Q4 2023 Portman Ridge Finance Corporation Earnings Call

Okay.

Welcome to Portland reach Finance Corporation's fourth quarter, and full year 'twenty 'twenty fee earnings conference call.

Operator: Welcome to Portman Ridge Finance Corporation's fourth quarter and full year 2023 earnings conference. An earnings press release was distributed yesterday, March 13th, after the market. A copy of the release, along with an earnings presentation, is available on the company's website at www.portmanridge.com in the Investor Relations section and should be reviewed in conjunction with the company's Form 10-K filed yesterday with the SEC. 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&P 500. The company assumes no obligation to update any such forward-looking statements unless required by law.

Earnings Press release was distributed yesterday March 13th after market close.

A copy of the release along with an earnings presentation is available on the company's website at Triple double you got Hartland, who each dot com.

The Investor Relations section and should be reviewed in conjunction with the company's Form 10-K filed yesterday with the S E T.

As a reminder, this conference call is being recorded by 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 reserve.

A lot of a number of factors, including those described in the company's filings with the S E T.

Portland reached Finance Corporation assumes no obligation to update any such forward looking statements unless required by law.

Operator: Speaking on today's call will be Ted Goldthorpe, Chief Executive Officer, President, and Director of Portman Ridge Finance Corporation; Jason Roos, Chief Financial Officer; Patrick Schafer, Chief Investment Officer, and Brandon Satoran, Chief Accounting Officer. With that, I would now like to turn the call over to Ted Goldthorpe.

Speaking on today's call will be Tad Goldfarb, Chief Executive Officer, President and director of Parkland reached Finance Corporation, Jason Rus, Chief Financial Officer.

Patrick Schaefer, Chief investment Officer, and Brandon <unk>, Chief Accounting officer with that I would now like to turn the call over to Ted Gulfport, Chief Executive Officer apartment rich.

Edward Joseph Goldthorpe: Chief Executive Officer of Portman Ridge. Good morning, and thanks everyone for joining our fourth quarter and full year 2023 earnings call. I'm joined today by our Chief Financial Officer, Jason Roos, our Chief Investment Officer, Patrick Schafer, and our Chief Accounting Officer, Brandon Satorum. I'll provide brief highlights on the company's performance and activities for the year. 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 fourth quarter and full year 2023 results, and we are pleased with the solid earnings power of the portfolio, despite operating in a somewhat challenging market condition. During the year, we saw a 10% increase in total investment income and a 16% increase in core investment income year over year. Additionally, our net asset value per share increased from $22.65 per share to $22.76 per share quarter over quarter. Credit quality also improved in the quarter with a reduction in non-accruals on a cost, market value, and company account basis.

Good morning, and thanks, everyone for joining our fourth quarter and full year 2023 earnings call.

I'm joined today by our Chief Financial Officer, Jason Rus, Our Chief Investment Officer, Patrick Schafer, Our Chief Accounting Officer, Brandon So Turin.

I'll provide brief highlights on the company's performance and activities for the year, 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 fourth quarter and full year 2023 results and we were pleased with a solid earnings power of the portfolio. Despite operating in a somewhat challenging market conditions. During the year, we saw a 10% increase in total investment income and a 16% increase in core investment income year over year.

Additionally, our net asset value per share increased from $22 65 per share to $22 76 per share quarter over quarter.

Credit quality also improved in the quarter with a reduction in our non accruals on our cost market value and company count basis.

We continued our accretive repurchase program purchasing 101680 shares at an average cost of approximately $1.8 million during the fourth quarter.

Edward Joseph Goldthorpe: We continued our accretive repurchase program, purchasing 101,680 shares at an average cost of approximately $1.8 million during the fourth quarter. Due to the continued strong performance this past quarter, the Board of Directors was able to approve another strong dividend for the first quarter of 2024 in the amount of $0.69 per share, a level that represents a 12.1% annualized return on net asset value. For the full year 2023, total dividends distributed to shareholders amounted to $2.75 per share, representing a 7.4% increase as compared to the dividend distributed in 2021.

Due to the continued strong performance this past quarter. The board of directors was able to approve another strong dividend for the first quarter of 2024, and the amount of 69 cents per share a level that represents a 12, 1% annualized return on net asset value.

For the full year 2023, total dividends distributed to shareholders amounted to $2 75 per share representing a seven 4% increase as compared to the dividend distributed in 2022.

Edward Joseph Goldthorpe: Turning to conditions in our primary market, new deal activity began picking up in late Q4, and while our primary market has been consistently active for most of 2024 so far, deal activity during 2023 as a whole was meaningfully down relative to 2022 and 2021. On the sponsor finance front, fourth-quarter deal activity began to tick up due to valuation expectations being more reasonable and a belief by most industry participants that interest rates had either reached their peak or were near enough that new buyers could reasonably estimate their cost of capital. In both sponsor and non-sponsor activity, we continue to find the investment opportunities to be very attractive, given the combination of higher benchmark rates, lower leverage on new deals, higher equity contributions from sponsors, and better documentation.

Turning to conditions in our primary market new deal activity began picking up in late Q4, and while our primary market has been consistently active for most of 2024, so far deal activity. During 2023 as a whole was meaningfully down relative to 2022 and 2021.

On the sponsor finance front, the fourth quarter deal activity began to tick up through a combination of valuation expectations being more reasonable and a belief by most industry participants that interest rates and either reached their peak or near enough that new buyers could reasonably estimate their cost of capital.

And both the sponsor and non sponsor activity, we continue to find the investment opportunities to be very attractive given the combination of higher benchmark rates lower leverage on new deals higher equity contributions from sponsors and better documentation.

As has been the case for the last couple of quarters, we continue to be very selective on new investment opportunities and have overall found investments in existing portfolio companies more attractive and new borrowers to that end during the fourth quarter, 55% of our capital deployed was in existing portfolio companies as compared to <unk> 45 per cent bean.

Edward Joseph Goldthorpe: As has been the case for the last couple of quarters, we continue to be very selective on new investment opportunities and have overall found investments in existing portfolio companies more attractive than in new borrowers. To that end, during the fourth quarter, 55% of our capital deployed was in existing portfolio companies as compared to 45% being deployed into new borrowers, three new borrowers to be specific. Our goal continues to be to maintain an exceptionally diversified portfolio and invest in companies that have the potential to provide strong returns for our shareholders. Refocusing on Portman Ridge, we continue to believe our buyback, our stock remains undervalued throughout 2023, and we consistently repurchase shares under a renewed stock purchase program. During the year, we repurchased an incremental 224,933 shares for an aggregate cost of approximately $4.4 million.

Deployed in new into new borrowers three new borrowers to be specific.

Our goal continues to be to maintain an exceptionally diverse diversified portfolio and invest in companies that potential have the potential to provide strong returns for our shareholders.

Refocusing on Portman Ridge, we continue to believe our buyback our stock remains undervalued throughout 2023 and consistently repurchased shares under our renewed stock purchase program during.

During the course during the year, we repurchased an incremental 224933 shares for an aggregate cost of approximately $4.4 million.

Patrick Schafer: This compares to an aggregate cost of $3.8 million for full year 2022. Consistent with prior years, the company's board of directors renewed our $10 million stock buyback program for another year. And with that, I will turn the call over to Patrick Schafer, our Chief Investment Officer, for an overview of our investment activity. Thanks, Ted.

This compares to an aggregate cost of $3 $8 million for full year 2022.

Consistent with prior years, the company's board of directors renewed our $10 million stock buyback program for another year.

And with that I will turn the call over to Patrick Schafer, Our Chief investment Officer for a review of our investment activity.

Thanks Ted.

Patrick Schafer: Turning now to slide 5 of our presentation and the sensitivity of our earnings to interest rates, as of December 31, 2023, approximately 90% of our debt portfolio was either floating rate or non-floating rate. As of December 31, 2023, approximately 90% of our debt portfolio was either floating, or floating rate with a spread to the interest rate index such as SOFR or prime rate, with substantially all of these being linked to SOFR. As you can see from the chart, the underlying benchmark rates of our assets during the quarter lag the prevailing market rates and still remain below the SOFR rates as of March 8, 2024. But between the market transition last year from LIBOR to SOFR and the recent pause from the Fed, the gap is the narrowest it has been since the onset of the Fed rate hike cycle.

