Good afternoon Welcome to the Golub Capital BDC December 31, 2014 Quarterly Earnings Conference Call. Before we begin, I would like to take a moment to remind our listeners that remarks made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts made during this call may resilient to looking forward-looking statements and are not guarantees of future performance or results and involve any number of risks and uncertainties. Actual results may differ materially from the forward-looking statements as a result of a number of factors, including those described from time-to-time in Golub Capital BDC’s filings with the Securities and Exchange Commission. For a slide presentation that we intend to refer to on the earnings conference call, please visit the Investor resource tab on the homepage of our website, www.golubcapitalbdc.com and click the Events Presentation link to find the December 31, 2014 investor presentation. Golub Capital BDC’s earnings release is also available on the Company’s website in the Investor Resources section. As a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to Mr. David Golub, Chief Executive Officer of Golub Capital BDC. Please go ahead sir.

Thanks operator. Good afternoon everybody. Thanks for joining us today. I'm joined today here at by Golub Capital by Ross Teune, our Chief Financial Officer; and Greg Robbins, Managing Director. Last Friday we issued our quarterly earnings press release for the quarter ended December 31st and we posted a supplemental earnings presentation on our website. We’ll be referring to this presentation throughout the call today. I'd like to start by providing an overview of the December 31, 2014 quarterly results. Ross is then going to take you through our quarterly results in more detail and I'll come back at the end and provide an update on our outlook for conditions in middle market lending and the Golub Capital BDC for the next several quarters. Let me before we begin though give a bit of an overview. Despite a tough quarter for credit as an asset class and despite a tough quarter for some of our fellow BDC’s, I'm pleased to report that Golub Capital BDC had another solid quarter. The December 31 quarter results were very consistent with several themes I highlighted in prior calls. First I said last quarter that originations and repayments in the September 30 quarter were unusually high and that both would slow in the December 31st quarter and they both did. Originations and repayments were unusually high in the September 30 quarter and were unusually low in the December 31 quarter, and this led to a reduction in prepayment fees and in amortization of original issue discounts. Second I said last quarter that pricing and terms were getting a little better a long period of spread compression and leverage creep. And pricing and terms have gotten a little better. That’s reflected in our December 31st quarter numbers. We’ll talk about that in more depth. But…

All right, thanks David. I'm going to begin on Slide 4. As David mentioned we had total organizations of $146.5 million and total portfolio runoff of $80.9 million. As shown on the comparative table, new origination commitment and portfolio runoff were both down from unusually high levels and the quarter ended September 30th. In that quarter new origination commitments totaled $332.6 million and total portfolio runoff was $286.6 million. Overall net funds growth for the quarter $53.1 million, a 3.9% increase over the prior quarter. As shown on the bottom, 53% of our new origination commitments were in traditional senior secured investments, 43% were in one-stop investments, 3% in the senior loan fund and the remaining 1% in equity co-investments. In future quarters we expect that the origination asset mix will shift back with one-stops comprising the majority of new investment commitments. Turning to Slide 5, these four charts provide a breakdown of the portfolio by investment type, industry classification, investment size and fixed versus floating rate. Looking first at the charts on the left hand side, despite originating a higher percentage of traditional senior secured investments this quarter, the proportion of one-stop investments in the portfolio increased and the proportion of traditional senior secured investments declined. This was the result of a reclassification change. We have been categorizing some of our late stage lending activities as senior secured loans, but we choose to reclassify it as one-stop investments because the pricing and risk profile of these investments is more similar to those of our one-stops. The total fair value of late stage lending loans reclassified during the quarter as one-stops was $47.1 million. As a result of the reclass one-stop investments increased to 72% of portfolio as of December 31 and traditional senior secured investments declined to 18%. We…

