SAR Saratoga Investment

Christian Oberbeck Chairman, Chief Executive Officer
Michael Grisius President, Chief Investment Officer
Henri Steenkamp Chief Financial & Compliance Officer
Tim Hayes B. Riley FBR
Casey Alexander Compass Point
Bryce Rowe National Securities
Mickey Schleien Ladenburg
Call transcript
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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Saratoga Investment Corp's, Fiscal First Quarter 2021 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 Mr. to time, Chief call Officer, I this turn Financial would Compliance Corp's At Investment like the Saratoga over and to Henri Steenkamp. Sir, ahead. please go

Henri Steenkamp

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

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Christian Oberbeck

structure forward this our calamitous unprecedented the companies We with and health of economic past we Despite full businesses across improved call. time been weather solid most Saratoga. and the of portfolio This to Thank look months are everyone. our in our capitalization Saratoga for our recently point liquidity today's presenting impact results and and the world, quarter, a positioned on recent at revealing challenging and environment. companies well to this you and and impact believe portfolio Henri welcome the COVID-XX has COVID-XX three our of

the on of We ensuring fortune past our working focus employees month, employees in times. our challenges face difficult staff pandemic. who and a times. our thank navigate to the to management the worked that the activities. continue management us employees of companies, want We our historically solid with our collaboratively us these our strong liquidity to of our The and is shareholders strength spillover all as constituents and conservative of believe business have that well investing, tirelessly uncertain put the to COVID-XX sheet by We the presented stood safety the significant portfolio these have challenging serve as especially approach utilization, through the ongoing some position optimizing good professional in so all of with maintenance levels while and to leverage by company and balance

briefly recap anticipate can experience this long and we business our in economy environment. how that the management global enable efficiently no with and uncertain clarity capital challenging will two. To last, effectively quarter future the have slide and liquidity, organization While displacement structure, to current and navigate the us on will past market confidence

to and highest strengthen exceeds months COVID-XX. believe to the equity generating in three First, loan almost of month return a QX, our of to changes relatively COVID-XX overall were unrealized on portfolio. financial two that ago, a This a of reported credit the the the year on multiples our basis These past million. the net is trailing over of XX% EBITDA for impact reported with BDCs realizations markdown investment impact our unlevered total industry the of average we negative on the this gross impacts quarter and to portfolio retaining of level of post significantly all BDC a high IRR continue by of of maintaining the industry investments COVID-XX a a XX.X% quality, led on registering X.X% our X.X% average incorporating spreads, exceeds results rating months company XX foundation market portfolio. our of and/or $XXX performance to after XX.X%, results, revised related performance of ROE highest we Representing credit

last Second, $XXX assets quarter, the $XXX markets, increase a uncertainty quarter to repayment. we the at and million under of our of decrease $XX turmoil million year. $X a XX% of offset by as declined slightly last new this investments management $XXX unprecedented same million from an from as the X.X% with or million time originated healthy in Despite million

new originations Importantly, two our new included portfolio investments. company

performance structure, for in enabled recently differentiator liquidity business, today's an portfolio to Our improved open important market. us have capital and remain

numerous both Third, the COVID-XX that as NAV and ourselves. to look the to strength, ahead pandemic the our companies are paramount, for balance we particularly small and liquidity economy businesses, challenges preservation presents portfolio sheet and

long $XXX of current million non-SPIC covenant end million supporting mark-to-market quarter Our $XX of structure debt. equity, with capital was term free strong at

which lending approximately new $XXX support to million of the cash of in X available million our of all-in-cost quarter used undrawn the uncommitted, week, raising exercise increases $XX requirement, began. and this end and including with liquidity be This pandemic liquidity as a $XX.X X.X%. bond, year-end new we of opportunities million exceeds of the existing XXX% facilities debt public since quarter-end We the of greenshoe had to June the SBIC leverage portfolio an increased $X to addition issuing can commitments Our further XXX% substantially and funding our million our by available and BDC substantially first in BDC regulatory public of our companies, commitments. finance discretionary capital baby and our

relative visibility at the portfolio, to of share quarter to been recent at and substantial $X.XX earnings since our to the management per of the lack the level, on XXXX. our reflect share one the $X.XX has of following recently long profile, strong beginning our May, raise short relatively by resiliency has decided for given amounts the provided improve efforts Finally, and the of and this and liquidity the XX, effective PPP current of unprecedented general Fed including earnings quarterly economy hand fiscal Board ended a per of dividend dividend, dividend by and the stimulus. our the last bond levels, the results interventions other hand call to liquidity declare term Directors fundamental team a company loans, and most and improved baby May This liquidity recent calibrated portfolio on highly

fundamental amount dividends the reassess to gain performance. a basis continue least visibility and will as better our on at economy quarterly of on business the we We

obligations, spillover obligations and we conservatively no a have income of such consequent on our discussed historically spillover substantial further have position. Payment ordinary we May dividend As call, preserves that liquidity flexibility therefore this our and direct spillover managed compliance liquidity.

performance continued $X.X year, within and environment, considering the current is but indicators NII adjusted our $X.X key million last ended XX% quarter. saw economic quarter versus compared and down the as quarters performance this to million May XX, up This quarter, solid XX% our XXXX, versus million XX, February last XXXX $X.X

is $XX.XX, equity later. the $XX.XX more X% adjusted BDC is the latest last highest per Henri NII down up quarter, from X% from share last quarter. this will exceeding last NAV year our detail down significantly performance. in and X.X%, $X.XX currently industry from return per share months and from $XX.XX industry Our $X.XX The and provide last on is $X.XX quarter, XX $X.XX year $X.XX down

remain term past, further asset of in the size committed quality to in base. we and the As our advance overall long

credits of As three, BDC our over took you and can slide risen quality the have on see steadily the under management remains assets our since we high.

as value While XX% which we X.X% this increase increase and slight compared review change a reflecting would and for well on fair basis unrealized our the of $XXX million, like year X% had to With now fair from last Henri quarter, increased to as quarter quarter. the last financial I to a call in as a the and based composition our decrease portfolio. to our value back last is performance from cost turn over that, the results, to

