Q2 2020 Earnings Call
Welcome to the conferencing service. Please stand by a conference operator will be with you momentarily. If you require assistance during the conference press the star followed by the zero on your telephone.
[noise] I could have your first last name please.
Our same debuted last name Brown.
Thank you and your company.
IRA A.I.E.R.A.
Thank you I'll take you through the off as you can see on slide seven.
So against this backdrop, how did GBDC fear you start with two pieces a good news turning to slide nine the first piece of good news is bad Gbdcs portfolio was designed to be resilient.
Portfolios largely exposed industries that have been relatively insulated from cobot 19, like enterprise software and technology business services financial services more loans to companies in these insights and these industries constitute over 75% of Gbdcs portfolio.
Moreover, that the size diverse diversification in granularity of Gbdcs portfolio mitigate the potential impact of idiosyncratic cobot 19 issues that may affect specific borrowers. The average size of each investment in Gbdcs portfolio was less than 40 Bips as of March 31.
The second piece of good news shown on slide 10 is it GBDC has minimal exposure to many of the areas that have been hardest hit by code 90 sectors like Airlines in aircraft Finance energy hotels entertaining entertainment and gaming.
Investments in these covert 19 impacted industries represented less than 1% of Gbdcs portfolio at fair value at March 31.
Similarly, gbdcs focus on lending at the top of the capital structure.
Sponsor backed companies means that the portfolio has minimal exposure to second lien debt mezzanine debt and other asset classes that we believe our particularly vulnerable in today's environment.
Pdcs accurate exposure to these asset classes also represented less than 1% of the portfolio at fair value as of March 31.
But I don't mean to be arguing that gbdcs immune to covert 19, turning to slide 11, you can see the GBDC has exposure to several industry sub sectors that have experienced and likely will continue to experience material covert 19 impact.
Areas, where particularly focused on include restaurants dental care eyecare fitness franchises in retail the sub sectors represent a bit less than 20% of gbdcs portfolio at fair value at March 31st.
We believe many of the borrowers in these sectors are well positioned and that they're going to be fine and let me explain why in restaurants, we focused on proven concepts, mostly in quick service and fast casual both of which have historically done well in recessions many of our borrowers offer drive to carry out or there.
Pivoted to doing so in fact, one of our restaurant Obligors reported their highest ever sales day last week with no traditional sit down customers.
In dental and Eyecare Weve focused on market, leading regional franchises and we believe go recover when they are permitted to reopen in some cases, we believe they may even capture pent up demand when they reopen.
And fitness franchises, we focused on low cost high value concepts that we believe are well matched to an environment, where consumers are more cost conscious.
And in retail we focused on consumer Staples and franchise stores that we believe our relative be insulated from cyclical pressure in fact, the majority of our portfolios the deemed essential and has remained open during covered my cheat.
And others in the portfolio that have been subject to some store closures have seen a significant increase in ecommerce revenue.
These are all mitigants, but may be clear the than cobot 19 challenges, particularly in this portion of the portfolio and we're proactively managing gbdcs portfolio to address these issues, but before I and my colleagues described those initiatives, let's first review how these challenges affected gbdcs results for.
The second fiscal quarter for the quarter ended March 31.
In short we saw two main impacts first on slide 12, there was a downward migration in our internal performance ratings from categories, four and five which are loans performing at or better than our expectations that underwriting to category three which are loans that are performing where are expected to perform below expectations.
Category three increased from 7.2% of the portfolio at fair value at 12, 31, 19% to 26.5% of the portfolio at 331. The majority of that increase was driven by investments in the subsectors that identified.
Earlier as the most exposed to cope with 19 challenges the percentage of the portfolio performing materially below expectations in categories, one and two was essentially unchanged quarter over quarter.
Turning to slide 13, cope with 19 also precipitated the widening of credit spreads the combination of covert 19 credit issues and wider spreads together caused unrealized losses of $2.06 per share on gbdcs any the.
One way to look at drivers of that unrealized loss would be based on the internal performance raise ratings. So for investments in categories, four and five we view spread widening as the primary driver of the unrealized losses. As we think these borrowers are performing at or better than original expectations. So on average if you look at loans in categories.
