SAR Saratoga Investment

Henri Steenkamp Chief Financial and Compliance Officer
Christian Oberbeck Chairman and CEO
Michael Grisius Chief Investment Officer
Casey Alexander Compass Point
Mickey Schleien Ladenburg
Call transcript
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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corporation’s Fiscal Third 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 Corporation’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 third 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

Officer, press XXXX IR our our will You Events to link and X introductory turn be refer Presentation XXth. will section the can find Please website. this conference like is our third for page also to A in distributed and earnings call fiscal A presentation over the would press Relations through earnings be release call last Investor making night. release to January a from p.m. detail. 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

world, conditions companies. businesses our portfolio immediate the and of the across we in in to visibility prospects quarter challenging and and volatile improve see continue Another improvement market our

in point structure most are on to in today’s We companies recent our future look our improvement and this solid forward call. liquidity and of believe time at reviewing results economic We that potential continue capitalization continued to and well challenges. portfolio our Saratoga to presenting the weather positioned

us investing, strong business and historically To in solid we capital last, market to no challenging that conservative and two. liquidity, global to briefly have enable organization are competence effectively clarity displacement uncertain how the quarter the on management levels the navigate of anticipate long environment. recap economy approach can past with this will future While and will structure, experience slide current

foundation investment to XX% we quality, COVID-XX. maintaining our by multiples with market our financial EBITDA nearly in to credit strengthen high is our portfolio loan retaining related level quarter XX% QX. to a spreads, this impact highest the after company performance up rating First, changes of of continued from and/or revised investments incorporating This credit

valuation the the unlevered nine-month XX-month Importantly, trailing more generating May than the of exceeds registering XX% of in significantly been basis of in of total in first gross the overall to of quarter realizations on X.X% portfolio reversed two-thirds since a the impact has QX, of IRR COVID-XX on reduction the net BDC the XXXX, return equity a negative of on and XX.X% million. $XXX This average XX, industry the portfolio.

the unprecedented repayments. the we quarter, of Despite million turmoil assets our the million from XX% million under uncertainty million $XXX as new increase to healthy and and $XXX $XX million from management by as of markets, $XXX up an this $XX last investments originated Second, X% offset of quarter increased year-end. in

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

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

and to NAV the our persistent and liquidity and challenges Third, to portfolio COVID-XX small as by economy we are paramount, continue to ourselves. the pandemic presented particularly look companies the both ahead to preservation for businesses,

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

commitments. and by to million commitments of discretionary of $XX committed undrawn quarter grow us XX% end funding liquidity available as currently. lending million had Our our enables AUM We of $XX

end quarter substantially leverage our regulatory XXX% requirement. exceeds XXX% of Our

Finally, $X.XX Directors by XX, $X.XX of share quarterly decided reflecting to dividend per increase to improved overall our our Board November liquidity quarter and ended XXXX. per the resiliency, share portfolio on for the

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

spillover on discussed we and spillover fiscal compliance historically going have managed that this dividend such Payment As our flexibility liquidity calls, increased suspect we of obligations into liquidity. no ordinary this preserves substantial consequent obligations have had further and previous year, conservatively, income our position. therefore,

and environment. continued to quarters economic saw quarter performance key XX, performance August within ended our the considering XXXX, solid compared indicators, This current as the and XX, November XXXX,

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

quarter. and NII NAV per XX share adjusted is quarter last NAV per up share quarters from is And quarterly last detail XXth return Latest XX%, last the $X.XX in increase growth XX grown more industry. down only is in second $X.XX the per year-over-year quarter, This past year. share the and highest year industry, highest the up the Our in the last later. months. last our is BDC months XX currently other from provide and up will from on having BDC the from XX.XX over BDC XX.XX with this X% X% equity one $X.XX Henri XX.XX,

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

financial portfolio. to over increase and With quarter. review to an to management performance As call steadily $XXX remains our to assets of our on QX, fair credits since X% high. the AUM since I our would BDC value like quality well has slide the that, over you of under million our composition now at can last as turn three, increased results, as we the see Henri the in back and risen took

