Q3 2022 Crescent Capital BDC Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Good day and thank you for standing by welcome to the Crescent Capital BDC Inc's third quarter ended September 32022 earnings conference call at.
At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session to ask a question. During this session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your first speaker today, Dan Mcmahon head of Investor Relations. Please go ahead.
Good morning, and welcome to Crescent capital BDC Inc's third quarter ended September 32022 earnings Conference call.
Please note that Crescent capital BDC, Inc. May be referred to as C cap Crescent BDC or the company throughout the call.
Before we begin I'll start with some important reminders.
Comments made over the course of this conference call and webcast may contain forward looking statements and are subject to risks and uncertainties.
The companys actual results could differ materially from those expressed in such forward looking statements for any reason.
Those listed in its SEC filings.
The company assumes no obligation to update any such forward looking statements. Please also note that past performance or market information is not a guarantee of future results.
During this conference call, we may discuss certain non-GAAP measures as defined by SEC regulation G.
Such as adjusted net investment income or NII per share.
The company believes that adjusted NII per share provides useful information to investors regarding financial performance.
Because it is one method the company uses to measure its financial condition and results of operations our.
A reconciliation of adjusted net investment income per share to net investment income per share. The most directly comparable GAAP financial measure can be found in the accompanying slide presentation for this call.
In addition, a reconciliation of this measure may also be found in our earnings release.
Yesterday after the market closed the company issued its earnings press release for the third quarter ended September .
Plenty to do and posted a presentation to the Investor Relations section of its website at Www Dot Crescent PVC Dot com.
Presentation should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC.
As a reminder, this call is being recorded for replay purposes speaking on today's call will be <unk>, President and Chief Executive Officer, Jason <unk>, Chief Financial Officer, Gary <unk>, Lombard and senior Vice President and re Chung.
With that I'd now like to turn it over to Jason.
Thanks, Dan Hello, everyone and thank you for joining our earnings call. We appreciate your continued interest in fee cap.
Today, I'll highlight our third quarter results.
Our current portfolio and provide some thoughts on the current market backdrop.
And then Henry will review, our recent investing activity and Gierhart, who will cover our financial results in more detail.
So let's begin.
Please turn to slide six where youll see a summary of our results.
We reported adjusted net investment income for the third quarter of <unk> 42 per share.
Total investments in total investment income both reached their highest level since inception.
And recurring yield related investment income continues to grow in both absolute dollars and as a percentage of our total revenue, which gierhart, who will provide more color on.
On a GAAP basis, our third quarter net investment income was <unk> 52 per share.
The difference relates to a 10 cent per share noncash reversal of our capital gains based incentive fees on net realized and unrealized capital appreciation.
Our net asset value per share ended the quarter at $20 16.
Down two 5% as compared to the prior quarter <unk>.
Majority of the decline relates to unrealized losses, we took to reflect wider credit spreads in the market as volatility within the leveraged finance in equity markets persisted during the third quarter.
Additionally, we wrote down a zero cost basis legacy All center investment that contributed approximately one third of the NAV decline.
Henry will touch on in his comments.
At the Federal Reserve has continued to raise rates to fight inflation, the resulting volatility has created an increasingly complex operating environment for many companies as many anticipate a general slowdown and softening demand.
Despite this the fundamental performance of our portfolio remains solid given our focus on market, leading companies and resilient industries with strong margins and high free cash flow generation.
And while certain of our companies have experienced some margin pressure from increases in labor and input costs.
To date, they have largely been able to pass through certain cost increases to maintain healthy profitability.
Given our track record through Covid.
Kevin plus years of investing in growing C cap at over 30 years since making our first private credit investment at Crescent we.
We feel well positioned to navigate the uncertain macro environment and take advantage of the opportunity set that it presents.
Please turn to slide 13, and 14 of the presentation.
Which highlight our diversified portfolio.
We ended the quarter with our largest portfolio since inception with nearly $1 3 billion of investments at fair value.
Across 136 portfolio companies.
With an average investment size of less than 1% of the total portfolio.
Our investment portfolio continues to consist primarily of senior secured first lien and Unitranche first lien loans collectively representing 89% of the portfolio at fair value.