Henri Steenkamp

from XXX un-deployed last NII XXXX yield our of outstanding Slide fee XX.X% share down was basis $X.XX four to per to down million from with up from X.X% NII yield accrual impacts reduced compared per to months period last and the growing one-off from from down down gains $X.X quarter, XXXX. decrease $X.XX currently XXXX non-recurring the our last primary year. primarily The NII NII $X.X cost to reflects three of for for share is fee of Thank XX.X% from year XX, from highlights at X.X%. ended capital of metrics and in of over last points to million related million the from XX, Ice. the due shares LIBOR AUM was year was last Adjusted last adjusting interest quarter $X.XX, XX.X% from net February million Adjusted the XX.X last XX.X% $X.XX second from adjusted QX. decreased by from shares the year. income quarter's in due shares $X.XX and past shares high XX, this primarily impact and $X.X key year the last primarily common of adjusted May a you, per NII and level share The This number up high year the increase adjusted effect investments, performance the reflecting last in X.X When last last Easy is as million results incentive average outstanding quarter increased last XXX quarter. ended Weighted year's year The share respectively. points Chris. NAV, quarter basis sale and calculation, May XX% QX higher per from incentive for this the in capital. was NII

summary, benefit net net investments value of that million company a the on related $XX.X a assets revised March million multiples each. $X reductions The blocker reduction $X.XX largest share. net weighted following on tax the million were the resulted single this in Group night. of Knowland fair or million this The $X.X more The resulting There were was of in in investments reductions first $XX.X depreciation CX us, from filed COVID-XX in reductions on depreciation fair million. remains portfolio, million of also $X.X performance was our portfolio to depreciation the value which million decrease on $X our most excess loss our impact we But three $XX.X million, gains. of $X.X the $XX resulting reflects million primarily and in five investment spreads, realized by average and also Educational are and $X loss of total and/or million last FormXX-Q value total with subsidiaries. of unrealized year. million a to EBITDA no depreciation X.X% in of offset quarter that also market unrealized with the operations with investments includes $X.X unrealized in deferred or share, for MD&A with summarized changes and since per per in QX unrealized Return was Services unrealized investment indicator events $X.XX with equity there CLO For investments million comprised on equity in net important and significant experienced performance both $XX.X an between net

XXXX Our industry expenses X.X% this return million expenses, increased XX.X%. above average of total and top for to the XX, which Total the from fees the but fees for assets. management $X.X ended management and base places equity at industry us financing XX for and May last million interest $X.X for the remained incentive negative this unchanged of was months, X.X% average quarter, period the at of quarter excluding on debt well

trends our slide in the added management upward increase and metrics since the starting has maintained. KPI the net XX interest rate past of run in how Saratoga note again have is the slides that margin Of our the has also took through QX. end statement over presentation, BDC we almost appendix the shows XX highlighting quadrupled quarters particular from to balance XX, continued slides sheet have income and of We at and the for XX

$XX.XX as million was as year at $XX.X million of $XXX.X as end, end NAV XX from from months on per of $XXX.X from year-end slide million down quarter the of million $XX.XX million increase of end, of same up from last quarter $XX.XX NAV a a NAV of X.X% five, $XX.X this ago. Moving $XXX.X share to as quarter and year. was NAV of and decrease as

XXXX, unrealized in of of $X.X net $XX investment XX, million For the deferred three ended months May offset benefit of income net million depreciation. tax Saratoga subsidiaries net on million were unrealized $X.X blocker earned, and by gains

and as XXXX in up and by Our this the increased steadily accretive NAV per past year XX% is asset demonstrated value in has since net share. increase has the alone growth just been

consistent unrealized $X.XX decrease deferred share non-CLO from benefit per to decreased you of major and on will sale in at to share the decrease by gains. quarter history offset continue sequential On simple was per $X.XX $X.XX Starting was Most changes of per NII realized reconciliation of our per This QX. from Ice share expense share see increase last and due year. net tax quarterly last the six to the from non-recurring income the Easy other basis. We NAV the NII in in interest slide $X.XX a and a income. top, a in

The investments. generated was by quarter. the the XX, depreciation of Moving decrease slide, XXXX debentures, available on of this cash, NII lower publicly us totaled the facility million. quarter this undrawn seven between NAV the $X.XX Madison on share was per available the outlines powder the our $XXX.X $X.XX unrealized by notes. spread offset May dry reconciled as for undrawn and which to This Slide $X.XX to our half SBA traded

of all liquidity liquidity without And to the a is trading X.XX% public overall nature taking term since especially increased our bond of long our NII first additional to into balance conservative accretive year two by bond began. nature, under by million remain allows COVID-XX in in quarter need for external fact the thus grow it and fully level position, raising end years plus. We baby the pleased quarter three with year our available to assets BDC that This since we with ticker million non-core financing, raise BDC our and becoming SAK, cash deployed. when XX% being end, baby $XX.X our sheet, maturity, actually available a five liquidity account data the us all an $XX of the

move weighted average XX the investment yields to our like that would to yield on composition through slides eight shows and I eight of Slide Now and composition and review portfolio. current our one have changed cost companies million $XXX now value at slightly in We or portfolio fair as and compared CLO XX invested past. $XXX AUM to fund. million have the at of

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further so income. relatively currently see our fair we current. and is core increased average is to This to interest the expect lowest to our impact decreasing, CLO quarter slightly yields decreases asset X.X% LIBOR XXX X.X% our during on but floor, with overall QX. CLO below basis yield well points to performing based really basis on remained in from value decreased XXX value points as to do X.X% weighted decreased fair The cost the and yield LIBOR not unchanged

up and in a $X.X XX, plus million new to quarter portfolio one and had in first investments million XX two increase quarter. follow-ons, the for investments in Turning net we the exit fiscal made companies $XX.X of resulting amortizations, during in slide $XX.X million

remain focus Business our that provide represents remain investments over in to large other nine as geography highly diversified and across distinct Our wide investments services. largest a well of and with services type, variety by in industries. healthcare industries education and business, services businesses spread industry on companies a classification terms as specific of

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or when of on to is were the accretive our management credit reflected About see carry long-term fiscal eight combined ROE. healthy million slide the net over QX, loss As took redemption our carried had from realized the highlights the helped our over grow equity you NAV portfolio quality, for we investments. sale unused in a two-thirds years, forwards NAV that were from these gains interest has past consistent Saratoga early fully of to can of due This $XX.X other XX, and of of performance gains sale BDC. of including capital