Turning now to slide five of our presentation and the sensitivity of our earnings to interest rates as of December 31, 2023, approximately 90% of our debt portfolio were either floating rate.

We were floating rate to either a spread.

We had a floating rate with a spread to the interest rate index, such as sofa or prime rate with substantially all of these being linked to silver.

As you can see from the chart the underlying benchmark rates of our assets during the quarter lagged the prevailing market rates and still remain below the sofa rates as of March eight 2024, but between the market transition last year from LIBOR to sofa and the recent pause from the fed the gap has narrowed it has been since the onset of the fed rate hikes.

The fed rate hike cycle.

Patrick Schafer: For illustrative purposes, if all of our assets were to reset to a three-month SOFR rate, we would expect to generate an incremental $86,000 of quarterly income. Having said that, slide 7 shows the aggregate impact on NII on a run rate basis of both our assets and liabilities as of December 31, 2023. Given the relatively shallow benchmark curve and limited financial impact of this analysis, we will likely be retiring this slide going forward from our earnings presentations, as we have been relatively in equilibrium for the past few quarters. Skipping down to slide 11, originations for the fourth quarter remain at a lower level than the prior year's fourth quarter, as well as below the repayment levels, resulting in net repayments and sales of approximately $30.1 million. Our new investments made during the quarter are expected to yield a spread to SOFR of 798 basis points at par value, and the investments were purchased at a cost of approximately 96.3% of par. Our investment securities portfolio at the end of the fourth quarter remained highly diversified.

For a lesser purposes.

All of our assets were to reset two or three months. So for rate, we would expect to generate an incremental $86000 of quarterly income.

Having said that slide seven shows the aggregate impact to NII on a run rate basis of both our assets and liabilities as of December 31 2023.

Given the relatively shallow benchmark curves and limited financial impact of this analysis, we will likely be retiring the side going forward from our earnings presentations as we've been relatively an equilibrium for the past few quarters.

Yes.

Skipping down to slide 11 originations for the fourth quarter remained at a lower level than prior year fourth quarter as well as below the repayment levels, resulting in net repayments in sales of approximately $31 million.

Our new investments made during the quarter are expected to yield a spread to sofa of 780 798 basis points on par value and the investments were purchased at a cost of approximately 96, 3% of par.

Our investment securities portfolio at the end of the fourth quarter remained highly diversified we ended the year with investments spread across 27 different industries and 100 different entities, all while maintaining an average par balance per entity of approximately $3 $1 million.

Patrick Schafer: We ended the year with investments spread across 27 different industries and 100 different entities, all while maintaining an average par balance per entity of approximately $3.1 million. Turning to slide 12, in aggregate, securities on nonaccrual status remain relatively low and decreased to seven investments at the end of the fourth quarter of 2023, as compared to eight investments on nonaccrual status as of September 30th, 2023, as one of our borrowers emerged from bankruptcy in Q4 and our restructured loan returned to cash pay. These seven investments in OnEqual Stats at the end of the fourth quarter of 2023 represent 1.3% and 3.2% of the company's investment portfolio at fair value and amortized cost, respectively. On slide 13, excluding our non-accrual investments, we have an aggregate debt securities fair value of $373 million, which represents a blended price of 94.3% of par and is 88% comprised of foreseen loans at par value.

Yeah.

Turning to slide 12, and aggregate securities on nonaccrual status remain relatively low and decreased to seven investments at the end of the fourth quarter of 2023 as compared to eight investments on non accrual status as of September 32023, as one of our borrowers emerge from bankruptcy in Q4, and our restructured loans returned to cash pay.

These seven investments on nonaccrual status at the end of the fourth quarter of 2023 represent one 3% and three 2% of the company's investment portfolio at fair value and amortized cost respectively.

On slide 13, excluding our non accrual investments, we have an aggregate debt securities fair value of $373 million, which represents a blended price of 94, 3% of par and is 88% comprised of first lien loans at par value.

Assuming a par recovery our December 31, 2023, a fair values reflect a potential of $29 $2 million of incremental NAV value, a 13, 7% increase or $3 12 per share excluding any recovery on non accrual investments.

Patrick Schafer: Assuming a prior recovery, our December 31, 2023 fair values reflect a potential of $29.2 million of incremental NAB value, a 13.7% increase, or $3.12 per share, excluding any recovery on nonaccrual investments. If we were to overlay an illustrative 10% default rate and 70% recovery on the entire debt securities portfolio, again excluding non-accrual investments, the incremental NAV value potential would be $1.83 per share, or an 8% increase in NAV per share as of December 31, 2023. Finally, turning to slide 14, if you aggregate the three portfolios acquired over the last three years, we have purchased a combined $434.8 million of investments and have realized over 82% of these investments at a combined realized and unrealized mark of 102% of fair value at the time of closing the respective mergers.

If we were to overlay in a luxury of 10% default rate and 70% recovery to the entire debt securities portfolio again, excluding non accrual investments the incremental NAV value potential would be $1 83 per share or an 8% increase to NAV per share as of December 31 2023.

Finally, turning to slide 14, if you aggregate the three portfolio was acquired over the last three years, we have purchased a combined $434 $8 million of investments and have realized over 82% of these investments at a combined realized and unrealized mark of 102% of fair value at the time of closing the respective mergers.

I'll now turn the call over to Jason to further discuss our financial results for the period.

Thanks, Patrick.

As both Ted and Patrick previously mentioned our results for the fourth quarter and full year 2023 reflects strong financial performance.

Patrick Schafer: I'll now turn the call over to Jason to further discuss our financial results for the period. This is Patrick. As both Ted and Patrick previously mentioned, our results for the fourth quarter and full year 2023 reflect strong financial performance. Our total investment income for the full year 2023 was $76.3 million, of which $63.5 million was attributable to interest income from the debt securities portfolio.

Our total investment income for the full year 2023 was $76 3 million of which $63 5 million was attributable to interest income from the debt securities portfolio.

This compares to total investment income for the full year 2022 of $69 6 million of which $55 8 million was attributable to interest income from the debt securities portfolio. The increase was largely due to growth in the previously.

We discussed the interest income pik dividend and fee income.

Excluding the impact of purchase price accounting, our core investment income for the year was $74 5 million, an increase of $10 3 million as compared to core investment income of $64 2 million in 2022.

Jason T. Roos: This compares to total investment income for the full year 2022, which is today, previously discussed interest income, PIC, dividend, and fee income. Excluding the impact of purchase price accounting, our core investment income for the year was $74.5 million, an increase of $10.3 million as compared to core investment income of $64.2 million in 2020. Our net investment income for the full year 2023 was $34.8 million, or $3.66 per share.

Our net investment income for the full year 2023 was $34 8 million or $3 66 per share.

As of December 31, 2023, and December 31, 2022, the weighted average contractual interest rate on our interest earning debt securities was approximately 12, 5% and 11, 1% respectively.

We continue to believe the portfolio remains well positioned to generate incremental revenue in future quarters due to the current rate environment.

Total expenses for the year ended December 31, 2023 were $46 8 million compared to total expenses of $40 7 million for the full year 2022.

Jason T. Roos: As of December 31, 2023, and December 31, 2022, the weighted average contractual interest rate on our interest-earning debt securities was approximately 12.5% and 11.1%, respectively. We continue to believe the portfolio remains well-positioned to generate incremental revenue in future quarters due to the current rate environment. Total expenses for the year ended December 31, 2023 were $46.8 million, compared to total expenses of $40.7 million for the full year 2022. This increase was largely due to an increase in interest and amortization of debt issuance costs, which was largely driven by an increase in interest rates on the company's liabilities.

