Golub Capital BDC, Inc. · NASDAQ:GBDC
Golub Capital BDC — Investor Presentation (March 2023)
46 slides from Golub Capital BDC's investor presentation, March 2023
Slide 1: Golub Capital BDC, Inc. Equity Investor Presentation March 2023
GOLUB CAPITAL BDC, INC. EQUITY INVESTOR PRESENTATION MARCH 2023 © 2023 GOLUB CAPITAL LLC
Slide 2: Disclaimer
Disclaimer Some of the statements in this presentation constitute forward-looking statements, attacks; general price and volume fluctuations in the stock markets; the impact on our which relate to future events or our future performance or financial condition. The business of the Dodd-Frank Wall Str
Slide 3: We Believe GBDC is Well Positioned For the Current Environment
We Believe GBDC is Well Positioned For the Current Environment GBDC Value Proposition We Believe GBDC is Well Positioned Against 1 2 The Right Strategy The Right Manager • Invests in first lien first out senior secured floating rate • Golub Capital has a history of strong underwriting and ✓ Inflatio
Slide 4: The Right Strategy
The Right Strategy O 1 GOLUB CAPITAL
Slide 5: GBDC's Investment Portfolio is Conservatively Positioned
GBDC’s Investment Portfolio is Conservatively Positioned Predominantly First Lien, First Out Senior Secured Loan Portfolio Preponderance of Portfolio is Floating Rate, Mitigating Interest Mitigates Credit Risk Rate Risk Portfolio Composition by Seniority Portfolio Composition by Interest Rate Type o
Slide 6: Higher First Lien Composition, Greater Portfolio Diversity Than Peer Averages
Higher First Lien Composition, Greater Portfolio Diversity Than Peer Averages Portfolio Composition by Seniority1 Diversification by Obligor GBDC’s portfolio is more conservatively positioned than the GBDC’s portfolio is almost twice as diversified by obligor as the BDC BDC peer average peer average
Slide 7: Strong, Long-Term Track Record of Low Credit Losses and Low Volatility
Strong, Long-Term Track Record of Low Credit Losses and Low Volatility of Credit Losses… Realized & Unrealized Net Gains (Losses) Since Inception Volatility of Quarterly Loss Rates Since Inception Annualized, % of portfolio at cost1 Standard deviation, % of portfolio at cost GBDC has the lowest vola
Slide 8: …Including Through the COVID Period
…Including Through the COVID Period CQ2 2020 – CQ1 2021 Realized Net Gains (Losses) CQ2 2020 – CQ1 2021 Volatility of Quarterly Loss Rates Annualized, % of portfolio at cost1 Standard Deviation, % of portfolio at cost GBDC delivered leading sector performance through the GBDC has the lowest volatili
Slide 9: GBDC's Asset Sensitive Balance Sheet is Well Positioned for Higher Interest Rates
GBDC’s Asset Sensitive Balance Sheet is Well Positioned for Higher Interest Rates Built-in potential for higher net investment spreads as loans continue to reset to higher base rates while most of GBDC’s total funding is not variable rate ~95% of total assets earn GBDC’s portfolio is expected to con
Slide 10: Asset Sensitive Balance Sheet Well Positioned for Higher Rates (Continued)
GBDC’s Asset Sensitive Balance Sheet is Well Positioned for Higher Interest Rates (Continued) Potential for meaningfully higher quarterly adjusted net investment income (“NII”) as loans continue to reset to higher base rates1 Approximate Adjusted NII per Share Impact With Increase in Base Rates: +13
Slide 11: Spread Widening in Highest Rated Credits Primary Driver of Unrealized Depreciation
Spread Widening in Highest Rated Credits Has Been the Primary Driver of Unrealized Depreciation and NAV Decline Since 3/31/22... Drivers of Net Change in Unrealized Depreciation Per Share Weighted Average T9M Cumulative Net Price1 % of 3/31/22 % of T9M Primary Category Change in Unrealized Net Asset
Slide 12: …Effectively Creating a Large Embedded Loss Reserve
