Unassociated Document
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
____________________________

FORM 10-Q

þ    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2010

OR

o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number 333-163279

Golub Capital BDC, Inc.
(Exact name of registrant as specified in its charter)

Delaware
27-2326940
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

150 South Wacker Drive, Suite 800
Chicago, IL 60606
(Address of principal executive offices)

(312) 205-5050
(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o
Accelerated filer o
  
 
Non-accelerated filer þ (Do not check if a smaller reporting company)
Smaller reporting company o
  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of August 9, 2010, the Registrant had 17,712,444 shares of common stock, $0.001 par value, outstanding.

 
 
 

Table of Contents
 

Part I.
Financial Information
  
     
Item 1.
Financial Statements
  
     
 
Consolidated Statements of Financial Condition as of June 30, 2010 (unaudited) and September 30, 2009
1
     
 
Consolidated Statements of Operations for the three and nine months ended June 30, 2010 (unaudited) and June 30, 2009 (unaudited)
2
     
 
Consolidated Statements of Changes in Net Assets / Members’ Equity for nine months ended June 30, 2010 (unaudited) and June 30, 2009 (unaudited)
3
     
 
Consolidated Statements of Cash Flows for the nine months ended June 30, 2010 (unaudited) and June 30, 2009 (unaudited)
4
     
 
Consolidated Schedules of Investments as of June 30, 2010 (unaudited) and September 30, 2009
5-10
     
 
Notes to Consolidated Financial Statements (unaudited)
11-23
     
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
24-36
     
Item 3.
Quanitative and Qualitative Disclosures About Market Risk
36
     
Item 4.
Controls and Procedures
36
     
Part II.
Other Information
  
     
Item 1.
Legal Proceedings
37
     
Item 1A.
Risk Factors
37
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
37
     
Item 3.
Defaults Upon Senior Securities
37
     
Item 4.
Removed and Reserved
37
     
Item 5.
Other Information
37
     
Item 6.
Exhibits
38

 
 
 

Part I. Financial Information
 
Item 1: Financial Statements

Golub Capital BDC, Inc. and Subsidiary
            
Consolidated Statements of Financial Condition
            
(In thousands, except share and per share data)
            
             
   
June 30, 2010
         
September 30, 2009
  
Assets
  
(unaudited)
        
Investments, at fair value (cost of $280,214 and $387,293 respectively)
   $ 277,610     $ 376,294  
Cash and cash equivalents
     71,380       -  
Restricted cash and cash equivalents
     32,728       30,614  
Interest receivable
     1,746       2,198  
Prepaid expenses and other assets
     296       16  
Total Assets
   $ 383,760     $ 409,122  
                 
Liabilities
                
Credit facility advances
   $ 121,764     $ 315,306  
Payable for investments purchased
     885       -  
Accrued professional fees
     540       13  
Management and incentive fee payable
     593       249  
Interest payable
     86       130  
Other payables
     107       672  
Total Liabilities
     123,975       316,370  
                 
Net Assets
                
Members' equity
     -       92,752  
Preferred stock, par value $0.001 per share, 1,000,000 shares authorized,
                
zero shares issued and outstanding as of June 30, 2010
     -       -  
Common stock, par value $0.001 per share, 100,000,000 shares authorized,
                
17,712,444 shares issued and outstanding as of June 30, 2010
     18       -  
Paid in capital in excess of par
     259,690       -  
Undistributed net investment income
     19       -  
Net unrealized appreciation on investments
     58       -  
Total Net Assets
     259,785       92,752  
                 
Total Liabilities and Total Net Assets
   $ 383,760     $ 409,122  
                 
Number of shares outstanding (unaudited)
     17,712,444       N/A  
Net Asset Value Per Share (unaudited)
   $ 14.67       N/A  

See Notes to Unaudited Consolidated Financial Statements.

