GOLUB CAPITAL BDC Inc
For the period ended Mar 31, 2024. Filed May 6, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 6, 2024
GBDC$12.74-1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-05.
0001476765-24-000016
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-06.
0001476765-24-000036
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 232 previous paragraphs and 235 current paragraphs.
154 unchanged; 65 reworded; 13 added; 5 removed; 8 previous and 3 current paragraphs rearranged.
Tables are not compared: 13 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
•the anticipated closing of the Proposed Merger (as defined in Note 1 of our consolidated financial statements).
Current report
Annualized for periods less than one year
Current report
On April 12, 2024, we filed an amended registration statement on Form N-14, which included a joint proxy statement of us and GBDC 3 and a prospectus of us. The registration statement on Form N-14 was declared effective by the SEC on April 15, 2024. Special meetings for each of our and GBDC 3’s stockholders are scheduled for May 29, 2024 to vote on the matters described in the joint proxy statement as required by the GBDC 3 Merger Agreement.
Current report
On April 8, 2024, we redeemed $500.0 million in aggregate principal amount of the 2024 Notes (as defined in Note 7 of our consolidated financial statements). The 2024 Notes were redeemed at 100% of the principal amount, plus the accrued and unpaid interest thereon.
Current report
On April 11, 2024, we entered into an interest rate swap on the 2028 Notes (as defined in Note 7 of our consolidated financial statements) pursuant to which we agreed to receive a fixed rate of 7.310% and pay a rate of one-month SOFR plus 2.835%. The interest rate swap is designated as an effective hedge accounting instrument. The notional amount of the swap is $225.0 million and terminates on November 5, 2028.
Current report
Investment income decreased from the three months ended December 31, 2023 to the three months ended March 31, 2024 by $0.5 million, primarily due to a decrease in accretion income resulting from decreased payoffs of portfolio company investments coupled with a slight decrease in interest income as a result of a decrease in the average earning debt investments balance of $81.1 million. The decrease in interest income resulting from the decrease in the average earning debt investments was partially offset by $4.8 million of interest earned on cash during the three months ended March 31, 2024, an increase of $3.9 million as compared to $0.9 million of interest earned on cash for the three months ended December 31, 2023 that was primarily due to increased cash temporarily held following the issuance of the 2029 Notes and prior to the redemption of the 2024 Notes.
Current report
The Income Incentive Fee decreased by $5.8 million from the three months ended December 31, 2023 to the three months ended March 31, 2024 primarily due to a $5.2 million income incentive fee waiver unilaterally provided by GC Advisors to waive incentive fees in excess of 15% in support of the Proposed Merger for periods during the pendency of the Proposed Merger (the “GBDC 3 Merger Waiver”). GC Advisors has agreed to permanently reduce the income incentive fee and capital gain incentive fee rate from 20% to 15% upon the close of the Proposed Merger.
Current report
For the six months ended March 31, 2024, we had $58.2 million in unrealized appreciation on 224 portfolio company investments, which was offset by $41.2 million in unrealized depreciation on 159 portfolio company investments. For the six months ended March 31, 2023, we had $40.4 million in unrealized appreciation on 145 portfolio company investments, which was offset by $88.5 million in unrealized depreciation on 202 portfolio company investments.
Current report
On April 11, 2024, we entered into an interest rate swap on the 2028 Notes pursuant to which we agreed to receive a fixed rate of 7.310% and pay a rate of one-month SOFR plus 2.835%. The interest rate swap is designated as an effective hedge accounting instrument. The notional amount of the swap is $225.0 million and terminates on November 5, 2028.
Current report
2029 Notes
Current report
On February 1, 2024, we issued $600.0 million in aggregate principal amount of the 2029 Notes, all of which remained outstanding as our debt as of March 31, 2024.
Current report
Distributions
Current report
•On January 16, 2024, we entered into the GBDC 3 Merger Agreement with GBDC 3, Merger Sub, GC Advisors, and, for certain limited purposes, the Administrator. See Note 13 in the notes to our consolidated financial statements for further information.
Removed paragraphs (5)
Previous report
(2)The income yield presented for the three months ended September 30, 2023 excludes the one-time recognition of $3.7 million of previously deferred interest income resulting from a former non-accrual loan returning to accrual status, which is included in the calculation of the investment income yield for the quarter ended September 30, 2023. The income yield was 12.2% for the quarter ended September 30, 2023 when including the $3.7 million of interest income.
Previous report
Waiver Letter Agreement
Previous report
Unsecured Bond Issuance
Previous report
changes, not seasonal business activity.
Previous report
Investment income increased from the three months ended September 30, 2023 to the three months ended December 31, 2023 by $0.2 million primarily due to an increase in accretion income resulting from increased payoffs of portfolio company investments coupled with an increase in cash and non-cash dividend income, partially offset by a decrease in PIK interest income that was the result of a one-time recognition of previously deferred interest income resulting from a former non-accrual loan returning to accrual status during the three months ended September 30, 2023.
Reworded paragraphs (65)
Previous wording
“anticipate,” “predict,” “potential,” “plan” or similar words. The forward looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth as “Risk Factors” in our annual report on Form 10-K for the year ended September 30, 2023.
Current wording
Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “predict,” “potential,” “plan” or similar words. The forward looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth as “Risk Factors” in our annual report on Form 10-K for the year ended September 30, 2023, our quarterly report on Form 10-Q for the quarter ended December 31, 2023 and in Item 1A. “Risk Factors” in this quarterly report on Form 10-Q.
