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SAR Saratoga Investment

Participants
Christian Oberbeck Chairman and Chief Executive Officer
Henri Steenkamp Chief Financial and Compliance Officer
Michael Grisius President and Chief Investment Officer
Mickey Schleien Ladenburg
Tim Hayes B. Riley
Christopher Testa National Securities Corp
Mitch Weiman Sumner Financial Advisors
Call transcript
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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corp’s Fiscal Second Quarter 2019 Financial Results Conference Call. Please note that today’s call is being recorded.

During today’s presentation, all parties will be in a listen-only mode.

we the remarks, for prepared management’s will line open questions. Following Officer, like time, Corp’s the Compliance I this to Chief would and Investment At Saratoga now turn to call Financial Mr. over Steenkamp. Henri Sir, please go ahead.

Henri Steenkamp

materially could fiscal from forward-looking referencing with would to I to law. our forward-looking our to call. everyone to cause Investment earnings to projections. Thank the actual do projections. important second that call forward-looking will We you. XXXX required a includes like differ quarter conference refer filings SEC and to We to for factors most our call. and these results unless be Today, welcome Saratoga during we by recent statements Corp’s not update presentation do statements Today’s undertake so you conference ask statements

Officer, press XXXX IR our our will You Events to link and X:XX introductory turn be refer Presentations XX. will section the can find Please website. this conference like is our second for page also to A in distributed & earnings call fiscal A presentation over the would press Relations through earnings be release call last Investor making night. release to October a from PM details. Executive to who today Chief I available Christian of remarks. replay our our of Oberbeck in shareholder quarter now Chairman the few

Christian Oberbeck

Thank everyone. you, and Henri welcome

quality in investments, we steps continued recent most our structure credit quarter, taken generating well capital this are our the of to strengthen as at back progress strong fiscal and look earnings. we new to highlight pleased growth As both important delivering maintaining as

return foundation strongest recap with loan X, our contribute to leading rating, strengthen high our quality To our industry realizations equity BDC year within a IRR trailing un-levered investments our this total portfolio a continue to XX.X% $XXX BDC basis, X.X% maintaining on on first, generating up of XX.X% Slide our quarter XX.X% of All by of a unrealized un-levered on financial of total a mean and quarter credit XX-month having level on of level sector. past yet, IRR the last of maintaining with highest gross performance of from investment these million. X.X% beating the on the we continuing XX.X% factors briefly and gross our

our million a $XXX Second, XX% a increase to time from million From our XXX% QX under reflects million the year. perspective, past same of management million, from as $XXX years. AUM we of a the increase expanded as assets last $XXX current and up an $XXX of term longer from X over

since This end. with platforms quarter a our through to new in million the four of new of total including bringing to platform the origination X demonstrate growing originations, investments $XX companies, success healthy portfolio quarter continues May

share over continued strengthening for share. XXXX. financial on consecutive Third, a has for $X.XX of paid the share dividend second XXXX the enabled per increase to quarterly This the $X.XX per XXth September quarter’s of foundation quarter. of an of $X.XX us our dividend quarter was per quarterly XX, increase fiscal dividend the past our We

which shares our All the we assuming periods. issuance, XX%, are dividend same equity of been the exceeded our dividend by recent when looking comfortably net other at most us BDCs. weighted our distinguishes QX payments investment income currently And our adjusted from have by average still for for over-earning fully and diluted are

improving we application of August And successfully million September license us million equity. On we various share the issued formal light our and us X SBA symbol X.X% issued inviting X dividends led strong XX, only new July issue X.XX our debentures our are of for liquidity XX, second positive this our than steps float of to past the importantly, important SBIC investors. of with XXXX, ticker a a million quarter. base approved remains increase an of NAV, our liquidity On and $XXX has raised a to license additional taken If premium XXXX, based for a will notes on in seven-year XX%, $XX the SAF, license. outstanding at substantial green finally, investment by We on increasing equity the XXXX, over in trading under having of to letter future, XX.XX X.XX% SBA Very allow increased shares the million in our file BDCs this fixed-rate by new to year. $XX.X in more million XX, additional shares.

significant preserve credit potential powder meet and pricing to in continue to changing environment. opportunities future We dry a

of quarter-end SBIC assets million license any available to QX grow allows by second XX% the financing. us liquidity existing without external Our $XX management under excluding new our

cash We QX. already available end Importantly, has our the capital as process of most further our today growing healthy invest of and us in issue did any and stock allowed under of the origination sourcing ATM as and to raised not QX. of

performance This XX, the compared XXXX quarter performance XXXX. strong May our quarters as within ended saw XX, indicators continued key to August and

million NII $X.X up $X XX% versus $X.X adjusted versus XX% this million last million and up quarter. quarter, Our last is year,

quarter, from this Our X% share NII and last adjusted XX% per year, $X.XX is from up up last quarter. $X.XX $X.XX

year, last year $XX.XX, months equity recent provide is from later. XX more share $XX.XX quarter. X.X% our and from is will up from with detail and NAV up X.X% and up – remain QX, XX extremely last We up pleased our these from per $XX.XX accomplishments. on return Henri and Our XX.X%, latest last performance

maintaining long-term remain quality. our overall the in asset the while mentioned committed its to often we've base of high size further advancing we past, As

performance the our I this positive to to XXXX well highest X, assets forward would risen the have of is our under and our management that, as steadily continuing at can on and you the turn back of to As credit composition over review since level long-term Henri now like results, call quality look our We see trend. With Slide yet. portfolio. its to financial as

