TCG BDC was a non-traded BDC that went public in an initial public offering in June 2017. The company sold 9 million shares priced at $18.50 each. After underwriting fees and discounts for the investment banks that participated in the IPO, the company received $17.94 per share.
The prospectus states plainly that shares were sold at a premium to net asset value (NAV), or book value. “At the initial public offering price of $18.50 per share, purchasers in this offering will experience dilution of approximately $0.25 per share.”
TCG BDC History
- March 2013 – The first quarterly filing
TCG BDC got its start under the name Carlyle GMS Finance, Inc., a non-traded, externally-managed BDC. It adopted a 1.5% base management fee on gross assets, plus a two-part incentive fee that would pay its external adviser 20% of the gains in excess of a hurdle rate of 6% annualized. As a prominent private equity manager, The Carlyle Group was welcomed with open arms into the BDC industry.
- End of 2013 — $1.1 billion in commitments detailed in its annual report
Carlyle GMS Finance got off to a fast start raising capital as a private BDC. By the time its first 10-K annual report was filed with the SEC, it had $1.1 billion of total commitments from investors, but less than $217 million had been deployed in a combination of middle market senior loans, second lien loans, and structured finance investments. The BDC had an attractive alignment of interest between its manager and its investors. The 10-K outlines a plan under which 25% of the after-tax incentive fees earned by the investment advisor would be used to purchase shares of its common stock.
- December 2016 – Carlyle’s BDC reaches cruising altitude
It takes time for BDCs to get fully invested with their preferred mix of investments, and to deploy leverage that is raised against their equity capital. Shares outstanding grew markedly from 17.9 million shares at the end of 2014 to 31.5 million at the end of 2015. Dividends had also increased from an initial distribution of $0.19 in the first quarter of 2014 to $0.40 in the first quarter of 2016. It also paid its first special dividend of $0.18 per share on January 22, 2016.
At this point, Carlyle GMS Finance has $1.1 billion of assets, and approximately $535 million of liabilities, which put it near the 1:1 legal leverage limit for BDCs. But its hefty stakes in structured finance obligations – also known as collateralized loan obligations (CLOs) – generated substantial unrealized losses. Net asset value stood at $18.14 at the end of the year, down from an initial mark of $20 per share.
- March 15, 2017 –The BDC preps for an IPO by changing its name to TCG BDC, Inc
In preparation for its initial public offering, the company changed its name to TCG BDC, Inc. It also whittled away at its position in structured finance investments, which became less popular among BDC investors. Such investments now made up just 0.4% of the portfolio at fair value. The BDC was required to IPO by May 2, 2018. Failure to do so would result in liquidation. Its Board of Directors was required to “use its best efforts to wind us down and/or liquidate and dissolve us” in the event it did not go public. The company increased its regular quarterly dividend to $0.41 per share to start 2017, and paid a special dividend of $0.07 per share on January 24, 2017.
- June 15, 2017 – Shares begin trading on the NASDAQ exchange under the ticker CGBD
- June 20, 2017 – The first dividend cut
After going public, TCG BDC enacted its first dividend cut, declaring a $0.37 per share quarterly dividend payable on July 18, 2017.