Goldman Sachs BDC Inc (GSBD) 2020 Q2 法說會逐字稿

Good morning. This is Dennis, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs BDC, Inc. Second Quarter 2020 Earnings Conference Call. (Operator Instructions)

Before we begin today's call, I would like to remind our listeners that today's remarks may include forward-looking statements. These statements represent the company's belief regarding future events that, by their nature, are uncertain and outside of the company's control. The company's actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements as a result of a number of factors, including those described from time to time in the company's SEC filings.

This audiocast has copyrighted material of Goldman Sachs BDC, Inc. and may not be duplicated, reproduced or rebroadcast without our consent. Yesterday, after the market closed, the company issued an earnings press release and posted a supplemental earnings presentation, both of which can be found on the homepage of our website at www.goldmansachsbdc.com, under the Investor Resources section. These documents should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC.

This conference call is being recorded today, Tuesday, August 11, 2020, for replay purposes.

I'll now turn the call over to Brendan McGovern, Chief Executive Officer of Goldman Sachs BDC.

Thank you, Dennis. Good morning, everyone, and thank you for joining us for our second quarter earnings conference call. I'm joined on the call today by Jon Yoder, our Chief Operating Officer; and Jonathan Lamm, our Chief Financial Officer.

I will begin the call by providing an overview of our second quarter results, including comments regarding the performance of our portfolio. I'll also provide an update on our proposed merger with our affiliated business development company, Goldman Sachs Middle Market Lending Corp., which we refer to as MMLC.

Jon Yoder will then discuss our portfolio in more detail with respect to the current environment before I turn it over to Jonathan Lamm to walk through the financial results. Finally, I'll conclude with some closing remarks before we open the line for Q&A.

So with that, let's get to our second quarter results. Q2 net investment income per share was $0.45 on after-tax net investment income of $18.2 million. The company's NII once again fully covered the dividend during the quarter. Our GAAP earnings per share was $0.86, which represents the highest quarterly EPS produced by the company since inception and reflects both a solid net investment income generated during the quarter as well as net gains in our investment portfolio, partly resulting from tightening of overall market credit spreads.

Net asset value per share increased to $15.14 per share, an improvement of 2.9% from the first -- from the end of the first quarter. Investments on nonaccrual remain unchanged quarter-over-quarter and represents just 0.1% at fair value and 0.9% at cost of the total portfolio.

We believe these are strong results in any environment, but particularly in light of the challenging economic environment that we operated in during the second quarter.

As we announced after the market closed yesterday, our Board declared a $0.45 per share dividend, payable to shareholders of record as of September 30, 2020. This equates to an annualized dividend yield of 11.9% based on net asset value per share at the end of Q2. We attribute our strong performance during the quarter to our focus on investing in businesses that we believe are durable and less prone to a significant impact from economic cycles.

Our largest sector exposures, which include software, health care and ITE business -- IT-enabled business services have thus far demonstrated resilience in this crisis. For example, our software portfolio companies averaged 18% year-over-year revenue growth rates in the first quarter of 2020, and preliminary numbers suggest that they maintain a high single-digit to low double-digit year-over-year revenue growth rates even during April and May when lockdowns were most acute.

Customer retention metrics were also strong, which we believe reflects the mission-critical nature of the applications.

Our health care portfolio is primarily comprised of businesses engaged in providing outpatient health care services or outsourced hospital services. These businesses were negatively impacted by the lockdown orders issued in March that prohibited so-called nonessential medical services.

In response, our portfolio companies reforecast their business plans for the remainder of the year, with conservative assumptions about the duration of the lockdowns, and the time it would take to return to a more normalized demand for medical services.

However, as the second quarter progressed, the lockdowns were lifted sooner than expected in many geographies and customer demand began to weigh down quicker than most companies forecast. In most states, businesses providing nonessential medical services were among the first to be relieved from lockdown orders. In general, this has resulted in patient volumes, revenues and liquidity that is better than these companies have forecast for this stage of recovery.

