Q4 2022 BlackRock TCP Capital Corp Earnings Call

Speaker 1: Ladies and gentlemen, good afternoon. Welcome everyone to BlackRock TCP Capital Corp. Fourth quarter, 2022 earnings conference call. Today's conference call has been recorded for replay purposes.

Speaker 1: During the presentation, all participants will be in a listen-only mode. A question and answer session will follow the company's formal remarks.

Speaker 1: To ask a question, please press the star key followed by the digit one.

Speaker 1: I will repeat these instructions before we begin the QA session.

Speaker 1: And now I would like to turn the call over to Katie McLean, Director of BlackRock TCP Capital Corp Investment Relations Team. Katie, please proceed.

Speaker 2: Thank you, Tia. Before we begin, I'll note that this conference call may contain four looking statements based on the estimates and assumptions of management at the time of such statements and are not guarantees of future performance.

Speaker 2: For looking statements involve risks and uncertainties, and actual results could differ materially from those projected. Any for looking statements made on this call are made as of today and are subject to change without notice. Additionally, certain information discussed and presented may have been derived from third party sources and has not been independently verified.

Speaker 2: Accordingly, we make no representation or warranty with respect to such information. Earlier today, we issued our earnings release for the fourth quarter and full year ended December 31, 2022. We also posted a supplemental earnings presentation to our website at www.pcpcapadels.com. To view the slide presentation, which we will refer to on today's call.

Speaker 2: Please click on the Investor Relations link and select events and presentations. These documents should be reviewed in conjunction with the companies Form 10K, which was filed with the SEC earlier today. I will now turn the call over to our chairman and CEO , Rajveg.

Speaker 3: Thanks Katie and thank you all for joining us for TCPC's fourth quarter and year in 2022 earnings call.

Speaker 3: I will begin today's call with a few comments on the market environment and provide overview of our fourth quarter and full-year results.

Speaker 3: We'll then turn the call over to our president and chief operating officer Phil Seng, who will provide an update on our portfolio and investment activity.

Speaker 3: results as well as our capital and liquidity positioning in greater detail. I will then conclude with a few closing remarks before we take your questions. 2022 was a year in which the equity and fixed income markets experience significant volatility, particularly in the latter half of the year. This was driven by a combination of geofloctal uncertainty.

Speaker 3: and that Federal Reserve's ongoing actions to aggressively raise interest rates in order to curb inflation, an effort that appears will continue for the foreseeable future.

Speaker 3: This volatility persisted in the fourth quarter and adversely impacted spreads across fixed income markets, including middle market loans breads.

Speaker 3: No sector or asset class was immune to the market volatility. And in the fourth quarter, we experienced a decline in NAD to impart to the market volatility, but mostly due to lower valuations on three specific portfolio companies and companies specific items. And so did our

Speaker 3: I will touch on these in more detail later, excluding the impacts of these three names, or any of the decline would be closer to 3%.

Speaker 3: In this environment, our team is more than two decades of experience, lending through multiple market cycles, and our ability to work with our portfolio companies to manage through challenging operating environments is particularly valuable.

Speaker 3: We are also reminded of the benefits of direct lending that historically delivered premium yields to the liquid markets and, importantly, better down-side protection in periods of market turbulence.

Speaker 3: One aspect of our investment strategy has led to strong downside protection and very low loss rates throughout our history has been our strong portfolio management and monitoring procedures.

Speaker 3: In addition to the ongoing monitoring or deal team to perform over investments in their individual portfolios, on a quarterly basis, TCPC's investment committee also performs a thorough review of every company in the portfolio.

Speaker 3: As part of this process, the same deal team members that originated and underwrote these investments.

Speaker 3: Reviewed a company's most recent financial performance and engaging dialogue with the business owners and operators to assess both current and projected performance relative to our original underwriting assumptions.

Speaker 3: All of this is conducted within the context of our deep industry expertise.

Speaker 3: using both a forward-looking and historical lens.

Speaker 3: Additionally, our industry expertise has always enabled us to underwrite loans with strong letter protections in the form of Covenant's specifically tailored to contemplate both company and industry specific dynamics.

