Crescent Capital BDC, Inc. · NASDAQ:CCAP
Crescent Capital BDC — Investor Day (June 2024)
60 slides from Crescent Capital BDC's investor day presentation, Jun 11, 2024
Slide 1: Crescent Capital BDC, Inc. Analyst & Investor Day
Crescent Capital BDC, Inc. Analyst & Investor Day June 11, 2024
Slide 2: Disclaimer and Forward-Looking Statement
Disclaimer and Forward-Looking Statement This presentation (the “Presentation”) has been prepared by Crescent Capital BDC, This Presentation may contain forward-looking statements that involve substantial Inc. (together with its consolidated subsidiaries, “CCAP,” “Crescent BDC” or the risks and unce
Slide 3: Welcome to the 2024 Analyst & Investor Day
2024 Analyst & Investor Day Welcome to Crescent Capital BDC, Inc.’s (“CCAP”) 2024 Analyst & Investor Day • Today’s presentation is being delivered in person in Milwaukee and simulcast on the web • For those joining remotely, presentation materials have been made available online alongside the webcas
Slide 4: Speakers & Management Team
Speakers & Management Team Professional Years Industry / Crescent Experience Mark Attanasio 39 / 33 Co-Founder, Crescent Jason Breaux 27 / 24 Chief Executive Officer, CCAP | Managing Director, Crescent Christopher Wright 23 / 23 Head of Private Markets | Managing Director, Crescent Albert Lee 14 / 1
Slide 5: Agenda
Agenda Section Presenter(s) Welcome & Introduction Mark Attanasio Introduction to CCAP Jason Breaux Power of the Crescent Platform Chris Wright Crescent’s Investment Strategy Albert Lee, Chris Wang, Ray Barrios, Elizabeth Ko CCAP Opportunity Henry Chung, Gerhard Lombard, Jason Breaux 5
Slide 6: Introduction to CCAP
Current or prospective client name Introduction to CCAP Jason Breaux 6
Slide 7: Key Takeaways
Key Takeaways 1. Crescent’s track record in private credit spans over three decades Investors have entrusted us with their capital over numerous market cycles 2. CCAP leverages the breadth of the Crescent platform Access to the scale and capabilities of one of the longest tenured, leading below-inve
Slide 8: Why We Established CCAP in 2015
Why We Established CCAP in 2015 Provide a broader Further scale our platform Develop a diversified universe of investors to be a more relevant pool of capital that access to Crescent solutions provider leverages the entire platform BDC structure attractive CCAP augments Enhances investment to a wide
Slide 9: Progress Since Public Listing
Progress Since Public Listing 1 2 3 Stable NAV performance Reported record net Introduced variable via disciplined investment income per supplemental dividend underwriting approach share for the past five framework and increased and portfolio construction consecutive quarters base dividend to $0.42
Slide 10: CCAP's Approach has Delivered Outperformance
CCAP’s Approach has Delivered Outperformance Net Asset Value per Share1 3.3% 4.6% 5.0% 1.9% 0.2% 0.3% 0.0% -5.0% -2.0% -2.1% -5.1% -4.7% -10.0% -9.3% -8.1% -15.0% -12.4% -11.7% -20.0% -16.2% -18.5% -25.0% -23.2% -30.0% Since CCAP Inception 3 5 Yr 4 3 Yr 5 1 Yr 6 CCAP BDCs (<$1B in Assets) BDCs (>$1B
Slide 11: Total Economic Return Performance
Total Economic Return Performance CCAP has delivered an attractive total economic return on a one and five-year basis One Year Performance Trading At or Above NAV1 Trading Below NAV1 19.4% 16.9% 16.3% 16.1% 14.6% 14.5% 14.5% 13.8% 13.2% 13.2% 12.9% 11.6% 11.6% 11.5% 10.4% 9.9% 9.6% 8.7% 6.8% 2.4% -1
Slide 12: Power of the Crescent Platform
Current or prospective client name Power of the Crescent Platform Chris Wright 12
Slide 13: A Leading Specialist Focused Exclusively on Corporate Credit
A Leading Specialist Focused Exclusively on Corporate Credit Crescent seeks to deliver attractive returns with less volatility, lower default rates and higher recovery than the market average • Complementary strategies investing across the debt capital structure of companies of all sizes, in both pr
Slide 14: Why Crescent?
