Palmer Square Capital BDC Inc. Announces Fourth Quarter and Fiscal Year Ended 2023 Financial Results

Rhea-AI Summary

Palmer Square Capital BDC Inc. (NYSE: PSBD) reported robust financial results for Q4 and full year 2023, with total investment income of $29.8 million, net investment income of $15.4 million, and a net asset value of $17.04 per share. The company also saw total assets of $1.1 billion and total net assets of $462 million as of December 31, 2023.

Insights

Financial Analyst

The reported financial results from Palmer Square Capital BDC Inc. for the fourth quarter and full year ended December 31, 2023, indicate a positive trajectory in terms of revenue and net investment income growth. The increase in total investment income from $23.8 million in the previous year to $29.8 million represents a significant year-over-year growth. This growth is also reflected in the net investment income per share, which rose from $0.51 to $0.57. Such improvements in a company's financial metrics are typically indicative of effective management and operational efficiency, which can be favorable for investor sentiment.

The net asset value (NAV) per share, an important metric for business development companies (BDCs) as it represents a measure of the company's net worth, increased from $16.76 to $17.04 quarter-over-quarter. This incremental growth, along with the subsequent NAV per share of $17.17 reported as of January 31, 2024, suggests a stable or appreciating value of the company's underlying assets, which is a positive sign for investors focusing on book value.

Moreover, the reduction in the debt-to-equity ratio from 1.42x to 1.39x signals a slight deleveraging, which could imply a conservative approach to debt management. However, the ratio is still above 1, which is common for BDCs but warrants monitoring as it indicates that the company has more debt than equity, potentially increasing financial risk.

Market Research Analyst

The performance of Palmer Square Capital BDC Inc. in the liquid debt and private credit markets is noteworthy, as these markets can be highly competitive and sensitive to macroeconomic conditions. The BDC's ability to realize gains of $6.6 million for the fourth quarter of 2023, after facing losses of $11.4 million in the same quarter of the previous year, indicates a strong turnaround and may reflect well on the company's investment strategies and market positioning.

Investors often look for consistent and growing distributions as a sign of a healthy BDC. The cash distributions totaling $0.54 per share for the fourth quarter align with investor expectations for income-generating investments like BDCs. This consistency in distributions, coupled with the solid financial results, could increase investor confidence and potentially affect the stock's attractiveness in the market.

Economist

The reported financial results from Palmer Square Capital BDC Inc. also serve as an indicator of the broader economic environment. BDCs typically provide financing to small and mid-sized companies and the positive results could suggest a healthy demand for capital and a conducive lending environment. The company's performance, especially in the context of the liquid debt and private credit markets, might be seen as a microcosm of the current state of corporate finance.

However, it is crucial to consider that BDCs are often exposed to market volatility and credit risk. The reported gains and improved NAV could be subjected to future market fluctuations, especially in an uncertain economic climate. Investors and analysts should, therefore, weigh these results against potential macroeconomic risks such as interest rate changes, inflationary pressures and shifts in the credit cycle.

MISSION WOODS, Kan.--(BUSINESS WIRE)-- Palmer Square Capital BDC Inc. (NYSE: PSBD) ("PSBD" or the "Company"), an externally managed business development company, today announced its financial results for the fourth quarter and full year ended December 31, 2023.

Financial and Operating Highlights

• Total investment income of $29.8 million for the fourth quarter of 2023, compared to $23.8 million for the prior year period
• Net investment income of $15.4 million or $0.57 per share for the fourth quarter of 2023, as compared to $12.4 million or $0.51 per share for the comparable period last year
• Net asset value of $17.04 per share as of December 31, 2023, compared to $16.76 per share as of September 30, 2023
• Total realized and unrealized gains of $6.6 million for the fourth quarter of 2023, compared to total realized and unrealized losses of $11.4 million in the fourth quarter of 2022
• As of December 31, 2023, total assets were $1.1 billion and total net assets were $462 million
• Debt-to-equity as of December 31, 2023 was 1.39x, compared to 1.42x as of September 30, 2023
• Paid cash distributions to stockholders totaling $0.54 per share for the fourth quarter of 2023
• January 31, 2024 net asset value of $17.17 per share

“I am pleased to report that Palmer Square Capital BDC Inc. delivered strong fourth quarter and fiscal 2023 results, closing out the year well-positioned to continue to capitalize on opportunities in the liquid debt and private credit markets,” said Christopher D. Long, Chairman and Chief Executive Officer of PSBD. “We are incredibly excited about PSBD’s differentiated investment strategy, which we believe will deliver a compelling yield and long-term total return while mitigating risk due to our active management, higher quality approach, and finally the more liquid nature of the portfolio. We are also incredibly proud of PSBD’s commitment to enhanced transparency and greater shareholder alignment. We look forward to executing our opportunistic credit strategy and delivering shareholder value in the years to come.”