Speaker 3: Additionally, our industry expertise has always enabled us to underwrite loans with strong letter protections in the form of covenants specifically tailored to contemplate both company and industry specific dynamics. As you can imagine, these existing protections...

Speaker 3: are more important today given the market environment as they allow us to take any action required.

Speaker 3: to protect our capital.

Speaker 3: If we're providing highlights from our fourth quarter and full-year financial results, I'd like to provide some more context to the sequential decrease in our NAV.

Speaker 3: In addition to the more normative evaluation adjustments across the portfolio due to wider market spreads in the quarter,

Speaker 3: Two thirds of the total unrealized losses recorded in the fourth quarter was attributable to three portability companies.

Speaker 3: Admintem, Razer, and Auto Alert.

Speaker 3: and the industry in which they operate. It is important to emphasize that the issues driving these valuation impacts are isolated, and in the case of equity investments.

Speaker 3: In the case of Ed Mensen, as many are aware, the company has delivered very strong performance over the last several years, driven in part by the ongoing shift to online learning, which led to significant write-ups and significant realized gains on our investment.

Speaker 3: In the case of Edminton, as many are aware, the company has delivered very strong performance over the last several years, driven in part by the ongoing shift to online learning, which led to significant write-ups and significant realized gains on our investment. While Edminton's performance continues to be strong,

Speaker 3: The pace of growth and demand for online learning tools coming out of COVID has slowed but continues. Given the normalization of growth in the sector combined with a more moderate outlook.

Speaker 3: and General Public Market valuation declines, the value of our investment was marked down in the fourth quarter.

Speaker 3: However, the overall performance our investment has been very positive and we remain confident in the long-term performance of it mentioned.

Speaker 3: Razor Group is a consolidator of small to medium-sized brands that sell through Amazon's third-party platform.

Speaker 3: While we continue to view our loans to Razor as well covered, the company's enterprise value has been pressured by the challenges facing the broader Amazon ecosystem.

Speaker 3: which resulted in a reduction of the value of our warmth.

Speaker 3: as well as a modic decline on the value of our first main loan.

Speaker 3: Finally, auto-earned is a company that provides marketing software to auto dealerships.

Speaker 3: Autorellert was severely impacted at the start of the pandemic when autodealerships were closed.

Speaker 3: and has subsequently been impacted by the supply chain issues that have resulted in limited near limited new car inventory.

Speaker 3: We are working with management and the sponsor on next steps. We are encouraged by the fact that some of the macro issues seem to be abating and recent results reflect improving performance.

Speaker 3: Now, turning to our fourth quarter and full year 2022 highlights. We delivered strong investment income of 40 cents per share in the fourth quarter and won $1.50 for the full year.

Speaker 3: Given the floating rate nature of more portfolio, our net investment income benefited from the increase in base rates in 2022, as well as wider spreads on new investments made throughout the year.

Speaker 3: As the acknowledgement of the higher ongoing earnings power of our portfolio, primarily driven by higher base rates, we announced a two cent per share increase in our dividend beginning with the fourth quarter dividend that was paid on December 31st.

Speaker 3: And our Board of Directors today announced a $0.32 per share dividend distribution for the first quarter payable on March 31st to shareholders of record on March 16th.

Speaker 3: This in addition to the five cent per share special dividend that was announced in December and paid last month to shareholders of record as of December 31st. As a reminder, we have always emphasized the stability of the dividend and the coverage through our returning that investment income.

Speaker 3: Throughout TCP's history, we have consistently covered our dividends. We're recurring that investment income. A commitment that remains important to us even with the recent dividend increase.

Speaker 3: Fill with discussion on our fourth quarter and flow your investment activity in more detail.

Speaker 3: But in summary, we are being disciplined and deploying new capital in this uncertain environment, while also taking advantage of the more lender-friendly investment environment.

Speaker 3: We reviewed a substantial number of transactions during the year and selectively deployed capital in a small percentage of those opportunities. Looking back at our historical performance as a public company, since 2012, we have generated a 10.3% annualized return on invested assets.

Speaker 3: and a total annualized cash return of 9.3%.