Why Crescent? Crescent is a pure play Team has long track record credit specialist investing in private credit together Minimizes potential for conflicts and enhances origination pipeline Singular Focus on Team Corporate Continuity Credit Fully Cycle-Tested Integrated Track Record Credit 30+ year tr
Slide 15: Investing in Credit Across Market Cycles for More Than Three Decades
Investing in Credit Across Market Cycles for More Than Three Decades 1991 High Yield Strategy launches 1992 First Direct Lending Strategy with focus on junior credit launches 1993 Bank Loan Strategy launches and first CLO closes 2004 2013 European office opens European Senior Direct Lending Strategy
Slide 16: Long Dated Track Record
Long Dated Track Record Longstanding partnerships built over years of working together and multiple vintages across 20+ private credit funds Cumulative Gross Originations & Deals Closed1 ($ in billions) $40 500 $35 $30 400 $25 300 $20 $15 200 $10 100 $5 $0 0 Pre-'00 '01 '02 '03 '04 '05 '06 '07 '08 '
Slide 17: Experienced Team
Experienced Team Crescent’s Executive Committee is responsible for the firm’s corporate governance and over 225 employees Investment Team Operations Team Investor Finance & Operations, Compliance Private Markets Public Markets Solutions Accounting HR & IT & Legal 80+ 30 Professionals Professionals 1
Slide 18: Crescent Private Credit Team Continuity
Crescent Private Credit Team Continuity Senior investment professionals average over 20 years of industry experience and over 12 years at Crescent Senior Crescent Private Credit Team Tenure1 20+ Years 5 16 to 20 Years 8 >85% of Crescent’s senior private credit investment team 11 to 15 Years 17 membe
Slide 19: Access to Resources of SLC Management
Access to Resources of SLC Management Crescent focuses on its expertise within its corporate credit niche while benefiting from resources and financial support of a global investment platform 150+ years $277B 750+ 1,400+ Top 100 Of experience Assets Under Investment Clients Served Most sustainable m
Slide 20: Crescent's Investment Strategy
Current or prospective client name Crescent’s Investment Strategy 20
Slide 21: Crescent's Investment Strategy
Crescent’s Investment Strategy Fundamental investment approach to seek out high quality businesses with defensive market positions, sustainable competitive advantages and strong management teams Origination Underwriting Monitoring • Core and lower middle • Fundamental credit • Active portfolio marke
Slide 22: Origination
Current or prospective client name Origination Albert Lee Chris Wang 22
Slide 23: Differentiated Middle Market Approach
Differentiated Middle Market Approach Private credit strategy heritage is in the core and lower middle market EBITDA Range Typical Characteristics $ in millions • Larger, well-diversified borrowers Upper • Leading market positions in large markets Middle $200+ • Able to access broadly syndicated loa
Slide 24: Crescent's Geographic Focus
Crescent’s Geographic Focus Global origination capabilities with a focus on creditor friendly jurisdictions (primarily North America and Western Europe) Canada London Western Boston Europe USA Chicago New York Los Angeles Headquarters Office Location Target Focus Australia Additional Market Coverage
Slide 25: Trusted Relationships
Trusted Relationships We believe we have some of the deepest sponsor relationships in private credit Reliability • 30+ year track record has created long-standing, deep-rooted sponsor relationships 585+ # of transactions with 275+ sponsors since Certainty to Close inception • Strong balance sheet al
Slide 26: Number of Deals Reviewed
Focus on Sponsor Backed Transactions Select Sponsor Relationships Private Credit Deal Flow by Year 2,000 1,916 1,828 1,738 1,800 1,565 1,600 1,524 1,532 1,399 1,400 1,299 1,288 Number of Deals Reviewed 1,165 1,200 1,000 800 735 600 400 200 67 37 34 37 30 36 46 32 41 28 16 (4%) (2%) (3%) (3%) (2%) (2
Slide 27: Most Active Relationships Span Decades
Most Active Relationships Span Decades 34 27 # of Transactions Closed 20 19 18 15 11 11 10 9 Sponsor #: 1 2 3 4 5 6 7 8 9 10 First Transaction: 1995 1994 2000 2004 1995 2016 2002 2010 2016 2014 Latest Transaction: 2024 2023 2023 2023 2024 2023 2022 2022 2024 2021 As of March 31, 2024. 27
Slide 28: Leveraging the Crescent Platform
Leveraging the Crescent Platform Over the past five years, Crescent’s Private Credit strategies have collectively invested over $25B CCAP $s Invested as % of Total Crescent Private Credit $s Invested 7% 8% 9% 5% 5% 6% 94% 92% 95% 95% 94% 92% 2019 2020 2021 2022 2023 LTM Q1'24 CCAP Crescent Private C
Slide 29: Incumbency Is a Stable Source of Deal Flow