From five they were marked down from 99.9% of our at 12, 31% to 96.2% of par as of March 30, Onest that marked down accounted for.
One dollar and two cents of Gbdcs adjusted unrealized net depreciation per share for the quarter or about half of the total.
For investments in category three our view is that the unrealized losses reflect a combination of both spread widening and credit stress as we said earlier the majority of the increase in category three came from Gbdcs investments in sub sectors that we believe are exposed in the material way to covert 19.
On average loans and category three remark down from 96% of our at 12, 31% to 90% of par at 331 larger average mark down compared to categories foreign five.
Markdowns and category three accounted for 86 cents of Gbdcs adjusted unrealized net depreciation per share for the quarter were 42% of the quarter.
Im sorry, 42% of the total.
In categories wanting to the average markdown with several points greater than the average markdown and category three again not surprising we believe the markdowns in this category reflect the stress of covert 19 on top of pre existing credit challenges.
Categories went into a relatively small portion of gbdcs portfolio about 2% of total investments at fair value and markdowns in categories. One and two contributed 18 cents of Gbdcs adjusted unrealized net depreciation per share for the quarter or 9% of total.
Slide 14 provides a bridge from 12 31 19 NPV per share of 16 66 to 331 20 NAV per share of 14 62 from an adjusted Eni perspective, GBDC generated 33 cents per share not surprising given our 8% annualized income income incentive fee.
Hurdle rate in the next column you can see realized credit losses net realized losses amounted to three cents per share very small amount the clear driver of the NAV per share decline in the quarter was the unrealized depreciation of $2 at six cents per share that we just reviewed in detail.
So how do we think about these unrealized losses.
Well at one level as long as our underlying borrowers continue to pay their principal and interest unrealized losses in the portfolio will reverse over the remaining lifelong thats just loan Matt.
We're hopeful that a large portion of the unrealized losses will reverse much sooner than that as credit spreads start to normalize over the coming months.
This is what happened in Golub capitals loan portfolios following the 2008 financial crisis.
Put differently unrealized losses offer a snapshot picture every quarter, but at the end of the day.
Only one thing matters for lenders, who who hold their loans to maturity alone either pays off or it doesn't.
Accordingly.
As we think about what job one is for goal of capital job ones really clear, it's to minimize gbdcs permanent or realized credit losses.
With that let me turn of Gregory Robbins, who is going to provide some specific some specifics on how we're approaching that task Gregory.
Thank you David turning to slide 16, we've been focusing on two key strategies.
First proactively managing our portfolio.
And second fortifying GBDC balance sheet.
Lets discuss each in turn.
The first focus area on slide 17 has been proactive portfolio manager.
There have been three phases.
In the first phase, which began earlier this year, we opened up lines of communication with our portfolio companies private equity sponsors and industry consultant.
To gather data and assess cobot 19 reps by bar.
In support of these efforts the golub capital direct lending team consisting of more than 130 professionals pivoted from loan origination to portfolio management.
We undertook detailed analyses using 13 week cash flow forecast real time sales figures and other proprietary data the segment the portfolio and identify the most affected volumes.
In the second phase, we developed and executed on short term game plans for the borrowers most affected by Cobot 19.
We also helped many of our borrowers apply for loans under government programs, where this was appropriate.
In the third phase, which is where we are now we're designing and executing a longer term game plans for all of our borrowers.
We're doing this collaboratively with the management teams and sponsors of each company.
And in many cases, where the borrower is doing fine. Despite Coca 19, the game plan as business as usual.
In more challenging cases, we're focused on credit enhancing amendments on incremental investments, where we as firstly lenders may contribute to a solution alongside capital support from the private equity sponsors.
Every deal is different but we think our deep partnerships with sponsors and our lead position on the preponderance of our loans has given us the power and the nimbleness to structure win win solutions.
Responses are unable or unwilling to support a company will also prepared to take the Keith.
And in a small number of cases, we expect we will do so.