Previous wording
One stop loans include loans to technology companies undergoing strong growth due to new services, increased adoption and/or entry into new markets. We refer to loans to these companies as recurring revenue loans. Other targeted characteristics of recurring revenue businesses include strong customer revenue retention rates, a diversified customer base and backing from growth equity or venture capital firms. In some cases, the borrower’s high revenue growth is supported by a high level of discretionary spending. As part of the underwriting of such loans and consistent with industry practice, we adjust our characterization of the earnings of such borrowers for a reduction or elimination of such discretionary expenses, if appropriate. As of December 31, 2023 and September 30, 2023, one stop loans included $785.5 million and $782.6 million, respectively, of recurring revenue loans at fair value.
Current wording
One stop loans include loans to technology companies undergoing strong growth due to new services, increased adoption and/or entry into new markets. We refer to loans to these companies as recurring revenue loans. Other targeted characteristics of recurring revenue businesses include strong customer revenue retention rates, a diversified customer base and backing from growth equity or venture capital firms. In some cases, the borrower’s high revenue growth is supported by a high level of discretionary spending. As part of the underwriting of such loans and consistent with industry practice, we adjust our characterization of the earnings of such borrowers for a reduction or elimination of such discretionary expenses, if appropriate. As of March 31, 2024 and September 30, 2023, one stop loans included $788.9 million and $782.6 million, respectively, of recurring revenue loans at fair value.
Previous wording
As of December 31, 2023 and September 30, 2023, we had debt and equity investments in 357 and 342 portfolio companies, respectively.
Current wording
As of March 31, 2024 and September 30, 2023, we had debt and equity investments in 366 and 342 portfolio companies, respectively.
Previous wording
The following table shows the weighted average income yield and weighted average investment income yield of our earning portfolio company investments, which represented nearly 100% of our debt investments, as well as the annualized total return based on our average net asset value, and the total return based on the change in the quoted market price of our stock and assuming distributions were reinvested in accordance with our dividend reinvestment plan, or DRIP, in each case for the three months ended December 31, 2023, September 30, 2023 and December 31, 2022:
Current wording
The following table shows the weighted average income yield and weighted average investment income yield of our earning portfolio company investments, which represented nearly 100% of our debt investments, as well as the annualized total return based on our average net asset value, and the total return based on the change in the quoted market price of our stock and assuming distributions were reinvested in accordance with our dividend reinvestment plan, or DRIP, in each case for the three months ended March 31, 2024 and December 31, 2023 and the six months ended March 31, 2024 and March 31, 2023:
Previous wording
(1)Represents income from interest, fees, accrued PIK and non-cash dividend income, excluding amortization of capitalized fees, discounts and purchase premium (as described in Note 2 of the consolidated financial statements), divided by the average fair value of earning portfolio company investments, and does not represent a return to any investor in us.
Current wording
(1)Represents income from interest, fees, interest earned on cash, accrued PIK and non-cash dividend income, excluding amortization of capitalized fees, discounts and purchase premium (as described in Note 2 of the consolidated financial statements), divided by the daily average fair value of earning portfolio company investments, and does not represent a return to any investor in us.
Previous wording
(3)Represents income from interest, fees, accrued PIK and non-cash dividend income and amortization of capitalized fees and discounts, excluding amortization of purchase premium (as described in Note 2 of the consolidated financial statements), divided by the average fair value of earning portfolio investments, and does not represent a return to any investor in us.
Current wording
(2)Represents income from interest, fees, interest earned on cash, accrued PIK and non-cash dividend income and amortization of capitalized fees and discounts, excluding amortization of purchase premium (as described in Note 2 of the consolidated financial statements), divided by the daily average fair value of earning portfolio investments, and does not represent a return to any investor in us.
Previous wording
(4)Total return based on average net asset value is calculated as (a) the net increase/(decrease) in net assets resulting from operations divided by (b) the daily average of total net assets. Total return does not include sales load.
Current wording
(3)Total return based on average net asset value is calculated as (a) the net increase/(decrease) in net assets resulting from operations divided by (b) the daily average of total net assets. Total return does not include sales load.
Previous wording
(5)Total return based on market value assumes distributions are reinvested in accordance with the DRIP. Total return does not include sales load.
Current wording
(4)Total return based on market value assumes distributions are reinvested in accordance with the DRIP. Total return does not include sales load.
Previous wording
Collateral management fees are paid directly by the 2018 Issuer and GCIC 2018 Issuer to GC Advisors and are offset against the management fees payable under the Investment Advisory Agreement. The 2018 Issuer paid Morgan Stanley & Co. LLC structuring and placement fees for its services in connection with the structuring of the 2018 Debt Securitization (as defined in Note 7 of our consolidated financial statements). Before we acquired the GCIC 2018 Issuer as part of our acquisition of GCIC (as defined in the “GCIC Acquisition” section below), the GCIC 2018 Issuer paid Wells Fargo Securities, LLC structuring and placement fees for its services in connection with the initial structuring of the GCIC 2018 Debt Securitization (as defined in Note 7 of our consolidated financial statements). Term debt securitizations are also known as CLOs, and are a form of secured financing incurred by us, which are consolidated by us and subject to our overall asset coverage requirement. The 2018 Issuer and GCIC 2018 Issuer also agreed to pay ongoing administrative expenses to the trustee, collateral manager, independent accountants, legal counsel, rating agencies and independent managers in connection with developing and maintaining reports, and providing required services in connection with the administration of the 2018 Debt Securitization and GCIC 2018 Debt Securitization and collectively the Debt Securitizations, as applicable.