Henri Steenkamp

last pr for Chris. to QX. you, Thank the related from unchanged November QX, a to this incentive NII mostly that is quarter, half does higher note incentive the second capital from adjusted $X.X year NII accretive and quarter. last SAB the first million on Adjusted in of $XX.X the adjusted expense non-recurrence baby increased year operating generated of was deployed, with NII and down last quarter is higher as fee our the repayments of full income four up will interest last lower the with $X.X fee AUM million fully not Slide down per from million $X.XX be reflects month year’s up of XX, quarter $X quarters variable gains was for last the key of expenses. higher performance from rates last XX% offset increased impact to this a impact the quarter. partially $X.XX, year. share last was AUM per AUM the mostly decrease $X.XX and second income the interest investments the tax by all metrics the net from offset our Of of cash available bonds as the that repayment recognized in ended share include adjusting and lower lower million rate occurred in year LIBOR The highlights impact XX.X% level quarter other XXXX. of originations of following the this income mostly overall to the by cash of benefit When The all of Once slightly compared from Compared and was from calculation, quarter year $X.XX NII. share accrual X% the in last primarily decrease portfolio.

effect shares increased XX.X year year. to QX year. outstanding from down decrease down for the the per addition to X.X% year Weighted basis last outstanding adjusted number X.X%. to impact common QX last capital. QX XX above, basis points shares our NAV, our the for of share million undeployed this by currently and Adjusted both period shares reduce yield points higher in This NII the X.X% LIBOR average NII quarter, XXX and reflecting from this this last of year XX In due growing yield over the was the shares and was from is million primarily XX.X% of last the

tax Services we a in Knowland year. quarter, in net appreciation five this equity million $X benefit total two with largest on of investments, and more and performance to offset with operations value resulting The last has which the performance. Education total per on a tax $X.X net more remains million reversed investments our $X million first share, million Group third net gains. only experienced unrealized with two-thirds assets on than $X reflects revised was impact our reductions about reductions unrealized market follows. Thinking gains increase investments was on been of and appreciation a $X.XX the portfolio average $X.X net There of federal May comprised and in improvements multiples since gain the that the now is in XX-Q for and/or important realized of income year indicator primarily both outlined $X.X CX of reduction and includes on on year-to-date unrealized million net resulting company the night, by are as in share. the per $X.XX related MD&A than us, gain Return subsidiaries. appreciation Therefore overall portfolio, weighted on $X.X $X.X since impact cumulative deferred this in filed of million the paid COVID-XX unrealized The the more For of million. realized our X.X% of in spreads, began or Form in quarter in are than or with $X.X total of blocker million. investments unrealized million two an investments from The of nine-month million $X.X the as portfolio appreciation the and value EBITDA increase million $X

months, interest which for $X.X period the fees debt quarters. for all fee equity us quarter financing expenses, X.X% from negative well on assets $X.X second return above in XX.X% and million of the X.X%. third for average million last quarter the Total expenses industry for this increased incentive to this average Our industry excluding and quarter. based of the total management was represents year second three This and this and XX management places

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

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

investment $X.X million the deferred For three paid in net million November appreciation unrealized $X.X unrealized ended offset of fiscal and by dividends gains XXXX, benefit the net million months tax in $X.X $X.X Saratoga capital of federal XXXX, $X.X million appreciation income and were on blocker million declared. net XX, tax realized earned on of subsidiaries

the In through DRIP for million made repurchase addition, plan, to the $X.X million were $X.X purchased shares and this of in pursuant stock all quarter. plan XX,XXX dividend share were distributions company’s

per share XX other has steadily the accretive alone. share. NAV this No at in X% BDC we past only Our only that up all, one over as importantly, fact, have since is increased is demonstrated net it value been increase other and Very has per asset NAV and grown by has year grown over in the has months, growth X.X%. past XXXX like the

increased $X.XX than in decrease by more in share last offset CLO a $X.XX $X.XX QX, from and sequential Starting of share basis. NAV realized increase will was to gains. benefit on income. consistent increase at top, share per continue a operating quarter in simple share income $X.XX interest a of per from the and expenses On major in six, a $X.XX $X.XX per per non-CLO NII in NII to the history interest We reconciliation slide changes our you unrealized see and quarterly net

NII our to and $X.XX $X.XX in of November fiscal by per and in QX. NAV deferred Saratoga in net $X.XX change investments, share totaled of part realized dry dividend net $X.XX on realized available offset subsidiaries on $X.XX net available taxes which gains Moving blocker gains $XXX.X $X.XX debentures Slide impact powder net between but undrawn outlines the reconciles tax SBA undrawn in XX, us This the of XXXX, the slide, spread of paid increase the cash, unrealized XXXX, lower investments Madison million. as capital to for was seven of appreciation facility. this partially the the the and quarter, on

available us with an X%, sheet an We overall additional fully of to all This level being liquidity pleased SBA NII especially all fact than rate. the also remain for in and by that’s and deployed, balance debentures need less in assets nature the external account our financing, with and position, end million XX% of the in taking fixed grow our that quarter $XXX is allows our cash when accretive million of into to nature very cost without it of accretive. $XX liquidity our long-term mostly with debt conservative and

