Q3 2021 Pennantpark Investment Corp Earnings Call
Ladies and gentlemen, you're currently on hold for today's conference call. At this time, we are assembling today's audience and plans for you'll enjoy shortly thank you for your patience and please remain on the line.
[music].
Good afternoon, and welcome to the Pittsburgh and investment Corporation's third fiscal quarter 2021 earnings Conference call. Today's conference is being recorded at this time all participants have been placed in a listen only mode.
And we'd be open for a question and answer session. Following the Speakers' remarks, if you'd like to ask a question and at that time simply press star 1 on your telephone keypad.
I would like to withdraw your question Press Star 2 on your telephone keypad.
It is now my pleasure to turn the call over to Mr. Erickson, Chairman and Chief Executive Officer of Pennant Park Investment Corp. Mr. Penn You May begin your conference.
Okay.
Good morning, everyone.
I'd like to welcome you to the pennant Park investment Corporation's third fiscal quarter 2021 earnings Conference call.
I'm joined today by Richard <unk>, our new Chief Financial Officer.
And Richard joined US in June from Guggenheim Partners, where he was head of alternative investment accounting for many years.
Friday Guggenheim he was at <unk>.
We are thrilled that Richard has joined us and our confidence and his extensive experience will be a tremendous asset for the company.
Thank you for you bet for us for all of his contributions to <unk> since inception, and a grateful that he is continuing with pennant park focusing on strategic initiatives.
For sure. Please start off by disclosing some general conference call information and included discussion about forward looking statements.
Thank you Lord I'd like to remind everyone that today's call is being recorded. Please note that this core property and pennant Park investment Corp.
And that any unauthorized broadcast of this call and any form is strictly prohibited.
A replay of the call will be available by using the telephone numbers and pin provided and now earnings press release as well as on our website.
And so I'd like to call your attention to the customary safe Harbor disclosure and our press release regarding forward looking information.
Today's conference call May also include forward looking statements and projections and we are.
Ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these projections.
We do not undertake to update our forward looking statements unless required by law.
And copies of our latest SEC filings. Please visit our website at <unk> dot com or call us at 212, <unk>, 1.1000 and at.
At this time I would like to turn the call back to our chairman and Chief Executive Officer at Penn.
Thanks Richard.
And going to spend a few minutes discussing how we fared in the quarter ended June 30th.
And the portfolio is positioned for the upcoming quarters, our capital structure and liquidity the financials and then open it up for Q&A.
We are pleased with our performance this past quarter.
We achieved a 4.1% increase and adjusted NAV.
Adjusted NAV went up 38 cents per share from $9.20.
And to $9.58 per share.
We are particularly pleased that our NAV today is up over 9% from what it was pre Covid on December 31.2019.
We have several portfolio companies and what's your equity investments and materially appreciated in value as they are benefiting from the recovery.
This is solidifying and bolstering our NAV.
We will highlight those companies and a few minutes.
Additionally, we are making progress and our equity rotation program.
During the quarter, we generated $51 million of cash proceeds from the equity portfolio, including proceeds from wheel Pros Walker Edison <unk> Pak WPB kanno and others.
As part of our business model alongside the debt investments, we make we selectively choose to co invest and the equity side by side with the financial sponsor.
And our returns on these equity co investments have been excellent over time.
Overall for our platform from inception through June 30, or $237 million of equity call investments have generated an IRR of 28% and a multiple on invested capital of 2.9 times.
And a world where investors may want to understand differentiation among middle market lenders are long term returns on our equity co investment program are clear differentiator.
Our core net investment income was <unk> 14 per share, which excludes $1.1 million of onetime expenses in connection with the prepayment of a portion of our SP IC financing.
With regard to growing net investment income we have a 3 pronged strategy, which includes.
Number 1 growing assets on balance sheet at PNM.
And as we move towards our target leverage ratio of 125 times debt to equity from 0.8 times.
