Q2 2023 Portman Ridge Finance Corporation Earnings Call
Well It comes importantly reach Finance Corporation second quarter 2023 earnings Conference call.
The earnings press release was distributed yesterday August 19 after market close.
A copy of the release along with an earnings presentation is available on the company's website at Triple double you adopt parkman to reach stopped com in the Investor Relations section and should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the S E T.
As a reminder, this conference call is being recorded for replay purposes.
Please note that today's conference call may contain forward looking statements, which are not guarantees of future performance or results and involve a number of risks and uncertainties.
Actual results may differ materially from those in the forward looking statements as a result of a number of factors, including those described in the company's filings with the S. E T.
Portman Ridge Finance Corporation assumes no obligation to update any such forward looking statements unless required by law.
Speaking on today's call will be will be CAD Goldfarb, Chief Executive Officer, President and director of Parkman reach Finance Corporation.
Jason and Bruce Chief Financial Officer, and Patrick Schaeffer, Chief Investment Officer.
He does that I would now like to turn the call over to Deb Goldfarb, Chief Executive Officer of Portman Ridge.
Good morning, and thanks, everyone for joining our second quarter 2023 earnings call.
I'm joined today by our Chief Financial Officer, Jason Rus, and our Chief Investment Officer, Patrick Schafer ill.
I'll provide brief highlights on the company's performance and activities for the quarter.
Patrick will provide commentary on our investment portfolio and our markets and Jason will discuss our operating results and financial condition in greater detail.
Yesterday Portman Ridge announced its second quarter 2023 results and continuing off the back of strong earnings momentum seen in the first quarter of 2023, we are pleased to announce a solid financial performance for Portman Ridge in both the second quarter of 2023, and the first half of 2023 overall.
Our total investment income core investment income and net investment income substantially increased as compared to the three month and six month period of last year.
We continue to see the impact of rising rates have had and generating incremental revenues from our debt portfolio.
Our core investment income for the second quarter of 2023 was $19 2 million, an increase of $5 5 million as compared to $13 7 million for the second quarter of 2022.
Our strong performance. This past quarter has allowed us to maintain our dividend of six nine cents per share marking a six cents per share distribution increase as compared to the third quarter of 2022.
In terms of a market update M&A and deal activity picked up during the second quarter, particularly in the back half and early third quarter. Despite the continued macro overhang of elevated inflation rates and continued increases in the fed funds rate.
While we continue to see lender friendly concessions on pricing in terms of the competitive dynamics are stronger than we've seen in several quarters.
We remained very selective regarding new portfolio companies, given the broader macro economic environment, but it found particularly attractive opportunities for add on investments in existing portfolio companies looking to complete compete tuck in acquisitions.
Turning the focus back to the company. We continue to believe in the valuation of Portman Ridge as we continued repurchasing shares under our new stock purchase program and.
In Q2 of 2023, we repurchased an incremental 27801 shares that followed on the trend seen throughout 2022, and the first quarter of 2023.
We expect this trend of repurchasing apartment shares to continue throughout 2023, as we were able to do so.
On this call Patrick will also walk through the potential upside cases for our net asset value, but as it pertains to the current quarter performance approximately 72% of our net losses in the investment portfolio were driven by our CLO equity positions.
While this continues to be a chill it challenging asset class given certain structural issues with the syndicated loan market CLO equity represents less than 3% of our total assets approximately.
Approximately 74% of our portfolio is in first lien debt and is now valued at a mean of meaningful discount to par have experienced normalized defaults or even elevated default default rates versus history, we believe theres still embedded net asset value upside in our portfolio.
Thus this adds to our earnings momentum driven by wider spreads on new origination and rising short term interest rates.
Dry both potential NAV and earnings upside.
With that I will turn the call over to Patrick Schafer, Our Chief investment Officer for a review of our investment activity.
Thanks Ted.
On to slide five of our earnings presentation, and a sensitivity of our earnings to interest rates as of June 30th 2023, approximately 99% of our debt securities portfolio were either floating rate with a spread to an interest.
Great index, such as LIBOR, so far or prime rate with 69% of these being linked to sofa.
You see from the chart the underlying benchmark rate of our assets during the quarter lagged the prevailing market rates and still remains meaningfully below the LIBOR and so for rates as of July 25th 2023.
