Thank you for standing by, and welcome to TCG BDC's Second Quarter 2021 Earnings Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer Please be advised that today's conference may be recorded. I would now like to hand the conference over to your host, Head of Investor Relations, Alison Roudieri.
Good morning, and welcome to TCG BDC's 2nd quarter 2021 earnings call. Last night, we issued an earnings press release and detailed earnings Today, we will hold a question and answer session for analysts and institutional investors. This call is being webcast and a replay will be available on our website. Any forward looking statements made today do not guarantee future performance and undue reliance should not be placed on them. These statements are based on And we will now take our next question from the line of David.
Thank you, that could cause actual results to differ materially from those indicated. TCG BDC assumes no obligation to update forward looking statements at any time. And with that, I'll turn the call over to our Chief Executive Officer, Linda Pace.
Thank you, Alison. Good morning, everyone, and thank you for joining us on our call this morning to discuss our Q2 2021 results. Joining me on the call today is our Investment Officer, Taylor Boswell and our Chief Financial Officer, Tom Hennigan. I want to focus my remarks on 3 areas. First, I'll touch on a few portfolio highlights.
2nd, I'll provide a review of our 2nd quarter results. And 3rd, I'll share some thoughts on the current market environment. Let me start by highlighting our portfolio activity and current credit position for the quarter. As we previewed last quarter, our deal activity in the 2nd quarter was extremely robust, outpacing even the volume of the 4th quarter. We originated over $213,000,000 of loans across a diverse array of new borrowers and add ons for existing portfolio companies.
Overall, the portfolio is sitting at just under $1,900,000,000 and we continue to find ample attractive new deployment opportunities in today's market. We're pleased to report that credit performance continues to strengthen alongside the macroeconomic recovery. Over the past several quarters, we've seen tangible evidence of cyclical recovery across the portfolio, including those names most impacted by COVID. Fundamental performance is solid. Our watch list continues to trend down as a percent of the portfolio and our portfolio internal risk ratings continue to improve.
Importantly, we have seen no new non accruals in the last year and we are confident in the trajectory and progress we are making in each of our 4 non accrual names. We're proud of the performance of the portfolio through COVID, And most importantly, we see the current trajectory of improving performance and solid credit continuing on its current upward path. I'd like to turn now to the financial highlights of the quarter. We generated net investment income of $0.38 per common share and declared a total dividend of $0.38 This includes a base dividend of $0.32 and a $0.06 supplemental dividend, in line with our policy of regularly distributing substantially all of the excess income earned over our base dividend. As Tom will detail later, We see earnings continuing in the context of $0.36 to $0.37 as we've reported over the last several quarters, which remains comfortably in excess of our $0.32 base dividend.
Net asset value per share increased 2.8 percent or $0.44 from $15.70 to $16.14 While improving market yields drove some of this increase, NAV was substantially bolstered by stronger overall credit performance, particularly in those names impacted by COVID. We've taken an appropriately conservative approach to valuation through this cycle and we expect continued underlying fundamental improvement to drive positive NAV migration in the coming quarters. Additionally, we repurchased $8,000,000 of our common stock, resulting in $0.02 of accretion to net asset value. We care deeply about our shareholders' total return experience. And at our stock's current valuation, We will continue to be consistent active repurchasers of our shares.
Turning to the investment environment. Investment activity across our business footprint in the 2nd quarter was amongst the highest on record, reflective The active transaction environment and consistent with the trends in private equity and broadly syndicated loan markets. We view the investment opportunity set in our market as highly attractive, especially on a relative risk reward basis and are actively deploying capital into those transactions we regard as most compelling. At the same time, as you would expect, we remain highly selective investors, Finally, I'd like to take a moment to welcome Aaron Likong, who joined our Board of Directors in June as an independent director. Aaron brings a great deal of expertise in both the leveraged finance and middle market private equity to our Board.
We are pleased to have the benefit of counsel and experience. I'd like to now hand the call over to our Chief Investment Officer, Taylor Boswell.
Thanks, Linda. As usual, I'll begin with Carlisle's macroeconomic perspectives, and then I'll share thoughts on our investment approach to today's highly active and competitive market. Global growth accelerated in the 2nd quarter as vaccine distribution progressed, health restrictions eased and economies reopened. U. S.
GDP grew at an annualized 6.5% from the Q1, while the eurozone and Chinese economy Expanded at 8% 5%, respectively. Most strikingly, households in the U. S. Continue to spend freely, And we have seen a 20% year to date increase in our discretionary spending index relative to 2019. This year's acceleration in economic activity paired with the pandemic related disruptions in the last year caused headline Q2 inflation to reach levels not In over a decade.