Number 2 growing our <unk> JV with pantheon and to about $550 million of assets from approximately $400 million of assets through balance sheet optimization, including a potential securitization.
And 3 the opportunity to rotate out of our equity investments over time and to yield instruments.
We are well on our way to implement and implementing the NII growth strategy and.
In addition to generating $51 million and cash proceeds from our equity portfolio.
This past June quarter since June 30.
PNM has had new originations of $69 million.
Although in the June quarter repayments on loans, roughly equaled new loan originations and the September quarter. So far repayment activity has abated and new originations have accelerated.
Our portfolio performance remains strong as of June 30, the average debt to EBITDA and the portfolio was 4.6 times and the average interest coverage ratio the amount by which cash income exceeds cash interest expense was 3.4 times.
We have no non accruals on our books and PNC and PSL at.
The portfolio is highly diversified with 86 companies and 29 different industries.
Since inception, <unk> has invested $6.2 billion.
And an average yield of 12%. This compares to a loss ratio of about 15 basis points annually.
This strong track record includes our energy investments are.
And our primarily subordinated debt investments made prior to the financial crisis and now the pandemic.
As we analyzed our 14 year track record of P&L. It is clear our returns took a step function up starting in 2015.
And the IRR of our investments made prior to 2015 was 9.7%.
Since 2015, we have achieved a 13, 8% IRR we.
We believe this is due to for key factors.
Number 1 better company selection within industry verticals, where we have domain expertise.
Number 2 avoidance of investments and the energy industry and other cyclicals.
Number 3.
And 1 results from our equity co investment program and <unk>.
For a substantially increased focus on core middle market companies, where our capital can be more important to companies core middle market to us means below $50 million of EBITDA and.
According to S&P loans with loans to companies with less than 50 million of EBITDA have a lower default rate and higher recovery rate for loans to companies with EBITDA higher than $50 million.
And our performance through the global financial crisis, and recession was excellent during that recession and the weighted average EBITDA for underlying portfolio companies declined by 7.2% at the bottom of the recession. This compares to the average EBITDA decline for the Bloomberg North American high yield index of 42%.
Based on tracking EBITDA of our underlying companies through Covid.
EBITDA decline was substantially less than it was during.
During the global financial crisis, our media and EBITDA decline at the bottom of Covid and June 2020 was 1.4%.
This compares favorably to the 7% decline and EBITDA during Covid the credit Suisse high yield index.
Many of our companies are and industry, such as government services healthcare technology software business services and select consumer companies, where we have meaningful domain expertise.
We believe that we are experiencing strong recovery with some companies and industries being beneficiaries of the environment.
And we're pleased that we have significant equity investment to several of these companies, which can substantially move the needle over and I.
I would like to highlight some of those companies the companies, our Caddo Walker Edison PT network and JF petroleum.
Cano health as a national leader and primary health care, who is leading the way and transforming health care to provide high quality care at a reasonable cost to a large population.
<unk> equity position as a cost and fair market value on June 30th of zero and $61 million respectively.
Walker Edison is a leading e-commerce platform focused on selling furniture exclusively online through top e-commerce companies, our equity position as a cost of zero and a fair market value of $9.5 million as of June 30th.
Due to to capital transactions, 1 a dividend recap and another and equity financing by Blackstone, We have received cash equal to 4 times, our capital on our equity position.
PT network as the leading physical and occupational therapy provider and the mid Atlantic States.
Our equity position as a cost of $23 million and a fair market value of $60 million as of June 30th.
Mid Ocean JF Holdings are JF petroleum is a leader and the distribution installation and servicing of vehicle fueling and related equipment to a retail fueling locations and the U S. As of June 30th P&L and equity securities with a cost and fair market value of 40 million and $49 million respectively.
These companies are getting financial momentum in this environment and our NAV should be solidified and bolstered from the substantial equity investments as their momentum continues.
PMT has among its lowest percentage of <unk> energy investment since 2013 and.
Energy investments represent only 7% of the overall portfolio.