We have deliberately built out our work apps team over the last 12 month to prepare for an economic downturn.
The second focus area as outlined on slide 18 had been fortifying gbdcs balance sheet to support existing investments increased future opportunities.
We spoken about this in the context, the Gbdcs rights offering which subscription period concluded on May six and is expected to raise approximately $300 million of new equity for the company.
GBDC intends to use the rights offering proceeds for three key purposes.
First to repay outstanding outstanding indebtedness.
Second to make credit enhancing incremental investments to support existing portfolio companies.
Third to make selective new investments.
Pro forma for the rights offerings Gbdcs GAAP leverage will decrease from 1.22 times to 0.92 times as of March 30, Onest, which is at the low end of our targeted range and well within our 150% asset coverage test.
We have developed a use of proceeds plan, which we anticipate will give GBDC a significant amount of additional flexibility.
Liquidity and borrowing capacity.
We expect to be able to provide you with more detail on that game plan shortly.
We also believe that the rights offering has bolstered gbdcs flexibility to play offense on new transactions in the future.
Right now new deal M&A is on.
With buyers and sellers unable to agree on that they have the week.
That's okay because for now we want to stay focused on credit enhancing incremental investments in our portfolio.
But if we go out three to six months if this will change.
History has shown that some of the most attractive opportunities exist during and after significant market dislocations.
As illustrated on slide 19 leverage levels decreased dramatically after the global financial crisis, and solid capital is able to capitalize significantly on those opportunities.
We believe recent market events will likely lead to sustain lender friendly environment.
Much like we saw over the last recession.
Lower leverage higher spreads increased covenant and enhance downside protection our component of what we expect that see come out of the current market environment.
So to summarize this portion of the presentation.
While we recognize that uncertainty as high are likely to persist.
We believe GBDC is well positioned to navigate over 90.
As shown on slide 20, we believe GBDC has developed a number of powerful competitive advantages.
In our experienced sustainable competitive advantages.
The key to consistent replicable premium shareholder returns.
With that let me hand, it over to John to go through our results for the more March quarter in more detail John.
Thanks Gregory.
I'm on slide 22.
First just as a reminder, in addition to the GAAP financial measures in our Investor presentation. We've also provided certain non-GAAP measures to make GBDC its financial results easier to compare to our results prior to our merger with Tc IC.
These non-GAAP or adjusted measures seek to strip out the impact of the merger related purchase premium write off and amortization amortization and our further described in the appendix of our earnings presentation.
We'll refer to these adjusted measures where appropriate as we think they are a better indicator of Gbdcs financial performance.
With that context, let's look at the results for the quarter in the column on the far right of the page.
Adjusted net investment income per share or as we call. It income before credit losses for the March 31st quarter was 33 cents unchanged from the previous quarter.
Adjusted net realized and unrealized loss per share was $2.04.
This compares to adjusted net realized and unrealized gain per share of two cents for the quarter ended December 30, Onest 2019.
As David discussed in his remarks, the adjusted net realized and unrealized loss for this quarter was primarily driven by unrealized losses from the impact of covert 19.
Loss per share and adjusted loss per share for the March 31st quarter was $1.71.
This compares to earnings per share and adjusted earnings per share for the December 31 quarter of 35 cents.
As a result of a loss per share our NAV per share decline approximately 12.2% to $14 in 62 cents as of March 30, Onest from $16.66 at December 30 Onest.
On March 32020, we paid a quarterly distribution of 33 cents per share and then finally on April nine 2020, our board declared a quarterly distribution of 29 cents per share payable on June 29, 2020 to stockholders of record as of June nine 2020.
This distribution is consistent with historical quarterly cash distributions at an annualized rate of approximately 8% of net asset value.
I'll now hand, the call over to Ross to go through the results in more detail Ross.
Great. Thanks, John I'll start on Slide 23. This slide highlights our total originations of 167 million and total exits and sales of investments of $291 million for the quarter ended March 30 Onest.
Factoring in unrealized depreciation and other portfolio activity, including a record level of revolver fundings total investments at fair value decreased by 5.4% or approximately 238.1 million.
