Q1 2021 Ares Capital Corp Earnings Call
Yeah.
Good morning, welcome to Ares Capital Corporation's first quarter ended March 31, 2021 earnings conference call.
This time, all participants are in a listen only mode.
As a reminder, this conference is being recorded on Wednesday April 28 2021.
I will now turn the call over to Mr. John still more managing director of Ares Investor Relations. Please go ahead.
Thank you let me start with some important reminders comments made during the course of this conference call and webcast as well as the accompanying documents contain.
And forward looking statements and are subject to risks and uncertainties. The company's actual results could differ materially from those expressed in such forward looking statements for any reason, including those listed and it's actually.
Ireland.
Ares Capital Corporation assumes no obligation to update any such forward looking statements. Please also note that past performance or market information is not a guarantee of future results.
During this conference call and the company May discuss certain non-GAAP measures as defined by SEC regulation G. Such as core earnings per share for core EPS. The.
The company believes the core EPS provides useful information to investors regarding financial performance because it's one method. The company uses to measure its financial condition and results of operation.
A reconciliation of core EPS to the net per share increase or decrease and shareholders' equity, resulting from the operations and most directly comparable GAAP financial measure can be found and the accompanying slide presentation for this call. And addition reconciliation of these measures may also be found in our earnings release filed this morning with the SEC on for.
<unk> eight cash.
Certain information discussed in this conference call and the accompanying slide presentation, including information related to portfolio companies with debt.
Rai from third party sources and has not been independently verified and accordingly, the company makes no representation and warranties with respect to this information.
The company's first quarter ended March 31, 2021 earnings presentation can be found on the company's website at Www Dot Ares Capital Corp Dotcom.
Clicking on the first quarter 2021 earnings presentation link on the homepage and Investor resources section of the website.
Ares Capital Corporation's earnings release, and 10-Q are also available on the company's website.
Now I'll turn the call over to Mr kept it here Ares capital Corporation's Chief Executive Officer.
Thanks, John.
Hello, everyone and thank you for joining us I'm here with our co President Mitch Goldstein and Michael Smith, Our Chief Financial Officer, Penni roll and several other members of the management team.
I want to start by highlighting our strong first quarter results and then provide some thoughts on the current market and our positioning.
This morning, we reported strong first quarter core earnings of 43 cents per share.
Up from 41 cents per share a year ago.
Our first quarter GAAP earnings of 87 cents per share reflects significant net unrealized gains is higher portfolio valuations drove our net asset value to a new record of $17 and 45 per share.
We also had an active investing quarter and the second quarter is set up for even more activity.
The U S government delivered a powerful combination of significant fiscal and monetary stimulus.
Coupled with ambitious vaccine rollouts across the U S to provide a favorable backdrop for Ares capital and our portfolio companies.
We believe the economy is rebounding and this rebound is driving higher levels of transaction activity and our market.
We're seeing more traditional corporate M&A activity, which is a key driver for the financing solutions that we provide the companies.
Ares capital today, as the largest BDC and as you know we are externally managed by one of the largest global direct lending platforms and the market today with approximately $100 billion of direct lending assets under management and.
As of December 31, 2020.
We believe that this platform and our position offers a unique view into market trends I'd like to highlight a few favorable trends that are occurring and then provide expansion opportunities for the company.
First private equity sponsors are focused on buying and building portfolio companies through M&A transactions over longer time horizons through their focus core funds were and continuation funds.
This trend is leading to an increasing number of sponsors seeking add on acquisitions to support the growth of their existing investments and a heavier reliance on income and debt providers.
With our permanent capital significant scale and flexible capital solutions and large portfolio and incumbent relationships. We believe this market trend favors Ares capital for future growth and plays well to our strength.
Another important growth driver is the continued expansion of the direct lending market itself.
We've been investing and middle market companies for the better part of two decades, and we continue to see a growing desire for companies to choose direct lenders with scale and flexibility often at the expense of banks the capital markets and other more traditional sources from years past.
Many companies are frustrated by the lack of flexibility and visibility that a liquid market or bank led solution can provide and these companies are increasingly turning to the flexibility of capital certainty of closing and long term partnership approach that we can deliver.
This trend is widening our market opportunity and allowing us to invest and larger businesses and trend that you've seen from us over the last several years.