In review. turn now over fact, I our including That and financial overview ROE Investment above year portfolio Grisius, our not call six the of for average one Michael to QX year X%. XX% the my is investment now concludes Officer market. and an with Chief will President below

Michael Grisius

describe a portfolio the and comment of see light couple the take minutes state on of as of in market I'll then strategy Henri. current performance we current COVID-XX. to investment it, you, our the impact Thank of continued and

originations of While months of XXXX of market of years, the market were considerably. that a pandemic to had we waited new over the environment while M&A couple the When halt. altered the very to first similar the platform come the couple last impact persisted our has had of Most dynamics has suspended, understand market been in the impact nearly and last pandemic. sellers better to spoke, buyers processes

is and more often new with being in new beginning market deals marginally are generally initiatives getting on The lower thresholds processes that naturally the M&A at done portfolio new current or are in is hold, inquiries. seeking The some are most liquidity. either While we platforms now companies growth higher to still loan and spreads. less deployed see that capital that leverage are existing pursuing frequently this are with market

underwriting In the uncertainty. much addition, reflecting higher than bar economic usual is the current

time and those of deploying achieved believe portfolio capital that strength adjusted durability excellent invest an the seeking such that risk companies said, in can support this in environment. midst businesses think compelling actively demonstrated highly are We of by select difficult Now returns that have be we in and it’s to all opportunities. we new

out We for onset investments market the including of new institutions lenders the market lenders, This pandemic, of from seem is deployment. week. for to the have shifted deployment some to invested But although more since the be but this for just be to platform appear practically generally competition business, capital dynamics open still in there favorably altogether. new a competitive three one capital has standpoint,

continue We portfolio be our companies. very actively with to engaged

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reflect strong we our situations. our first lean in enterprise help well portfolio. reflects expect of in primarily the of performance environment, is durability our the COVID-XX impact supported in have QX values that performance to navigate historically following debt reduction XXXX. through economic this value overall portfolio believe to in and we related valuations certain the the EBITDA attributes that XX% this remain of changes events a of industries strong stressed us total resulted and the by of portfolio revised X.X% multiples confident as March and/or generally Our company portfolio, in We thus since in market performed portfolio we that spreads, far will

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endeavor the Our approach portfolio on to and on always slide $XX.X the has peer in you its and our to at resulted Saratoga. quality model. our of thoroughly assess working understand and XXXX. of the business with space, strength We BDC remains and ownership to been into at its XX, objective the the characteristics. net as over a can deeply underwriting, best for of management taking in approach capital strengths and of sought directly the culture underwriting invested returns top have in as We risk see underlying strong our order to this has long focus investment of approach possible accurately since term performance with businesses gains shareholders paramount as company We A each the always the management durable over producing portfolio accretive realized long adjusted with million term. the being of business

and positioned us opportunities at underwriting of performance also quality quarter of believe our portfolio rating has highest economic Our believe our XX% as underwriting well COVID-XX strong current the exist We credit approach, the and of successful our our of results these the overall for downturn. internal rating that approach our credit end. team We impact and quality this and contributed to our markets. reflecting shows typically reflect returns in of current portfolio portfolio has strength

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see overall portfolio our quality slide remains credit you As XX, on solid. can

On the total X.X% unrealized IRR of impact this COVID-XX on management, is investments on million Saratoga weighted quarter. took see SBIC our BDC since over right of and you reflecting the combined value the can reductions $XXX chart fair gross unlevered

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Christian Oberbeck

Mike. you, Thank

share Investment’s following hand profile out play XX, our a for recent basis. and long interventions level strong term portfolio, relatively declare $X.XX the has of on dividend will on hand in liquidity ultimately lack loans, domestically visibility and improved reassess business the the the share recent how per quarterly dividend Saratoga reflect bond at performance decided outlined recently a stimulus PPP Board at of ended fiscal the the from raise relative prior least to Board slide This continue will the infusions, $X.XX on dividend to quarter results, and operations. May to and of Directors per baby quarterly has this and Fed XXXX. massive on the XX, economy calibrated its in short this current liquidity The context other As of been of the Directors the to one

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Instructions]. [Operator you. Thank

from Riley question Hayes B. comes with FBR. first Our Tim

line now Your is open.

Tim Hayes

of good doing first fundamental Hey, My morning have Hope much just you're all how you credit versus of here, well? widening was due depreciation spread to performance? an estimate do the guys. unrealized question

Henri Steenkamp

performance morning, in is our the either to of two-thirds Good widening or now this a About performance third were reduction portfolio attributed and about a in – tell can rough this point. spread you I about write-downs to estimate. would attributed be expected Tim. reduction at in that

Tim Hayes

the know the are that's know at performance you versus just versus now. you of there Okay, the are that it, or it's companies right any exposed bucket if here, non-sponsored on third you got fundamental to CLO know going level or threads types performance, BDC common it's that, of sponsored companies you that's what’s to know related the kind helpful. of of whether And industries more

Michael Grisius

the I such latter. unprecedented would say it's It's times.

run being Let's As our experience those I a when companies saying, ‘oh! that human world the most evaluating we're scenario certainly shuts would a you where in sure amount that of interaction. appreciate, we fair the affected businesses say weren't are down.’ that But are require can

this you CX’s credit fundamental we you nothing that's require about, tutoring person. specific sync a hasn't they do strong attendance for in really its Knowland’s value have the can caused high portfolio experience has lodging referenced and are to right proposition being that feel the to know view of Knowland. cases, portfolio. that as of – attending change case on we the case with excellent company really sector, school are certainly Those more that's think those instance and impacted that a characteristics that's and across people provides in tutoring kids good and But I us services tell, businesses they school really So visibility fundamentals, our now. customer changed base and In in in our CX in

You to that, overtime. what and will those fundamentally COVID we know see working feel are but how, be impact businesses and you're to that the very still wait both they'll of strong be through going

Tim Hayes

if of That's that roughly if CX, on these Were or you helpful, were XX% where Michael. metrics those, downgraded had can that internal that given human it's XX% they these you companies? your near these for headwinds downgraded businesses or touch maybe companies that term of not other again on or and some I you it's appreciate term internally interaction credits, bucket was function what or Knowland bucket a outlooks just reflecting needed the if of know longer for that more