In analyzing corporate performance during this remarkable period compared to a typical economic cycles, one dynamic that stands out is the extraordinary response from business owners and management teams to quickly and aggressively adapt business plans in the face of uncertainty.

In the early phases of typical recessionary cycles, companies are often slow to respond as the commencement, depth and duration of recessions are difficult to forecast. In this environment, however, given the obvious devastating impacts from the global health crisis and ensuing lockdowns, companies acted swiftly to adjust business models in recognition of the challenging operating environment.

Expenses were cut, large capital outlays were put on hold, and balance sheet focus on liquidity was made a priority. By and large, private equity sponsors and business owners are acting rationally to ensure the ability for companies to breeze through to the other side of this environment.

In our view, this decisive and proactive management has been and remains a significant benefit to lenders. While there is certainly a long way to go before the broader economy returns to normal and the possibility of additional lockdowns, we are pleased thus far by the efforts undertaken to preserve value in this crisis.

Next, I want to provide an update on our previously announced merger with MMLC. On June 11, we entered into and announced an amended and restated agreement and plan of merger that was unanimously approved by the Board of Directors of each company, following the recommendations of each company's respective special committee consisting exclusively of their independent directors. The consideration has been changed from a fixed exchange ratio to a net asset value per net asset value exchange, whereby the exchange ratio will be determined at closing so that the MMLC shareholders will receive GSBD shares representing a proportional ownership of the combined company equal to MMLC's proportional contribution to the combined company's net asset value.

In connection with this amendment, GSAM has entered -- has agreed to extend the variable incentive fee cap for an additional year through the end of 2021.

As a reminder, the variable incentive fee cap provides that incentive fees payable to GSAM will be reduced if net investment income will be less than $0.48 per share without implementation of the incentive fee cap. GSAM also agreed to reimburse GSBD and MMLC for all fees expenses incurred and payable by GSBD or MMLC or on their behalf, in connection with its current transaction, subject to a cap of $4 million with respect to each of GSBD and MMLC.

This transaction creates a number of significant benefits for shareholders that I'd like to reiterate. First, we currently expect the merger to be accretive to GSBD's NII per share in the short and long term. Second, we also expect the transaction to result in significant deleveraging for GSBD, which creates more capacity to deploy capital in today's attractive investment environment, while at the same time, adding a greater margin of safety to maintain GSBD's investment-grade credit rating and compliance with regulatory and contractual leverage ratio requirements. Third, the merger is expected to result in an overall improvement in GSBD's portfolio metrics, including a higher portfolio yield and a greater single [name] diversification. It's also worth noting that MMLC only has one investment on nonaccrual status, representing less than 0.1% of portfolio at fair value and 0.7% at cost.

Finally, the combination more than doubles the size of GSBD and is expected to result in benefits of scale, including improved access to diversified funding sources, cost synergies and greater trading liquidity.

For all these reasons, we are very confident this transaction is in the best interest of shareholders of both companies. The record date for shareholders eligible to vote on the transaction is August 3, and a special shareholder meeting is scheduled to occur on October 2.

In the coming days, shareholders will receive proxy materials, proxy statements, so we encourage everyone to take your time to vote in favor of the merger.

With that, let me turn it over to Jon Yoder.

Thanks, Brendan. The second quarter of 2020 will undoubtedly be remembered for years and decades to come as an extraordinary period, during which entire sectors of the global economy shut down on a more or less synchronous basis. Against this backdrop, we were pleased with our portfolio as demonstrated by the strong principal and interest payment performance by our portfolio companies in the face of this adversity.

In our diversified loan portfolio, with 107 underlying portfolio companies, loans to just 3 companies were modified to defer principal and interest payments, representing approximately 2% of the portfolio at both cost and fair value. In one case, we agreed to defer the second quarter payments until October, but the company has already resumed to making monthly payments in July as the business and liquidity have rebounded.