Current wording
Collateral management fees are paid directly by the 2018 Issuer and GCIC 2018 Issuer to GC Advisors and are offset against the management fees payable under the Investment Advisory Agreement. The 2018 Issuer paid Morgan Stanley & Co. LLC structuring and placement fees for its services in connection with the structuring of the 2018 Debt Securitization (as defined in Note 7 of our consolidated financial statements). Before we acquired the GCIC 2018 Issuer as part of our acquisition of Golub Capital Investment Corporation, a Maryland corporation, or GCIC, on September 6, 2019, the GCIC 2018 Issuer paid Wells Fargo Securities, LLC structuring and placement fees for its services in connection with the initial structuring of the GCIC 2018 Debt Securitization (as defined in Note 7 of our consolidated financial statements). Term debt securitizations are also known as CLOs, and are a form of secured financing incurred by us, which are consolidated by us and subject to our overall asset coverage requirement. The 2018 Issuer and GCIC 2018 Issuer also agreed to pay ongoing administrative expenses to the trustee, collateral manager, independent accountants, legal counsel, rating agencies and independent managers in connection with developing and maintaining reports, and providing required services in connection with the administration of the 2018 Debt Securitization and GCIC 2018 Debt Securitization and collectively the Debt Securitizations, as applicable.
Previous wording
On January 16, 2024, we entered into an Agreement and Plan of Merger, or the GBDC 3 Merger Agreement, with Golub Capital BDC 3, Inc., a Maryland corporation, or GBDC 3, Park Avenue Subsidiary Inc., a Maryland corporation and our wholly owned subsidiary, or the Merger Sub, GC Advisors LLC, or GC Advisors, and, for certain limited purposes, Golub Capital LLC, or the Administrator. The GBDC 3 Merger Agreement provides that, subject to the conditions set forth in the GBDC 3 Merger Agreement, Merger Sub will merge with and into GBDC 3, with GBDC 3 continuing as the surviving company and as a wholly-owned subsidiary of us and, immediately thereafter, GBDC 3 will merge with and into us, with us continuing as the surviving company. See “Note 13. Subsequent Events—Merger Agreement with Golub Capital BDC 3, Inc.” for a description of the terms of the GBDC 3 Merger Agreement and the transactions contemplated by the GBDC 3 Merger Agreement.
Current wording
Pending Merger with Golub Capital BDC 3, Inc. (the “Proposed Merger”): On January 16, 2024, we entered into an Agreement and Plan of Merger (the “GBDC 3 Merger Agreement”) with Golub Capital BDC 3, Inc., a Maryland corporation (“GBDC 3”), Park Avenue Subsidiary Inc., a Maryland corporation and wholly owned subsidiary of us (“Merger Sub”), GC Advisors, and, for certain limited purposes, the Administrator. The GBDC 3 Merger Agreement provides that, subject to the conditions set forth in the GBDC 3 Merger Agreement, Merger Sub will merge with and into GBDC 3, with GBDC 3 continuing as the surviving company and as a wholly-owned subsidiary of us, and, immediately thereafter, GBDC 3 will merge with and into us, with us continuing as the surviving company. The parties to the GBDC 3 Merger Agreement intend the Proposed Merger to be treated as a “reorganization” within the meaning of Section 368(a) of the Code.
Previous wording
On February 2, 2024, our Board declared a supplemental distribution of $0.07 per share payable on March 15, 2024 to holders of record as of February 15, 2024.
Current wording
On May 3, 2024, our Board declared a supplemental distribution of $0.06 per share payable on June 14, 2024 to holders of record as of May 16, 2024.
Previous wording
In addition to our analysis of the year-to-date reporting period compared to the year-to-date prior period, we are
Current wording
In addition to our analysis of the year-to-date reporting period compared to the year-to-date prior period, we are presenting our analysis for the reporting quarter compared to the immediately preceding quarter as we believe this comparison will provide a more meaningful analysis of our business as our results are largely driven by market changes, not seasonal business activity.
Previous wording
Consolidated operating results for three months ended December 31, 2023, September 30, 2023 and December 31, 2022 are as follows:
Current wording
Consolidated operating results for the three months ended March 31, 2024 and December 31, 2023 and the six months ended March 31, 2024 and March 31, 2023 are as follows:
Previous wording
Net income can vary substantially from period to period for various reasons, including the recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, quarterly and year-to-date comparisons of net income may not be meaningful.
Current wording
Net income can vary substantially from period to period for various reasons, including the recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, quarterly and year-to-date comparisons of operating results may not be meaningful.
Previous wording
Investment income increased from the three months ended December 31, 2022 to the three months ended December 31, 2023 by $27.9 million primarily due to an increase in interest income due to rising LIBOR and SOFR interest base rates coupled with an increase in the average earning debt investments balance of $11.8 million, an increase in non-cash dividend income and a decrease of the GCIC acquisition purchase price premium amortization.
Current wording
Investment income increased from the six months ended March 31, 2023 to the six months ended March 31, 2024 by $45.2 million, primarily due to an increase in interest and payment-in-kind (“PIK”) interest income due to rising interest base rates coupled with an increase in non-cash dividend income and a decrease of the GCIC acquisition purchase price premium amortization.
