GSBD

Leadership Transition

• Co-Chief Executive Officer David Miller will step down effective December 31, 2026, at which point Vivek Bantwal will become sole CEO.
• Justin Betson will move into the role of co-president and co-COO alongside incumbent Tucker Greene; he has 20 years of experience at Goldman Sachs and deep experience in private credit underwriting.

Market Environment & Portfolio Positioning

• M&A and private equity deal activity remained subdued in Q2 2026, with overall private equity deal volume down 38% quarter over quarter and sponsored loan issuance down 33%, slowing the pace of new investment deployment.
• Tighter capital conditions in the direct lending market have pushed new deal spreads wider, reduced leverage levels, and strengthened lender documentation terms, improving the economics of new investments for Goldman Sachs BDC.
• Post-quarter end, the firm has observed a meaningful pickup in M&A activity and deal flow, positioning it for increased deployment in H2 2026.
• Portfolio performance is differentiated: the majority of borrowers perform in line with expectations, with stress limited to a small number of idiosyncratic cases involving high leverage or sector-specific headwinds.
• The firm maintained a selective, disciplined deployment approach in Q2, prioritizing high-conviction opportunities while reducing leverage to the lower end of its target range. New commitments totaled $12.9 million across 9 companies (including 2 new borrowers), with $114 million drawn from prior unfunded commitments. Total repayment proceeds were $146 million, resulting in net negative new investment that supported deleveraging.
• New deal activity has shifted from software to healthcare, business services, and industrials; the firm is not avoiding software, but the most compelling risk-adjusted opportunities in Q2 were in other sectors. The portfolio is diversified across 39 industries and 173 borrowers.
• Weighted average spread on Q2 originations was 511 basis points, wider than originations six months prior, with a conservative weighted average loan-to-value of 37.4%.
• Credit quality improved sequentially: non-accruals fell to 2.9% from 3.2% quarter over quarter, with the number of non-accrual borrowers falling from 11 to 10. A dedicated in-house workout team, paired with retained engagement from original deal lead underwriters, proactively manages distressed positions to maximize recoveries, with two successful workouts completed in Q2:
  1. Thrasio: the firm received full repayment of its senior loan and over 75% par repayment of its second lien position, with full repayment expected in H2 2026.
  2. Seneca Holdings: the firm negotiated a 2.5-year maturity extension, gained higher seniority in the capital structure, increased its cash pay component, and returned the first lien position to accrual status.

Balance Sheet Strength

• The firm's liability structure relies on long-dated committed facilities with no mark-to-market provisions, providing stability in volatile markets. It had $796 million of remaining borrowing capacity on its revolving credit facility at quarter end.
• Deleveraging post-quarter end has brought leverage below the 1.25x target, allowing the firm to reactivate its $75 million authorized share repurchase program.

• Management expects increased investment deployment in H2 2026, supported by the post-quarter end pickup in M&A activity and available capacity from reduced leverage.
• The firm will maintain a selective, disciplined approach to deployment, focusing only on highest risk-adjusted return opportunities.
• Incentive fee expenses are expected to remain muted over the next several quarters due to the firm's three-year total return lookback structure.
• The $0.32 per share third quarter 2026 base dividend has been declared, and management intends to maintain the current $0.32 base dividend in the near term, with ongoing regular assessments based on base rate trends, new deal spreads, and portfolio performance.

Goldman Sachs BDC operates as a single focused segment of private credit investments. For Q2 2026: GAAP net investment income (NII) was $42.2 million, and adjusted after-tax NII was $41.5 million, representing a material increase from $24.8 million (GAAP) and $24.7 million (adjusted) in Q1 2026. On a per share basis, NII was $0.38, equal to an annualized 12.6% yield on book value. Total investment income rose to $83.7 million from $78.8 million quarter over quarter. Net asset value per share ended the quarter at $12.06, down less than 1% from $12.17 in Q1 2026. Total portfolio investments at fair value were $3.2 billion, with 98.6% allocated to senior secured loans, and the remaining 1.4% in preferred/common stock and unsecured debt. The weighted average yield of debt and income-producing investments at amortized cost was 9.5%. Non-accrual investments represented 2.9% of total portfolio fair value, down from 3.2% in the prior quarter. Total outstanding debt across the full financing package was $1.9 billion as of quarter end, with 64% of total principal outstanding in the form of unsecured debt. Net debt-to-equity ratio was 1.35x as of June 30, 2026, and fell below the 1.25x target post-quarter end due to net repayment activity.

• Broader market uncertainty from AI disruption and geopolitical tensions creates complexity for underwriting and portfolio company performance, particularly around equity valuation for software sector borrowers.
• Persistently subdued M&A and deal activity could limit near-term deployment opportunities.
• A small subset of portfolio companies with elevated leverage or sector-specific headwinds face idiosyncratic default and recovery risk, though management notes these are not indicative of broader portfolio trends.
• Actual future results may differ materially from forward-looking statements due to a range of unforeseen factors, as disclosed in the firm's regular SEC filings.

Q: With M&A activity picking up post-quarter, will GSBD see a pickup in origination activity, and how is management thinking about deployment?

A: There is a lag between deal signing and funding, so Q2's low origination reflected earlier market softness and higher leverage that limited new investment. Post-quarter end, leverage is now at the desired level and sponsor M&A activity has picked up, with new deals already being signed across the platform. Increased origination will gradually dilute the portfolio of legacy names over time.

Q: What is management's approach to leverage and stock buybacks after the recent shift lower, and how does this tie to legacy portfolio issues?

A: Post-quarter end, leverage has fallen below the 1.25x target to roughly 1.2x, which is comfortable enough to reactivate the buyback program. Capital will be split between share repurchases and new investment deployment. Management believes the worst of markdowns from legacy problem assets is likely behind it, and continued elevated repayment activity frees up capital for both new deals and buybacks.

Q: What one-time interest income contributed to Q2's NII rebound, and will this level recur?

A: Around $5 million of Q2's interest income came from one-time items, including accelerated original issue discount and catch-up income from restoring non-accrual positions (most notably Thrasio) to accrual status, which is not expected to recur. Similar one-time income could occur in future quarters if new repayments and non-accrual restorations take place.

Q: How has spread pricing changed for the currently active sectors (healthcare, business services, industrials) and are there spread differences across industries?

A: Spreads for large cap sponsor deals are meaningfully wider than they were at the end of 2024's tight spread environment. After widening to the low 500s basis points in early 2026, spreads have settled in the 475-500 basis point range for large cap deals, with middle market deals commanding a small premium. There is no meaningful spread difference across industries; leverage levels are adjusted based on the individual risk profile of each business and its sector, rather than spread differentials.