Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

 CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 3, 2018

TCG BDC, INC.
(Exact name of registrant as specified in charter)

Maryland
 
814-00995
 
80-0789789
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
 
 
520 Madison Avenue, 40th Floor, New York, New York
 
10022
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (212) 813-4900 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐





Item 2.02 – Results of Operations and Financial Condition.
On May 3, 2018, TCG BDC, Inc. (the “Company”) issued a summary press release and a detailed earnings presentation announcing its first quarter 2018 financial results. Copies of the summary press release and the earnings presentation are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively.
The information disclosed under this Item 2.02, including Exhibits 99.1 and 99.2 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933 (the "Securities Act") or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 7.01 – Regulation FD Disclosure.
On May 3, 2018, the Company issued a press release, included herewith as Exhibit 99.1, announcing the declaration of a second quarter 2018 dividend of $0.37 per share, payable on July 17, 2018 to stockholders of record as of June 29, 2018.
The information disclosed under this Item 7.01, including Exhibit 99.1 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed incorporated by reference into any filing made under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01 – Financial Statements and Exhibits.
 
Exhibits 99.1 and 99.2 shall be deemed furnished herewith.

(d)
Exhibits:
Exhibit Number
  
Description
 
 
  
 







SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
TCG BDC, INC.
 
 
 
 
(Registrant)
 
 
 
 
 
Dated: May 3, 2018
 
By:
 
/s/ Thomas M. Hennigan
 
 
 
 
Name: Thomas M. Hennigan
 
 
 
 
Title: Chief Financial Officer



Exhibit


Exhibit 99.1


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For Immediate Release
May 3, 2018

TCG BDC, Inc. Announces First Quarter 2018 Financial Results and Declares Second Quarter 2018 Dividend of $0.37 Per Share

New York - TCG BDC, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our,” “TCG BDC” or the “Company”) (NASDAQ: CGBD) today announced its financial results for its first quarter ended March 31, 2018.

Selected Financial Highlights
(dollar amounts in thousands, except per share data)
March 31, 2018
 
December 31, 2017
Total investments, at fair value
$
1,913,459

 
$
1,967,531

Total assets
1,990,655

 
2,021,383

Total debt and notes payable
798,968

 
833,946

Total net assets
$
1,131,857

 
$
1,127,304

Net assets per share
$
18.09

 
$
18.12

 
 
For the three month periods ended
 
 
March 31, 2018
 
December 31, 2017
Total investment income
 
$
47,483

 
$
49,510

Net investment income (loss)
 
25,130

 
26,516

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments
 
(4,041
)
 
467

Net increase (decrease) in net assets resulting from operations
 
$
21,089

 
$
26,983

 
 
 
 
 
Basic and diluted per weighted-average common share:
 
 
 
 
Net investment income (loss)
 
$
0.40

 
$
0.43

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments
 
(0.06
)
 
0.01

Net increase (decrease) in net assets resulting from operations
 
$
0.34

 
$
0.44

Weighted-average shares of common stock outstanding—Basic and Diluted
 
62,504,465

 
62,143,344

Dividends declared per common share
 
$
0.37

 
$
0.49


First Quarter 2018 Highlights
(dollar amounts in thousands, except per share data)

On May 2, 2018, our Board of Directors declared a quarterly dividend of $0.37 per share, which is payable on July 17, 2018 to stockholders of record as of June 29, 2018;
Net investment income for the three month period ended March 31, 2018 was $25,130, or $0.40 per share, as compared to $26,516, or $0.43 per share, for the three month period ended December 31, 2017;
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments for the three month period ended March 31, 2018 was $(4,041), or $(0.06) per share, as compared to $467, or $0.01 per share, for the three month period ended December 31, 2017; and
Net increase in net assets resulting from operations for the three month period ended March 31, 2018 was $21,089, or $0.34 per share, as compared to $26,983, or $0.44 per share, for the three month period ended December 31, 2017.