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

Our total investment, as our positions. is of XX% in our yield percentage core On total out that assets first-lien excluding of the below dropped and well slide assets, healthy. yet yield see represents nine our X% XX%, as can how remains last BDC you our CLO, has which first-lien of

This unchanged of our decreased This purely the our by to on by in to this demonstrated basis X.X% as value. with LIBOR yields increase fair core overall to and assets yield below by slightly already yield remaining core at based quarter is X.X% but QX, same our floors, points cost asset compared margin because was X.X%. the XX

As lowest is our points a reminder, XXX basis floor.

So LIBOR we expect income. to in did decreases see not interest further impact really the

XX.X% and our current is yield and is CLO performing. CLO Our

Turning in XX, as as terms slide to diversified of remain investments type, geography. our well highly by

investments follow-on investments in three fiscal portfolio During On the five a portfolio of could companies the increase in exits diversity and in you new in $XX.X industry million breadth net $XX we quarter. had made the represents. for quarter plus resulting million $XX.X and million two third our amortizations, XX slide and of that see

software, investments with are Our healthcare industries, XX large distinct on focus services. services, education and a IT and over spread education

finance in overall the securities. total investment our which is consists X.X% total our an of addition, our In investment equity structured Of strategy. part of investment CLO interest, reflected as remained portfolio, important

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

X%. below Grisius, turn an over period and portfolio to X% concludes of That call is In Investment I industry Officer now our fact, same our one year an the very financial of favorably to will over average average review. ROE XX%, investment six-year Michael not Chief and market. for overview now the the with almost compares my

Michael Grisius

Henri. take by of COVID-XX Market you, and minutes the current COVID-XX, a in to market the of environment. and and see I affected in then of couple describe continue be conditions than comment we will the earlier current far to Thank performance the impact light the state extent on lesser it unique strategy of economic investment as continued portfolio to our crisis. but a

platform trend deals deals in albeit opportunities to QX or highly We limited be portfolio originations returns achieved of businesses and by a Quality bar QX can quite pricing are QX and usual. were seeking deploy either aversion healthy widen our that have liquidity. finding in more disciplined have are in economic capitalizations. Lenders a general the said, and into in deploying existing support staying as our that leverage underwriting to and remains pursuing change credit helping with saw these, tightening the transaction our growth seeking to of requiring crisis, we are new be In to mostly continued not to appears with of adjusted and midst tighten We levels. select capital are started equity positive That in for robust pre-COVID market. seeing part companies QX. risk in covenants was actively we the outlook risk difficult there quite and yields higher lessening believe initiatives compelling XXXX. than a Earlier strength This the volumes, deals times market the capital. for companies those in the most demonstrated of this rebounding durability such uncertain and Nonetheless, environment.

investments have alone. of in invested We since in calendar the the XX past pandemic, new including onset this quarter platform five

actively our engaged remain also portfolio We with companies.

our that to near- them paycheck and of relief. the the taken PPP portfolio also steps or on avail able generally many mentioned companies of of as found have both have and were long-term before, we We COVID-XX program the right have to loan businesses, their effects help protection themselves mitigate

portfolio our loans now terms paying to quarter. our of are All Roscoe according their since in payment this including

interest non-accruals still opted it to or have have past on telling. that Tokamak during non-accrual, Alarm now remain due the non-accrual investments other calendar for as My and been center two it keep XXXX. no We new on there has

our to We the this COVID-XX also of appreciation quarter, fair related an almost reduction recovery to $X QX XX%. recognize value unrealized which additional million brings primarily in

as and us recovered originated certain this we will and its values our industries portfolio, We value reflects XX% our stress of the portfolio enterprise of that portfolio, in by approximately expect navigate that supported As assets by through cost overall durability is strong debt an basis. we we our historically and believe help the confident in economic of attributes far thus performance have in non-legacy portfolio performed well fair first-lien strong of generally this overall situations. Saratoga environment to remain has

We no have direct energy exposure.

