Q3 2023 SLR Investment Corp Earnings Call
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Good day, everyone and welcome to the Q3 2023 F. L. Our investment Corporation earnings Conference at this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session. You may registered to ask a question by pressing star one on your telephone keypad.
You may withdraw yourself from the queue by pressing star two.
This call may be recorded I'll be standing by if you should need any assistance. It is my pleasure to turn the conference over to Chairman and co CEO Michael gross.
Thank you very much and good morning, welcome to <unk> investment Corp, 's earnings call for the third quarter ended September 32023.
And today by Bruce <unk>, our co Chief Executive Officer, and our Chief Financial Officer, <unk> kg try before we begin would you. Please start by covering the webcast and forward looking statements.
Thank you Michael good morning, everyone.
I'd like to remind everyone that today's call and webcast are being recorded.
Please note that they are the property of has a lot of investment pool.
Any unauthorized broadcast in any form is strictly prohibited.
Conference call is also being webcast from the events calendar in the Investor section on our website at Www Dot catalog investment Dot com.
Audio replays of this call will be made available later today as disclosed in our November seven earnings press release.
I would also like to call your attention to the customary disclosures in our press release regarding forward looking statements.
Today's conference call and webcast may include forward looking statements and projections.
Statements are not guarantees of our future performance or financial results and involve a number of risks and uncertainties.
Past performance is not indicative of future results.
Actual results may differ materially as a result of a number of factors, including those described from time to time in our filings with the SEC.
Does not undertake to update any forward looking statements unless required to do so by law.
The paint copies of our latest SEC filings. Please visit our website or call us at 212, 90 nicely 167 zero.
At this time I would like to turn the call back over to our chairman and co CEO Michael gross.
Thank you Suraj.
We are pleased to report that for the third quarter of 2023.
<unk> generated net investment income of 43 per share representing a 16% increase year over year, which once again exceeded our distributions for the quarter.
The increase in our NII per share over the past year has been driven by portfolio growth and increases in reference rates, which have flowed through to our floating rate portfolio.
At September 30.
Net asset value per share was $18 six.
Up from $17 98 per share at June 30, reflecting stable credit performance and the over earning of our distributions.
We're digging into our third quarter performance I'd like to touch on the overall investment climate.
We're living in a period of heightened Martin market volatility, resulting from geopolitical tension and economic uncertainties with sadly no near term end insight.
<unk> pressures from elevated energy labor and capital costs are proving to be persistent and interest rates are expected to stay higher for longer.
Growth may slow as a result, but the U S economy has remained remarkably resilient. Despite these multiple shocks.
The performance of our portfolio companies has equally remained resilient.
In sponsor finance our portfolio of companies larger continue to exhibit both revenue and EBITDA growth.
While the rapid increase in rates impacted valuations and diminished M&A volume. This year, there are attractive opportunities to finance quality borrowers who have resilient cash flows are stable assets supporting borrowing basis.
<unk> has been important provider of capital to the private equity community at some private credit managers grapple with hold limitations importantly, M&A volume has begun to pick up and is expected to continue expanding next year, given substantial p/e dry powder and projected stable interest rates.
Given uncertainties associated with economy and geopolitical events, we believe that maintaining a defensive approach via App selections are critical to maintain our long term strong performance.
Software platform, we are seeing some of the most attractive investment opportunities in years, and we believe the private credit asset class remains highly attractive both in absolute and relative return basis.
The current market environment creates opportunities for firms like SLR with deep experience and expertise and investing throughout market cycles.
So it will be opportunistic in leveraging its diversified platform across sponsor and specialty finance investment strategies to generate attractive returns while protecting our capital.
The overall health of our portfolio remains solid with a nonaccrual rate based on cost at just <unk>, 7% and <unk>, 3% at fair value at quarter end.
The weighted average interest coverage on our spot first loans is just under two times. We believe these healthy metrics are the result of our focus in sponsor finance on recession resilient industry hiring.
