Q1 2020 Earnings Call

[music].

At this time I would like to welcome everyone should the CDC Inc. conference call for the quarter ended March 31st 2020.

Participants are in listen only mode question answer session will follow the company's formal remarks.

Anyone should require operator, especially during the current French Please press star zero on your telephone keypad.

Today's call is being recorded at a replay will be available approximately two hours. After the conclusion of the call on the company's website at www dot varied BDC dot com under the Investor Relations section.

Please note. This call may contain certain forward looking statements that include statements regarding the company's goals beliefs strategies future operating results in cash flows.

Although the company believes these statements are reasonable actual results could differ materially from those projected in forward looking statements. These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks, including those just was under the section entitled risk factors and forward looking statements in the Companys annual report on form 10-K for this fiscal year ended December 31.

First 2019 and quarterly report on form 10-Q for the quarter ended March 31st 2020, each is filed with the Securities Exchange Commission.

Thanks, BDC undertakes no obligation to update or revise any forward looking statements unless required by law at this time I will turn the call over to Eric Lloyd Chief Executive Officer for banks BDC.

Thank you operator, and good morning, everyone first warm start well, just saying I hope everybody is doing physically and mentally well and whatever situation. You're currently on it that you and your loved ones are making the best of these unique times.

We appreciate everyone joining us for today's call. Please know throughout this call will be referring to our first quarter 2020 earnings presentation. That's been posted on our Investor Relations section of website.

On the goal I'm joined by berries, Bdcs, President and co head of finance, Yeah. So our topic Donald managing director and the portfolio had work for our liquid credit.

Worldwide, your old and Bdcs, Chief Financial Officer, Jonathan Bock.

And John will Bureau, first quarter results and provide a portfolio and market update a few minutes Oh I'll begin today with some halibut comments about the first quarter and the market volatility that we saw.

Please turn to slide five of the presentation in the first quarter liquid credit markets NBC stock prices experienced or worst quarter since the 2008 financial crisis, falling roughly 14% and 46% respectively.

The global fear and uncertainty we created by the co. Good 19 really drove strong across the board.

In the past we discussed the high correlation between liquid credit spreads a BDC stock prices and this correlation prove true again in the first quarter.

Regardless of the underlying collateral whole by Bdcs.

Just to the equity markets revalued risk in the BDC space in the first quarter, we believe that increased risk and corresponding price moves should be reflected in our net asset value.

On slide six is your first quarter highlights as we were expecting to market volatility caused by Koby Nike had a direct impact on our net asset value as NAV per share decline, 20.8% and the quarter to dine dollars and 23 cents.

Hi, John will go through an average later, but suffice to say that unrealized depreciation or portfolio. What's the driver of this decrease.

Each quarter, we value our investments by taking into account market and portfolio company information in our internal valuation process that is consistent across the entire bugs platform and consistent quarter to quarter.

Our total investment portfolio is carried at 87.4% of cost at March 31st versus 98.3% of costs at December 31st.

Overall, we've been pleased were held the sponsors a management teams of our middle market portfolio copies of handled these challenging market conditions.

All but four about middle market debt investments are dying to above 90% of cost as at March 31st with the remaining for valued above 85% across.

We continue to have no nonaccrual investments and all oil companies made their scheduled interest in France principal payments in the first quarter.

Additionally, we've seen improved conditions in the liquid markets since quarter end, resulting an appreciation or broadly syndicated loan portfolio.

Ultimately however, how quickly the country gets back to work will be the critical driver for poor performance in the second quarter.

Well performing <unk> performance was certainly the quarter. The story of the first quarter I do want to point out a couple of other key items.

Our net investment income per share of 15 cents, what's consistent with the <unk> fourth quarter of last year, and 1% blower <unk> first quarter doing enough 16 cents per share.

Well, we did see the expected increase in our investment income for the quarter as result of our middle market deployments last December the impact of further elaborate declines and overall slow down the middle market lending at March resulted in a real relatively flat investment income and <unk> net investment income for the quarter.

Second drums or portfolio rotation, we had gross middle market originations of $93 million during the first quarter, which were funded in part by 46 million of net broadly syndicated loan sales.

Importantly, what we saw the slowdown direct lending market in March the breadth of the bearings platform allowed us to be opportunistic with strategic purchases of 22 million or broadly syndicated loans and 12 million structured product investments at attractive prices that should generate increased returns in future quarters.

It was during these times or market volatility.

The bearings widen investment funnel across global markets multiple asset classes and allow the barron's BDC to remain active in these markets and searched for the most attractive risk adjusted returns.

On slide seven we summarize some additional financial highlights for the first quarter and in each quarter of 2019.

Despite the NAV declined during the quarter, our net debt equity ratio was 1.3 times still well below the regulatory threshold of 2.0 times and providing a cushion to withstand additional pressure on asset values meet our contractual commitments for unfunded capital and support existing and new investments with incremental capital.

Currently the decisions we've made since becoming the investment advisor to the BDC and August 2018, including our fee structure, our focus on high quality true first lien senior secured investments as well as bearings unique ownership by mass mutual have positioned us to manage through these challenging markets and opportunistically take advantage of market dislocations.

That should drive long term shareholder value.

Turning to slide eight I'll provide a quick update on our share repurchase program Youre called that we announced a new share repurchase program for 2020 on our last earnings call whereby the board has authorized the company to purchase up to 5% of its outstanding shares during the year of shares trade below NAV per share subject to liquidity and regulatory constraints.

This program kicked off in early March and through yesterday, we have repurchased roughly 2% of our total shares outstanding or approximately $7 million.

The volatility in our stock price created a strong buying opportunity as our average purchase price per share with some dollars and 21 cents over the entire period and the first quarter NAV accretion of three cents per share generated by these repurchases should provide a long term benefit to shareholders as one person's replay.

As a reminder, bearings LLC continues to be bearings bdcs largest shareholder only 28.4% other shares outstanding. Another example of our commitment to long term shareholder alignment.

Let me finish about thinking the bearings team for their incredible tremendous efforts. During this difficult time of uncertainty we're focused on the health and wellbeing of our employees and of our communities, creating a work from home environment and flexibility to allow employees to do their job effect will be well, taking care of their families and loved ones and themselves.

I continue to be impressed by the focus of our investors portfolio companies and other stakeholders and their tireless efforts I believe will prove to be a driver of long term success.

I'll now turn the call over the end to provide an update on our investment portfolio and what we're seeing in the middle market today.

Thanks, Eric and good morning, everyone I want to Echo Eric's comments I hope all of you and your families are well unsafe.

On Slide 10, we show a summary of our investment activity for the first quarter.