Henri Steenkamp

year level due of investments our The income interest The the in $X.XX higher last and quarterly Chris. primarily reflects capital increase as from see of impact key interest results $X.X with XX% $X.XX our our from AUM Slide $X.X for to metrics up increased NII compared you, as per income calculation, QX increased Across strong share When metrics, increase ended accrual XX% $X.XX, quarter-end assets Adjusted quarter invested, last share to million cash, was primarily both year. incentive quarter. This sequential was performance immediately as and was August positive and on gains the X last Adjusted last adjusted including XXXX. fee from million higher the from companies. last as from up portfolio share is XX, XX year in quarter last $X.X last related of last unrealized up well the XX.X% points QX. yield net year, XX.X%. points results. was for and highlights credit year's in the up quarter. from was basis and $X.XX you the XX% adjusting four XX.X% $X.XX second some NII basis quality all these million per up from new Thank NII fee of per capital incentive can quarter, up raised investments new from this to yield XX up

unrealized subsidiaries. realized blocker primarily preferred depreciation $X.X Alarm B million per deferred million us, net from million was losses resulting of quarter million of Tile The and $X.X investments and Redi Investment’s For resulting in $X.X $X.X loss investment depreciation weighted our Return $X average the increase on Class or unrealized share, Foundry $X.X $X.X in indicator Holdings. million on tax total second of equity includes units, in million on by depreciation or includes performance remains experienced unrealized $X.XX our loss assets a Elyria gains. depreciation, we investments a the on which on in million share. per for operations million $X.XX unrealized an $X.X Saratoga The unrealized benefit comprised in net Center net offset depreciation unrealized our on net on important million My unrealized investments, of $X.X equity net investment both

quarter for of touching to equity financing a expenses, assets this recognition expenses, generated by million from taxable from million incentive from and blockers management last $X.X industry fees excluding million XX losses. was our decreased X.X%. base BDC expenses, therefore debt $X.X Our in average months, period and last income interest total last return the primarily and reflecting year, $X.X generating operating year the above deferred percentage X.X% Expenses on decreased fees benefit on the management held average total XX.X% Quickly of investments tax X.X%. in as is well a to X.X% up net of same equity

highlighting the in balance and for net our shows presentation have XX slides starting statement run-rate also have at the management We Saratoga income upward KPI the particular past of maintained. how interest from the sheet we since over XX XX Of BDC. appendix again than end margin of the took our has tripled and quarters trends Slide the more the metrics added is that note Slide

period share year and from as Slide the year of as $XXX.X from ago. NAV quarter $XXX.X end XX a to increase as was $XX.XX quarter end, of this million X, as on of and was Moving $XX.XX a end same NAV per of $XX.XX million months year. as from of million up of $XX last quarter $XX at NAV this million of million $XXX.X end, increase NAV

For $X.X million gains earned of investments months declared. realized August were net of net tax ended net $X.X blocker income unrealized gains dividends million investment offset X unrealized million by the partially of subsidiaries, deferred million $X.X depreciation $X.X of XXXX, on on expense XX, and our net million in and $X.X

of made million issued million No company’s of equity offering $X shares was sold through dividend the of net stock and during distributions company’s this the period. were operating $XX.X addition, were In stock ATM plan. costs through DRIP common

shares deferred offset income tax asset to on see per NII basis. XXXX has expense increased per in operating in increased in quarter. continue increase our fees. The $X.XX are the management a other shown DRIP dilution since share in our changes NII in per value increase increase an and Our asset and fees. realized $X.XX offering reflecting on graph this On a steadily the increase $X.XX changes increased consistent the $X.XX and increases and share gains. $X.XX to X, this Slide base history will share quarter income, in from reconciliation decrease of All last $X.XX were $X.XX net $X.XX incentive by the Starting benefit. total in were in $X.XX benefit quarterly due a major of at These we sequential significant to top, issuance, expenses base, increase increase interest you NAV changes per simple interest of share from from equity net and

net powder Slide loss in a of cash unrealized quarter most end, which cash of the NAV half quarter. lower $X.XX the and the quarter slide, to accretive on generated cash us equivalents to to for is and $X.XX the between Subsequent have $XX.XX on of and increase QX from and end we by date issuance this $XX.X equity share the and impact $XX.XX originations. quarter offset NII investments. facility. quarter $X.XX as This for by the Moving our available a new at net invested of outlines million. offering with the available reconciled record undrawn the totaled Madison to dry per this declared QX $X.XX X for spread dividend QX DRIP our was The end,

to strengthen This steps quarter, liquidity. our we took also increase capital and significant and

offering, increasing also more to equity addition debt. long-term rate of secondary the we through In $XX.XX million fixed issued our

all a X of of new our our was stagger existing baby taking debt XX baby X-year maturities fact debt other all X the structure. to our process staggered the bond long-term our into conservative nature, below liquidity of sheet having plus. in our and this maturity issued basis start with our we pleased of versus a balance SAF This position, SAB baby just ensuring ticker matures over in Importantly, across We years bond have account with also our the bond by is the overall issuances allowed that is actually maturities us that points new and especially nature capital remain the years.