We expect this to normalize over time as the underlying one three and six month contracts reset.
For lesser purposes, if all of our assets were to reset to either a three months LIBOR or sofa rate, respectively. We would expect to generate an incremental 484000 of quarterly income.
Well our liability costs will also rise relative to their Q2 levels. We still expect net positive benefit of approximately four cents per share assuming all of our assets and liabilities are utilizing the same three months benchmark rate for an entire quarter, which is further illustrated on slide seven.
Skipping down to slide 11, both investment activity and originations for the quarter were slightly higher than prior quarter, resulting in net repayments and sales of approximately $21.0 million net deployments consisted of new fundings of approximately $15 3 million offset by approximately $36 3 million of repayments in <unk>.
Sales.
These new investments are expected to generate eight.
I expect it to yield a spread to silver of 828 basis points on the par balance and the investments were purchased at a cost of approximately 98 spot six 5% of par.
Which will generate incremental income to the state and spread.
As mentioned during our earnings call. It was our expectation that Q2 would generate more repayments than deployments as we intentionally dropped portion of our revolver in Q4 of 2022.
To invest ahead of several repayments in May we repaid $23 $6 million of our 2018 dash to secured notes.
I would like to specifically call out two payments paydowns during the quarter both of which occurred relatively early on first we completed the recapitalization of northeast Metalworks and asset acquired as part of the merger with harvest capital in April 2023, as part of the transaction, we have repaid approximately one third of our position and restructured the remaining.
Position to prioritize additional periodic repayments.
Secondly in mid May we refinance out we were refinanced out of our second lien term loan position in Tech Tech, which has been a portfolio company since the initial externalization transaction back in April 2019.
In addition, being one of our larger positions. It was by far our largest second lien position and allows us to further rotate into first lien senior secured loans.
During the quarter, we funded $600000 into our great Lakes joint venture, which has taken us close to being fully funded under that commitment.
Similar to our experience with new assets on the balance sheet incremental investments in our great Lakes joint venture have have comment increasing spreads and widening OID, which should result in higher returns going forward.
Our investment securities portfolio at the end of the first at the end of the second quarter remained highly diversified with investments spread across 27 different industries and 104 different entities, all while maintaining an average par balance per entity of approximately $3 $2 million.
Turning to slide 12, we had one new issuer in two incremental portfolio company investments go on nonaccrual as compared to March 31 2023.
One of which is a term loan for <unk>, which was value which is valued at 53.82% of par and has recently emerged from bankruptcy from which we are looking to or we're looking to recover a portion of our initial investment.
The second which is a term loan for Lucky box, which is valued at 28, 2% of par and aggregate investments on nonaccrual status remained relatively low at seven investments in the in the second quarter of 2023 as compared to five investments on nonaccrual status as of March 31 2023.
These seven investments on nonaccrual status at the end of the second quarter 2023 represented <unk>, 8% and two 6% of the company's portfolio at fair value and amortized cost respectively.
Okay.
On slide 13, as Ted mentioned, if we focus on the top three rows of the table and exclude our nonaccrual investments we have an aggregate debt securities fair value of $410 6 million of which represents a blended price of 92.18% of par and is 88% comprised of first lien loans.
At par value.
Assuming a par recovery our June 31, 2023 fair values reflect a potential of $34 $8 million of incremental NAV, a 16, 2% increase or 3.65.
There are $3 65 per share excluding any recovery on the nonaccrual investments.
For lesser purposes, if you were to assume a 10% default rate and 70% recovery on this debt portfolio. There would still be an incremental $2 25 per share of NAV value or a 10% increase over time as the portfolio matures and is repaid again, excluding any recovery on the nonaccrual investments.
The default rate is about this default rate is above anything the market is expecting or has experienced historically.
Turning finally to slide 14, if you aggregate. These three portfolios over the last five years three years, we have repurchased a combined $434.
$8 million of investments have realized over 73% of these positions at a combined realized and unrealized mark of 102% of fair value at the time of closing the respective mergers.
We were able to achieve these results. Despite the global pandemic in 2020, and most of 2021 and a weak market for almost all asset classes in 2022.
In a similar vein as the previous slide as of June 32023, there remains an incremental $12 $8 million of value as compared to par in these portfolios, which equates to $9 4 million or a four 4% increase when applying a similar 10% default rate and 70% recovery analysis and excluding non accrual.