Incumbency Is a Stable Source of Deal Flow Existing portfolio provides proprietary investment opportunities Commitments to New vs. Existing Borrowers1 Incumbent knowledge provides a competitive advantage 15% when evaluating new opportunities 25% 24% 29% 38% Growth capital needs for existing portfoli
Slide 30: Case Studies – Incumbency
Case Studies – Incumbency Crescent is an incumbent lender to both large existing borrowers as well as lower middle market borrowers that mature to the core middle market CASE STUDY #1 CASE STUDY #2 Company Company • Full-service provider of non-discretionary fire inspection • Leading independent dis
Slide 31: Underwriting
Current or prospective client name Underwriting Chris Wang Ray Barrios 31
Slide 32: Underwriting in Today's Environment
Underwriting in Today’s Environment Recession Resilient Industries Highly Cash Generative With Prior Investment Experience Business Models Consistent Investment Focus Conservative Structures Stringent Documentation with Attractive Loan-to-Values There is no guarantee that CCAP will be able to meet t
Slide 33: Mature, Resilient Businesses
Mature, Resilient Businesses We focus on mature companies with annuity-like revenue characteristics and strong cash flows Examples of What We Like Recurring Cash Flows Mission Critical Product or Service Long, Stable Operating History Strong Cash Flow Conversion Examples of Why We Pass Capital Inten
Slide 34: Sectors in Focus – Healthcare and Software
Sectors in Focus – Healthcare and Software Well defined investment thesis and underwriting criteria for several of the most active LBO sectors Investment Thesis Underwriting Criteria Diligence Focus • Stable demand drivers • Strong market position • High acuity • Non-cyclical • Stable revenue cycle
Slide 35: More Layers to Diversification
More Layers to Diversification 0.5% 0.4% 0.6% 0.3% 0.7% 0.2% 1.0% Health Care Equipment Healthcare Providers1 1.2% 0.1% & Services Healthcare Services 1.7% 26.6% of FMV Healthcare Equipment Diversified Software & Services Services 20.9% of FMV Government 2.4% 13.5% MSP 2.6% Financial Real Estate 3.5
Slide 36: Credit Is in Our DNA…Details Matter
Credit Is in Our DNA…Details Matter Leverage and Covenants don’t always tell the whole story Metric Expectation Reality Crescent Approach Tighter EBITDA Add-backs / Non-Recurring Charges definition can be Pro Forma Adjustments more important than Leverage Can be Low leverage absolute leverage level
Slide 37: The Upper Middle Market Conundrum
The Upper Middle Market Conundrum Upper middle market private credit features resemble broadly syndicated loans in the current market Typical Features Traditional Private Credit Upper Middle Market Private Credit / Broadly Syndicated Loans Pricing Premium to leveraged loan index In-line with broader
Slide 38: Targeted Approach to Seniority
Targeted Approach to Seniority Crescent applies a bespoke process to capitalizing its investments, with an emphasis on investing in the “right place” in the capital structure for a respective borrower CCAP Portfolio: Wtd. Avg. LTM EBITDA by Investment Type ($M)1 $141 $108 $33 2 3 4 First Lien Unitra
Slide 39: Market Segmentation Drives Structure
Market Segmentation Drives Structure Total CCAP <$200M >$200M Portfolio1 EBITDA EBITDA (96% of Total Debt FV) (4% of Total Debt FV) 6.8x Net Leverage1,2.3 5.5x 5.5x At Underwrite Financial Covenant1,2,3 At Least One 72% 74% 25% At Underwrite Weighted average based on fair value of investments as of
Slide 40: Investing Responsibly to Guide Better-Informed Decisions
Investing Responsibly to Guide Better-Informed Decisions Crescent believes systematically incorporating ESG Approach at Crescent Environmental, Social and Governance (“ESG”) • ESG Committee with cross-firm representation considerations into the investment decision process allows us to conduct more t
Slide 41: Monitoring
Current or prospective client name Monitoring Elizabeth Ko 41
Slide 42: Active Portfolio Management
Active Portfolio Management Portfolio management begins with loan documentation. Deals typically structured with monthly financials, quarterly maintenance covenants, incurrence tests, and capped baskets for add-backs Daily / Weekly Monthly Quarterly Annual / Ongoing • Real time updates as new • Deta
Slide 43: Crescent's Risk Rating Process
Crescent’s Risk Rating Process Investments are regularly reviewed using Crescent’s internally developed risk rating process that solicits feedback from the broader Crescent team Risk Rating Scale 1 Expectations At or Above Higher 3rd Party Review Committee Valuation Frequency Includes leaders from:
Slide 44: Watchlist and Workout Approach
Watchlist and Workout Approach Crescent seeks to identify potentially challenging situations early to optimize the ultimate path to exit Identify Seek Early Amend Monitor Restructure Optimize Outcome 1 2 3 4 5 6 • Review investment • Seek to reprice • More regular • Inject new capital • Evaluate str