<unk> is now and stable operational and financial footing and is benefited from higher prices and production.
The company's free cash flow positive after debt service and plans to use any cash flow to repay debt.
As of June 30th equity represented approximately 35 per cent of the portfolio.
The equity investment as held for the past 12 months have appreciated by approximately 45% driven by many of the Companys previously mentioned.
And our long term goal continues to be to target that percentage down to about 10% of the portfolio.
As we monetize the equity portfolio, we're looking forward to investing and the cash into yielding debt instruments to increase net investment income.
The outlook for new loans is attractive we are as busy as we've ever been and 14 years and business reviewing and doing new deals with our experienced talented and growing team are wide funnel is producing active deal flow that we can then carefully and thoughtfully analyzed so that we can be selective as to what ends up and our portfolio.
We are focused on the core middle market, which we generally define as companies with between $10 million of $50 million of EBITDA.
And we like the core middle market because it is below the threshold and does not compete with the broadly syndicated loan or high yield markets as such we do not compete with markets, where leverages higher equity cushion is lower covenants are light wide or non existent information rights or fewer and EBITDA adjustments are high.
And less diligence and.
And the timeframe for making an investment decision is compressed.
On the other hand, where we focus and the core middle market generally our capital is more important to the borrower.
As such Leverages lower.
Equity cushion is higher we have real quarterly maintenance covenants, we received monthly financial statements to be on top of the companies.
EBITDA adjustments are more diligence and achievable and we typically have 6 day weeks to make thoughtful and careful investment decisions as.
As we highlighted a moment ago, according to S&P loans to companies with less than $50 million of EBITDA have a lower default rate and a higher recovery rate and those loans for companies with higher EBITDA.
Let me now turn the call over to Richard our CFO to take us through the financial results.
Thank you all for the quarter ended June 30 for net investment income totaled <unk> 14 per share.
<unk> <unk> per share of Spic's prepayment fees looks.
Looking at some of the expense categories base fees totaled $4.4 million taxes general and administrative expenses totaled $1 billion and interest expense totaled $7 million and <unk>.
And 1 time expenses from the prepayment of Spic's financing.
Net realized gains on investments was $42 million or 62 per share.
Change in net unrealized losses on investments were $16 million 25 per share.
Change and the value of our credit facility decreased our NAV by <unk> <unk> per share our.
Our net investment income equaled our dividend.
Consequently, and EV per share went from $9.24 per share to $9 and 59 per share up 3.8% from the prior quarter adjust.
Adjusted NAV, excluding the mark to market and by liabilities was $9 and 58 per share up 4.1% from $9.20 per share and the prior quarter.
As a reminder.
Minder, our entire portfolio credit facility and senior notes are marked to market by our board of directors each quarter using the exit price provided by independent valuation firms securities exchanges.
All independent broker dealer quotes when active markets available from the ASC 820, and <unk> 25, and cases, where broker dealer quotes are inactive we use independent valuation firms to volume and investments.
Our GAAP debt to equity ratio net of cash was 0.8 times regulatory debt to equity ratio net of cash, which excludes FDIC debt was 0.7 times.
We have a strong capital structure with diversified funding sources and no near term maturities, we have a $435 million revolving credit facility maturing in 2020.4 with a syndicate of banks $64 million of SBA debentures maturing in 2027, and $2028.86 million of unsecured notes maturing and <unk>.
For <unk>.
And $150 million of unsecured notes maturing in 2026.
Our overall debt portfolio has a weighted average yield of 9.2%.
On June 30, our portfolio consisted of 86 companies across 29.
And industries the portfolio was invested in and 41% and first lien senior secured debt, 14% and second lien secured debt, 10% and subordinated debt, including 6% and PSL F and 35% and preferred and common equity, including 4% and psf.
And 1% of the portfolio has a floating rate all of which has a LIBOR floor. The average LIBOR flow of 1%.
Now, let me turn the call back to art.
Thanks Richard.