In another case, we collected monthly payments in April and May but agreed to defer the June payment in exchange for an infusion of equity capital that is junior in right of payment to our loan.

In addition, we executed amendments this quarter that permitted two borrowers to switch from cash to take interest. These two investments represent less than 1% of the investment portfolio at both cost and fair value. Both of these amendments were executed in connection with new equity or other capital infusions by other investors in the companies.

In the majority of cases, when negotiating amendments like these, we obtain compensation for agreeing to the amendment, which is typically in the form of a fee and increased interest rate or a capital injection or other form of credit support by the owner of the business. I would note that none of these amendments relate to nonsponsored businesses.

While our focus this quarter was primarily on our existing portfolio, we were active across our platform in reviewing new investment opportunities. Deal volumes were quite low in the early part of the quarter, but we saw a steady increase as the quarter progressed. Terms of new deals are meaningfully better than the pre-COVID period and generally includes wider spreads, tighter covenants and better call protection.

We would also add that the underwriting process is significantly enhanced because now we can review a company's financial performance over the last few months to actually see how it performs during a recessionary period. While we will continue to be primarily focused on our existing portfolio in the current quarter, our platform remains highly engaged with middle-market sponsors and owners to evaluate opportunities, and we are confident that the company will be a beneficiary of the improved investment environment.

So to turn to specifics for the quarter. During this quarter, we made 2 new investment commitments, one of which was to a new portfolio company, and one was to an existing portfolio company, but both of these were negligible in size. We received $18.3 million in repayments, driven primarily by the full repayment of our second lien investment in DiscoverOrg, which was renamed Zoominfo and went public in an IPO on June 4.

It quickly raised to a market capitalization of over $18 billion. This would imply that the loan-to-value on our second lien investment in the company was approximately 7%.

Last quarter, we spoke about drawdowns on revolving loan commitments that we had made to certain portfolio companies. This quarter, we experienced net repayments of revolving loan commitments, which we think is evidence that liquidity is generally solid across our portfolio companies.

Given the muted originations and repayment activity this quarter, our portfolio composition as of June 30 is relatively unchanged quarter-over-quarter. Total investments in our portfolio were $1.4245 billion at fair value comprised at 92.7% in senior secured loans, including 78.3% in first lien, 2.4% in first lien/last-out unitranche, and 14.4% in the second lien debt, as well as 0.5% in unsecured debt and 6.8% in preferred and common stock.

We also had $60.8 million of unfunded commitments as of June 30, bringing total investments and commitments to $1.4853 billion. As of quarter end, we had 107 portfolio companies operating across 38 different industries. The weighted average yield of our investment portfolio at cost at the end of the second quarter was 7.5% as compared to 7.7% at the end of the first quarter.

The weighted average yield of our total debt in income-producing investments at cost was 8.3% at the end of the quarter as compared to 8.5% at the end of Q1. The decline in yields during the quarter was primarily attributable to the decline in LIBOR. However, the vast majority of our portfolio has a LIBOR floor of 1% or higher. Therefore, we do not expect significant further headwinds given current LIBOR levels.

I'll now turn the call to Jonathan to walk through our financial results.

Thanks, Jon. During the quarter, we continued to maintain cash on our balance sheet in excess of our unfunded obligations for the time being. As a result, we had $105.8 million of cash and cash equivalents on our balance sheet as of the end of Q2 against unfunded investment commitments of approximately $60.8 million.

While we are cognizant of maintaining this excess liquidity has a cost, we believe it remains prudent to have excess cash on hand during this extraordinary environment. We will continue to evaluate the level of this excess liquidity on an ongoing basis and would expect it to decline as the economic environment normalizes.

Turning to our operating results. Our net investment income per share was $0.45, the same as in Q1. Earnings per share were $0.86 compared to a loss per share of $1.58 in the previous quarter. Our total investment income for the second quarter was $30.6 million, which was down from $32 million last quarter. The decrease was primarily driven by a decrease in interest income due to a decline in LIBOR.