And these advantages continue to materialize, we're able to increase both the quantity and the quality of the transactions that we review.
And the first quarter of this year, we saw a 14% increase and the number of transaction opportunities and 25% increase and the average EBITDA of the companies that we reviewed and a 40% increase and the estimated aggregate dollar amount of deal activity when compared to the first quarter average for the past five years.
The growing breadth of our pipeline allows us to see a larger and more diverse set of investment opportunities, which ultimately allows us to be highly selective we continue to finance less and 5% of the deals that we review.
This selectivity and our focus on high free cash flow businesses with market leadership positions. Ultimately result in a differentiated and attractively positioned portfolio.
As Mitch will discuss later in more detail.
Our portfolio continues to perform well with 99% of contractual interest collected and no new portfolio companies on non accrual for the quarter.
Furthermore, supporting my earlier comments about the rebounding economy, our portfolio company has experienced weighted average EBITDA growth of 7% over the last 12 month period.
This is a continued improvement from about 5% and the fourth quarter and 2% in the third quarter of last year.
It's also worth noting that the weighted average EBITDA growth for our top three largest industries software and services health care services and commercial and professional services was 30% higher than the portfolio weighted average growth rate in aggregate.
This underscores that our approach of overweight and the most attractively positioned industries and sectors of the economy is paying off.
Our portfolio performance also continues to benefit from our upmarket focus and the first quarter, our larger portfolio companies with greater than $100 million of EBITDA had growth rates. There were more than two times those are companies with EBITDA below $50 million.
We are not ignoring smaller transactions, we simply believe that and the current environment they offer less relative value than they have and the past relative to some of the larger financings that we've completed.
Let me now turn the call over to Penni to provide some more details on first quarter results and some other thoughts and our financing activities.
Thanks, Kip good morning, everyone.
Core earnings per share of 43 cents for the first quarter of 'twenty, 'twenty, one or lower than the 54 cents for the fourth quarter of 2020 and higher than the 41 cents for the first quarter of 2020.
Our first quarter core earnings were driven by strong recurring interest and dividend income and.
And a solid level of capital structuring service fees from new originations and capital markets activities.
Our GAAP earnings per share for the first quarter of 2021, or 87 cents, which compares to <unk> 89 cents for the fourth quarter of 2020 and a GAAP loss per share of a dollar and 42 cents for the first quarter of 2020.
Our GAAP earnings per share for the first quarter of 'twenty 'twenty. One included net realized and unrealized gains on investments of 64 cents offset by a realized loss of 10 cents related to the early redemption of our 24 and seven notes.
He further and break this down the net gains include net unrealized gains on investments of 57 cents per share, which primarily reflect continued tightening of credit spreads relative to the end of the previous quarter performance improvement and certain names and higher company valuations.
Now that we are full year passed the significant volatility induced by the pandemic, we have seen a steady recovery and the value of the portfolio.
Over the course of the past 12 months and net unrealized gains on our investments have exceeded the net unrealized losses, we recorded and the first quarter of last year.
I E. We have now recovered the aggregate net markdowns recorded in Q1, 2020.
At March 31, 2021 our stockholders' equity grew to $7 $6 billion, resulting in a record net asset value per share of $17.45.
Compared to our pre pandemic level of $17.32 at December 31, 2019, and $15.58 at March 31, 2020, the height of the pandemic impact on market valuations.
Our NAV per share ended the first quarter of 2021 and an all time high and represents a 12% increase from a year ago and a 1% increase from the end of 2019.
Yeah.
Our portfolio at fair value at the end of the quarter was $15 $4 billion and we had total assets of $16 billion.
As of March 31, 2021, the weighted average yield on our debt and other income producing securities at amortized cost was eight 9% and the weighted average yield on total investments at amortized cost was seven 9% as compared to nine 1% and 8% risk.
Actively at December 31, 2020.
At March 31, 2021, 82% of our total portfolio at fair value was and floating rate investments and.
Additionally, excluding our investment and the SDLP certificates, 87% of the remaining floating rate investments had an average LIBOR floor of approximately one 1%, which is well above today's current one and three month LIBOR rate.
Shifting to our capitalization and liquidity, we had an active quarter focused on raising additional capital and extending debt maturities during.