our fixed facility interest this For all the most rising Madison rate. fixed in part, rate environment borrowings our also we primarily our cost being except with have

are the of to side our they through X, big rising floating rates. our sheet we although LIBOR which beneficiary Slide of of short-term XX% now of have across them have remain rates. And we means investments on floors, a balance Moving all asset

the and per than other fiscal no for of interest Assuming existing investments interest interest quarter our in $X.X interest as to hypothetical that or to by increase This our XXX quarter full more were incremental actions income. existing quarter approximately million taken our remain all points current basis changes. to alter of increase were a rate end constant is X% earnings a any income our would without terms, rates

and review years, I lien. consistent remain investment well levels would XX how $XXX move continued core yield yields consistent to portfolio and CLO total assets. our to as our the high our and shows the in portfolio. BDC the loans and these the fund remained CLO Slide our average first weighted yield XX, the and repayments like our X in On X million XX assets, our see Now, past range of XX% the past of on and of composition and with X companies can several as through yield Slide you on has of investments with for despite relatively current invested that in replacement assets syndicated Slides XX% excluding composition

overall overall remained Core in relatively quarter, primarily our were XX.X% and syndicated X% in our the consistent decreased equity earning from slightly loans, our asset moved increase hardly AUM. with This last Also, due past LIBOR yield excluding X% assets above repaid yields, this our to XX%. our quarter. to syndicated approximately bucket, CLO rates increasing QX. to non-interest

resulting second Turning for $XX.X $XX.X in a follow-ons made quarter, to the million investments quarter. and had the portfolio and X increase of in new net Slide companies during investments in XX, of million $X.X amortizations, full million fiscal we in

Our with services, spread by as numerous Business distinct and amongst well industry of industries investments markets. spread on terms end geography over also focus highly remain type in healthcare business, large diversified XX is education as a services. and

We investment of X.X% Of oil to exposure part portfolio, continue our which to our total overall remained industry. important and investment of have gas equity interest no the an strategy. consists direct

net the financial combined now consistent quality, our $XX or portfolio and market. my in performance This realized interest the good overview of call ROE. for X That NAV healthy the a million to of For fiscal we had of concludes has and and reflected long-term Michael an will from our review. redemption past the President Chief of our of grow investments. over early equity of years, investment including sale helped credit turn portfolio Officer Grisius, is QX, to I indicator Investment continues gains sale a our be other

Michael Grisius

and I Thank market’s we conditions call you, last in I since have Henri. comment July. a take challenging on our few to conditions minutes portfolio extremely will describe market as strategy. The see performance will competitive them. our investment remained Then

capital provided resulted persists the structure We formation spread this us growing and on documentation compression leading significant. are terms year this year. part increases has deal Thankfully, in deal the LIBOR overabundance have earlier competition and focused of disciplined our due in narrowing borrower-friendly to again, counterbalance some and during the credit observing activity process. very has of This to but be to fund in deal increasingly and been actually year spreads

results For benefit positioned strong during LIBOR QX, relatively remained should further. have rates remain the unchanged rise quarter. while generated our well LIBOR We to been

continue believe target capital one market the most lower-middle the We our to to market, deploy is attractive in.

experience lenders of than to to into companies market to of to of competitive, number more most it sheer to pursuit of has we the are our that last market find is high you remain sip debt that allows that our our continued we see through year far competitive in aggressive middle-market. The there and become end the industry larger dynamics. believe XX, as Slide increased extremely risk-adjusted and less the us shareholders transactions on market While believe multiples their returns be significantly putting deliver work. likely from and money best And regardless can the are

level. our quarter our continue primarily executed portfolio term relatively to return a previous exceptionally profiles August times, is been origination of the while confident leverage deals. X as sustainably a quarter we XXXX, reflecting attractive last this numerous leverage of investing our risk will the exceed X we focus quarter able have the we the now a of well Total are X on modest on business strong investment. maintaining XX, overall above risk this to credits that were achieve above and of the for average being X.XX lower multiples As profile. models that from with Nevertheless, enterprise of leverage results down value with average out deals times, backdrop, where With businesses our dollar

long-term but generate the also last investments an investment follow-ons, our XX XX while growing as illustrates X relationships to the are third new we our despite originations slide strength and that sourcing this including level is that our criteria. new future origination with quarter, consistent of dynamics, ability year’s difficult new ahead With only not of calendar of sources the pace, deals. over portfolio consistent market platform. also have Importantly, could established serve formed companies recently record of applying platform investments through Several

also quarter’s most further We can as have investment pipeline. and continue well we is five size follow-ons, the are confident AUM included already our closed new to growth originations end, thereby nature remain the steadily illustrate both as to over which our the of of our grow one and available fiscal portfolio in to company QX that above pleased and of work. health this long-term, cash quarter We putting since as

decisions all not is seek or in this foremost strategy as and and investing we a predict first remains which taken macroeconomic criteria, do one to purely prudent most Now a on focused critical on steady at decision do rests We credit and time the to discipline, successful quality. cycles. believe time this continuous not approach and basis continue that we believe on judgment that labor said, on sound