$ in thousands, except per share data	For the Quarter Ended
Financial Highlights	12/31/23	9/30/23	12/31/22
Net Investment Income Per Share1	$0.57	$0.56	$0.51
Net Investment Income	$15,391	$14,804	$12,408
NAV Per Share	$17.04	$16.76	$14.96
Dividends Earned Per Share2	$0.54	$0.56	$0.64
Portfolio Highlights	12/31/23	9/30/23	12/31/22
Total Fair Value of Investments	$1,108,811	$1,104,713	$1,017,212
Number of Industries	38	40	41
Number of Portfolio Companies	191	184	176
Portfolio Yield3	10.51%	11.27%	11.47%
Senior Secured Loan4	96%	97%	96%
Investments on Non-Accrual	0%	0%	0%
Total Return5	4.88%	7.97%	0.21%
Debt-to-Equity	1.39x	1.42x	1.76x
1. Net investment income for the period divided by end of period share count.
2. Dividend amount reflects dividend earned in period.
3. Weighted average total yield of debt and income producing securities at fair value.
4. As a percentage of long-term investments, at fair value.
5. Total return is calculated as the change in net asset value (“NAV”) per share during the period, plus distributions per share (if any), divided by the beginning NAV per share. Total return is not annualized. Assumes reinvestment of distributions.

Portfolio and Investment Activity

As of December 31, 2023, we had 227 investments in 191 portfolio companies with an aggregate fair value of approximately $1.0 billion. Based on total fair value of $1.1 billion including short term investments, the portfolio consisted of 85.9% first lien senior secured debt investments, 5.0% second lien senior secured debt investments, 0.4% corporate bond investments, 2.9% CLO mezzanine and equity investments, and 5.8% short-term investments.

As of December 31, 2023, 98% of the long-term investments based on fair value in our portfolio were at floating rates. At the end of fiscal year 2023, all debt and short-term investments were income producing, and there were no loans on non-accrual status. As of December 31, 2023, the weighted average total yield to maturity of debt and income producing securities at fair value was 10.51%, and weighted average total yield to maturity of debt and income producing securities at amortized cost was 8.93%.

For the fourth quarter of 2023, the principal amount of new investments funded was $85.3 million across 30 new investments. For this period, the Company had $52.6 million aggregate principal amount in sales and repayments.

For the full year ended December 31, 2023, the principal amount of new investments funded was $273.7 million across 67 investments. For this period, the Company had $247 million aggregate principal amount in sales and repayments.

Liquidity and Capital Resources

As of December 31, 2023, the Company had $2.1 million in cash and cash equivalents and approximately $640 million in total aggregate principal amount of debt outstanding. Subject to borrowing base and other restrictions, the Company has available liquidity, consisting of cash and undrawn capacity on credit facilities of approximately $262 million compared to $20.1 million dollars of undrawn investment commitments.

Recent Developments

On January 17, PSBD priced its initial public offering of approximately 5.5 million shares on the New York Stock Exchange at a price of $16.45 per share. Gross proceeds from the IPO totaled approximately $90 million.

Earnings Conference Call

The Company will host a conference call on Wednesday, February 28, 2024 at 11:00 am ET to review its financial performance and conduct a question-and-answer session. To participate in the earnings call, participants should register online at the Palmer Square Investor Relations website. To avoid potential delays, please join at least 10 minutes prior to the start of the call. The conference call can be accessed through the following links:

• United States: +1 (888) 596-4144
• International: +1 (646) 968-2525
• Event Plus Entry Passcode: 1803382#
• Live Audio Webcast

A replay of the live conference call will be available shortly after the conclusion of the event and accessible on the events and presentations section of the Palmer Square Investor Relations website.

About Palmer Square Capital BDC Inc.

