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Golub Capital BDC Reports OK Calendar Q4-16

|Includes: Golub Capital BDC (GBDC)

Golub Capital BDC reported for calendar Q4-16 Net Investment Income of $16.953 million ($0.3078/share). With Total Investment Income of $33.849 million ($0.6147/share) - the NII/TII ratio was 50.08%. GBDC's Net Increase in Net Assets Resulting from Operations was $18.984 million ($0.3448/share) due to $2.031 million of realized and unrealized losses. The NAV was $15.74 compared to $15.96/share last quarter.

  Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13 Q2-13 Q1-13
Realized & Unrealized Gains 2.031 -1.129 2.404 -2.691 5.640 3.989 3.083 4.107 0.615 5.322 1.206 0.737 1.577 -0.130 0.657 1.857
Realized & Unrealized Gains/share $0.0369 -$0.0211 $0.0467 -$0.0524 $0.1099 $0.0778 $0.0611 $0.0871 $0.01314 $0.1131 $0.0257 $0.0168 $0.0364 - $0.0032 $0.0177 $0.0571
  Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13 Q2-13 Q1-13
Fee Income 0.254 0.614 0.060 0.474 0.300 1.382 0.080 0.595 0.208 1.282 1.042 0.021 1.000 x 0.594 0.839
Total investment income 33.849 34.503 32.106 30.762 30.500 33.552 30.410 28.461 27.545 30.658 28.029 25.260 25.579 22.816 22.268 20.096
Fee income percent of total 0.75% 1.78% 0.19% 1.54% 0.98% 4.12% 0.26% 2.09% 0.75% 4.18% 3.72% 0.08% 3.91% x 2.67% 4.17%
  Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13
Total investment income 33.849 34.503 32.106 30.762 30.500 33.552 30.410 28.461 27.545 30.658 28.029 25.260 25.579
Net investment income 16.953 17.228 15.885 16.868 14.999 15.481 15.205 13.754 14.557 14.850 15.073 13.352 13.260
Investments @ fair value 1.696 1.661 1.629 1.612 1.528 1.530 1.571 1.423 1.401 1.348 1.325 1.254 1.180
Wt Av Share Count 55.065 53.583 51.514 51.383 51.303 51.260 50.491 47.175 47.121 47.068 46.986 43.755 43.285
TII/share $0.6147 $0.6439 $0.6232 $0.5987 $0.5945 $0.6545 $0.6023 $0.6033 $0.5845 $0.6513 $0.5956 $0.5773 $0.5909
NII/share $0.3078 $0.3215 $0.3084 $0.3283 $0.2923 $0.3021 $0.3011 $0.2916 $0.3089 $0.3155 $0.3208 $0.3050 $0.3063
NAV/share $15.74 $15.96 $15.88 $15.85 $15.89 $15.80 $15.74 $15.61 $15.55 $15.55 $15.44 $15.41 $15.23
Wt Av Yield 7.7% 7.8% 7.6% 8.0% 8.2% 8.0% 8.4% 7.9% 7.8% 8.2% 8.3% 8.0% 8.6%
Q4-16 contained a one time special dividend of $0.25/share - with that transaction being more than accountable for the NAV decrease of $0.22
  Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14
Debt 889.500 684.700 856.325 833.930 802.602 813.250 823.463 754.822 715.030 697.539 723.564 590.372
Debt/share 16.1545 12.7783 16.6232 16.2297 15.6443 15.8652 16.3091 16.0050 15.1743 14.8198 15.3996 13.6292
Debt/share to NAV 102.63% 80.06% 104.68% 102.39% 98.45% 100.41% 103.62% 102.50% 100.16% 95.30% 99.74% 88.51%
Interest expense 7.606 7.141 7.019 6.833 6.731 6.657 6.142 6.017 5.694 5.987 5.609 4.540
Interest expense/share 0.1381 0.1333 0.1363 0.1330 0.1312 0.1313 0.1216 0.1277 0.1208 0.1272 0.1194 0.1037
Interest expense/TII 22.47% 20.70% 21.86% 22.21% 22.07% 19.84% 20.20% 21.14% 20.67% 19.52% 20.01% 17.97%
Annualized Int exp/Debt 3.42% 4.17% 3.27% 3.28% 3.35% 3.27% 2.98% 3.19% 3.18% 3.43% 3.10% 3.08%
PWAY - Int exp/Debt 428 bps 363 bps 432 bps 472 bps 485 bps 473 bps 542 bps 471 bps 462 bps 477 bps 520 bps 492 bps
GBDC has two 'debt securitizations: A 2010 note of $350 million that matures in 2023 and a 2014 note of $402 million that matures in 2026
As of 6-30-16 the 2010 note has a balance of $215 million - the 2014 note has a balance of $246 million
The primary traunche of the 2010 note pays interest at LIBOR + 1.74% - the primary traunche of the 2014 note pays interest at LIBOR + 1.75%
GBDC has two SBIC debentures that mature in 2021 and 2025 with a balance of $255 million and an average rate of 3.7%
As of 6-30-16 GBDC has credit facility debt of $146 million the pays interest at LIBOR + 2.25%

The good news - my response to this info is a long, slow yawn. The game plan of investing in safer companies (compared to other BDCs) is to have more predictable results - and the numbers show that "predictability". Most BDCs have ugly histories in the first spreadsheet on realized and unrealized gains. Low PWAY BDCs do not.

The bad news - part one. BDCs produce more numbers that the average investor can juggle. There is a danger when that happens of overly focusing on one number. GBDC has a relatively low "base management fee" of 1.375% compared to the sector 'mode' of 2.00%. That would give an investor the wrong impression that the fees from GBDC are significantly lower than average.

I want to think of fees in terms of both assets under management and fees and a percentage of total income. It takes low PWAY BDCs more assets to produce $1,000 of income. When you account for that, the percentage of fees to income can be higher than average - and that is the case for GBDC. GBDC's 50.08% NII/TII ratio is close to - but beneath - sector average.

The bad news - part two. I want an acceptable amount of reporting disclosure. If I am accepting a lower yield from a BDC, I want to have sufficient justification for that decision. I want to have portfolio company numbers for Debt/EBITDA. I want to see that GBDC is loaning to companies with lower leverage. GBDC fails to provide an acceptable level of disclosure.

Assessment - the good news (even though it is only one point) outweighs that bad news (even though it is two points).

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.