Nuveen Churchill Direct Lending Corp. Q4 FY2024 earnings call

Key Points

• Completed IPO in January 2024 and listed on the New York Stock Exchange.
• Generated an ROE of 12.4% on net investment income for the full year.
• Paid total distributions of $2.10 per share for the year, resulting in an 11.6% yield based on year-end 2024 net asset value.
• Deployed over $950 million of new investments in 2024, a year-over-year increase of over 40%.
• Issued $300 million of unsecured notes in January 2025.
• Investment activity in the fourth quarter was focused on senior secured first lien loans, with new originations totaling $163 million.
• Net asset value per share increased to $18.18 at December 31, 2024.
• Portfolio credit quality was strong, with a weighted average internal risk rating of 4.1 and a watch list at 5.9% of fair value.
• The Churchill platform had a record year of investment activity in 2024, investing over $13 billion across approximately 400 transactions.

In the fourth quarter, net investment income was $0.56 per share, and for the full year, it was $2.26 per share. New originations in the fourth quarter totaled $163 million, with senior lending accounting for 98% of NCDL's origination activity. First lien debt represented over 90% of the fair value of the overall portfolio. The portfolio had 210 companies, and the top 10 investments made up 13.2% of the fair value. Nonaccrual status was 0.1% of the total portfolio at fair value.

Forward-Looking

• After the last $0.10 special dividend, plan to use supplemental dividends based on approximately 50% of excess earnings over the regular dividend.
• Expect to continue deploying into traditional middle-market transactions, rotate the portfolio away from more liquid upper middle market assets, and modestly increase leverage utilization towards the upper end of the target range of 1.0x to 1.25x debt-to-equity.
• Issued $300 million of unsecured notes and repriced debt facilities to reduce borrowing costs.

Risks

• Market risks such as spread compression in the private credit market.
• Potential impact of policy changes from the new administration, though currently not expecting a material impact due to portfolio diversification.

Q: Detail on supplemental dividends after the last $0.10 dividend.

A: Shai Vichness stated that consistent with IPO guidance, roughly 50% of excess earnings over the base dividend would form the basis of the supplemental dividend, with possible special dividends from equity gains.

Q: How much more repricing is expected in the portfolio to impact the overall yield?

A: Shai Vichness estimated that roughly 70% of potential repricing has already occurred, with not much left to go.

Q: PIK income ratio in 2025.

A: Shai Vichness said PIK income would be in the very low single-digit percentage range, mainly from junior capital which is a small portion of the portfolio.

Q: Dominance of direct lenders in middle market new LBOs.

A: Ken Kencel stated that direct lenders are likely to continue dominating the core middle market due to speed, confidentiality, and deep relationships.