Michael Grisius

if question? really the your fundamental experiencing that in quarter current the The businesses change reflecting that for this necessarily just bit downgrades address environment. the outlook I last that – does don't any not from know in changed are reflecting environment, long difficulty particular reflecting business, that the term a more are

Tim Hayes

but point are there kind list you rather any term that on the alluded outlook these been My term Yes. for to of disruptions Roscoe Alarm, I the others is of and No, and the you for non-accrual have and ones business that earlier, near a know now to? watch kind longer Mac the can helpful know Taco culprits your that that are while, you more given

Michael Grisius

business beyond would necessarily, right uncertainty. specific you as no put the There's the there's we couple I into but you that world that we would so much we that now, that think caution category mentioned about know

done a markets would having said But recurring in revenue certain a really we've be one. you job has education portfolio that, good strong characteristics. that the end think look assembling economy, super I at

the see education should well, market's We with hold market the to We that. just going uncertainty you come that around but are really know to fall. all are that looking models deal COVID how there's serving up think our business end

that to of kind and pointing all actively. we're not specific one, managing watching but are any very We

Tim Hayes

okay. I the prepared And this it, know I and know and reestablished, to coverage just level little see adjusted can dividend this there. got Chris, better but it, dividend. then, appreciate comments board you around kind you a you us for – based the context appreciate the I NII the here, of on but give on it one $X.XX a point. decision be Good know and very Got this more quarter, might strong at you a know, remarks it's obviously

you be know where of it is scenarios almost sustained and number or degradation you economic you can that dropping certain in the where maybe grow in a kind at think kind in of even borrowing this know, arbitrary see the of You an can material it you credit kind outlook. is $X.XX just of scenarios reflects most level power earnings a

Christian Oberbeck

that's Okay, well question. good think a I very look,

can you of of portfolio. just about exactly as within set our two of occurred where sort to deliberating the team know that's amount you with and both and grasp ago, know conversation. a of coming As our the environment think Really change you board months we our imagine, time from lot if as it back spend in a the you it,

to on, budgets I our thing performance think and mystery and I have current that with more portfolio out Stimulus months of there thing ago, companies and was so as has unemployment all of what have actually of the and been payments tremendous and and as decline. weathering been two Mike is while helpful a everything. clarity a you enormously companies to very through there the touched team on, now and has a know bridging and loans the close touched calamitous Mike amount how and been are again substantial all as could type type PPP all think also very that of There this we Fed really just going lot performing

you So now of the government by bridge we're about way our a riding help brought right that to wave know liquidity kind this. was through

in pretty adjusting businesses environment, this things as so you know And look are good.

we're about trying concerned unemployment. forward the concern I be the know to think what going is we excess have, you

balance XX. have run has it to has July amount sheet they to time. going extended, PPP things The – of out loan been know is finite do how I been their compensation doing. don’t unlimited capital it this point allocated The at but know is You has Fed in to a the

the system companies, our next? got clear ability that. there U.S., faith America know the not initiatives economy capital, And slack? have to about to out when in So our you of in U.S. the and come with the we know great and great initial liquidity things play are management back it's you teams, these we does and or economy what's faith out so of great and teams real – and know up the It consumed, adjust may, you our pick is the one

kind will pay know at forward. what do XXX% of of so didn't know this and know to quarter, the environment occur actual not declines want earnings there because we up dividend set However, just economic out maybe we our you past you coming right

We bond more we balance also on have a baby issue, just issued cash sheet. so our

companies. more cash and the So liquidity more we and so as we strength substantially have important, is and substantially important, cash said critically liquid at balance as holding sheet it’s earlier about very

to do flexibility what We that as to of cash. have with lots

is cash expensive. However, that

We deployed. that is creates pay so our of level and portion earnings until you have interest to capital drag that the the unused on on a know on –

good pace, having redemptions some continue as Hopefully up in way productive could again you that origination get deals think you we're to, activity. or a capital I you this know but will Mike could significant measured know something. a alluded or at dry we the and know – absorb and

studies on our drag wanted of our so for pay then that you get. know our allow you be CLO’s, what and have with carrying animal has we CLO performed type in for complex earnings. all kind that you kinds tests didn’t way it for a and resilient So And is we of and we – outs know a could of quite to very load CLO we who anyone

kind the is two for we we have two able had know know a meaningful we consideration. have management But equity inside felt last the kind up you so way well and retreat, that carry like, and you dividend. to of sustain a, the of know post-COVID, the that or that somehow completely, should of something to broadly felt low account things who where of are range you last kind or could that also you solidly investments a status events, distributions the CLO as range outcomes, fee into to if know of there a was we a middle take the you syndicated the be our knew you or in distribution we know would a blocked adverse we then so position and sort partially know know into if wanted number the to and we all quarters, in decline, of we XX from was our XX that that to it full know payments, XX’s, full you inside things quo and go be and and decline some You get our this market which gotten caused

that's So of lot a the thinking.

little I just know more you end there’s science at day a exact with number, the think you because in you substantial dealing art know we're still know uncertainty. such the than of bit the

We improved our future. How certain portfolio? you we as Henry and we well, that as of our things: in liquidity a good uncertainty are right the One know economy? you are on dramatically. we our still are things. liquidity we of we how And now. is, of know certain position? the How So lot – since two a hard his, position last very position about what's liquidity three about sort think worked about certain mentioned in had I have about We our feel has call,

how together that of arrived we all putting is So at $X.XX.

Tim Hayes

Got into well precision. it. helpful, that the very on appreciate uncertainty color as the factoring and it's can Chris, that appreciate certainly I

comments So guys, thanks again it. the for appreciate

Michael Grisius

Tim. Thanks

Christian Oberbeck

Thank you.


Thank you.

