Financial Data and Key Metrics Changes - The company reported net investment income of 0.45 per share and a special distribution of 0.67 per share, up from 18.15 from 226 million, primarily focused on senior secured first lien loans [8][17] - The investment portfolio's fair value increased to 1.99 billion at the end of Q2 2024 [39] - First lien debt represented approximately 90% of the fair value of the overall portfolio, maintaining a steady percentage [18][46] Market Data and Key Metrics Changes - The company observed an increase in competitive dynamics in the private credit market, leading to additional spread compression, albeit at a slower pace than in the previous quarter [12] - The weighted average yield on debt and income-producing investments at cost declined to 10.9% from 11.3% at the end of Q2 2024 [46] - The watch list increased to 5.6% of the overall portfolio fair value, reflecting proactive portfolio management [49] Company Strategy and Development Direction - The company is focused on rotating out of higher-priced, lower-spread upper middle market positions into traditional middle market opportunities, which offer wider spreads and more attractive terms [9][18] - The strategy emphasizes maintaining a diversified portfolio across various metrics, including sponsor relationships and industry sectors [27] - The company aims to capitalize on increased M&A activity expected as the interest rate reduction cycle begins [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the U.S. economy's resilience and steady revenue growth from portfolio companies, despite elevated interest rates [15] - The company anticipates continued strong performance into 2025, driven by a robust pipeline of investment opportunities [26] - Management highlighted the importance of maintaining strong relationships with private equity sponsors to drive deal flow [62] Other Important Information - The company has a share repurchase program, utilizing approximately 100 million allocated, with plans to continue buying back shares as trading occurs at a discount to NAV [52][85] - The third lockup release occurred on October 21, increasing the number of shares available for trading significantly [53] Q&A Session Summary Question: Is there any white space across the broader Churchill platform to further penetrate the market? - Management noted a 30% increase in firms where new deals are being done and ongoing efforts to expand relationships with new private equity LPs [60][62] Question: What is the current deal flow and tone with sponsors? - Management reported a continued increase in deal activity, with Q3 showing a 60% year-over-year increase in senior lending activity [65] Question: How was amendment activity in the quarter? - There was no significant increase in amendment activity, with stable yields on new floating rate investments [68] Question: What is the size of the upper middle market portfolio being rotated to the core middle market strategy? - The upper middle market portion is approximately $200 million, which is about 10% of the total portfolio [74] Question: Can you describe the increase in the watch list investments this quarter? - The increase in the watch list was due to proactive portfolio management, with no new non-accruals during the quarter [80]
Nuveen Churchill Direct Lending(NCDL) - 2024 Q3 - Earnings Call Transcript