Hello and welcome to the Nuveen Churchill Direct Lending Corp. First Quarter 2024 Earnings Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to turn the conference over to Alona Gornick, Senior Investment Strategist. Please go ahead, Alona.

Good morning and welcome to Nuveen Churchill Direct Lending Corp. first quarter 2024 earnings call. Today I’m joined by NCDL’s Chairman, President and CEO, Ken Kencel; and Chief Financial Officer and Treasurer, Shai Vichness. Following our prepared remarks, we will be available to take your question. Today’s call may include forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about the company, our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict. Actual results may differ materially from those expressed or forecasted in the forward-looking statements. We ask that you refer to the company’s most recent filings with the SEC for important risk factors. Any forward-looking statements made today do not guarantee future performance and undue reliance should not be placed on them. The company assumes no obligation to update any forward-looking statements at any time. Our earnings release, 10-Q and supplemental earnings presentation are available on the Investor Relations section of our website at ncdl.com. Now, I’d like to turn the call over to Ken.

Thank you, Alona and thank you, everyone for joining us on the call today. In the first quarter, we completed our IPO to list NCDL on the New York Stock Exchange. As such, we understand that some of you may be new to our platform. Welcome to both existing and future investors. We are thrilled that you’re here with us today. Today I’m going to provide a brief snapshot of our performance in the quarter. I think it worthwhile to briefly cover who we are at NCDL, what our strategy is, and the broader investment environment that we are operating in. Then I’ll turn it over to Shai for a more detailed discussion of our performance. I’m pleased to share that we’ve delivered a strong start to the year that carries on the momentum since our last call. NCDL reported solid first quarter results supported by strong net investment income performance, growth in net asset value, robust investment activity and an attractive first quarter dividend representing an annualized dividend yield of 9.9%. Now I will briefly cover our corporate structure, which demonstrates Churchill’s longstanding focus on financing and investing in leading US middle market companies. Our differentiated investment approach and unique sourcing model that seeks to partner with best-in-class private equity sponsors in the middle market. Churchill Asset Management is the exclusive US middle market private capital manager for TIAA and Nuveen. And TIAA, our parent company and largest investor, is among the highest rated insurance companies in the US and one of the largest private credit investors in the world with a 50-year history of investing in the private markets. Nuveen is TIAA’s asset manager and Churchill sits within Nuveen’s $1.2 trillion asset management business. Churchill is a strategically integrated middle market private capital platform and collectively we manage…

Thank you, Ken and thank you all for joining us to review our first quarter results. For the quarter, we earned $0.56 of net investment income per share and in April, we paid a regular dividend of $0.45 per share, which equates to an annualized dividend yield of approximately 9.9% based on our quarter end NAV. We had $0.01 of net realized and unrealized gains, bringing our total net income for the quarter to $0.57 per share. Looking forward, our Board has declared a regular dividend for the second quarter of 2024 of $0.45 per share payable on July 29th to shareholders of record as of June 28th, 2024. In addition to the regular dividend, our Board has also declared a special dividend of $0.10 per share payable together with our Q2 dividend to shareholders of record as of May 13th. This $0.10 special dividend is the first of four special dividends that we declared at the time of our IPO, with record dates of 105, 195, 285 and 380 days post IPO. As a reminder, we intend to operate with a supplemental dividend program that sees us paying out a portion of the excess earnings over and above our regular dividend, allowing us to deliver the benefits of higher returns in the current environment to shareholders as well as grow our NAV. Our debt to equity ratio at the end of the quarter was 0.82 times, modestly below our target range of 1.0 to 1.25 times as we repaid borrowings with a portion of the proceeds of our final private capital call and IPO, which together totaled approximately $242 million. We remain on track to re-lever the portfolio over the course of 2024 with the goal of ending the year within our target leverage range 1.0 to 1.25 times.…

Thank you, Shai. Before we get to questions, I just want to thank our team here at Churchill. Their hard work and dedication are outstanding. They are a key reason why NCDL is off to such a great start as a public company. They have been nothing short of exceptional. We’re excited about the first quarter and what it represents for NCDL, and we have really appreciated your engagement and are looking forward to continuing our ongoing dialogue. I will now turn the call over to the operator for Q&A.

Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from Vilas Abraham from UBS. Your line is now live.

Hey, everybody. Thanks for the questions. You commented on the deployment into the secondary market as you guys ramp up. Can you just put that in context to the $200 million in new fundings? What’s your portion of that was BSL? Just how are you thinking about rotating out of that over the next several quarters into a core middle market direct ones that you’re focused on? Thanks.