Investments.
I'll now turn the call over to Jason to further discuss our financial results for the period.
Okay.
Thanks, Patrick.
As both Ted and Patrick previously mentioned, despite operating under a challenging economic environment. Our results for our second quarter of 2023 reflect strong financial performance.
Our total investment income increased by 4.6 million to $19 6 million in the second quarter of 2023 in comparison to 15 million in the second quarter of 2022, as we continue to see the impact of rising rates on our portfolio.
This reported total investment income represents a $700000 decrease from the $23 million reported total investment income in the first quarter of 2023.
The quarter over quarter decrease was largely due to reduced payment in kind income as seen in the second quarter when compared to the first quarter of 2023.
As well as lower pay down income and lower purchase accretion as the discount associated with investments acquired through mergers and acquisitions continues to run off.
Excluding the impact of purchase price accounting, our core investment income for the second quarter of 2023 was $19 2 million, an increase of $5 5 million as compared to $13 7 million for the second quarter of 2022, and a decrease of 100000 as compared to $19 3 million for the first quarter of 2023.
Our net investment income for the second quarter of 2023 was $7 9 million, an increase of $2 4 million as compared to $5 5 million for the second quarter of 2022, and a decrease of 600000 as compared to $8 5 million for the first quarter of 2023.
The quarter over quarter decrease was largely due to the aforementioned decreases seen in payment in kind income paydown income.
And purchased discount accretion for the six months ended June 30th 2023, our NII was $16 4 million, an increase of $3 million as compared to $13 4 million in the same six month period from 2022.
As of June 30th 2023, and March 31st 2023 of the weighted average contractual interest rate on our interest earning debt securities was approximately 12, 1% and 11, 7% respectively.
We believe the portfolio continues to be well positioned in a rising rate environment to generate incremental revenue in future quarters.
Total expenses were relatively flat quarter over quarter at 11.7 million for the second quarter of 2023 as compared to total expenses of $11 8 million seen in the first quarter of 2023.
This quarter over quarter decrease highlights our efforts are continuing to reduce overall expenses in certain areas such as administrative services professional fees and other general and administrative costs.
Our net asset value for the second quarter of 2023 was $215 million or $22.54 per share as compared to $225 1 million or $23 56 per share in the first quarter of 2023.
A significant driver of the quarter over quarter decline is attributable to realized losses from impairments taken against our CLO equity positions as well as markdowns on that portfolio.
On the liability side of the balance sheet as of June 32023, we had a total of $333 7 million par value of borrowings outstanding comprised of 78 million and borrowings under our revolving credit facility of $108 million of four and seven 8% notes due 2026 and $147.7 million in secured notes due 2000.
29.
This balance represents a quarter over quarter decrease of $24 6 million driven by a 23.6 million repayment on the secured notes due 2029.
As of the end of the quarter, we had $37 million of available borrowing capacity under the senior secured revolving credit facility and no remaining borrowing capacity under the 2018 does to revolving credit facility as the reinvestment period ended shortly after our draw on November 20th 2022.
As of June 32023, our debt to equity ratio is 1.6 times on a gross basis and 1.4 times on a net basis from a regulatory perspective, our asset coverage ratio at quarter end was 163%.
Lastly, and as announced yesterday, a quarterly distribution of 69 per share was approved by the board and declared payable on August 31, 2023 to stockholders of record at the close of business on August 22023.
This is a six cents per share distribution increase as compared to the third quarter of 2022.
Including the distribution.
Including the distributions subsequent to the announcement of full year 2022 earnings results total stockholder distributions for 2023 amounted to $2.06 per share.
With that I will turn the call back over to Ted.
Thank you Jason ahead of questions I'd like to reemphasize that we believe we are well positioned to take advantage of opportunities that arise from the current market environment by continuing to be selective and resourceful in our investment decision making.
Overall, we believe we remain situated to continue to deliver attractive returns to our shareholders throughout the second half of 2023 as we have demonstrated in the first half of 2023.
Thank you once again to all our shareholders for your ongoing support. This concludes our prepared remarks and I'll now turn the call over the operator for any questions.
Thank you.
The floor is now open for your questions to ask a question at this time. Please press Star then the number one on your telephone keypad.
We will pause for just a moment to compile the Q&A roster.
Okay.
Yes.
Okay.