Palmer Square Capital BDC Inc. (NYSE: PSBD) is an externally managed, non-diversified closed-end management investment company that primarily lends to and invests in corporate debt loans, including but not limited to large private U.S. companies in the broadly syndicated loan market, as well as the direct large cap private credit market. PSBD has elected to be regulated as a business development company under the Investment Company Act of 1940. PSBD’s investment objective is to maximize total return, comprised of current income and capital appreciation. PSBD’s current investment focus is guided by two strategies that facilitate its investment opportunities and core competencies: (1) investing in corporate debt loans and, to a lesser extent, (2) investing in other debt securities which may include collateralized loan obligation debt and equity. PSBD’s investment activities are managed by its investment adviser, Palmer Square BDC Advisor LLC, an affiliate of Palmer Square Capital Management LLC.

Forward-Looking Statements

Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in PSBD’s filings with the SEC. PSBD undertakes no duty to update any forward-looking statement made herein unless required by law. All forward-looking statements speak only as of the date of this press release. Although PSBD undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that PSBD may make directly to you or through reports that in the future may be filed with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Financial Highlights
														For the Period January 23, 2020 (Commencement of Operations) through
		For the Year Ended December 31,												December 31,
		2023				2022				2021				2020
Per Common Share Operating Performance
Net Asset Value, Beginning of Period		$	14.96			$	20.06			$	20.15			$	20.00
Results of Operations:
Net Investment Income(1)			2.26				1.78				1.47				1.32
Net Realized and Unrealized Gain (Loss) on
Investments(4)			1.98				(5.00	)			(0.18	)			(0.19	)
Net Increase (Decrease) in Net Assets Resulting from
Operations			4.24				(3.22	)			1.29				1.13
Distributions to Common Stockholders
Distributions from Net Investment Income			(2.16	)			(1.85	)			(1.01	)			(0.98	)
Distributions from Realized Gains			-				(0.03	)			(0.37	)			-
Net Decrease in Net Assets Resulting from Distributions			(2.16	)			(1.88	)			(1.38	)			(0.98	)
Net Asset Value, End of Period		$	17.04			$	14.96			$	20.06			$	20.15
Shares Outstanding, End of Period			27,102,794				24,286,628				22,570,331				12,562,805
Ratio/Supplemental Data
Net assets, end of period		$	461,955,393			$	363,443,482			$	452,797,588				$253,144,971
Weighted-average shares outstanding			25,700,603				23,130,666				15,494,614				11,156,932
Total Return(3)			29.21	%			(16.51	%)			8.10	%			4.29	%
Portfolio turnover			25	%			27	%			53	%			63	%
Ratio of operating expenses to average net assets without
waiver(2)			13.15	%			8.28	%			5.54	%			5.69	%
Ratio of operating expenses to average net assets with
waiver(2)			12.90	%			8.03	%			5.29	%			5.44	%
Ratio of net investment income (loss) to average net assets
without waiver(2)			13.54	%			9.61	%			6.92	%			7.18	%
Ratio of net investment income (loss) to average net assets
with waiver(2)			13.79	%			9.86	%			7.17	%			7.43	%
1. The per common share data was derived by using weighted average shares outstanding.
2. The ratios reflect an annualized amount.
3. Total return is calculated as the change in net asset value (“NAV”) per share during the period, plus distributions per share (if any), divided by the beginning NAV per share. Total return is not annualized. Assumes reinvestment of distributions.
4. Realized and unrealized gains and losses per share in this caption are balancing amounts necessary to reconcile the change in net asset value per share for the period, and may not reconcile with the aggregate gains and losses in the Consolidated Statements of Operations due to share transactions during the period.