Recently, realized inflation remains concentrated in certain supply constrained sectors, such as autos, materials and energy. We expect many of these pressures to ease in coming quarters as capacity expands And consumer spending patterns revert. One place we are keeping a close eye on is the labor market, where we see more risk as the year progresses, given continued tight labor availability. Despite these pressures, corporate profits are expanding across many sectors, Thanks to significant productivity improvements, including a broad based increase in the adoption of technology. In total, We judge the macro backdrop to be highly supportive of continued credit performance, both generally and in CGBD's portfolio.
The velocity with which our markets have recovered after 2020 severe shock is remarkable. Like 2019, we are again in a very robust transaction environment and the key metrics in our industry, spreads, fees, leverage and the like are now broadly in line with the pre COVID period. We've come full circle and the operative question for today's market Is the same one as 2019. How will you drive outperformance in a competitive environment? Across our platform, We have windows into the vast majority of credit risk markets and we can report with high confidence that there is no avoiding competition.
Not in sponsor finance, not in technology lending, not in ABL, not in liquid markets, not in any investment market The last decade Central Bank policies have made obsolete the question of how do you avoid competition. Rather, The right question is, how do you win in the face of competition? Here's how we do it at Carlyle. First, We leverage our leadership position in middle market sponsor finance to win the deals we want to win and in so doing avoid adverse credit selection. We accomplished this by maintaining a heavy investment in direct origination, offering a complete leveraged finance product set at Possessing underwriting and execution expertise to move with speed and conviction and delivering value to borrowers Beyond our capital in as many ways as possible.
In short, we used Carlyle's platform To create an extremely broad investment funnel and we pair it with a highly relevant solution set for potential borrowers, allowing us to be both highly credit selective and trusted partners for financial sponsors. It's critical to remember We're operating in a market where demand for capital is growing at least as strongly as the supply of capital, in a market with an extremely fragmented competitive set. Our platform's competitive advantages are real and sustainable and stand in stark contrast to the average player in the market, where deal sourcing and relevance of offering may be more constrained. We're comfortably on the right side The competitive landscape and fortunate to operate in a market which offers extremely strong relative investment value. 2nd, We complement our First Dollar sponsored finance business with additive private credit assets where Carlisle possesses Similarly deep expertise, such as asset backed, non sponsor and recurring revenue lending.
The value in this exercise It's not that these markets are categorically better or worse than our core market. Rather, the value is that they are fundamentally different than our core assets, allowing us to diversify risk factors in our book, tactically assess relative value deal by deal and be even more credit selective. We are confident that complementing our core with these other safe and defensive private credit profiles will result in better portfolio construction and investment results on a through cycle basis. Finally, We are intensely focused on deploying the advantages of the Carlyle platform against every investment opportunity in every aspect of our operations From origination to diligence to execution to portfolio management, we understand our edge, apply it with rigor and seek to extend it in all possible ways. At Carlisle, we sit alongside hundreds of talented investment professionals with specific expertise across sectors, geographies and asset classes from which we can derive investment insights to both capture opportunities And avoid mistakes.
In addition, we leverage fully staffed and highly capable teams in capital markets, workout, Create and sustain edge for CGBD. In summary, our market offers a highly attractive investment opportunity, characterized by growing demand for capital, high current income and significant downside protection. It makes all the sense in the world that people want And that there would be ample competition. At Carlisle, our platform equips us to win the business we want to win in competitive markets And across cycles. Harnessing these competitive advantages has been exactly what Linda, Tom and I have been focused on these past 2 years.
We are confident that it will continue to produce strong investment results. As always, thank you for your continuing support. I'll now hand the call over to our CFO, Tom Hennigan.
Thank you, Taylor. Today, I'll begin with a review of our 2nd quarter earnings, then I'll provide further detail on the portfolio and our balance sheet positioning. As Linda previewed, we had another very solid quarter on the earnings front. Total investment income for the 2nd quarter was $43,000,000 That's up from $41,000,000 in the prior quarter, primarily due to 2 main factors. 1st, higher core interest income on our investment book and second, higher amendment and underwriting fees.