Previous wording
The annualized income yield by debt security type for three months ended December 31, 2023, September 30, 2023 and December 31, 2022 are as follows:
Current wording
The annualized income yield by debt security type for the three months ended March 31, 2024 and December 31, 2023 and the six months ended March 31, 2024 and March 31, 2023 are as follows:
Previous wording
Income yields on senior secured and one stop loans increased for the three months ended December 31, 2023 as compared to the three months ended September 30, 2023, primarily due to rising SOFR rates. Income yields on senior secured and one stop loans increased for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, primarily due to rising LIBOR and SOFR rates. Our loan portfolio is partially insulated from a drop in floating interest rates, as 97.9% of the loan portfolio at fair value is subject to an interest rate floor. As of December 31, 2023 and September 30, 2023, the weighted average base rate floor of our loans was 0.82% and 0.80%, respectively.
Current wording
Income yields on senior secured and one stop loans remained relatively flat for the three months ended March 31, 2024 as compared to the three months ended December 31, 2023. Income yields on senior secured and one stop loans increased for the six months ended March 31, 2024 as compared to the six months ended March 31, 2023, primarily due to rising interest base rates. Our loan portfolio is partially insulated from a drop in floating interest rates, as 98.0% of the loan portfolio at fair value is subject to an interest rate floor. As of March 31, 2024 and September 30, 2023, the weighted average base rate floor of our loans was 0.82% and 0.80%, respectively.
Previous wording
As of December 31, 2023, we have second lien investments in five portfolio companies and subordinated debt investments in five portfolio companies as shown in the Consolidated Schedule of Investments. Due to the limited number of second lien and subordinated debt investments, income yields on second lien and subordinated debt investments can be significantly impacted by the addition, subtraction or refinancing of one investment.
Current wording
As of March 31, 2024, we have second lien investments in four portfolio companies and subordinated debt investments in six portfolio companies as shown in the Consolidated Schedule of Investments. Due to the limited number of second lien and subordinated debt investments, income yields on second lien and subordinated debt investments can be significantly impacted by the addition, subtraction or refinancing of one investment. The income yield for subordinated debt loans increased for the three months ended March 31, 2024 as compared to the three months ended December 31, 2023 due to the one-time recognition of $0.2 million of previously deferred interest income resulting from the change in accrual status of a former non-accrual loan. The income yield for subordinated debt loans was 15.2% for the three months ended March 31, 2024 when excluding the $0.2 million of previously deferred interest income.
Previous wording
The following table summarizes our expenses for the three months ended December 31, 2023, September 30, 2023 and December 31, 2022:
Current wording
The following table summarizes our expenses for the three months ended March 31, 2024 and December 31, 2023 and the six months ended March 31, 2024 and March 31, 2023:
Previous wording
Interest and other debt financing expenses, including amortization of debt issuance costs, increased from the three months ended September 30, 2023 to the three months ended December 31, 2023 by $0.9 million, primarily due to the December 2023 issuance of the 2028 Notes with a yield to maturity of 7.310% and additional debt issuance costs recognized in connection with the 2028 Notes, that were partially offset by a decrease in average debt outstanding of $9.1 million. Interest and other debt financing expenses, including amortization of debt issuance costs, increased from the three months ended December 31, 2022 to the three months ended December 31, 2023 by $7.3 million, primarily due to rising LIBOR and SOFR rates on borrowings from our floating rate debt facilities, partially offset by a decrease in average debt outstanding of $3.1 million. For more information about our outstanding borrowings for the three months ended December 31, 2023 and 2022, including the terms thereof, see “Note 7. Borrowings” in the notes to our consolidated financial statements and the “Liquidity and Capital Resources” section below.
Current wording
Interest and other debt financing expenses, including amortization of debt issuance costs, increased from the three months ended December 31, 2023 to the three months ended March 31, 2024 by $2.6 million, primarily due to the February 2024 issuance of the 2029 Notes with a yield to maturity of 6.248%, additional debt issuance costs recognized in connection with the 2028 and 2029 Notes and an increase in average debt outstanding of $151.4 million. Interest and other debt financing expenses, including amortization of debt issuance costs, increased from the six months ended March 31, 2023 to the six months ended March 31, 2024 by $15.2 million, primarily due to the issuance of the 2028 Notes and 2029 Notes, rising interest base rates on borrowings from our floating rate debt facilities and an increase in average debt outstanding of $77.6 million. For more information about our outstanding borrowings for the three and six months ended March 31, 2024 and 2023, including the terms thereof, see “Note 7. Borrowings” in the notes to our consolidated financial statements and the “Liquidity and Capital Resources” section below.
Previous wording
For the three months ended December 31, 2023, September 30, 2023 and December 31, 2022, the effective annualized average interest rate, which includes amortization of debt financing costs, amortization of discounts on notes issued and non-usage facility fees, on our total debt was 5.4%, 5.2% and 4.4%, respectively.
Current wording
For the three months ended March 31, 2024 and December 31, 2023 and the six months ended March 31, 2024 and March 31, 2023, the effective annualized average interest rate, which includes amortization of debt financing costs, amortization of discounts on notes issued and non-usage facility fees, on our total debt was 5.5%, 5.4%, 5.4% and 4.6%, respectively.
Previous wording
The effective annualized average interest rate increased for the three months ended December 31, 2023 compared to the three months ended September 30, 2023 due to the 2028 Notes issuance and rising interest rates on our borrowings from floating rate debt facilities. The effective annualized average interest rate increased for the three months ended December 31, 2023 compared to the three months ended December 31, 2022 primarily due to rising interest rates on our borrowings from floating rate debt facilities.