To conclude and we want to reiterate our mission our goal is to generate attractive risk adjusted returns through income coupled with long term preservation of capital.
Everything we do is aligned to that goal, we try to find and less risky and middle market companies that have high free cash flow conversion, we capture that free cash flow primarily in debt instruments and we pay.
Pay out those contractual cash flows and the form of dividends to our shareholders and.
In closing I'd like to thank our extremely talented team of professionals for their commitment and dedication. Thank.
Thank you all for your time today and for your continued investment and confidence in us.
That concludes our remarks at this time I'd like to open up the call for questions.
Thank you for you'd like to ask a question. Please signal by pressing star 1 on your telephone keypad, if youre using a speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
And press Star 1 to ask a question.
And we can now take our first question from Casey Alexander with Compass point. Please go ahead.
Hi.
Good morning, and thank you for taking my questions. Good afternoon, I guess it is.
Can you tell us what.
The current outstanding debt is on Ram and using the current price decks energy price decks as a baseline.
To what extent can you pay that down.
Quarter by quarter.
Thanks, Casey and it is.
Good question, it's about $40 million and debt.
$40 million of debt on the balance sheet of Ram.
We can and we can pay it down over the course of the next 2 or 3 years.
And so very attractive long term loan from the fed Mainstreet program.
So as we generate cash flow, we have the option to either pay it down or just accumulate cash on the balance sheet. So we'll evaluate volume.
We'll evaluate things as they go.
But it is cash flow generative and synergies.
From companies generating good cash flow today.
Just to make sure that I understand your answer debt. If you dedicated the excess cash flow to paying down the debt you could have it paid off and 2 to 3 years, yes.
Yes, okay, great that's very helpful.
Lee given debt.
I mean, you're.
Return of Niv to above pre COVID-19 levels.
And yet the.
Screen discount in the stock.
Is there any consideration towards even a modest share repurchase program to take advantage of the discount.
It's the highest in the peer group and.
And yet your returns seem to be improving and NAV has clearly improved and perhaps that would be a useful.
Way to take advantage of it for shareholders yes.
And that's a great question, and we're always considering and I think.
As we look we generated $51 million of proceeds on from equity investments.
Investment this past quarter.
For that as those continue and get even greater we certainly would look at taking a portion of the proceeds towards hopefully will be elaborate and a $51 million.
And dedicate a portion of that over time too to buying back the stock.
Yes.
And that's.
We've got to play it out we got to we got to start generating these proceeds and over the coming quarters and.
And I would certainly if the stock price continues to be or and is certainly consider we would certainly consider dedicating a portion of hopefully bigger proceeds too.
A very worthwhile investment.
And if the stock.
Alright, great. Thank you for taking my questions.
And we can now take our next question from Robert Dodd Raymond James. Please go ahead.
Hi, guys, good afternoon, and I guess.
On.
For the capital structure, obviously, you have been paying down.
And the SBA debt.
<unk>.
And obviously you just did.
Unsecured bonds and so your unsecured is a good portion of.
Very helpful portion of the mix and then can you give us any idea where.
Where are you.
The mix of of debt for the.
To be and should we expect.
And the SBA.
To continue to shrink you've only got 2 pools.
Benches left I think.
64 billion is that going to be contemplated to be paid off.
<unk>.
Ahead of maturity and the maturities are way up.
Yes, yes, so it's a good question and the way the Spic's financing works and as you get towards the back end of.
The pool, which we are not really permitted to make new investments from that so.
So you can just sit there and with cash and pay pay the interest expense and where you can pay it off which is why we elected to pay off and about $45 million. This quarter. So yes, the spic's will wind down over the coming quarters or years, we like unsecured financing, particularly these type of levels, we did a day.
And a deal not too long ago, which was well received so over time, we're going to use unsecured probably to a greater expense targeting about 33% of the.
And the debt stack as unsecured and we also like securitization technology.
And we haven't yet used it.
And <unk>, we've used it and our sister BDC <unk>.