This increase was largely due to an increase in interest and amortization of debt issuance cost, which was largely driven by the increase in interest rates on the companys liabilities.

Our net asset value for the fourth quarter of 2023 was $213 5 million or $22 76 per share an increase of 11 <unk> per share as compared to $214 8 million or $22 65 per share in the third quarter of 2023.

The quarter over quarter increase in NAV per share. Despite total NAV decreasing slightly was predominantly driven by the repurchase of 101680 shares during the fourth quarter.

Turning to the liability side of the balance sheet as of December 31, 2023, we had a total of $325 7 million par value of borrowings outstanding at a current weighted average interest rate of 7%. This balance was comprised of $92 million in borrowings under our revolving credit facility of $108 million of four and seven 8% notes due 2026.

Jason T. Roos: Our net asset value for the fourth quarter of 2023 was $213.5 million or $22.76 per share, an increase of $0.11 per share as compared to $214.8 million or $22.65 per share in the third quarter of 2023. This quarter-over-quarter increase in NAV per share, despite total NAV decreasing slightly, was predominantly driven by the repurchase of 101,680 shares during the fourth quarter. Turning to the liability side of the balance sheet, as of December 31, 2023, we had a total of $325.7 million in par value of borrowings outstanding at a current weighted average interest rate of 7%. This balance was comprised of $92 million in borrowings under our revolving credit facility, $108 million of foreign 7.8% notes due 2026, and $125.7 million in secured notes due 2029.

And $125 $7 million in secured notes due 2029.

As of the end of the year, we had $23 million of available borrowing capacity under the senior secured revolving credit facility and no remaining borrowing capacity under the 2018, there's two notes as the reinvestment period ended shortly after our draw on November 22022.

As of December 31, 2023, our leverage ratio was one five times on a gross basis and one two times on a net basis from a regulatory perspective.

Our asset coverage ratio at year end was 165%.

Finally, and as announced March 13th does in 'twenty for a quarterly distribution of 69 per share was approved by the board and declared payable on April <unk> 2024 to stockholders of record at the close of business on March 25th 2024 visit.

This is a one cent per share distribution increase as compared to the first quarter of 2023.

Jason T. Roos: As of the end of the year, we had $23 million of available borrowing capacity under the Senior Secured Revolving Credit Facility and no remaining borrowing capacity under the 2018-2 notes as the reinvestment period ended shortly after our draw on November 20, 2022. As of December 31, 2023, our leverage ratio was 1.5 times on a gross basis and 1.2 times on a net basis, from a regulatory perspective. Our asset coverage ratio at year-end was 165%. Finally, and as announced on March 13, 2024, a quarterly distribution of 69 cents per share was approved by the Board and declared payable on April 2, 2024, to stockholders of record at the close of business on March 25, 2024. This is a one cent per share distribution increase as compared to the first quarter of 2023. Total stockholder distributions for 2023 amount to $2.75 per share. With that, I will turn the call back over to Ted. Thank you, Jason.

Total stockholder distributions for 2023 amount to $2 75 per share.

With that I will turn the call back over to Ted.

Thank you Jason ahead of questions I'd like to reemphasize reemphasize that we believe we are well positioned to take advantage of the current market environment.

Throughout 2023.

Through our proven investment strategy, we believe we will be able to deliver strong returns to our shareholders in 2024.

Thank you once again to all of our shareholders for your ongoing support. This concludes our prepared remarks, and I'll turn over the call for any questions.

Yes.

Floor is now open for your questions to ask a question. This time. Please press star followed by the number one on your telephone keypad.

We'll pause for just a moment to compile the Q&A roster.

Okay.

Your first question comes from the line of Christopher Nolan with Ladenburg. Your line is open.

Hey, guys.

Hey, Chris the one one time reimbursements.

Expense relate to please.

Yeah, Hey, Chris This is Jason Thats, a reimbursement to the fund are.

It related to and for administrative transition transition services are paid to personnel, Oh, hi, garrison and <unk> following the acquisition of those Bdcs.

Okay and then.

Given the two.

2018 dash to secured notes are due.

No longer in their reinvestment period, and given the slow cautious.

Investment.

Perspective, you guys are taking on new investments.

Edward Joseph Goldthorpe: Ahead of questions, I'd like to reemphasize that we believe we are well positioned to take advantage of the current market environment, as shown throughout 2023. Through our proven investment strategy, we believe we will be able to deliver strong returns to our shareholders in 2020. Thank you once again to all of our shareholders for your ongoing support. This concludes our prepared remarks, and I will turn the call over to the caller for any questions. The floor is now open for your questions. To ask a question this time, please press the star followed by the number one on your telephone keypad.

How should we look at the balance sheet growing or not growing in coming quarters.

Yes.

Hey, Chris It's Patrick.

So I would say.

I think the way I would frame. It is I think relative to December 31st I think you could reasonably expect.

You know of.

More of a reduction in terms of.

Our liabilities as you saw at the end of the quarter, we had something like 70 million of cash on the balance sheet I think it's reasonable to assume it.

Operator: We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Christopher Nolan with Leydenburg. There you go. I'm going to ask for the one-time reimbursement.

Junk of that is ultimately going to go towards towards debt repayment.

But I would say kind of absent that.

We would expect kind of generally speaking over the course of the year I would imagine to be in a relatively stable place I mean, if you I E.

Jason T. Roos: Hey Chris, this is Jason. That's a reimbursement to the fund related to and for administrative transition services paid to employees of Ojai, Garrison, and HCAP following the acquisition of those BDCs. And then, given the, The 2018-2 secured notes are... no longer in their reinvestment period, given the slow caution. How should we look at the balance sheet growing? Yeah, hey Chris, it's Patrick.

If you assume again some chunk of that is repaid you probably be down to something like somewhere between one three and one four times gross leverage.

And probably on the lower end from a net leverage perspective, like I say net leverage that we have for the quarter.

Patrick Schafer: So I'd say, you know, I think the way I would frame it is, I think relative to December 31, you could reasonably expect, you know, a little more of a reduction in terms of our liabilities. As you saw at the end of the quarter, we had something like 70 million in cash on the balance sheet. I think it's reasonable to assume, you know, a chunk of that is ultimately going to go towards debt repayment. But I would say, kind of absent that, we would expect, generally speaking, over the course of the year, I would imagine to be in a relatively stable place. I mean, if you assume, again, some chunk of that is repaid, you probably would be down to something like somewhere between 1.3 and 1.4 times gross leverage, you know, and probably on the lower end from a net leverage perspective, like the same net leverage that we have for the quarter.

And that kind of is right within our wheelhouse in terms of what we set our target leverage range is on a long term basis.

So I think from that point forward.

You could reasonably expect relatively consistent portfolio size again, obviously kind of timing around.

When things are repaid versus versus new investments, but I think generally speaking.

We're probably on the tail end of sort of our kind of.

The decrease in our portfolio in favor of debt repayment.

Gotcha.

And then final question is on the driver I noticed that ATP oils no longer non accrual.

Was the exit from that the driver for the realized losses.

So no.

No I don't think I don't think ATP was ever on non accrual its an equity position. So it's not it doesn't have like a sort of stated coupon or anything to otherwise otherwise habit habit of crew.

Patrick Schafer: And that kind of is right within our wheelhouse in terms of what we said, our kind of target leverage ranges on a long-term basis. So I think from that point forward, you could reasonably expect, you know, relatively consistent portfolio size, again, obviously with timing around when things are repaid versus new investments. But, generally speaking, you know, we're probably on the tail end of sort of our kind of decrease in our portfolio in favor of debt recovery. And then the final question is, on the driver, I noticed that ATP oil is no longer known. Was the exit from that the driver for the real...

So I don't that yes, let me maybe Scott just the realized losses you are seeing their credits are related to.

Primarily a couple of Cielo has died over called this last quarter and as a result, we flipped.

Previously recognized unrealized losses into realized this quarter.

Got you and you guys are holding the equity strips so no CLO right.

Correct.