Thanks Ross. I want to share a couple of themes that I think will be talking about over the course of calendar 2015. The first, I mentioned in my opening remarks, the market for middle market lending remains challenging. Spreads have widened modestly but the middle market remained highly competitive and most of the deals we see today are not passing our credit screens. Either the underlying business isn’t adequately resilient or the financial structure is too aggressive or both. Interestingly many of these deals are getting right now. They're just not getting done by us. Our deal rejection rate at or near an all-time high. Second insight, middle-market junior debt, which has historically been a meaningful part of the Golub Capital BDC portfolio, we're finding middle market junior debt in general to be downright unattractive right now. Attachment points are too high, pricing is too low and importantly structural protections including covenants are weak. This is an area where we have not seen a meaningful degree of widening -- spread widening or structure improvement since September. We think there is a situation where there are too many players chasing too few middle market junior debt deals and consequently we're sticking with our strategy of deemphasizing junior debt at this time. Our third theme, you've heard me talk about this before. We started talking about it in the last couple of quarters. We plan to continue to focus where our competitive advantages are most prominent. So right now we're focused senior and one-stop loans to resilient borrowers with low risk capital structures who are backed by relationship oriented private equity sponsors. In calendar 2014 more than 80% of our new investments involved repeat private sponsor clients. More than half were to companies Golub Capital had previously been a lender to.…

Thank you. (Operator Instructions). And our first question comes from the line of Troy Ward from KBW. Please go ahead, your line is open.

David on Slide 8, that’s got you internal credit ratings, we saw -- you mentioned a slide pick up and ratings one to three. Can you just give us a little bit of clarification on those ratings? Are those buckets impacted by volatility in the mark-to-market or are those ratings just reflective of the fundamental performance of the underlying companies?

Both are factors. I think volatility in pricing is typically because our instruments or floating rate is -- it’s typically influenced by credit factors. It’s rare that you have a mark-to-market change that doesn’t have any credit relationship, Troy. So I’d say both.

Okay. And then one another question. Kind of about we’ve seen a BDC that announced today that they feel looking at strategic alternatives, and with this particular BDC it's like the third time they've done it. So I don’t think that’s any new information. But from your participation in the market, not about any specific portfolio, but when you see a potential opportunity to pick up a portfolio of loans, whether it’d be a large or small or somewhere in between, how do you evaluate that type of opportunity when you think about taking on somebody else’s underwriting? Is that just nonstarter for you or how do most other -- how do lenders kind of view that type of opportunity?

It’s by no means a nonstarter. I think the opportunity to purchase existing portfolios tends to be associated in our business with downturns. What makes the situation today unusual is the firm you’re talking about is seeking strategic alternatives and selling a portfolio in what’s not a stressed market. We would look at that sort of situation in the context of what our alternatives are in generating good returns for shareholders. So if we thought that we could acquire a portfolio out of price and on terms that would be good for our shareholders, we’d pursue it and if not then not. That’s kind of apple pie. I think the more tricky part of evaluating situations like this and I think this is what you’re alluding to Troy, the tricky part is it’s where when you’re looking at acquiring a portfolio for us to be able get the same kind of detailed granular data on each of the underlying credits that we're used to when we’re doing new originations. So we need to weight the relative decline in information quality against potentially attractive price as a mitigant.

Okay, great. And then just one more quick question before I hop back in the queue. You talked a lot about obviously saying that it’s all about the underwriting and maybe we’re getting past a point where everybody looks like a superstar underwriter. Do those comments lead us to believe that you think a down cycle is coming or where do you think we are in the current credit cycle?

I think that we’re seeing -- today we’re seeing a heightened degree of dispersion of credit results, and I think this is not a great insight for those of you on this call who have been looking at the results that have come out in respect of other BDC. You can see the dispersion in the results in or industry. So my expectation is that dispersion is going to continue, that we're no longer in a period when an improving economy and loosening credits standard keeps defaults artificially low, and so returns are going to accrue to those who were good underwriters in a way that perhaps some weaker underwriters have been benefited by market conditions over the last couple of years and will no longer be.

(Operator Instructions). Our next question comes from line of Robert Dodd with Raymond James. Please go ahead your line is open.

A much more simple question in a sense. As you’ve talked about on the call, your prepayment and accretion income was down substantially, but year-over-year and versus the prior quarter, and obviously I realized that is very-very difficult to predict and to a point it can be very choppy. But to what level do you feel this quarter is kind of a new base case, if the markets are a little bit more choppy et cetera, maybe there aren’t as many repayments et cetera, can you give us a little bit more color? Do you think this is kind of the go forward run rate level or do you think this quarter did still represent an abnormally low amount of prepayment activity?