Your first question comes from.
Christopher Nolan.
Your line is open.
Hey, guys.
Okay.
Share repurchases have any accretion to NAV per share.
And if so can you quantify it.
Yeah, we bought about 500000 of about 500000 worth of equity in the quarter I think if you look at it.
Six months today, and I think it's about 37 <unk>.
Roughly.
Okay.
Also were there any nonrecurring items.
P P F.
Yeah, I would say on the expense side Theres, probably about where I know there is there is about 100000 of nonrecurring or one time is legal expense and the professional expenses other than that our other income fees are generally kind of one times in nature, but do you have a recurring effect.
Court over quarter, it's generally pretty.
Somewhat volatile, but but there is always some fee income that we see in that line I would say it's.
It was trended up this quarter from last quarter due to some one time items in there about 300 400 Grand roughly correct.
Great and then I guess finally for publishing for the Bdcs I'll cover.
Incremental asset quality deterioration.
Strategically do you see the developing environment to be conducive to more consolidation in the BDC space.
Oh, that's how I thought youre going with that question.
I would say I think a lot of the low hanging fruit has been picked I think in terms of M&A.
But.
No again scale is becoming more and more and more important across broad credit and then youre seeing like both in terms of getting financing from banks, which is becoming more scarce and also in servicing our clients appropriately. So scale is definitely important I I you know I don't see any near term M&A, but.
But it is a good question, it's something we're always looking for and obviously, we always get phone calls on on M&A opportunities.
Sounds good I'll get back in the queue. Thanks, guys.
Thank you.
Our next question comes from Ryan Ryan Lynch Mccabe VW. Your line is open.
Good morning My.
First question good morning, Hey.
First is just a clarification.
Did you say, 72% of the realized losses, which is kind of reflecting the.
Yeah.
$6 million to $7 million of losses related to the CLO positions or was at 72% of realized and unrealized losses.
Yes.
Yeah, Hey, Ryan so of the 6.7 realized.
About five $5 six of that was related to the CLO.
Okay.
And then so.
A couple of questions on that.
What drove the decline in <unk>.
I guess.
<unk>.
Like because that wasn't offset by realized gains or unrealized gains I guess when you sold those.
What kind of drove the.
The lower valuations in your CLO book, because it didn't seem like broadly syndicated loan prices really move lower in the quarter.
Yeah.
Yeah, Let me, let me clarify that a little bit right. So so the Oh lows did have about 900000 in unrealized that flipped into realized as part of that 5.6, I just mentioned and the remainder of that while all of the $5 six was flipped into realized as part of an impairment. So we reduce the cost basis of the.
<unk> of the instrument it wasn't a sale of the of the physicians and that's driven by the basically the accounting and the fair value based on the future cash flow expectations of that CLO equity and then I'll pass it to Patrick Yes, having having said all of that.
There is still a again, despite whether you consider it unrealized or whether we take it as an impairment versus remains unrealized.
There were some I'll call it fair value declines in our CLO portfolio and by and large to your point the syndicated market hasn't moved very much but what we've seen honestly this quarter for the first time in a while.
We can we can talk about the reasons why but a lot of the CLO managers themselves are actually selling some of the assets within the portfolio.
Times to meet certain tests, sometimes four for other reasons, but given that most of our CLO.
The CLO vehicles that we're invested in or out of the reinvestment period.
You sell an asset at 90, that's just a that's just a law this is Dave.
<unk> to <unk> <unk>.
So what we saw particularly again, it's across a number of the we have I guess three different managers in total between our silos and by and large the majority of the of the I'll call. It marked down or decline in fair value is from the managers themselves selling assets at below par.
So Ryan thematic what's happening, which obviously is incredibly frustrating is the waste yellows are setup, obviously, they they they managed to tests and you've obviously had ratings migration down are things on downgrade watch and so as Patrick said a lot of it is portfolio repositioning around downgrades.
And obviously that hurts the valuation of the CLO equity.
So I mean, I guess, the only silver lining it's only two 5% of our remaining portfolio.
Okay.
Makes sense and then I guess on the other portion.
So that that kind of colors, I think a lot of it to the realized losses, but there were still some unrealized losses in the quarter as well as some some realized that was outside of the CLO is what.
What drove those declines I know there were I think you said.