Speaker 3: We believe our performance remains at the high end of our peer group, demonstrating our ability to consistently identify attractive opportunities at premium yields and deliver exceptional returns to our shareholders across market cycles. Now I will turn it over to Phil to discuss our investment activity.

Speaker 3: and portfolio position. Thanks, Roy.

Speaker 4: The public market volatility and uncertainty in the capital markets generally throw the slowdown in activity in 2022 versus the record levels.

Speaker 5: We want.

Speaker 4: Positively though, we saw meaningful shifts toward a more lender-friendly investment environment marked by wider spread and less quishback on terms. Against this backdrop, we continued to identify and review a significant number of potential investment opportunities as we capitalized on the scale of the broader BlackRock, US private capital platform and the breadth of our team's experience.

Speaker 6: at your end.

Speaker 4: Our portfolio has fair market value of approximately $1.6 billion.

Speaker 4: 88% of our investments were senior secure debt spread across a wide range of industries providing portfolio diversity and minimizing concentration risk.

Speaker 4: We also believe our portfolio is well positioned to perform a myth's market uncertainty given our emphasis on companies with established business models in less cyclical industries.

Speaker 4: The portfolio at quarter end consists of investments in 136 companies in all time high.

Speaker 4: As the chart on slide 6 of the presentation illustrates, our recurring income is distributed broadly across the portfolio and is not reliant on income from any one company.

Speaker 4: In fact, more than 90% of our portfolio companies each contribute less than 2% to our recurring income.

Speaker 4: 85% of our debt investments are first-lane providing substantial downside protection. And 94% of our debt investments are floating rate, proving an important benefit in this rising rate environment.

Speaker 4: Moving on toward rest and activity.

Speaker 4: We believe our Deal Source Channel agnostic approach and our industry specialization provide an advantage, particularly at a time that we're seeing a slowdown in traditional sponsor back activity.

Speaker 4: Our industry-focused deal teams continue to identify unique investment opportunities from a wide range of sources, including directly through our industry contacts and management teams.

Speaker 4: in addition to our traditional sponsor relationships.

Speaker 4: In reviewing these opportunities, we emphasize transactions where we act as a lender of influence, which enables us to negotiate deal terms and conditions that we believe provide meaningful down federal protection.

Speaker 4: These include substantial collateral and tailored coveted packages that are particularly important in periods of economic volatility like we are in today.

Speaker 4: In addition, for industry specialization, which are borrowers' value, bolsters are ability to assess and effectively mitigate risk in our underwriting and when we negotiate terms in the credit documentation.

Speaker 4: Despite the slowdown in activity in 2022, TCPC invested $338 million, including $75 million in the fourth quarter.

Speaker 4: The deployment of the fourth quarter included loans to seven new and six existing portfolio companies.

Speaker 4: Follow on investments in existing holdings continue to be an important source of opportunity for us.

Speaker 4: In terms of dollars invested 50% of total investments in the fourth quarter and 44% in the full year 2022 were in existing portfolio company.

Speaker 4: We believe that in common seed is an important advantage in what we source investments given these are companies who already know and understand well.

Speaker 4: We've seen them execute on their investment thesis and having a healthy, existing dialogue with the management team.

Speaker 4: TCP's largest investment during the fourth quarter was a senior secured first lane loan to Madison Logic, a provider of account-based and a content marketing services to B2B marketers.

Speaker 4: We viewed this as an opportunity to invest in an industry leader that is benefiting from tailwinds in the account-based marketing sector. We also believe that the high ROI on account-based marketing versus other marketing services

Speaker 4: will be more resilient in periods of economic stress. BlackRock's prior experience and expertise in the complex account-based marketing sector allowed us to understand.

Speaker 4: The real merits of the credit and obtaining conservative deal structure had an attractive risk adjusted return.

Speaker 4: Our second largest investment in the quarter was senior secured first-lane term loan to integrity marketing, the leading independent distributor of life and health insurance products in the U.S.

Speaker 4: During the fourth quarter, given our familiarity with the business model, the industry, and our relationship with the sponsor, we led an incremental personally in-term loan to the company to support ongoing M&A.