Both OID accretion from repayments and income from the 2 JVs were flat versus prior quarter. Total expenses were $21,000,000 in the quarter, up modestly from $20,000,000 last quarter. The result was net investment income for the quarter of $21,000,000 or $0.38 per common share, exceeding the general guidance we've been providing during recent earnings On August 2, our Board of Directors declared the dividends for the Q3 of 2021 at a total level of $0.38 per share that comprises the $0.32 base dividend plus a $0.06 supplemental, which is payable to shareholders of record as of the close of business on September 30. Similar to prior quarters, as we look forward to the rest of 2021 and beyond, we remain very confident in our ability Comfortably deliver the $0.32 base dividend plus continue the sizable supplemental dividends in line with the $0.04 to $0.05 we've been paying the last few quarters. Moving on to the performance of our 2 JVs.
Total dividend income was $7,500,000 in line with last quarter. On a combined basis, our dividend yield from the JVs inched up from 10% closer to 11%, given we're able to make return of capital at NMCF 1 following a recent favorable amendment under our primary credit facility. Total assets at the JVs increased from $1,200,000,000 to 1,300,000,000 reversing the recent trend of declines that have been driven by repayment headwinds. Linda noted the robust new originations across our direct lending platform. This was particularly evident in the MMCF I portfolio with fair value increasing by over 10% in the 2nd quarter.
Going forward, We continue to expect stable dividend generation from the 2 JVs similar to this quarter's results. Under valuations, our total aggregate realized and unrealized net gain was $21,000,000 for the quarter, the 5th Consecutive quarter of positive performance following the drop in March 2020. Using the same buckets I've outlined in prior quarters, we again saw improvement across the board. 1st, performing lower COVID impacted names plus our equity investments in the JVs, which accounts for a combined 70% of the portfolio, increased in value about $8,000,000 compared to threethirty 1. 2nd, the assets that have been underperforming pre pandemic, some which have COVID exposure were up $4,000,000 marking the 5th consecutive quarter of stability or improvement.
This included an exit at par of our investment in Plano molding. The final category is the moderate to heavier COVID impacted names. We continue to see improvement in fundamentals and recovery prospects for these investments. Collectively, they experienced a net $9,000,000 increase in value. I'll turn next to the portfolio and related activity.
We continue to see overall stability and improvement across the book. Total non accruals were flat at 3.3% based on fair value And this was the 4th consecutive quarter with no new additional non accruals. Similar to last quarter, we don't see any additional loans at risk of non accrual. As Linda noted, we also see potential for improvement in the level of non accruals over the next 12 months. The total fair value of transactions risk rated 3 to 5, indicating some level of downgrade since we made the investment, improved again this quarter by $14,000,000 in the aggregate, while over $50,000,000 in transactions experienced some level of upgrade.
While there remains some unfinished work, we're very pleased with the continued positive momentum in the performance of the overall portfolio. I'll finish with a review of our financing facilities and leverage. We continue to be very well positioned with the right side of our balance sheet. Statutory leverage was again stable at about 1.2 times, while net financial leverage, which assumes the preferred is converted and the risk metric we use to manage the business was again right around one turn of leverage. So we're sitting close to the lower end of our target range of 1 0 to 1.4 times, giving us flexibility to invest prudent in the current robust deal environment.
And regarding the preferred equity issuance for May 2020, I'll reiterate again, this instrument was a strong sign of support by Carlyle during the darkest days of the global pandemic and it continues to be a long term investment by Carlyle in our BDC. So currently there is no intention to convert. With that, back over to Linda for some closing remarks.
Thanks, Tom. Before turning to your I'd like to conclude by noting that we are very pleased with the current momentum embedded in our business. The engines we have in place, Namely the talent and hard work of our team here and throughout Carlisle are driving attractive and sustainable returns for our shareholders. And please enjoy the remaining weeks of summer. And with that, I'd like to now turn the call back over to the operator to take your questions.
Our first question comes from the line of Ryan Lynch of KBW. Your line is open.
Hey, good morning. Thanks for taking my questions. The first one, you were talking about the competitive environment that's out there today in the direct lending market, which has been very clear to us. And you talked about how you guys are coming to the market and how you guys can hopefully win deals. What I was hoping to get is to get A little more background on where you guys stand as a direct lending platform.
I'd love to hear what Sort of AUM you guys can currently come to the market, that's currently dedicated to the direct lending space across the Carlyle platform that That obviously CGBD can participate with and what sort of commitment sizes you all can make across the platform That's obviously one way to help win deals is to be able to commit to larger hold sizes to be able to offer And as we've seen the direct lending market grow and grow, we've seen larger solutions, becoming a competitive advantage. So I'd just love to An update on where you guys stand there from a platform standpoint?
Yes. Sure thing, Ryan. It's Taylor. And happy to pick up that question. So, just to provide a couple of points of context around that, Carlyle's overall global credit business It's about $60,000,000,000 of AUM.