I haven't been able to calculate or were those driven by markdowns in the two new non accruals or what was kind of the overriding factors for them for the other write downs in the portfolio I think there's probably a little bit a little bit from non accruals, but I'd say the bigger impact probably about half of call. It. The non CLO impact is from is from one position it's called <unk>.
It's a it's a mark to market decline, we continue to work with the company and the lender group and we feel pretty decent that that mark down quarter over quarter is really just temporary and we would anticipate that sort of reversing itself.
And the kind of near to medium term. So that's kind of about half of the Mark is really just what we well we are very much characterize mark to market.
And probably most of the rest of the other half is due to two other.
Other positions one is called anthem Sports Entertainment, it's just a large position and we marked it down you know two or three points sort of kind of consistent it's consistent with sort of mark to market again, it's not a it's not a significant mark down on a percentage basis, but it's a relatively large position so as kind of an outsized dollar impact and then the third.
One is H.
H D C or host way company has been underperforming a little bit they are in the process of selling a number of assets.
A various different assets within the port within the company that we would expect to realize a decent chunk of that of that loan in the kind of near to medium term and the remainder of it will kind of continue on so again I think we feel relatively good that most of that of that markdown as temporary or.
Or call it mark to market as opposed to as supposed to credit necessarily.
And one of them on the nonaccrual side.
It has two new securities, but it's only one new issuer and and one of those issuers is expected to emerge from bankruptcy <unk> merchant bankruptcy. So that'll also they're not accrual nonaccrual lines should also be stable to positive barring some some surprises.
So I would say theoretically credit quality in the portfolio. Despite Patrick's comments is it's pretty stable actually.
And again, we don't expect a big spike in non accruals going forward.
Okay, what kind of on that point.
When you were talking about kind of post way and then the potential recovery for there.
You guys talked about some potential upside.
If some of your.
Your senior loans that aren't on nonaccrual status today.
It recovered.
Through a scenario, where there was you know X percentage of false churn recoveries I guess.
When I mean.
What what do you think changes in the environment before those start getting written off or is it just a very slow sort of accretion.
If those companies continue to perform kind of lay that down as the foundation is it just going to be.
Slow accretion over time as they get closer to maturity and repay.
Which could obviously take years.
<unk>.
Or does something have to happen and broader in the market regarding spreads or something like that or what is sort of done.
What do you see as the potential catalysts or timeframe.
Eventually recover.
Those potential write downs.
Yes.
I think I think we think theres a lot of embedded upside the bulk because of this mark to market phenomenon and in the way our matrix works in terms of markdowns theres a bit of a lag. So obviously today as we sit here today, you know obviously the loan and high yield market have tightened recently, so some of that should be we'll just be mark to market based on indices.
And then the number two is obviously a lot of is driven by activity levels. So activity levels have been really really muted. This year like you know repayments are really low.
But we are seeing you know pick up in M&A and a pickup in activity levels and so some of it is just you know these companies get sold there's a huge pop pull to par effect I mean, one thing thats affecting us is generally speaking is <unk>.
Some companies doing these small incrementals in a small incrementals of pricing wide to where the existing debt stacks are so even though there's no credit issue. It re prices not only the first lien, but it reprice of the second lien preferreds replaces the whole capital structure.
And so when it comes to go out and do these small little add ons that also could have a pretty big impact on clinical mark to market, even though there's no credit issue. So we've seen that in a couple of names where were marked at a pretty big discount to par, but theres no credit, but there's no credit issue and its generating really good yields.
I mean, the answer to your question is a mixture of all of them like a theres a pull to par factors for maturities and we don't have a lot of like long term maturities given their loans.
Two is a tightening of the market, which we've seen a little bit of that happened over the last couple of months and number three as you know there are correlated because if the market starts tightening people cannot can obviously get things done easier and therefore activity level should pick up M&A wise and there you get some pops on valuations when things get taken out.
Yes, okay.
I know, we're obviously talking about the future worsening credit.
Nobody can predict but I appreciate the comment on that one other last question that that actually just just came out that that was kind of thinking about your previous comments on the CLO. So I wanted to circle back.
The discussion on the CLO and the write downs.
As I know, it's a very small percentage of your portfolio at this point, especially the most recent markdowns but.
The sort of trend that happened in the second quarter.
Maybe having to move some stuff around because of.
Some downgrades or things like that and having to sell at losses is there any reason to expect that that would start.