 
1
 


Golub Capital BDC, Inc. and Subsidiary
                        
Consolidated Statements of Operations (unaudited)
                        
(In thousands, except share and per share data)
                        
                         
   
Three months ended
June 30,
    
Nine months ended
June 30,
  
   
2010
    
2009
    
2010
    
2009
  
Investment income
                        
Interest
   $ 7,230     $ 9,482     $ 25,718     $ 23,814  
                                 
Total investment income
     7,230       9,482       25,718       23,814  
                                 
Expenses
                                
Interest and other credit facility expenses
     591       1,114       2,144       3,680  
Base management fee
     903       811       2,237       2,074  
Incentive fee
     55       -       55       -  
Professional fees relating to registration statement
     188       -       788       -  
Professional fees
     363       154       734       167  
Administrative service fee
     144       -       442       -  
General and administrative expenses
     171       66       303       203  
                                 
Total expenses
     2,415       2,145       6,703       6,124  
                                 
Net investment income
     4,815       7,337       19,015       17,690  
                                 
Net gain (loss) on investments
                                
Net realized loss on investments
     -       -       -       (795 )
Net change in unrealized appreciation (depreciation) on investments
     (100 )     2,016       985       (4,459 )
                                 
Net gain (loss) on investments
     (100 )     2,016       985       (5,254 )
                                 
Net income
   $ 4,715     $ 9,353     $ 20,000     $ 12,436  
                                 
Basic and diluted earnings per share1
   $ 0.29       N/A       N/A       N/A  
                                 
Basic and diluted weighted average shares outstanding
     16,255,783       N/A       N/A       N/A  
                                 
                                 
1
The earnings per share and weighted average shares outstanding calculation for the three months ended June 30, 2010 is based on the assumption that the number of shares issued immediately prior to to the conversion on April 14, 2010 (8,984,863 shares of common stock) had been issued on April 1, 2010, the beginning of the three month period.

See Notes to Unaudited Consolidated Financial Statements.



 
2
 
 
Golub Capital BDC, Inc. and Subsidiary
Consolidated Statements of Changes in Net Assets/Members' Equity
(In thousands, except share and per share data)

                                           
                                           
         
Common Stock
    
Paid in Capital
    
Undistributed
    
Net Unrealized
        
   
Members'
          
Par
    
in Excess
    
Net Investment
    
Appreciation on
    
Total Net
  
   
Equity
    
Shares
    
Amount
    
of Par
    
Income
    
Investments
    
Assets
  
Balance at October 1, 2009
   $ 92,752           $ -     $ -     $ -     $ -     $ 92,752  
Proceeds from members' equity contributions
     47,209                     -       -       -       47,209  
Payments of members' equity distributions
     (13,530 )                   -       -       -       (13,530 )
Net increase in net assets resulting from operations for period October 1, 2009 to April 13, 2010
     15,672                     -       -       -       15,672  
Golub Capital BDC Conversion1
     (142,103 )     8,984,863       9       142,094       -       -       -  
Issuances of common stock, net of offering and underwriting costs2
             8,727,581       9       117,596       -       -       117,605  
Net increase in net assets resulting from operations for period April 14, 2010 to June 30, 2010
     -       -       -       -       4,270       58       4,328  
Dividends
     -       -       -       -       (4,251 )     -       (4,251 )
Balance at June 30, 2010
   $ -       17,712,444     $ 18     $ 259,690     $ 19     $ 58     $ 259,785  
                                                         
                                                         
1
Immediately prior to the initial public offering, Golub Capital BDC LLC converted from a limited liability company leaving Golub Capital BDC, Inc. as the surviving entity. Golub Capital BDC, Inc. issued 8,984,863 shares of common stock to existing Golub Capital BDC LLC owners in connection with the conversion.
2
On April 14, 2010, Golub Capital BDC, Inc. priced its initial public offering, selling 7,100,000 shares of its common stock at a public offering price of $14.50 per share. Concurrent with this offering an additional 1,322,581 shares were sold through a private placement also at $14.50 per share. On May 19, 2010, an additional 305,000 shares were issued at $14.50 per share upon exercise of the underwriters' over-allotment option.

See Notes to Unaudited Consolidated Financial Statements.


 
3
 


           
Consolidated Statements of Cash Flows (unaudited)
            
(In thousands)
            
             
   
Nine months ended June 30,
  
   
2010
    
2009
  
Cash flows from operating activities
            
Net income
   $ 20,000     $ 12,436  
Adjustments to reconcile net income to net cash provided by (used in) operating activities
          
 Amortization of deferred financing fees
     -       369  
 Amortization of discount and premium
     (6,580 )     (3,581 )
 Net realized loss on investments
     -       795  
 Net change in unrealized (appreciation) depreciation on investments
     (985 )     4,459  
 Fundings on revolving loans, net
     4,604       6,203  
 Fundings of portfolio investments
     (16,314 )     (363,129 )
 Proceeds from principal payments and sales of portfolio investments
     117,959       91,248  
 Changes in operating assets and liabilities:
                