Our recurring free cash flow, such as health care and business services.
As a reminder, our specialty pet businesses enabled us to be highly selective in our sponsor finance strategy.
At quarter end, approximately 98% of our portfolio was comprised of first lien senior secured loans.
Our long term investment in first lien loans and resulted in our portfolio. We believe is better equipped to withstand continued inflationary pressures and high interest rates and portfolio with second lien and Unitranche loans.
Additionally, with 73% of our comprehensive investment portfolio invested in specialty finance assets, which are borrowing basis and full covenant structures supporting our investments we are defensively positioned.
Our differentiated investment approach of coupling capsule alone.
Advanced loans provides us with enhanced portfolio diversification and additional downside protection in periods of tightening economic conditions.
Importantly, our broad set of origination capabilities allows us greater flexibility in allocating capital to our various private credit investment strategies, the best risk reward opportunities across economic cycles.
Firms with significant available capital such as the <unk> platform are able to fill the void left as regional banks retreat in the syndicated loan market grapples with structural challenges from the end investor base.
Borrowers value, where speed and certainty of execution, and our flexibility and ability to invest $150 million to $200 million any given upper middle market financing, which gives us greater pricing power and influence over terms.
$13 billion of total investable capital across the platform inclusive of anticipated leverage SLR hasn't scaled by full financing solutions, which benefits Src through co investments.
<unk> has increased its capital base, we've continued to invest in the firm's infrastructure and origination capabilities recent.
Recent hires in the third quarter include Investor professionals.
<unk> operating partner focused on growth initiatives.
Chief business development Officer, and a former BDC equity equity research analysts. We believe these human capital investments significantly enhance our strategic focus of being a right sized and differentiated private credit manager with a scale to accurately deep and broad opportunity set to generate alpha through security selection, rather than producing index Lex returns.
On a cash flow loan only approach.
Additionally, our specialty businesses are benefiting from the regional banking turmoil as borrowers seek alternative financing to replace our existing credit lines from banks have retreated from the market are in place teams of approximately 300 professionals across SLR.
<unk> specialty finance affiliates owned by SLR seeing provides us local market knowledge and relationships that lead to competitive sourcing and information advantages.
Importantly, we have ample dry powder to capitalize on the favorable investment environment at September 30th including available credit facility capacity at the S. S. L. P.
Specialty finance portfolio companies Src had over $600 million of available capital to take advantage of the current attractive investment environment.
I'll turn the call back over to <unk>, our CFO to take you through the third quarter financial highlights.
Thanks.
That's a large.
It's a lot of investment Corp's net asset value at September 32020.
$985 million was $18 six per share.
Compared to $981 million was 17098 cents per share.
In 2023.
The quota and seize.
He is on balance sheet investment portfolio.
Fair market value of approximately $2 $2 billion.
154 portfolio companies across 43 industries.
Okay to the fair market value of $2 $2 billion and 156 portfolio companies, Although it's 45 industries at June 30.
September 30 at the company had approximately $1 $2 billion of debt outstanding with leverage of 121 times net debt to equity.
At this point in time the level of leverage doesn't fully reflect planned loan asset contributions from our balance sheet to the <unk> as we continue to ramp that vehicle.
September 30th yet to sell people folio consisted of $134 million.
Our senior secured floating rate loans.
To complete the SSL DRAM.
We expect our leverage ratio to once again be in the middle of our target leverage range.
Nine to 125 times.
So obviously its funding profile isn't a strong position to weather a rising rate environment.
The existing $470 million of senior secured unsecured fixed rate notes have a weighted average interest rate of three 8%.
Did not have the maturity until the end of 2024.
Moving to the P&L for the three quarters ended September 30, gross gross investment income totaled $59 6 million versus $56 3 million for the three months ended June 30.
Net expenses totaled $36 3 million.
For the three months ended September $30. This compares to $33 7 million higher quarter.
As a reminder, at the time of the merger of Epsilon Senior investment call for SUNS into the company last year.