As a as Jason mentioned, I think one or two of them fight anymore. Yeah. Finally got finally got called so no but broadly speaking when you look at our CLO bucket that is the equity stripes.

Patrick Schafer: So, no, I don't think ATP was ever on a non-accrual basis, it's an equity position, so it doesn't have like a sort of stated coupon or anything to otherwise have it accrue, so I don't think that... Yeah, no, let me, maybe, the realized losses you're seeing there, Chris, are related to... primarily a couple of CLOs that were called this last quarter, Gotcha, and you guys are holding on... I mean, again, as Jason mentioned, I think one or two of them, yeah, finally got called. So, no, but broadly speaking, when you look at our CLO bucket, that is the equity. I'll get back in line.

I'll get back in line. Thank you.

Our next question comes from the line of Paul Cheng Cheng <unk>. Your line is open.

Good morning, Thanks for taking my question.

Good morning, nice sort of asked on the reimbursement.

But I'm just curious I mean are.

Are those expenses.

The adviser essentially reimbursed for this quarter are those expenses.

Over with at this point or do you expect there'll be more those next this year.

Stan.

No no that was that was a one time expense reimbursement.

And I would say.

Operator: Thank you. Our next question comes from the line of Paul Johnson with KBW. Your line is:

For a good run rate on administrative expenses, you should look at the quarter quarter amount for that being roughly 400400 $50000.

Operator: Yeah, good morning; I might have sort of asked about reimbursement. I'm just curious, are those expenses done and over with at this point, or do you expect there will be more this year? of those stand. No, that was a one-time expense reimbursement, and I would say... For a good run rate on administrative expenses, you should look at the quarterly amount for that being roughly the $400,000, $450,000, quarterly run rate going forward. So you should see that. OK. And then, yeah, thanks for that. And then,

Quarterly run rate going forward.

So you should see that.

Yes.

Gotcha.

Okay.

And then thanks for that and then.

As far as the realizations I mean, it sounds like most of that was driven by close this quarter getting called away.

Were those.

Most of those realized losses.

I mean that I mean that obviously helped us.

Physicians were those already.

Jason T. Roos: As far as realization, I mean, it sounds like most of that is driven by CLOs this quarter getting called away. I mean, were those most of those realized losses? That means that discussion, were those already marked, or was there any extra?

Mark or was there any sort of extra markdown in the quarter.

Yeah about.

So youre seeing totaled $15 six total realized loss about 14 point for that was.

Jason T. Roos: Yeah, about 15.6 total realized losses, about 14.4 of that was flipped from unrealized to realized, then the remainder was incremental this quarter, related to a couple of other CLO positions that we've been working on. Okay.

Flip from unrealized to realized than the remainder was incremental this quarter.

Related to <unk>.

A couple of other CLO positions or we still hold.

Okay I appreciate that that's helpful.

And then.

In terms of just <unk>.

Patrick Schafer: Appreciate it, and then you know, in terms of just leverage and Leo, Obviously, you don't, and Mark Zuckerberg. Leverage Basis. I mean, this is kind of where you'd like to have it, is sort of running going forward around these levels, or do you feel like outing? Yeah, it's a great question.

Leverage in the portfolio.

Obviously, you got it.

We can start with that.

Leverage basis.

Where you'd like to have the portfolio sort of running going forward around these levels or do you feel comfortable.

Potentially adding.

Leverage.

And for the year.

Yes, it's a great question I mean, we've provided guidance on where we want to be in terms of target leverage range, and obviously on a net basis or at or below the low end of that.

Patrick Schafer: I mean, we've provided guidance on where we want to be in terms of the target leverage range, and obviously, on a net basis, we're at the, we're below the low end of that. You know, the investment environment today is very attractive, like we're seeing very wide spreads and, obviously, high SOFR. So it is a decent deployment environment.

The investment environment today is very attractive like we're seeing very widespread and obviously high sulfur. So it is a decent deployment environment.

Operator: But you know, we're continuing to be pretty prudent about investing money, so I don't think you're going to see a big spike in leverage. But I think we are operating at the low end of our target. And then last, this is the last one for me, a simple one, but on the share purchases for the quarter, do you guys have on hand an estimation of how, you know, the share base will perform this quarter? Yeah, we'll have to get back to you on that one.

But we're continuing to be pretty prudent about investing money. So I don't think youre going to see a big spike in leverage.

But I think we are operating at the low end of our target range.

Okay.

Annualized since last one for me.

<unk>.

The share repurchases for the quarter do you guys have any.

On hand in estimation of how what sort of per share basis. It was accretive to NAV this quarter.

Yes, well have to get back to you on that one.

I don't have that off hand.

Operator: All right, thanks for taking my question. The next question comes from the line of Stephen Martin with Slater. Hi, most of my questions have been asked and answered.

No problem alright, thanks for taking my questions.

Thanks.

Next question comes from the line of Steven Martin with Slater. Your line is open.

Hi, most of my questions have been asked and answered can you.

Can you talk about the trends in.

Patrick Schafer: Can you talk about the trends in PICC? And also, I know you've talked about the portfolio for the quarter, but we're close to the end of the quarter. Can you say anything about deployments and repayments? So far, we're where you'd expect.

<unk> for the quarter and also I know you've talked about the portfolio for the quarter, but you're close to the end of the quarter can you say anything about deployments and repayments.

So far or where you expect.

Yes, I think I think starting with your starting with your with your latter question.

Patrick Schafer: Yeah, I think starting with your ladder question, I think probably where we sit today, we might be a little bit down still for the quarter. But there's a couple of things that we're working on just from an investment perspective. So, as I kind of mentioned to Christopher Nolan, just kind of depending on whether some of those things ultimately hit in March versus get kind of finalized in early April, obviously, you know, affects a little bit of that. But I would say we're probably still sort of a slight net repair. Yeah, on the PIC, look, I wouldn't expect there to be any sort of meaningful trends in any direction.

Look I think probably where we sit today, we might be a little bit down still for the quarter.

But theres a couple of things that we're working on just from a from an investment perspective, so as I kind of mentioned to <unk>.

Christopher Nolan like just kind of depending on whether that debt.

All of those things ultimately hit in March versus get kind of finalized in early April <unk>.

That's a little bit of that but I would say.

We're probably still sort of hubs.

Slight net net.

Net REIT payor.

Okay and on the Pik.

Yeah on the Pik.

Look I.

I wouldn't expect there to be sort of meaningful trends in any direction as we've kind of talked about before.

Patrick Schafer: As we've kind of talked about before, there are a lot of instances where, you know, as we're thinking about an investment in a security, we take the combination of cash and PIC and think about it as kind of an aggregate investment. So from our perspective, if, you know, we think we can structure a higher overall return piece of paper, but a little, you know, a small component of that is PIC, you know, we think that's an attractive opportunity to do so. Obviously, there are, you know, small instances where we intentionally go into a transaction with an all-PIC security.

You know there are a lots of instances where like.

As we are thinking about an investment in a security sort of we're taking the combination of cash and pik and thinking about it in as kind of an aggregate investment so from our perspective. If you know we think we can.

Structure, a higher overall, returning piece of paper, but a little.

A small component of that is is pik, we think that's an attractive opportunity to do so obviously there are small instances, where we intentionally go into a transaction with a with an all pik security, but I'd say generally speaking if you look at our at our peak investment our Pik income as a whole broadly it's sort of in situations.

Patrick Schafer: But I think generally speaking, if you look at our PIC investment, our PIC income as a whole, broadly, it's sort of in situations where there is a mix of cash and PIC component to the security. Okay, talk about portfolio restructurings, leverage ratio within the portfolio, what you're expecting. Great question. I think it's somewhere on our slides.

Where there is a mix of cash and pik component to the securities.

Okay.

Can you talk about.

On the.

Portfolio restructurings.

Leverage ratio within the portfolio.

What you're what you're expecting.

Yes, I think we no no great question I think we do.

