Q1 2024 MidCap Financial Investment Corp Earnings Call

Operator: Good morning and welcome to the earnings conference call for the period ended March 31st, 2024, for MidCap Financial Investment Corporation. At this time, all participants have been placed in listen-only mode. The call will be open for a question and answer session following the speaker's prepared remarks. If you would like to ask a question at that time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, press star 2. I will now turn the call over to Elizabeth Besen. Investor Relations Manager for MidCamp Financial Investment Corporation. Please go ahead.

Good morning, and welcome to the earnings Conference call for the period ended March 31st 2024, four mid cap financial investment Corporation.

Speaker Change: At this time, all participants have been placed in listen only mode.

Speaker Change: The call will be opened for a question and answer session. Following the speakers prepared remarks.

Speaker Change: If you would like to ask a question at that time.

Speaker Change: Simply press Star one on your telephone keypad.

Speaker Change: If you would like to withdraw your question.

Speaker Change: Star two.

Speaker Change: I will now turn the call over to Elizabeth Besen.

Elizabeth Besen: Investor Relations manager for mid cap Financial Investment Corporation. Please go ahead.

Elizabeth Besen: Thank you, Operator, and thank you, everyone, for joining us today. Speaking on today's call are Tanner Powell, Chief Executive Officer, Ted McNulty, President, and Greg Hunt, Chief Financial Officer. Howard Widra, Executive Chairman, as well as additional members of the management team, are on the call and available for the Q&A portion of today's call. I'd like to advise everyone that today's call webcasts are being recorded. Please note that they are the property of MidCap Financial Investment Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our press release.

Elizabeth Besen: Thank you operator, and thank you everyone for joining us today speaking on today's call are Ken or Pal, Chief Executive Officer, Ted Mcnulty, President and Greg Hunt Chief Financial Officer, Howard were dry executive chairman as well as additional members of the management team are on the call and available for the Q&A portion of today's call I'd like to advise everyone that today's.

Elizabeth Besen: Webcast are being recorded please note that they are the property of Midcap financial investment Corporation and that any unauthorized broadcast in any form is strictly prohibited.

Elizabeth Besen: Information about the audio replay of this call is available in our press release I'd also like to call your attention to the customary safe Harbor disclosure in our press release regarding forward looking information today's conference call and webcast may include forward looking statements you should refer to our most recent SEC filings. Our most recent filings with the SEC for risks that apply to our business and that may adversely affect any forward.

Elizabeth Besen: I'd also like to call your attention to the Customary Safe Harbor disclosure in our press release regarding forward-looking information. Today's conference call and webcast may include forward-looking statements. You should refer to our most recent SEC filings with the SEC for risks that apply to our business and that may adversely affect any forward-looking statements we make. We do not undertake to update our forward-looking statements or projections unless required by law.

Elizabeth Besen: Looking statements, we make we do not undertake to update our forward looking statements or projections unless required by law to obtain copies of our SEC filings. Please visit either at the Sec's website at Www Dot SEC Gov, or our website at www Dot Midcap financial I see dotcom.

Elizabeth Besen: To obtain copies of our SEC filings, please visit either the SEC's website at www.sec.gov or our website at www.midcapfinancialic.com. I'd also like to remind everyone that we've posted a supplemental financial information package on our website, which contains information about the portfolio, as well as the company's financial performance. Throughout today's call, we will refer to MidCap Financial Investment Corporation as either MFIC or the BDC, and we will use MidCap Financial to refer to the lender headquartered in Bethesda, Maryland. At this time, I'd like to turn the call over to Tanner Powell, MFIC's Chief Executive Officer.

Elizabeth Besen: I'd also like to remind everyone that we've posted a supplemental financial information package on our website, which contains information about the portfolio as well as the company's financial performance.

Elizabeth Besen: Throughout today's call, we will refer to Midcap financial investment Corporation, as either MF IC or the BDC will use midcap financial to refer to the lender headquartered in Bethesda, Maryland at this time I'd like to turn the call over to John or Paul <unk>, Chief Executive Officer. Thank you Elizabeth and thank you everyone for joining today's call I will begin today's.

Tanner Powell: Thank you, Elizabeth, and thank you everyone for joining today's call. I will begin today's call with a summary of our results and will also provide our perspective on the current environment. I will then provide an update on our proposed merger with Apollo Senior Floating Rate Fund, Inc. and Apollo Tactical Income Fund. Ted will then discuss our investment activity and provide an update on the investment portfolio and credit quality. Lastly, Greg will review our financial results in greater detail.

