Goldman Sachs BDC, Inc. (GSBD) Q1 2017 Earnings Report, Transcript and Summary

Good morning. This is Brent and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs BDC, Inc. First Quarter 2017 Earnings Conference Call. [Operator instructions] I will now turn the call over to Ms. Katherine Schneider, Head of Investor Relations at Goldman Sachs BDC. Katherine, you may begin your conference.

Thanks, Brent. Welcome, everyone. Before we can today’s call, I would like to remind our listeners that today’s remarks may include forward-looking statements. These statements represent the company’s belief regarding future events that by their nature are uncertain and outside of the company’s control. The company’s actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements as a result of a number of factors, including those described from time-to-time in the company’s SEC filings. This audiocast is copyright material of Goldman Sachs BDC, Inc. and may not be duplicated, reproduced or rebroadcast without our consent. Yesterday, after the market closed, the company issued an earnings press release and posted a supplemental earnings presentation, both of which can be found on the homepage of our website at www.goldmansachsbdc.com, under the Investor Resources section. These documents should be reviewed in conjunction with the company’s Form 10-Q filed yesterday with the SEC. This conference was being recorded today May 5, 2017 for replay purposes. With that, I will turn the call over to Brendan McGovern, Chief Executive Officer of Goldman Sachs BDC, Inc.

Thank you, Katherine. Good morning, everyone and thank you for joining us for our first quarter earnings conference call. As usual, I will start by providing an overview of our first quarter results and provide key highlights for the quarter. I will then turn the call over to Jon Yoder to discuss our investment activity and portfolio metrics. Jonathan Lamm, our CFO, will discuss our financial results in greater detail. And finally, I will conclude with some closing remarks before we open the line for Q&A. We are pleased to report another solid quarter for our shareholders. Net investment income per share was $0.49 in Q1 as compared to $0.50 per share for Q4 of 2016. Earnings per share were $0.40, up significantly from $0.15 from the prior quarter. On an annualized basis, our net investment income produced an 11% yield on book equity. As we announced after close yesterday, our board declared a $0.45 per share dividend payable to shareholders of record as of June 30. This quarter marked the seventh consecutive quarter where our net investment income meaningfully exceeded our dividend. Moving on to investment activity, the first quarter is typically notable for seasonally muted transaction levels. Given that backdrop, we are particularly pleased to report strong new origination activity during the quarter, with gross originations of $112.6 million. As we have been anticipating, repayment activity also picked up during the quarter. And as a result, the overall portfolio levels were essentially flat quarter-over-quarter. Average and ending debt-to-equity during the quarter was 0.7x and 0.76x respectively. We continued to produce solid portfolio growth in our senior credit fund, which increased by 8.9% quarter-over-quarter. At 7.9% of total assets, our investment in the senior credit fund is the company’s single largest position and it continues to produce attractive returns. The trailing 12-month return on this investment is approximately 14%. Turning to the market, for much of the quarter, investors were focused on the potential for a series of rate hikes over the course of the year. This drove significant investor interest in floating rate asset classes, including bank loans. The new capital flown into bank loans caused a contraction in spreads for broadly syndicated loans. While the middle-market is somewhat insulated from fund flows given the illiquidity of the asset class, we did see broadly syndicated loan investors who are hungry for paper dip down into the upper middle-market. This pay per paper resulted in a yield compression in the upper middle-market and while there is strict advantage of lower borrowing cost to refinance at lower levels. Reflecting this activity – reflecting this reality, our repayments during the quarter were skewed towards upper middle-market portfolio companies. We saw less competition from broadly syndicated loan buyers in the core of the middle-market where we generally operate and accordingly less pressure on yields. Finally, we are pleased to report that subsequent quarter to end, the company’s investment grade rating and sales outlook was reaffirmed by Standard & Poor’s. This positive rating reflects the company’s largely senior secured investment portfolio, strong earnings metrics and affiliation with Goldman Sachs that provides shareholders with access to our proprietary sourcing capabilities, leading infrastructure and operational benefits. With that, let me turn the call over to Jon Yoder.