Investment advisor agreed to waive incentive fees, resulting from income due to the accretion of purchase discount allocated to investments client as part of the merger.
During the third quarter the company waived approximately 175000 ounces merger related incentive fees.
Which now totals approximately $2 million in cumulative weighted waivers by the manager related to the merger.
Accordingly, the Companys net investment income for the three months ended September 30 totaled $23 4 million or 40 <unk> per average share.
Compared to $22 $7 million of 40 <unk> per average share for the three months ended June 30.
Below the line the company had net realized and unrealized gains for the third quarter totaling $3 6 million ounce.
So this is a net realized and unrealized loss of $3 7 million for the second quarter of 2020.
As a result, the company had a net increase in net assets, resulting from operations of $26 9 million for three months ended September 32023, compared to a net increase of $19 million for the three months ended June 32020.
As we mentioned on the previous call. The company has returned to making quarterly rather than monthly distributions and on November 7th Board of Ethnography declared a quarterly distribution of <unk> 41 per share payable on December 28, 2020 to holders of record as of December 14, 2023.
We estimate this change will slightly reduce our annual operating expenses and is one change that is consistent what our objective to find solutions to maximize shareholder value.
With that I'll turn the call over to our co CEO Bruce <unk>.
Thank you for us.
Before I provide an overview of our portfolio I'd like to discuss our approach to portfolio construction.
Over 17 years of expanding our lending strategies as a diversified commercial finance company has provided us with the financing platform well suited for the current volatile market environment.
We're seeing a dispersion in the opportunity set across segments of the private debt markets.
As a result, we believe that asset selection will be critical to achieving strong performance during this vintage.
<unk> business model provides us with flexibility and capabilities to capitalize on the most attractive lending opportunities in todays market.
Take a fundamental bottom up approach to our portfolio construction based upon the relative attractiveness and risk adjusted returns across our investment verticals.
We are more active in sponsor finance. However, we expect to see increased opportunities in both the ABL and life science lending as we get into next year.
At that point, we will readjust our deployment accordingly.
We believe having the flexibility to play offense and defense at the right moments across cycles is key to long term consistent investment performance.
Now, let me discuss the portfolio.
At quarter end the comprehensive portfolio consisted of approximately $3 1 billion of senior secured loans to approximately 790 borrowers.
It was across a 110 industries with $4 million or 1% average position exposure.
Measured at fair value 99, 2% of our portfolio consisted of senior secured loans with approximately 98% invested in first lien loans, including investments to our SSL <unk> attributable to the company.
Only 2% was invested in second lien cash flow loans with the remaining one 2% invested in second lien asset based loans.
Our specialty finance investments account for approximately 73% of the comprehensive portfolio with the remaining 26, 5%.
Senior secured cash flow loans to upper mid market sponsor owned companies.
We believe that this defensive approach to portfolio construction positions us well for potential economic weakness and provides a differentiated risk return profile for our shareholders.
At quarter end, our weighted average asset level yield was 12, 3% up from 12, 1% last quarter.
Our portfolio credit quality remains strong at quarter end the weighted average investment risk rating was just under two based on our one to four risk rating scale with one representing the least amount of risk.
99, 3% of the portfolio on a cost basis was performing now.
Now, let me touch on each of our four investment verticals.
I'll start with our sponsor financed cash flow business.
We originated first lien senior secured loans to upper mid market companies and non cyclical industries, such as healthcare providers and diversified financials.
To mitigate the impact on our portfolio for cyclical economic factors.
At quarter end, our cash flow portfolio was approximately $824 million.
<unk> loans, and our SSL attributable to the company.
Divested across 51 borrowers.
With approximately 99% of the cash flow portfolio invested in first lien loans. We believe that this portfolio is well positioned to withstand liquidity pressures that individual bars may face. Additionally.
Additionally.
We believe we have a defensively positioned portfolio.
Our borrowers have a weighted average EBITDA of over $130 million, we have low ltvs of approximately 41% and interest coverage ratios of just under two times.