Frankly from a middle market investment standpoint, the first quarter consisted primarily of January and February.

New investment activity largely came to a standstill in March.

New middle market investments totaled 93 million with sales and repayments of 41 million during the quarter.

New investments included 10, new platforms, including for European platforms, and 10 follow on investments.

Regarding the follow on investments 9 million was for the funding a previously committed delayed draw term loans and 6 million was four new commitments to existing portfolio companies.

And then all instances the investments were made to find acquisitions.

Other than funding 1.6 million of delayed draw term loans in April to fund add on acquisitions.

Bearings BDC.

Has not made any additional investments in portfolio companies.

To support liquidity needs driven by the current economic environment.

It's important to note that bearing speed to see does not have any revolver commitment.

So there's not been a drain on our liquidity as a result of portfolio company revolver draws.

John will discuss our liquidity in more detail.

But we remain focused on our ability to meet all of our contractual delayed draw term loan commitments two portfolio companies.

Given that our de T cells are generally earmarked for acquisitions.

And required compliance with incurrence covenants.

We would not expect mint material usage of these DTT else in the current economic environment.

As Eric mentioned, well middle market activity was slow in March we did opportunistically take advantage of market conditions.

Of the 28 million of broadly syndicated loan purchases and the quarter 22 million was made in March.

We also made 12 million of structured product purchases.

Which includes HEALOS and private asset backed securities.

Given the prices of these assets, we believe the long term returns generated by these high quality liquid investments.

Well generate some of the best risk adjusted returns available in the current market.

On prior calls I've emphasized the value of choice.

And bearings large investment funnel across high quality Obligors and desperate asset classes has proven to be advantageous in this volatile market.

On Slide 11, you can see that at March 31st we were invested in roughly 645 million a private middle market loans in equity, which included 74 million of unfunded commitments and 385 million up liquid broadly syndicated loans.

I'll walk through how the portfolio change during the first quarter in a minute.

But first I'd like to make some high level observations about our portfolio.

The portfolio statistics on slide 10 regarding leverage interest coverage and EBITDA are all generally consistent with its the statistics, we reported last quarter.

Given the timing of financial reporting these metrics are primarily supported by portfolio company financial information.

As of December 31st 2019.

Even after they are updated to reflect first quarter portfolio company results.

The covert 19 impact in our economy will not be fully reflected.

That is why it is important to focus on items like seen already and diversification in this market.

Our total portfolio is 96.9% senior secured.

First lien assets spread across 29 different industries.

The 571 million funded middle market portfolio was spread across 62 portfolio companies and 18 industries and sponsored back transactions.

Well, the 385 million BSL portfolio was spread across 94 portfolio companies and 20 industries.

Our top 10 investments are shown on slide 12.

Reflect another aspect of the overall diversity of our portfolio as a top 10 positions represent only 21% of the overall portfolio and no investment exceeds 2.4% of the total portfolio.

Yes, no single investment should have a significant impact on the company overall.

There are many unknowns heading into the second quarter and beyond.

Which is why a high quality diverse portfolio is more important than ever.

Slide 13 shows a bridge of our total investment portfolio from the end of 2019 to March 31st.

We've touched on the key origination a repayment components.

But this slide also shows the impact of unrealized depreciation on the portfolio as a whole which totaled 121 million for the quarter.

This unrealized depreciation has further broken out on slide 14.

You can see that approximately 83 million or 68%.

Of the unrealized depreciation was attributable to our liquid investments, while 35 million or 29% was attributable to our middle market portfolio.

Within the middle market portfolio 26 million.

Was driven by higher spreads in the broader market.

For middle market that investments based on our observations of a combination of high yield the middle market indices.

We've classified 8 million.

The middle market portfolio unrealized depreciation.

As being attributable to underlying credit or fundamental performance.

At this point the vast majority of this is not driven by reported portfolio company results.

But rather are ongoing.

Proactive analysis of the impact of the current situation on our portfolio companies.

Including the effects on revenues and liquidity.

Through our discussions with management teams and sponsors.

Certain investments have been impacted more and others and our valuations have been adjusted to reflect this.

As Eric indicated all of our portfolio companies made their scheduled interest and principal payments in the first quarter and we continue to remain in close contact with each company is a co vid 19 situation develops.

Switching gears a broader market. Please turn to slide 16 of the presentation.

Average unit tranche spread saw slight uptick in the first quarter. They remain near historic lows, while spreads for the other non bank structures generally decreased during the first quarter.

Is important to keep in mind, however that the majority of this data was driven by market conditions in January and February.

The spread increases as a result of cobot 19 are muted thus far.

As you can see from the credit Suisse single B leverage loan index.

We would expect spread increases across the board and the second quarter based on current market conditions.

Slide 17 gives a graphical depiction of relative value across the triple b that will be and single B asset classes recall bearing size and scale is a 327 billion asset manager provides our BDC with unique investment frame of reference and bulk liquid and illiquid credit.

The data here outlined spreads at three year highs across the spectrum.

But it also shows the relative value opportunities that can exists for investors at different levels of credit risk.

For an example.

And investor looking to take single B RIS can earn an investment spread of 981 basis point invested in liquid corporate loans relative to approximately 750 basis points indirect lending unit tranche.

In contrast to the extent and Investor why did a similar yield provided by that unit trends transaction.

But improved their risk position, they could considered structured market investments and triple B C O loads at wide spreads.

In short the.

The value of choice across markets provides a meaningful benefit to the BDC investors.

In our core direct lending markets, we will continue to be highly selective focusing on select sponsors and markets across the U.S. in Europe.

We will also continue to be opportunistic across the credit spectrum.

But always maintaining diversity.

Without an over emphasis on one product obligor or or geography.

With that I'll turn the call over to John to provide more color on our financial results.

Thank you and I'm on Slide 19, you can see the branch of the company's net asset value per share from December 31st 2019 to March 31st 2020.

Now as Eric mentioned, our dad was down by $2.43 this quarter to $9.23 per share declined approximately 20.8%.

This decrease was due to net unrealized depreciation of $2.44, which was offset by one cents for the net impact of all that impact of the of the all the other drivers combined including three cents accretion from share repurchase, including the three cents a share accretion for our spring.

Our share repurchase program.

You saw that a breakdown of it's unreal I realize depreciation on any per share basis was also shown when you can discuss slide 14.

No at a high level over 90% of any be decline was driven by broad market is caused by spread increases for middle market loans and price declines for liquid investments.

Also reflected on that chart was the fact of foreign currency fluctuations did not having material impact on airport on our financial results in the quarter, what you'd expect given our hedging strategy.