Great. Thanks, Brendan. So, we are pleased to report a strong quarter of new origination activity. We had new investment commitments and fundings of $112.6 million and $107.5 million respectively, including an additional $13.4 million investment into the senior credit fund. New investment commitments were across 6 new portfolio companies and 4 existing portfolio companies. Sales and repayment activity totaled $110.3 million, driven primarily by full repayments from three portfolio companies. The full payments were from our $59 million second lien investments in Highwinds Capital, our $12 million second lien investment in Hutchison Technology, and our $24 million first lien investment in Dispensing Dynamics. I would like to pause on our largest repayment during the quarter which was Highwinds Capital. In July 2013, we made a second lien loan to Highwinds Capital, which is a digital content delivery network operator. Our investment thesis was centered on the company’s stable business profile with the sensible cash flows, demonstrated by the company’s proven history of subscriber retention. Furthermore, we believe that the company benefited from attractive macro tailwinds as more and more content is consumed digitally. Over the past 3.5 years, Highwinds has been able to successfully execute its growth strategy both organically and through accretive acquisitions. During the first quarter, Highwinds sold the majority of its business to a private equity sponsor, which resulted in the repayment of our second lien loan at a premium to par. We were able to achieve a gross IRR on this investment of 16%. While the company’s success allowed it to graduate to a lower cost of capital, we were able to participate in the new first lien loan supporting the acquisition of Highwinds by the private equity sponsor through the senior credit fund. We think that this is a good demonstration of the synergies in strategic value that the senior credit fund brings to our shareholders. Namely, it allows us to continue to drive value from our domain expertise and relationship with the borrower, even as that borrower grows and graduates for that lower cost of capital. As of March 31, total investments in our portfolio were $1.164 billion at fair value, comprised of 90.1% senior secured loans, including 34.9% in first lien, 27.2% in first lien last out unitranche, and 28% in second lien debt as well as 30 basis points in unsecured debt, 1.7% in preferred and common stock and about 8% in the senior credit fund. We also had $11.9 million of unfunded commitments as of the end of the quarter, bringing total investments and commitments to $1.176 billion. The portfolio continues to be well diversified, with investments in 43 portfolio companies, operating across 26 different industries, with no major industry concentrations. Both the overall portfolio yields and credit quality were relatively stable during the quarter. The weighted average yield on our total investment portfolio at cost, this quarter was 10.5% versus 10.6% in the prior quarter. The weighted average net debt to EBITDA of the companies in our investment portfolio at quarter end was 4.6x, slightly down from 4.8x the prior quarter. The weighted average interest coverage of the companies in our investment portfolio was 2.7x which was unchanged from the prior quarter. Turning to the senior credit fund, we are very pleased with the continued growth of this investment where we have earned a 14% return on our invested capital, over the trailing 12 months. We and our partner were able to grow investments in the senior credit fund by 9% during the quarter and by 53% year-over-year. Our investment in the senior credit fund now represents approximately 8% of the company’s total investment portfolio and is the company’s largest single investment. During the quarter, we and our partner originated $76 million of investments for the senior credit fund in four new companies and one existing portfolio company bringing the total size of the investment portfolio to $522 million. All of these new investments were in first lien, senior secured floating rate loans, with interest rate floors. The senior credit fund had sales and repayments of $31.8 million, resulting in net portfolio growth of $41.7 million during the quarter. The senior credit fund portfolio also remains well diversified, with investments in 38 companies, operating across 23 different industries. With that, I will turn the call over to Jonathan to walk through our financial results.