Our portfolio is comprised of businesses that perform essential services with either recurring or reoccurring revenues.
And they have low capital intensity, which results in high free cash flow.
Overall, our portfolio has exhibited solid credit metrics remained relatively steady throughout this year.
During the third quarter, we originated $115 million and experienced repayments of $34 million.
Our third quarter investments have an average yield to expected maturity of 12, 9%.
Leverage of approximately five times through our investment and interest coverage of just under two times.
Importantly, these investments carry less leverage than the historical average for new cash flow issuance.
As Michael mentioned, our sponsor finance deal flow continues to be lower overall as valuation expectations result in higher base rates, but we have found pockets of opportunities to make loans at very attractive risk adjusted yields.
At quarter end, the weighted average yield on this cash flow portfolio was 11, 8%.
Now, let me turn to the ABL segment.
Historically this segment has performed well during periods of market volatility.
When borrowers that are asset rich, but have cash flow pressures.
Seek to raise capital backed by their liquid assets.
The opportunity set has increased for ABL as borrowers seek working capital financing against the backdrop of increased bank regulation.
The fallout from the regional banking crisis.
Tightening credit and the ABL segment.
Given the economic headwinds, we are very conservative in our approach to underwriting.
Increase in deal volume. However, it is enabling us to remain active while being extremely selective.
At quarter end.
Our senior secured ABL portfolio totaled $976 million, representing 31% of the comprehensive portfolio and it was invested across 159 borrowers.
The weighted average asset level yield of this portfolio was 15, 3% up from 14, 6% in the second quarter.
The average LTV was approximately 60%.
For the third quarter, we had $85 million of new investments and repayments of roughly the same $87 million.
Now, let me turn to equipment finance.
At quarter end this portfolio totaled $955 million and was highly diversified across 550 borrowers.
Our credit profile continues to be strong.
Our weighted average asset level yield was nine 6% on the equipment portfolio.
During the third quarter, we originated $122 million of new investments and had repayments of $144 million.
Our investment pipeline and equipment finance has increased significantly this quarter.
We have expanded our vendor financing business for non OEM distributors.
And finding attractive risk adjusted return profiles.
Expect to provide which we expect to provide portfolio and income growth for this segment in 2024.
Now, let me finally turn to life Sciences.
Ripple effect of the Silicon Valley Bank failure has had a profound impact on the life science sector.
The decline in investment valuations evidenced by public market caps borrowers are seeking to extend the cash runway via debt financings without corresponding equity cushions provided by incremental equity investment.
This dynamic has resulted from borrowers reluctance to issue equity at today's lower valuations.
As a result, our.
<unk> is seeing signs of distress in the earlier riskier stage of our life science issuance market, which is where we don't play.
We are pleased to report that our $325 million portfolio remains fundamentally strong over 95% of the portfolio is invested in loans to borrowers that have over 12 months of cash runway.
Additionally, all of our portfolio companies have in revenues with at least one product in the commercialization stage, which significantly derisk our investment.
As a result, none of our life science loans are on our watch list or have migrated lower in our risk rating system during the 2023.
Life Science loans represent just over 10% of the portfolio and contributed just over 20% of our gross investment income in the third quarter.
During the quarter the team committed 39 $39 million in new investments and funded $25 million of those commitments.
In addition, we had repayments of $42 million.
We have just under a $110 million of unfunded commitments, which may be accessed by borrowers based on reaching milestones such as FDA approval revenue levels or liquidity.
Stones.
At quarter end, the weighted average yield on this portfolio was 13%. This excludes any success fees and warrants, which takes our yield higher.
While we expect valuations in the life science market to take another quarter or two to stabilize before we see equity issuance pickup.
We do continue to see several new issue opportunities that we find extremely attractive.
Given <unk> ability to allocate capital to the best reward risk rewards segments, we have the luxury of being highly selective in our capital deployment and the life science sector, while still generating positive originations for the company overall.