Elizabeth Besen: All with a summary of our results and will also provide our perspective on the current environment. I will then provide an update to our proposed merger with Apollo's senior floating rate Fund, Inc, and Apollo Tactical income Fund Inc.

Elizabeth Besen: Ted will then cover our investment activity and provide an update on the investment portfolio and credit quality Lastly, Greg will review our financial results in greater detail yesterday after market close we reported solid results for the March quarter, which included a slight increase in net asset value per share relatively stable credit performance and continued derisking of the portfolio that.

Tanner Powell: Yesterday after the market closed, we reported solid results for the March quarter, which included a slight increase in net asset value per share, relatively stable credit performance, and continued de-risking of the portfolio. Net investment income per share for the March quarter was 44 cents, which corresponds to an annualized return on equity, or ROE, of 11.4%. Results for the quarter reflect solid recurring interest income from our predominantly floating rate portfolio and strong fee and prepayment income. Gap EPS for the March quarter was $39.

Elizabeth Besen: Investment income per share for the March quarter was 44 cents, which corresponds to an annualized return on equity or Roe of.

Elizabeth Besen: A 11, 4%.

Elizabeth Besen: Results for the quarter reflect solid recurring interest income from our predominantly floating rate portfolio and strong fee and prepayment income GAAP EPS for the March quarter was 39 cents.

Tanner Powell: Similar to last quarter, we continue to improve the risk profile of our portfolio by reducing our exposure to Merck, our aircraft leasing portfolio company, as well as our second lien exposure. At the end of March, corporate lending and other represented 92% of the total portfolio, of which 97% was first lien on a fair value basis, up from 96% in the last quarter. With the repayment of one of our few remaining second lien positions, our second lien and other debt exposure is now only about 0.7% of the total corporate lending portfolio.

Elizabeth Besen: Similar to last quarter, we continue to improve the risk profile of our portfolio by reducing our exposure and marks our aircraft leasing portfolio company as well as our second lien exposure.

Elizabeth Besen: At the end of March corporate lending and other represented 92% of the total portfolio of which 97% was first lien on a fair value basis up from 96% last quarter.

Elizabeth Besen: With the repayment of one of our few remaining second lien positions are second lien and other debt exposure is now only about 7% of the total corporate lending portfolio.

Tanner Powell: We believe MFIC has one of the most senior corporate lending portfolios among BDCs, as evidenced by our weighted average attachment point of essentially zero. We believe we have constructed a corporate lending portfolio that will perform well even during a potential economic downturn. Overall, we feel good about the health and quality of our corporate lending portfolio as our underlying borrowers have largely been able to handle higher borrowing costs. We have not seen any significant signs of credit weakness across the portfolio. We are, of course, closely monitoring our portfolio and mindful of the potential impacts of a higher-for-longer rate environment. I would now like to provide our perspective on the current environment.

Elizabeth Besen: We believe MFC has one of the most senior corporate lending portfolios among bdcs as evidenced by our weighted average attachment point of essentially zero. We believe we have constructed our corporate lending portfolio that will perform well even during a potential economic downturn overall, we feel good about the health and quality of our corporate lending portfolio.

Elizabeth Besen: As our underlying borrowers have largely been able to handle higher borrowing costs.

Elizabeth Besen: We have not seen any significant signs of credit weakness across the portfolio. We are of course closely monitoring our portfolio and mindful of the potential impacts of a higher for longer rate environment I would now like to provide our perspective on the current environment. Despite high interest rates elevated inflation and geopolitical uncertainty U S economy has proven to be resilient.

Tanner Powell: Despite high interest rates, elevated inflation, and geopolitical uncertainty, the U.S. economy has proven to be resilient and continues to display strong growth. At the beginning of 2024, investors expected the Federal Reserve to cut rates multiple times during the year. However, as the quarter progressed, sovereign inflation pushed out the expectation for the start of rate cuts, and the market generally believes that we are in a higher-for-longer scenario. Apollo's chief economist believes that there's a reasonable chance that the Fed may not cut at all in 2024, while the market is currently pricing in only one cut.

Elizabeth Besen: And continues to display strong growth at the beginning of 'twenty 'twenty four investors expect expected the federal reserve to cut rates multiple times during the year. However, as the quarter progressed southern inflation has pushed out the expectation for the start of rate cuts and the market generally believes that we are in are higher for longer scenario apologies.

Elizabeth Besen: Economists believes that there's a reasonable chance that the fed may not cut at all in 2024, while the market is currently pricing in only one cut this year.