Slide 2021 show our income statements balance sheets are last five quarters from an income statement perspective, we've already touched on some of the key highlights, but I'd like to point out a few high level trends on the topline are consistent portfolio every tape rotation has resulted in an increase.

Our total portfolio average spread of 84 basis points since March 31st 2019th.

With the average spread increasing from 373 basis points to 457 basis points. The average yield at par in our total portfolio. However has decreased from 6.2% to 5.7% over the same time horizon as a result of lower libel, resulting in a relatively flat total level of invest.

Net income.

Now this market dynamic could it made tempting to pursue higher yields in order to grow the bottom line, but its during the turbulent markets. We're experiencing today that we're happy we remain focused on a primarily first lien strategy.

You can see on slide 21, our balance sheet trends, excluding our short term investments total investments at fair value were down approximately 106 million compared to the fourth quarter due to the unrealized appreciation that we've discussed excluding this impact the portfolio would have increased $15 million based on.

Portfolio rotation and similar to last quarter, our cash balance in short term investments balance at March 31st we're largely transitory due the timing of repayment of our BSL credit facility and debt Securitizations with the proceeds from our BSL sales.

During the fourth quarter, we lowered the tenant on the BSL facility from $150 million to $80 million in further lowered its a $30 million subsequent to quarter end to rightsize the facility relative to our raining DSL portfolio following a $20 million repayment.

Also during the first quarter $27 million. This yellow class a one notes were repaid bringing the total CLL debt principal balance down to 291 million at March 31st an additional 65 million of the CLL class a one knows what we paid in April bringing the total current CLL debt principal.

Balanced out to $226 million details on each of our borrowings are shown on slide 22.

Our debt to equity ratio at March 31st 2020 was 1.42 times or most importantly, 1.2 times after adjusting for cash and short term investments in unsettled transactions.

Pro forma for the BSL credit facility in the CLL debt repayments in April totaling $84 million, our debt to equity was 1.23 or roughly in line with our net debt as of March 31st I'd also like to note that.

Our only debt maturity in the next two years as the BSL, Chris the credit facility that matures in August of 21, 2021, which is now down to that sides roughly $30 million.

Jump to slide 23.

From a liquidity perspective, our primary sources of liquidity continued to be the proceeds from planned rotation out of our liquid DSL as appropriate.

And depending on those markets divisions as well as the borrowing capacity under our 800 million dollar senior unsecured corporate credit facility.

Today's available borrowing capacity under this facility, which is all subject to leverage borrowing base and other financial covenants would allow us to borrow a mouse up to the approved regulatory limit of two times, we certainly do not plan to increase leverage that level, but I want to use that to illustrate that we have the available liquidity support.

Listing portfolio codes and remain active market participants today.

The chart on slide 23 shows the impact on our net leverage of funding our unused capital commitments.

Well bearings did not have any revolver exposures on our balance sheet, we have $73.5 million of delayed draw term loan commitments to our portfolio company as Ian mentioned as well as our remaining 40 million dollar commitments to our joint venture and that's not [noise].

These DDT l. commitments are generally in place to support portfolio company acquisitions, and also generally have incurrence test limiting their.

Total leverage that's we'd expect usage in those dinky else to be limited to those companies generating very strong results and further limited by the depressed level of acquisition activity that you're looking at in today's market.

Now why we'd expect limited usage. This table shows that we do have the available cat capacity to meet the entirety of these commitments if called upon while maintaining cushion against our regulatory leverage limits.

In addition, our 385 million dollar liquid broadly syndicated loan portfolio also provides additional liquidity if it was needed what we could sell those investments to reduce leverage while not impacting current nagy. We can also sell those investments in order to redeploy the capital and other investments with improved risk adjusted return.

Any sale right of course would likely convert to an unrealized would convert an unrealized loss to a realized loss, but long term that can be improved with the incremental returns on those new investments one final point regarding our liquidity and capitalization relates to our ability.

To issue shares of common stock pursuant to board approval at a price below in Avi, which was approved at our annual meeting of stockholders yesterday.

We appreciate the support that we receive from our shareholders on this proposal, particularly during a period of such extreme market volatility and uncertainty.

It was evidenced to us stockholders that place their trust in bearings and the board and we take that responsibility to act in our shareholders' best interest.

Very seriously slide 24 updates are paid and announce dividends since daring took over as the investment adviser to the BDC.

We announced yesterday that our second quarter 2020 dividend of 16 cents a share will be paid on June 17th 2020, and this dividend levels consistent with the first quarter and represents two important points.

First the reality of the current market environment is that middle market originations will be lower than historical levels. The breadth of the bearings platform will allow us to take advantage of opportunities as the market continues to evolve, but we would not expect overall portfolio yields to increase materially in second quarter second.

Maintaining a consistent dividend level represents our current expectation that our portfolio continued to perform in the second quarter, given how well it was positioned entering into the crisis and how it's managing through the crisis to date.

Slide 26 summarizes our new investment activity during the second quarter and investment pipeline. Since April 1st we closed end fund one new middle market investment $10 million of equity in first lien debt wasn't origination margin or be in three of roughly 9.6%. We've also funded $1.6 million per previously committed.

Yes, primarily to one well performing European portfolio company in order to fund some tuck in acquisitions. The current bearings global private finance it doesn't pipelines approximately $110 million on that probability weighted basis, and it's predominantly first lien senior secured investments as a reminder, this pipeline to estimated based on it.

Expected closing rates for all deals, it's less than the pipeline and lastly, I'd like to provide an update on our joint bumps or what the still the South Carolina recalling it system.

Local allows us to leverage the broader parents possible that increases the industrial diversity within the BDC well not that's much Muslims first the cost basis of BBB season, but remain on budget dollars as we continue to Robinson <unk> subscription levels facility.

The $1 million of investment declined while the fair value of the investment declined to $6.4 million now this quarter's decrease in values largely driven by the same technical price driven valuation much then pop drinks DTC.

The JV portfolio consists of weapons, 70%, probably syndicated loans, 21% middle market that investments and 9% public and private ABS securities. We will evaluate opportunities to learn subsequent quality flux recalled it including make investments in new girls and I'll hop attractive risk adjusted return profile in this.

Some violent and we thought operator, we would love to open the line for questions.

Thank you, ladies and gentlemen, we will now be conducting the question and answer session. If you would like to ask the question. Please press star one on your telephone keypad confirmation trends indicate that your line is in the question Q you May press star to if he would like to remove your question from the Q for participants using speaker equipment, and maybe necessary to pick up your hands.

As far pressing the star keys, one moment, please let me pull for questions.

Thank you My first question comes from Robert Dodd with Raymond James. Please proceed with your question.