And so while CGBD is a really important vehicle and flagship vehicle for us at $1,900,000,000 of AUM, it does represent A small portion of our total capital base aligned against these markets. And what I would say also about that $60,000,000,000 of AUM at Carlisle is We really have built a credit business that focuses down on core corporate leverage finance markets. So the vast majority of that AUM It's targeted right in the places where you think Carlisle would be good, corporate levered credit, private transactional levered credit and the like. And so collectively that does give us a very full product suite to deliver to the marketplace, which really enhances our relevance in the marketplace as well as our hold sizes to get specifically into, illiquid credit, which you can kind of shorthand As a direct lending business or the relevant private corporate credit markets, we manage about $15,000,000,000 in capital across the platform in those strategies. And so we have a very material footprint.
Specifically around hold sizes, we've done transactions on our platform as large as $750,000,000 in total commitment size. Obviously, individual positions that flow into CGBD end up being smaller, but it's a material market presence. One thing I will call out for you though is unlike some players in the market, we really remain focused on the core middle market, That $20,000,000 to $75,000,000 EBITDA business and a lot of the very large transactions that are printing in the unitranche market and Appropriately getting significant headlines. Those are far larger borrowers where the competitive set is competing with traditional lever Finance markets, broadly syndicated loans and high yield markets and the like. So, our capital base is very relevant, very scaled, But you're less likely to see us competing head to head in large cap Markets against broadly syndicated and high yield and more likely to see us kind of sticking to that middle market knitting where You don't have to go head to head with both private credit and traditional liquid market financing sources.
So sorry for the long answer. I hope that's Broadly responsive to the question.
No, that's very helpful. Very good context and color on your overall platform. Good to hear. The other question that I had, which you guys have kind of talked about in the past And reiterated it, but you talked about the convertible preferred stock being kind of a long term financing solution that you guys intend to hold. And I think you said you viewed that as an attractive source today.
I mean, You guys have been able to issue liabilities, unsecured notes recently at 4.5%, I wouldn't be surprised if you could do something less than that in today's market. So why is paying 7% Cash on a convertible preferred, an attractive source of financing when you're able to tap Unsecured notes at 4.5%. And then depending on your answer to that, we can get into Converting that, what does that look like? How does that look like from a manager converting at a size of a discount, The external manager converting and having to make it a sizable profit from supporting the BDC. I don't know if that's a great look either, but I just don't Understand my comment of why paying 7% is attractive source when you guys are issuing debt for significantly below that?
Yes. Hi, Ryan, it's Linda. I'll start and then maybe turn it over to Tom. So just to kind of reiterate, if you recall, when we put the convert in place, Life was pretty dire, right? Our stock price was half of what it is today.
We're in the middle of the pandemic. We're looking at really how to make sure our balance sheet was strong and defensible during a time that was had just an enormous amount of uncertainty. And Carlyle coming in and doing the preferred was a really great testament not only to their support of our business, but also to just really Help us achieve the goals that we wanted to achieve at that point in time. So I'd like really People to kind of just put all of this in context, for Carlyle, it's a great show of support, but let's not forget It is $50,000,000 for Carlyle and it's $50,000,000 for our balance sheet. So it's Relatively small.
And Carlyle, this is strategic, right? They're not Looking to convert this anytime soon, it's here to support the business and we really look at this as equity. So compared to our dividend yield on our common stock, this is paying 7%, which is We think actually a pretty attractive piece of equity for our balance sheet. And converting it It's just not really in the card. So I would just encourage people to think of this really as Permanent equity, which you may view as expensive, but we actually view as pretty cheap.
And No, that this is not something that is going to dilute our current shareholders Really any in the foreseeable future that we can tell. So and we're pretty conscious of that. Back when we issued this, We didn't want to dilute shareholders, especially back in the spring of 2020. And that's still our view now. There No reason to dilute current shareholders, not when Carlyle is standing behind the business like it is.
Tom, maybe you could kind of talk about our unsecured and kind of just the rest of the balance sheet and how we're thinking about that.
Yes, sure. What I'd just add is, I think we have the best of both worlds. We have the financial flexibility. It's effectively equity. We manage the business as if it's Equity, we get credit under our leverage facilities as if it's equity.
So certainly from a financial flexibility perspective, we think it's well priced equity. So Managing the business we're going to have to have this in the capital structure. When you look at our broader capital structure, we've got diversified funding sources With our traditional corporate revolver, we have a very attractive CLO vehicle, that's got north of 2 years left under its reinvestment period. And that's obviously well suited for our primarily 1st lien book. And then of course we have our 2 tranches of unsecured notes.