Thanks, John. We ended the first quarter of 2017 with total portfolio investments at fair value of $1.164 billion, outstanding debt of $506 million and net assets of $664 million. Our net investment income per share was $0.49 as compared to $0.50 in the prior quarter. Earnings per share were $0.40 as compared to $0.15 in the prior quarter. As Brendan mentioned earlier, our Board of Directors declared a second quarter dividend of $0.45 per share, payable to shareholders of record as of June 30. This is the seventh consecutive quarter that we have out-earned our dividend on a net investment income basis. During the quarter, our average debt to equity ratio was 0.7x as compared to 0.71x during the previous quarter. And we ended the first quarter with the debt to equity ratio of 0.76x consistent with the prior quarter. Turning to the income statement, our total investment income for the first quarter was $32.2 million, up from $30.5 million last quarter, primarily driven by an increase in interest income, including prepayment related income, partially offset by a decline in other income. Total expenses before taxes were $13.9 million for the first quarter, as compared to $12 million in the prior quarter. Expenses were up quarter-over-quarter primarily driven by an increase in incentive fees, partially offset by a decline in other operating expenses. As we have discussed in the past, incentive fees can change quarterly as we net our capital losses, whether realized or unrealized, against pre-incentive net investment income in the calculation. We ended the quarter with net asset value per share at $18.26, down approximately 27 basis points from prior quarter, driven by unrealized depreciation on certain investments. Our supplemental earnings presentation provides a NAV bridge to walk you through these changes. During the quarter, our Board of Directors renewed the company’s stock repurchase plan to March 18, 2018, to repurchase up to 25 million of its common stock, if the market price is below the company’s most recently announced NAV per share, subject to certain limitations. We believe that buying back shares at a discount to NAV should the opportunity arise is an attractive use of the company’s capital. Those stock repurchases were made during the quarter or subsequent to quarter end. With that, I will turn it back to Brendan.

Great. Thanks Jonathan. Overall, Q1 was characterized by steady consistent performance by our underlying portfolio investments, which facilitated strong net investment income to support attractive distributions to our shareholders. We remain focused on seeking out investment opportunities that generated attractive risk adjusted returns. We are appreciative with the opportunity to continue to manage our shareholder’s capital. And now Brent, please open the line for questions.

[Operator Instructions] Your first question comes from the line of Doug Mewhirter with SunTrust. Please go ahead.

Hi, good morning. First, could you give us an update on any – on your two non-accruals, whether there has been any movement on there, towards reconciliation or exit?

Sure. Thanks Doug. Starting with Iracore, if you look in the Q, we actually had a pretty subsequent events disclosure on Iracore, so we were successful post-quarter end in getting Iracore restructured. The substance of that is we converted our debt investment into equity of the company. We also made a $3 million investment to refinance our existing debt of the company, which will be a performing loan at 10%. So overall, we are pleased with the outcome, I think if you look at this situation overall, clearly not where we wanted to be, but by virtue of the restructuring, while there is an accounting realized loss that we are taking here on the back end, we own close to 20% of the company for a business that we are hopeful over the cycle can generate good, attractive returns and return bring it back to it’s old levels of probability gives us a chance to earn back the full amount of our invested capital potentially over time, so pleased with outcome and the opportunity that we have going forward with that investment. WIS is the other non-accrual as of quarter end, that situation is ongoing so a little bit more challenging, to comment with that with specificity there Doug. But suffice to say, we are in ongoing negotiations with all the stakeholders within the ecosystem of that investment and as is always the case, we will continue fight to optimize the outcome on behalf of the investors.

And just one thing I would add I guess on Iracore is, as Brendan said it’s post-quarter end we – effective with the transaction and as a result from an accounting perspective we will have some unrealized conversion realized, but we don’t expect a material change in value from where we were marked at quarter end.

Thanks. That’s helpful. The – another bigger picture question, you talked about how the – as you go a little higher into the upper middle market it’s more competitive, but your sort of core wheelhouse is still relatively insulated, I was wondering a little bit about this – the SCF, and that the average loan is a little bit large or the average EBITDA of your company is a little bit larger. So I don’t know if that sort of qualifies as maybe the lower end of upper middle market in your eyes, so what does that mean for your outlook, if that environment…?

Good question, Doug. I think the data you are referencing is correct. If you look at SCF, it’s slightly bigger companies, I will probably be off by a little bit here, but immediate EBITDA probably in the lower-60s for the companies in the SCF, maybe mid-60s. So very much middle market types of investment, so I think when you look back over this past quarter, quite pleased with the production there. As we mentioned we grew that by close to 9% quarter-over-quarter, I would say the underwrite remains consistent from a quality perspective and from a yield perspective in those sort of loans. We have had some repayment activity there, but so we are able to grow that portfolio. Not really a data approach to that market. So we continued to leverage the sourcing engine of the platform to find differentiated opportunities, so always tough to predict going forward. Certainly originations can be lumpy as can repayments. So we are trying to predict going forward, but certainly in the context of what we described as a more competitive environment this quarter, particularly for the upper middle market, quite pleased with our performance in the production and the quality production there.

