The following information was previously provided to subscribers of Premium BDC Reports along with:
- GSBD target prices/buying points
- GSBD risk profile, potential credit issues, and overall rankings
- GSBD dividend coverage projections and worst-case scenarios
This update discusses Goldman Sachs BDC (GSBD) and was previously posted on our new platform with updated target prices, dividend projections, rankings, and recommendations:
- Full GSBD Report: GSBD Updated Projections/Pricing
GSBD will likely experience additional selling pressure during the first and second week of July 2021 potentially driving the stock price closer to its ST target of $18.50 and I will send out reminders before the last lock-up expires.
“….upon the closing of the Merger that generally restricted all stockholders who received shares of our common stock in the Merger from transferring their respective shares of our common stock for at least 90 days following the date of the closing of the Merger (the “Closing Date”), subject to a modified lock-up schedule thereafter (lock-up restrictions on 1/3 of the Affected Stockholders’ shares will lapse after 90 days from the Closing Date, lock-up restrictions on an additional 1/3 of the Affected Stockholders’ shares will lapse after 180 days from the Closing Date, and lock-up restrictions on the remaining 1/3 of the Affected Stockholders’ shares will lapse after 270 days from the Closing Date).
GSBD Dividend Coverage Update
For Q1 2021, GSBD reported slightly above its base-case projections due to higher-than-expected dividend and other income partially offset by lower portfolio growth driving slightly lower interest income. However, leverage (debt-to-equity) declined to a new near-term low giving the company plenty of growth capital for increased earnings potential. GSBD has covered its dividend by an average of 105% over the last 8 quarters growing spillover/undistributed income. Previously, GSAM announced that it will waive a portion of its incentive fee for the four quarters of 2021 (Q1 2021 through and including Q4 2021) for each such quarter in an amount sufficient to ensure that GSBD’s net investment income per weighted average share outstanding for such quarter is at least $0.48 per share.
“The increase quarter-over-quarter was primarily due to the timing of the merger at close in Q4 as well as increased income from GSBD’s historic origination activity during Q4. On a per share basis, GAAP and adjusted net investment income were $0.57 and $0.48 per weighted average share, respectively, as compared to $0.59 and $0.48, respectively, in the fourth quarter of 2020. The per share decrease is the result of an increase in post-merger weighted average shares outstanding.”
Similar to other BDCs, GSBD has been lowering its borrowing rates as well as constructing a flexible balance sheet including the public offering of $500 million of 2.875% unsecured notes due 2026 (CUSIP: 38147UAD9) in November 2020. Previously, the company issued $360 million of unsecured notes due 2025 at 3.750% (CUSIP: 38147UAC1). As of March 31, 2021, 63% of its borrowings were unsecured with $1.1 billion of availability under its credit facility. Fitch’s reaffirmed GSBD’s investment grade rating of BBB- and revised the outlook to stable.
“At quarter end, 63% of the company’s outstanding borrowings were unsecured debt and $1.1 billion of capacity was available under GSBD’s secured revolving credit facility. Given the current debt position and available capacity, we continue to feel we have ample capacity to fund new investment opportunities with borrowings under our credit facility.”
On October 12, 2020, GSBD completed its merger with Goldman Sachs Middle Market Lending (“MMLC”) which doubled the size of the company including significant deleveraging. This deleveraging creates more capacity to deploy capital into today’s attractive investment environment while adding a greater margin of safety to maintain GSBD’s investment-grade credit rating and comply with regulatory and contractual leverage ratio requirements.
The Board reaffirmed its regular dividend of $0.45 per share payable to shareholders of record as of June 30, 2021. Previously, the company paid a special dividend of $0.05 per share in May 2021 which is the second of its three quarterly installments of special dividends aggregating to $0.15 per share in connection with the merger.
Full BDC Reports
This information was previously made available to subscribers of Premium BDC Reports. BDCs trade within a wide range of multiples driving higher and lower yields mostly related to portfolio credit quality and dividend coverage potential (not necessarily historical coverage). This means investors need to do their due diligence before buying.