One point I want to highlight as of March 30, Onest, We had just $17.5 million of remaining undrawn commitments on revolvers and 134.1 million of remaining undrawn commitments on delayed draw term loans.
These are small numbers in the context of gbdcs balance sheet and liquidity position.
As shown on the bottom table the weighted average rate of 7.1% on new investments the weighted average spread over LIBOR or a new floating rate investments of 5.2%.
And the weighted average fee on new investments all declined from the prior quarter, primarily due to a higher percentage of traditional senior secured originations this quarter.
The weighted average rate on investments that paid off of 7.7% was relatively consistent with the prior quarter.
As a reminder, the weighted average interest rate on new investments is based on the contractual interest rate at the time of funding.
For variable rate loans, the contractual rate would be calculated using current LIBOR or the spread over LIBOR and the impact of any LIBOR floor.
The top of slide 24 shows that Gbdcs portfolio remained highly diversified by obligor with an average investment size of less than 40 basis points.
The bottom of the slide shows that our overall portfolio mix by investment type has remained consistent quarter over quarter with one stop loans continuing to represent our largest category at 82%.
Turning to slide 25, 97% of our investment portfolio remains in first lien senior secured floating rate loans, and an defensively positioned and defensively positioned to what we believe are to be resilient industries.
Turning to slide 26, this graph summarizes portfolio yields and net investment income spreads for the quarter.
Focusing first on the light Blue line. This line summarizes our represents the income yield or the actual amount earned on the investments, including interest and fee income, but excluding the amortization of upfront origination fees and purchase price premium.
Income yield decreased by 20 basis points to 7.8% for the quarter ended March 31, primarily due to the continued decline in LIBOR.
The investment income yield or the dark Blue line, which includes amortization of fees and discounts also decreased by 20 basis points, 8.2% during the quarter ended March 30 Onest.
The weighted average cost of debt for the awkward Blue line also decreased by 20 basis points to 3.7%.
As a result, our net investment spread or the Green line, which is the difference between the investment income yield and the weighted average cost of debt remained stable at 4.5%.
Slipping to the next two slides nonaccrual investments as a percentage of total debt investments at cost and fair value increased modestly to 2.3% and 1.6% respectively as of March 30 Onest.
During the quarter the number of nonaccrual investments increased to a total of 10.
David discussed in his opening commentary primarily due to the cobot 19 outbreak percentage of investments rated three on our internal performance ratings increased to 26.5% of the portfolio at fair value as of March 30 Onest.
As a reminder, independent valuation firms value at least 25% of our investments each quarter.
For the quarter ended March 30, Onest Bitauto percentage of portfolio company investments valued by the independent valuation firms was over 40%.
Slide 29 in 30 provide further details on our balance sheet income statement as of in for the three months ended March 30 Onest.
Turning to slide 31, this graph illustrates our long history of steady growth and NAV per share since our IPO prior to the impact of Cobot 19 in the quarter ended March 30 Onest.
Turning to slide 32, the graph on the top summarizes our quarterly returns on equity over the past five years.
The graph on the bottom summarizes our quarterly regular distributions as well as our special distributions over the past five years.
The next slide summarizes our liquidity and investment capacity as of March 30 Onest.
The form of restricted and unrestricted cash availability on our revolving credit facilities and debentures available through our Sps see subsidiaries.
As previously highlighted the rights offering we announced on April Onest expired on May six.
The offering was meaningfully oversubscribed, and we'll raise approximately 300 million and net proceeds.
Slide 34 summarizes the terms or a debt facilities as of March 30 Onest.
Prior to the application of any proceeds from the rights offering.
As well as our focus on diversified long term and stable sources of debt capital.
With that I'll turn it over to David for some closing remarks David.
Thanks, Ross so to summarize todays discussion the fluid 19 outbreak led to credits credit stress and wider spreads in calendar Q1 2020. This in turn caused barge unrealized losses and Gbdcs portfolio, our key priority now as to proactively manage the.