During the quarter, we extended our corporate revolving credit facility to a full five years and upsized debt by nearly $350 million, bringing the total facility size to $4 billion, which is the largest single credit facility for any BDC.
In addition, we took advantage of the historically low rate environment and issued $1 billion up 2.15% unsecured notes maturing in July 2026, which was a record low coupon for us or any BDC.
While also optimizing our liability structure by exercising our option to early redeem our 2047 notes at par.
It is $230 million of notes, which we assumed in our acquisition of Allied capital over 10 years ago represented the highest interest rate of any of our outstanding debt securities at six and seven and 8%.
We also returned to the equity markets for a secondary issuance for the first time since 2014 issuing 14 million shares of our common stock at a premium to our net asset value, bringing us net proceeds of approximately $250 million.
Yeah.
After considering our investment and capital activities during the quarter. We ended the first quarter with nearly $5.2 billion of total available liquidity and a debt to equity ratio net of available cash of $285 million of 1.02 times down from one point.
And one seven times at the end of the fourth quarter.
While our leverage ratios will vary over time, depending on activity levels. We will continue to work to operate within our stated target leverage range of 0.921 0.25 times.
Overall, we continue to be very proud of our capital structure with ample amount of dry powder, we believe and remains one of our most significant competitive advantages and positions us well to remain active investors.
Before I conclude I want to discuss our undistributed taxable income and our dividends and we currently estimate that our spillover income from 2020 into 2020, one will be approximately $454 million or dollar and four cents per share.
We believe having a strong and meaningful undistributed spillover supports our goal of maintaining a steady dividend throughout market cycles and sets us apart from many other bdcs that do not have any spillover.
This morning, we announced that we declared a regular second quarter dividend of <unk> 40 per share. The second quarter dividend is payable on June 30th 2021 to stockholders of record on June 15th 2021.
I will now turn the call over to Mitch to walk through our investment activities for the quarter.
Thanks Penni.
I would like to spend a few minutes, providing more detail on our investments and portfolio performance for the first quarter of 2021 and.
I will then provide an update on post quarter and activity and our backlog and pipeline.
During the first quarter, our team originated $1 75 billion of new investment commitments to a diverse set of high quality companies for.
More than 20 distinct industries.
The EBITDA and the companies, we finance during the quarter ranged from around $15 million to nearly $300 million underscoring the breath of our opportunity set and our ability to be a solutions provider for a wide array of companies.
Our originations during the quarter also highlights our ability to invest actively while remaining defensive and.
Approximately 80% of the commitments were first lien.
The two largest industries for which we committed capital for health care services, and commercial and professional services, consisting for a long health focus on defensive high free cash flow business model.
As Kipp stated with increasing M&A activity and a strong sourcing advantages, we are seeing and attractive set of new investments.
Our new first lien commitments. This quarter, we achieved about 40 bps of higher yield and 20 bps up greater upfront fees as compared to the senior loans, we originated in Q1 'twenty.
Furthermore, the senior loans, we originated during the quarter and nearly half a turn lower leverage than existed in our senior loan portfolio at the end of 2019.
With 21, new companies added we ended the quarter with 350 distinct portfolio companies and a highly diversified portfolio with an average hold position and fair value of only <unk>, 3% and.
Additionally, our portfolio was well supported by the value of the companies, we finance with weighted average LTV of approximately 50% at the end of the first quarter.
Now shifting to the health of our portfolio, our weighted average portfolio grade at fair value of three point O remain.
Unchanged from last quarter, and we saw about a seven to one ratio our portfolio upgrades relative to downgrade for this quarter, which is indicative of the improving trends and our portfolio.
In addition, the number of companies that had been graded as either one or two continue to decline as a percentage of the portfolio.
Okay.
Our non accrual rate and costs remained flat quarter over quarter at three 3% and as Kipp mentioned there were no new companies added to non accrual.
I will finish with a brief update on our post quarter and investment activity and pipeline.
And from April 1st through April 20, <unk> 2021, we made new investment commitments totaling $971 million of which 630 million were funded we exited or repaid and 432 million of investment commitments, including $51 million of loans sold for I am for vehicles managed by I am.
Generation and approximately 5 million of net realized gains on these exits.