Palmer Square Capital BDC Inc.
Consolidated Statement of Assets and Liabilities
		December 31, 2023				December 31, 2022
Assets:
Non-controlled, non-affiliated investments, at fair value (amortized cost of $1,159,135,422
and $1,120,099,935, respectively)		$	1,108,810,753			$	1,017,211,732
Cash and cash equivalents			2,117,109				1,650,801
Receivables:
Receivable for sales of investments			97,141				31,014,356
Receivable for paydowns of investments			344,509				136,119
Due from investment adviser			1,718,960				234,102
Dividend receivable			301,637				141,997
Interest receivable			8,394,509				6,465,594
Prepaid expenses and other assets			30,100				598,327
Total Assets		$	1,121,814,718			$	1,057,453,028
Liabilities:
Credit facilities, net(1)		$	641,828,805			$	641,309,417
Payables:
Payable for investments purchased			14,710,524				42,750,748
Distributions payable			-				6,941,066
Management fee payable			2,252,075				1,872,815
Accrued other general and administrative expenses			1,067,921				1,135,500
Total Liabilities		$	659,859,325			$	694,009,546
Commitments and contingencies(2)
Net Assets:
Common Shares, $0.001 par value; 450,000,000 shares authorized; 27,102,794 and
24,286,628 as of December 31, 2023 and December 31, 2022, respectively issued and
outstanding		$	27,103			$	24,287
Additional paid-in capital			520,663,106				473,921,377
Total distributable earnings (accumulated deficit)			(58,734,816	)			(110,502,182	)
Total Net Assets		$	461,955,393			$	363,443,482
Total Liabilities and Net Assets		$	1,121,814,718			$	1,057,453,028
Net Asset Value Per Common Share		$	17.04			$	14.96
The accompanying notes are an integral part of these consolidated financial statements.
1. Security or portion thereof held within Palmer Square BDC Funding I, LLC (“PS BDC Funding”) and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Bank of America, N.A. (“BofA N.A.”) (see Note 6 to the consolidated financial statements).
2. As of December 31, 2023 and December 31, 2022, the Company had an aggregate of $20.1 million and $2.6 million, respectively, of unfunded commitments to provide debt financing to its portfolio companies. As of each of December 31, 2023 and December 31, 2022, there were no capital calls or draw requests made by the portfolio companies to fund these commitments. Such commitments are generally up to the Company’s discretion to approve or are subject to the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company’s consolidated statements of assets and liabilities and are not reflected in the Company’s consolidated statement of assets and liabilities.

Palmer Square Capital BDC Inc.
Consolidated Statement of Operations
		For the Year Ended December 31
		2023				2022				2021
Income:
Investment income from non-controlled, non-affiliated investments:
Interest income		$	107,739,382			$	73,705,450			$	38,897,216
Dividend income			4,066,745				610,203				9,597
Other income			417,480				184,247				778,840
Total investment income from non-controlled, non-affiliated investments			112,223,607				74,499,900				39,685,653
Total Investment Income			112,223,607				74,499,900				39,685,653
Expenses:
Interest expense			44,483,152				23,452,169				8,616,661
Management fees			8,408,074				8,328,713				6,369,583
Professional fees			792,645				741,961				758,435
Directors fees			75,000				75,000				75,000
Other general and administrative expenses			1,528,225				1,862,314				1,827,931
Total Expenses			55,287,096				34,460,157				17,647,610
Less: Management fee waiver (1)			(1,051,009	)			(1,041,089	)			(796,198	)
Net expenses			54,236,087				33,419,068				16,851,412
Net Investment Income (Loss)			57,987,520				41,080,832				22,834,241
Realized and unrealized gains (losses) on investments and foreign currency
transactions
Net realized gains (losses):
Non-controlled, non-affiliated investments			(2,715,413	)			(8,130,187	)			4,753,263
Total net realized gains (losses)			(2,715,413	)			(8,130,187	)			4,753,263
Net change in unrealized gains (losses):
Non-controlled, non-affiliated investments			52,563,544				(107,432,980	)			(8,527,786	)
Total net change in unrealized gains (losses)			52,563,544				(107,432,980	)			(8,527,786	)
Total realized and unrealized gains (losses)			49,848,131				(115,563,167	)			(3,774,523	)
Net Increase (Decrease) in Net Assets Resulting from Operations		$	107,835,651			$	(74,482,335	)		$	19,059,718
Per Common Share Data:
Basic and diluted net investment income per common share		$	2.26			$	1.78			$	1.47
Basic and diluted net increase (decrease) in net assets resulting from
operations		$	4.20			$	(3.22	)		$	1.23
Weighted Average Common Shares Outstanding - Basic and Diluted			25,700,603				23,130,666				15,494,614
The accompanying notes are an integral part of these consolidated financial statements.
1. As of December 31, 2023, all investments are non-controlled, non-affiliated investments. Non-controlled, non-affiliated investments are defined as investments in which the Company owns less than 5% of the portfolio company’s outstanding voting securities and does not have the power to exercise control over the management or policies of such portfolio company.