Tanner Powell: Specific to the lending market, during the first quarter, there was an increase in activity in the syndicated loan market. MFIC is focused on the middle market, which is less susceptible to competition from the syndicated loan market. Although spreads in our market have decreased, the decline has been less than what we've observed in liquid loan markets. The spreads in our market are still healthy by historical standards, and we continue to believe risk-return in the middle market remains compelling. In our market today, a typical deal would price with a spread of around $500 to $550 basis points.

Elizabeth Besen: Specific to the lending market during the first quarter. There has been an increase in activity in the syndicated loan market M. S. C is focused on the middle market, which is less susceptible to competition from the syndicated loan market, although spreads in our market have decreased the decline has been less than what we've observed in liquid loan Mark <unk>.

Elizabeth Besen: Spreads in our market are still healthy by historical standards and we continue to believe risk return in the middle market remains compelling.

Elizabeth Besen: In our in our market today, a typical deal with price with a spread of around 500 to 550 basis points as you know and if I see are squarely focused on the core middle market mid cap financial which was founded in 2009 has a long track record, which includes closing on approximately 114 billion of lending commitment.

Tanner Powell: As you know, MFIC is squarely focused on the core middle market; mid cap financial, which was founded in 2009, has a long track record that includes closing on approximately $114 billion of lending commitments since 2013. This origination track record provides us with a very large data set of middle market company financial information across all industries, and we believe it makes MidCap Financial one of the most informed and experienced middle market lenders in the market.

Elizabeth Besen: Since 2013.

Elizabeth Besen: Origination track record provides us with a very large data set of middle market company financial information across all industries, and we believe makes midcap financial one of the most informed an experienced middle market lenders in the market Apollo's affiliation with mid cap financial is a significant competitive advantage vantage for EM, if I see in short we believe.

Tanner Powell: Apollo's affiliation with MidCap Financial is a significant competitive advantage for MFIC. In short, we believe the core middle market offers attractive investment opportunities across cycles and does not compete directly with either the broadly syndicated loan market or the high yield, Next, let's turn to the dividend.

Elizabeth Besen: The core middle market offers attractive investment opportunities across cycles, and does not compete directly with either the broadly syndicated loan market or the high yield market.

Tanner Powell: Our approach to dividends seeks to provide shareholders with an attractive current yield while also retaining some earnings for NAV stability and growth. To that end, our Board of Directors declared a dividend of $0.38 per share, consistent with our prior quarter dividend, to shareholders of record as of June 11, 2024, payable on June 27, 2024. A $0.38 dividend represents an annualized yield of approximately 9.9% based on NAV per share as of March 31. Our dividend continues to be well covered by net investment income.

Elizabeth Besen: Next let's turn to the dividend approach to dividend seeks to provide shareholders with an attractive current yield while also retaining some earnings for NAV stability and growth to that end our board of directors declared a dividend up <unk> 38 per share consistent with our prior year prior quarter dividend to shareholders of record as of June 11th 2024.

Elizabeth Besen: Payable on June 27, 2024, 30, eights and dividend represents an annualized yield of approximately nine 9% based on NAV per share as of March 31st our dividend continues to be well covered by net investment income.

Tanner Powell: Before handing the call over to Ted, I would like to provide a brief update on MFIC's proposed mergers with AFT and AIF. We remain excited about these proposed mergers, and we believe that their consummation, which is subject to receipt of certain stockholder approvals and satisfaction of other customary closing conditions, will be approved by the end of the year, will create a stronger combined company. We look forward to realizing the potential benefits of a larger combined company, including enhanced returns for all stockholders, greater scale, and enhanced portfolio diversification after closing.

Speaker Change: For handling the call over to Chad I would like to provide a brief update on M. S. Ics proposed mergers with a F G and H I F. We remain excited about these proposed mergers and we believe that their consummation, which is subject to receipt of certain stockholder approvals and satisfactory.

Speaker Change: Other customary closing conditions will create a stronger combined company.

Speaker Change: We look forward to realizing the potential benefits of a larger combined company, including enhanced returns for all stockholders greater scale and enhanced portfolio diversification after close.

Tanner Powell: As a reminder, if one or both of these mergers close, MFIC will pay a one-time cash dividend of $0.20 per share to all stockholders following the closing. The exact record date for this dividend will be determined by MFIC's Board of Directors based on the timing of the closing. We filed a definitive joint... proxy statement slash prospectus related to the mergers on April 4th, and the special meetings for the stockholders of all three funds to vote on the merger proposals have been scheduled for May. We have officially commenced the proxy solicitation process related to these proposals, and we kindly request that any stockholders of MFIC, AFT, or AIF who have not yet cast their votes on these proposals do so in the coming With that, I will turn the call over to you.