Moving significant team’s on relationships have XX, experience and skill to that become our continue led relationships new has to and focus new on mature Slide set, strategic our deals. for development business to sources

can see materially despite on rest past increased deal ownership proprietary these in from chart over slide, importance you originations years our from discipline. sourcing. relationships has competitive sourced of come our As underscoring evaluated sponsors. come of market XX% The deals the the companies couple of our institutional the The and underscores equity number without private of deals also conditions.

the sheets at top of term at same While the the increased the funnel has have rate. significantly, grown not size issued

are due find at order meet more many that in to inconsistent we deals quality, standards. In looking now our fact, to those

to We is past we have maintain the Nevertheless, quality, cost that the to recognize quality. of new validation our companies of it’s in in worth no pipeline credit our today’s is overarching find the something X deals enabled of we the goal Especially strength deals level work the harder close underscoring business platform. to development matter same how with many months, noteworthy, strengthening deals recently high giving at top, us market. X see doing as has of to of our further portfolio business

benefit time. with for flow by foundation have supporting a fundamental over consistently us future businesses outsized New our shareholders deliver returns recognizing deal in the growth companies ability of portfolio for as value their frequently serving added and demonstrating to our

strong. overall quality Our portfolio credit is of

of realizations. on million XX.X% SBIC approximately $XX On our see unlevered invested unleveraged approximately $XXX the Saratoga XX.X% of our million basis, the BDC. can the million investment Slide management made and by IRR combined in team our a is you on XX.X% invested rest realized on As in $XXX on is IRR gross investments on gross XX,

see when was our over million our investments leverage. XX gross combined SBIC investment highlights relatively of The market XX.X% in is conservative, of profile overall with investments low the senior XX.X% of On mix leverage comprised debt SBIC to unrealized especially you at of on investments. times, securities Slide portfolio first lien management. $XXX Saratoga our the that right, since these also XX remains took X.XX unlevered BDC weighted can compared on that of IRR and the chart

the from program capital stretching without cost highly deliver of to shareholders this favorable us out returns allows risk on our spectrum. accretive Our to

assets on last to quarter up of you can XX% Slide $XXX.X end, This million our $XXX.X SBIC increase XX, represents portfolio. to see now Moving overall million as quarter. from our of

million of As cash all license. quarter available quarter capacity end, investment X% This firm capacity, only total our our total SBIC we $X of SBIC current available represents as end. have within of

of file SBA of license. SBA million application formal to license recently a would If up SBA second earlier, to us both mentioned over $XXX growth Overall, leading approval issued debentures us quarter’s Light results guaranteed strength demonstrated sourcing to growing for as $XX.X Chris inviting Green on origination a from continues long-term. letter and again capabilities issue new to As platforms assets our a additional allow approved, of a operating this subject come as to million equity. growing High-quality to of base this high-quality the well follow-ons. new

have focus these and the Credit market. and concludes spoken of to required us my selection the the high-quality increased power within tough This on about to We would operating our has the culminating Chris. CEO, turn results diligent overall due remains top in remain our of quality diligence asset review over producing results, scale committed like this to call our procedures, approach. we back our I market. always but extremely remain underwriting to an

Christian Oberbeck

Thank you, Mike.

on dividend dividend grown one dividend first a impact full increases. giving outstanding our the dividend dividend following Despite quarterly in based on since these the offerings us industry. represents outlined consistent our of by program program XX.X% increase $X.XX, to higher payment our sequential the of increases, the quarter recent cash quarters over-earning coverages still secondary most XXX% Slide by XX launched. we BDC also to This XX of As are shares our the has

of not comparable. X an year. have of one directly we have peers us include policies variable only also top BDCs to past our the have the of XX, near BDCs growth, dividend X.X% dividend dividends list see was which had As the places some therefore you very can the top that grown easily year-over-year This on at Slide and

their either of marketplace. payments. increases, had size had has within quarters while us differentiated have the truly dividend believe have dividend BDCs most dividend of increases or We now continually no We our sequential decrease increasing XX the

the We to also see outperform industry. SAR continue

Moving XX, when Slide generated viewed XX%, longer appreciation a total index total to both of includes dividends, which XX BDC beating return and the over the Slide as return you management see can horizon, took and for all the on X XX, is horizons. of in of we our which time when months, over for returns BDC, both last And of places us X-year our time X-year capital top the has BDCs X%. significantly

ago, Over the years, became investment return outperformance performance and certain our the XX, of our in to the key compared return further return. X management of context industry past the our XXX% specific XX% as metrics. X exceeded alternatively manager you XX% can the BDC index to index’s broader XXX% the the the see return when our years and Slide placed team of exceeded

capacity. note, closer as As the we averages, outperforming Of XX scale, per return most we the NAV yield, the expense NII diverse on to investment industry reach coverage, continue moving is portfolio, to our achieve in and towards industry other dividend have growth, latest metrics. equity, XX year-over-year ratio high categories, months latest marks grown our starting while share, and on interest we’re across months are yield dividend assets including