But we certainly like the long term low cost of securitization and your likes and any long term unsecured nature of bonds and then the other piece of it of course will be in a plain old credit facilities, which is kind of what we already have so over time expect us to increase unsecured and expect us to potentially utilize securitization.
Both and our JV as well as our balance sheet at PNM and.
And I think that's and again the game plan at this point and time.
Got it and then.
The next question and then within within.
And the JV, obviously, you mentioned potentially using securitization debt.
Given generally securitization is due within the day, we will.
And would allow higher leverage.
Carried on the balance sheet and what's the target level is.
Would the usage of securitization technology.
Should we expect that to result in higher leverage.
Third party debt.
Including U S sub notes.
The JV always is the target leverage still kind of.
1.5 times within that vehicle.
Yes.
And look again at the corollary and our joint venture with <unk>, where we did a securitization and the joint venture and we are contemplating using that because of the securitization does give you a very long term safe financing.
And you can do you can sleep at night with that long term securitization, we would contemplate potentially doing the same thing and our joint venture here with pantheon <unk> and.
And you could contemplate and I'll just throw out a straw man.
With the same amount of junior capital there.
And there we currently have in that joint venture and getting to a portfolio of call. It $570.580 million.
Something like 2.3 times leverage to junior capital, which could be very helpful from an ROE standpoint, and generate nice NII for for PNM <unk>. So thats, just 1 strawman that 1 could contemplate.
Similar to what we're doing over and <unk>.
Yes.
1 more if I can kind of following up to Casey's question.
With that and still sizable still equity M&A.
M&A market and oil and gas seems to be.
Starting up.
No.
Im not an expert on that particular and.
Obviously, but any any M&A activity beginning to happen within the Austin chalk.
Or any anything on that debt.
Make it.
And then.
And <unk> Asian, because its.
Capital.
More likely in the.
Okay.
And if you chip.
Yes.
Hope so we hope so and it's early days, but we're hopeful and yes, we are not going to wait for the last dollar. If there is a good nice monetization event, we we like our shareholders, we will look to come.
For the equity to cash of course, we're not we will not be perfect market timers that said, it's still early right.
And it's still early.
Look when you when you see more robust M&A when you see more drilling I mean, ultimately somewhat some other oil and gas companies should be able to say I have an option to drill or I have an option to do an M&A deal with someone like Ram and.
And.
And because Ram has a very well delineated acreage and and 12.
12 holes and the ground that had been very productive.
That's a really good use of shareholder investor cash to buy ramp so.
No.
And every day, you're reading the newspapers and the big companies are being very judicious and careful and you're not drilling and they are there.
And there <unk>.
Got the discipline and all this other stuff so so when you and I.
I don't want say no ones and we're waiting for people to be on discipline. While we are waiting for them to feel a little bit more expansive about doing things whether that be drilling whether that be M&A.
And we look forward to that day, and we will try to optimize value and as expeditious timeframe as possible.
Got it thank you and congrats on the day quarter.
Okay.
And as a reminder to ask a question. Please signal by pressing star 1 on your telephone keypad.
We'll take our next question from Ryan Lynch of <unk>. Please go ahead.
Good afternoon, and congrats on a nice quarter.
My first question has to do with the equity co investment strategy, obviously, that's been a.
A really successful strategy and the past I'm just curious.
With the size of your equity portfolio today, and the weighted asset really for the last several quarters have you guys modified net equity co investment strategy at all or are you guys still.
Trying to Youtube.
Make equity co investments as much as you can on.
On new investments and debt.
The nice start.
Exiting proceeds from the recent equity investments of $51 million does that help that.
That and allow you to Jamie even for a little aggressive in that area yes.
And so great question, and it's a little bit of a conundrum last quarter equity was about 35% of our book.
This quarter, it's about 35% of our book, but we took $51 million of cash and then we have mark up so.
And I guess, that's good that's good that means and we're generating cash and we've had.