We ended with net expenses of $12 million for the quarter as compared to $13.4 million in the prior quarter. Expenses were down quarter-over-quarter, primarily reflecting the voluntary fee waiver in the quarter.

During the quarter, our ending net debt-to-equity was 1.33x versus 1.4x at the end of Q1. We ended Q2 with net asset value per share at $15.14 as compared to $14.72 from the prior quarter, driven by unrealized appreciation on investments, primarily as a result of tightening credit spreads.

The company continued to have $46.6 million in taxable accumulated, undistributed net investment income at quarter end, resulting from net investment income that has exceeded our dividend historically. This equates to $1.15 per share on current shares outstanding.

Consistent with prior years, we spilled over all of the undistributed net investment income into 2020, as we believe the cost of this spillover in the form of the excise tax is a small price to pay relative to the much higher cost of issuing new equity to replace that amount.

With that, I will return it back to Brendan.

Thanks, Jonathan. In closing, while we are pleased with the company's strong performance during the quarter, we remain highly aware that we are operating in an extraordinary environment and that we are likely closer to the beginning than the end of the economic disruption caused by the ongoing pandemic. We are focused on work with management teams and the financial sponsor and owners of our portfolio companies to navigate through this challenging time.

At the same time, we are keeping a careful watch for unique opportunities to create value for our shareholders. We believe that the proposed merger with MMLC is just such an opportunity, and we encourage our shareholders to take the time to vote in favor of the transaction at their earliest convenience.

As always, we thank you for the privilege of managing our capital, and as always, we are open to hearing from you, especially as all this work is in an extraordinary environment.

With that, let's open the line for questions.

(Operator Instructions) And your first question is from the line of Finian O'Shea with Wells Fargo Securities.

I was a little late here, so forgive me if this was addressed. Asking about the fee waiver of $2.1 million, $2.2 million. I thought the waiver was predesigned to only cap the incentive fee to earn $0.48? Is this quarter's waiver just an ad hoc, or is there a design to it? Obviously, it helps you meet the dividend, so maybe that's it. But any color there would be helpful.

Yes. Fin, it's Brendan. I'll let Jon chime in if he has a point here as well. But yes, this was over and above the contractual variable kind of fee waiver that we had put in place. And the view, Fin, was obviously this is a pretty extraordinary environment. And as a means to further support the upcoming merger, we thought it makes sense to continue to support the company with the incremental fee waiver, and we think, ultimately, that's a benefit to shareholders to support the dividend here.

And as we look forward to the merger and the transaction, we've talked a lot about the incremental benefits that the company will get. We enumerated a bunch of those in the call here today, including the deleveraging, but also very importantly, including the accretion to net investment income on a per share basis.

And so again, as we sort of approach getting the merger over the finish line, we thought it was appropriate to provide incremental support to the company in that regard.

No, sure, that's helpful. And just to follow there, appreciating all the dividend support and the waivers now and over time. Even with this rebound, your dividend is about 12% of book, which is probably high even with your very good cost structure.

I mean, it's, perhaps, earnable, but at least borderline. Do you have a longer-term view? Are you confident with a certain level of, say, leverage and spread that you're able to earn the dividend through the merger?

Yes. I think, again, Fin, I think, that's the main point here. As we look forward to the merger, and getting the transaction done, and the benefits, as I talked about, we've got a big deleveraging that will take place, which gives us incremental asset capacity. And when you combine the 2 companies, given -- especially when you look at MMLC, a lack of nonaccruals, higher portfolio yields, we do continue to see the dividend as affordable pro forma for the merger.

Yes. And just the one thing I'd add to that is the other benefit, as Brendan mentioned, is the deleveraging. And so part of it is, obviously, we're in a much better spread environment today than we were pre-COVID. So as we think about pro forma for the merger, the ability to deploy capital following our deleveraging into the better spread environment is also incrementally helpful. So it's more than just the A plus B, it's also, as I say, the incremental that we can get from there.