Speaker 4: Integrity operates in a stable and growing segment of insurance market that has demonstrated a track record of strong organic and inorganic growth. New investments in the fourth quarter were offset by total dispositions of $75 million. The overall effective yield and our depth portfolio increase from 9.2 million.

Speaker 4: percent weighted average effective yield on exceeded solutions.

Speaker 4: As I noted earlier, we are seeing a shift toward a more lender-friendly environment with improvements in both pricing and turns relative to 12 and even 6 months ago.

Speaker 4: Here today we have seen a modest pick up an activity and have been investing selectively maintaining our underwriting discipline and being mindful of the inflationary environment.

Speaker 4: We emphasize companies that have significant price and power to pass on higher input costs.

Speaker 4: including increases in their cost of capital. It's also important to note that we did not mirror the perfection.

Speaker 4: But we do build insufficient buffers to ensure companies can withstand higher costs and changes in the market environment without their impairing their ability to service our loans. Our pipeline continues to remain healthy.

Speaker 4: and the yield on investments in our pipeline are generally in line with our current portfolio.

Speaker 7: Thank you, Phil.

Speaker 3: As rationala did, our net investment income and the fourth quarter spread the fit of some of the increases in base rates in 2022.

Speaker 3: Then investment income of 40 cents was up nearly 30% versus the fourth quarter of 2021, and they exceeded the fourth quarter of 32 cents per share. On an annual basis, then investment income was a dollar and 53 cents.

Speaker 3: an increase of approximately 22% over 2021.

Speaker 3: Today, a thrash noted, we declared a first-boarded dividend of 32 cents per share.

Speaker 8: We remain committed to being a sustainable dividend, so it's fully covered by net investment income.

Speaker 8: as we have done consistently over the last 10 plus years.

Speaker 8: Investment income and the fourth quarter was $0.01 per share.

Speaker 8: This included recurring cash interest of $68.

Speaker 8: And if you have income also in grade 2 cents of dividend income.

Speaker 8: a penny of leather income and three cents from accelerators, OID and XSTs.

Speaker 8: As a reminder, we amortate up-front economics over the life of some investment.

Speaker 8: rather than recinating all of it at the time the investment has made.

Speaker 8: Operating expenses for the fourth quarter were 33 cents per share.

Speaker 8: and included interest and other dead expenses of 18 cents per share.

Speaker 8: and centipede in the quarter total $4.99 million or $8 cents per share.

Speaker 8: Net Unrelaged Voss in the fourth quarter totaled $71 million for a dollar and 22 cents per share.

Speaker 8: As Roch says cut earlier, unrealized losses were primarily driven by three items.

Speaker 8: A $21.5 million unrealized boss on our loan to our own worth.

Speaker 8: An unrealized losses in our investments in Edmonton and Razor Kerm, of $18.6 million and $6.3 million for our investment in Edmonton and Razor Kerm, of $18.6 million.

Speaker 8: as well as unrealized models that crowd the portfolio from wider market spread.

Speaker 8: and then realize losses for the quarter for only $46,000.

Speaker 8: The many trees in that office of the quarter was $47.8 million for getting through the tent of the share.

Speaker 8: We have a robust valuation process and substantially all of our investments are values every quarter using prices provided by independent third party sources.

Speaker 8: These include quotation services and independent evaluation services.

Speaker 8: And this process is also subject to rigorous oversight, including back testing of every disposition against evaluation.

Speaker 8: The credit quality of our overall portfolio remains strong.

Speaker 8: We placed our launch to auto alert on none of the role during the fourth quarter.

Speaker 8: A total of three portfolio companies are now in Donac Rural representing only 2.0% of the portfolio of fair value and 4.2% of cost.

Speaker 8: Turning that to our liquiding.

Speaker 8: Her balance sheet, this is Ang, remains strong.

Speaker 8: And we ended a quarter with total liquidity of $367 million relative to our total investment of $1.6 billion. This included available leverage of $286 million and cash of $82 million.

Speaker 8: Unfunded loan commandments to portfolio companies at quarter-hand equals 8% of total investments for approximately $127 million.

Speaker 8: of which only 28 million were re-blow or commit.

Speaker 8: Our diverse and flexible leverage program includes two low-cost credit facilities.