And what I'll note too, those unsecured notes Price a little bit high compared to current market standards, but it's a couple of tranches there. They mature in a few years. They actually have very favorable call features as well. So we look down the road in terms of A traditional bond deal that has effectively a whole make whole. We've got some flexibility in the capital structure with those bonds depending.
The only thing that I would just add though is one of the issues with looking at the preferred as equity is that as it It's here today from a regulatory standpoint, it counts as leverage. So it's counting towards your leverage calculation as it sits here today, not as an Equity tranche. And so that's one of the issues from looking at that standpoint. I would just say, if it does convert At its current price, I mean, one of the things that, CGBD is known for as having a large Successful big platform backing it in Carlyle through the external manager. So I don't know if it's a great look when it does convert To have the manager making a large profit from BDC shareholders We're making an investment into it at a rough time in the market.
And then again, I don't think necessarily having 7% cost of Capital out there, which right now counts as leverage is a great option.
Yes. Ryan, I think we'll be Cautious of that, how that could look and would look. But what I I would tell you now is 2 things. 1 and Tom, correct me if I'm wrong on this, but just also keep in mind that our financing facilities Do not look at this as leverage, right? They so it's not restraining our flexibility visavis The rest of the liabilities on the balance sheet.
And just I know you're keeping it in the back of your mind that What happens when and if this converts. But again, I would just reiterate, there's no plan to convert it. And Sometimes I think the focus on this $50,000,000 preferred gets lost And overshadows, I think what we would like people to really feel like what is the focus of our story, which is over the past 2 years, the management team, particularly Taylor and Tom And the rest of the team have just really been working super hard to get us through COVID, get us out of the CUP program, Put in place processes and procedures that strengthen the balance sheet, that strengthen the portfolio. And we've made such great progress over the past couple of years That I cringe a little bit that the $50,000,000 preferred that is support from our parent Kind of overshadows that message. So, maybe a little bit of advertisement here from me, but I guess as CEO that is part of my job.
But so listen, we're happy to keep talking about it each quarter. But I would just ask, Let's not lose sight of also, I think, kind of the bigger picture that we're trying to show to you and to our And keep in mind that Carlisle has I think as Carlisle and us here at CGBD, We pride ourselves on having a really strong reputation for taking care of our shareholders and it's not our intent To change that way of operating.
That's a fair point. And I do want to say that this was a really nice quarter, Kind of all around, so keep up the good work on that front. That's all for me. I appreciate the discussion today.
Thanks, Ryan.
Our next question comes from Finian O'Shea of Wells Fargo. Please go ahead.
Hi, everyone. Just to follow-up on Ryan's question, sorry to do that. I was listening to some of your Comments, Linda, I agree that life was pretty dire when the parents stepped up during COVID, but It was also rather bright and sunny in say 2018 when the BDC lost a lot of money and was Paying the parent a full incentive fee. So I guess the question is, Against your opening remarks about caring deeply about the shareholders' total return, Do you perhaps care more deeply about the advisor? Or should something give like should there be sort of a pick one between the convert and not having a credit look back?
Thanks, Fin, for that question. I I think I've kind of addressed the convert issue. And talking about our look back and our management fee, We do believe that Carlisle has a very fair and balanced Management fee structure, we think that in the shareholders are getting a lot of value for that. Keep in mind that we do manage the JVs and don't take a fee for that. So Sometimes I think that gets a little bit lost when people look at our overall fee structure.
So you're kind of getting the management of the JVs at a very nice discount on the management fee. And one of the other kind of topics I think that Taylor really discussed on the call and one that we'd like to Further emphasized is all of the resources that Carlyle brings to the table, Just away from just the core team that's supporting the CGBD and the rest of direct lending is there for investors as well. So our management fee and not having a look back, I'm not really sure that that is what is going to be driving our stock price higher. It's really We've got to continue on this straightforward consistent performance, get our non accruals Down, which is looking better and better, and really keep our shareholders Satisfied by knowing that we can generate our dividends, perform well on credit, And ultimately, we think that will get our stock price up. I'm not sure our management fee is really the issue.
Okay, makes sense. That's all for me. Thank you.
Thank you. And there appear to be no further questions in queue from the phone lines at this time. At this time, I'd like to turn it back over for closing remarks.
This is Linda. I want to thank everybody for joining us on our call today.
And this concludes today's conference call. Thank you for participating. You may now disconnect.