Hi, guys, Oh, the and I appreciate all the color you gave in presentation locks et cetera on the <unk> any remarks related to credit.

79 cents pretty small.

Compared to the Oakville, Mark because the market.

Mentioned, obviously, that's based primarily on 12 31 financials, but then discussions with with portfolio companies to get more up to date information that expectations can you give us any.

Paula on Kinda, how you know obviously those marks in principle, a you know the values that sweet 31 can you give us any color about what you've heard.

Since then.

That may be differs from either better or worse, but frankly versus expectations that you built.

Into those marks at at that time, obviously there are forward looking then but you know what month slate of as well so any color on that.

<unk>.

Sure I can take this one then and Eric and John If you if you want to jump in Yeah go ahead.

So just just to provide a little bit of color here I think you know when we have the benefit of being a a global platform with with businesses and in Asia, and and so through our parent mass mutual in bearings.

This whole event that was occurring the healthcare crisis, we were seeing it happened real time in our markets that were that were in globally and even our direct lending business, we'd have people on the ground in Hong Kong <unk> Hong Kong. So we anticipated that there was gonna be potentially impact to our market you know I've.

Finally, we would not have been able to anticipate the shelter in place and all those other factors, but we did assume that there could be demand supply shocks to our portfolio companies and potential operational disruptions and and so like we said in our in her opening remarks, we did not used to 12 through.

One financials nor expected.

First <unk> first quarter performance, because I didn't really.

Reflect the true impact of cobot, which really would have been felt a in march particularly the last half of March and as you pointed out Robert We you know we had many discussions with management teams beginning in January progressing through early March a as we tried to identify which come.

And he's had high medium and low exposure to co bid and then also had to assume that there was going to be a subsequent economic recession that would follow.

And and every investment that we make a even before all this we obviously spent a lot of time on a downside scenarios, assuming a cycle. So what we try to do in our discussions was was really bridge that downside cycle with the input that we were getting from the management teams through there.

Our analysis and their assumptions of this event.

And as you point out its in precise it's not perfect I think directionally, it's more realistic its certainly not appropriate to be using Q1, you really want to Q2.

Projection, because Q2 will really truly reflect the full impact of of coded and beyond Q2, it's really hard to get a line of sight in terms of what what the environment's going to look like so we're having calls every few weeks were adjusting our marks based on those.

Calls and you know I would say that in a number of cases management teams when.

In mid to late March when this thing totally happened and people were you know really concerned about the event and it was really unknown. How this is going to play out I think some of the the analysis that came back was very draconian and and.

And the actually based on conversations some of those businesses are doing much better than they expected.

And others are on plan and maybe some others are a little worse. So it's it's kind of all over the board <unk>. The one benefit we had going into this is that when you look at the industries that were the most vulnerable industries.

With this healthcare crisis, you know they are industries that we avoid are underway on ongoing basis. So through luck and and discipline. We were we were able to avoid a lot of that I'll, let Eric or John chime in.

Well so.

Robert does that answer your question.

That does thank you and that leads me to kind of the next one [laughter].

So I put it on all you know there was some obvious industries conceptually when you know if if if yet you know Jim you know hotels hospitality things like that where there's obviously going to be big issue other than any other industries that you've seen so far.

Maybe it's surprising on how negative the impact has been or how well where they've they've whether that so far I mean, it say.

Right meaningfully better than expectations.

Yeah.

Great question again. This is all based on our conversations with our management teams obviously.

It's it's not anything that we've actually seen in numbers. So we do get monthly numbers smoke and for most of our account I would say.

You know for logistics, we have three logistics.

Companies in our in our portfolio. They all seem to be doing a very well. So we haven't seen any any impact one of them involved in.

The shifts minnows of food or the other one is chemicals and life Sciences. So you know think essential items I guess, that's probably what has been really surprising is depending on these companies and where they fall out from a essential serve.

This or not.

And those companies that are you know more discretionary less essential are the ones that it's just really gotten bad and so you know Fortunately.

We don't like retail and restaurants at a in the middle market because of the of the risk when you when your financing small businesses like that where there's a lot of discretion and you're seeing and in this environment, even larger retail and restaurants.

Were you would think critical mass skin diversification would be a protection quite frankly, a those businesses have just been crush I've never truly been a big believer in recession resistant businesses, because I think every business does.

It is somewhat impacted to a to the economy overall I think a lot of people look at health care as being somewhat recession resistant. So a surprise to me would be companies that are in the health care space that provide valuable services like.

Dental management practices that are being impacted in this environment.

So it's it's it's all over the board we have.

One business that is in the business of dealing with.

No crime scene sand, you know just kinda cleaning up.

Situations, where.

Unfortunately people have died are getting killed that business is obviously you know doing quite wellness in this environment.

So it's really all over the board and it's fluid and just based on the shelter in place, it's really hard to predict <unk> the impact.

Oh, and how does that Oh, we got there.

As you know, it's kinda like what we learned in 2008 nine right. It's there's the first order effect would you be obvious ones and so you look out your portfolio as Ian said, we immediately went to every portfolio called pretty and put them in three buckets are based on the cobot impact high medium and low sounds simplistic, but you know sometime supposed to be works, but.

First order impact really easy ones, it's really the ones that are second third order impact right. You know you Gotta look through that company and say, okay over their ultimate end customer you know 25% of it is tied towards let's just call catering or something like that right, where you know that business. He is going to going to go away and so I think what what the teams.

Doing well is really looked through and the company beyond just kind of the surface level really understanding that company from our underwriting engagement with the management team and sponsors.

And really haven't discussion on those kinda second third order affects them and I think those will be the places where you know they've either be positive or negative surprises I think that certain other wonder just pretty obvious to everybody.

Thank you. Our next question comes from Sydney and shape with Wells Fargo. Please proceed with your question.

Hi, guys good morning.

First question for John on issuing below and Avi.

Can you give us some more color on where you would issue below book.

Including do you hear us as a tool for defense or your own capital structure may be stressed or off fence, where the market opportunity would wouldn't merit new equity.

[noise], Thanks, and <unk> for that and just to just to bring out the those that are out there and are we talked about.

In the proxy we'd received approval to issue approximately 25% of shares below in a the outlining the factors and the proxy and and the benefits maybe a few high level thoughts because you know what we want to outline is is remember dilutive issuance I can in certain circumstances.

Be seen as a benefit.

That being said history in the space might outlined that its use could be could be a little bit checkered.

And so our point and having the ability to do at one is seen as a significant responsibility and for us. It always starts with alignment. So thin you've seen the fact that we own over 28% of the shares the largest shareholder and so one would not be looking to dilute or harm a that position in the future and really there's.