As of April 22nd our backlog and pipeline stood at roughly $2 1 billion and $310 million respectively.
Our backlog contains investments that are subject to approvals and documentation and may not close or we may sell a portion of these investments post closing.
However, I will note that our backlog is nearly double that reported on April 22, 2019, and 10 times the backlog reported on April 29 of last year.
We believe we'll have a busy 2021.
I will now turn the call back over to Kip for some closing remarks.
Thanks, a lot Mitch we believe we're off to a strong start to the year and we're very pleased with our first quarter results, which included strong core and GAAP earnings and recovery and our NAV per share to a level that is now above pre pandemic levels and improving portfolio credit metrics and.
Company is hard at work delivering value for shareholders and we believe we're again positioned for growth during what we believe will be a substantial economic recovery.
The COVID-19, pandemic and all the uncertainty and challenges that brought our non over however, we see a lot of it and the rearview mirror and have optimism for 2021 and beyond.
While many aspects of the last 12 months have been unfortunate. We believe these difficult times have again demonstrated our strength and reinforced our long track record of performance through varying market cycles.
Coming out of this our company is healthy and thriving we believe a busier and hopefully more normal year ahead provides a great backdrop for Ares capital and the returns that we can deliver for our shareholders.
That concludes our prepared remarks, we'd be happy to open the line for questions.
Yeah.
Thank you.
This time, if he would like to ask a question. Please press Star then one on your Touchtone phone.
If you would like to withdraw your question. Please press Star then two please.
Please note and as a courtesy for those who may wish to ask a question. Please limit yourself to one question and.
And we'll follow on.
If you have additional questions and they ran for the Q.
And the Investor Relations team will be available to address any further questions and thank you conclude.
Conclusion of today's call.
Yeah.
And the first question today will come from Devin Ryan with JMP Securities. Please go ahead.
Great Good morning, everyone.
Hey, Devin.
And clearly a lot of good stuff and.
Moving on this quarter I just want to look at.
For the quarter to date investment activity.
The weighted average yield of debt and other income producing securities.
And of course was 77, 4%, which is down from recent quarters and I just want to get a little more flavor around it that's just market conditions and current pricing or if that's tied at all to maybe moving.
The risk curve.
And and then just maybe asked differently just talk a little bit more about the pricing and how that's evolved and the market recently.
Yeah, I think it's it's it's nothing.
Necessarily by design to hit on the second point.
And look with the economic recovery, we've definitely seen spreads compress from where they had been over the last six to nine months a little bit bigger.
And he says we're not really seeing much of that.
Continue I feel like it's sort of plateaued.
At this level and we're back to a steady state, but I think having to go I'd have to go back through specifically the backlog and pipeline versus the quarter and my guess is it just a little bit more.
Mixed for first lien and it's not.
As you know sort of directing that by design right. We actually think there are still quite a lot of pretty interesting higher yield higher risk, but good risk reward situations out there.
Okay, Great very helpful. And then I guess a related question. So looking at the pipeline is very healthy here.
Software and services.
Notably, making up more than half of the pipeline and so I just would be curious if that's kind of reflecting the mix of deal flow. So it's commensurate or is that an area that you may be leaning more and because of the attractiveness.
And some color there and then just any other industries that you are particularly interested and right now yes.
Yes.
And look I mean, we kind of follow along with the general backlog and pipeline of deal flow right, particularly that of private equity firms, which still represents the majority of our financing opportunities I would tell you that because of.
The attractive growth elements and the software and services space. There's just a lot of activity there right tremendously high valuations on the equity side and just a lot of what we think is really high quality credits and good deal flow and the software and services space. So we've continued to build out that effort and it's been a growing effort for us and we think it's very attractive.
<unk> and add on top of that.
Seeing the same thing and health care and we're seeing the same thing generally and business services with pounds, just presenting a really significant.
Portion of our backlog and pipeline in terms of industry mix.
Okay, Great I really appreciate and Kipp.
Thanks, Tim and I have a good one.
And the next question will be from Finian O'shea with Wells Fargo Securities. Please go ahead.
Hi, good morning.
First question for Ken on the higher level of and investment income and Ivy Hill I know the.
BDC invested more during COVID-19.
For some back.