Our Point. comes Casey next from Alexander Compass with question

Your open. now line is

Casey Alexander

really My for the gave the good us, know Mike. environment. was first like sort put that that of was this those to you the money industries that out to confidence in, that investors to made out? that this that new those can the – for money tell quarters you and discuss think if uncertain particular and you the would question that your of conditions know I they kind what company thinking about were can you new multiples could Hi, Mike, drove investments What is such morning. investments put investments you in under confidently

Michael Grisius

to deals very we performing are the you for in and happening. and same continuing morning, this themselves well new not knows changed their assembled is Good in this uncertainty facing know perform this in that portfolio. those everyone is underwriting portfolio and Casey; a are stream that a revenue of many is we’ve ones for be case are in to is as lot new many businesses historically question. a proven we've What's applied result that growth applied strong. have The just were that and deals The that as continued outlook did in very companies still happening we environment, this companies the that environment good their

In that three exceedingly risk that are returns benefiting we from service I platform capital cases so think we shareholders addition, our the expertise adjusted their from and benefit through software cases I In are our area. think delivering strong are in really businesses think all a here and their all and outsized. will in structure our shareholders is three that the

were aren't portfolio a large is businesses interaction. earlier businesses we've as and SaaS now even affected One productivity the business efficiency the prior but of of tools businesses of being greater software of to them in our the human models that some fact other that and environment boost as evaluating seen, not in are way. require introduce additional know because or by you value greatly in an this environment their And that things companies referred I are more seeing time tools of as XXX% lot ways that getting of in our to an throughout to most that related a

getting cases, consequence of a in returns. continued position you in elements without terrific about So are offers common the that a think structures as into well details we that – balance and each performance, adjusted as know risk three we're strong strong one, sheet and lots capital in all a really for outlook

Casey Alexander

economic would your me visibility as it to Chris kind be where this would as confidence may period secondly, times, striking seem opposed sticking relationships. a sideways. you of time Where a start if that to you see would in up discussed, the relationships how little of react you what Okay highly in such explain they go-to there's as new relationships time uncertain with with to new be to Can these some go develop new like gives things it, uncertainty relationships this? to

Michael Grisius

the times, know to you you a well they of visit long as show gestation The and a in of go deals Great recognize efforts on that tends detailed period. well, start they’ve that and firms reputation, diligence how that exhaustive, business relationships that way. to time would very then terrific those development exceedingly to in most have fairly relationships if that office It can deals giving developed get question. is know so a deals; you quite it not is be lender lengthy. the performed the up thing and has to seen you the in they want done, you is our and hopefully their are we've a that could tough that we great very company Most work do period of we as they've that space we reacted

whatever want relationship. to want one, be get that also those do. strong We're want careful they we strong look if relationship with way where the way. turn a diligence really there to and and of we We a would you that we're at been look a all relationship us it we see goes we to discipline. So continue we relationships we a a that to you healthy in is to there support to new referenced develop and what with financing enough we we just can very the know provider business to compete have not business But those our no good do, have very time best the to We develop them where equity relationships private with about I've due to firms the is important lot down done time because exhaustive that do sponsors and the certainly back and people an point, the relationships that getting this and know follow have that you world add on of referring relationships. are ones same comfortable spending quite the that have not last the that I go-to we're the relationships with know we at if deals the say fundamentals opportunity, look or actively. and know and is don't

expectation So important that come group is give is and because I that deals you the you sponsor know ownership a an or underwriting us going not we're it in with certainly that, to bail you understand out. for to

to foremost, Is the relative almost are capital? safe. value where necessarily space like sponsor could but capital, group's it the we where that can and the fundamentals and diligence Not of we we because circumstances that recoup it's we the we we reasonable us, fundamental sheet. all going asking looking our understand, that under is are feel can that there in our of and thoroughly ownership recover or balance ourselves, necessary, to business safe rescue the because in – if dollar always the at last First there's

relationship the addition, that factor their one reputation, etc. is it's that what's is things in, in Now of and certainly we who

us does come very and trying of been develop from we’ve But helpful. doesn't portfolio been over it relationships companies strengthen actively into time. and in we to So the environment, that that supportive the that to that's prevent have seeking relationships this the certainly play have,

but this we – a there but great we’ve tell by down you in and think have with a yourself strong as higher with for that as people are evidencing environment distinguish get fact, even the opportunities opportunity the businesses fundamental we those have them as with this on so comfortable this, businesses to businesses, in and of there that characteristics. we of I the those this environment I you cases looked to prospects being really we underwritten face metrics solid, we turned turned didn't mentioned supporting pretty dug In in seen well. presented us actually down longer before the many as capital deal environment being are deeper, really bar, is will in know of some opportunities have term

Casey Alexander

thoughts within insiders so beginning insider can the the have Okay. stock, contentious, certainly but very I like put some length I've your much if really seems and appreciate great the and behavior, that do last the Chris, and you of you is been question simply would it's quarterly and answers; color answer if Michael, in to environment and it, several purchases, at of one other insider could your this then is and color us call, context environment, My this call sounds is, asked Chris appreciate question yourself good the conference which which this not on to by the a thank after I the it. began give and the visibility went comments. the express I making you uncertainty of for institutions that several I we for apologize last those contradictory the on of for lack purchases day

Christian Oberbeck

some that of Sure, just one Mike the just thing for you add like that. Casey. complete on thank well I’d firm's to what said, thinking to maybe question to

much know environment environment I as team, Mike the of the we is that our you – our encouraged quality relationships and know relationships investments of a we're long think in much encouraged existing so our know in this by all are relationships you the with So it's and… this deepen all, our field and by and to best partners exercise create where lasting you the very new how very deepen one not and articulated performing Mike these with collaborative the there the like. across more said, of management well are being opportunities very and this the developments quality nature bidding discussed, we

many, many, will and years long us being position by pay a many here, in now, today, right many so a you foundation we're term be dividends now. for if And to play with will setting which ball

another transferred can As – their their my and and management of to of certain was a the compensation to – as shares members insider purchases, shareholders. Henri’s you further ask you empower incentives I know our team. alignment to you ownership group Form the XX,XXX you speak know of with chunk to were of know a on know the their our transferred I'm managers for – you you Henri. basically the X see Henri. know things; you filings, from going couple can to know call, not you form, A

– did and was I number. ownership went to time what so up of so I sort forget of in And minimum wanted in you levels the – what do, know I my the I maintain a exact spirit

around it net of something, so XX the I I'm of XX,XXX think stay or was a full for personally. even shares – and short sort still little to me

didn't So despite management Further, which that is similar investment the we you a in and of I say we team think me and a going and to issue it give part of never shares important. management think to impression, come through know – able going maintain and is know to as of I don't know you think then make it the to we're team don't our decision price never the be was value okay. you this the for out level we to also environment important I and but hope uncertainty, did think there’s the lengths – great company, strong,

have company our We faith enormous in and sheet. our balance

hadn't harvest the we companies. from – we think had at our experience. portfolio right, early time We in that, information had we that the COVID said to that moment were I

