base dividend in the fourth quarter.
- CCAP's investment portfolio is highly diversified, consisting of 185 companies with a focus on first lien loans, representing 90% of the portfolio at fair value.
- The portfolio is supported by well-capitalized private equity sponsors, with 99% of the debt portfolio in sponsor-backed companies.
- CCAP declared a regular dividend of $0.42 per share for the first quarter of 2025, continuing its history of stable or increasing dividends since 2015.
Negative Points
- Net asset value (NAV) per share decreased by $0.22 to $19.98 in the quarter, primarily due to changes in unrealized marks.
- The net investment income per share declined from $0.64 in the prior quarter to $0.55, impacted by lower investment portfolio yields and reduced non-recurring income.
- There was an increase in three-rated investments, indicating potential challenges within certain portfolio companies.
- The company experienced a pickup in non-accruals, with non-accruals representing 0.9% of total debt investments at fair value.
- CCAP's total investment income decreased from $51.6 million in the prior quarter to $46.4 million, reflecting the impact of Federal Reserve rate cuts.
Q & A Highlights
Q: Can you explain the increase in re-rated assets and any common themes driving this?
A: Jason Breaux, CEO, noted that the seven new names added to the watch list have company-specific challenges. Henry Chung, President, highlighted themes such as challenges in third-party logistics due to freight rate compression, destocking trends in packaging, and pressures in early-stage Medtech and biotech sectors. These sectors collectively represent less than 4% of the portfolio.
Q: What is your exposure to tariffs and government contracting?
A: Jason Breaux, CEO, mentioned that they are closely monitoring the situation. Henry Chung, President, added that about 12% of the portfolio is exposed to foreign suppliers, and less than 5% is related to government contracting, primarily in software. Overall, these exposures are a minority of the portfolio.
Q: Can you discuss the realized and unrealized gains and losses for the quarter?
A: Jason Breaux, CEO, stated that unrealized losses were due to individual watch list names and a pickup in non-accruals. Gerhard Lombard, CFO, explained that there were no significant individual movers, but an increase in three-rated assets contributed to higher unrealized losses.
Q: Are the new non-accruals Crescent-originated or legacy investments?
A: Jason Breaux, CEO, clarified that one of the three new non-accruals was Crescent-originated, while the other two were legacy investments.
Q: What drove the realized loss this quarter?
A: Henry Chung, President, explained that the primary driver was the restructuring of a portfolio company, CECO, which moved from unrealized to realized loss due to the restructuring.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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