Last quarter and the investment income still appears very robust.
Is this and improved trajectory or more.
Sorry for that.
Vehicle.
No I mean, we've continued to invest and Ivy Hill and with that obviously regenerate tissue.
And typically you know more funds under management assets under management, there that obviously.
Increases the management fees of that company and we also invest securities and a lot of the funds and vehicles that they put together, which also just allows us to ramp up the investment income from Ivy Hill. So.
It's simply just an increased dividend this quarter.
You should expect to see as we invest more obviously, we should we should be taking and more income from from Ivy Hill, and obviously a dividend increase just represents.
<unk> belief that it's a it's a very attractive investment vehicle and and relationship with Ivy Hill, So just continuing upwards.
Great and then just a follow on on the origination this quarter.
Sarah day future.
Without getting into specific items.
Is this sort of AR and it.
Idiosyncratic situation that came to you from your network or are you peering into opportunities that.
You may see or may derive from the the spec ecosystem.
Out there.
Yeah. This one it was a little idiosyncratic came in through a banker obviously involved with a.
A particular spec yeah, we don't have to bother with the nature of their I would you know it's it's.
And not something that I would say, we're seeing consistently ie financing opportunities from specs.
Okay. That's all for me. Thank you. Thanks.
Thanks Pat.
And the next question will come from Ryan Lynch with <unk>. Please go ahead.
Hey, good morning.
First one I just had was you know if you look at term structure leverage and the broadly syndicated loan market, it's pretty much been on a on a straight path getting more and more.
Throw a friendly.
And obviously that trickles down into the upper middle market and the middle market, where you all and <unk>.
And I'm, just curious and do those trends concern you based on just the trajectory that that's been on and have you seen those trends starting to kind of level out or flatten out or improve at all and and if not what what you see and the future that could potentially kind of ease.
Some of those those pressures and kind of slow down that trajectory.
Yeah, I mean look with the again I think rebounding economy optimism.
And from investors and you know for.
Pressure a year when folks were obviously frustrated with yields and.
Non sub investment grade so if other other portions of the portfolio, we were seeing a lot of activity and credit spread tightening.
And the early part of the year and and I think the middle market does follow that everyone always answers at the same way, which is it lags a little bit right.
You know look I think the large cap market has retreated a little bit and the last 30 to 60 days. So we don't see them.
Dramatic kind of continued drops from here right.
Early part of this year. There is just you know not a lot of new issuance Refis were we're really heavy and that's sort of come down a little bit now with heavier and new issuance on the calendar. So again the concept for things that are sort of plateauing here, where they are is I think how we see things.
Okay. That's helpful and then going back to kind of the backlog and pipeline question you kind of discussed that earlier with the high concentration and kind of other software health care and.
And you said that that's a little bit more of a reflection of kind of the private equity sponsors and what they're focusing on today, which those all seem to be largely kind of more recession resistant businesses do you see that mixed starting to shift maybe in the back half of 2021 is maybe some more color.
That impacted or and more cyclical businesses as private equity sponsors can.
Start to transact with those more given kind of the increase and.
Kind of the economic recovery.
And it's possible I mean, I think that when you go back to this time last year a lot of the deal flow was around COVID-19 rescue type stuff.
Which I am thinking is for the most part.
Find us.
And I understand where your question is coming from but don't have my Crystal ball today, you think are good.
Solid economic recovery that's broad.
And would have folks looking more to cyclical industries, but.
And we've actually talked about this across our firm as a whole whether it's credit private equity and elsewhere. It seems to be that with purchase prices, particularly in private equity debt or elevated.
Folks are willing to pay for growth in the sectors, where they.
And they are expecting growth regardless of how uniform the economic recovery is though I hate to answer with and we'll see but you know your guess.
Good bye and maybe right now it makes sense, but.
We're not seeing it yet.
I Gotcha I appreciate I appreciate the comment and keep you and just give me a call back whenever you get your Crystal ball and Andy I guess.
Thanks.
Got it would come and Andy Thanks.
And the next question will be from Melissa Waddell with J P. Morgan. Please go ahead.
Good morning, guys. Thanks for taking my questions today, and actually a lot of them have already been answered, but I started and this is.
Rich over related to the activity for the questions that you've been getting certainly noticed that April day.