per share months are equity shareholders to emphasize XX which continue and on the our growing We return value NAV outperformance, receiving. reflects latest our

the markets and are capital asset this earning adjusted fully our attractive low the We characteristics grow call bond that the Saratoga XX%, that risk. highly growing of is community. to profile based Investment and management return on including baby BDC against dividend which to attractive on and maintain this in and long-term and help and Moving levels our an the slide months offerings, solid diluted on NII include we year our the equity more of the one maintaining with long-term with size ownership all discussed on investment including protection quality to a earnings fiscal available BBB current to potential, and will growth strong equity, make XXXX differentiated of recent designed outlined with by of Slide pro at rate competitive high-quality XX% our addition on obtaining per rating, have interest institutions. base, cost risk XX, AUM, industry NII investor drive grade highest a These steady QX earnings, of initiatives a of strong expansion latest substantial yield XX potential liquidity base, over forma share, characteristics

minimal BDCs to credit industries, industry. portfolio the overall achieved oil contains high-quality the exposure premier including Our performance, has Saratoga cyclical Investment among With marketplace. the and in gas this recognition

at Slide We financial quality proud are without goal lot accomplished to and benefiting this in a quarter XX, on our looking our asset from Finally, we've results. scale. credit of base with remain expand course while our long-term sacrificing

I ongoing and questions. Saratoga objectives increase should and capabilities. shareholder return to thank for like continued industry the now to our for in again profitability performance. to that the simple our consistent open to also continue In all and and management team Executing shareholders Corp, total We for call like on our for we’d leadership by would analyze, source, result growth support. capacity and We're close and their manage closing, our excited investments ahead adding our of lies to our Investment

Operator

[Operator you. question Mickey Our Thank of Instructions] line from first comes Schleien Ladenburg. the with

line Your now is open.

Mickey Schleien

Good what nature wasn't morning, Was it quarter book quarter. of fees, increase? your the or was wanted which by to the due those you you and closing start Do other amortize this if fees? previous asking the them, versus do that origination at you about doubled to income, everyone. I origination

Henri Steenkamp

Mickey, we’d if which so obviously there be hi. Sure, was there, Henri, We primarily Yes, and had didn't repayments. book wouldn't any it's reflective have prepayment it of repayments, penalties our obviously increased originations. in we

a So and policy fee between we've had that driven is that portion, it's consistent portion a of like our OID. advisory and structuring is by generally closing always have is effectively split which originations our and

through advisory income the your goes the and which life income, on other sort driven of the of to the primarily closing and the interest amortized go but originations. to deal investment of that generally as piece, when the is variance over gets fee the OID, So immediately the half doesn't goes through line, fee question income close then that the by we

Mickey Schleien

That’s that questions that CLO. on estimated investment noticed What Okay, the declined then portion meaningfully of Henri. quarter-to-quarter. And pretty change? I yield the a helpful. the the few equity caused on

Henri Steenkamp

It's remaining, sort period I the of mainly of of CLO. a reflection, the our Mickey, guess,

and probably getting out to saw a our refinancing of as of interest potentially there actually and And know in effective our does in you sort on of period we the through probably not so shrink XX-Q refinanced. average in effective you are CLO that or upsizing the As to of process that and our saw we you end but there, the is time, have reinvestment our rate that’s our CLO. weighted until going filings resolved a the only closer possibility currently warehouse we moment is closer get rate, interest as refinancing, even

Mickey Schleien

into this we to that liabilities, the that warehouse other so into you are means date, but ends is as it know that month upsize end I so you looking is set the the some next point, you the Henri? the a that I this reinvestment or Actually of presumably if segue understanding at of couple don’t deep saw line, process are questions, indicated and my my period month,

Christian Oberbeck

of mean and and a combination yes, alternatives orderly are that evaluating assets and upsizing. our we Henri I reset upsizing. Yes, in allows through the obviously our this process as this Chris. fashion line us warehouse in we third process that accumulate in be a XX-Q is have this do in been to we think a in sort before. of refinancing towards disclosed we mentioned for would And And Mickey, I of have our so

Mickey Schleien

you CLO? of us so a looking from if the that presumably of give to in terms today, what market exist take we incentive management the CLO, collect are tighter the can And spreads the impact Chris, you fees those do advantage refinancing you and capture in you the can sense the on how of expect through

Christian Oberbeck

and to transaction you going actually exactly like to both Mickey, Well, size, the a closes, of as can imagine we predict where difficult are rate this be, in composition. terms until it’s

color good give not really that’s now. on can so right And something we

we information, in to after all think and it’s point but able at will obviously it all that. refinance I present we time, be have that to this premature do that

Henri Steenkamp

the by management incentive fee Because the obviously, CLO then of be the know term and also by size in driven fee the of Mickey, could be obviously the as refinancing. assets impacted the the would you

or obviously that drive it could could incentive fee. X X be So, X, years and the

to So the result refinancing end it’s get of to first, before the impact. you assess sort the got can you of

Mickey Schleien

to the So, is in something calendar can see we this expect quarter? fourth completed

Christian Oberbeck

this expectation completed quarter. financing either quarter Our the be following would or

Mickey Schleien

approved inject new on your facility to questions are Okay. begin a capitalizing license SBIC to the draw does couple on to equity on And the last if thoughts you allow into and of leverage, second are what it just your credit you license?