Patrick Schafer: I think our leverage ratios are kind of roughly flat from the portfolio quarter over quarter. Again, I think generally speaking, we've mentioned this trend, but new positions tend to be sort of, I'll say, lower levered than perhaps legacy positions just because of the interest coverage and sort of how borrowers are thinking about that. But I would say, again, on the whole, if you look at our market as well as BDCs broadly, the underlying performance of companies continues to hold up. People are still seeing somewhat decent revenue in EBITDA trends. So I'd say on the margin, we probably would expect flat to decreasing leverage over the whole of our portfolio, plus amendments.

It's somewhere on our slides I think our leverage ratios are kind of roughly roughly flat from the portfolio quarter over quarter.

Again, I think generally speaking we've mentioned this trend, but new positions tend to be sort of I'll say lower levered than perhaps legacy positions just because of the interest coverage and sort of insight of how borrowers are thinking about that.

But I would say again on the whole like if you look at our market as well as your kind of Bdcs broadly like underlying performance of company is kind of continues to hold up people are still seeing somewhat decent revenue and EBITDA trends. So I would say on the margin you know we would probably we would expect kind of flat to decreasing leverage.

Over the whole of our portfolio.

Patrick Schafer: Credit quality, like you saw this last quarter, you know characters are down. I think credit quality, as we sit here today, Israel, is stable, and What About Amendments?, you know, extend.

And amendment of quality like you saw this last quarter non accruals were down I think youre going to I.

I think credit quality as we sit here today as well as stable across the portfolio.

And what about amendments.

Extensions.

I would say aye aye, there's probably still a little bit of an uptick in extension activity in general just because again as we've kind of mentioned some of these trends like the M&A market is coming back, but I think generally speaking sponsors obviously try and get themselves as much flexibility as they can in terms of in terms of when they might want to exit a port.

Patrick Schafer: I would say there's probably still a little bit of an uptick in extension activity in general just because, again, as we've kind of mentioned, some of these trends, like the M&A market, are coming back, but I think, generally speaking, sponsors obviously try and give themselves as much flexibility as they can in terms of when they might want to exit a portfolio. So we're definitely seeing some reasonable amount of extension activity just because we like the credit, the company's performing fine, and we're happy to give the borrower, the sponsor two more years to decide whether they want to exit the company. But I wouldn't say there's been any uptick in forced extensions and things like that.

So we're definitely seeing sort of still like kind of some reasonable amount of sort of amendment extension activity just because look we like the credit with companies performing fine we're happy to give the borrower sort of the sponsors that are two more years to decide whether they want to want to exit the company.

But I wouldn't say, there's kind of any uptick in sort of <unk>.

Forest extensions and things like that I think it's generally a relatively.

Patrick Schafer: I think it's generally a relatively, you know, stable slash average type of environment for that sort of activity. And in the past, you've said you were getting paid for this. Would you still make the same comment? Yes, we still either get, you know, a fee or some type of pricing. Again, the market right now is seeing where we sit today, like, broadly speaking, spreads coming in as a whole in terms of new deals. So, you know, sometimes keeping the spread the same is an economic benefit to us as opposed to some type of repricing transaction. But yes, I'd say, generally speaking, that those activities are not for free.

You know stable slash average type of environment for that sort of activity and in the past. You've said you were getting paid for those or would you still make the same comment yes.

Yes, we still either get.

A fee or or some type of pricing again the market right now.

We are we are seeing where we sit today like broadly speaking spreads coming in.

As a whole in terms of new deals. So you know sometimes keeping the spread the same as is the same is a is an economic benefit to us as opposed to some type of repricing transaction, but yes, I'd say generally speaking that those activities are not are not for free.

Patrick Schafer: But again, in a situation where a company has meaningfully de-levered and they want, you know, an incremental two or three years, keeping it at, let's say, S650 as opposed to getting priced down to S600 is actually an economic benefit to us. So, I would say you're still getting paid for it, but sometimes, depending on the characteristics, it's a little bit less obvious how you're getting paid. Thank you very much.

But again in a situation, where a company has meaningfully de levered and they want.

An incremental two or three years, keeping it at let's say a 650 as opposed to getting price down to 600 is actually an economic benefit to us. So I would say youre still getting paid for it but.

Sometimes depending on the characteristics, it's a little bit its little bit less obvious how youre getting paid alright.

Alright, Thank you very much.

Next question comes from the line of David Mizrahi, Jackie Sorry, Zackie with confluence investment management. Your line is open.

Operator: The next question comes from the line of David Mizayaki, sorry, David Miyazaki with Confluence Investment Management. Thank you. Thank you for taking my questions.

Thank you. Thank you for taking my questions could you just remind us what your longer term plan is for your CLO investments here and found about it looks like about $9 million now that you're holding.

Patrick Schafer: Could you just remind us what your longer-term plan is for your CLO investments? You're down to about, looks like about $9 million now that you're holding. Where do you plan to take this in the future?

Where do you plan to take this in the future.

Yes, I mean, the plan is ticket to zero I mean, we were trying to wind down the portfolio and get the Clo's called so the plan is to take it to zero.

Patrick Schafer: I mean, I mean, the plan is to take it to zero. We're trying to wind down the portfolio and get the CLOs called. The plan is to take it to zero. Okay. That was my thought on that, and does that affect, Kind of where your target leverage ratio is, is that it winds down, or do you feel like you have more capacity to take the balance sheet leverage up higher? And my opinion, not particularly, again, it's kind of $8 million. It doesn't have a meaningful impact on the asset side.

Okay.

My my thought on that and does that does that effect.

Kind of where your target leverage ratio is as that winds down.

Feel like you have more capacity to take the balance sheet leverage up higher.

Okay.

In my opinion, not not particularly again, it's kind of $8 million. It doesn't it doesn't have kind of a meaningful impact on the asset side.

Edward Joseph Goldthorpe: We generally feel like we want to be in the 1.25 to 1.4 times net leverage range, so I wouldn't say that that necessarily has a meaningful impact on how we think about leverage for the portfolio as a whole and how we think about either taking up or down that leverage for a little bit. I'd say we probably would be more focused on sort of the macro in terms of where we think the economy is broadly as well as how attractive we think the investing environment is. That would probably be more so driving our leverage decisions as opposed to the CLO portfolio itself. Okay, great, thanks. And then I just kind of step back and widen the lens a little bit.

We generally feel like we want to be in the 125 to one four times net leverage.

So I wouldn't say that that necessarily has a meaningful impact on how we think about leverage for the portfolio as a whole and how we think about either taking up or down that leverage we're a little bit. We I'd say, we probably would be more focused on sort of the macro in terms of where we think sort of the <unk>.

Economy as broadly as well as how attractive we think the investing environment is that would probably be more so driving our leverage decisions as opposed to the CLO portfolio itself.

Okay, great. Thanks.

And then if I, just kind of step back and widen the lens a little bit I mean.

Edward Joseph Goldthorpe: Ted, you and the team have had a lot of experience in the middle market, and one of the things that managers in the industry tend to do is talk about the ideal kind of borrower profile to go after. And it's almost always whatever they happen to be working on. And since you've worked in the upper middle market, you've worked with some of these acquisitions that have been from the lower middle market. At $100 million, it looks like in EBITDA, it's kind of your... neighborhood as far as what your weighted average EBIT die is, is that pretty close to what your, say, the median would be? And how do you feel about where you are?

Ted you and the team have have had a lot of experience in the middle market.

And one of the things that.

The managers in the industry tend to do is talk about the ideal.

Borrower profile to go after and its almost always whatever they happen to be working on and since you're working in the upper middle market.

I've worked with some of these acquisitions that had been from the lower middle market.

$100 million it looks like an EBITDA and kind of your your home kind of neighborhood as as far as what your weighted average EBITDA is is that pretty close to what your say the median would be and how do you feel about.

Where you are do you like that neighborhood or do you think that you should be going up bigger is one of the trends are here about or do you like sticking in the middle or lower side, where you have more bargaining power.