…Effectively Creating a Large Embedded “Loss Reserve” Relative to GBDC’s Historical Credit Track Record Cumulative Net Unrealized Depreciation on Investments vs. Additional Reference Metrics Peak GBDC Historical Net Realized Loss Rate 0.3% Average rolling four-quarter GBDC net ~2.8x realized gain ra
Slide 13: Additional Footnotes
Additional Footnotes GBDC’s Investment Portfolio is Conservatively Positioned 1. Junior Debt consists of subordinated debt and second lien loans. 2. The percentage of fixed rate loans and floating rate loans is calculated using total investments at fair value. 3. Please see Internal Performance Rati
Slide 14: The Right Manager
The Right Manager O 2 GOLUB CAPITAL
Slide 15: Overview of Golub Capital
Overview of Golub Capital Firm Overview − Founded in 1994 $60+ billion − Over 775 employees with over 170 investment professionals Capital Under Management1 − Award-winning middle market lending franchise2 25+ − Top 3 middle market bookrunner for each of the last 10 years3 − Lending offices in New Y
Slide 16: The Golub Capital Advantage
The Golub Capital Advantage We believe our long-term partnerships with our investors, private equity sponsors and financing partners create sustainable, mutually reinforcing competitive advantages that are difficult to replicate Robust deal flow Performing, diversified, first lien portfolio Discipli
Slide 17: Broad Sponsor Finance Platform
Broad Sponsor Finance Platform 350+ 250+ $25–700MM Sponsor Relationships1 Repeat Sponsor Relationships Hold Size Range Golub Capital Advantages for Private Equity Sponsors Origination Volume with Repeat Sponsors2,3 % of total origination volume − Reliability − Product breadth and flexibility 90% 90%
Slide 18: The Sponsor Advantage
The Sponsor Advantage We believe lending to sponsor-backed companies is less risky and helps us select better credits, maintain better portfolio performance and achieve better problem resolution than lending to non-sponsored companies Credit Selection − Sponsors specialize in creating equity value a
Slide 19: Ability to Work with Borrowers Across the Middle Market
Ability to Work with Borrowers Across the Middle Market We provide a wide range of financing solutions across the entire middle market spectrum which allows us to see more deal flow, be more selective and grow with our borrowers over time Distribution of Middle Market Originations by Borrower EBITDA
Slide 20: Attractive Opportunities From Existing Borrowers
Attractive Opportunities From Existing Borrowers As the incumbent lender to over 300 middle market companies, we believe we are well positioned to capture attractive deal flow from our existing borrowers − We believe financings with existing borrowers generally have attractive risk-return characteri
Slide 21: Our Capabilities Enable Us To Lead Approximately 90% of Our Deals
Our Capabilities Enable Us To Lead Approximately 90% of Our Deals We believe acting as a lead lender provides distinct advantages relative to a participating role Advantages Golub Capital as a Lead Lender % of total origination volume* − Lead lenders control pricing, deal structure and terms − Lead
Slide 22: Our Broad Sponsor Finance Platform Leads to Extensive Deal Flow
Our Broad Sponsor Finance Platform Leads to Extensive Deal Flow We believe our direct origination strategy, scale and market position create a wide deal funnel, allowing us to be selective and disciplined Historical Selectivity Golub Capital Middle Market Lending Opportunities* 2,824 2,543 2,388 2,3
Slide 23: Rigorous and Disciplined Approach to Underwriting and Credit Selection
Rigorous and Disciplined Approach to Underwriting and Credit Selection We believe our track record of low defaults rates* is sustainable as a result of our underwriting approach, focus on risk management and industry expertise ✓ Originators each have 10+ years of credit underwriting experience Origi
Slide 24: Extensive Investment Team With Deep Industry Expertise