is demonstrated economy, degree addition, company the unrealized and overall on in multiples, and market portfolio lead of spreads realized In have historically operating of and our the recurring impacts limited of retention, majority effects therefore and our future. potentially however, of comprised a businesses to and not portfolio depreciation in COVID-XX adverse there still to related conditions of increases high the market revenue including underlying recognized that potential revenue future the strong performance plenty uncertainties produce being in credit market negative in declines and specific could on but are

Now clarity, despite help will of our our to presented us sticking well-constructed by face. best to continue we the continue this that structure challenges strategy we believe serve and in navigate and liquidity lack to believe the market COVID-XX. currently especially We capital will has us to

Our slide resulted always and portfolio approach focus our been performance as this the a you as realized our on being the at cost. BDC can XX has at quality to gains space net percentage portfolio to on approach respect of top with see underwriting of of has in the

understand of to and We with accretive shareholders invested its a and its the strong objective best and culture for Saratoga. list strength business characteristics. investment underlying to at in possible our ownership We top of years. the durable the producing had remains We model. to business capital underwriting working thoroughly as assess businesses with endeavor that a long-term each as only three order approach strengths adjusted accurately over sought over always appear into company eight long-term. deeply BDCs of and the returns risk the are the have of We to a the close Furthermore, past directly the number positive paramount management

nearly the rating portfolio Our highest last up impact at our to internal as of credit credit our slightly reflects quality COVID shows of compared as end, and of quarter quarter. XX% rating

XX, QX looking can at industry are see multiples debt Now you leverage QX. downward on from calendar that slide trending to

capitalization decreasing overall to portfolio that certain for new last Total trend leverage company in was expect quarter lower and QX. X.XX of from continued in times We deals. leverage reflecting our portfolio strength the have

attractive leverage, our strong risk rather sustainably we As last of just business in return are and investment. on will of enterprise the highlight confident value models our focus we investing dollar exceed than profiles considering the remains credits frequently the exceptionally that with businesses where

long-term In difficult addition, even in to illustrates strengthening ability over the the a generate investments the new slide market of midst our dynamics.

added portfolio origination in our including follow-ons investments, executed during supported calendar and portfolio most XX the easily that capabilities. on the most XX follow-on the have companies COVID-XX. reflecting liquidity new During ongoing emphasis This year we investments year portfolio XXXX, eight and companies’ is new closings, deal we both broadening company made which

been relationships recently team’s on focus Moving significant slide quarter experience the grow new in hired grow give resource measured of and has important and steadily what by a new our COVID-XX, strategic The are issued especially senior XX on well notable and our on become continue sources our us our development as portfolio past sheets set, from deal pleasing for pipeline. continue over skill reflecting mature factors despite business to newly to But beginning development led that months to XX, additional to can business demonstrate this more expand is to strategic number environment, term are our deals. new impacted in our of are decline as relationships business to progress efforts. formed long-term. active this deal have over an focus new the continue priority. and confidence We that number greatly has a four that see this we our investments company of function to opportunities as that There relationships, AUM we is we XX although activity the of

several evidenced relationships. made newly is to by investments recently have we reach the marketplace formed with into grow First, we continue as our

have and as look to their relationships Second, that developed deep of us with numerous source financing. preferred active long-term firms we established

which that developed plenty to are and Third, within industry opportunities in trends we have see segments continue we investment long-term experiencing expertise. growth of intentionally secular

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

on bounce on chart $XXX see our BDC then QX the weighted IRR a SBIC can you and is remaining to our changes since back management. of depreciations largest XX.X% unrealized the since of companies. Saratoga gross the investments. do We performance. than their two-thirds markdown of to combined All million is of wide long-term our over More interaction. art what are the took remains and total investments On levered the right, unrealized in Group, across more variety that in Nolan CX Education on not three are view and of depreciation in-person fundamental dependent believe which The ArbiterSports human three

Our investment approach million gross levered team has unrealized realizations. the management investment XX.X% yielded approximately The exceptional realized IRR Saratoga is returns. on by of made on investment $XXX

quarter to Moving invested first can on $XXX.X slide at fully see XX, with is of license you funded cost our as million SBIC end.

nine Chris? the review the our this back the has licenses and and a due SBA SBIC on with way equity intensely available $X.X to has underwriting portfolio, COVID-XX of and of cash There and of itself to the Credit past well of constructed debentures really year, world really I’d the the which our future market team been quality $XX equity, like team, whole of to fore million portfolio always and preserving of deployed. proved of confident have resilient the significantly is and of concludes second changed and in against the against Our focus $XXX debentures our million $XX platform CEO. And and funded and demonstrating million in looking still while back the over my for is procedures. to asset remain our equity. overall year, the turn currently our we strength This QX be diligence months, been call remain at and already impact and that million focused value came Saratoga. primary the

Christian Oberbeck

Thank you, Mike.