In the third quarter or is there another risk.
Potential for continued write downs again, I know, it's a smaller portfolio, but could we continue to see that in the third quarter write downs from the CLO.
Yeah. That's a good question I mean, the answer the short answer your question is like.
I don't know like it feels like a lot of that repositioning was done in the first half of the year and obviously people are feeling much much better about the economy and all that so theres been way less ratings movements recently, but obviously ratings are a lagging indicator.
I don't have a great answer for your question.
We think we're very conservatively on those and obviously, we took a big write down this quarter, but.
It's hard to it's hard to say.
To be honest, it's hard to know because we're not the manager of those couple of securities right. So.
Like I don't want to I don't want to like say something that turns out to be wrong, because we just don't know.
That's totally fair.
Okay.
That's all from me I appreciate the time today.
Thank you so much.
Next question comes from Steven Martin with Slater. Your line is open.
Hi, guys.
Steven.
Couple of my questions have been asked and answered.
All your.
Portfolio.
And the.
The public.
The debt the senior portion of your portfolio, how would what would you bet the average Mark Hughes.
Yes.
It's somewhere in the I'd say the total is probably representative of of the senior portfolio, which is somewhere in the in the low nineties 91 to 93 cents of par give or take I think our portfolio as a whole is 91 spot six or 91 spot seven I don't think the only the senior loan versus the second lien is is Sydney.
Difficultly different again senior loans make up.
75% of the total portfolio and 88 high 80% of the debt portfolio. So you can probably think of that as a pretty comparable number like you know in terms of representing the first lien portfolio as a whole.
So that's why you say that there is a lot of accretion opportunity or recovery in the.
Senior portion of the portfolio.
Correctly in the portfolio as a whole obviously.
It is significantly weighted towards senior and that's how we.
We call that out specifically because as we think about default rates and recovery rates, obviously recovered rates would be much higher than in senior positions as opposed to junior positions.
Okay.
The nonperforming.
You had the chart, which I love of.
The acquisitions, you've done and how those portfolios have.
Realized realized and unrealized.
Nonperforming is how many of them or BC partner.
D C originated versus sort of old purchase portfolio position.
Yeah sure sure answer is only one is is the BC.
Is it BC originated asset and the rest of them we have remaining.
I guess, we're talking about six issuers or six portfolio companies. So the remaining five are various different kind of legacy call it positions or at a minimum we're in the we're in the book before we took over and that would include going all the way back to the K Cup externalization.
Five of six borrowers are you know again between K GAAP and <unk> acquisitions.
Our we'll call it legacy we don't like to use that word but call it legacy.
And when you underwrote those.
Yes.
Acquisitions.
Are these surprises and are these bad outcomes versus what you under rotors is this where you had already it was part of your your.
Purchase accounting.
Yeah. Good question I honestly I would need to look at them all individually I do think a.
A decent amount of so of the six.
My hunch is so on the sticks, but again just to go back of the six two or again, they are like kind of I'll call them like not real accruals. There. One is $75000 note that we converted a equity position to a senior note. It was never an accrual in the first place.
It was never it would never had any fair value. So that really again my perspective, that's not really a credit issue whatsoever, so that drops down to call. It five portfolio companies. One is a $500000 remaining of our position from the original K cap that.
Was already marked at 50 something cents when we took over it was on non accrual when we took it over there was a very small piece that we've been waiting to get sort of flushed out of a state bankruptcy process. It's been and it's been in this process for I don't know like four years or so so.
So that brings you down to four.
One of them is a b C portfolio company that brings you down to three and I think two of the remaining three were on non accrual at the time, we took it over so maybe call. It one was a surprise.
Versus the <unk> versus the five that we sort of took over in terms of our underwriting.
Ted what is the prospect and you've talked about the third quarter. We're a little we're only halfway through whats the prospect for deployment versus repayment in.
In the third quarter.
Yeah.
I would say we continue to see good opportunities to deploy although the market is getting a little like literally in a very very like over the last like three weeks. The market has gotten tighter for the first time in probably four quarters.
And then repayments continue to be muted like I would say.
We're getting some one off payments, but I would say repayment activity, we haven't seen a big pick up.
As compared to as compared to the average I think the.