Speaker 8: to unsecure note issuances and on the SBA program.

Speaker 8: Motivate or unsecured deck continues to be invested in great rated by both me and said.

Speaker 8: given the motor size of each of our net dishes.

Speaker 8: We are not overly reliant on any single source of financing.

Speaker 8: and our maturity remain well-added. Additionally, we are comfortable with our current mix of secure and unsecured financing, and do not have any media financing needs.

Speaker 8: Combine, did we get our cheapest rate on our outstanding borrowing?

Speaker 8: Increase modestly to 3.9% from 3.26% at the end of 2021.

That is an increase of only 64 basis points.

While base raising trades approximately 4.4%

This is the result of currently having over 75% of our barn from fixed rate sources.

Now, we'll turn the callback order rush.

to cut the callback order watch. Thanks Eric.

While the economic outlook may be uncertain.

Our team is focused on delivering the results our shareholders have come to expect from TCPC.

We remain highly disciplined in our underwriting. We make investment decisions based on a comprehensive analysis of each company, its management team and strategy and relevant industry dynamics.

Our Investing Committee evaluates each investment in regularly monitors the financial performance of each of our holdings.

From our perspective, where we are in the credit cycle, that is less than our ability to selectively capture opportunities throughout the cycle.

To that end, we draw upon our teams two decades of experience and BlackRock's extensive resources to prudently identify opportunities.

that aligned with our selective investment approach. While providing our borrowers with financial solutions,

to help grow their businesses. We continue to source strong, senior secured credit opportunities.

which have historically out-of-the-formed equities, bonds, and other ventricured debt through economic downturns.

While underweight high-level cyclical industries, we will also continue to maintain a broadly diversified portfolio.

In closing, along 2022 presented challenges, we successfully navigated the evolving environment and our cautious optimistic about the year ahead. We remain focused on generating strong, just to return for our shoulders.

In closing, along 2022 presented challenges, we successfully navigated the evolving environment and our cautious optimistic about the year ahead. We remain focused on generating strong, aggressive returns for our shareholders. With that, operator, please open the call for questions.

We will now begin the QA session. If you would like to ask a question, please press star followed by one or your touch to hand send a letter to the

If for any reason you would like to remove that question, please press star followed by two. Again to ask a question, please press star one.

As a reminder, if you are using a speakerphone, please remember to pick up your handset before for asking your question.

Oh, pause here briefly to allow questions to generate in queue.

The first question comes from the line of Robert Dodd with Raymond James. Please proceed.

Hi guys, I'm just in questions, a couple questions about the NAV here on auto-wheelur, and then the equity pieces in it in a second. I mean, to your point, it was impacted at the beginning of the pandemic and then supply chain and getting new vehicles and petrol. I mean, none of those.

trends seem to be particularly new yet the mark down this quarter was obviously could be significant I mean back in 21 I have million bucks.

Can you give us any more? Okay, what was the fact that there was originally meant to mature in January ? Obviously it happened. What was the driver of that being so large, the mark down being so relatively large when?

The trends you described don't seem to be particularly new or new in the fourth quarter of 2022.

Hey Robert, it's Raj. Thank you. I'll try to answer that in the way I can and there's probably some elements that I can't address directly.

But I would say that the trends aren't new. I would agree with that. The compound effect, I mean, but the trends are neither a one-quarter trend. And you have sort of a accumulating and compounding effect of...

things coming out of the pandemic that are top-wide oriented either you know dealership shutting down and then as they are opening up you have an inability

to actually get the inventory for the supply chain issues.

that sort of hindered the value proposition of the business, the applicability of it.

So I think you had a Theory of the things that compound that led to you know finally an audit rule and a I guess an acquiescence if you will on you know in terms of where the company is and where they need to go Ironically, you know coming out of Q4

a couple of other things that were actually updated. The supply chain issues are loosening up. We are seeing some early signs of recovery.