Up from 88% in the prior quarter.
And we remain well diversified across 18 industries and continue to lend almost exclusively to private equity backed companies.
With 98% of our debt portfolio and sponsor backed companies as of quarter end.
We generally believe that our private equity partners provide operational and financial support to strengthen their portfolio companies for long term value creation, which.
Which is particularly valuable during periods of heightened volatility.
For the third quarter 133 out of our 136 debt investment portfolio companies, representing over 99% of total debt investments at fair value made full scheduled principal and interest payments.
90% of our debt investment portfolio today is marked above 95 on the dollar with an average mark of approximately 97.
Two more credit trends are outlined on slide 17.
Continued strong performance ratings and low non accrual levels.
Our weighted average portfolio grade of $2, one was unchanged as compared to the past few quarters.
And the percentage of risk rated one or two investments.
Hi, its ratings of our portfolio companies can receive remains unchanged at 89% of the portfolio at fair value.
As of quarter end, we had investments in four portfolio companies on nonaccrual status, representing 2.0, and one 3% of our total debt investments at cost and fair value respectively.
I'd now like to turn it over to Henry to discuss our Q3 investment activity Henry.
Thanks, Jason Please turn back to slide 15, where we highlight our recent activity.
Gross deployment in the third quarter was $90 million as you can see on the left hand side of the page over 90% of which was in senior secured first lien and Unitranche investments in total we closed on seven year.
<unk> follow on investments totaling $46 million and $4 million, respectively, with the remaining $40 million coming from our revolver and delayed draw term loan activity.
All of the new investments were private equity backed loans with sulfur or youre right were floors attractive fees or OID and a weighted average spread of approximately 620 basis points in.
In addition loan to value levels remain attractive averaging 46% for the transactions closed this quarter.
The $90 million in gross deployment compares to approximately $60 million in aggregate exited sales and repayments in the quarter inclusive of a $10 million of liquidating return of capital from our joint venture, which we're in the process of winding down it.
It is also worth highlighting that <unk> total commitment for the aforementioned new deals represented about 6% of the over $1 $1 billion total check size committed across question accounts, highlighting the breadth of <unk> platform.
Moving to the right hand side of the page you will see that our net investment activity has led to unit tranche first lien, becoming a more prominent percentage of our total portfolio.
This increase for 53% a year ago to 64% today is by design as it allows us to offer even greater certainty of execution to our private equity sponsors, especially in this market environment and enabled us to enhance our yield opportunity while remaining at the top of the capital stack.
Turning to slide 16, you can see that the weighted average yield of our income producing securities at cost increased meaningfully quarter over quarter from eight 3% to nine 5% on the heels of the federal reserves interest rate hikes.
As of September 30th 99% of our debt investments at fair value were floating rate with a weighted average floor of 83 basis points, which compares to a 73% floating rate liability structure with no floors.
This situates us well to benefit from increases in base rates above our average floors as is the case this quarter with growth in our interest income line item.
As Jason noted during his comments and item worth highlighting as it relates to our portfolio as our investment and so their technical Institute for STI, which we acquired through the central merger at a cost basis of zero.
Following the close of the merger the portfolio company had several positive developments that resulted in us realizing over $2 million in total cash proceeds over the course of our investments.
We increased the fair value above our initial zero cost basis due to positive investment performance.
Over due to recent regulatory changes that impacted the portfolio company, we reduced the unrealized fair value of the position back down to zero. This quarter. This drove a <unk> 17 per share or approximately one third of this quarters a reduction in net asset value.
Before I turn it over to Carol hard to discuss our results in more detail I wanted to spend a minute on our announced acquisition of first Eagle BDC.
On the public call. We hosted in early October we reviewed the strategic merits of the transaction.
<unk> expected net investment income accretion improved portfolio positioning enhanced scale and investment capacity.
First Eagle reported their third quarter results earlier, this week and with 84% of their book invested in senior secured first lien loans, 93% sponsor backed and 97% floating rate debt investments. We continue to believe that we are adding a highly complementary portfolio to seed cap.