And one thing I would also like to add Doug is, obviously in the Senior Credit Fund, it’s less sensitive than our balance sheet is to asset yields and is more sensitive to financing yields because it is levered 2 to 1. And so the other phenomenon as spreads have contracted, for upper middle market loans, we have seen spreads on financing of those loans also contract. And so we are certainly very mindful of that and I think if you project out in the future what we will be very thoughtful about how we can take advantage of contracted spreads on the financing side as well.

Great. Thanks. Just two last numbers related questions, very quick and it’s just more me savings some calculations, what were the I guess your call fees and accelerated OID in the quarter in that interest income line and also what was your sort of give back on the incentive fees this quarter, for your slight unrealized loss position?

So we had approximately $1.3 million in terms of call fees and accelerated appreciation – accretion relative to the investments that were repaid and there was approximately $0.01 related to the incentive fees in terms of – $0.01 a share in terms of – related to the incentive fees in terms of give back.

Great. Thanks. That’s all my questions.

Your next question comes from the line of Leslie Vandegrift with Raymond James. Please go ahead.

Hi, good morning. Thank you for taking my question this morning. First of all, just a quick modeling one on here, the spillover income as of the end of the quarter, do you guys have that?

It’s $0.75 a share – of total undistributed net investment income.

Perfect. And Jon, I know you were talking about it at the Washington Inventory Services Update and discuss ongoing negotiations, but I guess have you seen that go against you a bit, the mark down came down in about 30% from where it was a quarter ago, so has that turned a bit and what likely to pay back?

I would say a few things Leslie, one, no dramatic changes in the underlying performance of the company. So, as I mentioned, we are in the middle of ongoing negotiations as we speak of the last. We certainly don’t want to comment on that. So, we remain hopeful that the opportunities to optimize the outcome here. So, certainly we don’t want to project forward what might be the case particularly as we are in the throws of that discussion.

Okay, alright. And you talked about the upper middle-market spread compressions and just kind of the market dynamics in general right now and mentioned the senior credit fund impact. But you guys also have the private BDC right now that is ramping up and you have the idea that the public could co-invest with it. If you start doing co-investments there, would they not be that larger upper middle-market size?

Leslie, its Jon Yorder here. So look I think one of the things that we have always tried to do and we think is really critical to success in middle-market lending is to stay true to middle-market. And so as we have sized capital both initially for Goldman Sachs BDC, GSBD, but also as we thought about how much capital we are willing to manage on a private basis. We have specifically targeted amounts that we feel we can comfortably deploy into our core middle-market strategy. And so the other thing we have done with our private BDC is as you may know is it’s structured as a capital call facility, so that we can draw capital only when and if we find attractive opportunities in our core strategy. So, we are not under pressure to simply deploy capital just because we have got to get – we have got shares issued that we have to get some income earning assets to be able to pay that dividend. So I mean, it was frankly deciding how much capital to manage in the form in which you are able to draw that capital is frankly core in our view to have been successful in this strategy.

I think Leslie, the only other thing to add there and you mentioned it we did this quarter, that you will see that in the 10-Q as well, which is a critical outcome here and a great outcome for the platform and for GSBD shareholders in particular. So as Jon mentioned, we are not anticipating any change in strategy in terms of moving up to bigger borrowers, rather with the benefit of the exempt of order, we can be much more meaningful in the context of each tranche that we are participating in, the half that we have allows us to drive those initiations to an even greater degree. So, we get the benefit of that scaled capital base, with also the thoughtful approach that Jon described around the capital call facility. No pressure to do the deals that are just in front of us, but rather to do the right deals. And I think again when you look at this quarter in particular with the full benefit of that in place we are seeing that come to fruition, so we remain pleased overall.

Okay. And then, sorry, go ahead.

Also, I am going to add one more point on this just to reiterate it, I think we have talked about this on the last call, but for anybody who was not able to join that call, I think it’s worth reiterating, we think that the private BDC that we have, in the co-investor order, coupled with that, is a significant driver of value to our GSBD, our Goldman Sachs BDC shareholders, because we believe it will allow us to add increasing amounts of diversity to the portfolio, positions once they get allocated between the two companies obviously, the position sizes will get smaller on an individual name basis within GSBD, which we think is a very positive trend and then you are starting to see that playing already even in this quarter which is the first quarter, we have operated with that co-investment release, you saw the number of portfolio companies already starting to pick up. So, we think that’s a hugely valuable thing to shareholders as well.