Extensive Investment Team With Deep Industry Expertise Golub Capital’s 170+ investment professionals have in-depth knowledge and experience across a variety of industry sub-sectors Software & Technology Healthcare 700+ $60+ Billion 450+ $34+ Billion Transactions closed Capital committed Transactions
Slide 25: Long-Standing Track Record of Low Default Rates
Long-Standing Track Record of Low Default Rates Long-term Default Rate Default Rate during COVID-19 dislocation3 Peak Default Rate during Great Financial Crisis4 2004–2022 April 1, 2020–March 31, 2021 2009 10% 10% 10% 9.61% 8% 8% 8% 6% 6% 6% 655 bps 4% 4% 4% 3.15% 3.06% 2% 2% 232 bps 2% 2.09% 117 bp
Slide 26: Our Low Long-Term Default Rate Allows Us to Access Leverage on Attractive Terms
Our Low Long-Term Default Rate Allows Us to Access Leverage on Attractive Terms We believe our strong long-term track record lets us access diversified, long-term sources of debt financing across financing securitizations (CLOs), bank facilities, unsecured notes and other funding sources − Overall g
Slide 27: Low Default Rates and Diversified Debt Lead to Consistent Premium Fund Returns
Low Default Rates and Diversified, Long-Term Sources of Debt Lead to Consistent Premium Fund Returns GCP Quarterly Returns Distribution GBDC Quarterly ROE Distribution Since GCP Inception (2004) Since GBDC Inception (2010) 82% 73% 45% 36% 34% 28% 24% 18% 18% 9% 10% 8% 4% 4% 5% 2% Below 1.0% 1% to 2%
Slide 28: Growth in Capital Under Management Enhances Our Competitive Position
Growth in Capital Under Management Enhances Our Competitive Position and Allows for Innovation Our growth has given us scale advantages, including our buy-and-hold capabilities (up to $700 million per borrower), our syndication capabilities (up to $2 billion), a larger team and more areas of industr
Slide 29: Our Business Is Designed to Sustain and Reinforce Our Competitive Advantages
Our Business Is Designed to Sustain and Reinforce Our Competitive Advantages We approach direct lending as an operating business, and we believe our differentiated capabilities make our competitive advantages difficult to replicate $100MM+ Disciplined investments in proprietary systems and technolog
Slide 30: Additional Footnotes
Additional Footnotes The Golub Capital Advantage 1. Please see slides titled, “Broad Sponsor Finance Platform”, “The Sponsor Advantage”, “Attractive Opportunities From Existing Borrowers” and “Our Capabilities Enable Us To Lead Approximately 90% of Our Deals.” 2. Please see slides titled, “Our Broad
Slide 31: The Right Structure
The Right Structure O03 GOLUB CAPITAL
Slide 32: GBDC's Structure Is Designed For Resilience—And Strong Long-Term Performance
GBDC’s Structure Is Designed For Resilience—And Strong Long- Term Performance Key Structural Attributes of GBDC: ✓ Robust, conservative and diverse debt capital structure ✓ Highly flexible and low-cost funding relative to peers ✓ Minimal near-term debt maturities ✓ Significant available liquidity ✓
Slide 33: Conservative Financial Leverage With a Durable and Diverse Funding Structure
Conservative Financial Leverage With a Durable and Diverse Funding Structure GBDC Debt Capital Structure1: Outstanding Undrawn Funding Source Debt Commitment Par Commitment Reinvestment Period Stated Maturity Interest Rate2 Securitizations: 2018 Debt Securitization $408,200 $408,200 $— January 20, 2
Slide 34: Flexible and Low-Cost Funding with Long-Dated Maturities
Flexible and Low-Cost Funding with Long-Dated Maturities Weighted Average Cost of Debt Investment Portfolio Generates Meaningful Liquidity Annualized % of debt outstanding as of December 31, 2022 Exits/Sales of Investments as % of Portfolio at Amortized Cost 5.5% 35% 30% 4.4% 25% Average: 21.9% 20%
Slide 35: Highly Flexible Funding Structure and Significant Available Liquidity
Highly Flexible Funding Structure and Significant Available Liquidity Funding Sources by Type and Available Liquidity 47% of debt funding from long-date, fixed Amount Outstanding as of December 31, 20221 ✓ rate unsecured notes with a 2.7% weighted ($ in millions) average coupon $992 Total Available