Speaker Change: As a reminder, if one or both of these mergers closing if I see we'll pay a one time cash dividend of <unk> 20 per share to all stockholders. Following the closing of the exact record date for this dividend will be determined by M. S. Ice's board of directors based on the timing of the closing.

Speaker Change: We filed a definitive joint.

Speaker Change: Proxy statement slash prospectus related to the mergers on April 4th and the special meetings for the stockholders of all three funds to vote on the merger proposals had been scheduled for May 28.

Speaker Change: Officially commenced the proxy solicitation process related to these proposals and we kindly request that any stockholders of M. S. I C. A F T. Our Aif, who have not yet cast their votes on these proposals do so in the coming days. Please note that we will not be able to answer any questions related to the current vote count on today's call.

Speaker Change: I will turn the call over to Ted.

Ted McNulty: Thank you, Tanner. Good morning, everyone. Beginning with investment activity, As a reminder, MFIC is focused on investing in loans sourced by MidCap Financial, which provides MFIC with a large pipeline of investment opportunities. MidCap Financial is a leading middle market lender with one of the largest direct lending teams in the U.S., with close to 200 investment professionals. On last quarter's call, we mentioned we were seeing a noticeable pickup in pipeline activity.

Ted McNulty: Thank you Tanner and good morning, everyone, beginning with investment activity.

Ted McNulty: As a reminder, M. F. T is focused on investing in loans sourced by Midcap financial which provides <unk> with a large pipeline of investment opportunities midcap financials, a leading middle market lender with one of the largest direct lending teams in the U S with close to 200 investment professionals on last quarters call. We mentioned, we were seeing a noticeable pickup in pipeline activity.

Ted McNulty: We're pleased to report that this has led to a strong level of closings during the March... Midcap Financial was active during the March quarter, closing approximately $5.1 billion in new commitments, an increase of approximately 31% from the December quarter. During the March quarter, MFIC's new investment commitments totaled $149 million of new first lien commitments across 16 different borrowers for an average new commitment of $9.3 million as we continue to focus on diversification by borrower.

Ted McNulty: We're pleased to report that this has led to a strong level of closings during the March quarter Midcap financial was active during the March quarter closing approximately $5 1 billion in new commitments, an increase of approximately 31% from the December quarter.

Ted McNulty: During the March quarter M. S. Ice's, new investment commitments totaled $149 million of new first lien commitments across 16 different borrowers for an average new commitment of $9 3 million as we continue to focus on diversification by borrower 30.

Ted McNulty: <unk> 38 per cent of new commitments were made to existing portfolio companies. Although we are seeing some pricing compression in the market the weighted average spread of our new commitments in the quarter was relatively unchanged at 624 basis points, one basis point lower than commitments made during the December quarter. The weighted average OID for new commitments was approximately 211.

Ted McNulty: 38% of new commitments were made to existing portfolio companies. Although we are seeing some pricing compression in the market, the weighted average spread of our new commitments in the quarter was relatively unchanged at 624 basis points, one basis point lower than commitments made during the December quarter. The weighted average OID for new commitments was approximately 211 basis points. This spread in OID translates into a very attractive unlevered asset yield of around 12%. Assuming a 5% base rate, the weighted average net leverage of new commitments was 3.9 times. We believe the risk return on these new commitments is very compelling.

Ted McNulty: One basis points this spread in OID translates into a very attractive levered asset yield of around 12%.

Ted McNulty: Assuming a 5% base rate the weighted average net leverage of new commitments was three nine times, we believe the risk return on these new commitments is very compelling our pipeline of investment opportunities remains strong.

Ted McNulty: Our pipeline of investment opportunities remains strong. In terms of funded investment activity, gross fundings for the corporate lending portfolio, excluding revolvers, totaled $129 million. Sales and repayments totaled $95 million. Net corporate lending revolver paydowns were $14 million, and we received a $4 million paydown from Merck. In aggregate, net fundings for the quarter totaled $16 million.

Ted McNulty: In terms of funded investment activity gross fundings for the corporate lending portfolio, excluding revolvers totaled 129 million sales and repayments totaled $95 million net corporate lending revolver Paydowns were $14 million and we received a $4 million paydown for merck's in aggregate net fundings for the quarter totaled $16 million.