Continue to work in close conjunction with the first Eagle team, particularly as it relates to what we deem to be noncore investments that represent 9% of the first eagle portfolio as of September 30 were approximately 2% of the pro forma combined cap portfolio that we believe will provide opportunities for near term rotation into directly.
<unk> first lien investments.
With that I will now turn it over to your heart.
Thanks, Henry and good morning, everyone.
Our adjusted net investment income per share of 42.
Third quarter of 2022.
Compares to <unk> 41 per share for the prior quarter.
Total investment income of $29 million for the third quarter, the highest quarterly figure we've reported since inception.
Compared to the $26 8 million for the prior quarter, representing an increase of approximately 8%.
Importantly, if we consider recurring yield related investment income comprised of interest income pik income amortization and unused fees.
Was up 18% quarter over quarter from $22 8 billion to $26 8 million a record figure for us.
Driven by rising base rates and a growing portfolio.
This recurring revenue ultimately accounted for 93% of this quarters total investment income.
We generated significant investment income in the form of dividends and accelerated amortization of OID from the realization of the central portfolio over close to the last two years.
That nonrecurring income is now being replaced by recurring yield related income from Crescent originated assets.
I would also note that Pik income continues to represent a modest portion of our revenue.
At approximately 2% of total investment income.
We expect revenue growth to continue in our net interest margin to extent you can tail winds from rising rates and a larger income producing portfolio.
And because we are investing in largely first lien and unitranche focused assets.
Having largely rotated out of legacy <unk> and our broadly syndicated bank loan joint venture, we expect to generate a high quality of top line revenue, primarily consisting of interest income.
We have provided details on our sensitivity to interest rate movements in this quarters Form 10-Q for those.
To further examine potential impact.
Holding all else equal, we expect approximately 85% of the portfolio to reset to higher base rates during the fourth quarter, which will provide additional lift to our fourth quarter revenue.
Partially offset by higher fourth quarter financing costs.
<unk> by virtue of having the asset side of our balance sheet reset monthly or quarterly and a portion of our outstanding debt on a daily basis means that there is about a one quarter delay between the beneficial impact of higher base rates on interest income.
Versus the more immediate impact of higher borrowing costs in a rising rate environment as we are currently experiencing.
This should translate to modestly higher NII during the fourth quarter.
With additional upside potential in 2023 from base rate increases combined with the accretion from projected cost synergies and scale benefits associated with our pending acquisition of the first Eagle BDC.
Turning back to this quarter's earnings.
GAAP earnings per share or net decrease in net assets, resulting from operations for the third quarter of 2022.
Minus eight.
Which compares to minus <unk> <unk> per share for the prior quarter.
GAAP earnings included net realized and unrealized losses on investments of 59 per share as well as our fourth and final <unk> per share.
Special dividend.
At September 30.
Buckled as equity with <unk>.
<unk> hundred $23 million, resulting in net asset value per share.
$8 16.
As compared to $639 million with $20 69 per share last quarter.
$596 million of $21 16 per share.
32021.
Positive net deployment of $30 million in the third quarter was partially offset by unrealized mark to market losses on our investments.
Ultimately leading to modest portfolio growth and a total investment portfolio at fair value of $1 3 billion as of September 32022.
Approximately $8 million quarter over quarter.
And we reviewed sdi's impact on our NAV this quarter and the remainder of this quarter's NAV decline is not in our view and the reflection of deteriorating credit quality in our portfolio, but rather the widening credit spread environment, which impacted more.
This dynamic as evidenced by our internal portfolio ratings at the end of the third quarter.
Assistant with prior quarters with roughly 90% of the portfolio rate of one or two our highest rating categories.
We believe this is an important distinction to highlight for shareholders in a volatile market environment.
Now, let's shift to our capitalization and liquidity I'm on slide 19.
As of September 30, our debt to equity ratio was 111 times.
Up modestly from 103 times at June 30.
And on the low end of our target range.
The weighted average stated interest rate on our total borrowings with 531% as of quarter end.
We expect that near term full deployment activity will be financed by our attractively priced Cherokee facilities.