Portfolio to minimize realized credit losses, if we're successful the rest will take care of itself at GBDC, we have a long and industry, leading track record of keeping credit losses, LOE, including through many prior periods of market uncertainty and volatility. We believe we entered this period with a series of compelling competitor.
Of advantages that are stronger than ever, including our experienced team scale sponsor relationships and industry expertise.
Our track record, our competitive advantages and the deep sense of humility should position us well to manage GBDC through these challenging times.
With that let me. Thank you for your time today and for your partnership.
Operator, please open the line for questions.
Thank you if you would like to register question. Please press Star one followed by the floor on your telephone you will hear a three tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration.
Please press the one followed by the Sthree.
One moment please for the first question.
Our first question comes from the line of Finian O'shea of Wells Fargo. Please go ahead with your question.
Hi, good morning, thanks, or good afternoon, thanks for having the on and if everyone's doing well.
David first question on.
The rights offering proceeds you I think Greg actually gave a bit of a breakdown there.
Are you able to provide any more color on.
The split between debt pay down and new commitments and.
On.
New.
Credit enhancing commitments, what kind of pipeline do you have now for those portfolio opportunities.
Great. So let me let me address each of those two question. So let's talk first about.
Rights offering proceeds don't have an exact answer for you right now, but I can give you a directional answer.
Let's start with the goals that we're we're undertaking the to apply to the rights offering proceeds to to pursue we want to use of proceeds to fortify liquidity and to create more flexibility so that combination will.
Equipped bust.
Played in those offense and defense within the portfolio and capitalize on what Gregory was talking about the attractive lending environment that we're.
Anticipating is going to develop once the M&A market regains its footing.
So we're we're currently thinking is that will use about $140 million of the proceeds to retire several older debt facilities that are no longer in the reinvestment periods Theres. The 2014 see a low that's that's been winding down and there is the two SLF facilities by paying off those facilities.
As we create a large amount of unencumbered assets to add to what is already a large amount of unencumbered assets on gbdcs balance sheet. We're also in discussions to expand one where more of our long term bank facilities.
In combination the the.
The increase in unencumbered assets and the increase in size of one or more of our long term bank facilities should put us in a position where we have ample liquidity, we have significant availability under our debt facilities and we have hundreds of millions in unencumbered asset so I'm I'm I'm pleased with.
How thats developing.
We also plan to continue to explore other debt alternatives, including unsecured notes when the market becomes more attractive for those.
Second question, you asked and if I understood. It right was what's the pipeline look like for these credit enhancing incremental investments that you've heard me talk about and the answer is good.
We're we're in a lot of discussions right now with sponsors as you would imagine.
To address longer term.
Amendments and in many cases those amendments will include some combination of new investment by sponsors deferral of interest by junior debt providers.
Some improvement in our credit position.
In some cases, a repricing of up of our loans in some cases, a new investment by us on attractive terms.
So so we've got we've got to a large number of those that were working on right now and I think thats, that's sort of transaction.
It is going to be.
The focus of what we're working on over the course of the next three or four months.
We're going to continue to look at the potential to do new deals, but the truth is there's not much new going on right now as Gregory but at the M&A markets dead, because buyers and sellers can agree on the data the week so.
It's it's both timely for us to be focused on these credit enhancing incrementals in our own portfolio and there is also not much competition for time.
In in respect of that.
Thank you those.
A lot of good color or was that you more or less answered or.
Sort of my next question on the.
Morgan Stanley credit facility Amendment.
We know that was the.
Relapsed or collapse and commitment was pushed out just one quarter.
Presumably there were.
Are you there would need to be cash proceeds to pay that down.
You just kind of touched on that you're looking at other forms of.
Unsecured and other debt there but.
Anything we should look at given the the sort of near term from here.
Reduction in that credit capacity.
So I think what you're alluding to is that in in our.
In our filings last quarter, we indicated that we extended but not permanently a portion of Morgan Stanley Bank facility and we're in discussions with Morgan Stanley and with our other bank providers about the right mix of of commitments under our.
Our long term bank facilities. The truth is we don't need all of that Morgan Stanley facility. So maintaining it in this current form is not something that that we would like to pursue.