Valuation increases at the same time as we want to try to get more and more accidents and try to and more fat percentage of the portfolio down. So I guess, we'll take increases and NAV and Nx and.
Cash proceeds all day long if we can if we can do that.
So short answer long, where we're going to just going to continue what we're doing on the equity call invests now none of these investments are ever that large.
And individuality.
And I know across our platform and originally it was 8 or $9 million and thats across different vehicles right.
And so wheel pros was like for a $5 million across different vehicles. So I know 1 of these co invest.
For that large to weight down the P&L and euro <unk> or any of our other vehicles.
If they do start and if they do well then they weigh them down, but thats kind of a good way down because.
<unk>.
And I've kind of $5 million becomes $50 million or whatever so.
So we really haven't adjusted because each individual.
Each individual investment we make is not that big so just answering your question.
But it's something we're cognizant oven and frankly.
And it's 1 of the worst well it would be wrong for us it's been working well so it would be wrong for us too.
2 to not continue that <unk> itself got way down with the energy investments, we made a bunch of years ago, and we're not doing that anymore. So.
So we still have we still have to work our way out of this but I think we see we see the light at the end of the total we see the pathway. We're encouraged with our results recently and the way we've been investing really since 2015, where we saw a 400 basis point increase and our irr's due to a lot of factors.
<unk>.
And if it Ain't broke don't fix it in the meantime, we got to clean up the mess that was created before.
Yes, I think that makes a lot of sense and R&R.
And shareholders would welcome that can learn from every quarter by adding significant cash proceeds but not yet.
And the equity book go down given the rise and share values and that's obviously a good good place to be.
The second question that I had.
They may require you to board and Crystal ball, a little bit you guys, you mentioned $69 million of new originations on a quarter to date in September and the September quarter.
You said repayment has had sort of abated, which which would <unk>.
Not the case really and the June quarter and bid I'm just wondering given how active the markets are broadly you expect the repayments to kind of stay at that lower level or do you think thats just a little blip.
And it's more likely than not that day will kind of.
And it's back to higher levels in concert with just higher market activity going on right now so.
So.
I'll try my best on the Crystal ball and.
I'm, just giving you kind of news flashes off.
Half of what we're looking at week by week as we bring deals through investment Committee.
And I am theorizing now, but I think a lot of the reduction and repayments is due to the fact that we're now getting more mature.
And this cycle.
And the first wave of deals were.
Refinancings repayments M&A so.
Pick 1 company day co pack, which is a company that we were and for awhile and.
And as a nice company that company got sold it got sold to a bigger buyout shop financed by a bigger private lender and so really nice company, but when we got involved with 3 or 4 years ago. We were part of the first institutional capital.
Of a family owned businesses family solve their company to a private equity firm, we financed that deal and this M&A trades that just happened a couple of months ago is the next iteration is the company got bigger and more mature and and went to a different portion of this direct lending private equity ecosystem.
And I think Thats a lot of what you've been seeing over the last 6 months as COVID-19.
And as kind of hopefully abated.
Abated, a little bit the deals and we're seeing that are coming in the door. These days.
The next phase of this which are.
Back to companies that it's their first time and this direct lending private equity ecosystem, it's a founder its a family and as an entrepreneur and a private equity firm that we're backing and it's the first institutional capital and our debt is the first and institutional debt on that balance sheet. So.
This is my theory as to why we're seeing less repayments, so far and we'll see if it continues but.
Big part of what we do is finding those situations, where it's the first institutional capital and a business company does $10.15.20 of EBITDA.
Sponsor has both inorganic and organic plans to take that EBITDA of $30.40 $50.70.
Our debt capital will help hopefully help fuel that growth.
And our equity co invest will.
And we will ride alongside and generate some upside. So I think we're seeing more of those deals walk in the door.
Which will hopefully be a new part of the direct lending private equity ecosystem for years to come.
Okay I appreciate that.
Our thought process.
Possible question to answer with any clarity, but that's helpful.
Those are all my questions I appreciate your comments afternoon.