As declare and $X.XX outlined performance decided raises the of Investments the share Directors dividend recent has its capital Board for per following a of on considering quarter company XXXX. slide Saratoga to a this portfolio, XX, the of $X.XX This quarterly least from both increase The will reassess reflects a on and at continue economic ended last factors. basis to Directors Board quarter. November XX, current

capital negative Moving of XX, which was for NAV XX% volatility, index dislocations to impacting impacted slide returns markets, in particularly last our is which months, latest total returns BDC with XX-month in below and negative appreciation line market constraints caused Latest average severe to XX%. both liquidity dividends XX smaller $XXX XX%. COVID-XX, total return total generated by many and return million negative the of with BDCs the XX for has months with BDCs includes closer

Our longer XX. term next slide is performance outlined in our

Our three-year BDCs horizons. in and place top of respectively and time returns XX the us both five-year top for all two

Over the context XX% five the see index portfolio, the you XX on key index’s categories return including three interest XX% of the broader on outperformance the per our return X% and the outperformed XXX% On remain the latest and over key industry slide diverse across placed past return years, latest months growth. share months past certain in specific to performance We further yield and XX, greatly of years, return. return XX our exceeded equity metrics. above NAV average and the the industry key can

few our of that of share BDCs only year. top grown past two one we continue and We accretively growing and which Not NAV in equity have respectively, BDCs the are by XX on to the it we have two NAV, NAV also are on and are only value have the one months per done first latest reflects shareholders per growing focus outperformance, return our receiving. share, done

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on to characteristics which industry highest and management of SBIC investments, levels share at return for in our our investment NII and per accompanied active a differentiating the top grade profile. with receipt long-term NAV expansion high restored which to and make accretive solid include rating quality bond providing per equity liquidity, of issuance, -- and XX%. NAV and public strong Our the baby the second Access management share and under support earnings us at historic both, and leading of maintaining risk and low assets cost liquidity, putting industry attractive of yield, portfolio ownership one the growing BBB private cost by of license sub-X% industry

and our exposure portfolio our the standards investment industry. and cyclical benefit strong sheet environment, all of balance well through to And like call quality underwriting remain contains Saratoga’s us gas open to support. questions. team, structure and addition, high again liquidity industries the oil shareholders I In for long-term. the for historically We current credit thank capital strategy in that in closing, I’d management our shareholders minimal will would including and historically and and battling In the experienced confident our now in ongoing like that tested serve their near- substantial future conventionally to challenges will


Thank line you. the comes Alexander with from of [Operator Instructions] Our Compass first Casey Point. question

Your line is open.

Casey Alexander

Hi. Can hear Good morning. me? you

Christian Oberbeck


Michael Grisius

Good fine, you We hear morning. Casey?

Casey Alexander

sort what you idea it right. questions at you a control it kind is? us Netreo There of of or some to give increase that Terrific. of company million give changed in Can All Mike, us of a was a become quarter-over-quarter it that what investment And couple investment made? for decision caused $XX was some investments. feel you. control

Christian Oberbeck

quick take Yeah. just the jump just will Casey, on I in classification.

are through a that the of more that detail. can quite warehouse change about CLO. potentially a seeing refinancing So additional we the been -- in on talk ownership our CLO control substantial million probably loan $XX have control is actually advance We that. in always you in loan category that invested in in The Mike Netreo dollars that unsecured has our investment.

just on in our expand a little So in Netreo? dollars. ownership you do to that’s Mike want the change equity But

Michael Grisius

Happy equity ownership. investment one in we where have Casey. and morning, that. about is that market has company well-positioned of we over for really The no that feel feel that is it significant that can that the and lot Good It’s Yeah. is in offering. The we the very occurred expansion enterprise a as too. Netreo got good feel that quarter a in the There’s value relates business it’s is that like it’s we right change it time. a grow products confidence one -- operates to

Casey Alexander

that for clarification. you Thank Great.

are term weighted there pretty term average far yield the loans the an a portfolio. of entire is unsecured at in was and those yield Secondly, that increase below loans

you or caused grab quarter did loan that a syndicated during the broadly change? investment So an what guys in

Michael Grisius

actually that’s loan. warehouse $XX exactly CLO million Casey, No. No. that

So to into an my unsecured falls that it increased loan loan, and as that’s because any warehouse you earlier exactly put it’s that’s so your into that that category CLO reason well. category point,

ahead in additional it’s the warehouse an our So investment CLO of refi.