Current wording
The effective annualized average interest rate increased for the three months ended March 31, 2024 compared to the three months ended December 31, 2023 primarily due to the 2029 Notes issuance. The effective annualized average interest rate increased for the six months ended March 31, 2024 compared to the six months ended March 31, 2023 primarily due to the 2028 Notes and 2029 Notes issuances and rising interest rates on our borrowings from floating rate debt facilities.
Previous wording
The base management fee decreased from the three months ended December 31, 2022 to the three months ended December 31, 2023 primarily due to the base management fee rate reduction to 1.0% from 1.375% effective July 1, 2023 under the Investment Advisory Agreement, as compared to the Prior Investment Advisory Agreement that was partially offset by increased base management fees incurred due to an increase in average adjusted gross assets from the three months ended December 31, 2022 to the three months ended December 31, 2023.
Current wording
The base management fee decreased from the six months ended March 31, 2023 to the six months ended March 31, 2024 primarily due to the base management fee rate reduction to 1.0% from 1.375% effective July 1, 2023 under the Investment Advisory Agreement, as compared to the Prior Investment Advisory Agreement and a decrease in average adjusted gross assets from the six months ended March 31, 2023 to the six months ended March 31, 2024.
Previous wording
The Income Incentive Fee increased by $0.1 million from the three months ended September 30, 2023 to the three months ended December 31, 2023 as a result of an increase in Pre-Incentive Fee Net Investment Income primarily due to an accrual for excise tax expense $0.8 million lower for the three months ended December 31, 2023 as compared to the three months ended September 30, 2023. The Income Incentive Fee increased by $5.3 million from the three months ended December 31, 2022 to the three months ended December 31, 2023 primarily as a result of an increase in Pre-Incentive Fee Net Investment Income and a greater rate of return on the value of our net assets driven by net funds growth, the impact of rising LIBOR and SOFR rates and an increase in non-cash dividend income during the first fiscal quarter of fiscal year 2024. For each of the three months ended December 31, 2023, September 30, 2023 and December 31, 2022, we were fully through the Income Incentive Fee “catch-up” provision and the Income Incentive Fee was equal to 20% of Pre-Incentive Fee Net Investment Income.
Current wording
The Income Incentive Fee increased by $2.8 million from the six months ended March 31, 2023 to the six months ended March 31, 2024 primarily as a result of an increase in Pre-Incentive Fee Net Investment Income and a greater rate of return on the value of our net assets driven by net funds growth, the impact of rising interest base rates and an increase in non-cash dividend income during fiscal year 2024 that was partially offset by the GBDC 3 Merger Waiver. For each of the three months ended March 31, 2024 and December 31, 2023 and the six months ended March 31, 2024 and March 31, 2023, we were fully through the Income Incentive Fee “catch-up” provision and the Income Incentive Fee was equal to 15% of Pre-Incentive Fee Net Investment Income, net of the GBDC 3 Merger Waiver, for the three months ended March 31, 2024 and 20% of Pre-Incentive Fee Net Investment Income for the three months ended December 31, 2023.
Previous wording
In total, professional fees, the administrative service fee, and general and administrative expenses increased by $0.2 million from the three months ended December 31, 2022 to the three months ended December 31, 2023 primarily due to an increase in the administrative service fee and professional fees.
Current wording
In total, professional fees, the administrative service fee and general and administrative expenses increased by $0.5 million from the six months ended March 31, 2023 to the six months ended March 31, 2024, primarily due to an increase in the administrative service fee and professional fees.
Previous wording
Total expenses reimbursed to the Administrator during the three months ended December 31, 2023, September 30, 2023 and December 31, 2022 were $2.0 million, $1.0 million and $2.1 million, respectively.
Current wording
Total expenses reimbursed to the Administrator during the three months ended March 31, 2024 and December 31, 2023 and the six months ended March 31, 2024 and March 31, 2023 were $2.0 million, $2.0 million, $4.0 million and $3.2 million, respectively.
Previous wording
As of both December 31, 2023 and September 30, 2023, included in accounts payable and other liabilities were $2.0 million of expenses paid on behalf of us by the Administrator.
Current wording
As of March 31, 2024 and September 30, 2023, included in accounts payable and other liabilities were $5.7 million and $2.0 million, respectively, of expenses paid on behalf of us by the Administrator.
Previous wording
The following table summarizes our net realized and unrealized gains (losses) for the three months ended December 31, 2023, September 30, 2023 and December 31, 2022:
Current wording
The following table summarizes our net realized and unrealized gains (losses) for the three months ended March 31, 2024 and December 31, 2023 and the six months ended March 31, 2024 and March 31, 2023:
Previous wording
During the three months ended December 31, 2023, we had a net realized gain of $1.1 million primarily attributable to the realized gain recognized on the sale of an equity investment and the translation of foreign currency amounts and transactions into U.S. dollars that were partially offset by realized losses on the disposition of an equity investment of a portfolio company. During the three months ended September 30, 2023, we had a net realized loss of $0.7 million primarily attributable to the realized loss on foreign currency transactions and the loss on the settlement of forward currency contracts. During the three months ended December 31, 2022, we had a net realized gain of $3.3 million primarily attributable to recognized realized gains on the sale of equity investments in multiple portfolio companies and the gain on the settlement of forward currency contracts.