Activity has laws and <unk>.
And then versus outpacing then sort of more broadly and the first quarter.
And are you anticipating a change there for sure for net originations going forward or is it too early to tell.
Oh, I'm, sorry, I missed a little bit of the lead into the question and I.
I got the second part.
We don't we don't see any change and the activity levels right things sort of come and go and.
Backlog and pipeline is very healthy business and Super active right now.
But if I didn't quite answer your question feel free to jump back in.
Sure.
Sorry about that and.
I was asking if you're anticipating a switch from sort of net exit Q net originations now given and.
The size and the pipeline and backlog.
No I think it was easy answer and we saw a couple of really large companies get refinanced.
As exits and this quarter right, which is sort of.
The rationale for for the net quarter, but no I don't expect any changes.
Thank you.
Yes.
And <unk>.
And the next question is from Casey Alexander of Compass point. Please go ahead.
Hi, good morning.
Yeah.
And Im fine thank you.
A couple of questions one is here.
Hearing debt finance, the company with $300 million of EBITDA.
It used to be debt.
The company thought in terms of larger companies as being second lien opportunities is that still true and when you're talking about companies of that size.
Has that impacted the hold sizes that you're willing to hold and the portfolio as well.
Yes, I mean typically.
Company that size will do a.
Syndicated first lien deal more often than not.
And placed junior capital privately and more.
That's more common I guess used to be right, where you had smaller high yield deal is getting executed et cetera.
And now Ares and obviously, a handful of our competitors have capital to to privately place a lot of this junior capital.
Directly, which which they view as a win win and and I think we do too.
In the larger names right. It's just math right that we typically will do will have larger final holds and some of these larger companies and I think I've said this in past calls, but we're actually seeing no real risk premium.
Available and smaller companies right the capital structures are largely the same.
And I mentioned this in our prepared remarks, a little bit, but we've we've moved up the company size spectrum.
And because we think there's really good relative value and some of these larger companies, which inherently should be better credits right with better management teams et cetera et cetera. So we like that and we continue to see that as being a competitive advantage and place that really plays into our strengths and ones, where one where we intend to remain active.
Alright, great. Thank you.
My follow up is.
And I read some comments.
From Michael Air and Getty about government stimulus has delayed sort of a default speicher a default cycle by two to three years and I'm just curious given the economic growth that we're seeing why that would even be delayed two or three years why wouldn't we just be starting a whole new economic.
Our cycle and and what would lead into that two to three years.
Yeah.
Yes, I didn't I didn't see that but.
I think the.
And the common wisdom out there. These days are sort of debt defaults have peaked right and that they're starting to come down.
Okay.
To me that would play more into your thinking that we've gotten through.
And this last 12 months.
And there seems to be a pretty solid economic rebound.
Which to your point and they just start things over again I think the asterisk is is we really have.
Some companies that are.
Really impact really significantly impacted by COVID-19 for the long haul right. So astra's gift by saying I don't think that the economic recovery is necessarily accruing to them. The same way it has to others right, but I think the stimulus pushed the pain out for some of these industries for a little while and things like travel and hospitality.
D and others, we can all think of I think there's there's still.
A lot of work to do for these companies to get back to where they were before.
COVID-19 presented itself, but and I guess, we'll see.
Alright. Thank you I appreciate your thoughts yes. Thank you.
And the next question comes from Robert Dodd with Raymond James. Please go ahead.
Morning, and congratulations for the quarter.
Excuse me.
And that's what I'm kind of focusing on credit quality and it looks very robust right now I mean, the weighted average grade of the portfolio no change it for me Mitch than.
7% to one upgrade downgrade ratio and number of companies so that tends to imply that a lot of small companies and getting upgraded or shift the weighted average growth.
And the same time, you said and the small companies are lagging fairly materially.
And on EBITDA growth and kind of rebound. So can you give us any colorado and why it is that the small companies are getting upgraded and new rates and system, while lagging the broad portfolio by so much.
Oh, that's a hard one.
Think some of it is some some composition just and the portfolio, where we've got some smaller equity positions that are getting upgraded so it's not necessarily representative.
I think if you make that generalization and look I mean, I think Robert the thing that we're most focused on as we've laid out for folks who this is being hard at work on and kind of the ones and twos and just.