Okay. Sure. And just a final question, appreciating the market outlook commentary. It's consistent with most of what we've heard this quarter. Can you talk about -- you're pretty -- you've been historically pretty active in the nonsponsored channel.

Can you talk about that avenue? Is that more open or less open or kind of developing in a similar way to the -- down the fairway of traditional sponsor market?

Yes. So good question. I think what we've said before, and I think it's worth repeating here, is the way we think of our two -- our kind of two pistons within our engine of sourcing, one being through our sponsored partners and one through our connections with business owners in the Middle Market, is that they tend to work somewhat in opposition to each other, meaning that when they're -- when you are in a period of time when there's a lot of sponsor activity, then probably a lot of middle market business owners are looking to monetize their company to take advantage of that strong bid from private equity firms. And that means they're probably less likely to borrow money on their own to pursue growth initiatives.

When you're in an environment where there is less sponsor activity, and frankly, valuations perhaps are not as high as they once were, this is the type of environment where we would expect and historically have seen increasing interest from nonsponsored -- from business owners to borrow money to grow the business themselves, again, rather than monetizing it at perhaps a lower enterprise value than they otherwise could get.

So I mean, look, we're still in the early stages of this. I think March, April and into May, was frankly just a shock to the system. And I think we didn't see a lot of activity almost anywhere, sponsored and nonsponsored. But as volumes are rebounding, it's certainly our expectation based on past history and -- that we'll see more on the nonsponsored side in the coming months and quarters. And I'd say, if you're looking at our pipeline today, there's evidence that, that's now starting to play out.

Okay. And just one more, you gave your, I think, 3 modifications. Is this exclusive of immaterial or regular covenant relief, like less material covenant relief?

Yes.

Because there's a lot of...

Yes. No. So what we're focused on -- the color or the information we gave in the prepared remarks are what we think are the most important amendments or changes to the existing loan documents.

And as you may have heard, again, I'm not sure exactly when you sat in the call, Fin, but we had 2 -- less than 2% of the portfolio comprised of 3 names where we granted a deferral, and we had a couple of names where we switched from PIK to cash. But again, that was less than 1% of the portfolio. So all-in, kind of the changes, the modification of, what I'll call cash or cash payment terms were less than 3% of the total portfolio, so we think fairly small.

In addition to that, I mean, there's -- in any quarter, there's a lot of what we would consider to be, certainly less immaterial, but what do we care to actually more is -- more typical garden-variety amendments for this, that or the other thing. And so there were other things besides that, but nothing that we would highlight as, I say, being economically material.

And Fin, I'll say it, and I know others have kind of quoted. We know it's important to bifurcate between payments amendments and be quite specific about that as well as other amendments, I know others have quoted [Jon in which there are other categories,] other modifications that would include waivers of leverage (inaudible). If you take those in total, it was about 6% of the portfolio on a fair value basis.

(Operator Instructions) And your next question is from the line of Robert Dodd with Raymond James.

I joined a little late as well so -- but I appreciate all the colon on the amendments, so I'll be kind of following up on -- to Fin's question. On the dividend relative to NAV -- I mean when we look at -- in the [outer] period after the waiver -- structural contractual waivers expire, we relevered a little bit, market spreads are a little wider today.

I still, frankly, have a little bit of a hard time coming up to earning that $0.45 unless there's a further rebound in NAV or investable assets. So is that -- is there any predication on maybe taking up leverage even further beyond? Obviously, it's going to go down more in the MMLC deal, but is there any -- are there any other factors that are going into that? Because it still seems a bit of a stretch (inaudible).

Yes, Robert, I'll take a crack here, and we're happy to walk you through, and we'll treat details as we go forward here as well. But Jon hit on, if you think through the components, that will contribute to the NII accretion on a go-forward basis here, there is one, what we'll describe here as -- given the deleveraging, there is incremental investing capacity pro forma for that.