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Portfolio and Investment Activity
(dollar amounts in thousands, except per share data, unless otherwise noted)

As of March 31, 2018, the fair value of our investments was approximately $1,913,459, comprised of 104 investments in 87 portfolio companies/investment fund across 28 industries with 56 sponsors. This compares to the Company’s portfolio as of December 31, 2017, as of which date the fair value of our investments was approximately $1,967,531, comprised of 107 investments in 90 portfolio companies/investment fund across 28 industries with 57 sponsors.
As of March 31, 2018 and December 31, 2017, investments consisted of the following:
 
March 31, 2018
 
December 31, 2017
 Type—% of Fair Value
Fair Value
 
% of Fair Value
 
Fair Value
 
% of Fair Value
First Lien Debt (excluding First Lien/Last Out)
$
1,242,310

 
64.92
%
 
$
1,293,641

 
65.75
%
First Lien/Last Out Unitranche
233,564

 
12.21

 
237,635

 
12.08

Second Lien Debt
217,707

 
11.38

 
246,233

 
12.51

Equity Investments
18,812

 
0.98

 
17,506

 
0.89

Investment Fund
201,066

 
10.51

 
172,516

 
8.77

Total
$
1,913,459

 
100.00
%
 
$
1,967,531

 
100.00
%

The following table shows our investment activity for the three month period ended March 31, 2018:
 
Funded
 
Sold/Repaid
Principal amount of investments:
Amount
 
% of Total
 
Amount
 
% of Total
First Lien Debt (excluding First Lien/Last Out)
$
65,783

 
54.39
%
 
$
(117,619
)
 
68.38
%
First Lien/Last Out Unitranche
1,231

 
1.02

 
(394
)
 
0.23

Second Lien Debt
25,582

 
21.15

 
(53,990
)
 
31.39

Equity Investments
500

 
0.41

 

 

Investment Fund
27,850

 
23.03

 

 

Total
$
120,946

 
100.00
%
 
$
(172,003
)
 
100.00
%

Overall, total investments at fair value decreased by 2.7%, or $54,072, during the three month period ended March 31, 2018 after factoring in repayments, sales, net fundings on revolvers and delayed draws and net change in unrealized appreciation (depreciation).

Total investments at fair value held by Middle Market Credit Fund (“Credit Fund”) increased by 10.7%, or $105,575, during the three month period ended March 31, 2018 after factoring in repayments, sales, net fundings on revolvers and delayed draws and net change in unrealized appreciation (depreciation). As of March 31, 2018, Credit Fund had total investments at fair value of $1,090,348, which was comprised 99.4% of first lien senior secured loans and 0.6% of second lien senior secured loans at fair value. All investments in the Credit Fund portfolio were floating rate debt investments with interest rate floors.

As of March 31, 2018, the weighted average yields for our first and second lien debt investments on an amortized cost basis were 9.01% and 10.82%, respectively, with a total weighted average yield of 9.24%. Weighted average yields include the effect of accretion of discounts and amortization of premiums and are based on interest rates as of March 31, 2018. As of March 31, 2018, on a fair value basis, approximately 0.8% of our debt investments bear interest at a fixed rate and approximately 99.2% of our debt investments bear interest at a floating rate, which primarily are subject to interest rate floors.
As part of the monitoring process, our Investment Adviser has developed risk policies pursuant to which it regularly assesses the risk profile of each of our debt investments and rates each of them based on the following categories, which we refer to as “Internal Risk Ratings”:

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Internal Risk Ratings Definitions
Rating
  
Definition
1
  
Performing—Low Risk: Borrower is operating more than 10% ahead of the base case.
 
 
2
  
Performing—Stable Risk: Borrower is operating within 10% of the base case (above or below). This is the initial rating assigned to all new borrowers.
 
 
3
  
Performing—Management Notice: Borrower is operating more than 10% below the base case. A financial covenant default may have occurred, but there is a low risk of payment default.
 
 
4
  
Watch List: Borrower is operating more than 20% below the base case and there is a high risk of covenant default, or it may have already occurred. Payments are current although subject to greater uncertainty, and there is moderate to high risk of payment default.
 
 
5
  
Watch List—Possible Loss: Borrower is operating more than 30% below the base case. At the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Payment default is very likely or may have occurred. Loss of principal is possible.
 
 
6
  
Watch List—Probable Loss: Borrower is operating more than 40% below the base case, and at the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Payment default is very likely or may have already occurred. Additionally, the prospects for improvement in the borrower’s situation are sufficiently negative that impairment of some or all principal is probable.
Our Investment Adviser’s risk rating model is based on evaluating portfolio company performance in comparison to the base case when considering certain credit metrics including, but not limited to, adjusted EBITDA and net senior leverage as well as specific events including, but not limited to, default and impairment.
Our Investment Adviser monitors and, when appropriate, changes the investment ratings assigned to each debt investment in our portfolio. In connection with our quarterly valuation process, our Investment Adviser reviews our investment ratings on a regular basis. The following table summarizes the Internal Risk Ratings of our debt portfolio as of March 31, 2018 and December 31, 2017:
 
March 31, 2018
 
December 31, 2017
 
Fair Value
 
% of Fair Value
 
Fair Value
 
% of Fair Value
(dollar amounts in millions)
 
