KBRA Affirms Ratings for Goldman Sachs BDC, Inc.

KBRA affirms the issuer and senior unsecured debt ratings of BBB for Goldman Sachs BDC, Inc. (NYSE: GSBD or "the company"). The rating Outlook is Stable.

Key Credit Considerations

The ratings and Outlook are supported by Goldman Sachs BDC, Inc.'s ties to Goldman Sachs' ("GS") $3.1 trillion of Assets Under Supervision along with SEC exemptive relief to co-invest with GS affiliates. GS provides the company with robust deal sourcing, research, a large sponsor network, and strong banking relationships. Additionally, the company has a solid management team, which has a long track record working with the private debt markets with each member of senior management having 20 or more years of experience in the industry. Also, the ratings are supported by GSBD’s $3.4 billion well-diversified investment portfolio comprised largely of senior secured first lien loans (~96%) to 167 portfolio companies across 41 sectors with a median portfolio company EBITDA of ~$62.5 million as of September 30, 2024. GSBD focuses primarily on middle-market companies in the U.S. that are private equity sponsored or often non-sponsored family-run businesses that provide significant equity cushion with low LTVs. The weighted average leverage was 6.3x and interest coverage of 1.7x, using a “current quarter” calculation. As of September 30, 2024, the top three portfolio sectors were Software (20.6%), Health Care Providers & Services (10.8%), and Professional Services (9.3%). Further supporting the rating is GSBD's diversified funding profile consisting of $1.26 billion of senior unsecured notes and a $1.7 billion revolving credit facility with 14 lenders as part of the syndicate as of September 30, 2024. Liquidity remains solid with $1.07 billion in available bank credit and $54.5 million in cash and cash equivalents set against $860 million of unsecured notes coming due in February 2025 and January 2026, and unfunded commitments of ~$575 million. As of September 30, 2024, the company’s percentage of unsecured senior debt to total debt outstanding was a solid ~67%, providing sound unencumbered assets for the benefit of unsecured noteholders, in KBRA’s view. Gross leverage was moderate at 1.19x, well within regulatory coverage of 2:1, and within the company’s target range of less than 1.25x, comparable to peers. The company’s asset coverage was 183%, leaving a solid 23% cushion to allow for market volatility in less favorable markets.

GSBD has historically maintained somewhat elevated non-accruals compared to peers, driven, in part, by its investment portfolio prior to its merger with an affiliate BDC in 2020. As of September 30, 2024, GSBD had nine portfolio companies on non-accrual, with non-accruals as a percentage of total investments at cost and fair value totaling 4.5% and 2.2%, respectively. Further counterbalancing the company's strengths are the potential risk related to the company’s illiquid investments, retained earnings constraints as a Regulated Investment Company (RIC), and a more uncertain economic environment with high interest rates, geopolitical risks, and the potential of increasing non-accruals.

GSBD is an externally managed, closed-end, non-diversified investment management company that elected to be treated as a Business Development Company (BDC) under the 1940 Act as a RIC, which, among other things, must distribute to its shareholders at least 90% of the company’s investment company taxable income. The company is formed as a Delaware limited liability company. The company is managed by Goldman Sachs Asset Management, L.P. ("GSAM"), an affiliate of Goldman Sachs & Co. LLC. GSBD's affiliate BDC, Goldman Sachs Private Credit Corp., is rated by KBRA (Issuer and Senior Unsecured Debt Ratings: BBB/Stable Outlook).

Rating Sensitivities

Positive rating momentum could be achieved if GSBD's credit metrics remain solid despite an uncertain economic environment amid high rates, inflation, and geopolitical risks. A rating downgrade and/or Outlook change to Negative could be considered if there is a significant downturn in the U.S. economy with negative impact on GSBD's earnings performance, asset quality, and leverage. A significant change in senior management and/or risk management policies could also lead to a negative rating action.

To access ratings and relevant documents, click here.

Methodologies