Current wording
During the three months ended March 31, 2024, we had a net realized loss of $13.8 million, primarily attributable to the realized loss recognized on the disposition of equity and debt investments of a portfolio company that were partially offset by realized gains recognized on the translation of foreign currency amounts and transactions into U.S. dollars and a realized gain on the sale of an equity investment. During the three months ended December 31, 2023, we had a net realized gain of $1.1 million, primarily attributable to the realized gain recognized on the sale of an equity investment and the translation of foreign currency amounts and transactions into U.S. dollars that were partially offset by realized losses on the disposition of an equity investment of a portfolio company.
Previous wording
For the three months ended December 31, 2023, we had $32.8 million in unrealized appreciation on 153 portfolio company investments, which was offset by $42.1 million in unrealized depreciation on 213 portfolio company investments. For the three months ended September 30, 2023, we had $38.5 million in unrealized appreciation on 187 portfolio company investments, which was offset by $19.2 million in unrealized depreciation on 183 portfolio company investments. For the three months ended December 31, 2022, we had $25.4 million in unrealized appreciation on 125 portfolio company investments, which was offset by $66.5 million in unrealized depreciation on 215 portfolio company investments.
Current wording
For the three months ended March 31, 2024, we had $46.5 million in unrealized appreciation on 209 portfolio company investments, which was offset by $20.1 million in unrealized depreciation on 174 portfolio company investments. For the three months ended December 31, 2023, we had $32.8 million in unrealized appreciation on 153 portfolio company investments, which was offset by $42.1 million in unrealized depreciation on 213 portfolio company investments.
Previous wording
Unrealized depreciation for the three months ended December 31, 2023 and September 30, 2023 primarily resulted from isolated deterioration in the credit performance of a small number of portfolio companies. Unrealized depreciation for the three months ended December 31, 2022 primarily resulted from decreases in the fair value across our portfolio company investments due to incremental spread widening in the market during the first quarter of the 2023 fiscal year and, to a lesser extent, isolated deterioration in the credit performance of a small number of portfolio companies.
Current wording
Unrealized appreciation for the three months ended March 31, 2024 primarily resulted from strong credit performance in our portfolio and the reversal of unrealized depreciation on the disposition of equity and debt investments of a portfolio company. Unrealized appreciation for the three months ended December 31, 2023 primarily resulted from improved performance of certain portfolio companies and the reversal of unrealized depreciation due to spread tightening in the market during the second half of calendar year 2023. Unrealized depreciation for the three months ended March 31, 2024 and December 31, 2023 primarily resulted from isolated deterioration in the credit performance of a small number of portfolio companies.
Previous wording
For the three months ended December 31, 2023, we experienced a net increase in cash and cash equivalents, foreign currencies and restricted cash and cash equivalents of $32.8 million. During the period, cash provided by operating activities was $163.6 million, primarily driven by proceeds from principal payments and sales of portfolio investments of $179.4 million and net investment income after tax of $83.5 million, offset by fundings of portfolio investments of $73.2 million. Lastly, cash used in financing activities was $130.8 million, primarily driven by repayments of debt of $629.5 million and distributions paid of $59.7 million, offset by borrowings on debt of $563.7 million.
Current wording
For the six months ended March 31, 2024, we experienced a net increase in cash and cash equivalents, foreign currencies and restricted cash and cash equivalents of $322.0 million. During the period, cash provided by operating activities was $313.0 million, primarily driven by proceeds from principal payments and sales of portfolio investments of $322.9 million and net investment income after tax of $170.1 million, offset by fundings of portfolio investments of $147.0 million. Lastly, cash provided by financing activities was $9.0 million, primarily driven by borrowings on debt of $1,145.6 million, offset by repayments of debt of $999.7 million and distributions paid of $123.6 million.
Previous wording
For the three months ended December 31, 2022, we experienced a net decrease in cash and cash equivalents, foreign currencies, restricted cash and cash equivalents and restricted foreign currencies of $14.6 million. During the period, cash provided by operating activities was $52.9 million, primarily driven by proceeds from principal payments and sales of portfolio investments of $253.8 million and net investment income after excise tax of $61.7 million, offset by fundings of portfolio investments of $248.9 million. Lastly, cash used by financing activities was $67.5 million, primarily driven by repayments of debt of $88.0 million, distributions paid of $47.2 million and purchases of common stock under the DRIP of $9.2 million, offset by borrowings on debt of $77.1 million.
Current wording
For the six months ended March 31, 2023, we experienced a net decrease in cash and cash equivalents, foreign currencies, restricted cash and cash equivalents and restricted foreign currencies of $43.0 million. During the period, cash provided by operating activities was $82.7 million, primarily driven by proceeds from principal payments and sales of portfolio investments of $394.0 million and net investment income after excise tax of $131.9 million, offset by fundings of portfolio investments of $412.6 million. Lastly, cash used by financing activities was $125.7 million, primarily driven by repayments of debt of $310.1 million, distributions paid of $90.8 million and purchases of common stock under the DRIP of $22.0 million, offset by borrowings on debt of $312.3 million.
Previous wording
As of December 31, 2023 and September 30, 2023, we had cash and cash equivalents of $70.7 million and $65.6 million, respectively. In addition, we had foreign currencies of $6.0 million and $4.2 million as of December 31, 2023 and September 30, 2023, respectively, restricted cash and cash equivalents of $96.8 million and $70.4 million as of December 31, 2023 and September 30, 2023, respectively, and no restricted foreign currencies as of both December 31, 2023 and September 30, 2023. Cash and cash equivalents and foreign currencies are available to fund new investments, pay operating expenses and pay distributions. Restricted cash and cash equivalents and restricted foreign currencies can be used to pay principal and interest on borrowings and to fund new investments that meet the guidelines under our debt securitizations or credit facilities, as applicable.