But we've got we've got a number of different options that are attractive we're going to make a final decision on that in the coming weeks.
Okay. Thank you and just one final from me I'll hop back in.
On the dividend.
You know recently reduced to 29 cents as part of the portfolio update.
Is the BDC able to earn that pay out through the.
The rights offering transaction.
Yeah, I think there are lot of factors right now that are going to impact any of the per share. We just went through a quarter, where we had a very significant unrealized loss that reduced NPV per share.
When I think about dividends for GBDC, what I would like to see us.
Have is is that.
Steady dividend that slowly increases over time and Thats, what we did for.
About 10 years prior to prior to the Cobot 19 quarter.
So what we've got to assess prospectively is.
We are where is NAV per share going to.
Settle.
Most of the uncertainties associated with.
With Covance 19, I think once we have more clarity about that we will be able to have.
A.
A firmer answer on on your question I think right now the answer. Your question is we're just going to along with everybody else Afton muddle through with the uncertainties created by this cobot 19 environment.
It's all for me thanks, so much.
Thank you. Our next question comes from the line of Ryan Lynch of K.
KBW. Please go ahead with your question.
Hey, good afternoon.
First wanted to just touch again on on the rights offering.
I know you guys gave some some general commentary on kind of thoughts behind why that was done but was one of the primary reasons behind the rights offering.
You didn't have to do with any concerns.
Potential covered in breach is around any of your securitizations.
And the potential impacts diverting cash flow to pay down of Securitizations versus cash flows are required to be paid out of the dividend regarding ric status.
No I don't think it was quite as you described I would describe it somewhat differently I would say that.
Code 19 created an environment in which we saw a much wider range of potential future scenarios than we typically do so if you typically think about the future in terms of a bell curve and U shape. Your your base case assumptions around the middle of the Bell curve you can create an upside case.
And the downside case that are a little off of that that that base case.
And cover the vast preponderance of potential scenarios in October 19 World you can't do that the curve is a very different shape, it's much flatter with much faster tails. So as an asset manager in covert 19 World. We came to the conclusion that it made sense to have.
More flexibility in our capital structure to be able to manage effectively through a much wider array of different scenarios now in some of those scenarios. We were concerned that we wouldn't have sufficient capital to be able to do these credit enhancing.
Credit enhancing incremental investments and simultaneously to be able to make best use it for low cost liabilities that that GBDC contractually has so.
I'm not.
I'm not seeing Ryan that your your question isn't the right question I think I think that those concerns are among a whole slew of concerns that drove us to conclude that the rights offering was the lowest the right thing to do I put that larger group of concerns under the rubric of.
In an increased level of uncertainty in the environment and the desire to have.
Balance sheet that would work well in the context of a wider ray of different forward scenarios.
I feel very good about where we are now.
Okay.
Did you think that longer term. This will have you reevaluate how you.
Compose.
The right side of your balance sheet, given that you guys ran with zero.
No unsecured notes or unsecured debt.
Which.
A lot of other bdcs are chosen to make that part of their liability structure, which is obviously higher cost debt, which is bad during the uptime splitting downtime like this it creates a significant amount of unencumbered assets that become very important in a downturn like this and I don't know if we're going to see PDC.
Do you.
We would have rights offerings like this specially the ones with significant amounts of unsecured debt. So you think that you will rethink your liability structure going forward as far as the composition of the goes.
We had already read thought our our liability structure and as I commented on in the September quarter discussion in the December quarter discussion.
We we had begun to on a serious evaluation of.
Getting an investment grade rating and end of issuing.
Unsecured notes, so I'm I'm a believer in unsecured notes I I think but we have a place in the liability structure of of a scale BDC and I'm sure. It's something we're going to be seeking to to explore.
Object to that market normalizing in terms of costs.
Okay.
And then just.
Kind of a technical one with the unfunded commitment I think you guys had 152 million.
At the ended the quarter.
What is the level of unfunded commitments that were.
Revolvers or or commitment that we're kind of at the full discretion of the borrower to drawdown versus kind admits that that has some sort of like delayed draw term loan or or not at a full discretion of the borrower to drawdown.