XX% analysts we our things board so across was of and the NAV’s type know that, XX% in predicting declines like but of value levels below the were you was thought value this we intrinsic what felt invest. far were our trading a and You to opportunity there that yes, very so to were clear intrinsic at below we a was that lot and uncertainty, still that substantially know

Casey Alexander

you thank team appreciate very thank my really addressing my for I much taking you the it Chris, questions. management for whole question, to and

Christian Oberbeck

you. Thank pleasure. my Sure,


you. Thank

Our next question comes Rowe with from National Bryce Securities.

line open. is now Your

Bryce Rowe

and was May, that and you company to $X spoke about, guess morning. repayments wanted ask new references that million the added since of all far week? number end just was Thanks $X net the good platform that to curious if I seven million I so that this of slot included

Michael Grisius

Bryce. Yeah, that's right

last know increased closing it know includes have, yes, week. company you right. a so do we the of especially sort this and we some been quarter on context concluded know that color you we've to we've done again was liquidity portfolio That this new number of quarter to and So you’re where you the give in is, that just what our portfolio

Bryce Rowe

you made you remarks if you know of of repayments. and environment reconcile expecting of Mike, this in that maybe Okay, lower Henri levels or your kind about the prepared with some comments could

quarter? this know, get environment the you an repayments to position at net Just a in in what's driving repayment point you like curious to this the

Michael Grisius

change at but portfolio I one is of us been that control. off one be of process that change getting performance in a performing through was what consistent the very was one sale we've company's off think was very and there so that expressing, because paid this had and one with company it’s to is control in resulted stalled there that continued well a point, re-energized just paid that just sale and that process deal strong, that environment,

a is the you environment at are at those been businesses that there's if that’s done. there there, percentage four think are companies than have know looking being those expressed, transactions theme we you but would that that's The this play. there distinguishing environment, this as I ago, all for know still out So in of dynamics much are it's – in I’ve themselves what months lower

Bryce Rowe

XX% was could the too. this of second it, priced in of May whereas a okay. Got added to X% April. was take Mike, in done yield and middle that March, looks portfolio of at first new maybe the about two has and in quarter, one kind that half or portfolio company And With type you coupon in done you one companies the a that the be

you So X% in a would those companies I'm higher level there just kind average of relatively something to at of play the where each seeing allowed is weighted XX% versus versus be respect low know that that's that now curious is to you rate rate know a – with today yield. have if portfolio pricing or for what you're going

Michael Grisius

a firms one return adjusted first a for with of question. I still a risk the some X% terrific courting time, premier software with That's investment the we've rate, country. good mean that we in sponsor offers the the think one group been

that an you I had. think opportunity be were we for that if re-pricing future, and our a today, that's than is priced know in deal the that the deal the hope wider that be there'll pricing would of that

starting felt relationship closing closing of be to COVID for the we're like unusual forth, were that deal of to of the you you it us really we know investment. is timing, we excited with reasons variety do the that and point the term and we're had for because that that to accelerate that pricing and this the long subsequent thing kind so was environment. the reflective closed seeing to more but right know in for it Certainly proceeding in know an a You was at other

I one environment waiting much sidelines for for much to I requesting that, pre-COVID, think and that very those return that about are the widening a seen in opportunities we level is is but but I widened, think spreads capital attachment so we it to as we there is much the the there's hoped. the seen in They we that not have but on have certainly point, a we seen people select on circumstances month pricing. degree. is put we've not opportunities in mentioned, some would but greater, think have widen relative really high the four portfolio this that Certainly haven't where is as and new to way improved adjusted thing we leverage those opportunity much risk as an have company can capital invest the as ago, to work of

Bryce Rowe

think you portfolio gone helpful. the of the portfolio from press that assume And have know month-to-month the process whether the release have was Mike as had that I maybe how in team I through and trends of a one or portfolio – about be referred gathered then what more just I kind so you for management kind that's you’ve you companies you COVID intelligence to your some that broadly as a seen, progressed just way. me; Okay, comment along portfolio managing and week-to-week of good period. we’ve this it pretty wondering

Michael Grisius

time would in give – about find third would value, investments new our know actively fluctuates course, I some our and to to time trying portfolio. spend new two-thirds obviously But this the a you depending say to we our context, through deal etc. our on Well, course, the ordinary managing of and portfolio ordinary in up of combing probably just you grow shareholder companies, I opportunities, particular about

liquidity XX%. to shifted where argue, onset ongoing With our just where of as their COVID, outlook of being with had One a portfolio. at time portfolio to their how point the that. to doing we've is position, management weekly and through like do we we and what's affected each are portfolio ever switched close events their really getting meetings, what performance, company and we since team they the been onset the XXX% every on our that to We that things literally that updated could continue looking went have,

extent important to that to accommodate loan I referenced, you out our to to a sure loans. of has portfolio typically note. things on themselves make people point Now, lot had availing how companies timely we the I that, we should Where as nature management we’re first basis name play a to we with were that as the as that the done they well. of place, that were getting documents our PPP teams. in modifications Initially changed? can it's that too, to were doing We were imagine, and to helping make market

at management us So our something for portfolio companies is that that's level natural to expect. for the managing natural and teams

time team ownership actively to open I monitor our just addresses time all that some probably same see more and address So there, just uncertainty know be we've things. got more don't on to down, much – that. by have settled the we're to the that point anything, the We given portfolio on new at your want as more are dialogue still of we're continuing hopefully spending That at think I visibility we but we're we're know, spending half management surprised performance well. the carefully don't making sure you portfolio starting and have than Does groups top Clearly an that things with this but and time shifted. loan question. extremely the on the enquiries and we it out and

Bryce Rowe

of from of lot seeing your helped a I I ways, where of at curious curious cash I I get portfolio a guess from what that does. fits? companies. you period, mean was you've those, management mean EBITDA companies I you've perspective, that from was the in active what kind know No, perspective, seen just fundamental in know that PPP you revenue an those funds have but know portfolio you it flow