 
 
 
 
 
 
Internal Risk Rating 1
$
66.3

 
3.91
%
 
$
73.7

 
4.15
%
Internal Risk Rating 2
1,324.3

 
78.20

 
1,399.6

 
78.74

Internal Risk Rating 3
142.1

 
8.39

 
170.2

 
9.57

Internal Risk Rating 4
134.6

 
7.95

 
103.3

 
5.81

Internal Risk Rating 5
26.3

 
1.55

 
30.7

 
1.73

Internal Risk Rating 6

 

 

 

Total
$
1,693.6

 
100.00
%
 
$
1,777.5

 
100.00
%

As of March 31, 2018 and December 31, 2017, the weighted average Internal Risk Rating of our debt investment portfolio was 2.3 and 2.2, respectively.

Consolidated Results of Operations
(dollar amounts in thousands, except per share data)

Total investment income for the three month periods ended March 31, 2018 and December 31, 2017 was $47,483 and $49,510, respectively. This $2,027 net decrease was primarily due to a decrease in interest income and other income from our debt portfolio and a decrease in interest income from Credit Fund, partially offset by an increase in dividend income from Credit Fund, during the three month period ended March 31, 2018.

Total expenses for the three month periods ended March 31, 2018 and December 31, 2017 were $22,353 and $22,994, respectively. This $641 net decrease during the three month period ended March 31, 2018 was primarily attributable to a decrease in management fees as a result of an decrease in investments, a decrease in incentive fees, and a decrease in professional fees.


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During the three month period ended March 31, 2018, the Company recorded a net realized loss and change in unrealized depreciation of $(4,041). This was primarily due to net change in unrealized depreciation on our debt investments from changes in various inputs utilized under our valuation methodology, including, but not limited to, market spreads, leverage multiples and borrower ratings, and the impact of exits.

Liquidity and Capital Resources
(dollar amounts in thousands, except per share data)

As of March 31, 2018, the Company had cash and cash equivalents of $45,610, notes payable (before debt issuance costs) of $273,000, and secured borrowings outstanding of $527,865. As of March 31, 2018, the Company had $285,135 of remaining commitments and $178,258 available for additional borrowings on its revolving credit facilities, subject to leverage and borrowing base restrictions.

Dividend

On May 2, 2018, our Board of Directors declared a quarterly dividend of $0.37 per share, which is payable on July 17, 2018 to stockholders of record as of June 29, 2018.

Conference Call

The Company will host a conference call at 8:00 a.m. EDT on Friday, May 4, 2018 to discuss these quarterly financial results. The call and webcast will be available on the TCG BDC website at tcgbdc.com. The call may be accessed by dialing +1 (866) 394-4623 (U.S.) or +1 (409) 350-3158 (international) and referencing “TCG BDC Financial Results Call.” The conference call will be webcast simultaneously via a link on TCG BDC’s website and an archived replay of the webcast also will be available on the website soon after the live call for 21 days.

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TCG BDC, INC.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(dollar amounts in thousands, except per share data)
 
March 31, 2018
 
December 31, 2017
 
(unaudited)
 
 
ASSETS
 
 
 
Investments, at fair value
 
 
 
Investments—non-controlled/non-affiliated, at fair value (amortized cost of $1,704,235 and $1,782,488, respectively)
$
1,695,287

 
$
1,779,584

Investments—non-controlled/affiliated, at fair value (amortized cost of $16,516 and $16,273, respectively)
17,106

 
15,431

Investments—controlled/affiliated, at fair value (amortized cost of $200,101 and $172,251, respectively)
201,066

 
172,516

Total investments, at fair value (amortized cost of $1,920,852 and $1,971,012, respectively)
1,913,459

 
1,967,531

Cash and cash equivalents
45,610

 
32,039

Receivable for investment sold
14,925

 
7,022

Deferred financing costs
3,441

 
3,626

Interest receivable from non-controlled/non-affiliated investments
6,163

 
5,066

Interest and dividend receivable from controlled/affiliated investments
6,630

 
5,981

Prepaid expenses and other assets
235

 
76

Total assets
$
1,990,655

 
$
2,021,383

LIABILITIES
 
 
 
Secured borrowings
$
527,865

 
$
562,893

2015-1 Notes payable, net of unamortized debt issuance costs of $1,897 and $1,947, respectively
271,103

 
271,053

Payable for investments purchased
16,919

 
9,469

Due to Investment Adviser
104

 
69

Interest and credit facility fees payable
5,513

 
5,353

Dividend payable
23,150

 
30,481

Base management and incentive fees payable
12,552

 
13,098

Administrative service fees payable
125

 
95

Other accrued expenses and liabilities
1,467

 
1,568

Total liabilities
858,798

 
894,079

 
 