Yeah. Hey, Vilas, it’s Shai. Thanks for the question. Yeah so the upper middle market deals that we bought in the secondary, it represented about 40% of the origination during the quarter. And again, as we talked about, that was sort of opportunistically looking at assets in that space that we could acquire on average at a discounted price to par. Again, we really did not invest really at all in the broadly syndicated market. We sort of think about relative value on a daily basis. Looking at, again, what’s accretive to the BDC, obviously being very sensitive to purchasing assets much above par in the current environment that might then be refinanced out. So again, that 40% was deployed into more liquid upper middle market transactions as opposed to kind of full BSL liquid loans. The second part of your question in terms of our plans to sort of rotate, that was always on the agenda right in terms of putting cash to work from the proceeds of our final capital call, as well as the IPO and then rotating over time as we talked about, we continue to have a very robust pipeline and feel good about our ability to fully ramp the vehicle into the traditional middle market over the course of this year.

Okay, that’s helpful. And then just maybe just a higher level question. Just given your line of sight into the sponsor world, just hoping that you could comment a little bit on the odd that you think deal activity is really going to pick up here over the coming quarters. It feels like there’s been an expectation for a little bit now with some disappointment in Q1. Maybe just kind of sector wide that it wasn’t a little bit stronger than it turned out to be. So just curious your thoughts there looking forward.

Yeah, it’s Ken and great to hear from you. It’s interesting. We actually saw pretty solid quarter last quarter. If you look at our overall platform origination activity, if you look at stats across, certainly across the traditional middle market, deal activity relative to a year ago, Q1, was actually up quite a bit. Now what’s interesting is a good portion of that was not new deal M&A related, there was a much bigger increase in refinancing activity. We saw a fair amount of activity coming out of our portfolio. So add-on financing activity, but overall we saw, I would say, we felt that this was a very solid first quarter. Now, deal activity was not as active as the fourth quarter, but that’s not surprising our fourth quarter is typically our most active quarter, but first quarter to first quarter, comparing ‘24 to ‘23, we were up pretty significantly year-over-year. And we would expect that as the year goes on to continue to improve in terms of new deal activity, certainty regarding interest rates not going up further, I’d say is certainly the consensus view. While rates may not be declining as rapidly as expected, and I think we went from six cuts to four cuts to two cuts, and maybe no cuts this year. I would say that certainty around interest rates stability there. I think as private equity firms look out over the course of the year, we would expect deal activity to modestly increase. There is obviously a significant amount of private equity dry powder out there, private equity firms that we deal with. As you know, we’re also, through our private equity and junior capital team, a big LP in many private equity firms, funds that dynamic certainly telling us that private equity is anxious to get back in and deploy capital. And so we would expect deal activity to continue to improve during the course of the year as more certainty regarding rates tends to normalize.

Okay, thank you.

Thank you. [Operator Instructions] Our next question is coming from Brian McKenna from Citizens JMP. Your line is now live.

Okay, great. Thanks. I hope everyone is doing well. Maybe just a question on credit quality. Non-accruals remain very low in the absolute, but you did add one company, it’s non-accrual during the quarter. So can you just talk a little bit more about this? And then you’ve been able to resolve a couple of other non-accruals over the past 12 to 18 months. So what’s the expectation for a positive resolution on this new non-accrual?

Yeah. Hey Brian, it’s Shai. Thanks a lot for the question. Obviously we did add the one name to the non-accrual list this quarter. It is the only non-accrual in the portfolio. So again, you think about the hallmarks of our strategy, diversification at the position level is one of them. So when we have a problem, obviously it’s a manageable problem. This position was in our junior debt portfolio. So just for what that’s worth. Again like we do with all of our positions, we work through these transactions with the sponsors. We have dedicated resources focused on getting us to the best resolution possible. So it’s early days here, but we continue to work through the situation, obviously with a goal of maximizing value for shareholders. One comment just on the junior part of our portfolio, right. When you think about how we invest, obviously we lean very heavily into the private equity sponsor relationships that we have as an LP in a very large number of leading private equity firms. If you think about our activity, the majority of our activity, the vast majority in our senior lending business is with private equity firms, where we have that LP relationship when we go further down in the capital structure. So into our junior debt investments, its virtually 100% with private equity sponsors that we know well, the same is the case with this investment. So we think that gives us obviously an advantage when working through troubled situations like this one. So that’s what I’ll say now. I mean, obviously our hope is that we’re going to recover here, maximize value, but not much more to say right now.

Yeah, Brian, it’s Ken. I would just add to that, just to give you a sense of what we’re seeing more broadly across our portfolio. As you know, we have both senior loan investments as well as junior capital and private equity. So a very large portfolio of middle market companies, we believe credit quality remains quite good. Certainly there are isolated examples of situations, but overall we’re seeing no evidence of deterioration or any significant concerns. And I would certainly say NCDL is a good example of that. Very isolated situations and very rare. So we feel very good about credit quality right now.