Casey Alexander

the the what that CLO, buy paper for some give that of to does So that’s flexibility is refinance prepping the you for? new

Christian Oberbeck

Chris. Casey, what it this used is we for. That’s Yes.

Casey Alexander

college to a business. see what what’s prep us tutoring and what led color markdown CX? prospects give and I more Could a also you Okay. be Although that could Great. some, to Thank pandemic? that markdown Mike, it’s are you you has a expand was a seems to you. CX vertical and there well that the as the going mentioned there, there little Education, the on during done

Michael Grisius

of good think well has are really a kids are they now sign the nitty-gritty. just remind SAT Happy too. to on are helping It’s That -- and circumstances remarks, we typically very and reacted introduced they that the The very. with they -- of attracting about. have colleges. my that and around facing but is these is And biggest new do private high meetings to -- business get forth. get they tutoring that this in-person business have into want engaging predicated exams in-person well so challenged. nature all not has and to meetings. the also have model much challenge customers, it’s process is But their looking sessions limit been tutors to that their that that. historically direct parents business their application a things course, worked upon typically as a really business can’t more of remote But with been so before feel up obviously them There provides quite interaction prep, to I and holding companies, are top naturally one-on-one because and that’s got AP is in-person the to are we part tutoring services that under we The is I into students this folks school think that I

in been it time. for We have quite some

the key outcomes out are a are players at what one the in deals the we really We is sheet. It’s in education look good look always Its balance which spot industry. of we are in strong. when very

So we good as in support sponsors have come well. -- good sponsorship as

the a good business that’s we in it’s feel certainly So been but long-term, challenged.

-- continuing valuation respect. recent quarters. -- the the be reflects see that would in onset headwinds. it a that with some companies our with evaluation devalued it having business of the And the you the on pandemic would that We really that We changed have not recognizing now that certainly face experience in materially

Casey Alexander

Thank Great. Okay. you.

this will I that I think, of a that I Chris, distribution tax, gains gains distribution guess, Noting ask can -- explain capital is us there some for will again gains you capital capital to or manner significant you. shareholders? deferring there is the for Lastly, be

Christian Oberbeck

good a question, That’s Yeah. Casey.

a In we share. a Ice, Easy the carry-forwards incurred for you of set capital last of from as BDC, amount significant NAV rules significant per from year what we we used loss be that amount have and gains loss capital the before of final realizations historically, build capital RIC. then we this portion remaining utilized and shelter are recall had would over primarily had think, some and NAV over carry-forwards the I took tax to our when coming time gain under the those and capital past we those

For a RICs there’s choice.

can you that retain level or pay and You them. XX% you gain at or -- the capital can distribute BDC a can

done with has capital to practice we been our gains have this retain As so our historical payment.

those of states not pay structured asset is what benefit incurring so example RICs additional further does are increase and costs the value an And any net the equity in the of without way the a company it for selling allows of because state is those tax. fortunate that people incur taxes. do who the live were They taxes state in of that not a shareholders pay don’t that state if five to that few distributed

there So BDC at by tax is paid level. federal only it retaining the a

answer And will final a your question, so gain not be that retained your and will be capital of to distribution. there part

Casey Alexander

my of appreciate this Okay. morning. all taking you. my questions you Great. I questions and are That’s Thank

Christian Oberbeck

Thank you, Casey.


you. Thank

from question is Mickey with Schleien Ladenburg. Our next

Your line is open.

Mickey Schleien

at morning, I how through Good do the to are year now and amongst getting well. rather is to generally -- several are Obviously, stage to we end? about a everyone. than are that provided close to beginning liquidity like was by private liquidity pandemic. the a they think where timeframe, the equity everyone is decreasing lot of have of and understand at you liquidity there we I’d the borrowers. hope actually borrowers the a of of through doing I we that sponsors. It’s liquidity in the want PPP have been make the been ask onset your through to viewing and it enough you pandemic quarters still increasing pandemic of