Slide 36: Compelling Fee and Expense Structure
Compelling Fee and Expense Structure1 GBDC Fee Structure Overview GBDC Fees & Expenses vs. the BDC Industry2 Annualized Annualized % of assets over the last three years GBDC BDC Industry Average Management Fee 1.375% on invested assets 2.7% 91 bps 2.1% lower expenses Incentive Fee 20% at GBDC 1.8% 1
Slide 37: Compelling Fee and Expense Structure (Continued)
Compelling Fee and Expense Structure1(Continued) Golub Capital pioneered the concept of—and GBDC is one of only three publicly-traded BDCs to implement—a cumulative incentive fee cap (total return hurdle) with a since-inception lookback period Comparative Incentive Fee Illustration: Typical BDC Shar
Slide 38: High Degree of Alignment With Investment Adviser
High Degree of Alignment With Investment Adviser Which Benefits GBDC Shareholders in Myriad Ways ✓ Low base management fee ✓ One of the highest incentive fee hurdle rate in the publicly-traded BDC sector ✓ Incentive fee subject to a lifetime (since inception) cumulative lookback ✓ Maintained strong
Slide 39: The Right Time
The Right Time O4 GOLUB CAPITAL
Slide 40: GBDC Has a Low Current Valuation Relative to Current NAV and Historical Averages
GBDC Has a Low Current Valuation Relative to Current NAV and Historical Averages GBDC Price-to-NAV as of December 31, 2022: As of December 31, 2022: 1.25x 12% Discount to December 31, 1.09x A 2022 NAV 1.04x 1.00x C B A 15% Discount to 5-Year 0.88x B Average Trading Price/NAV 0.75x 19% Discount to Si
Slide 41: Low Current Valuation Relative to its Proven Track Record of Low Credit Losses
GBDC Has a Low Current Valuation Relative to its Proven Track Record of Low Credit Losses As of December 31, 2022:1 Realized & Unrealized Net Gains (Losses) Since Inception Annualized, % of portfolio at cost2 GBDC has earned annualized net investment gains since inception 12% Discount to December A
Slide 42: GBDC Has an Attractive Dividend Yield in the Context of its Structural Attributes
GBDC Has an Attractive Dividend Yield in the Context of its Structural Attributes GBDC Dividend Yield1 Attractive Dividend Yield Given GBDC’s Attributes 12.5% NAV Stability over time 10.0% 1. (history of low credit 10.0% losses) 8.3% 7.9% 7.5% Asset Sensitive Balance 2. Sheet 5.0% 2.5% Defensive inv
Slide 43: Long-Term History of Strong Performance Against BDC Industry Peers
GBDC Has a Long-Term History of Strong Performance Against BDC Industry Peers Quarterly ROE Distribution Average Quarterly Change in NAV Per Share2 Since GBDC Inception (April 2010) Since GBDC Inception (April 2010) 73% 0.03% 45% 28% 18% 18% 10% 8% 2% (0.38%) Below 1.0% 1% to 2% 2% to 5% Above 5% GB
Slide 44: GBDC Has Generated Strong Long-Term Stockholder Returns…
GBDC Has Generated Strong Long-Term Stockholder Returns… GBDC has outperformed broad-based equity and fixed income market indices since its inception in 2010 Annualized Total Returns Since GBDC’s Inception April 15, 2010–December 31, 2022 8.8% 8.0% 7.1% 5.2% 4.1% GBDC¹ MSCI World Index KBW Banks Ind
Slide 45: …Over Multiple Time Horizons, With Less Volatility Than Peers
…Over Multiple Time Horizons, With Less Volatility Than Peers GBDC has outperformed BDC peers and loan market indices with lower volatility Annualized Returns on NAV Volatility of Annualized Returns on NAV As of December 31, 2022 As of December 31, 2022 GBDC BDC Peer Average¹ GBDC BDC Peer Average¹
Slide 46: Important Investor Information
Important Investor Information Golub Capital (including its various affiliates) creates and manages multiple investment funds. Two Because many of the loans or other investments are not actively traded, this determination of of its control affiliates, GC Advisors LLC (“GC Advisors”) and GC OPAL Advi
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