As you can see on the right hand side of the slide we have a low level of debt maturities over the next few years with no maturities this year and $150 million maturity latest bill 595% unsecured notes in July of 'twenty three.
After that there are no remaining maturities until 2026 from a liquidity perspective as of quarter end we had.
$197 million of Undrawn capacity subject Deleveraged borrowing base and other restrictions.
And $22 million in cash and cash equivalents.
Additional expected proceeds from the continued wind down of our joint venture will provide for some incremental liquidity.
Finally for the fourth quarter of 2022, our board declared a <unk> 41 per share quarterly cash dividend, which will be paid on January 17, 2023 to stockholders of record as of December 30, <unk> 2022.
And with that I'd like to turn it back to Jason for closing remarks.
Thank you Gary Hart, we continue to believe that <unk> remains well positioned to navigate the economic and market uncertainty ahead.
While we do anticipate further market volatility and the potential for spread widening as the cycle progresses we.
We feel good about our current portfolio and our ability to lean into attractive opportunities created during periods of dislocation.
While of course, maintaining the same rigorous underwriting standards, we have always implemented.
We would like to thank all of you for your continued support and time today, we'll be happy to take your questions. So please understand that we may be limited in certain answers due to the ongoing first eagle transaction.
And with that operator, please open the line for questions.
I just want to make one clarifying remark before we start Q&A.
I just wanted to say that 123 out of our 126 debt investment portfolio companies, representing over 99% of total debt investments at fair value made full scheduled P&I payments in the third quarter I believe I said 133 out of 136 earlier in my remarks.
With that operator, you can go ahead and open up the Q&A. Thanks.
Thank you Sir.
As a reminder to ask a question at this time, you would need to press star one one on your telephone.
Please standby, while we compile the Q&A roster.
Once again, if you have a question at this time. Please press star one one on your telephone.
I'm showing no questions in the queue at this time.
I would like to turn the call back over to Mr. James <unk>, President and CEO for closing remarks.
Thank you operator, we thank you all for joining this call today, we appreciate your attention and your support of C cap and we look forward to speaking with you soon.
Yes.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise your hand during Q&A you can dial one one.
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Thank you.
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Yes.
[music].
[music].
Good day and thank you for standing by welcome to the Crescent Capital BDC, Inc. Third quarter ended September 32022 earnings conference call at.
At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session to ask a question. During this session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today to Dan Mcmahon head of Investor Relations. Please go ahead.
Good morning, and welcome to Crescent capital BDC Inc's third quarter ended September 32022 earnings Conference call.
Please note that Crescent capital BDC, Inc. May be referred to as C cap Crescent BDC or the company throughout the call.
Before we begin I'll start with some important reminders comments.
Comments made over the course of this conference call and webcast may contain forward looking statements and are subject to risks and uncertainties.
The company's actual results could differ materially from those expressed in such forward looking statements for any reason.
Including those listed in its SEC filings.
The company assumes no obligation to update any such forward looking statements. Please also note that past performance or market information is not a guarantee of future results.
During this conference call, we may discuss certain non-GAAP measures as defined by SEC regulation G. Such as adjusted net investment income or NII per share.
The company believes that adjusted NII per share provides useful information to investors regarding financial performance.
Because it is one method the company uses to measure its financial condition and results of operations our.
A reconciliation of adjusted net investment income per share to net investment income per share. The most directly comparable GAAP financial measure can be found in the accompanying slide presentation for this call.
In addition, a reconciliation of this measure may also be found in our earnings release.
Yesterday after the market closed the company issued its earnings press release for the third quarter ended September 32022, and posted a presentation to the Investor Relations section of its website at Www Dot Crescent BDC Dot com the.
The presentation should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC.
As a reminder, this call is being recorded for replay purposes speaking on today's call will be <unk>, President and Chief Executive Officer, Jason Brown.
<unk> Financial Officer, Gary <unk>, Lombard and senior Vice President and re Chung with that I'd now like to turn it over to Jason.
Thanks, Dan Hello, everyone and thank you for joining our earnings call. We appreciate your continued interest in fee cap.
Today I'll highlight our third quarter results discuss our current portfolio and provide some thoughts on the current market backdrop.