Thank you.
And we can now take our next question is from Kyle Joseph with Jefferies. Please go ahead.
Hey, good afternoon, Thanks for taking my questions most of and ask but.
I just wanted to thank you, Brian and get your sense for the revenue net revenue and EBITDA growth and you guys are kind of seeing currently and where you expect that to go over the remainder of the year as we lap some of the Covid costs.
And it's a phenomenal question because.
Yes.
With a big chunk of the portfolio.
A year ago everything was shut down so never in my 35 years and the business I have I have been seeing.
Revenue is up 300% and EBITDA is up 400% with just kind of some of the situations youre getting.
Youre getting.
And in this environment and it's kind of like hopefully we will never see this again and our time, we may but.
Obviously and many of these cases for the year on year growth is is tremendous and I think as I.
As I indicated in our prepared remarks, we tracked EBITDA down through the and I'm searching for my piece of paper, we track EBITDA down down through the cycle on a median basis.
It was only down really less than 2%.
So the bottom and our portfolio the bottom was June 30th.
1020.
So that was kind of the.
The bottom point searching around and get back to you Kyle on.
What we've seen.
Since then but clearly we've seen rapid growth.
We've seen.
And certainly the most rapid growth has been and the more COVID-19 impact and names so by definition.
So it's hard to I really need to get back to you with kind of a statistic and this is something we can generate over the coming days and weeks how does it look versus 2019.
How does the EBITDA.
The portfolio to the extent, it's named for names and extent, we had a name and 2019 and we have and in 2021, what is the EBITDA look like relative to that.
I would say.
I'd say by definition, given the NAV trends, it's up substantially but.
I would only be guessing so if I could you give me give me a little time I call you back and we can certainly disclose on our next conference call.
Tracking 2021 versus 2019, and give you a sense of kind of how it's looking on a portfolio basis.
Got it that makes sense and then 1 follow up for me.
Looking at the yield on the portfolio.
And again, another a little bit of a crystal ball question here with a lot of moving parts and rates and spreads and everything and and also kind of a mix shift as you rotate equity, but just how do you think about the yield on portfolio given the portfolio rotation and kind of spreads youre seeing and the market right now.
Yes, I mean, we see we see.
Stable yields and spreads.
So for so we're not seeing diminishing of the spreads and yields at this point they bounce back for sure.
We are kind of more and we are now back to a more clinical and normal.
Normal basis, I think what we're seeing though thats better is the quality of the companies the companies that were financing day by definition.
Wealth recover there and some cases, they did better through COVID-19, so even though spreads and yields are maybe creeping back to pre COVID-19 levels.
The quality of the companies and is better.
And the results seem to be on the uptick and the uptrend. So we can play a little bit more offense aggressively.
On that so the game for US really is to continue to select really good credits.
Lessons that we continually learn are it's all about the company find really good companies.
And.
If you stretch a little bit on leverage and if you stretch a little bit on yield if you find really good companies and all works.
So we've got to find really good companies and we're finding some a lot today.
Utilize the various levers we have available to us in terms of leveraging up the <unk> balance sheet.
Leveraging up the PSL F joint venture balance sheet and.
And working the equity rotation and those are the 3 levers.
And if we can continue to find quality deal flow.
With high quality companies.
We should be able to substantially grow NII and also hopefully ride some leftover time with a chunk of our portfolio, that's and equity securities.
Got it very helpful and thanks, a lot for answering my questions.
Thank you Kyle.
And with no further questions at this time I would like to hand, the call back to Mr. Penn for closing remarks.
Thanks, everybody for being on the call, we wish everybody a enjoyable and hopefully very healthy rest of the summer. Our next quarterly conference call will be in and November mid November for our 10-Q excuse me our 10-K.
Since September 30, 10-K that will be filing in mid November so look forward to speaking to people there and if not if not between now and then have a great summer everybody. Thank you.
This concludes today's call. Thank you for your participation you may now disconnect.
Yes.
Yes.
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