Okay, that’s great. Very helpful. And then, Ken, just the bigger picture industry question. You’ve been on the road a bunch, you’ve been at a number of events and conferences. So, what are some of the recurring themes or questions you’ve been receiving? Is there anything in particular that stands out within that? And then just based on some of the dynamics and views in the market, how is NCDL positioned to perform and ultimately take market share within the industry over time?

Yeah, no, that’s a great question. Thank you. I’d say a couple of themes that I’ve seen. I was just out at Milken and obviously lots of other credit managers there, and then we had a chance to dialogue with many large scale institutional investors and questions regarding some of the types of things we’re seeing. I’d say a couple of themes overall, and I think they all point very positively for us. One is, scale has become a very big issue now. I get lots of questions about new managers and I think actually most of the institutions I talk to kind of know the answer. The reality is that today, if you’re not a scaled platform with the ability to commit to and invest $250 million, $500 million per transaction in the traditional middle market, very difficult to be able to provide full solution and to be at the top of the queue, if you will, for new transaction opportunities. And frankly, there are only a handful of firms today that can really do that. So I would say scale is an increasing theme. So raising new capital is very important to that. And obviously in order to do that, you need to demonstrate a strong track record, right. So track record begets capital raising begets new deal opportunities. So scale is a big deal. And obviously we continue to have great success from a capital raising standpoint, we’re on track to have yet another very solid year in terms of raising capital from both institutional and retail investors feel very good about that. Second thing I would say thematically is differentiated sourcing. If you’re just out trying to find deals on a one-off basis and you don’t really have a built-in advantage from a sourcing perspective, very…

That’s great. Thanks, Ken. I’ll leave it there. And congrats on another great quarter.

Thank you.

Thanks a lot.

Thank you. [Operator Instructions] Our next question is coming from Mark Hughes from Truist Securities. Your line is now live.

Yeah. Thank you. Good morning. Related to the comment you just made about the credit quality and the dispersion, how much of that has to do with industry selection? Perhaps you had mentioned earlier that the quality of the opportunities was more mixed in the first quarter. I think you said you expected that to continue. Is that mix having to do with end market or quality of the company? So tying a couple thoughts together there, but any comments would be helpful.

Yeah, so I think one of the things that’s driving that is that, with the resurgence of the BSL market and even the upper middle market, obviously CLO formation has returned in earnest, and as well as funds flows into the various funds that invest in BSL. So the BSL market has really come back full force. And I think what that’s done is, it’s brought companies to the market that may be more repair financing or that refinancing that is really designed to address issues in the portfolio. So you’ve got more liquidity, right, because now companies have two options really. They have private credit and they have and certainly for the more larger businesses, BSL. So I think what that’s done is, it’s brought issuers to market, particularly on the refinancing side that may have had a tough time going lender, given our posture regarding what we’re willing to live with from a leverage and an industry standpoint. So I think that trend has led to more of a mixed deal flow. Now, that being said, I certainly don’t think that our deal flow and the deals we’ve chosen to do is mixed at all. In fact, I would say, we’ve stayed in the core middle market where we’ve been largely insulated from those dynamics. So as you get larger and larger, I think you start to see more of that pushing it in terms of leverage levels, pushing it in terms of new deals, for example, that are being done, but only work because there’s a [PEC] [ph] component to the deal and deals that are being done that are really more refinancing of problems. I would say from our perspective, by staying in the core middle market, by sticking to our knitting in terms of the…

Yeah appreciate that detail. On the number of new deals, I think you did 23 this quarter, 13 last quarter. Is that partly a reflection of the investment in the upper middle market assets or is that something different?

Yeah, Hey, Mark, it’s Shai. Yes, that’s right. I would say in terms of quarter-over-quarter from a direct origination core middle market focus, it’s probably fairly flat. And the upside there is from the secondary purchases.

Understood. Thank you. No real themes in terms of volume.

Yes. One of the big drivers overall for us, which continues to be an important component, is our portfolio. And frankly, not just our senior lending portfolio, which is about 250, 300 names, but also our private equity investments, right. So all across the entire firm, we’ve got over 600 positions in our portfolio. So there’s a lot of activity that goes on that may be related to senior, but it also may be a situation where a co-investor on the equity side and that drives an investment or a financing opportunity as well. So having a large portfolio is a real advantage right now for us.

Thank you. We reached the end of our question-and-answer session. I’d like to turn the floor back over for any further closing comments.

Thank you, everyone for joining us on the call today. We appreciate all of your support. We certainly enjoy the dialogue and – both on the call and as we move through the quarter, we appreciate you all checking in and having those conversations and certainly look forward to providing our Q2 results in August. Thanks, again.

Thank you. That does conclude today’s teleconference webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.