And then I guess my follow-up on that would be then with the idea that you co-invest, they get the smaller percentage, so you do have the smaller investments in the public BDC. But with you talking about capital call based on the private side, so you can sit out if it’s not as attractive as you want it to be, but does that not mean that when there is only a few good deals in a quarter and you are going to split them now between the public and private, does that not mean that we can slowdown on a much faster rate, if that occurs on the public side?

Well, I think if I understand the question, I think the harder question is and I think it speaks to core competencies, how do we manage the capital base on the public BDC to optimize outcomes? And I think when you look back historically I think we have been quite thoughtful, quite prudent overall about how to do that. Our core focus is always with our public BDC of trying to optimize invested returns. And so when you think through the components of that being able to allocate opportunities when they are available is important. So we are incredibly thoughtful, spend a lot of time thinking through how to manage that overall and again, I think it comes through this quarter when we did have this co-invested order in place. We were able to be quite productive overall, maintain the leverage profile that we have started within the overall portfolio. So, that’s our goal, that’s what we will continue to endeavor to do.

Okay. Last question and I promise and then I will let you go. But on the senior credit fund obviously, nice growth in it this quarter. Will we see there be off and on when you guys co-invest with the private, can you co-invest with the private in the senior credit fund or do those kind of have to be separate?

We cannot co-invest with the SCF any other funds, but I think as you know, Leslie they are very different investment mandates as well. So, generally speaking when we are doing deals, we are generally not splitting them between the BDC, the public BDC and the SCF. The SCF is really focused almost exclusively on senior debt, lower asset yields, generally lower leverage cash in points. So, we don’t really view that as a constraint.

So the private won’t either then. Okay.

Yes.

Okay, perfect. Thank you. I appreciate you answering my questions this morning.

Thanks, Leslie.

You next question comes from the line of Jonathan Bock with Wells Fargo. Please go ahead. Fin O’Shea: Hi, guys. Fin O’Shea for Jonathon this morning. Thanks for having us on the call. Not to stretch the market spread compression theme too much, but the generally what we are hearing thus far is that it’s more on the upper market as opposed to the core book. Looking at what went off and came on this quarter, about $100 million each way, the spread differential there, I think we are calculating about 4% of NOI annually. So correct me if I am wrong, would this be – can you kind of walk us through how fundamental this is in the conditions today or is it more singular transient something that should smooth out, if you could kind of just breakdown the attribution there, sure?

Sure, thanks. So, it’s a good question and you are obviously right in terms of this quarter, I would say though a couple of things. First of all, if you look back over the last four quarters, in two of the last four quarters, including the fourth quarter of last year, the yields on new originations actually exceeded the yields on repayments. So, it’s hard to discern trends from any individual quarter and certainly again looking back a little bit even a few quarters, you will see that there is no discernible trend. This quarter I think the yields on repayments were particularly elevated because of that Highwinds repayment. I highlighted in the prepared remarks, but that was a 13.5% yielding piece of paper. And that was by far the largest repayment that we had this quarter and so that is going to very much bring up your weighted average yield on the repayments because of that one deal. But as I say, if you look at the broader trends if you will or certainly the trends going back the last couple of quarters, I think you are going to be – you will see that there is no discernible trend in terms of the on-boarding yields versus the departing yields, if you will.

