Financial Data and Key Metrics Changes - The net asset value per share increased to 18.13 in the previous quarter, driven by net investment income and a modest increase in valuations despite unrealized losses on one portfolio company [11][12] - The company reported net income of 0.01 [10][11] - The debt to equity ratio at the end of the quarter was 0.82, slightly below the target range of 1.0 to 1.25 [117] Business Line Data and Key Metrics Changes - New originations totaled 91 million in the first quarter of 2023 [12][91] - The portfolio remained heavily weighted towards senior loans, representing 89% of the portfolio, with only 1.8% in equity co-investments and the remainder in junior debt [92][119] - The weighted average interest rate on new origination decreased by approximately 95 basis points, with spreads tightening in both the upper middle market and traditional middle market [93][94] Market Data and Key Metrics Changes - The broadly syndicated loan market saw a resurgence, leading to increased competition and tighter spreads in the upper middle market [7][8] - The company noted a mixed quality in deal flow, with increased refinancing activity and a focus on maintaining selectivity and credit discipline [8][9][10] Company Strategy and Development Direction - The company aims to maintain a high level of discipline and selectivity in evaluating investment opportunities, focusing on the core middle market [9][30] - The strategy includes a commitment to a supplemental dividend program to deliver higher returns to shareholders [35][90] - The company is positioned to optimize its liability structure by accessing the unsecured debt market as conditions stabilize [94] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to source attractive investments despite a competitive environment, emphasizing the importance of relationships with private equity sponsors [6][30] - The outlook for deal activity is expected to improve as certainty regarding interest rates stabilizes [44][126] - Management acknowledged the challenges in the broader market but emphasized the company's insulated position in the core middle market [88][89] Other Important Information - The company has a diversified portfolio with 195 companies, and the top ten positions account for only 12.6% of the total portfolio [84][118] - One junior capital investment was placed on non-accrual status, representing only 0.13% of the portfolio's fair value [120] - The company has implemented a share repurchase program with approximately $2.1 million utilized so far [121] Q&A Session Summary Question: Context on deployment into the secondary market and future rotations - Management indicated that the deployment into the secondary market represented about 40% of origination during the quarter, with plans to rotate into core middle market investments over time [17][18] Question: Expectations for deal activity in upcoming quarters - Management noted that while Q1 was not as active as Q4, year-over-year comparisons showed significant improvement, and they expect continued growth in deal activity as interest rate certainty improves [43][44] Question: Insights on credit quality and non-accruals - Management confirmed that only one company was added to the non-accrual list, emphasizing the overall good credit quality of the portfolio and the proactive management approach [61][103] Question: Themes observed in industry discussions - Management highlighted the importance of scale and differentiated sourcing as key themes, noting that only a few firms can effectively compete in the current environment [49][130]
Nuveen Churchill Direct Lending(NCDL) - 2024 Q1 - Earnings Call Transcript