Michael Grisius

the affect greatly to where on think more there's revenue mean know or nature depending referenced, will I of that interaction to companies it’s company COVID vary stream. The something are you that and the that's human are Right. I've going affected vary. of impact going ones their I as

so We dynamics, shareholders as strong which businesses haven't have are approach, underwriting portfolio. there's It’s to is we and theme our seen we impact. revenue recurring a are much that really from gravitate benefiting in our really common our

spreads, portfolio of by a you made performance driven reference seeing. the about in being I know indicative decreased being a or is the devaluation what being think and either widening reduction expected in and I third to X% valuation we’re value by just generally driven two-thirds of that performance of

Bryce Rowe

I Alright, and appreciate thank you the it. for color

Michael Grisius

Bryce. Thanks


you. Thank

comes Ladenburg. question Mickey Schleien Our next with

Your now is line open.

Mickey Schleien

of Glad the everyone's everyone. to to this into a go I late like have of handful hear Good I'd tough well. to still call, questions morning, doing but Kind ask.

Michael Grisius

No worries Mickey.

Mickey Schleien

I you versus alluded market today in the your I'll differently. this, would general? know ask May middle the a spreads today little to in Mike, Where Hey are but say market, question think you you bit XX lower

Michael Grisius

completely XXX a would put – I the a to so time apples in wider, sheet, four had at pick you balance I'll same if because yeah. ourselves in but not range, finding deals, to – apples, give basis yeah, lower I points it's XX leverage the we're opportunities to to a point

Mickey Schleien

continue books to you Okay, but conceivably that today, that pressure to were close could if asset net values the then correct?

Henri Steenkamp

think Mike. really right versus I is of beginning talking the COVID, March, Mike

Michael Grisius

that's [Cross clarify. – Right Talk] a good thing no, so to no,

Henri Steenkamp

May? From

Michael Grisius

Right, right.

reflecting seeing – a not so widening prevailing yes, market relative place. we're to the spreads further are valuations So in the mark-to-market

find if from for any haven't capital shift more sheet or and I generally a of XXX know likely to we reference deal, wider. to would the you valuation. – in market, spreads points deploy spot We all basis end pricing new the conservative what significant in meant ourselves else balance equal, a was shift was would our to that in in new were XX we I the seen that referencing be

Henri Steenkamp

from Yeah, pre-COVID.

Michael Grisius

from not valuation that's pre-COVID, right. From the point,

Mickey Schleien

to yielding investment understand question, and not attractive in an monitor have logic may find the portfolio. lowest that's If of market, back I it the this well a rate, doesn't the work I’m at going for that's Saratoga. in but very to kind business X% math the and Okay, profile mistaken, hard

do So could that to as on you just comments expand your at given all, deal why the characteristic? yield

Henri Steenkamp

lot new of license shareholders. opportunity very those indicated there's important also of we revisited. Well, that so pricing the the company, nice to made was vast a certain, pre-COVID like we in relationship majority at still I us to and some some one through SBIC as importantly, that that the you think a conclude are of and was could And for the strength time likelihood, our the sense. the of there's the priced capital the that our a us combination likelihood deployed a the in be position we firm, but us balance chance risk that made is was is not that that as return was accretive that deal felt quite adjusted and the there to sheet, things

Mickey Schleien

into and hospitality I hospitality, you to would top that okay group on know right, your referred allocation Knowland on I to but think that’s maybe that's makes right you comfort the challenged industry And probably that, also What highly Realty everybody the specifically [ph] Scepter knows suffering about [ph] Right, the to in sense. is and that Village Scepter airlines, most. now. ahead a industry go that, what of you’ve that gave besides adds

Michael Grisius

say wecan't there we have credit significant business I Well because that But the can is as it's support relates into it I Scepter [ph], would – and get say you put that. that deal. to appreciate associated would to this, it just with at details private and let’s all very hopefully

strong. us credit business's the made risk of the So with returns combination the as as associated it, comfortable really adjusted there that the very well performance, dynamics were

Mickey Schleien

or In by you deal terms the the of else? something dynamics and about structure talking are support credit the sponsor

Michael Grisius


Mickey Schleien

investment. Mike mentioned Okay. a you new third

correct? subsequent quarter, one that's I the think the that to

Michael Grisius

That's right, correct.

Mickey Schleien

in? us tell you Can what that's industry

Michael Grisius

many recency business a preference our of in would be not in But model the that’s don't disclosed mean to up SaaS well would the of think services a very a get been into. pleased even that we think that. with details. I holding this announced publicly its don’t I get given it's environment. think it’s is and I marketplace yet. the I'd I not not it's delivering too something the rather it, business yet. be it’s that into in ownership

Mickey Schleien

you is CX but business was spot, you you I think have performing like your, sweet And understand. said I well, know fine. of education That's and A segment, GoReact. touching the SaaS on which LINQ sort EMS others

on forming What potential don't is I have what assuming to for where the – through and given or are spike in thesis businesses going a curve? to with the valuations are industry those – what's in the that XX for how Another happen you the for universities time on terms K a hard your thesis I the matter of you schools the those reopen of in fall? businesses frankly

Michael Grisius

Okay, thing. so let me clarify one

experiencing one human is wrote that's that So a model we that there's challenges that in CX because material referenced, way fairly some involved. down it's tutoring so is of interaction what we and some a and

ownership, well terrific are the optimistic years, over and that models and is strength that We demonstrated will the has business as sponsorship out well. work it really

those to this, businesses, education are case As of uncertainty, not bringing you that typically products how the are will reopen prospects efficiency in that the businesses, system they the of ones for feel the there we software. good. and lot the other that, offered software are fundamental but are them, when related are really Near some being knows. a of schools vast there ways to they efficiency is the it still at of really businesses but just relates of really, or to are in terms majority in related greater those of school of all And the also majority vast the and how term managing none long use the continue us term look to

our You that shut can operate right their software. seeing if now that as see we're been becomes are of just to all that fundamental It it experience is is this has you're decide some it they to changing reopening, weekly, but and off uncertainty broader – don't and people going says how typically about there institutions. they

really haven't that or environment. experience that – we So seen had in seen this

watching Our material something there expectation that but that carefully. sector, our won't impact we're very a hope certainly it's is on that or be

