CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “target,” “estimate,” “intend,” “continue” or “believe” or the negatives of, or other variations on, these terms or comparable terminology. You should read statements that contain these words carefully because they discuss our plans, strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters. We believe that it is important to communicate our future expectations to our investors. Our forward-looking statements include information in this report regarding general domestic and global economic conditions, our future financing plans, our ability to operate as a business development company (“BDC”) and the expected performance of, and the yield on, our portfolio companies. There may be events in the future, however, that we are not able to predict accurately or control. The factors listed under “Risk Factors” in this annual report on Form 10-K, as well as any cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. The occurrence of the events described in these risk factors and elsewhere in this report could have a material adverse effect on our business, results of operations and financial position. Any forward-looking statement made by us in this report speaks only as of the date of this report. Factors or events that could cause our actual results to differ from our forward-looking statements may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the U.S. Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K. The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which preclude civil liability for certain forward-looking statements, do not apply to the forward-looking statements in this annual report on Form 10-K because we are an investment company. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:
PART I.
Unless indicated otherwise in this annual report on Form 10-K or the context so requires, references to “Company,” “we,” “us” and “our” mean West Bay BDC LLC. The terms “GSAM,” “Goldman Sachs Asset Management,” our “Adviser” or our “Investment Adviser” refer to Goldman Sachs Asset Management, L.P., a Delaware limited partnership. The term “GS Group Inc.” refers to The Goldman Sachs Group, Inc. “GS & Co.” refers to Goldman Sachs & Co. LLC and its predecessors. The term “Goldman Sachs” refers to GS Group Inc., together with GS & Co., GSAM and its other subsidiaries and affiliates. Goldman Sachs advises clients in many markets and transactions and purchases, sells, holds and recommends a broad array of investments for its own accounts and for the accounts of clients and of its personnel, through client accounts and the relationships and products it sponsors, manages and advises (such Goldman Sachs or other client accounts (including us, Goldman Sachs BDC, Inc. (“GS BDC”), Silver Capital Holdings LLC (formerly Goldman Sachs Private Middle Market Credit LLC) (“SCH”), Goldman Sachs Private Middle Market Credit II LLC (“GS PMMC II”), Goldman Sachs Middle Market Lending Corp. II (“GS MMLC II”), Phillip Street Middle Market Lending Fund LLC (“PSLF”) and Goldman Sachs Private Credit Corp. (“GS Credit”)), relationships and products, collectively, the “Accounts”).
ITEM 1. BUSINESS
The Company
We are a specialty finance company that is a non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (the “Investment Company Act”). In addition, we intend to elect to be treated as a RIC, and we expect to qualify annually for tax treatment as a RIC under Subchapter M of the Code, commencing with our taxable year ended December 31, 2024. From our inception on May 1, 2024 through December 31, 2024, we originated approximately $51.2 million in aggregate principal amount of debt and equity investments prior to any subsequent exits and repayments.
Our investment objective is to generate current income and, to a lesser extent, long-term capital appreciation. Our investment strategy is consistent with that of the broader Goldman Sachs Asset Management Private Credit platform, with a focus on capital preservation and capital appreciation, and includes:
We hold primarily directly originated, first lien senior secured, floating rate debt of companies located in the United States. We may also invest, to a lesser extent, in second lien, unsecured or subordinated loans, payment-in-kind (“PIK”) debt and equity and equity-like instruments, and in very limited circumstances, we may hold loans or other investments of issuers that are not located in the United States in connection with certain post-closing modifications of existing investments. For a discussion of our investment objectives and guidelines, see “Item 1. Business—Investments”.
We invest primarily in private companies based in the United States. We focus our lending across a spectrum of directly sourced opportunities in companies ranging from lower middle market to large capitalization in size. We may invest in companies of any size or capitalization. Subject to the limitations of the Investment Company Act, we may invest in loans or other securities, the proceeds of which may refinance or otherwise repay debt or securities of companies whose debt is owned by other Goldman Sachs credit funds or affiliates. We also intend to invest alongside institutional and retail-focused private credit Accounts, which may include proprietary accounts of Goldman Sachs. For additional information, see “Item 1. Business—Allocation of Investment Opportunities—Co-Investments Alongside Goldman Sachs and Other Accounts, and the Relief.” In addition, we expect to acquire or originate revolving credit facilities from time to time in connection with our investments in other assets.