Christian Oberbeck

liquidity SBIC as amount have fair along think a of just license presented I we available be for we investment have deployment and more those would lines.

have that feel to And to license. don’t able we have be so comfortable license capitalize yet. that we capital that We

license as we that well. time we fully the at when would I sources additional financing secure consider think

Mickey Schleien

got My be can Okay. to equity? regulatory if remind Light helpful. really debt would leverage you your Green in debt total equity just would letter question probably to is be what the it That us and particularly both since target terms helpful of last you

Christian Oberbeck

will the specific Henri talk I about numbers. let

a our be at level. know date leverage did X the was approval approval to I X to that allowed think And BDC XX. do as to and that disclosed takes as the that to April would you we get effect, we Board will be increase

an been Mickey, with years we subsidiary X operating know, you SBIC As now. have for

we and this into been all performance the demonstrated have to-date. so leverage total factored this had and leverage have we the total have then to ratios that And incremental ability that’s

the leverage don’t couple quarters, radical we a of in anticipate that certainly next don’t been operating general change the in So, ratios we – we've under.

Mickey Schleien

I morning. Chris. appreciate for Okay, this all that, of your Thanks time

Henri Steenkamp

Mickey. Thanks,

Operator

you. Thank

question the Hayes B. Our of Tim next line Riley. with comes from

line is Your now open.

Tim Hayes

on first be you from raises deployed? My between a drag just in share when quarter just those either timing were NII or earnings undeployed guys. rough morning, good when proceeds a recognized question, the per provide proceeds would wondering, to perspective, you yield and from mismatch received or the Hey, of capital the able the the estimate capital

Christian Oberbeck

Yes.

Henri Steenkamp

the think way that go would a an about that into I a Tim, of I lot different of that that. to you obviously would impact say should I the got what start take is Well, all there’s tried into you've sort in though to presentation assumptions shares. dilutive go as of and fully a the that quarter is the ensure obviously add think would do factors of

forma got that basis. a dilute And $X.XX if fully so that's that to QX just of on of sort you to pro how we get you – sort

other million think work outstanding obviously end interest had of had well. can will in investments remarks, six bond from we we considerations QX as I you firstly, at $XX quarter, be on at the as in quarter-end our bond cash we that in baby most the onwards the of weeks. to put if then And new baby think did last is we've two the also of the prepared hand said so

sort you some of look at think think of I the So, sort are you I would as assumptions of can model. those consider your

Tim Hayes

Center the sense. was saw the it preferred improving. Okay, since like outlook year then been like last moved it A your to restructuring investment makes seemed Alarm seemed had Class that And non-accrual, My

And the wondering feel you how happening about so kind just there and what's company? of

Christian Oberbeck

Yes, let that. address me

senior make in are such B A the attached has change is transaction new that investment of as Class the of business. think for there structured economics and the was to the pretty to referenced, into Class an to our being and our controlled exchanged business equity valuation significant owner when year, also Since That B Class the I the has investment way of securities. securities. both it we securities So, we by where – diluted time, investment. that the is a securities it It last you decided recently in B debt A business in a infrastructure that

what the Now see also in balance $XXX,XXX. round that subsequent securities sheet about quarter-end, to you new equity of we invested don’t in that is

if it in while likely while – is – the business probably investment are it that $XXX,XXX of – of of Class turn is in invest add things the we appreciation a trump go in. over devalue hope security more rata planned I'd right B the will $XXX,XXX, that our what had that pro the grow. than so that securities, of as And time will is the that some security, and new thing And portion other that it to that

is go a that recover if we'll the them So of to new investment the things that that deal good that hope to way we security. would like

Tim Hayes

just thanks little Medical. a credit noticed Roscoe that. had I was And was marked then Okay, bit down very helpful. been for That another

is Just change how any in material outlook the there, just there if credit? about feel wondering, you

Christian Oberbeck

that of the some who business continue in business. continued business. has it's to but No, that's sponsor, the supportive one been have we change with outlook very significant no the the to The has work of challenges,

Tim Hayes

quarter all maybe be difference that the has two year or helpful. compared And That's more your no just ago. from or multiples on structure. color you had really any that gotten that it. versus you today got touched or a Okay, closed at and the and helpful? me. in industry just Earlier commitment completed documentation slightly how would lighter to And deals exactly deals wondering leverage it on the one structure maintaining there come just on be to may around you those Is your

Christian Oberbeck

can that majority end we more you would you the would I of see pressure more but give marketplace, traditional where at that to the tell little the terms margin seeing the we terms we the think protections in margin, the sit, types just the we marketplace we use of cushion at for at middle-market. to you the sponsors are ordinarily a that things at due nature friendly, very we kind and nature have we that I is that the vast terms middle-market you same of that the are agreements sit the him are larger much covenant bit light, the of and where but are types the borrower of of do covenants, cov more you of the the see same look that the strong deals term those that the terms all the lower seeing of not end not competitive

Tim Hayes

for taking Thanks helpful. questions that’s today. Alright, my

Operator

you. Thank

Corp. National Our with Testa next question Christopher comes from Securities line of the

open. now is line Your

Christopher Testa

my Hi, questions. good for morning. taking Thanks

quite if use warehouse you put fund the then CLO. could the and you take CLO and so, maybe start it then or then shortly Where to to into would you asking long that Just getting where wanted or am and to X then understand the I you in be reinvestment position basically to some those gather separate period on is the the expire going year on a and kind CLO was time in so can period the time of extend warehouse facility little a I this what call as the ability down X effective either CLO, Mickey set another a not the life before are reinvestment reset as to a loans. bit yields loans after have ends of is to it, period if in going and for month some was them that upside reinvestment

So, am I curious just if that’s a possibility?