Palmer Square Capital BDC Inc.
Portfolio and Investment Activity
		For the Year Ended
		December 31, 2023				December 31, 2022				December 31, 2021
New investments:
Gross investments		$	273,733,424			$	278,951,054			$	926,351,937
Less: sold investments			(247,083,117	)			(314,355,643	)			(401,760,802	)
Total new investments			26,650,307				(35,404,589	)			524,591,135
Principal amount of investments funded:
First-lien senior secured debt investments		$	267,272,174			$	247,233,397			$	829,591,637
Second-lien senior secured debt investments			3,858,750				19,102,118				57,492,916
Corporate bonds			2,602,500				-				2,883,300
Convertible bonds			-				3,728,288				1,025,000
Collateralized securities and structured products - debt			-				-				14,757,907
CLO Equity			-				8,887,251				20,101,177
Common stock			-				-				500,000
Total principal amount of investments funded			273,733,424				278,951,054				926,351,937
Principal amount of investments sold or repaid:
First-lien senior secured debt investments			233,535,659				292,852,517				380,386,061
Second-lien senior secured debt investments			8,013,549				11,938,325				12,583,308
Corporate Bonds			-				987,500				-
Convertible bonds			-				4,504,808				3,026
CLO Equity			2,533,909				1,976,080				-
Collateralized securities and structured products - debt			3,000,000				1,501,875				8,788,407
Common Stock			-				594,538				-
Total principal amount of investments sold or repaid			247,083,117				314,355,643				401,760,802
The information presented above is at amortized cost unless otherwise indicated.

		For the Year Ended
		December 31, 2023				December 31, 2022				December 31, 2021
Number of new investment commitments			67				38				155
Average new investment commitment amount		$	3,802,624			$	4,784,093			$	4,521,355
Weighted average maturity for new investment commitments			5.19 years				5.95 years				5.85 years
Percentage of new debt investment commitments at floating rates			98.82	%			100.00	%			99.42	%
Percentage of new debt investment commitments at fixed rates			1.18	%			0.00	%			0.58	%
Weighted average interest rate of new investment commitments			10.22	%			9.17	%			4.80	%
Weighted average spread over reference rate of new floating rate investment
commitments			4.87	%			4.80	%			4.39	%
Weighted average interest rate on investment sold or paid down			9.56	%			5.45	%			4.40	%
1. New CLO equity investments do not have an ascribed interest rate, and are therefore excluded from the calculation.
2. Variable rate loans bear interest at a rate that may be determined by reference to either a) LIBOR (which can include one-, two-, three- or six-month LIBOR) or b) the CME Term Secured Overnight Financing Rate (“SOFR” or “S”) (which can include one-, three-, or six-month SOFR), which resets periodically based on the terms of the loan agreement. At the borrower’s option, loans may instead reference an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate), which also resets periodically based on the terms of the loan agreements. Loans that reference SOFR may include a Credit Spread Adjustment (“CSA”), where the CSA is a defined additional spread amount based on the tenor of SOFR the borrower selects (making the reference rate S+CSA).

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240227258463/en/

Investors

Andy Wedderburn-Maxwell

Palmer Square Capital BDC Inc.

+1 (913)-386-9006

Investors@palmersquarebdc.com

Media

Josh Clarkson

Prosek Partners

PSBD@prosek.com

Source: Palmer Square Capital BDC Inc.

FAQ

What was Palmer Square Capital BDC Inc.'s total investment income for the fourth quarter of 2023?

Palmer Square Capital BDC Inc.'s total investment income for the fourth quarter of 2023 was $29.8 million.

What was Palmer Square Capital BDC Inc.'s net investment income for the fourth quarter of 2023?

Palmer Square Capital BDC Inc.'s net investment income for the fourth quarter of 2023 was $15.4 million or $0.57 per share.

What was Palmer Square Capital BDC Inc.'s net asset value as of December 31, 2023?

Palmer Square Capital BDC Inc.'s net asset value as of December 31, 2023, was $17.04 per share.

What were Palmer Square Capital BDC Inc.'s total assets and total net assets as of December 31, 2023?

Palmer Square Capital BDC Inc.'s total assets were $1.1 billion and total net assets were $462 million as of December 31, 2023.

What was Palmer Square Capital BDC Inc.'s debt-to-equity ratio as of December 31, 2023?

Palmer Square Capital BDC Inc.'s debt-to-equity ratio as of December 31, 2023, was 1.39x.

How much did Palmer Square Capital BDC Inc. pay in cash distributions to stockholders for the fourth quarter of 2023?

Palmer Square Capital BDC Inc. paid cash distributions to stockholders totaling $0.54 per share for the fourth quarter of 2023.