Edward Joseph Goldthorpe: Do you like that neighborhood, or do you think that you should be going up bigger is one of the trends to hear about? Or do you like sticking in the middle or lower side, where you have more bargaining power? I think the latter. I mean, our franchise is really what I would call big enough, so we don't want to lend to companies below $15 million in EBITDA. Our weighted average EBITDA in our portfolio is, I think, a little misleading. It skews high versus where I think our real franchise is.

Yes, I think I think the latter I mean, our franchise is really what I would call big enough. So we don't want to lend to companies below 15 million of EBITDA.

Our weighted average EBITDA in our portfolio I think it's a little misleading, it's skews high versus where I think a real franchises.

Edward Joseph Goldthorpe: I mean, the reality is some of our peers are competing head to head with the syndicated markets and the banks, which we are not, and just given our size as a platform, we just think, you know, like you can see our average spread to LIBOR is L750 versus a market at the large cap end of like L525. So, you know, our credit quality is very stable, and non-accruals are really low. So we think, as long as the company is big enough, we think we get paid an extra return, and we don't see a discernible difference in credit quality. So I would say that our average EBITDA always looks high if you really think about our core franchise, and it's driven by a couple of outliers.

Reality is some of our peers are competing head to head with the syndicated markets and the banks, which we are not.

And just given our size is a platform. We just think like you can see our average spread to LIBOR is L 750 versus a market at the large cap.

End of <unk> <unk> 525, so.

Credit quality is very stable.

Non accruals are really low so we think as long as a company as big enough. We think we get paid extra returned and we don't see a discernible difference in credit quality.

So I would say that weighted average EBITDA always looks high if you. If you really think about our core franchise and it's driven by a couple of outliers.

Okay Yeah.

Edward Joseph Goldthorpe: Okay, yeah, that that oftentimes tend to be the one of the limitations of looking at weighted, to that point, there's a lot of instances where if we get involved in a roll-up acquisition strategy at 40 of EBITDA, that might be 180 of EBITDA now, but obviously our original investment was 40, and that's kind of how we look at it, and so, too, we tend to be a little bit more active in sort of, I would say, the quote-unquote syndicated market, but more so like in periods of stress where we're looking at acquiring assets off of bank balance sheets and things like that, and those would tend to skew higher EBITDA, but that is more of an opportunistic purchasing as opposed to, as Ted said, kind of the core of our franchise. Right. Okay.

That oftentimes tend to be the one of the limitations of the current weighted averages.

Yes.

To that point like Theres, a lot of instances, where if we get involved in a roll up acquisition strategy at 40 of EBITDA that might be 180 of EBITDA now, but obviously our original investment was 40 and that's kind of how we look at it and so too we tend to be a little bit more active in sort of I would say the conical syndicated market, but more so like <unk>.

Grades of stress, where we're looking at acquiring assets off of bank balance sheets, and things like that and those would tend to skew higher EBITDA, but that is more of an opportunistic.

Purchasing as opposed to as Ted said kind of the core of our franchise.

Right Okay.

Less less the topic.

Edward Joseph Goldthorpe: Last topic, you know; I like slide 14, it's always, I mean. It's good to kind of see the history of how you've marched through acquiring assets, and you know the industry kind of has a mixed bag of outcomes with regard to acquiring portfolios of loans from other managers. And I mean, what can you kind of say about how your realizations or even what it used to be, kind of ongoing wind-downs have been relative to your expectations? And when we look at the larger amounts that are still held, are you getting to a point where the proportion of difficult loans and conditions is higher now because the end of the portfolio is harder to wind down, or do you think that the progress is going to be relatively linear?

I like slide 14, it's always.

I mean, it's just good to see the history of high March through acquiring assets in the industry kind of has a.

A mixed bag of of outcomes with regard to acquiring.

Portfolios of loans from from other managers.

And.

I mean, we can kind of say about how.

Your realizations or even what it used to kind of ongoing wind downs have been relative to your expectations.

When we look at the larger amounts that are still.

Still held are you getting to a point where.

The proportion of difficult loans and conditions is higher now because the end of the portfolio is higher is harder to wind down or do you think that the progress is going to be relatively linear.

I think the latter it's a great question actually I mean, the reality is if you look at that slide 14, I mean, the <unk> portfolio are basically out of.

Edward Joseph Goldthorpe: The reality is, if you look at slide 14, the Oakhill portfolio we're basically out of, Harvest for less than $10 million of exposure, and it's not on here because that's like the original platform was KCAP, and we're down to a very small number in KCAP too. So really, the legacy loans relate to garrison. A number of those loans are more challenging than not, but most of them are lower yielding.

Harvest for less than $10 million of exposure and we don't it's not unheard because thats like the original platform as cap and we're down to a very small number and kick up too. So really the legacy loans relate to garrison a number of those loans.

Were more challenged than not but most of them are lower yielding and so.

Edward Joseph Goldthorpe: So Garrison had an on-balance sheet CLO structure. Those are the types of loans. Those lower-interest spreading loans tend to be the ones that get refinanced later.

Garrison had an on balance sheet CLO structure. So those are the types of loans those lower spread loans tend to be the ones that got refinance later.

Edward Joseph Goldthorpe: That being said, we closed the Garrison transaction at the end of 2020, so we're three and a half years into that portfolio. So a lot of those legacy loans are coming up on maturities and other things. One suggestion that a very smart shareholder said to us yesterday is we may want to break out of that 69 percent how much we've extended because, again, we tend to be, in the Garrison portfolio specifically, we tend to be a small player, so we usually take the realization that there have been some instances of us extending because we like the credit and we could get more spread So we should break that out for people around Pearl Active Extensions versus what else is in the pipeline.

That being said we closed the garrison transaction.

'twenty, so we're three and a half years into that portfolio. So a lot of those legacy loans are coming up on maturities and and other things one suggestion that a very smart shareholders said to us yesterday as we may want to break out of that 69, how much we've extended because again, we tend to be in the garrison portfolio, specifically, we tend to be a <unk>.

All player. So we usually take the realization there has been some instances of us extending because we like the credit and we could get more spread.

So we should break that out for people around proactive extensions versus what else is in the portfolio.

Edward Joseph Goldthorpe: And then we should also break out for you guys what's the low yielding as a percentage of the remaining 69%. But to answer your last question, we think it's going to continue to be linear because a lot of these are coming up on, you know, two years or, you know, 18 months from their maturity date. Okay, yeah, that's very helpful.

And then we should also breakout for you guys, what what's like low yielding as a percentage of the remaining $69 million.

But yes to answer your last answer your very last question. We continue we think it's going to continue to be linear because a lot of these are coming up on two years or.

18 months from the mature today.

Okay. Yeah, that's very helpful I think that.

Operator: I think that you probably have one of the best, if not the best, perspective on taking over portfolios and working them out. And you've had a lot of success in recycling this capital and seemingly not come across any big surprises about the downsides of what you're doing. So it's helpful to have some granularity on how that's actually unfolded and what's left. So I appreciate that. Yeah, it's good.

You probably have the one of the best if not the best perspective on and take care of our portfolios and working them out than <unk> had.

A lot of success in recycling this capital in.

Seemingly not not come across.

Big surprises to the downside and what Youre doing so it's helpful to have some granularity on.

Operator: It's good feedback. That's good feedback. We got some similar feedback from somebody yesterday, and I think it's good. Okay, thank you very much, and Jeff Sessions.

How that's actually unfolded and what's left so I appreciate that Martin that's good. It's good feedback that's good feedback we got so we get similar feedback from somebody yesterday and I think it's good feedback.

Operator: Thank you. Thank you. The next question comes from the line of PPAC Sarpangal with Repertoire Partners.

Okay. Thank you very much.

Dave.

Next question comes from the line of Deepak <unk> repertoire partners. Your line is open.