Then Henry will review, our recent investing activity and Gierhart, who will cover our financial results in more detail.
So let's begin.
Please turn to slide six where youll see a summary of our results.
We reported adjusted net investment income for the third quarter of <unk> 42 per share.
Total investments in total investment income both reached their highest level since inception and.
And recurring yield related investment income continues to grow in both absolute dollars and as a percentage of our total revenue, which gierhart, who will provide more color on.
On a GAAP basis, our third quarter net investment income was <unk> 52 per share.
The difference relates to a <unk> <unk> per share noncash reversal of capital gains based incentive fees on net realized and unrealized capital appreciation.
Our net asset value per share ended the quarter at $20 16.
Down two 5% as compared to the prior quarter the majority of the.
Decline relates to unrealized losses, we took to reflect wider credit spreads in the market as volatility within the leveraged finance in equity markets persisted during the third quarter.
Additionally, we wrote down a zero cost basis legacy All center investment that contributed approximately one third of the NAV decline.
Which Henry will touch on in his comments.
At the Federal Reserve has continued to raise rates to fight inflation, the resulting volatility has created an increasingly complex operating environment for many companies.
Many anticipate a general slowdown and softening demand.
Despite this the fundamental performance of our portfolio remains solid given our focus on market, leading companies and resilient industries with strong margins and high free cash flow generation.
And while certain of our companies have experienced some margin pressure from increases in labor and input costs.
To date, they have largely been able to pass through certain cost increases to maintain healthy profitability.
Given our track record through Covid.
Kevin plus years of investing in growing C cap at over 30 years since making our first private credit investment at Crescent we.
We feel well positioned to navigate the uncertain macro environment and take advantage of the opportunity set that it presents.
When you turn to slides 13, and 14 of the presentation.
Which highlight our diversified portfolio.
We ended the quarter with our largest portfolio since inception with nearly $1 3 billion of investments at fair value across 136 portfolio companies with an average investment size of less than 1% of the total portfolio.
Our investment portfolio continues to consist primarily of senior secured first lien and Unitranche first lien loans collectively representing 89% of the portfolio at fair value.
Up from 88% in the prior quarter.
And we remain well diversified across 18 industries and continue to lend almost exclusively to private equity backed companies with 98% of our debt portfolio and sponsor backed companies as of quarter end.
We generally believe that our private equity partners provide operational and financial support to strengthen their portfolio companies for long term value creation, which.
Which is particularly valuable during periods of heightened volatility.
For the third quarter 133 out of our 136 debt investment portfolio companies, representing over 99% of total debt investments at fair value may full scheduled principal and interest payments.
90% of our debt investment portfolio today is marked above 95 on the dollar with an average mark of approximately 97.
Two more credit trends are outlined on slide 17.
Continued strong performance ratings and low non accrual levels.
Our weighted average portfolio grade of $2, one was unchanged as compared to the past few quarters and.
And the percentage of risk rated one or two investments the highest ratings of our portfolio companies can receive remains unchanged at 89% of the portfolio at fair value.
As of quarter end, we had investments in four portfolio companies on nonaccrual status, representing 2.0, and one 3% of our total debt investments at cost and fair value respectively.
I'd now like to turn it over to Henry to discuss our Q3 investment activity.
Henry.
Thanks, Jason Please turn back to slide 15, where we highlight our recent activity.
Gross deployment in the third quarter was $90 million as you can see on the left hand side of the page over 90% of which was in senior secured first lien and Unitranche investments in total we closed on seven new and nine follow on investments totaling $46 million.
$4 million, respectively, with the remaining $40 million coming from our revolver and delayed draw term loan activity.
All of the new investments were private equity backed loans with silver or euribor floors attractive fees or OID and a weighted average spread of approximately 620 basis points in.
In addition loan to value levels remain attractive averaging 46% for the transactions closed this quarter.
The $90 million in gross deployment compares to approximately $60 million in aggregate exits sales and repayments in the quarter inclusive of a $10 million of liquidating return of capital from our joint venture, which we're in the process of winding down at.