 Interest receivable
     452       (1,427 )
 Prepaid expenses and other assets
     (280 )     (12 )
 Payable for investments purchased
     885       -  
 Accrued professional fees
     527       -  
 Management and incentive fee payable
     344       148  
 Interest payable
     (44 )     (53 )
 Other payables
     (565 )     -  
Net cash provided by (used in) operating activities
     120,003       (252,544 )
                 
Cash flows from investing activities
                
Net change in restricted cash and cash equivalents
     (2,114 )     (20,489 )
Net cash used in investing activities
     (2,114 )     (20,489 )
                 
Cash flows from financing activities
                
Borrowings on credit facility
     -       263,754  
Repayments on credit facility
     (193,542 )     (46,570 )
Proceeds from capital contributions
     47,209       59,217  
Payments of capital distributions
     (13,530 )     (3,368 )
Proceeds from shares sold, net of underwriting costs
     119,034       -  
Payment of offering costs
     (1,429 )     -  
Dividend paid
     (4,251 )     -  
Net cash provided by (used in) financing activities
     (46,509 )     273,033  
                 
Net change in cash and cash equivalents
     71,380       -  
                 
Cash and cash equivalents, beginning of period
     -       -  
                 
Cash and cash equivalents, end of period
   $ 71,380     $ -  
                 
                 
Supplemental disclosure of cash flow information
                
 Cash paid during the period for interest
   $ 2,188     $ 3,363  
                 
Supplemental disclosure of noncash activity
                
 Obligations of Company paid by members of Golub Capital BDC LLC
   $ 896     $ 317  

See Notes to Unaudited Consolidated Financial Statements.

 

 
4
 

Golub Capital BDC, Inc. and Subsidiary
Consolidated Schedule of Investments (unaudited)
June 30, 2010
(In thousands)

 
Investment
Type
Spread Above
Index1
  
Interest
Rate2
  
Maturity
Date
    
Principal
Amount
    
Cost
    
Percentage
of
Net Assets
  
Fair
Value
  
Investments, at fair value
                                        
Canada
                                        
Debt investments
                                        
Diversified Conglomerate Service
                                        
Open Text Corporation
Senior loan
L + 2.25%
     2.60 %     10/2013     $ 1,314     $ 1,135       0.5 %   $ 1,293  
                                                     
Leisure, Amusement, Motion Pictures, Entertainment
                                                  
Extreme Fitness, Inc.
Senior loan
L + 7.50%
     11.50 %     03/2012       4,649       4,649       1.8       4,649  
                                                     
Total Canada (cost $5,784)
                                         2.3 %   $ 5,942  
                                                     
United States
                                                    
Debt investments
                                                    
Aerospace and Defense
                                                    
Thermal Solutions LLC
Senior loan
L + 4.75%
     6.00 %     03/2011     $ 95     $ 94       - %   $ 93  
Thermal Solutions LLC
Senior loan
L + 5.25%
     6.50 %     03/2012       1,880       1,868       0.7       1,786  
                                          0.7       1,879  
Automobile
                                                    
CLP Auto Interior Corporation
Senior loan
L + 4.75%
     5.10 %     06/2013       3,240       3,240       1.2       3,143  
Driven Brands, Inc.
Senior loan
L + 5.00%
     7.00 %     10/2014       5,981       5,981       2.3       5,981  
                                          3.5       9,124  
Banking
                                                    
Bonddesk Group LLC
Senior loan
L + 3.00%
     3.36 %     08/2012       2,006       1,936       0.8       1,965  
Prommis Solutions
Senior loan
L + 2.75%
     3.20 %     02/2013       1,523       1,523       0.5       1,447  
                                          1.3       3,412  
Beverage, Food and Tobacco
                                                    
Lone Star Beef Processors, L.P.
Senior loan
L + 4.00%
     4.75 %     05/2013       3,610       3,587       1.4       3,610  
ABP Corporation
Senior loan
L + 4.50%
     8.50 %     02/2013       2,328       2,284       0.9       2,328  
Bertucci's Corporation
Senior loan
L + 9.00%
     12.00 %     07/2012       1,969       1,913       0.8       1,969  
CTI Foods Holding Co., LLC
Senior loan
L + 4.00%
     6.00 %     06/2015       894       886       0.3       862  
                                          3.4       8,769  
Building and Real Estate
                                                    