Christian Oberbeck

kind the of ends, yes, in period warehouse couple the of while parallel. reinvestment A on points works that,

to the past, the period, in pass us end at points calendar to still And stay we that have so of the re-price re-price if CLO allows plenty well in it warehouse marketplace the QX. it. So, don’t our to re-priced time have different into we we immediately,

sort the to in So marketplace it’s are can not accumulate And whether to might of you it so been about buy ordinary the market exactly while reinvestment really warehouse not full not all. of together business, and exactly period August is happens the we and warehouse course is, talk to it. how has that maybe in the at in point really critical and the warehouse ends coming a so then to are the period short of since itself them proper a afterwards place of – little question liberty before and quarter loans that and opposed rapidly kind scheme a of grand is or us lot the forced in the very in bit you value them buy you buy maybe on of if a and a time the distort pricing as sometimes of a market to go have

is So, designed so at when CLO CLO warehouse the you time. re-price into the that folds warehouse the that the

Christopher Testa

now makes Yes, sense. it. that Got

Henri Steenkamp

definitely And is it’s warehouse just I owned subsidiary of our a wholly add, so that would existing CLO. a

XX. the Chris statements financial to it XX-Q we you see the as as in said, the as had in upsize the consolidated our what so and the combined for assets is existing those how entity in has our the CLO August of CLO. warehouse it’s And So can you with actually purposes, – CLO know, actually assets financials,

Christopher Testa

it. Got

that’s Okay, helpful.

up end guess CLO just I the to repriced going upsizing when time was this it’s using or So was reset? another the be And remind me last and won’t one.

Henri Steenkamp

ago. years X

Christopher Testa

Okay.

be say this by be over LIBOR cost to So, ballpark average would reduced so? the in that pretty your would weighted spread basis be would that savings, material XX or points probably

Henri Steenkamp

us discuss the in it’s lot on exactly premature is to think of going pricing. for There the factors I marketplace. a

anticipate I later think So, it’s as going either price pricing to comment to – particular. us how are in for said this we it’s hard in again, And or this would quarter just the this general about we in quarter. next earlier,

specifics have now. not would will good, we comfortable really something putting then, information that right feel just we out it’s hard, So, firm

Christopher Testa

investment fair. color. income growth relatively you in XX%? And did deal good of grew later about a by appreciate the quarter, and now that’s had the in portfolio so the the a close the in investment increase I have quarter guys Okay, X% you

Henri Steenkamp

you definitely look the have actual in the – I it to think – of I even the happen Chris, pretty deal schedule actually actually think was of again, it's after is I the it think, investment investments you offering. I But specifically, can quarter some the was. see equity although it it after did and during date.

Christopher Testa

it. Got

increased prepayment quarter, was but light other pretty the your activity was Okay, significantly. sense. now income that And in makes

what Just drove on wondering, some provide color that? if you could

Henri Steenkamp

Yes.

quarter new then The the on pretty was origination, other really it as origination I X% it we origination. generally all was, and the recognized upfront was big not driven all, that income at fee earlier by mentioned prepayment-related

Christopher Testa

Got it, okay.

to we're and fiscal pretty when So expect these past the higher? although three you the guys – we recognizing you that should of that sort the of step-ups quarters conservative that upfront, had volume robust bps driven dividend had of context XXX you remain in much have obviously guys

Christian Oberbeck

get generally take that. and dividends we've when do we our we and imagine quarter-end, Chris, anticipate, account to we've everything take we close into and to got as to when you would declare

give were – to cautioned we've just statements dividend. And on so not our been we forward-looking it's

Christopher Testa

congrats for Got begin that it, one you last guys investment to been mean, and making okay. Easy me, I Ice for on has an And performer excellent with.

so well view point I'm even in day get curious, pie in the this growth just of portfolio if monetize the you this general the long-term the make a and having just Just you're this equity one where this doing it's is portfolio looking to performance how do you this, concentration as guys – piece you a position and reasons looking for the terms backing something just and out in looking a still those optics smaller of go at the in risk this. is hold large you to of or that forward? mean, something will I this

Christian Oberbeck

coming think of the that's that driven I concentration investment metrics of a good mentioned you challenges out about are by think question. performance very positive and itself. I Well, the optics And some

Christopher Testa

Right.