But I think to answer your question, you're sort of capturing the whipsoft effect of...

things that are creeping through the prior couple of years, accumulating in a way in this quarter on a company basis, and then there are some external data points that we just have to take into account that I think really brought the valuation into something.

and the range that we're talking about here. And I think there'll be more detail that we can provide in subsequent quarters, but I would try to leave the answer at that. Hopefully address your question. It does answer that part of the question. I mean, obviously the maturity on the loan was February 15th, which...

has already passed. I think if it had repaid since quarter end you would have probably said so, so I'm going to presume that it hasn't. Was all of that taken into account whatever the situation actually is today at the time the fair value was determined at 1231.

or we got, is Q1 going to be another evaluation?

given it properly, I'm guessing, Mr. maturity. Yeah, Robert, this is Phil. Thanks for that follow up. So you're right, the maturity is imminent and that has precipitated deeper discussions with the management team.

and the private equity sponsor on next steps. We can't provide too many details at this point, but we're eager to perhaps next quarter. But I think it's important to note that Woodrocks had mentioned, which is the signs of improving performance.

on the business and perhaps it's worth while giving a quick reminder.

Auto Alert to software and data analytics business used by auto dealerships to try sales growth.

But in the past several years with inventory-level things so low to supply chain as we've discussed, and consumer demand being so robust, kind of post-pandemic, the dealerships just couldn't keep cars on the lot. So the need for sales authorization, software with less of a priority.

Obviously we're seeing reversal of those dynamics. Higher rates are clearly impacting demand for cars, which requires a need for more sales and analytics tools.

and inventory on the dealer's lots are returning to more normalized levels. So keep in mind, the market's reflection of financial performance through 2022. It does not reflect what we've been witnessing in the last two months or a year to date. So do I think next quarter it's going to be the same?

in terms of a little decline.

We're not seeing any of that. Yeah, and you know, just to wrap it up on your question about if the maturity is taken into account and anything regarding the contractual element.

that are known at the time of the evaluation are certainly taken to account by the evaluation provider. That would include maturity, performance through that period, and so forth. So it would have been taken into account. I think there's a host of more things that are going to...

You know come to play here, but I still mention we hope to talk about that in the future quarters The good news is in a sense that

I run it be a better environment for this business even though it's a you know we're not going challenging economic environment. Got it, got it, I appreciate all that color. If I can on the other two, Ed Mentor and Laser, successful equity investments.

So it's not a completely different angle from order alert. Adventure obviously is kind of three quarters of a combined for that, which has been a successful asset point. Can you give it all on the mark, Dan? I mean, you talk about Adventure, you know, the outlook to the mark, except maybe could you segment?

How much of the markdown was market cost or volatility inputs for volume value and why aren't 20 things like that? Versus.

actual outlook adjustment. I don't know if I can give a...

Quantitative breakdown, I would say both applied. Certainly, if you think about both momentum and razor, if you have to categorize these businesses, they'd be considered growth equity or growthier equity.

higher multiple businesses that are still high multiple, it just happens to be a reset in the public markets. And the case of the momentum, both aside from the market multiple, there is just a temper growth in the case of the momentum. There's a bit of digestion, if you will, from the mass of spend coming through COVID.

online school and I think it's just more of a it's still a growing outlook it's probably a more

you know, inflection of a bump and then it continues, you know, long-term secular positive that has an impact today. You know, I think that will out of thing that's going to continue necessarily because the outlook is still positive and where the market's, the public markets go, you know, if anyone knows.

But I don't want to quantify it. I don't think I can have that breakdown, but both are applicable. In the case of razor, you know, just the broader Amazon.

ecosystem as we mentioned has, you know, dealing with supply chain issues. Those similar to the auto alert situation are abating. There's people have a lot of money to spend on things and a lot of the products these, these reseller cells are things that are essential, you know, and people are continuing to buy.

so long as they can get a hold of them to ship out. So I would like to give you a better breakout on company versus market multiple. It's a little blended, but just to reiterate both applied here. But in each case, we're pretty positive on the positioning and the outlook for.

The two businesses just happen to be a reset of valuations that we're not immune to. Thank you and thank you for the additional color on all of our items. That's it for me. Thanks a lot.

that just happens to be a reset of valuations that we're not immune to. Thank you and thank you for the additional color on all of our items. That's it for me. Thanks for all. Thanks, Robert.