American Fire Protection Group, Inc.
Senior loan
L + 6.75%
     9.00 %     06/2011       4,548       4,443       1.4       3,638  
Architectural Testing, Inc.
Senior loan
L + 6.50%
     9.50 %     05/2013       6,636       6,636       2.6       6,636  
Infiltrator Systems, Inc.
Senior loan
L + 5.50%
     8.50 %     09/2012       7,840       7,484       2.9       7,526  
ITEL Laboratories, Inc.
Senior loan
L + 6.75%
     9.75 %     03/2014       7,875       7,808       3.0       7,875  
ASP PDM Acquisition Co. LLC
Senior loan
L + 2.75%
     3.06 %     12/2013       610       568       0.2       555  
Best Lighting Products, Inc.
Senior loan
L + 8.00%
     10.00 %     08/2012       2,431       2,362       0.9       2,431  
KHKI Acquisition, Inc.
Senior loan
L + 6.00%
     8.50 %     03/2012       396       395       0.1       376  
KHKI Acquisition, Inc.
Senior loan
L + 6.00%
     8.50 %     03/2013       2,600       2,596       0.8       1,950  
Tecta America Corp.
Senior loan
L + 5.75%
     6.35 %     12/2011       2,668       2,668       0.7       1,708  
                                          12.6       32,695  
Cargo Transport
                                                    
Peco Pallet, Inc.
Senior loan
L + 3.75%
     4.10 %     06/2013       4,107       3,945       1.6       4,066  
                                                     
Chemicals, Plastics and Rubber
                                                    
Celanese Holdings LLC.
Senior loan
L + 1.75%
     2.04 %     04/2014       985       843       0.4       935  
Syrgis Holdings, Inc.
Senior loan
L + 5.50%
     7.75 %     08/2012       352       335       0.1       345  
Syrgis Holdings, Inc.
Senior loan
L + 6.00%
     8.25 %     08/2013       864       818       0.3       829  
Syrgis Holdings, Inc.
Senior loan
L + 8.50%
     10.75 %     02/2014       474       448       0.2       474  
                                          1.0       2,583  
Containers, Packaging and Glass
                                                    
Pelican Products, Inc.
Senior loan
L + 5.00%
     7.75 %     01/2013       77       71       -       77  
Pelican Products, Inc.
Senior loan
L + 5.00%
     7.75 %     01/2014       2,861       2,631       1.1       2,861  
Industrial Container Services, LLC
Senior loan
L + 4.00%
     4.50 %     09/2011       1,130       1,109       0.4       1,130  
                                          1.5       4,068  
Diversified Conglomerate Manufacturing
                                                    
Neptco Inc.
Senior loan
L + 5.25%
     7.25 %     03/2013       4,404       4,235       1.4       3,743  
Pasternack Enterprises, Inc.
Senior loan
L + 4.50%
     6.00 %     02/2014       4,995       4,845       1.9       4,995  
Vintage Parts, Inc.
Senior loan
L + 5.50%
     6.03 %     12/2013       7,224       7,140       2.8       7,152  
Heat Transfer Parent, Inc.
Senior loan
L + 3.00%
     3.35 %     06/2013       1,833       1,761       0.6       1,595  
                                          6.7       17,485  

See Notes to Unaudited Consolidated Financial Statements.
 
5
 


Golub Capital BDC, Inc. and Subsidiary
Consolidated Schedule of Investments (unaudited)
June 30, 2010
(In thousands)

 
Investment
Type
  
Spread Above
Index1
    
Interest
Rate2
  
Maturity
Date
    
Principal
Amount
    
Cost
    
Percentage
of
Net Assets
  
Fair
Value
  
Diversified Conglomerate Service
                                            
Benetech, Inc.
Senior loan
  
L + 5.00%
       5.35 %     12/2013     $ 8,845     $ 8,540       3.3 %   $ 8,668  
Compass Group Diversified Holdings, LLC
Senior loan
  
L + 4.00%
       4.32 %     12/2013       4,597       4,597       1.8       4,597  
Cortz, Inc.
Senior loan
  
L + 5.50%
       8.50 %     03/2014       6,655       6,603       2.6       6,655  
The Service Companies, Inc.
Senior loan
  
L + 6.50%