Michael Grisius

Good will morning, Mickey. take question. I that

The right. of and early took portfolio program PPP through managing liquidity are the was the companies You pandemic. advantage majority quite the stages they as our of were that helpful of

are that we we one carefully and and this very when pleased top of and is it’s on something quite we March managing are started that to as monitoring sure job actually making are in We things switch every and settled portfolio have see position liquidity for as the handful have we have them. of discussed material companies. of except But you the one general, things of and write-downs that in deals our that each

significantly, a the to portfolio companies about of position the significant and their good Even where we feel have feel are in in make with worked and their understand those businesses sure we liquidity companies portfolio performance write-down, actually by The needs the they stabilized and and that that other large -- we that respect. have ownerships position. very other are liquidity the good about management we have we

put very or with reduced are as profitability their sponsorships they company know managed the that’s We now. position have to that’s have you right where in that a and the themselves appropriate for they keep cost got their environment good dealing

Mickey Schleien

terms in those, deals, sponsored transactions? problem those all Mike, of them let’s are call

Michael Grisius

sponsored The referenced three we all are that transactions.

as portfolio Of transactions non-sponsor course, my the on overall to we apply both. in well, comments invest but

Mickey Schleien

that checks when to the those more write will Okay. this and they And pandemic survive think those until do ultimately equity investments are you amongst believe to backdrop sponsors, three afloat these keep willing deals they are businesses the improves? year later

Michael Grisius

space their good Well, the one that referenced companies their each are think, thing absolute and case liquidity supported In sponsorship CX’s other niche they good in strong. leader that clear, important but they competitors, and leader also has very remaining some it’s make they the businesses in sponsored, they is leading those not it’s because their the of position the both space, are a In fundamentally its And proposition these about case, on Arbiter’s are The prospects. their message the and constitute Each and those think customers not we to is the now has underwriting market that the space. important portfolio our in -- due Nolan’s about of front-end. for businesses this feel is COVID. each very long-term I we to and make because of devaluation making one really value in sure changed. this are they of this portion one we businesses, I we by their in three want have and case in largest absolute

of We they recover. to sense won’t don’t these world normalcy that we been to right had like be where So the will returns feel companies back they any if before. that think

Now our you there’s they all if never the adequately we certainty will. that’s and expectation to that are ride think around that, but capitalized storm,

Mickey Schleien

That’s Thank That’s very me. that. for -- excuse Mike. helpful, you

investment the I of CLO, the anything reinvestment quarter-to-quarter there the Was period. should its questions. CLO up? end to that dynamics yield estimated that caused understand the that go of I couple have terms yield at noticed realize of Turning increased we equities I and to in a the of estimated it’s

Christian Oberbeck

actual of some from rates. offset But effect was performance up it increased prepayment the of did in more strong increase the primarily quarter-over-quarter prepayment a for one quarter been a fact past really the XX% assumptions. the in have XX% the this that that came cash in the CLO information even actually the are interest if the the rate in full which valuation. the or performance so, It’s you quarter and and trends three We strong and reflecting of up valuation really our flows Mickey, impact CLO actually past of from our we had see of in would through over desks change could reflection past to we of not the value. performance the months as And getting

Mickey Schleien

are And what do -- upon you be we -- looking and at terms are CLO you of the Okay. a refinancing what Henri high the timing to refinancing? upsized at it in looks sort of like level, expect

Christian Oberbeck

that one. we assets do discussed as Mickey, will in have in to our a do into We the so have funded and we have earlier, that step for warehouse. maybe and I warehouse attached CLO

so and which assets that could utilized in upsize we to additional already have we also And have have some warehouse. leverage us allow fully we not the

so And to judgment. to conducive market environment we in that be the are should from -- our prepared upsize

so engaging we as In are we we this process you seek -- generally years, would is refinance the of market. seen the the in terms which the speaking of in have over time and refinancing, to zone with the

the dramatically. appreciate As you months can has also last market six over evolved very the

been. six more ago now its than much closed more and -- robust it So it months was then has basically

Mickey Schleien

and market with Chris. BDC refinance sense what And from income available CLO, agree what right upsize fee CLO? manager can us of estimated CLO we the the a of given in terms the that can you of yield level sort or see now its definitely level might give that I once earn of on

Christian Oberbeck

actually a Well, know preliminary think, Mickey, it’s that, that. for little to communicate us alone I let well

in So right we not marketplace are the now. still

it’s a just So early. little

in next done have have, by think would our it I conversation probably then hopefully. we

Mickey Schleien

maybe income sort taxable just ordinary undistributed is last for the And question level housekeeping What Okay. share? the of Henri. per of

Henri Steenkamp

an no guess sort But with it I we year to way the of about went don’t amount have think for spillover. into Mickey. I is a you, exact

course, basically have declared even. we And third of dividend. now the So is break then, this

by and $X.XX three over quarters have then has between $X.XX dividend and obviously We earned far. quarter thus declared the since each and had