Current wording
As of March 31, 2024 and September 30, 2023, we had cash and cash equivalents of $292.8 million and $65.6 million, respectively. In addition, we had foreign currencies of $7.9 million and $4.2 million as of March 31, 2024 and September 30, 2023, respectively, restricted cash and cash equivalents of $159.6 million and $70.4 million as of March 31, 2024 and September 30, 2023, respectively, and no restricted foreign currencies as of both March 31, 2024 and September 30, 2023. Cash and cash equivalents and foreign currencies are available to fund new investments, pay operating expenses and pay distributions. Restricted cash and cash equivalents and restricted foreign currencies can be used to pay principal and interest on borrowings and to fund new investments that meet the guidelines under our debt securitizations or credit facilities, as applicable.
Previous wording
JPM Credit Facility - On February 11, 2021, we entered into the JPM Credit Facility (as defined in Note 7 of our consolidated financial statements), which, as of December 31, 2023, allowed us to borrow up to $1.49 billion at any one time outstanding, subject to leverage and borrowing base restrictions. As of December 31, 2023 and September 30, 2023, we had outstanding debt under the JPM Credit Facility of $319.7 million and $784.4 million, respectively. As of December 31, 2023 and September 30, 2023, subject to leverage and borrowing base restrictions, we had $1,167.8 million and $703.1 million, respectively, of remaining commitments and availability on the JPM Credit Facility.
Current wording
JPM Credit Facility - On February 11, 2021, we entered into the JPM Credit Facility (as defined in Note 7 of our consolidated financial statements), which, as of March 31, 2024, allowed us to borrow up to $1.49 billion at any one time outstanding, subject to leverage and borrowing base restrictions. As of March 31, 2024, we had no amount outstanding under the JPM Credit Facility. As of September 30, 2023, we had outstanding debt under the JPM Credit Facility of $784.4 million. As of March 31, 2024 and September 30, 2023, subject to leverage and borrowing base restrictions, we had $1.49 billion and $703.1 million, respectively, of remaining commitments and availability on the JPM Credit Facility.
Previous wording
2018 Debt Securitization - On November 16, 2018, we completed the 2018 Debt Securitization. The Class A, Class B and Class C-1 2018 Notes are included in the December 31, 2023 and September 30, 2023 Consolidated Statements of Financial Condition as our debt, and the Class C-2, Class D and Subordinated 2018 Notes were eliminated in consolidation. As of December 31, 2023 and September 30, 2023, we had outstanding debt under the 2018 Debt Securitization of $377.7 million and $388.7 million, respectively.
Current wording
2018 Debt Securitization - On November 16, 2018, we completed the 2018 Debt Securitization. The Class A, Class B and Class C-1 2018 Notes are included in the March 31, 2024 and September 30, 2023 Consolidated Statements of Financial Condition as our debt, and the Class C-2, Class D and Subordinated 2018 Notes were eliminated in consolidation. As of March 31, 2024 and September 30, 2023, we had outstanding debt under the 2018 Debt Securitization of $347.0 million and $388.7 million, respectively.
Previous wording
GCIC 2018 Debt Securitization - Effective September 16, 2019, we assumed as a result of the GCIC Merger, the GCIC 2018 Debt Securitization. The Class A-1, Class A-2 (Class A-2-R GCIC 2018 Notes after refinancing on December 21, 2020) and Class B-1 GCIC 2018 Notes are included in the December 31, 2023 and September 30, 2023 Consolidated Statements of Financial Condition as our debt, and the Class B-2, Class C and Class D GCIC 2018 Notes and the Subordinated GCIC 2018 Notes were eliminated in consolidation. As of December 31, 2023 and September 30, 2023, we had outstanding debt under the GCIC 2018 Debt Securitization of $491.8 million and $513.5 million, respectively.
Current wording
GCIC 2018 Debt Securitization - Effective September 16, 2019, we assumed as a result of the GCIC Merger, the GCIC 2018 Debt Securitization. The Class A-1, Class A-2 (Class A-2-R GCIC 2018 Notes after refinancing on December 21, 2020) and Class B-1 GCIC 2018 Notes are included in the March 31, 2024 and September 30, 2023 Consolidated Statements of Financial Condition as our debt, and the Class B-2, Class C and Class D GCIC 2018 Notes and the Subordinated GCIC 2018 Notes were eliminated in consolidation. As of March 31, 2024 and September 30, 2023, we had outstanding debt under the GCIC 2018 Debt Securitization of $467.3 million and $513.5 million, respectively.
Previous wording
On October 2, 2020, we issued $400.0 million in aggregate principal amount of the 2024 Notes. On October 15, 2021, we issued an additional $100.0 million in aggregate principal of the 2024 Notes. As of both December 31, 2023 and September 30, 2023, we had $500.0 million of outstanding aggregate principal amount of the 2024 Notes.
Current wording
On October 2, 2020, we issued $400.0 million in aggregate principal amount of the 2024 Notes. On October 15, 2021, we issued an additional $100.0 million in aggregate principal of the 2024 Notes. As of both March 31, 2024 and September 30, 2023, we had $500.0 million of outstanding aggregate principal amount of the 2024 Notes. On April 8, 2024, we redeemed $500.0 million in aggregate principal amount of the 2024 Notes, or 100% of the principal amount, plus the accrued and unpaid interest thereon.