This show.
Positive migration there.
But to be honest I'd have to.
Have to dig in a little bit more where have some.
And have some folks taking a little bit more in terms of what I have in front of me right here, but got it got it.
And I appreciate it.
Thank you Juan.
And then just the follow up.
This this quarter and a lot of discussion about dealing with bigger businesses. The viewing lottery EBITDA businesses. I think you basically answered this question and directly in response to Melissa, but EBIT the weighted average EBITDA strength.
Kelly materially for the first time, a long time this quarter is that an artifact of things like that seem to help get refi Ed out or and artifact just more broadly at the debt.
And how competitive the refi market is in.
It's very large and.
The BSL market yeah.
We had two we had two very large companies get refinanced out Athena was one of them and corn market was the other both had north of $300 million of EBITDA.
And and I do think your points are and as you know.
Some of these refinances.
B or refinancings were occurring at the upper and EBITDA size of our portfolios because folks for finding.
Pretty attractive syndicated loan market to refinance per Ryan's question as well so.
Got it thank you.
Yes, and I'll, just say that its really not having any.
Okay and then.
And are winning quite a lot.
Okay.
As you'll see as we roll the year for it.
And the next question comes from Christopher Merrimack with Janney Montgomery Scott. Please go ahead.
Hi, Good morning, I wanted to ask more details about the leverage.
Is there a scenario where you would not be at the upper end of the leveraged at the one point to that you cited.
Yes.
No.
And I expect and penni can jump in too if you'd like to I mean, we sort of see it being ordinary course somewhere between one and one point too and as you know we just the more active we are on a net originations basis, the more we have to draw.
And the revolvers to fund that that's typically just the way, we do things and if we see a more significant repayments quarter like we did this past quarter. The levers tends to go down, but I think we'll operate within that range based on activities levels activity levels.
Great I appreciate all the information on this point.
Youre welcome.
Once again, if you'd like to ask a question. Please press Star then one.
The next question comes from Kenneth Lee with RBC capital markets. Please go ahead.
Hey, Thanks for taking my question and this is going to be a follow up to a previous question regarding the investment backlog.
Should we expect to see more of a mix shift towards second lien investments over the near term.
Especially as you start to grab too and.
Emphasize more on investing and larger borrowers. Thanks.
Yeah, I don't think the mix has shifted too much and I wouldn't expect the mix to shift going forward right. I mean, one of the hallmarks of this strategy is that we want obviously go out to borrowers and Counterparties with a complete set of products right. So we're happy doing everything for first lien all the way through down to doing preferred and common equity investments. So it's really just going to.
B.
What presents itself and backlog and pipeline and what do we see as most attractive, but I think the mix will stay.
Quite similar to where we are today I think it's been consistent over the last year or so.
Right that's very helpful.
And just one and one follow up if I may.
Was there anything notable.
That was driving the portfolio dividend income that was reported and the quarter.
And.
Penny I might let you take that one day is there anything that sticks out I think we had.
Special dividend from one company in particular that we've been restructuring that we now own.
But beyond that I can't think of anything other than that special dividend that came from one one portfolio company that we're sort of in the midst of turning around and fixing.
Great. Thank you very much debt.
Alright, Kevin Thanks.
Ladies and gentlemen, this concludes our question and answer session and I'd like to turn the conference back over to Mr. Kipp severe for any closing remarks.
No nothing beyond that we appreciate everybody getting on the call to here.
The company is doing we feel great about the positioning today and.
Everybody at least a happy spring here and the northeast as the weather warms up and I guess, we'll talk to you.
Formerly here again summertime so thanks for thanks for attending.
And thank you Sir.
Ladies and gentlemen, this concludes our conference call for today.
Any part of today's call and the archived replay of the call will be available approximately one hour. After the end of the call for May 12, 2021, and five P. M. Eastern time to domestic callers by dialing eight seven and seven.
And for a 475 to nine and 10.
International callers by dialing plus one for 1231 and 70088.
Replays. Please reference conference number 101 531 for zero.
An archived replay will also be available on a webcast link located on the homepage of the Investor resources section of Ares capital website. Thank.
Thank you very much you may now disconnect your lines.
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Yes.
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