I would just add that similarly as Jon alluded to Highwinds as the high yield investment, there are not a tremendous number of other large extremely high yielding investments in the portfolio. It’s not as though we have pursued a broad ball approach of very high-yielding mezz investments versus other very low yielding investments. So, there is relative consistency across the portfolio from a yield perspective overall. I think Jon also alluded to the fact this was a 2013 vintage deal that we had the opportunity to do a handful of add-ons over time. So, a bit of an anomaly for sure and I think not something that portends a trend going forward. You also referenced a 4 point NOI spread. I want to make sure I understand that, because I am not sure you are looking at it correctly. I suspect you might be looking at the 10-Q where we described 9.5% investment yields, which are really just the stated interest rate. So a few things to note there, that actually that’s something you are referencing, it actually excludes, for example, follow-on investments, which excludes our senior credit fund investments. It also excludes other sources of yields, including OID, in that calculation. So, as we look at it and Jon Yoder said this as we look at the recent history, our origination yields on a yield basis, has been more like 10.8% or 10.5% for the last several quarters and in fact if you went back to Q4, actually substantially higher even than that number. So look I think it’s an appropriate question, certainly there is a lot of commentary on the topic. We continue to be pleased with how we are performing in the context of that market environment, finding good transactions that will meet our yield. In fact we are not really changing the asset mix to any discernible degree as well. Fin O’Shea: Yes. You are correct three was – thank you. But it was just core book, core yield, but I appreciate all the color, of course and then just a couple company specific names, I will ask them both at once and move along, can you just provide an update on NTS, I think that was marked a previous non-accrual maybe if I am wrong. And then can you describe or just give a little more color on the nature of the Bolttech add on, what kind of size or what kind of – how could just the infusion in general that came along there and why didn’t it help, should that have helped the mark, how should we look at that? Thank you.

I will take the Bolttech and I’ll turn to Jon for [indiscernible]. So Bolttech, no change quarter-over-quarter to the mark, I think we are about $0.55, but you did note correctly saying that we did a small add-on investment, in that tranche. We came to an arrangement with the sponsor where we put in a small amount of capital, we have actually put in a multiple of the announced capital that we put in, in that same tranche, and so yes, overall it is certainly helpful to the company. That’s capital that was intended to come to the business to facilitate some growth initiatives that they have in store and so far overall, not a ton to report on execution there, but frankly not kind of changed quarter-over-quarter in the company’s results. So we are pleased and heartened that the sponsor who has got the vast majority of the capital beneath us is putting in, like I said, a multiple what we are putting into support that initiative. And overall, we are hopeful, we will obviously remain watching the investment, hopeful that can help that performance improvement.

I guess just on NTS, you are right, we marked down a couple of points, I wouldn’t characterize it as a particularly significant move for the quarter. There is obviously, as you know, a lot of different inputs that we take into coming to our fair market value considerations, but in terms of the underlying performance of the company, the company is actually doing just fine. Modestly in respect to this plan for the year, so we feel like the trends in that company are actually I would say cautiously optimistic about the trends in that company. Fin O’Shea: Thank you, guys.

Your next question if from the line of Christopher Testa with National Securities. Please go ahead.

Hi, good morning. Thanks for taking my questions. Just curious, just for the – looking at the second quarter relative to the first, just wondering how much of the volume quarter-to-date that you have seen in the pipeline has been new money versus refinance and where you see the trend going?

So in terms of I would say that – in the upper middle market as we kind of talked about largely refinancing driven. And I think we are continuing to see that across the markets. In the sort of what we think of as the core of the middle market, there has actually been a fairly decent amount of new financing activity and what we are kind of seeing there is that there has been and I think that is well documented at this point, of bit of capital that’s flowed into private equity in recent years. When I say recent years, really going back to the financial crisis and so at the same time, as companies have kind of reached the size that they start to attract offers from private equity buyers, given the amount of capital there is competition of assets, which is driving up valuation multiples, and so I would say companies get sold perhaps a little bit earlier in this market than they would have been in the past. So the companies that perhaps are only $7 million, $8 million, $9 million and $10 million of EBITDA suddenly are attracting a lot of interest. Whereas the pre-financial crisis or earlier, companies like that may have been left to mature a little bit more before they really attract significant private equity interest. So I would say in that regard, because of that private equity bid, there is probably the trend line is that there is more companies, new companies, but probably more on the smaller side compared to the historical standards, they are looking for new money financing.

And Christopher, just kind our taking through my head at the deals in the quarter and John was actually right. Four of the deals we did were four new transactions, purchases of companies by new investor with our capital, supported by just one refinancing transaction, one other was an add-on back to an existing investment that actually supported an acquisition. So overall, that’s the trend line, actually at least as evidenced by our origination this quarter, fairly robust and we are finding good opportunities existing.