Ted McNulty: Our portfolio turnover continues to drive a positive shift in the composition of our portfolio. Sales and repayments included the exit of a $15 million second lien position, which reduced our already low second lien and other debt exposure by half to just $13.8 million, or 0.7% of the total corporate lending portfolio at fair value. We believe this negligible amount of non-first lien exposure highlights the very senior nature of our corporate lending portfolio.

Ted McNulty: Our portfolio turnover continues to drive a positive shift in the composition of our portfolio sales and repayments included the exit of a $15 million second lien position, which reduced our already low second lien and other debt exposure by half to just $13 8 million or 0.7% of the total corporate lending portfolio at fair value.

Ted McNulty: We believe this negligible amount of non first lien exposure highlights the very senior nature of our corporate lending portfolio.

Ted McNulty: Turning to our investment portfolio, we have built a well-diversified senior corporate lending business. At the end of March, our portfolio had a fair value of $2.35 billion and was invested in 154 companies across 23 different industries. Corporate lending and other represented approximately 92% of the total portfolio, and Merck's accounted for 8% of the total portfolio on a fair value basis. The average funded corporate lending position was $14.6 million, or approximately 0.7% of the total corporate and other lending portfolio. 97% of our corporate lending portfolio was first lien, up from 96% last quarter. And over 99% of our corporate lending debt portfolio, on a cost basis, had one or more financial covenants.

Ted McNulty: Turning to our investment portfolio, we built a well diversified senior corporate lending book at the end of March our portfolio had a fair value of $2 35 billion and was invested in 154 companies across 23 different industries corporate lending and other represented approximately 92% of the total portfolio and Merck.

Ted McNulty: <unk> accounted for 8% of the total portfolio on a fair value basis. The average funded corporate lending position was $14 6 million or approximately 0.7% the total corporate and other lending portfolio, 97% of our corporate lending portfolio is first lien up from 96% last quarter and over 99% of our corporate <unk>.

Ted McNulty: Lending that portfolio on a cost basis at one or more financial covenants and 88% of our corporate lending portfolio is backed by financial sponsors, who we know well and with whom mid cap financial has long standing relationships.

Ted McNulty: And 88% of our corporate lending portfolio is backed by financial sponsors who we know well and with whom MidCap Financial has longstanding relationships. In a higher-for-longer interest rate environment, our portfolio companies continue to exhibit strong fundamental performance and meet our expectations. On a median basis for the quarter, portfolio company revenue and EBITDA both increased by mid-single digits year over year. The growth in revenue is attributable to organic expansion, while improvements in margins are due to borrowers optimizing their cost structures.

Ted McNulty: Despite the higher for longer interest rate environment, our portfolio of companies continue to exhibit strong fundamental performance and meet our expectations on a median basis for the quarter portfolio company revenue and EBITDA, both increased by mid single digits year over year. The growth in revenue was attributable to organic expansion while improvements in <unk>.

Ted McNulty: Margins are due to borrowers optimizing their cost structures. We believe the sustained positive improvement is an encouraging indicator of the portfolio's underlying strength.

Ted McNulty: We believe the sustained positive improvement is an encouraging indicator of the portfolio's underlying strength. The weighted average yield at cost of our corporate lending portfolio was 12.1% on average for the March quarter, down slightly from 12.2% in the December quarter. At the end of March, the weighted average spread on the corporate lending portfolio was 621 basis points, down 2 basis points compared to the end of December. Turning to credit quality, our focus on true first lien, top of the capital structure, middle market loans has resulted in what we consider to be strong and resilient credit. Given the second lien repayment I mentioned.

Ted McNulty: The weighted average yield at cost of our corporate lending portfolio was 12, 1% on average for the March quarter down slightly from 12, 2% in the December quarter at the end of March the weighted average spread on the corporate lending portfolio was 621 basis points down two basis points compared to the end of December.

Ted McNulty: Turning to credit quality, our focus on true first lien top of the capital structure Middle market loans has resulted in what we consider to be strong and resilient credit metrics given the second lien repayment I mentioned the weighted average attachment point for our corporate lending portfolio was essentially zero or to be more precise 0.04 times.

Ted McNulty: The weighted average attachment point for our corporate lending portfolio is essentially zero, or to be more precise, 0.04 times. This metric means that there is no senior debt to our position, illustrating that our corporate lending portfolio is indeed first. We believe it is key to look at this metric as not all debt labeled first lien is actually at the top of the capital structure, as its name would suggest. At the end of March, the weighted average net leverage of our corporate lending portfolio was 5.36 times, up from 5.27 times last quarter. Moving to interest coverage, the weighted average interest coverage ratio remained unchanged at 1.9 times, with four companies below one times.