Our unemployed funds will be held or invested in Short-Term Investments.
“Short-Term Investments” means (i) cash or cash equivalents, (ii) interest-bearing accounts of financial institutions of recognized creditworthiness, (iii) certificates of deposit maturing within one year from the date of acquisition thereof issued by financial institutions of recognized creditworthiness, (iv) money market funds and/or (v) marketable direct obligations issued or unconditionally guaranteed by any national government, or issued by any agency thereof, maturing within one year from the date of acquisition thereof.
We will not (a) invest in loans to borrowers or equity of issuers who are not organized under the laws of, and do not have their principal place of business in, the United States, unless such investment is being made in connection with a post-closing modification of an existing investment; provided that any such investments shall not exceed, in the aggregate, 1% of the Company Value (as defined below), (b) invest more than 5% of the Company Value in second lien, unsecured and subordinated loans, (c) invest more than 5% of the Company Value in PIK Loans (as defined below), (d) invest more than 5% of the Company Value in any single Portfolio Group (as defined below), (e) invest more than 20% of the Company Value in loans to borrowers that belong to the same GICS Industry Classification or GICS Sector Classification (as defined below); provided that we may select any one (1) GICS Industry Classification or GICS Sector Classification which may exceed 20% of the Company Value, but which shall not exceed 25% of the Company Value, (f) engage in any hedging activities or invest in any derivatives; provided that we may invest up to 2.5% of the Company Value in interest rate, foreign exchange or other derivative agreements to hedge interest rate, currency, credit or other similar risks (and not for speculative purposes); provided, further, that we will not invest in any naked options or similar instruments, (g) invest more than 5% of the Company Value in equity and equity-like instruments, as provided in the LLC Agreement (as defined below), (h) invest in any blind pool or other investment vehicles (1) managed or advised by the Investment Adviser or any of its Affiliates (as defined below) that directly or indirectly charge a management fee or performance fee (or similar fee) to us, except as otherwise provided in the LLC Agreement or (2) managed or advised by a third-party investment manager, (i) invest more than twenty percent (20%) of the Company Value in Portfolio Companies in which any GS Direct Lending Fund (as defined below) has a pre-existing investment (excluding any pre-existing co-investments made by us and other Co-Investing GS Direct Lending Funds (as defined below)), (j) invest in any portfolio company in which any GS Direct Lending Fund and/or Goldman Sachs (on its balance sheet) holds more than fifteen (15%) of the equity securities (excluding any pre-existing co-investments made by us and other Co-Investing GS Direct Lending Funds), (k) make any investment unless our allocable portion of such investment is 49% or less than the total amount being invested (measured by beneficial ownership) by Co-Investing GS Direct Lending Funds and us, or (l) make any investment where the Investment Adviser knows or reasonably should know, based solely on its ordinary course due diligence, that a Unitholder or an Expanded Affiliate (as defined below) thereof (other than Goldman Sachs) will be required to make a regulatory filing arising under the applicable laws or regulations of the country in which the investment is made, or the country (or countries) in which any entity (or entities) used by us to make the investment is domiciled, solely as a direct result of such investment by us. We employ leverage as market conditions permit and at the discretion of the Investment Adviser, subject to the terms of our Second Amended and Restated Limited Liability Company Agreement (as amended and/or restated or otherwise modified from time to time, the “LLC Agreement”) and the limitations set forth in the Investment Company Act, which currently allows us to borrow up to $2 of debt for each $1 of equity. We intend to use leverage in the form of borrowings, including loans from financial institutions as well as the issuance of debt securities. In determining whether to borrow money, we will analyze the maturity, covenant package and rate structure of the proposed borrowings as well as the risks of such borrowings compared to our investment outlook. We would expect any such leverage, if incurred, to increase the total capital available for investment by the Company.