There are some afforded benefits to the extent that you think about dynamics in debt capital and credit ratings et cetera, having that ability and that but but also carrying a high degree of responsibility for having that ability. So I wouldn't rule out anything to try to say, it's a certain level here or there it's always done to these.

Then as ever needed in line with shareholders best interests, which we are the largest one but but you know given the past of of you know certain dilution for investors.

Which can in some <unk>, which is harmful and even rights offerings are dilutive. It's just the different part of the class that gets diluted you end up kind of realizing that that its a tool to have but one that you wouldn't put on the front burner as one to use as much as it's just a part of a dynamic plan and really you look at the key.

Current liquidity position, where we sit which we feel very comfortable about to both acquit new investments and support our portfolio code. So less well, that's a hard and fast line and more of a broader picture to look at for US. It's all about alignment we've proven that we want to continue to stick with it given our shareholder or set we appreciate the benefit that we receive having that option.

I see that isn't enormous responsibility to our shareholders and we choose not to have any way shape or form take advantage of that and harm Investor Trust fend does that answer your question.

Yes sure thing.

And Oh thinner and if it does vary I just want to be your crystal clear mixture we are.

Yes for that the right and <unk> you know, we're grateful that people do choice for that liability medicine that that could occur down the road and what flexibility it could give us we have no intention as John said you know this these times within its just that are asking for that.

Approval, just happen to coincide with us market volatility.

We intend to ask for that six months ago three months ago. At this time, so I don't want anybody to read into the timing of that request and this market volatility that somehow those two things are connected there weren't conducted at all.

That's helpful. Thank you and then for eat enter Eric you you touched on the opportunity in liquid or structured products can you give us you know any views on expanding your commitment to a joint venture where.

Sure where you can approach this in a more tailored fashion on asset selection leverage and so forth and if you agree would you have the appetite to set up another joint venture where you hold to more of an economic interest.

Oh I'll start with a joint venture question and then all lateral it over to Eric kind of talking about the the broader the broader platform and how we see opportunities.

For us, we're very painful and appreciative of our joint venture with South Carolina, but remember what happens here is often joint ventures can in certain circumstances become the tail that lack the dock.

Were you know too much of an economic interest in a JV that drives went earnings with high levels of leverage can end up walking people into a situation where that becomes the primary driver of return for us, it's about diversification and having that ability even at a in our commitment size, we feel very comfortable you know at.

At that level that we both receive diversification into other asset classes that the BDC can't I easily participate and given bearings why investment final, but also not creating the situation, where it where tails do whack docs and you lose that benefit of the of the diversification overall and so that's one made.

Your point, and then and then to pass it to Eric on kind of relative value really that the fact that weve had such a wide funnel and and and sit across a number of of global global asset classes that that that report to Eric you know this is that the opportunity to look across those to generate returns and we're finding opportunities both for the BDC.

And the JV and oftentimes they can co invest together, but a lateral that went over to Eric.

Yeah. So.

I would answer the specific to your your question we have no intention right now starting up a another JV or with anybody and are having a larger stake in India that I feel like no. Our real focus is on the asset quality and portfolio management of the existing portfolio and making.

Sure we performed exceptionally well with those assets I think what we tried to show in this quarter was the.

Beginning to show the shareholder base that the bearings platform has the opportunity stuff, that's broader and different than some other people and you know we didn't want to go too deep into that structured products. You know initially, but one of them show that the type opportunities that would exist and so.

And I think overtime.

Could you already of course news could you see us doing more of it well always going to go to where we think the best risk. Adjusted returns are we have a liquid and Tom can speak to this really liquid high yield portfolio relative value committee that that typically would meet every couple of weeks been read more frequently as measured these days.

Where we look at loans versus bonds, we look at Europe versus U.S., So U.S. loans Europe loans, your European high yield U.S. high yield and all of the structured credit components in there and actually includes our emerging markets business and the like in that and that discussion and so as a firm in our DNA is always about relative value. It's always about where's the best.

Risk adjusted return given the situation. So as John mentioned, you know if you looked at what could happen here did happen in March you saw some opportunities where frankly, the liquid market provided materially better risk adjusted returns than the middle market did and so we're always going to go to where that's relative values.

Thank you I answer your question.

And your line is life.

If it fits into that answer your question.

Yes. Thank you.

Got good.

Thank you. Our next question comes from Kyle Joseph with Jefferies. Please proceed with your question.

Hey, good morning, guys and thanks for a everything you provided in the deck very helpful. I just wanted to get I get a sense for given a another drop in rate this quarter or give us a sense for where we are in terms of LIBOR floors on your portfolio and remind that well present.

Each of your portfolio, but the BSL in the middle market portfolio do you have LIBOR floors.

Oh so.

Okay go in <unk> in for the Middle market and Tom for the liquid side I don't have an exact percentage for you on the middle market I would tell you. The majority the vast majority of ours have a lot more floor.

Goats, typically 1% we saw some pressure I'd say you know three to six months ago, where people are drawn to pick those out and maybe just put a floor zero in there. So I would say, it's it's the vast majority, but I don't have a specific number of electric.

You know that the exact percentage off you know top your head.

Yeah, I don't want to give the exact percentage, but I think if you looked at surge.

80% to 90% that'd be kind of directionally.

In the ballpark and certainly I can tell you today any any document that we open.

For whatever reason.

We're making sure that floors are in there as well so tightening other.

Items in the documentation I'll turn over to Tom on the of liquid side.

Yeah, I I'd say, the liquids <unk> kind of exact opposite of that almost 90% of the deals have zero percent floors. So there's a floor, but it's at zero and so we don't have the benefit of that 1% floor for the majority of the market in the broadly syndicated side.

That's very helpful. Thanks I.

They are that the majority of the Mark.

At 331 with it sounds like primarily driven by.

I.

Yes out in the event can you give us a sense and how much of that has come back a quarter to date.

Yeah. This is Tom I'll I'll take that one we've had roughly kind of call. It a 4% recovery on prices and broadly syndicated loans odds generally you know that yes index is a good measure that it's up about 4.2% I'm in the month of of April and were roughly in line with that.

Got it thanks, and then one last one from me. Obviously this you know depend on ultimately that the duration of this this impact and whatnot, but just want to get your initial perspective on a on how that disruptors disruption impacts that can competitive environment.

Any sort of outlet for potential consolidation.

It was.

But there then turned over to then turn it over to Buck.

So.

Two years ago, or so I was on a panel for in Super return over in Europe, and and someone asked about volatility and what my view of that was and I said, yeah. I was actually looking forward to it I'm not sure I was looking forward to this kind of this will help guilty oh or in the sudden well going forward to it because I do think or your question is it's an opera.