Christian Oberbeck

and across it's concentration no that to diversified think the kind I Easy of part customer geography its Ice Easy – highly do offer, through a a that look across is persistent of is distributed fundamentals, at important we what's has really and they distributed We fundamental – base. Ice very we and entities. service very at and highly highly think way and There is, a all

And anywhere. don't in itself that and concentrated it's highly of so think we

think is with diversified in of works with well portfolio – we and diversification works and BDC so it's that terms And well of investment very mindset income. sources a an credit

you or continuously that plans the for if And kind any but of have we We additional growth. appreciate, opportunities will, exit alternatives do arise. kind of we our so expect investments said, any you to our regard evaluate way as with as don't one with other activity,

Christopher Testa

it. Got

Henri Steenkamp

investment a that it I’d important to is amount it gets just thing that because – me add to obviously add an The fair too, of let for and attention. us

an that investment is quite reminder, as Just for in a been time. some this we've

history this we a like do. and started debt size came we the that and mentioned – characteristic an that diligence the well, investment it was having a awful and which of made the diversity to bit. level when small When at with quite And not you an business we Chris get very management small a it do of without we so with the lot we the is we team have to investment, quite comfort the would look as did business know comfortable the that return

returns. assets you securities In return on structured throughout they have why we investment at deployed addition have. the we've really that just the to assets, that, fantastic way if the they're the the look That's country,

support our to increase they reinvesting way into they marketplace confident that, the as We growth don’t equity that change are they feel capital anxious in yield to that the as in have much in any value because business, happy We time. the management see and our historically we continue over to that. see view can perform that dynamics will nice on in

on it and bullish its We runway grow. see continue there lot and to for that this of to very a to be grow think equity is value business

that’s that, go but have it. on got our we to deliver perspective on Now,

business. confidence of investment wouldn’t the and that As of to history nature we we it size, the do have but to that, relates have done an want though, for I do concentration and emphasize in this to

Christopher Testa

morning. Got always your as and time it, color that’s great appreciate this

Operator

Thank you.

Mitch comes Financial Advisors. Weiman with next Sumner from the Our question of line

is line Your open. now

Mitch Weiman

of Hi, wondering do any in scenario, I jump affecting to analysis guess you need just as how of interest are rates doing was start question. kind quality? a to one I really credit I if had big you

Christian Oberbeck

or economic more question a general a our portfolio that in Is question?

Mitch Weiman

more portfolio. Yes, your on

Christian Oberbeck

well let’s affects part the talk about the Okay, into first how as parts, it taking that two BDC.

right of all are we our and fixed debt our…. capitalized is mentioned all rate Henri earlier now, As as

Mitch Weiman

talking your am loan portfolio? I about No,

Christian Oberbeck

Sure.

Then companies I is protected see in think the are I particular, is interest obviously of but the so in in activity big the this strong ask the broadly it are increase we think of and economic a lot jump, are across how at that increase question as in rates, When quality performance portfolio you an we there. see a level. So I highest portfolio you our mean, seeing a and economy, credit our important we result companies. our

the our earlier, mentioned highest had level. Mike not ratios are leverage overall as think I at

of rise, increased the and So, they there is sides on growth. also interest cost earnings these an but activity increase benefiting companies in rates revenue economic the from as are

interest even we be have it, we economy, come crisis to our growth come rates So see I from that there in think that to mention and we that was effect do X% the economic or growth of would X% mean, not. probably does really that from which question quality super the a a does interest rates general the we the If rise does improving if from, are spike, a come portfolio, think don’t would is credit of what reaction where an benefits course. so in

Mitch Weiman

the portfolio, credit the X% hit that it a would really some quality Black be of to out Swan not you think, So, a move spike or it’s it take real there? X% have

Christian Oberbeck

again, recessions, in investing all because will. portfolio economic to we focus Yes, way don’t that right. trying that sensitivity it, sort are in for the And companies if our and growing much companies, you niche oriented to of of looked – look we at at our see we have necessarily secularly weather businesses looking even not perform is even cyclical broader we really and kind can are

the specific that’s advantages our the small they the that – of of dependent develop kind own take think at end being not they broader trends, of so we able are lot And of to are companies their of. end, one the economic small and are they have of a at the advantage being on opportunities market middle-market as of

Michael Grisius

the is underwrite economy. always underwriting are in that, we if it said when a is we credit, are don’t the sensitize immune downturn cycles, but macroeconomic business looking Having thing no cycles, to a it I’d we credit, as we to that at emphasize economic when predict each we

the economy, are structure if there consider investment, structure is downturn the next and we and are business we if looking how to over like leverage we an and business we in time, just rising and environment interest are among that month is we what and capital sensitive the the making look a things look model looking does the underwriting what the as get we is when at also environment. at this rate business at rate the capital comfortable a So,

when correlates our though out over businesses is that strong and points the Chris rising are going performing As perform economy well when it’s experience our are very generally typically well that well. been economy time, with to rates

Mitch Weiman

thank Okay, you.

Operator

This turn you. question-and-answer concludes would to to call our remarks. session. closing for his like Oberbeck Thank over Christian I now back the

Christian Oberbeck

Well, forward everyone I speaking us today for look would and like to with to thank joining you next quarter. we

Operator

gentlemen, thank conclude does today’s you participating in Ladies today’s This program. and for conference.

great have You may a all day. Everyone disconnect.