 
 
NET ASSETS
 
 
 
Common stock, $0.01 par value; 200,000,000 shares authorized; 62,568,651 shares and 62,207,603 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively
626

 
622

Paid-in capital in excess of par value
1,179,432

 
1,172,807

Offering costs
(1,633
)
 
(1,618
)
Accumulated net investment income (loss), net of cumulative dividends of $245,404 and $222,254 at March 31, 2018 and December 31, 2017, respectively
4,502

 
2,522

Accumulated net realized gain (loss)
(43,677
)
 
(43,548
)
Accumulated net unrealized appreciation (depreciation)
(7,393
)
 
(3,481
)
Total net assets
$
1,131,857

 
$
1,127,304

NET ASSETS PER SHARE
$
18.09

 
$
18.12



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TCG BDC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands, except per share data)
(unaudited)
 
 
For the three month periods ended
 
 
March 31, 2018
 
December 31, 2017
Investment income:
 
 
 
 
From non-controlled/non-affiliated investments:
 
 
 
 
Interest income
 
$
39,328

 
$
40,243

Other income
 
895

 
2,626

Total investment income from non-controlled/non-affiliated investments
 
40,223

 
42,869

From non-controlled/affiliated investments:
 
 
 
 
Interest income
 
379

 
381

Total investment income from non-controlled/affiliated investments
 
379

 
381

From controlled/affiliated investments:
 
 
 
 
Interest income
 
2,631

 
3,420

Dividend income
 
4,250

 
2,840

Total investment income from controlled/affiliated investments
 
6,881

 
6,260

Total investment income
 
47,483

 
49,510

Expenses:
 
 
 
 
Base management fees
 
7,222

 
7,473

Incentive fees
 
5,330

 
5,625

Professional fees
 
762

 
938

Administrative service fees
 
186

 
139

Interest expense
 
7,815

 
7,816

Credit facility fees
 
525

 
430

Directors’ fees and expenses
 
98

 
88

Other general and administrative
 
405

 
390

Total expenses
 
22,343

 
22,899

Net investment income (loss) before taxes
 
25,140

 
26,611

Excise tax expense
 
10

 
95

Net investment income (loss)
 
25,130

 
26,516

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments:
 
 
 
 
Net realized gain (loss) from:
 
 
 
 
Non-controlled/non-affiliated investments
 
(129
)
 
(3,968
)
Net change in unrealized appreciation (depreciation):
 
 
 
 
Non-controlled/non-affiliated
 
(6,044
)
 
5,782

Non-controlled/affiliated
 
1,432

 
134

Controlled/affiliated
 
700

 
(1,481
)
Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments
 
(4,041
)
 
467

Net increase (decrease) in net assets resulting from operations
 
$
21,089

 
$
26,983

Basic and diluted earnings per common share
 
$
0.34

 
$
0.44

Weighted-average shares of common stock outstanding—Basic and Diluted
 
62,504,465

 
62,143,344

Dividends declared per common share
 
$
0.37

 
$
0.49



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About TCG BDC, Inc.
TCG BDC is an externally managed specialty finance company focused on lending to middle-market companies. TCG BDC is managed by Carlyle Global Credit Investment Management L.L.C., an SEC-registered investment adviser and a wholly owned subsidiary of The Carlyle Group L.P. Since it commenced investment operations in May 2013 through March 31, 2018, TCG BDC has invested approximately $3.8 billion in aggregate principal amount of debt and equity investments prior to any subsequent exits or repayments. TCG BDC’s investment objective is to generate current income and capital appreciation primarily through debt investments in U.S. middle market companies. TCG BDC has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended.

Web: tcgbdc.com
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by the use of forward-looking terminology such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may,” “plans,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. You should read statements that contain these words carefully because they discuss our plans, strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters. We believe that it is important to communicate our future expectations to our investors. There may be events in the future, however, that we are not able to predict accurately or control. You should not place undue reliance on these forward-looking statements, which speak only as of the date on which we make it. Factors or events that could cause our actual results to differ, possibly materially from our expectations, include, but are not limited to, the risks, uncertainties and other factors we identify in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” in filings we make with the Securities and Exchange Commission, and it is not possible for us to predict or identify all of them. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Contacts:
Investors:
Media:
Daniel Harris
Elizabeth Gill
+1-212-813-4527
daniel.harris@carlyle.com
+1-202-729-5385
elizabeth.gill@carlyle.com


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Exhibit


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