Too early to separate the better quality managers from others, right and I think they'll be.

I think everybody's going to have challenges in their portfolio and as I've said to our team for years and any investor I talked to institutional shareholder you name. It sounds like you know you really don't make your your your keep <unk> you know makes your money on you know, having a 8% origination yield versions of 7.75 origination.

The old or you know I need to half or season, I I mean, you really make it by managing downside risk and being having the experience base to manage the that downside risk and and having a deliberate portfolio construction that helps you protect from that because you know how starting now known as John mentioned.

You know we have the large amount of diversification our portfolio I think our single largest investment, it's plus or minus two and half for certain of our portfolio and so I think.

Volatility will be I think ultimately good for the industry, because only they'll they'll create some separation as far as consolidation I mean, you know well see where that goes it's a it's a difficult industry to consolidate given the way you know structures are these businesses, but I do think that you know.

The may provide some opportunities you know <unk> out there 'cause shareholders looked at it just how certain managers performed during this period of time.

John on <unk> I ended up yeah, Eric I'd Echo your comments and Kyle on no you're familiar with this but really the the economic challenges come in two parts the first as a.

Crisis of liquidity and you've seen that a on the part of the you know that the industry their liquidity issues right and then the second is up a point on credit that usually takes several more quarters and months to bear out the potential for acquisitions usually comes in a on the industry on that on that credit wave right, which we've yet to see.

Always just like anyone will will mentioned on the call always open for the opportunity to the extent its shareholder accretive but the goal here for US is to always realize that we've got great opportunities in our core markets assets and so that any such acquisition would need to be very compelling from a shareholder perspective, and it might get there, but but right now you have the credit.

Wave coming first and as you dive into to NVS and others. You know I think will you'll understand will all understand a in the future kind of where where the chips fall for the entire industry, but how does that help.

Oh, that's Ah thanks, very much for answering my question.

Thank you. Our next question comes from Casey Alexander with Compass. Please proceed with your question.

Hi, Good morning, everybody and hope everybody is a feeling well during this and thank you for the granularity of your presentation I I think in investors should really.

I appreciate particularly the breakdown of a unrealized.

Marks I think that's extremely revealing.

I've got a few quick questions here one.

You only touched on it likely in your presentation, but what have your conversations been with the sponsors of your portfolio companies.

And how does that contour youre bucketing from high medium to low in terms of kind of risk rating, where your portfolio companies are at.

Yeah, you won't see I'll, Yeah, I'll take this one show.

As I mentioned, we had a multiple conversations with management teams and then the second stage was.

Having conversations with sponsors because part of the analysis and again, what we're trying to bucket initially was exposure to co. Good from a high medium and low perspective, and kind of think of that as kind of the first wave and maybe the most disruptive wave with the assumption.

We're going to have some kind of recession.

The severity of that recession, obviously dependent on the duration of the healthcare crisis and and so.

As we identified companies with high and medium exposure to cope with them that conversation was with the sponsor. Okay. You have this company. It has exposure what's your game plan how are you going to support it both in terms of oversight.

Strategy and also capital and the reality is on the capital side sponsors have finite amount of capital and and so part of our analysis was you know getting a perspective from them in terms of where does this investment reside which we wouldn't know.

You know is it an older vintage vintage or a newer fun and if it's an older vintage spend therefore.

They have less capable capital available to support that company. So then you get into analysis of what other companies are still active in that in that portfolio and how much capital do they have and then it's kinda game theory about which ones do you think they're going to support and which ones you don't think they're going to support.

Or obviously with newer funds they have more capital to support those those companies.

So that was that was the analysis that we went through and it doesn't change the high medium low.

Impact of co bid, but it changes our playbook in terms of what our approach is gonna be if this company gets into either liquidity crisis, or a or a big risk you know big our restructuring the other thing I'll point out, which I did I didnt mention is that.

All the discussions that we had with her management teams and sponsors we basically took all that information to our high yield team. We have almost 50 high yield industry experts and basically had been validate what we were hearing in terms of the industries.

And and the the comments that were getting around the company's ability in that industry to withstand a any kind of liquidity issues or covert issues and maintaining that value proposition.

That does that help Casey with your question.

Yes, it does it and in a follow on in a situation where sponsor is at the end of the rope in the fund and obviously you know they they have rules about cross investing does the sponsor yet still participate with you again in sort of gain planning for additional.

All forms of capital to that company I mean, it seems to me that they just because they can't do it themselves doesn't mean that they are necessarily so we'll just kinda, let it go and do any of those options include government sponsored lending programs.

So I'll take it and then if anyone else wants to jump in please go ahead. So yeah, but the reality is yes, I mean, hopefully we've done a good job on the front end, we underwrite the sponsors that we work with so we're really.

Focused on sponsors that have operational expertise treat us like a partner or not not just like a supplier and so I historically through other cycles I've had sponsors that we're unable to put money in but really worked those companies too.

Due to help maximize recovery at the end of the day if additional capital comes in if it's the right sponsor they have a choice they can be diluted or they could they could lose lose their their equity completely and you know the right sponsors are gonna be supportive in terms of working a whole.

Stick plan, whether it's them, putting the capital or or someone else putting in the capital, but all of US working together to two you know preserve that company and maximize recovery and the only thing I'll say on the on the government plan is that's obviously, a new and kind of.

Changing environment, that's really up to the company in the sponsors to determine if that's program that they want to participate and participate in or not.

Okay. Thank you for that and John from a maintenance standpoint, the discussion of the debt pay down a as a subsequent event post the ended the quarter should we look at that as the coming from short term investments or is that more.

Being taken from a capacity on the credit line to repay those other forms of leverage.

Yeah, No no no no capacity on the credit line want it comes from short term investments in cash and you know we've been active a in and in sales to the extent that you know we generate a few that were still trading at attractive levels to where we bought or if there was some moves in and out but the by and large no I'm using your revolver cut.

Pass it to pay off SPV lenders is a bad idea.

Right. Thank you very much I appreciate you taking all my questions and again I hope everyone is feeling well.

Thank you.

Thank you. Our next question comes from Ryan Lynch with KBW. Please proceed with your question.

Hey, Good morning, I Hope you guys are all doing well first question just has to do with your your securitization COO you know as we obviously gathering and compliance as of Q1 with all your confidence and in that CLL, but you know as we kind of gets further down the road and I'm, assuming that we will.

I have more defaults are just across the board and more ratings downgrades.

For credit investments down the road how comfortable are you all out with with maintaining you know out your triple C Biden, but youre triple C bucket or you or your own see a cushion for that securitization going down the road.