I think that's a great question. So flip to Page 4 of the presentation and you can see on -- in the second line on the chart you can see a line called exits includes full and partial payoffs. And you can see in the September 30th quarter it was $287 million and it fell to $80.9 million in the December 31st quarter. This is obviously speculative. There is going to be some movements in these numbers from quarter-to-quarter. But if you ask me for our judgment -- our judgment would be the $287 million was very unusually high and the $80.9 million feels unusually low.

Okay. Got it. And then obviously, also it's a function of mix of age of assets. Obviously if something is coming up on it, its maturity date and there is less prepayment and OID to recognize and accelerate, do you -- partly on that front as well do you expect more loans to run the course rather than get repriced? As you said, this is a quarter away you saw incremental yield, first time in a while above repayment yield. So is that an indicator that maybe there is going to be less of that repricing activity as well and more of the repayment would be older loans where that income is less volatile? Because prepayment fee is obviously, or the OID has already been run through the P&L?

I guess I look at it slightly differently. So very few of loans ever go to maturity. The typical loan that we make is repaid in about 2.5 years, maybe three at the outside, and they're typically repaid in connection with an acquisition, sale of the company, a major refinancing of some sort. I don't think that pattern is going to change. So if one thinks about the portfolio, $1.4 billion and one thinks that a third of it is going to turnover each year, which is again I think approximately been our experience over the course of many years, it points you toward a $400 million to $500 million repayment rate annually. And as I said that number would be sort of in between the $80.9 million and 286.6 per quarter.

Got it. Just one final one if I could. Obviously you talked about not finding junior debt particularly attractive at all and more and more of your business again going back to the one-stop form, where you've got a first lien. There is obviously another tier in the middle there with second lien. I don't know whether you automatically classify that as junior, but the attachment points in the pricing, even on second lien until very, very recently had appeared to be getting a bit stretched. What's your appetite for that versus obviously the one-stops you control here? First lien might be stretch in terms of attachments but you've got much more control versus during your second. And so do you have any appetite to be doing second lien or would you put that in the unattractive bucket at this point as well?

When I say junior debt I mean to be including a second lien and mezzanine in one broader category. So I very much was meaning that we view second lien as in general quite unattractive in today’s environment. And again if you look on that same page, Page 4, at the second lien category in the asset mix table in the middle of the bottom of the page, you'll see over the course of the last five quarters it's been 0%, 6%, 0%, 0%, and 7% of origination. So it's been on average a very small piece of our business and I would anticipate it will stay small.

Our next question comes from the line of Doug Mewhirter from SunTrust. Please go ahead your line is open.

I had a question about the senior loan fund and how it I guess interacts with your -- the rate of your portfolio in your origination pipeline. So I guess first just the numbers question. Were there any sell downs during this quarter and how much was that, if there were any from transfers from your existing -- on balance sheet to your SLF?

We did do some sales from balance sheet to SLF this quarter. I don't have the exact number in front of me right now. We can certainly get back to you with that. It was in the range of $20 million.

And so I guess the second, maybe more broader question is, if you just look at just the numbers that you presented, I know there's a lot of nuances that are not in these numbers, but looking at your originations, about roughly $75 million were senior secured, which is generally sort of your target for what you would like to book in the SLF. But you had a much smaller number actually go into the SLF and I was wondering what’s the difference between the loans you kept on balance sheet in the SLF. And if you're doing sell downs anyway why don't you just cut out the middle man and originate more of them directly into the SLF?

We in the quarter had sufficient equity and debt capacity within balance sheet, within parent to be able to acquire all of the things that we acquired. So all we would have done if we had accelerated sales to SLF would be to reduce earnings, because we would be paying unused fees at the parent level and incurring basically analogous interest costs at SLF to the ones that we incurred on balance sheet. So the way we're looking at it and we talked a bit about this on the last call, the way we're looking at it is that as we continue to originate and to use the capacity that we've got on balance sheet, we will look to some faster sales from balance sheet to SLF but we're going to do it in a measured and methodical way designed to optimize shareholder returns rather than simply growing SLF for the sake of growing SLF.