Previous wording
On December 5, 2023, we entered into an interest rate swap on the 2028 Notes with SMBC as the counterparty. Under the terms of the agreement, we agreed to receive a fixed rate of 7.310% and pay SMBC a rate of one-month Term SOFR + 3.327%. The interest rate swap is designated as an effective hedge accounting instrument. The notional amount of the swap is $225.0 million and terminates on November 5, 2028. The carrying value of the 2028 Notes is inclusive of an adjustment for the change in fair valueof an effective hedge accounting relationship.
Current wording
On December 5, 2023, we entered into an interest rate swap on the 2028 Notes pursuant to which we agreed to receive a fixed rate of 7.310% and pay a rate of one-month Term SOFR + 3.327%. The interest rate swap is designated as an effective hedge accounting instrument. The notional amount of the swap is $225.0 million and terminates on November 5, 2028. The carrying value of the 2028 Notes is inclusive of an adjustment for the change in fair valueof an effective hedge accounting relationship.
Previous wording
On February 1, 2024, we issued $600 million of 2029 Unsecured Notes (the “2029 Notes”), which bear a fixed interest rate of 6.000% and mature on July 15, 2029. In connection with the 2029 Notes, we entered into an interest rate swap agreement on the full principal amount of the 2029 Notes where we receive a fixed interest rate of 6.248% and pay a floating interest rate of one-month SOFR plus 2.444%
Current wording
On February 1, 2024, we entered into an interest rate swap on the 2029 Notes pursuant to which we agreed to receive a fixed rate of 6.248% and pay a rate of one-month Term SOFR + 2.444%. The interest rate swap is designated as an effective hedge accounting instrument. The notional amount of the swap is $600.0 million and terminates on July 15, 2029.
Showing the first 40 of 65 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
During the six months ended March 31, 2024, we had a net realized loss of $12.7 million, primarily attributable to the realized losses on the disposition of equity and debt investments of a portfolio company in the second quarter of the 2024 fiscal year that was partially offset by realized gains recognized on the translation of foreign currency amounts and transactions into U.S. dollars and realized gains recognized on the sale of equity investments in multiple portfolio companies. During the six months ended March 31, 2023, we had a net realized loss of $1.5 million primarily attributable to the realized loss recognized on the disposition of equity and debt investments of a portfolio company investment that was partially offset by realized gains on the sale of equity investments in multiple portfolio companies and gains on the settlement of forward currency contracts.
Current report — wording carried from elsewhere
Unrealized appreciation for the six months ended March 31, 2024 primarily resulted from improved performance of certain portfolio companies and the reversal of unrealized depreciation due to spread tightening in the market during the second half of calendar year 2023. Unrealized appreciation for the six months ended March 31, 2023 primarily resulted from the reversal of unrealized depreciation on the disposition of equity and debt investments of a portfolio company, loan repayments and improved performance of certain portfolio companies. Unrealized depreciation for the six months ended March 31, 2024 primarily resulted from isolated deterioration in the credit performance of a small number of portfolio companies. Unrealized depreciation for the six months ended March 31, 2023 primarily resulted from decreases in the fair value across our portfolio company investments due to incremental spread widening in the market during the first quarter of the 2023 fiscal year and isolated deterioration in the credit performance of a small number of portfolio companies.
Current report — wording carried from elsewhere
The carrying value of the 2029 Notes is inclusive of an adjustment for the change in fair valueof an effective hedge accounting relationship.
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,”
Previous report — wording carried elsewhere
Merger Agreement with Golub Capital BDC 3, Inc. (the “Proposed Merger”)
Previous report — wording carried elsewhere
On January 16, 2024, GC Advisors agreed to irrevocably waive any incentive fees in excess of 15% and waive incentive fees in excess of an incentive fee cap that is also reduced to 15%, in each case effective as of January 1, 2024 for periods for periods ending on or prior to the earlier of (i) the closing of the acquisition of GBDC 3 pursuant to the GBDC 3 Merger Agreement or (ii) the termination of the GBDC 3 Merger Agreement. See “Note 13. Subsequent Events—Merger Agreement with Golub Capital BDC 3, Inc.” for a description of the terms of the Waiver.
Previous report — wording carried elsewhere
presenting our analysis for the reporting quarter compared to the immediately preceding quarter as we believe this
Previous report — wording carried elsewhere
comparison will provide a more meaningful analysis of our business as our results are largely driven by market
Previous report — wording carried elsewhere
Unrealized appreciation for the three months ended December 31, 2023 and September 30, 2023 primarily resulted from improved performance of certain portfolio companies and the reversal of unrealized depreciation due to spread tightening in the market during the second half of calendar year 2023. Unrealized appreciation for the three months ended December 31, 2022 primarily resulted from loan repayments and improved performance of certain portfolio companies.
Previous report — wording carried elsewhere
As of December 31, 2023, we had loans in nine portfolio companies on non-accrual status, and non-accrual
Previous report — wording carried elsewhere
GC Advisors also sponsors or manages, and expects in the future to sponsor or manage, other investment funds, accounts or investment vehicles (together referred to as “accounts”) that have investment mandates that are similar, in whole and in part, with ours. For example, GC Advisors presently serves as the investment adviser to Golub