So we would describe it, Robert, as taking that above any previously announced targets that we've described historically. We would note, and Jon noted this as well, certainly a much better investing environment, higher yields, higher spreads, more upfront points, more call protection and the like.

I think also when you look at this quarter, in particular, LIBOR being a big, big component of the decrease in net investment income, and if you look at GSBD on a stand-alone basis, having a much bigger component of fixed cost debt, unsecured fixed cost in our capital structure is a -- we take a bit more of a hit in a quarter like this where LIBOR did go down, and some of our debt obligations are fixed in nature.

That's not the dynamic at MMLC, so that will be a component here as well. Another category is monetization of currently nonincome-producing assets at GSBD, in particular. So a handful of names. We -- Hunter Defense would be a good example.

Nonincome-producing assets in the portfolio today, strong performance ability to monetize that and reinvest into income-producing assets here. And so we -- yes, again, another dynamic in this quarter, in particular, complete lack of any other income.

I think we had about $300,000 this quarter, Robert, of amended fee or amortization of discounts. And so on a more normalized basis, I think, that number on a year-over-year basis was something $2 million in the year ago quarter. So if you take all those components, certainly, on a pro forma basis, supportive of a much higher per share income level.

So, good, I appreciate that. So I mean one of the components of that, obviously, is deploying a higher yield services. Two questions here. I mean are you going to be [for lack of] (inaudible) have actually been rotating the portfolio because, obviously, you can only redeploy it with high yields and that, but you got excess capital, but it takes time for that to flow through to take up (inaudible) yields widely. And the other thing I was wondering about is, how are you going to want to work the deal within this environment?

Yes. I'll take a crack, and I'm sure Jon has some thoughts here as well. And so again, the merger is a deleveraging. There is incremental investment capacity, well within the capability of the team to quickly take advantage of the current market opportunity and deploy that capital into the current environment.

So we wouldn't see it, for example, Robert, that excess capital taking a long time for us to get deployed and put out into this current market environment. And so I don't think we need to move up the risk spectrum in order to produce those higher yields. The current environment is quite supportive of that.

In fact, you can get safer loans, lower leveraged companies that you've got the ability to observe their performance during this pandemic and understanding their ability to be resilient in this environment to make those loans at higher yields in higher spreads, and so we think that's all within the capabilities set.

In terms of how do we underwrite in this environment, obviously, we're all figuring out how to reengineer workflow processes, or in the ordinary course, every single company that we're investing in, we're out meeting the company, we're meeting the management team, we're kicking the tires on a local basis, and now we have to do what's going to be the safest for our team and for our counterparties as well. So there's a lot we could do with technology. There's a lot that we're able to do with the benefit of our third-party advisers as well in certain cases on consulting reports, et cetera. So we feel quite comfortable investing in this environment.

One thing I'd say as well, again, when you look at the [pro forma] of our portfolio, where we've been heavily invested into areas like software and health care, I suspect you'll see other managers who have seen resilience of those spaces want to break in.

Having been active in those spaces for quite a long time, having the benefit and depth of relationships, I think, puts us at a leg up as we're winning transactions in those spaces and those sectors that have proven to be a bit more resilient.

Yes. I mean, Robert, I would add two things. And just as a quick reminder here, so the weighted average portfolio yield at GSBD, as Brendan mentioned, clearly has declined because of the decline in LIBOR. Although now we're below the floor, so we don't expect to see much, much further from here.

But importantly, remember, the other sort of leg down we had in the average portfolio yield was when we brought the senior -- our former Senior Credit Fund onto the balance sheet. We talked about this in about a year ago when we executed that transaction.

And our plan continues to be that -- those were largely lower-yielding kind of upper middle-market loans that will probably not -- we're not focused in our core direct origination strategy. And so as -- and once we brought this on the balance sheet, our plan has long been that as those loans get repaid or matured, we otherwise find ways to monetize them that we'd be able to redeploy that capital into higher spread -- into a higher spread environment, and that continues to be the plan.