Slide 45: Cycle-Tested Since 1992
Cycle-Tested Since 1992 Underwriting and monitoring processes have been fine-tuned by investing through multiple cycles We’ve had lower default rates relative to the market…2, 4 …with higher recoveries 3, 4 2.71% 88% 62% 0.17% Leveraged Loan Index 1 Crescent Private Credit Leveraged Loan Index 1 Cre
Slide 46: CCAP Opportunity
Current or prospective client name CCAP Opportunity Henry Chung Gerhard Lombard Jason Breaux 46
Slide 47: The CCAP Value Proposition
The CCAP Value Proposition CCAP benefits from the extensive relationships, disciplined investment process and 30+ year experience of the Crescent platform Past performance does not guarantee or indicate future results. 47
Slide 48: Investment Portfolio Performance Ratings
Investment Portfolio Performance Ratings Internal Performance Rating Migration % of Portfolio at Fair Value 100% 0.8% 10.0% 90% 80% 89.2% 70% 60% 50% 40% Q1 2020 Q1 2023 30% Alcentra acquisition closed First Eagle acquisition closed January 2020; beginning of March 2023 COVID-19 20% 10% 0% Q3 2015 Q
Slide 49: Well Defined M&A Playbook
Well Defined M&A Playbook While the lion’s share of CCAP’s portfolio has always consisted of Crescent-originated investments, there has been a significant rotation out of investments onboarded in connection with the Alcentra Capital and First Eagle BDC (FCRD) acquisitions Components of CCAP Portfoli
Slide 50: Track Record of Dividend Coverage
Track Record of Dividend Coverage We have generated earnings in excess of dividends paid since our inception $14.92 $14.29 $11.99 $13.10 $12.59 $10.26 $10.78 $8.37 $8.99 $6.57 $7.30 $4.74 $5.66 $3.09 $4.02 $1.78 $2.55 $0.55 $0.27 $1.37 2015 2016 2017 2018 2019 2020 2021 2022 2023 Q1 2024 Cumulative
Slide 51: Thoughtful Dividend Policy
Thoughtful Dividend Policy CCAP has earned its base dividend while simultaneously delivering additional income to stockholders via a variable supplemental policy Base Dividend Coverage1 Base Dividend Dividend Coverage 153.7% 143.9% 148.8% 131.7% 136.6% 129.3% 114.6% 117.1% 119.5% 107.3% 112.2% 112.2
Slide 52: Alignment with Our Shareholders
Alignment with Our Shareholders Crescent has demonstrated significant alignment since launching CCAP in 2015 Advisor Support Insider Dilutive Offerings Ongoing SLC for Equity Growth Ownership & Dividend Cuts Stock Support >$65M 7.9% 0 $10M • Transaction support for • Represents over $50M • Expected
Slide 53: Platform Capital Markets Relationships
Platform Capital Markets Relationships 15 50 ~$12B Lead banking relationships Total lender relationships Existing commitments across the platform across the including asset-based facilities, platform subscription lines, corporate revolvers and unsecured debt 53
Slide 54: CCAP's Leverage Strategy
CCAP’s Leverage Strategy CCAP has historically operated below or in the lower range of its stated target leverage range 1.11x $376M >2x Available Liquidity vs. Debt-to-Equity Available Liquidity1 Unfunded Commitments2 1.40x 1.30x 1.23x 1.19x 1.18x 1.20x 1.15x 1.11x 1.11x 1.08x 1.10x 1.03x 0.98x 0.97
Slide 55: Illustrative Return Analysis
Illustrative Return Analysis We believe CCAP presents an attractive potential return opportunity for equity investors ~20.0% Potential NAV Accretion Pull to NAV 11.4% Current Dividend ROE Opportunity Yield Note: There is no guarantee that CCAP will be able to meet the objectives stated. For discussi
Slide 56: Concluding Remarks
Concluding Remarks Crescent’s origination capabilities and longstanding relationships will Crescent platform and team are continue to provide CCAP ongoing cycle tested with over three decades access to high quality investment of private credit investing experience opportunities Potential for increme
Slide 57: Questions & Discussion
Current or prospective client name QUESTIONS & DISCUSSION 57
Slide 58: End Notes
End Notes Slide 9 – Progress Since Public Listing for this period includes ARCC, FSK, OBDC, BXSL, GBDC, PSEC, TSLX, GSBD, OCSL, NMFC, BCSF, BBDC, MFIC, SLRC, CGBD, PFLT, TCPC, CION, Note: Net IRR is extracted performance and Crescent will promptly provide the RWAY, FDUS, GAIN, PNNT, HRZN, GLAD, TPVG
Slide 59: End Notes
End Notes Slide 16 – Long Dated Track Record Slide 35 – More Layers to Diversification 1) Inception to date through December 31, 2023. Invested capital is 1) 24 individual portfolio companies across multiple, distinct specialties: aggregated by portfolio company, and all subsequent add-ons are ophth
Slide 60: End Notes
End Notes Slide 45 – Cycle Tested Since 1992 to the risk at the time of origination or acquisition. The investment is generally performing as expected, and the risks around our ability to ultimately recoup 1) While we believe CDLI is the most directly comparable index given it tracks the cost of the