That's the life science market continues to stabilize we expect the opportunities to increase hopefully.
Hopefully with less competition from lenders who are risk on during this current file volatile environment.
Now I'll turn the call back to Michael.
Yes.
Thank you Bruce.
Sorc's portfolio reflects stable fundamentals and benefit from the flexibility to allocate capital to investments across our lending vertical.
We've offered the most attractive risk adjusted returns for our shareholders.
We have available capital and an opportunity for continued earnings growth in Q4 and in 2024.
While the director of its rates remained volatile it is important to remember that specialty finance spreads and returns are not as volatile as cash flow sponsor finance investments across cycles. Importantly, we would not expect yield contraction with specialty finance assets to the same extent as sponsor finance when markets return to a more normal state.
Looking forward, we expect broad origination opportunity driven by a combination of increased M&A activity loan maturities and regulatory slash credit contraction forces impacting regional banks to the benefit of middle market lenders such as <unk>.
In addition, as the regional Bank dislocation continues to unfold, we are seeing increased opportunities to expand our specialty capabilities through tuck in acquisitions for our existing commercial finance portfolio companies to add or acquired portfolio teams partner or to acquire portfolios of specialty finance assets.
Src's broad foundation of diversified commercial finance businesses have the resources and experience to acquire portfolios in service loans and opportunistic opportunistic basis.
Continue to believe that a diversified portfolio approach across sponsor and commercial finance assets is the most effective strategy to generate income and manage risk across economic cycles.
We closing our investment advisors alignment of interest the company shareholders continues to be the one of our guiding principles.
<unk> team owns over 8% of company stock, including a significant percentage of our annual incentive compensation and invested in the stock.
Teams investment alongside fellow Src shareholders demonstrates our confidence in the company's defense portfolio stable funding and favorable position. We thank you very much for your time today and we'll now open up the line for questions.
At this time, if you'd like to ask a question. Please press star one now on your telephone keypad to withdraw yourself from the queue. You May press star two once again to ask a question that is star one on your telephone keypad.
Take our question first question is from Erik Zwick of hub Group. Your line is open.
Thanks, Good morning, everyone I wanted to start maybe if you could just provide a little bit of color into that the types of investments, but the characteristics of those that you are.
Electing to put into the <unk> at this point.
Just to refresh for a minute Eric.
You may recall.
We merged solar and solar senior which closed in April of 'twenty, two and solar senior had a portfolio of low yielding cash flow backs sponsor loans. In addition to some ABL assets and the strategy for the SSL P was to migrate the solar senior lower yielding cash flow assets in.
The SSL P. So thats, primarily whats been moving in there there's been one or two assets, where we've originated direct cash flow loans into the <unk>, but it's been predominantly migrating the SUNS portfolio down there.
Thank you that's helpful. And then just curious a little bit on your commentary about the life Sciences.
Segment, you had mentioned that.
Some of the areas, where you don't win they are starting to see a little bit of pressure curious if you could just add a little bit of maybe detailing to.
What issues are rising there and your confidence that those would not spread to kind of the areas in the life science that you do lend to those companies.
Sure I think just from 30000 feet the life Science segment.
Is dictated in large part by capital raising as they continue to fund the development of drugs and devices through the FDA approval process and where we are starting to see some stresses in the early stages because valuations have come off on the equity side, we are finding that.
Issuers and borrowers are waiting as long as possible in the hopes that that equity value will recover to fund that continued cash burn needed to move through the FDA approval process. We have always been late stage as you may recall, our business our team in life Sciences has been doing this for over 25 years, they've never had it.
Walt or loss throughout their career.
Knock on wood.
But we are focused on late stage and the best evidence for that is that the return is lower and we have revenues as I mentioned, 100% of our companies have revenues in one product at a minimum across their portfolio of products that may be moving through the FDA. So what that means is that.