Mickey Schleien

A understand. questions couple I the CLO. on Okay, of

So of is downgrades passing to obviously that yield level test their based and loans your I'm that have the distribution? rated your with reduce expect of comments do been first all if bulk for estimated And the of of that it defaults tests, not market the B-minus given how expected? typically quarterly understanding April. next it's that's CLOs I'm going the terms the does are and would quarter which distributions CLO. in its into not was the CLO month the the the case make sure its my But on more if in mistaken, look higher you

Henri Steenkamp

Mickey. Yeah, that’s right

three months but and was measurement a absolutely It's You’re yesterday date, the measurement – was a actually also a right. is date. every date measurement once April

determines So it all CLO which July is X a whether and date passes test, measurement of that did. its our

QX. rate, three-months’ much until as measurement conservative perspective, it then test saw day has single monitoring for our did From to interest a and with the months obviously its too we interest it's will valuation, the August today, but the changed that, firstly to in XX, the so So of we payment the were and With QX. next met we average effective assumptions the which Obviously then as on there in drive that's couple rate valuation get specifically of October then is date effective issue regards output time. to the no there'll will so all new of a that date you pretty know be date an and and actual and a know the valuation drive since you next months XX. over downgrade as to obviously not they you valuation for interest through yesterday, tests three of May next the weighted keep from the rate need to regards it the measurement

Mickey Schleien


based equity the Henri you on into need another said, in term it. not near it what least that very does at So CLO seems injected just the additional

Henri Steenkamp

Yeah, correct.

As yes. of today,

Mickey Schleien

drag into tapping cash commitments. it’s Okay, and available, but level I you of very discretionary unfunded when the do a question, certainly liquidity to then have low going appreciate back

saw was I it $X think I $X million or million.

that’s So overwhelming an not really amount you. for

just to it have know buy not the or I cash, am you it something? imagine use that declared level the in to only and given maybe are advantage the at start of question dividend, so is now am seem offset to you to stock, in would would I you the again I least back me some share portfolio a shareholders of you going the know the the It will know take reinvest smart confidence You've the drip Chris, drip but – best of missing this and price. to dilution, for of

Chris Oberbeck

question. good Mickey, a I very think that's

I trading based roughly of we very think substantial markdowns know it are as Two-thirds Mike fundamental quality are marks. credit in based. earlier of heard mention you discount a a more that mark-to-market spread I know opposed portfolio is of think the mark the marks our you you down on as is at – spread NAV, to lot to

a we our confidence of So in have the new and lot NAV are investments making. we

consider we purposes. for how noted. do of is undervalued The is substantially we you’ve to needs what is our So that obviously have repurchase ability the feel socket stock and as one questions do yes to liquidity needed much this

SBIC outside our with extent invested know think companies that essentially talked portfolio about I capital, supply have you that we capital. we to X our to which in need in that company largely call, fully last as we incremental holding needs for is have and entity, from the

So which some dry to so keep million X SBIC of go million in invested to sub-X% room rate. we’ve those that some incremental another have available we that do and SBIC we there in in to capital have investments, a and is need extra us and another helped – levered powder one that, And repayment little two-to-one support which inside equity $XX gets our there's $XX.X we gave did liquidity we helpful. have then which at still X,

non-SBIC different of long sort have have outside put a of criteria, more opportunities that And and know SBIC our be at and have in are we equity type can types also that equity into financed. capacity and the our then on investment the and we of entity. extremely in lot that businesses relationships gauge term are we those the So know investments important we you franchise return the still very that the so looking you we're to We near we high X SBIC when of always building, for are there. borrowing how

don’t the time there And with necessarily, have might a point – so they cost so, level of are know same today have capital and but in spreads less this developing return higher into at and to strategically of you for as of of some very those while strategically we’ll money relationships SBIC that in the important economics, also is translate newer criteria we today markets some world. put outside us, work and those

we lot So, balance. to a have

the I know normal you system open think riding call, and And slack will the of up real also is whole know call huge if back a this continue? last it pick We you wave that an what liquidity you will as on know economy and at you continue does the on we and the how rate will to get question. and to that's still said

raised think careful market, know I'm And baby you me as that only and so market we I could our to in We fortuitous. need was industry. very we wrong, just guess, issuance correct capital because bond be soon as Henri, we if we the and the to got first were get we to and

when to disappear. all you decline, know things public markets, capital markets know you As tend know you

And we we not very period into where need a be in position raise careful we you raise to capital capital. feel have to get a like so where of time can’t to also

one, feel So and have get can interests and so we our new a lot comfortable. support number let’s uncertainty you our very a position and where We we deals. lot competing know liquidity do a of of ahead portfolio in

buying think value and have something in I absolutely of does consideration. it's equity

on liquidity for important just will that in massive we've again, improvement that's and think be ago factored of near we in and term. from so two But months And long all the a just our had very these.

Mickey Schleien

No, to guess make the the I shares that I wouldn't at back to last open my to follow-up offset minimum least on drip agree try given. to my at likely sense would with a market question, be, Chris. that buy it the from dilution

you've your got shareholders. of with know You a lot experience

for or know less You least more try be at to it price make could offset to and stock meaningfully that of are versus ratio it would shareholders sense and cash NAV to seem at that. dilutive to this going the elect to

Chris Oberbeck

consideration. a clearly That's

there that In of that do and a drip NAV I but I mean share we different per for reasons, concern that you that again to much per substantially share, terms NAV have how then know understand is, issues over quarters does earnings consequence. all fairly to understand varied of dilution the and and has that different to

So that’s watching. and absolutely of something aware that we are

Mickey Schleien

it for very earnings the calls longest on appreciate but Thank very, I probably what’s that's your one Okay, you. patience of for me. you, helpful.

Chris Oberbeck

Mickey. you thank Well,

Henri Steenkamp

Thanks Mickey


for Thank at back would time. Christian questions you. I'm turn showing any not this to call further like I the closing to remarks. now over Oberbeck

Christian Oberbeck


we speaking quarter. with next forward joining want look thank and we to today, you to So for everyone us


Ladies gentlemen, Thank for you concludes conference call. and today's participating. this

may You disconnect. now