It is also worth highlighting that <unk> total commitment for the aforementioned new deals represented about 6% of the over $1 $1 billion total check size committed across crescent accounts, highlighting the breadth of Crescent platform.
Moving to the right hand side of the page, you'll see that our net investment activity has led to unit tranche first liens, becoming a more prominent percentage of our total portfolio.
This increase from 53% a year ago to 64% today is by design as it allows us to offer even greater certainty of execution to our private equity sponsors, especially this market environment and enabled us to enhance our yield opportunity while remaining at the top of the capital stack.
Turning to slide 16, you can see that the weighted average yield of our income producing securities at cost increased meaningfully quarter over quarter from eight 3% to nine 5% on the heels of the federal reserves interest rate hikes.
As of September 30th 99% of our debt investments at fair value were floating rate with a weighted average floor of 83 basis points, which compares to a 73% floating rate liability structure with no floors.
This situates us well to benefit from increases in base rates above our average floors as is the case this quarter with growth in our interest income line item.
As Jason noted during his comments and item worth highlighting as it relates to our portfolio as our investment in <unk> Technical Institute for STI, which we acquired through the central merger at a cost basis of zero.
Following the close of the merger the portfolio company had several positive developments that resulted in us realizing over $2 million in total cash proceeds over the course of our investment.
We increased the fair value above our initial zero cost basis due to positive investment performance.
However, due to recent regulatory changes that impacted the portfolio company, we reduced the unrealized fair value of the position back down to zero this quarter.
This drove <unk> 17 per share or approximately one third of this quarters a reduction in net asset value.
Before I turn it over to Carol hard to discuss our results in more detail I wanted to spend a minute on our announced acquisition of first Eagle BDC on the public call. We hosted in early October we reviewed the strategic merits of the transaction, including expected net investment income accretion improved portfolio positioning enhanced scale and <unk>.
Best in capacity first.
First Eagle reported their third quarter results earlier, this week and with 84% of their book invested in senior secured first lien loans, 93% sponsor backed and 97% floating rate debt investments. We continue to believe that we are adding a highly complementary portfolio to seed cap.
We continue to work in close conjunction with the first Eagle team, particularly as it relates to what we deem to be noncore investments that represent 9% of the first eagle portfolio as of September 30 were approximately 2% of the pro forma combined cap portfolio that we believe will provide opportunities for near term rotation and <unk>.
<unk> originated first lien investments.
With that I will now turn it over to Gerhard.
Thanks, Henry and good morning, everyone.
Our adjusted net investment income per share of 42.
Third quarter of 2022 compares.
Compared to <unk> 41 per share for the prior quarter.
Total investment income of $29 million for the third quarter, the highest quarterly figure we've reported since inception.
Compared to $26 8 million for the prior quarter, representing an increase of approximately 8%.
Importantly, we consider recurring yield related investment income comprised of interest income pik income amortization and unused fees.
Was up 18% quarter over quarter from $22 8 billion to $26 8 million a record figure for us.
Driven by rising base rates and a growing portfolio.
This recurring revenue ultimately accounted for 93% of this quarters total investment income.
We generated significant investment income in the form of feed dividends and accelerated amortization of OID from the realization of the central portfolio over close to the last two years.
That nonrecurring income is now being replaced by recurring yield related income from Crescent originated assets.
I would also note that Pik income continues to represent a modest portion of our revenue.
At approximately 2% of total investment income.
We expect revenue growth to continue in our net interest margins to expand due to tailwind from rising rates and a larger income producing portfolio.
And because we are investing in largely first lien and unitranche focused assets.
Having largely rotated out of legacy <unk> and a broadly syndicated bank loans joint venture, we expect to generate a high quality of top line revenue, primarily consisting of interest income.
We have provided details on our sensitivity to interest rate movements in this quarters Form 10-Q for those one to further examine this potential impact.
Holding all else equal, we expect approximately 85% of the portfolio to reset to higher base rates during the fourth quarter, which will provide additional lift to our fourth quarter revenue.
Partially offset by higher fourth quarter financing costs Gen.