There is value there you can put a multiple on those revenues they are moving towards cash flow breakeven and so the ability to raise capital still exists on the equity side. They are waiting in the hopes that they can raise it at a more attractive valuation, but they have been able to tap the equity markets both private.
And public so that's why as I mentioned, we have over 95% of the portfolio has cash runway over a year to fund that continued burn as they move towards cash flow breakeven. So that's what's been insulating our companies from the earlier stage companies that are <unk>.
Troubling to raise capital to fund moving through clinical trials, two phase III and commercialization with the FDA.
That's great detail. Thank you and then last one for me and I'll step aside if you could just kind of refresh me on your current interest rate sensitivity as well as maybe your expectation that rates are going to stay here longer if we might see some changes in the near term.
I don't think we have a unique crystal ball on that our focus is really on for our borrowers and across our portfolios, making sure that we have the liquidity as well as the free cash flow to cover interest rates today, we are stressing them to be 50 to 100 basis points.
When we look at our stress tests across the individual portfolio companies and Thats, where were very comfortable I don't think anyone is underwriting and increased much above that.
I realize the second part of that question was more speculative, but just curious I appreciate your thoughts today. Thank you.
Thank you.
We will take our next question from Sean Paul Adams of Raymond James.
Hey, guys good morning.
Could you just give a little bit of color about the status of the JV and the facility where the revolving period ends in June 2024.
If a therapy for the SSP.
Yes.
Yes.
The the JV.
Is in the process of ramping.
We've contributed a combined $57 million of equity between the two of US with 28 $5 million so far.
And the assets just to track that for you. It started in the fourth quarter of last year, we had about $18 million of commitments and had been moving assets steadily in each quarter that was $46 million of commitments in Q1 dollars 79 in Q2 and now we're up to $140 million as we stated previously we continue.
To expect to get in that $230 million to $250 million by year end.
And the maximum it should be about $300 million when we continue to complete the ramp in Q1.
And the.
The credit facility really just opened a year ago. So we have the ability to continue to extend that forward.
If the maturity is 2007 just to.
Give you that data.
Perfect. Thank you for the call.
We'll take our next question from Ryan Ryan Lynch of K B W.
Hey, good morning.
First question I had was just on the chart that you guys have regarding that asset based loans weighted average yields it's like 15, 3% in.
In the quarter.
So what I'm trying to reconcile is that's a very high yield on those asset based loans, but then when I look at the underlying businesses that are holding those loans. Besides any any sort of finance that are on your balance sheet, one being like that.
So our credit solutions.
That entity only generated about a six 9% yield.
The SLR see over.
Over the first nine months of 2023.
It looks like it's about Levered, one to one that that entity and so I'm just trying to understand and reconcile.
Very high underlying asset yields on those asset based financing, but yet the overall NPV of SLR credit solutions has a yield of less than half of that that is generated for SLR. So can you reconcile those two.
Yes, without getting to the specific numbers just the medically Ryan as you know the asset based loan category that references to 15, 3% asset level yield.
It's a combination of credit solutions to your point as well as.
Business credit and healthcare ABL, both of which came into SLR in connection with the merger with SUNS last year, and they're asset level yields are higher than credit solutions.
Where they are focused as you know predominantly on receivable backed financing and factoring of receivables across a variety of industries, including health care dedicated segment. So that's just a little color on the components.
And then.
So credit solutions does have lower asset yields in that blend to 15, 3%.
But we are ramping credit solutions and.
The return.
Return on equity there is burdened by obviously.
Being under invested which we are in the process of rebuilding that.
Together with the cost of the business, which is more fixed.
And so we expect to see improved returns there as we continue to ramp that portfolio.
Yes.
I mean have there been because it's hard to tell have there been underlying credit issues.
Pressured.
Net returns of some of these entities because from a high level, because youre right theres different pieces here, but from a high level. If I just look at your controlled investments.
They represent about 38% of your overall portfolio that SLR see holds.