Edward Joseph Goldthorpe: Thank you. Hey Ted, Patrick, and team. Yeah, it seemed like more further progress, on both the portfolio management side in terms of improvements in leverage and portfolio quality. And, and also definitely on the capital allocation side. I know you've been buying back shares for a few years now, but... You know, but kind of seems to be increasing the size of that as well, given the accretion that it's creating a few questions on each of those one on the buybacks and capital allocation. I know that you've been pretty consistent in repurchasing shares and You've talked about seeing your stock as undervalued, but you've also talked about the environment increasingly becoming a pretty attractive place to invest. What do you think about that?

Thank you, Hey, Ted Patrick and team.

Another solid.

Yes, it seemed like more further progress.

On both the portfolio management side.

Terms of improvements in leverage and portfolio quality.

And and.

And also definitely in the capital allocation side I know you've been buying back shares for a few years now but.

But it seems to be increasing in.

In size of that as well given the accretion that is creating.

A few questions on each of those one.

On the <unk>.

On the buybacks and capital allocation.

I know that you've been pretty consistent repurchasing shares and.

You've talked about senior stock is undervalued, but you've also talked about the environment increasingly becoming a pretty attractive place to invest.

How do you think about.

Edward Joseph Goldthorpe: you know, balancing those two alternatives and where to deploy your capital, especially because it looked like, maybe in the previous year, you leaned into some of the weakness in the credit market and, appropriately so, you know, had a lot more deployments than repayments on a net basis. And then I think also, similarly now, as there's a little bit of an improvement, you've seen more repayments or paydowns. But maybe, one, if you could talk, because I know it looks like some of the newer investments are yielding, and others, on the portfolio management side, It seemed like we don't have the full details, obviously, in terms of gross versus net by industry, but it seemed like we don' There was either an exit or reduction in some of the areas that are probably those that you viewed as less attractive, whether it's automotive, consumer, or energy. I know you already have pretty low exposures there.

Balancing those two alternatives and where to deploy our capital, especially because it look like.

Maybe in the previous year, you leaned into some of the weakness in the credit market and.

Appropriately so had a lot more deployments than repayments on.

On a net basis and and then I think also similarly now.

As there was a little bit of an improvement you've seen now more repayments through pay downs.

But maybe if you could talk because they knew it looks like some of the newer investments are yielding.

Quite a high number upfront and other good terms.

I was kind of like the first question just on the capital allocation side and then.

On the portfolio management side.

It seemed like we don't have the details obviously in terms of gross versus net by industry, but.

It seemed like.

There was either an exit.

Or reduction in some of the areas that are probably those that you viewed as less attractive.

Whether it's automotive consumer energy I know you already have pretty low exposures there but.

Can you talk about if there's anything that we can see in that data.

Edward Joseph Goldthorpe: Can you talk about if there's anything that we can't see in that data, you know, in terms of industry breakdown? And then finally, it looked like there were some interesting new investments that I was just curious to learn more about. In particular, I think the newer ones were Murray.

In terms of industry breakdown.

And then finally it looked like there were some interesting new investments just curious to learn more about.

In particular, I think the newer ones where Murray.

Edward Joseph Goldthorpe: Cinemedia Holdings and Tactical Air Systems, and then I think there were some follow-on investments, Metal Works and I. We'd love to hear more about that. Why don't I start, and Patrick can chime in as well.

Cinema Media media Cc Media holdings and tactical Air systems.

And then I think there were some follow on investments Metalworks and.

Of the Holdco.

Love to hear more about those.

Thank you.

Yes.

Why don't I start and Patrick can chew.

Chime in as well.

Edward Joseph Goldthorpe: I mean, the new investments that we're doing were, like, incredibly attractive. And you can see it, you know, we've picked up on a, like, a portfolio basis, 75 basis points of incremental spread over even just two quarters, and then obviously silver's higher. You know, the post-regional banking crisis, the, there was just no one lending last year.

The new investments that we're doing we're like are incredibly attractive and you can see it we've picked up on a like a portfolio basis 75 basis points of incremental spread over even just two quarters and then obviously silvers higher.

The post regional banking crisis.

Theres just no one lending last year and so we were able to do really low levered widespread deals. So we're really excited about that vintage.

Edward Joseph Goldthorpe: So, we were able to do really low-levered, wide-spreading deals, so we're really excited about that vintage. I would tell you that it's gotten more competitive, so like, you know, spreads have definitely come down year-to-date, starting in about February, particularly on generic sponsor, is supply the band. There's just not that many good LBOs out there.

I would tell you that it's got more competitive so like spreads have definitely come down year to date started in about February.

Particularly on generic sponsor finance is supply demand theres, just not that many good <unk> out there.

Edward Joseph Goldthorpe: So our new investments, we're very excited about. On the exit side, yeah, you brought that up. I mean, we had a...

Our new investments were very excited about on.

On the exit side you brought it up I mean, we had a.

Stressed auto supplier that we picked up in one of our acquisitions that we were taken out of this quarter and I would tell you we're very excited to be taken out.

Edward Joseph Goldthorpe: This was a forest auto supplier that we picked up in one of our acquisitions that we were taken out of this quarter. And I would tell you we were very excited to be taken out in many different ways. So that was good and, away from that, I think a lot of the Exit Activity was a relatively normal course. The auto supplier, in particular, was something we were very excited to not have in our portfolio anymore. And then on capital allocation, I would say, you know, like this last year was the first year that I've run a BDC ever, where for the first time ever, the math made more sense for us to deploy capital than to buy back stock. But I think our philosophy is that we should always buy back stock, particularly when we're trading below NAV, because we believe that NAV is always right. And we think, you know, you heard Patrick's comments.

And many different ways.

And so it's that.

It was good in the away from that I think a lot of the exit activity was relatively normal course, but yeah. The auto supplier in particular it was <unk>.

Something we're very excited.

To not have in our portfolio anymore.

And then on capital allocation I would say.

Like this last year was the first year that I've run a BDC ever where it made for the first time ever the math made more sense for us to deploy capital than to buy back stock but.

But I think our philosophy is we should always be buyback stock, particularly when we're trading below NAV.

Because we believe that NAV is NAV and we think you heard Patrick's comments. We think there is like you know 10 plus percent NAV upside in just things maturing at par.

Edward Joseph Goldthorpe: We think there's like, you know, 10 plus percent NAV upside in just things maturing apart. So we just think it's a good discipline to always be buyback stock, regardless of what the math says. But the math, for the first time, and basically for a long, long time, would support new deployment as well as buyback stock.

So we just think it's good discipline to always be buy back stock regardless of what the math says, but the math for the first time in basically in a long long time.

I would support actually new deployment as well as buy back stock. So as you said, we've increased our buyback program, but we're also finding really good things to invest our money in.

Edward Joseph Goldthorpe: So, you know, as you said, we've increased our buyback program, but we're also, you know, finding really good things to invest in. Yeah, and Deepak, taking some of your portfolio questions, so I'll hit a couple of them and apologize if I don't get all of them since you listed a couple of issues. You can't remember them all, but starting at the end, Albie Holbkow, that was actually a restructuring of a position we had in Lucky Bucks. The company emerged from bankruptcy, and we received debt and equity as part of a take- Northeast Metalworks, I think, dates back to Q2. It was a legacy Harvest Capital HCAP portfolio.

And Deepak taken some of your portfolio of questions.

So oh I'll hit a couple of them and I apologize if I don't get all of them since you've said a couple of ships cant Kevin Ken as I remember them, all but starting at the end all be holdco that was.

It's actually a restructuring of our of our position we had in Lucky box the company emerged from bankruptcy and we received.

Debt and equity as part of as part of it take back. So that's just kind of a restructuring in the quarter.

Northeast metal works.

I think it dates back to Q2 it was a legacy.

Harvest capital H cap portfolio.

Patrick Schafer: We actually did a refinancing with the company where we brought in another lender, reduced our exposure, and sort of put in place a new facility. So that's really just kind of like a, again, I'd call it a refinancing, but shows up as different securities because we kind of brought in another person and reduced exposure there. Now, on to your three new borrowers.

We actually did a refinancing with the company, where we brought in another lender reduced our exposure.

Put in place a new facility. So that's really just kind of like a.