The vast preponderance of our undrawn commitments at quarter end we're.
In the form of of of acquisition focus details I think we were down to 16 million one 6 million of of revolvers that were undrawn.
Most most obligors.
Drew their revolvers in March of 2012.
Okay.
And then and we did we didn't break it down our tier this quarter run. So it's a 17.5 million was the exact number of unfunded revolvers.
Thank you Ron.
Thank you that okay.
And then one other one.
As far as calendar second quarter, so that the June quarter ended.
Assuming that.
Theres no change in fair value for your portfolio. It is just held content.
Do you anticipate the total return.
Look back feature of your incentive fee structure kicking in holding everything else equal I'm, just trying to get get appeal for for what you guys are looking at versus my model.
Uh huh.
Look back would would restrict eni incentive fees.
I'll also tell you that we don't anticipate that Eni incentive fees are going to be terribly high in the near term.
Okay, Yeah, it'd be great you could because of the factors our hurdle.
Yes, okay. Our thanks for taking my questions I appreciate the time I'll hop back in the Q.
Thank you.
Our next question comes from the line, Matt to Jayden Raymond James. Please go ahead with your question.
Hi, everyone afternoon, and hope all is well so just two quick ones. The first one.
Revolving around sponsor attitude and willingness to putting more capital. So just any any general commentary you can give there and specifically I guess, what we would be interested in is whether or not theres any different than willingness to put in more capital by industry. So for example for our retail portfolio company versus more of us.
Staples say healthcare is there any difference in willingness to putting more capital. Thank you.
I would say, there's not a difference based on industry what matters most in discussions with sponsors about level of sponsor support our two two factors.
First factor is.
To what degree they they like the company's seed the capacity for for its performance to rebound in for it to to be a successful investment for them.
Sponsors.
For obvious reasons economic animals, they want to focus their resources on on those companies that are going to do well for that.
The second issue, which comes up sometimes.
Infrequently, but sometimes is that a particular investment comes from an older Fund and the sponsor has limited resources remaining that are available to it in that older Fund.
And it may have some competing needs in the context of cobot 19th.
So so.
What we're where we.
Where we anticipate some of the most challenging conversations with sponsors are are those that are in the second category, where the sponsor would like to provide support but doesn't have the but the capacity to do so to the degree it would like to it.
I would say on on balance and look it's still early days, but on balance we've been very gratified by the way in which sponsors have engaged with us in a very solutions oriented collaborative fashion.
Great. That's helpful. And then last one just any color you can provide on me the scale of amendment reliefs within the quarter.
And then through April whether or not but as a sped up would be very helpful. Thank you.
We had relatively little in terms of amendment activity in calendar Q1, we were roughly a dozen companies that were heavily impacted by Govan 19, where we agreed to reduce the cash pay spread of our loans and to have a portion of.
The the spread be payable in pick.
Virtually all I think all but one of our borrowers.
Fully paid their principal and interest in the quarter I anticipate there will be a need for a lot of amendments going forward I think most of those amendments are going to be.
In calendar Q3, actually as opposed to calendar Q2, whose bear in mind that.
For most companies they had to good months in one bad month in Q1, So Q1 financial results will.
In in the preponderance of cases not trip covenants.
Q2 financial performance, however is going to be harder for many companies not to trip covenants. So those those financial statements would be due over the summer.
And that would be when I would anticipate the biggest crunch of amendments would be needed.
That's all for me thanks, guys appreciate it.
Thank you as a reminder, if you'd like to register for question. Please press the one for.
Consolino, let's do one more.
And at this present time no one has registered for any questions. Please continue with your presentation for closing remarks.
Hi, just want to thank everyone. This was a long call I know we wanted to provide a lot of data to help everyone understand the covenant 19 consequences and challenges prospectively Hope. This was helpful. Thank you for listening. Thank you for your partnership and as always please feel free to reach out.
So if you have further questions look forward to chatting next quarter.
Thank you that does conclude the conference call for today, we thank you for your participation in assets. Please disconnect your lines.
[music].