And so I think it's not a change at all in kind of what we've historically done with -- in the balance sheet of GSBD, but it is more taking these assets that we brought on the balance sheet and putting -- turning them into what we've historically done.

The second point that I would make is, I think, one of the real advantages that, frankly, public BDCs have, including our BDC, is that -- and especially our public BDC, is that we've locked in a spread and our financing cost for the next 5 years, whereas people who are trying to raise new financing facilities to pursue private credit strategies today are no doubt going to pay a much higher spread than they would have pre-COVID.

Our revolver, as you probably know, has a maturity in 2025. It's LIBOR of 1.875%, which is a really attractive spread. I promise you, if you are a private credit manager and you're going to -- and you're raising a new fund today and trying to get financing, you're not going to get anywhere near that level of spread. So that's a real benefit and just reduces the cost of capital of our BDC relative to others. That's important because it means that the overall spread environment is likely -- for new loans, it's likely to stay a bit higher as these managers who have other private credit vehicles that don't -- that haven't locked in that low spread on their liabilities and instead are borrowing at much higher rates.

They're going to have to command higher spreads on their assets in order to meet their target return, so we think that probably gives the public BDCs, including ours, a pretty distinct advantage in this environment.

And then the last thing I would add just regarding underwriting. I think, Brendan hit on all the practical realities of underwriting in this environment, but I mentioned something in my prepared remarks that I want to amplify here, and that is for -- frankly, the easiest time, I would say, to underwrite a loan is when you're in a recessionary period or you've just gone through a recessionary period, so you can see exactly how a company performs in that kind of very, very pressure-tested environment.

We've gone 10 years, a decade, without having any recessions in this country, and it's been a long time since anybody really knew how these different companies were going to perform through a recessionary period. Now we've got all this very fresh and incredibly fresh evidence of what happens, and I think that allows us -- we're part lenders. We're not distressed folks trying to take advantage of economic stress, rather, we're just looking for high-quality companies that we think are recession-resistant and durable. And having this real fresh data set, I think, just augments our underwriting capabilities.

If I can, one follow-on question to that. Obviously, I mean, if we look at a normal recession, health care is quite resilient. This time depending on the vertical health care, right, it required consumer foot traffic going to get -- opticians, dentists, et cetera, not resilient because people weren't going.

So does the data that you get from this recession -- because it does not seem to be normal in terms of the impact of out of hands, is that as useful as you would -- the data we'd get in a quite around normal recession for that (inaudible)?

No, no. For sure, it's a fair point. And you're absolutely right. There are certainly some things that are unusual about this recession. I think you put your finger on, what I would say is the most important one, which is the impact it's had on health care.

I mean, as you said, normally, you wouldn't expect to see a lot of cyclicality in a health care business. But here, just given the nature of this -- the catalyst for this recession, it's obviously been affected differently than it normally would. But if you set that aside, Robert, at the end of the day, most of the impact of this recession is just a recession that has a different catalyst.

In a typical recession, you would expect to see companies that are linked to retail, or travel and leisure, or real estate to be more cyclical and more impacted. Oil and gas, again, more impacted. That is not unusual. And sure, there are some contributing dynamics around people's fear of being in crowds and in public places that are a little different this time, but the end result of that demand disruption is playing through in a -- in ways -- I guess in a way that wouldn't be that dissimilar to a regular recession.

So not -- your point is well taken, it's not that there is no idiosyncrasies to this recession. But I think overall, what you're simply seeing is a -- is demand disruption that is not that dissimilar to what you'd see in other sort of deep recessions.

At this time, there are no further questions. Please continue with any closing remarks.

Great. Thank you, Dennis, and thank you all for joining us on the call. As always, if you have any additional questions, please feel free to reach out to the team, and I hope you have a great week. Thank you very much.

Ladies and gentlemen, this does conclude the Goldman Sachs BDC, Inc. Second Quarter 2020 Earnings Conference Call. Thank you for your participation. You may now disconnect.