Sure. Brian This is bocca, that's a great question and one that know how folks are financings extremely important so very comfortable with the us he cushion very comfortable with available Triple C to the extent that downgrades presets can I just want to outline kind of the timing you know that came out that that that's yellow is really a function of just proper financing its not design.

On to to overlap or you know or or or to generate turned but mostly just protect sit tight pay down that's the form of the static CLL and when it was done was done around that April timeframe that had a lot of that a year end malaise that occurred in loans in the latter part of 2018 right. So there was a lot of a a conservative.

Built into that structure. So a very good from a liquidity perspective and that securitizations built a with a high level of cushion to make sure that even in to the extent downgrades persistent and enter a heavily elevated that big cash flow NIM actually flowed through to the investors that answer your question.

Yeah, Yeah that's helpful.

And then kind of following up on an earlier question from from Robert.

You mentioned on earlier that you guys don't have Q1 financial she had really for most of your portfolio companies and so I think that would assume that next quarter, you're probably not going to have Q2 financials you got for your portfolio companies, which.

You know that's gonna be kind of the the real telephone how these portfolio companies aren't performing so.

In your discussions, though that you are happening as you mentioned are you guys getting formal our forecasts are for 2020 from your portfolio companies are these just more in form of dialogue that a better going on and you know at this point you know even if you guys are getting forecasts or just have.

And you know kind of decent formal dialogue calls with with portfolio companies I mean, how.

You know how how reliant can you be on really anybody's ability today to forecast you know what that the economic picture looks like going forward and how's that going to your specifically impact specific portfolio companies.

That that you guys are operating just given the unprecedented levels of uncertainty that that we have going forward.

Yes, I'll take that question. So again most of the companies that we have in our portfolio, we get monthly financials.

And so we're able to bridge those monthly financials with the baseline projections that the management teams are giving us. So while it is a discussion we're actually getting receiving and then walking through actual projections I think what I would.

Point out and you.

Highlighted this is we don't I mean, it's such a fluid situation. There's obviously the initial impact there could be secondary impacts we could have flare ups or we could have another way I mean, you know at this point a a full year 2020 plan.

As you know really going to be difficult to put together that has that is accurate. So you know our focus is really on the second quarter as the initial step because that should be a quarter where.

If there is a co bed a impact it fully reflected in the numbers and as we continue to see trend lines. We can started expanding you know those projections from that second quarter into the third quarter, but it's gonna have to be step by step it actually means we're having.

Conversations every other week, a with these management teams and going through their projections and looking at the month lease in time, those monthly projections into the forecast they've given us the see if there's any deviation at all.

And I think honestly, that's the only way you can manage through something like this because you know every cycles different. This one is obviously a very different cycle and you know we just we don't know how it's going to play out.

So to me that over time, so let me try and add something to connect the dots here and they can make sure. We're clear as he is that we do get monthly financials on a number of our portfolio companies. We said the we didnt have financials really the March monthly financials, you don't have March Thirtyth reported first when.

You go through it and so I think that we referred to but the actual the first month ahead material covert impact you don't really get those financials until more around now and most of your portfolio companies, but we did have the mumford financials prior.

So in our conversations with with management teams.

We really easy instead focus on kind of what do you think April may June look like because that really gets to the heart of the liquidity of the company right, which is really the most important thing in times like this particularly for ones that are materially impact or no tie that back to a comment that was earlier, where we talked about how we can take the conversation we hope that company.

Then work with our high yield research analysts we have you know really large in the how your research stuff that's industry specific.

And as you know for most middle market lenders, it's very difficult to have industry expertise and have a diversified portfolio took review of industry expertise. Your portfolio has a lot of those industries on there.

So we're able to take that information, we're getting from that management team, what they're expecting in the second quarter.

Sit down with the research analysts and say does this make sense to your given how you're seeing the industry play out and other management teams are talking to and to begin to triangulate on what we think the second quarter looks like rent you just to your point, we're not trying to speculate on what the full year looks like as we don't know what that environment is gonna be but we're really focused on this quarter.

That makes sense, that's good clarification and good color.

And I think all that all that makes sense given these uncertain times.

Just just one last question.

You know.

Over the next coming months in coming quarters, I think just broadly speaking, there's the expectation for a significant increase in defaults nonaccruals and workouts across the credit landscape how comfortable are you all today.

Yes across the burying some platform of being able to ER to walk through those credits because it's going to take a significant amount of human resources professionals to just spent a lot of time working through those those credits to to be able to get the best outcome. So how comfortable are you with with their the amount of people.

The level of people and the skilled professionals to be able to to work through those credits without putting too much strain on the overall platform.

So I'll take that and then yeah and can jump in also so you know we highlight the bearings platform a lot and this will be another example, where I highlight the abroad bearings platform. The first thing to look out is the depth and experience of our existing <unk> team that works on the middle market credit spreads so let's focus on the illiquid credit for it.

<unk> you know there I mean, we have an incredibly seasoned team no we have.

Mm Hmm gun, they know the number but doesn't plus individuals with 20 plus years experience and the industry. So they see multiple cycles and I think this is a time, where youre having people that have that experience and haven't worked through these type of situations. Josh situations is really really critical that being said we don't.

Just want to align our existing team in the middle market, we have a very significant special situations group that basically historic these operated on the liquid side, but as partners with people like Tom thumb focuses more on performing credit. This group would look at more challenging situations. They have a lot of experience working through.

You know challenging situations on liquidity potential bankruptcies restructurings and the like we actually work with that group and that group as a part of our watch list process that helps evaluate credits and also as part of our resources, we tap into when we talk about under certain situations. How would we look to play that situation now.

In the third part all hit on is again the broad platform block has people don't see we talked about the investment professionals, we have a deep legal stuff bearings in house legal style, both with expertise in middle market private investments and expertise or team that has.

Has expertise and restructurings and we bring those legal resources to bear also as we sit the discussion so I feel very good about our team in isolation, but frankly, it's the power of the entire organization that I believe will how does best or be able to manage this remote part of them even hit.

And as we actually have a private equity business. It's a small business first relative to our fixed income business, but has experienced with operating operating companies and so no. We do have the knowledge based on how would you put together a board and how would you put to the right operating partners on there and how would you and set the management team and alike.

So all those different components are what we would tap into or we are we do tap into to have the best outcome for ourselves our own capital and for our shareholders capital.

And I would just had two points one as Eric mentioned lots of experience I'm on the team, including workout exterran experiencing going through cycles, almost almost EUR, 35% of the team has you know close to 20 Years' experience and then the other thing I would say it's just.

On Eric's point in terms of the resources.

