Nuveen Churchill Direct Lending Q2 Earnings Call Highlights

Nuveen Churchill Direct Lending NYSE: NCDL reported second-quarter net investment income of $0.41 per share, covering its $0.36 per-share base quarterly distribution, while credit challenges during the period contributed to a decline in net asset value and an increase in non-accrual investments. The board declared a total third-quarter distribution of $0.38 per share, comprising the regular $0.36 distribution and a $0.02 supplemental payment. The distribution will be paid Oct. 28 to shareholders of record as of Sept. 30.

Net investment income was unchanged from the first quarter at $0.41 per share. Total investment income, however, declined to $44.3 million from $46.3 million in the prior quarter, which Chief Financial Officer and Treasurer Shai Vichness attributed to a modest reduction in portfolio size and lower portfolio yields. Total GAAP net income was $0.07 per share, down from $0.18 per share in the first quarter. The second-quarter result included $0.34 per share of net realized and unrealized losses. Net realized losses of approximately $0.23 per share were primarily tied to amendments involving two underperforming debt investments, while unrealized losses totaled $0.11 per share.

Net asset value fell 1.8% quarter over quarter to $17.19 per share as of June 30, from $17.50 per share at the end of March. The company’s investment portfolio had a fair value of $1.9 billion at quarter-end, compared with $2 billion in the first quarter. Gross originations totaled $12.1 million, down from $82.9 million in the prior quarter, while gross investment fundings were $24.8 million, compared with $85.4 million. Management said the lower activity reflected a decision to manage leverage near the upper end of its target range, as well as the timing of transactions underwritten in the second quarter that closed in July. Sales and repayments totaled $67.5 million during the quarter, including full repayments on three larger positions totaling $59 million and partial prepayments of another $9 million.

The company added four portfolio companies to non-accrual status during the quarter. Those investments had a combined cost of $33.3 million and a fair value of $18.7 million. At June 30, NCDL had nine investments on non-accrual, representing 2.7% of the portfolio at cost and 1.5% at fair value. That compared with 1.3% at cost and 0.6% at fair value at the end of the first quarter. Vichness said the newly non-accruing investments were spread across four separate industries and did not reflect a common sector or portfolio-wide trend. Chairman, President and Chief Executive Officer Ken Kencel said the situations were idiosyncratic and that sponsors in each case had provided additional capital and support. NCDL’s internal watch list increas...