When I look at the returns that they've generated for the first nine months with an annualized return of about seven 1%. So there is a very low return on these investments relative to the overall weighted average yield on your portfolio of 12, 3%. So the underlying assets that are going into these entities.
It seem like they are very high and very healthy. Meanwhile, These control investments ultimate returns that theyre generating for SLR C are very low and so.
It'd be helpful. If you could kind of piece together, where reconcile what that difference is coming from and how to improve the returns on those entities given the asset yields in number are already very strong.
Sure I think to your first question.
Credit solutions did have an asset impairment earlier this year, which we talked about was on our balance sheet as well <unk>, which we're working through and without spending too much time on that one are optimistic that its mark for recovery at both credit solutions and us, but that's not the full story.
Here.
Point and to your question, it's really about re ramping that portfolio.
<unk> credit solutions in particular does have high churn.
As you know that is lending to companies that are cash flow in transition. So it is not an.
An easing portfolio to keep fully invested although in times like this is a time that we expect that to continue to ramp that portfolio. So we do expect to be able to build that ROE up in particular in credit solutions away from that we're also explore.
Exploring some opportunities to dramatically increase the portfolio at our other ABL business, which is focused more on factoring and ABL receivables, but I think the short story is it's about.
Expanding those portfolios to a larger scale and I think it's normal that we discussed back with $600 million of dry powder. The vast majority of that or substantially all of it is within the <unk>.
Finance companies in the <unk>. So we have the opportunity as we as we deploy that capital to really drive the ROE of those entities and Src as a whole.
Got it so it sounds like it's more of a.
Capital deployment further leverage within the entities would be the biggest driver that you guys could see that could drive returns there because the yields it looks like the underlying yields are already pretty healthy.
You also get better we do expect to deploy more capital and the <unk>.
Backdrop of the regional banking crisis as you know earlier this year that sort of froze those markets.
I would've told you, though that they are starting to reopen a year ago. When we lost a transaction in that segment. It would be to a regional bank and now theyre, just not showing up to bid for transactions, but these are more.
Working capital relationship loans and it takes a while to launch them. The good news is they are stickier away from credit solutions, which is transactional.
So we think as we build that business in the backdrop of the regional banks.
<unk> worked through the system, we're already seeing increased pipeline opportunities to expand the platform.
Okay.
That's all for me today I appreciate the time.
Thank you.
And once again to ask a question that is star one now on your telephone keypad will move next to Casey Alexander of Compass point.
Yes. Good morning, just one question and I apologize.
There's a lot of calls going on at the same time, so I am in late so if you've already answered this.
I appreciate it I'm just wondering why go back to a quarterly dividend you went to a monthly dividend presumably for good reasons and I'm, just curious why youre going back to a quarterly dividend pay.
A couple of reasons one is <unk>.
Pretty much all the Bdcs are correlated with just one or two exceptions and at the end of day. It also saves us money.
I'd say, its probably a penny or two a share.
Annually in earnings to go back to quarterly and that for US was reason enough to do it.
But that sounds like a good reason okay. Thank you. That's my only question I appreciate it.
Casey.
And once again that is star one to ask a question one moment, while we queue.
We have a follow up from Sean Paul Adams Raymond James Your line is open.
Hey, guys one quick follow up.
About base side.
A couple of other Bdcs actually just put them on nonaccrual.
Is there any commentary on the their status within your portfolio.
Yes, so so base side is a restructured loan.
From.
Earlier this year.
And it has been restructured into a combination of debt and equity.
And.
The company itself is in a period of very positive transition with a meaningful strategic joint venture that is underway as we speak so there is a new.
The old security was converted to a new debt and equity security.
I can't speak to how others are treating it but we think that.
That will occur.
Accrue interest.
Companies are performing better than expectations.
Got it thank you.
Thank you.
And it appears that we have no further questions at this time.
Thank you everybody and we appreciate your time and as always if you have any follow up questions. Please feel free to call any of us. Thank you.
This does conclude today's conference you may now disconnect your lines and everyone have a great day.
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