Only additional thing I would add I would add to Ted's comment is we do like the <unk> repayment was in sort of the middle of May which was a relatively chunky position. It was to almost $13 million. So as we kind of think about deployment that cash is sort of in the system waiting to be deployed and just the way that our market works.
Private deals tend to have a bit of a bit of a lead time. So you could expect even though all else being equal that $12 million to be sort of re deployed into various different investments that perhaps were not on the books as of June 30th.
Yes, I mean not to state the obvious Tetra Tech was a second lien and so that we can recycle that into comparability, yielding first liens and you obviously get better advanced rates on here. So it's ROE accretive payoff, let's put it that way.
Right, but would you expect if repayments are muted would you expect to deploy.
10 million this quarter 20 million 30 million is there some sort of guessing that you have.
I'd say probably more in the 10 to 20 range is not probably not the 30 range, but I'd say more on the and then again just pure deployment is probably more in the $10 million to $20 million range.
Okay, and one last one.
You can see you.
The last at least the last two or three quarters you've.
I would earn your NII has far exceeded your dividend rate.
And I know this is a question.
That you sort of expect whats the prospect for either a dividend increase or a some form of special.
Between now and the end of the year or do we have to wait till after December .
No I think here's here's the challenge to the dividend policy is obviously, where we're over in our dividend. The challenge. We have is the you know the way we do our dividend is the forward curve for rates.
When we set our dividend last quarter was down like 200 basis points in the next two years and obviously that's higher for longer.
You know the market is getting more comfortable with higher for longer so that that that two year out curve has actually gone up a lot.
So we always want to make sure our dividends protected around cuts in short term rates.
And we have a huge cushion for that and number two is we have to reprice some of our CLO.
Debt on our balance sheet, right, which is going to be a bit of an increase so all of that stuff means that if we take a big big hit on short term rates and we have to reprice all of our on balance sheet CLO debt, we can still easily cover our dividend. So yeah, we'll revisit it next quarter, we revisit it every single quarter, it's just hard but when.
When short term rates forward are moving around as much as they have been.
So the answer is the answer is that the answer is yes. The answer is we will revisit our dividend again.
And our November meeting.
Yes, because the year over year.
Has been year over year has been.
A nice percentage increase up until now.
But last year in the third quarter you upped the dividend. So if you don't have the dividend your year over year is pretty flat.
One other question on the close.
If you guys think that the Clo's are.
Realizing losses or the.
The non.
Outside managers cielo as they're realizing losses.
Don't think are warranted.
Are you allowed to go buy those securities from them at that discount.
Hi.
As usually I mean, there is.
Put it this way Steve Theres, nothing that would prevent us from doing it other than they don't necessarily like tell us when theyre going to sell stuff and what theyre going to sell so it would be very challenging to sort of like line that up but conceptually we could we don't I mean again, we could call them up and say Hey, before you saw anything in these vehicles call us, which we could do.
But they don't they don't like give us a heads up as they are in the process of selling things and what theyre going to sell so it's tough for us to like have advanced warning of their plans.
Got it hey, guys for the future like no more clo's.
Unless youre going to self manage them. So you can control.
Okay.
Alright, I'll talk to you guys later.
Thanks, Dave.
Again, if you would like to ask a question Press Star then the number one on your telephone keypad.
Another question comes in from.
From Christopher Nolan with Ladenburg Thalmann.
Your line is open.
Just a quick follow up on the CLO question.
Timetable when you can basically unwind this position and I know you guys have been holding onto it but given your portfolio managers or selling.
We see the timeframe in terms of you exiting CLO.
Yes, I'd say in most of our positions we are not the majority holder. So we don't really have control over at the exit.
For ones that we do which are a very small subset, we certainly look at that Chris.
Chris, but obviously it again kind of.
Where the market is right now and again, putting aside the managers behavior. We do think there is there is some far more temporal declines or unrealized losses in the syndicated market just from kind of mark to market and things like that so I think R. R.
The hope would be to kind of you know eggs.
Exit those in a more normalized environment, but for the most part we don't actually have control over those within our CLO as we're a relatively small percentage of the equity.
Okay. Thanks for the clarification.
There are no further questions at this time, Mr. Goldfarb I will turn the call back over to you.
Thank you very much and thanks, everyone for joining us today, and we look forward to speaking to you again in early November overly announcing our third quarter 2023 results. Thank you so much and enjoy the end of your summer.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
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