Thank you. (Operator Instructions). Our next question comes from the line of Jonathon Bock from Wells Fargo. Please go ahead your line is open.

David, if I took your comments as it relates to SLF and the ability to sell syndicate into SLF, would it also be fair to say that there is really no near-term need for equity capital at GBDC in light of the fact that you can generate your own liquidity if needed?

Well, I want to be a little careful here, because we don't control SLF. It is as everyone knows a joint venture and purchase decisions by SLF are not just ours. But having said that, I think our plan, our goal, subject to making sure that our joint venture partner is satisfied that the acquisitions that we're proposing from balance sheet to SLF are attractive, our goal would be very consistent with where you were headed Jon, which is we want to spend the capacity that we've got on balance sheet today and we want to grow that capacity by transferring some of balance sheet, senior secured assets to SLF.

And then the governors on the SLF, just in terms of -- is there anything on portfolio concentration issues that you might see as limiting factors as opposed to yes, you have another party, but is there anything contractual over time in terms of how fast this can grow, that could limit it, that we might want to be made aware of.

None that I can think of at this time.

And then in terms of credit risk. So in complete agreement that junior credit in many cases may be seen as potentially unattractive. David can you give us a sense, one-stop transactions we've heard though do run into an issue where leverage in either unit tranche or stretching or how you define it is also becoming stretched as well. I think you mentioned to kind of your broad comments overall. Is what we're seeing essentially just a switch from -- what we first saw of capital structures that were first and second generally took on too much leverage? Does that not now apply to the people that can come and write one giant check for everything, or are you seeing a little bit more in your view underwriting discipline on the part of those that can write one giant check and on a unit tranche piece of paper.

I think the later we are seeing, there are very small number of competitors in addition to Golub Capital that have the capacity to do one-stops, particularly one stops of size. And the one that comes to mind obviously is Ares, We compete often with Ares in our one-stop product. And our view for a long time now has been that Ares does a very good job in its underwriting and does a very good job in thinking about credit. So I think we and they both are very selective about where we want to play with one-stops. Many, many credits that sponsors would like us to provide one-stops on, we reject. I think it’s fair to say that we're seeing more credit discipline in one-stops than we're seeing in junior debt by a substantial margin.

Appreciate that. And then, and this gets to Doug's question, just as a wrap-up on the SLF. We understand you don’t want to grow for growth sake. Just by the fact that you are within the NOI incentives, it’s respected to grow prudently because obviously you are taking less in the form of fees where you are. Is it possible that the volatility that we've experienced in the broader credit market and your capabilities within other credit baskets, be it BSL or other areas which didn’t even run CLOs et cetera, is there not now an opportunity to perhaps take advantage of the spread widening that’s occurred in the more liquid paper to perhaps generate what might be an even better risk adjusted return in SLF buying on the broad market exchanges today as supposed to slowly itself indicating down? I'm just curious on your thoughts, because both can achieve decent ROE outcome, but both also have different levels of risk associated with that and timing in terms of investors realizing those returns.

I think the question of whether we should be accelerating deployment of SLF in broadly syndicated loans is an intriguing one. It’s one we've been thinking about a lot over the course of the last two quarters. We've actually acquired some probably syndicated loans within SLF, as you can see in our filings. I think it’s something we're going to continue to study. I don’t think it is our current intention to have SLF become heavily weighted in broadly syndicated loans. We think that would be a larger change in strategy than we're looking at right now. I think it’s really a question more at the margin as to what proportion of the SLF portfolio we want to see in opportunistic BSL purchases.

Thank you. And we presently have no further questions on the phone line at this time.

Again, thank you everyone for tuning in for our call today. And if you have any further questions that we didn’t address, please as always feel free to call either Ross or me at any time. Look forward to speaking to you again next quarter.

Thank you. Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation, and we ask that you please disconnect your line.