Thank you. The next question comes from the line of Kevin Fultz with JMP Securities. Please proceed.

Hi, good morning and thank you for taking my questions. Looking at trends within the portfolio, can you provide an update on where weighted average EBITDAW portfolio company leverage and just coverage strand at quarter end and how they have trended over the past few quarters?

Thank you. Thank you. Thanks for the question. We.

We haven't seen as motorcycle change or trend per se. Certainly we...

We realized that there's a little bit of a lag and some of that reporting and that might change over time. But as the people say, we haven't seen really a meaningful change over the last couple of quarters. Yeah, and let me add to that, Kevin. I would say, keep in mind, our portfolio is not...

sort of an index approach to the economy. We're very deliberate about where we're focusing by industry and by company. A fair bit of our portfolio is growing. So if I had to guess, I don't have that exact data in front of me. I wouldn't expect it to be a significant change in average EBITDA, LTVs or leverage.

And I would say that the majority of the pork, just to be clear, the majority of our portfolio given where in industries, you know, software, services, healthcare, financial services that are growing, the majority of our portfolio is growing on a revenue as well as a deep at the basis. So I think trend-wise.

You should consider it a healthy portfolio, one that we've been very deliberate about where we are positioning it based on secular views at an industry level. Those industries are healthy and growing and we're tending to work with well-positioned companies within those industries. So in turn, the average levels of Kipita are...

And you know, attaching points on the leverage, I would think our stable is not improving, but I don't want to make that comment without the data in front of me. Okay, that's good to hear. You know, I appreciate your comments on specific investments that were down during the quarter. Now, I guess on the amendment side, have you seen any increase in amendment requests from borrowers, and can you discuss your expectations that essentially pick up over the next three quarters?

Yeah, thanks for that question. So a member request having increased, and I think that's a clear reflection of the impact that the higher rate environment is having on not just about a market economy, but broadly as well, we've seen it, even within a large cap space. So.

So we think we are seeing a amendment activity pick up. We should be that to both our ability when we do negotiating these deals upfront.

putting in tight covenants and most of the time multiple covenants that really give us to the table early on when there is either slower growth or maybe there's not as much liquidity as we're baking in a front.

And in most of those cases, I think what's really important are the decisions that we make around the table in the investment committee on how we want to de-risk those positions to ensure full recovery on those loans. In fact, a number of our refinancings in recent quarters have been driven by the fact that we have a lot of money to spend on those loans. So, I think that's a really important part of the decision.

by amendment or near amendment cases where the companies are breaching coveted for the perhaps need more liquidity.

our tight structures have put us to the table requiring them to refinance us out if we're not comfortable in the position we're in.

Okay, appreciate the comments, Phil, and I'll leave it there.

Thank you. The next question comes from Delana Christopher Nolan with Laddenberg-Dalman. You may proceed.

Eric, was the decline in interest income quarter over quarter due to auto alert going down the rule?

It was primarily. We didn't recognize any income.

I'll go there for the quarter. And lower pre-payment income as well.

Yep, okay. And then for Auto Alert, is there a bank facility ahead of your position?

No, there's not. We are in a person's position on that level. All right. And then is there any discussions regarding a restructuring or bankruptcy related to auto alert? Okay.

We're not at a point where we can discuss the details, although I do appreciate the conversation, but we are in deep discussions with both the management team and the sponsor.

on Go Forward plans. We hope to have more to report subsequent quarters. Okay, final question. How much will spillover income in this quarter?

and we hope to have more to report subsequent quarters. Okay, final question. How much will spillover income in this quarter?

For the quarter itself or cumulative?

For the quarter itself or to accumulate it? Kill this please.

Yeah, cumulative is about $1.20 per share.

Great. Thank you. Thank you.

Thank you. Again, to ask a question, please press star 1.

There are no additional questions at this time. I will hand it back to the management team for closing remarks.

We appreciate your participation on today's call. I would like to thank our team for all of the continued hard work and the dedication. I would also like to thank our shareholders and capital partners for your confidence and your continued support. Thanks for joining us. This concludes today's call.

That concludes today's conference call. Thank you. Thank you.