Again, I would call it a refinancing but shows up as different securities because we brought.

Brought in another another person and reduce exposure there.

Onto your three new borrowers again, just to give you kind of a bit of a flavor.

Patrick Schafer: Again, just to give you kind of a bit of a flavor, Tactical Air is a defense business. They have two main segments. One part of the business is they actually work with the Air Force and the Navy to retrofit older airplanes with their weapon systems and cockpit technology and things like that. So that's one part of the business. And they're kind of one of the only folks that do that. And then the other part of their business is they actually, I forget the technical name of the segment, but they do what's called the red team. So they actually, their team, they have pilots and airplanes, and they actually kind of train and help with training exercises for the Navy and the Air Force, essentially acting as sort of the quote-unquote enemy combatants for training simulations.

Tactical error.

It's a defense business they have two main.

Segments.

One is they actually work with the Air Force and the Navy to retrofit kind of older.

Older airplanes with their like weapons systems, and and and cockpit cockpit technology and things like that so that's one part of the business and then and they are kind of one of the only only folks that do that and then the other part of their business as they actually I forget the name of the name of the SEC.

<unk>, but they do what's called like the Red teams so they actually.

Their team they have pilots in engine and airplanes and they actually kind of train and help help with training exercises for the Navy and the air force them essentially acting as sort of the clinical enemy combatants for for kind of kind of training simulation. So pretty good defensive business secured by you know pretty stable contra.

Patrick Schafer: So pretty good defensive business, secured by pretty stable contracts. We really like that business, Moray, and we did a first-in-term loan there.

<unk>, we really like that business more and we did our first lien term loan there.

Patrick Schafer: Murray Global Corporation. It actually provides, it's a tech-enabled business that provides things like legal solutions and consulting services. So a lot of what they do is around software implementation and ongoing maintenance for Fortune 500 companies within their kind of compliance and legal departments to help manage various different work streams between general legal paperwork as well as litigation, lawsuits, and discovery. And again, it's a fairly large gamut of things that they support Fortune 500 companies with. That particular transaction, we actually, it was, the company was making an acquisition in a different jurisdiction, and we structured a first lien loan with some warrants attached to it as well, which we think is a pretty attractive overall investment and security. And then Cinemedia, which will be the last one, that was a refinancing of an existing portfolio company of a large European private equity firm.

More Global Corporation.

Actually provides it.

Our tech enabled business that provides like legal solutions and consulting services. So a lot of what they do is around software implementation and ongoing maintenance for a fortune 500 companies within their kind of compliance and legal departments to help manage various different work streams between general legal paperwork as well as <unk>.

Litigation and lawsuits in discovery and again, it's a it's a fairly large gamut of things that they support fortune 500 companies with.

That particular transaction, we actually it was it was the company was making an acquisition in a different jurisdiction and we structured a first lien loan with with some warrants attached to it as well that.

That we think is a pretty attractive overall investments in security and then Senate meeting, which we the last one.

That was a refinancing of an existing portfolio company of a large European private equity firm.

Patrick Schafer: It's a U.S. business, but it's a European private equity firm that owns it. They do a couple of different things around sort of, I'll call it like video services and technology. So part of what they do is they actually have like cards and software that go into set-top boxes for kind of traditional broadcast technology. So you can think mostly of Europe, where you have sort of, you know, Sky TV, SIM cards, and things like that.

It's a U S business, but it's a European private equity firm owns it.

They do a couple of different things around sort of I'll call. It like video services and technologies. So part of what they do is they actually.

They have like.

Is there like cards and software that go into set top boxes for four kind of traditional broadcast technology. So you can think mostly in kind of Europe, where you have sort of sky TV Sim cards and things like that that's a piece of their business. They also do they work with content providers.

Patrick Schafer: That's a piece of their business. They also do, they work with content providers to help them deliver their video and streams sort of between, you know, call it like Netflix and sort of, you know, the internet provider who's sort of, you know, piping it into your homes. And then lastly, they also work with video streaming in a different area, but they help with ad targeting, content performance within applications and apps, and sort of broadband management, broadband device management, and things like that.

To help them deliver their video and streams.

Between call it like a Netflix and and sort of you know the the internet provider who's who's sort of piping into your homes and then lastly, they actually they also work with with video streaming a different area, but they help with AD targeting content performance within applications and apps.

And sort of you know broadband management your broadband device management and things like that so it's a it's a fairly.

Patrick Schafer: So it's a fairly... a fairly diverse set of revenue streams. Again, we're a senior secured first lien loan, and again, I think that's priced at $775 for $96. So again, that's just kind of a flavor of that. And if you just kind of think about that, you know, at a higher level, we've got a defense business and two business services that we're kind of adding, which we feel like are pretty attractive industries. And then Ted already alluded to it, but Exe did a, you know, an automotive supplier, which we would have no intention of, you know, getting back into that.

Fairly diverse set of revenue streams again, whereas senior secured first lien loan.

It's priced at 775 at 96, five so again, that's just kind of a flavor of that and if you just kind of think about that.

At a high level, we've got a defense business to business services that we're kind of adding which we feel like a pretty attractive industries.

And then Ted already alluded to it but exited a automotive.

Supplier, which.

We would have no intention of.

Getting back into into that industry.

Edward Joseph Goldthorpe: That all sounds great. Yeah, I certainly recognize that you already have most of your investments in business services, high-tech industries, and healthcare and pharma, but it seems like kind of a continued progression even more along that direction, which is great. And then just a quick follow-up. I don't have the details on the Lucky Bucks thing, but I had read something about how the company was suing or in litigation with the former promoter of that business for a pretty big number.

That all sounds great yeah.

Recognize that you already have most of your investments in business services High Tech industries in health care and pharma, but it seems like kind of a continued progression even more along that direction seems great.

And then just a quick follow up I don't have the details on the Lucky both thing but.

And I had read something about how.

The company was.

Yes. They are suing are in litigation with the former.

Patrick Schafer: Is that something that could be an interesting upside, or is it kind of immaterial given the size of your equity stake? I would not say it's immaterial, but what I would say in general is, look, it's public, so I can talk to some extent about it, but I would say that the facts look pretty persuasive, but you kind of never know when you get involved in litigation. So I would say it feels pretty interesting to us, obviously, to be pursuing this. But I would, again, I would say that that's not kind of really baked into how we think about the equity position there.

Promoter of that business for a pretty big number.

Is that something that could be interesting upside or is it kind of immaterial given the size of your equity.

Stake.

There.

I would not say it's immaterial.

But what I would say in general is.

It's public so I can I can I can I can talk to to some extent on it but.

It's.

I would say that the facts look pretty persuasive.

But you never know when you get involved in litigation, So I would say.

<unk> it feels oh.

Pretty interesting.

To us obviously to be pursuing.

But I would again I would say that that's not really baked into how we think about the equity position there.

Patrick Schafer: So again, you can kind of take that for what it's worth, but if you kind of read through the lawsuit, I'd say the facts are, you know, candidly pretty overwhelming. But having said that, like, you know, legal, I wouldn't want to handicap a legal process, so it's great, keep up the great work, thank you. There are no further questions at this time. Mr. Ted Goldthorpe, I turn the call back over to you. Thank you very much. Thank you all for attending our call. And, as always, please reach out to us with any questions, which we're happy to discuss. We look forward to speaking to you again on our next call, and thank you so much. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

So again, you can kind of take that fluids worth, but if you if you kind of read through to the lawsuit I'd say the facts are.

Pretty pretty overwhelming, but having said that like.

Legal I wouldn't want to handicap, a legal process.

So it's great keep up the great work. Thank you.

Thanks.

There are no further questions at this time.

Mr. Scott Goldfarb I will turn the call back over to you.

Thank you very much.

Thank you all for attending our call and as always please reach out to us with any questions, which we're happy to discuss we look forward to speaking you again on our next call and thank you so much.

Ladies and gentlemen. This concludes today's conference call you may now disconnect.

[music].

Yeah.