Generally by virtue of having the asset side of our balance sheet reset monthly or quarterly and a portion of our outstanding debt on a daily basis means that there is about a one quarter delay between the beneficial impact of higher base rates on interest income versus.
Versus the more immediate impact of higher borrowing costs in a rising rate environment as we are currently experiencing.
This should translate to modestly higher NII during the fourth quarter.
Additional upside potential in 2023 from base rate increases combined with the accretion from projected cost synergies and scale benefits associated with our pending acquisition of the first Eagle BDC.
Turning back to this quarter's earnings.
GAAP earnings per share or net decrease in net assets, resulting from operations for the third quarter of 2022.
Minus eight.
Which compares to minus <unk> <unk> per share for the prior quarter.
GAAP earnings included net realized and unrealized losses on investments of 59 per share as well as our fourth and final <unk> per share.
Special dividend.
At September 30, our stockholders' equity was $623 million, resulting in net asset value per share.
$20 16.
As compared to $639 million with $20 69 per share last quarter.
At $596 million of $21 16 per share at September 32021.
Positive net deployment of $30 million in the third quarter was partially offset by unrealized mark to market losses on our investments.
Ultimately leading to modest portfolio growth and a total investment portfolio at fair value of $1 3 billion as of September 32022.
Approximately $8 million quarter over quarter.
And we reviewed sdi's impact on our NAV this quarter and the remainder of this quarter's NAV decline is not in our view and the reflection of deteriorating credit quality in our portfolio.
Rather the widening credit spread environment, which impacted more.
This dynamic as evidenced by our internal portfolio ratings at the end of the third quarter.
Assistant with prior quarters with roughly 90% of the portfolio rate of one or two our highest rating categories.
We believe this is an important distinction to highlight for shareholders in a volatile market environment.
Now, let's shift to our capitalization and liquidity I'm on slide 19 as of September 30, our debt to equity ratio was 111 times.
Up modestly from $1 three three times at June 30.
And on the low end of our target range.
The weighted average stated interest rate for our total borrowings was 531% as of quarter end.
We expect that near term full deployment activity will be financed by our attractively priced secured facility.
As you can see on the right hand side of the slide we have a low level of debt maturities over the next few years with no maturities this year and $150 million maturity latest bill 595% unsecured notes in July of 'twenty three.
After that there are no remaining maturities until 2026 from.
From a liquidity perspective as of quarter end, we had $197 million of Undrawn capacity subject deleveraged borrowing base and other restrictions.
And $22 million in cash and cash equivalents.
Additional expected proceeds from the continued wind down of our joint venture will provide for some incremental liquidity.
Finally for the fourth quarter of 2022 or declared a <unk> 41 per share quarterly cash dividend, which will be paid on January 17, 2023 to stockholders of record as of December 30, <unk> 2022.
And with that I'd like to turn it back to Jason for closing remarks.
Thank you Gerhard.
Continue to believe that <unk> remains well positioned to navigate the economic and market uncertainty ahead.
While we do anticipate further market volatility and the potential for spread widening as the cycle progresses.
We feel good about our current portfolio and our ability to lean into attractive opportunities created during periods of dislocation.
While of course, maintaining the same rigorous underwriting standards, we have always implemented.
We'd like to thank all of you for your continued support and time today, we'll be happy to take your questions and please understand that we may be limited in certain answers due to the ongoing first eagle transaction.
And with that operator, please open the line for questions.
I just wanted to make one clarifying remark before we start Q&A I just I.
I just wanted to say that 123 out of our 126 debt investment portfolio companies, representing over 99% of total debt investments at fair value made full scheduled P&I payments in the third quarter I believe I said 133 out of 136 earlier in my remarks.
With that operator, you can go ahead and open up the Q&A. Thanks.
Thank you Sir.
As a reminder to ask a question at this time you would need to press star one one on your telephone please standby, while we compile the Q&A roster. Once again, if you have a question at this time. Please press star one one on your telephone.
Im showing no questions in the queue at this time.
I would like to turn the call back over to Mr. James <unk>, President and CEO for closing remarks.
Thank you operator, we thank you all for joining this call today, we appreciate your attention and your support of C cap and we look forward to speaking with you soon.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.