That’s great color. Thank you. And just looking at the originations I know that you guys have not done a whole lot of unitranche and that remains very popular product with the sponsor community, just wondering if you think that the structures there are not favorable or just not as favorable compared to the SCF, just curious how you are thinking about the unitranche investments here?

Yes. I mean I would say generally speaking, we tend to be agnostic, that’s why we look at each transaction on its merits and when you look at the overall portfolio, there is a pretty good mix of different types of transactions between first lien, I think we are about 35% of the book into first lien. Some of that you could characterize as unitranche. And if when you look at the yields, it will certainly be more consistent with the unitranche. We also have got another a quarter of the book in bifurcated unitranche. That’s been the area that we think is actually very attractive where from our perspective we are trying to cherry pick the most attractive part of the company’s capital structure to optimize returns for our investors. Frankly, it’s a lot more worth than just simply buying the whole tranche, but we think we get much a greater benefit to our investors in those transactions. One of the deals we did this quarter, myON, nice company, recurring cash flow business for software-as-a-services type business model and Cisco portfolio company with nice growth profile. So we are able to take what was a competitive offering with an all-in cost of capital consistent with a very strong credit profile of that borrower. But again, find what we think is the best part of that capital structure with the benefit of a pretty modest amount of personal leverage there. So yes, we continued to hustle and find up opportunities across all the various tranches of debt.

Okay, great. And do you know how much of the second lien book is sponsored?

Don’t have the number off the top of my head, we can certainly come back to you Chris with that detail.

Yes. I am going to say that the – certainly the – I don’t have the number handy either, but it is going to be a vast majority of the second lien book as sponsor. We do very little non-sponsored in the second lien.

Okay, great, that’s all for me. Thanks for taking my questions.

Thank you.

Your next person comes from the line of Derek Hewett with Bank of America/Merrill Lynch. Please go ahead.

Good morning. Most of my questions have already been asked and answered. But it looks like you guys are pushing up against the $100 million capital commitment for the Senior Credit Fund, have there been discussions with your partner to expand the program at this point?

You are absolutely Derek, good catch. I think for the broader audience, both we and our partner have committed $100 million when we first put that partnership together. I think as of the end of the quarter, we had each drawn about $90 million. So if you think about our 10 plus, their 10 plus of leverage, frankly plus some repayments, certainly plenty of capital for us to continue to execute on the strategy as we sit here today. But in light of where we have gotten and I would say over the course of the entire relationship, we have had and we do continue to have conversations more recently with an eye towards extending that, certainly has been a successful investment opportunity, so nothing to report just yet, but certainly we are focused on it and look forward to communicating back to you shortly on results there.

Okay, great. And then lastly, what percentage of the overall portfolio has been originated by the – your global wealth group and have we seen it kind of similar percentage based on your new originations?

Yes. So, on the non-sponsored side today it’s about a fifth of the book. And the vast majority of that has come through our private wealth channel. I would say in terms of the new origination, the pipeline continues to be very, very active in that channel. I kind of alluded to this earlier, but there one trend line whether – that’s certainly we are seeing is that entrepreneurs and families that own companies are certainly taking note of the relatively rich valuations that we are able to obtain from the private equity sponsors. And so we are seeing more of those businesses get sold earlier than perhaps they would have in the past. The value though that we still derive in those situations is it because the environment for private equity is quite competitive right now in terms of finding deals. We think that they will know that private equity firms are very, very anxious to tap into our network of relationships with these family and entrepreneurial companies and so that in turn solidifies our relationship with those private equity firms and in turn helps us drive even more attractive terms from those firms in sponsored deals. So, whether we are actually – whether our pipeline is deals where we are providing financing or whether there is our pipeline is resulting in referrals to private equity firms who then as I say solidify that relationship and command better terms on deals as a result of that, that’s – we think that, that channel provides us with value in both ways.

Okay, great. That’s all for me. Thank you.

Thanks, Eric.

[Operator Instructions] At this time, there are no further questions, please continue with any closing remarks.

Thanks, Brent and thank you all for your questions and engagement. We do appreciate it and of course, if you have to have more questions, please feel free to reach out directly to us over the course of the day. Thank you very much.

Ladies and gentlemen, this does conclude the Goldman Sachs BDC, Inc. first quarter 2017 earnings conference call. Thank you for your participation.