So sort current to amount parameter what how is. I the that gives think you think about a of of hopefully sort and

Mickey Schleien

pay one am didn’t … also so was there Henri a assuming you where I But quarter dividend,

Henri Steenkamp


Mickey Schleien

is the and taxable now? income …taxable fairly undistributed right meaningful

Henri Steenkamp

the I the mean $X.XX Yeah. as to you there’s said. so… there’s exactly probably for $X.XX other quarter, one Well, quarter and then

Mickey Schleien


Henri Steenkamp

amount. less …that’s the more yeah, or what --

is said CLO’s having obviously still unknown, refinancing, for the there that, purposes. CLO Now tax consolidated

could as that progresses over months. of that the also So couple that next impact obviously

Mickey Schleien

on either when And remind or you Right. are Henri consider… then RIC rules, to distribute you can required under us just that

Henri Steenkamp


Mickey Schleien

…options for that spillover?

Henri Steenkamp


end So we has coming months means That XXXX, this into so February, only half year’s spillover. the a February. this no with after year and the this February of be full taxable went eight through income to distributed

a it’s November middle I year. only, think, So of this

the So there’s And distributed. still be to quite a have all amount post-February dividends as February that period of well. the would spillover until obviously would count towards

Mickey Schleien

Right. Right.

Thank me Okay. this for performance. on congratulations you morning. That’s it and your

Henri Steenkamp

Okay. Thank you.

Christian Oberbeck

Mickey. you, Thank


Thank you.

question Riley next ahead. B. is Beckham Our with Securities. from [ph] Serge Please go

Unidentified Analyst

Hi. Good morning and thanks for taking question here. my

in you. opportunities rate seeing of capital. and Just Thank environment? you recycle increased especially sectors I wondering or guys prepayments the the are most currently industries suppose what to light

Christian Oberbeck

Good take will morning. that. I

more I think where obvious which -- investing environment. we we the not avoiding opportunities are certainly flip there the about the we are is of are think is seeing capital are it generally side ones COVID or where in we that, way the and

interaction. and space those especially travel and be types deal and certainly, we Those space, require the hospitality avoiding interaction Those So COVID to greatly industries that good of avoided. and are we the that happen in affected have leisure anything are new of where in restaurants. doing anything and industries are those most areas a human group

well, see up marketplace. and economy any We that have think, there even in this up businesses marketplace even what’s holding the have activity really there. subsets those that that well increasing by have for flourished large, some lots greater businesses environment, there happened are anything in activity this I certainly and are of held significant of performed the is If interest. well in of the

that SaaS their platform. those see amount that models to there valuation expertise we the our of and in proven to this that residential delivering management are penetrate One development start a that Two have this out point are businesses one super software-as-a-service of we would that a type that -- new last business And we of are businesses happens business heating are be an are so case You company, weren’t it’s I multiples are bit themselves. excited activity to fair That example. through model are, about kind group be things are that platform, as one in conditioning build example toward or space is of companies well, business and space. and There we new out the sector port but and aggressiveness a would further product is industry quite in we the in But three seen a market. have up lending lower is dental expand of in and particular of middle practice port of quarter businesses the those were one air portfolio much them three that -- very invested another a end in, for two business last businesses the customers. holding exceedingly software specific. there that for

Unidentified Analyst

you Thanks of Got you kind given and are the comments make regarding floating? the can it. maybe portfolios of for what some And bulk the color. rate seeing environment spreads on that interest

Christian Oberbeck

floor. the Well, assets at is on of as out, Henri spreads news that their good are pointed all our

are But I that businesses the in a is witnessed very already lending strong of on to quite got for are what marketplace back our pre-COVID kind people and spreads by have LIBOR, aggressive experience of that, kind returned if is certainly erosion any being there large. But say between and we pre-COVID levels. won’t we would credit, And are levels spreads the and -- are for to in those that getting that further portfolio. drawing we So we there’s businesses in performing aggressive which described. to is of I it businesses sectors in have the distinction those people have kind

Unidentified Analyst

Thank all me. for you. That’s

Christian Oberbeck

Thank you.

Henri Steenkamp

Serge. you, Thank Great.


Q&A final today. for will I the concludes Thank turn his call remarks. you. back And to session this Oberbeck for our Christian

Christian Oberbeck

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


your for participation today’s you Thank conference. in

disconnect. now You may