In This Article:
Release Date: May 09, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Goldman Sachs BDC Inc (NYSE:GSBD) has a strong portfolio with 96% of investments in first lien risk, providing a secure position in the capital stack.
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The company has a diversified portfolio with minimal exposure to international supply chains, primarily serving US customers in service-based industries.
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GSBD's net investment income per share for the quarter was $0.42, indicating solid financial performance.
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The board has enacted a revised dividend structure, including a base dividend and supplemental variable distributions, aligning with long-term earnings power.
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The company maintains a healthy net debt to equity ratio of 1.16 times, below the target leverage ratio of 1.25 times, indicating strong financial management.
Negative Points
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The macroeconomic environment remains challenging, with tariffs and potential recessionary impacts affecting deal flow and portfolio performance.
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The net asset value per share decreased by 1.6% relative to the fourth quarter, primarily due to special dividends and net realized and unrealized losses.
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The portfolio yield declined by 40 basis points quarter over quarter, reflecting a decrease in overall portfolio yield.
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Investments on non-accrual status remain a concern, although they decreased slightly to 1.9% of the total investment portfolio at fair value.
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The company faces a lack of new M&A activity, with market volatility pushing back the resurgence of new deals.
Q & A Highlights
Q: The portfolio yield declined about 40 basis points quarter over quarter. Could you explain the reasons behind this decline and whether the portfolio has largely repriced based on the base rate cuts from last year? A: (Alex Ge, Co-CEO) The repricing has largely subsided, with most borrowers having taken advantage of a more robust environment in prior quarters. The decline was driven by the exit of non-accrual positions with high coupons. However, spreads for new deals widened by about 25 basis points, and we leveraged our incumbency to secure better spreads. (David Miller, Co-CEO) The exit of non-accrual positions, which had high coupons, contributed to the overall yield decline, but it was positive as it reduced non-accruals.
Q: Regarding the loans with direct tariff exposure, was this reflected in the fair value of those investments as of the first quarter, or will it be determined in subsequent quarters? A: (Alex Ge, Co-CEO) The exposure doesn't necessarily mean immediate impact. We took a prospective look at potential impacts, categorizing companies with supply chain exposure to China and Mexico conservatively. Any performance deterioration would be reflected in the mark, but we haven't seen it yet. (David Miller, Co-CEO) We gained more clarity on potential tariffs post-quarter end, so there could be more updates once final tariffs are confirmed.