Within the firm Yeah, we hopefully we don't have a lot of situations, where we actually have to take the keys of a have a company, but if you just think about special says and our high yield a team with all their industry contacts. We just have such a huge network of people that we can bring into.

Patients, whether it's a board member or whether it's a management team or maybe it's a strategic buyer of a business. So there's just there's just a lot of resources. There that we can we can lever.

Got it.

That makes sense are those all my questions I appreciate that the time today.

Thank you. Our next question comes from David Me is Lucky with constant Lynch investment management. Please proceed with your question.

Hi, Good morning, I, just wanted to Echo I think it was casey's comment on on the detail you provided on your your unrealized depreciation I think slide 14 personally it was was very helpful.

I think that as you guys you're kind of at the beginning of earning season, it's I think.

As an investor sort of bracing myself, the CE mark to markets all over the place.

And so I was wondering if you could probably provide a little bit of detail on how you got to your valuations I mean did you I presuming is it kind of the combination of quotes and grid pricing. Some quotes get ignored did you find that your valuations where it.

Had wider ranges and did you find yourself at the higher end or lower end or was it any differently than what you normally go through.

I'll I'll take the valuation question and then and then that kick it over but David the the timeline is is same valuation process now no change and in fact, we kind of state.

As a very important important point, because you know for us.

We'll take broadly syndicated loans for example, the marks the mark to Mark not no no kickouts snow no major adjustments and that's it simple and then when you get into the middle market. This is where we want to when do our best because we kinda operating in the belief that either one marks their book or the market does it for you right. So we find that through our prospective disk.

Actions with management teams through our view of of making sure a common and consistent policy across the entire from very big on consistency, we found that that it really the while the levels will move as spreads have widened the process hasn't changed and a and then you talked about the kind of the overlay of third party, we find that very very.

Useful and so we found it really there's been no major dissonance, one way or the other as we do our best to try to outline and skate to where the puck is a based on our discussion. So so key points of key themes of consistency and sticking to the exact same process, even when the markets change that test is very.

The important and we're finding that we're happy to reflect those in valuations because really to us all Omar could do is just shift economic return to future periods. If one gets the credit risk.

Correct, and so provided having a strong liquidity position. There is never an issue discussing you know what the market because you build you built for that and you make sure that then at the day fair value is as best as you can estimated fair value does that help.

Yeah, I know that's very helpful. I am I'm [noise].

Unfortunately, I don't know that we're we're going to see the same same process throughout the industry. So it's definitely good to see.

Somebody early in the reporting season come out with such a clear and transparent process.

I appreciate that.

Yeah that Dave I'll go ahead and from a one thing yeah, well first of all thank you for both you for for the positive comments on our transparency I remember you know our our initial meeting you know 18 months ago. I said, you know two things that you're a mill or commit to you when you have three things alignment.

For the long term focus communication and transparency I grew three things through resellers. So we're doing our best a mixture were honoring up one thing I want also just how are those we have an independent valuation group were then bearings overall, so when you think of the valuation the work products done with the new investment team ends.

Team, there's a entirely independent valuation group that size off on all the valuations that's independent that doesn't doesn't report up through me.

We wouldn't even conduct until we get to the C. O. The company from from that perspective. The second one is this lobbyists, but it's true that there's more there's one price for each asset so that asset that's mark and the Bdcs marked out way on that's Mutuals books as Mark that way on our GP LP funds as mark whatever the asset.

Prices asset prices was 93.293 0.2 for everybody.

That's that's obvious and most people's minds, but I think it's important to mix restate that too.

[noise] that that's very helpful. There now and if I could there Eric I kinda shifts along of what's your would you communicated in the past.

No I I think that it's very helpful to have.

Some some clarity provider with regard to issuing below NAV against the backdrop of actually having purchased shares you know I think it's more important as investors for us to see what you actually do as opposed to what you're saying and I I do appreciate the share repurchases I could ship process or.

A question is a little bit to the regulatory front.

That you guys are aware and involved in different aspects one thing that is really affected.

The middle market industry, a lot I think is a whether or not sponsors could participate in paycheck protection. So was wondering if you have any observations or thoughts about what's happening with regard to assistance near portfolio companies and then as well I was I was.

A little surprised but I guess pleased to see that the FCC moved in with listen Mark to market.

Adjustments for the industry and you know for me that does represent a slight difference versus the 2008 crisis when the bdcs that very little regulatory attention and you know I know that the industry has been kind to work toward progress on NAFTA heavy and that really hasn't happened, but I do think as part of the reason why.

By the stocks got hit so hard in the first quarter. So if he could provide any insight on the regulatory front that would be very helpful.

I'll go FCC, and then a and E.N. and Eric can discuss paycheck protection, but but in terms of a b S. FCC leverage rules, just just one one party comment right, having the ability to adjust your asset coverage ratios remember the last crisis, David that will that is that that is certainly helpful.

If that were the only covenant right and so what you'll find is given the higher level of incremental debt that now is applied to the bdcs means that that's not the only covenant that one's working for granted it's one less but to the extent that one had overextended themselves on leverage you are and are having a material amounts of payment adjustments.

Default et cetera, you, how they not a regulatory problem you have a lender problem and so certainly relative to the last crisis. You found it was more regulatory then lender I'd imagine today, you're going to find its going to be more lender, then regulatory and then paycheck.

Protection, Ian and Eric.

I can start and then or do you want to chime in I mean, obviously with TPP.

Program is 75% for payroll, 25% occupancy and that means you know keeping the lights on it and in the business to the extent that you know, it's all forgivable and unless some of that 25% is not use for occupancy.

And you know I think it's still early days and and its a fluid situation I think if it's a industry that's been a completely.

Impacted by the Covance situation, where revenue just went to zero you know, you're probably seeing that scenario where people are considering it but it's really a portfolio company decision you know one do they qualify for the program and its and you know it made benefit them of Maine.

And that's really a decision for them it's between them in the program.

And so I think just yeah I think that's all we can we can say, we just don't really have any more information around that.

Okay.

Thank you we have reached the end of our question and answer session. So I'd like to pass the floor back over to Mr. voice for any additional concluding comments.

No just wanted to thank everybody for you know dollar them listening to US you know you have any follow up question Joe reach out to a was but you know for Jonathan or or me or even or anybody if you want to make sure you get your questions and appreciate the comments. So the complements the we got on the transparency in the level of detail but.

We provided that's our goal is what we strive for to provides the as I say that people all the time. It's your money. That's your it's your shareholders the shareholders money. They just Sun Trust us what that so they deserve to know how it's being handled and and all the transparency around that so appreciate those comments and everybody stay well Oh look forward.

To having a goal here three months and update you on the second quarter.

Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.

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