Ted McNulty: This metric means that theres, no senior debt to our positions illustrating that our corporate lending portfolio is indeed first lien. We believe it is key to look at this metric is not all that labeled first lien is actually top of the capital structure as its name would suggest at the end of March the weighted average net leverage of our corporate lending portfolio was 5.36 times.

Ted McNulty: Up from five to seven times last quarter.

Ted McNulty: Moving to interest coverage the weighted average interest coverage ratio remained at one nine times unchanged with four companies below one times. We're closely monitoring these situations and believe they are manageable as the companies have strong current liquidity good underlying business performance or how strong financial sponsor support.

Ted McNulty: We're closely monitoring these situations and believe they are manageable as the companies have strong current liquidity, good underlying business performance, or have strong financial sponsor support. The median EBITDA of MFIC's corporate lending portfolio was approximately $47,000. We have not seen a meaningful increase in covenant breaches or a pickup in amendment activity.

Ted McNulty: The median EBITDA of M. S ICD corporate lending portfolio was approximately $47 million.

Ted McNulty: We have not seen a meaningful increase in covenant breaches or a pickup in amendment activity. We believe our credit quality has benefited from midcap financials strong sourcing and underwriting capabilities. Our underwriting on mid cap source loans has proved to be sound based on data since mid 2016, which is the approximate date upon which we began Utah.

Ted McNulty: We believe our credit quality has benefited from MidCap Financial's strong sourcing and underwriting capabilities. Our underwriting on MidCap-sourced loans has proved to be sound. Based on data since mid-2016, which is the approximate date upon which we began utilizing our co-investment order, our annualized net realized and unrealized loss rate is around two basis points on loans sourced by MidCap Financial. We think this performance data shows how well the strategy is performing

Ted McNulty: <unk>, our co investment order, our annualized net realized and unrealized loss rate is around two basis points on loan sourced by mid cap financial we think this performance data shows how well the strategy has performed.

Ted McNulty: Although we added our $12 million investment in Naviga to non-accrual status during the quarter, investments on non-accrual remain very low, totaling $14.4 million, or 0.6% of the total portfolio, at fair value, across three nations. Naviga is currently in a sales process, and initial bids are reflected in our mark.

Ted McNulty: Though we added our $12 million investment in the V go to nonaccrual status during the quarter investment on investments on non accrual remained very low totaling $14 4 million or 0.6% of the total portfolio at fair value across three names and if he is currently in a sales process on initial bids are reflected in our mark we.

Ted McNulty: We believe these stable credit metrics reflect the way in which we have constructed our portfolio and are the direct result of our focus on sourcing assets from mid-capital, one of the leading middle market lenders. Importantly, MFIC benefits from MidCap Financial's large dedicated portfolio management team of over 60 investment professionals, which helps identify and address issues early. It is also important to note that MidCap Financial leads and serves as an administrative agent on the vast majority of our deals, which provides meaningful downside protection. As an agent, we're in active dialogue with the borrower and have enhanced information flow, which allows us to be proactive in resolving problem credit.

Ted McNulty: We believe these stable credit metrics reflect the way in which we have constructed our portfolio and is the direct result of focus on sourcing assets from mid cap financial one of the leading middle market lenders importantly M. S. ICD benefits from Midcap financials large dedicated portfolio management team of over 60 investment professionals, which helps identify and address issues.

Ted McNulty: Early it is also important to note the mid cap financial leads and serves as administrative agent on the vast majority of our deals which provides meaningful downside protection as agent, where an accident active dialogue with the borrower and have enhanced information flow, which allows us to be proactive in resolving problem credits.

Ted McNulty: Moving on to Merck. As discussed previously, we are focused on reducing our investment in our aircraft leasing and servicing business. While we don't expect paydowns to occur evenly, we believe aircraft sales and servicing income should allow for the paydown of third-party debt and MFIC's investment in Merck over time. As of March 31, our investment in Merck totaled approximately $190 million, representing approximately 8% of the total portfolio at fair value. During the March quarter, Merck paid MFIC approximately $5.9 million, which included $1.9 million of interest and a $4 million return of capital. With that, I will now turn the call over to Greg to discuss.

Ted McNulty: Moving onto Merck's as discussed previously we are focused on reducing our investment in our aircraft leasing and servicing businesses. While we don't expect paydowns to occur evenly we believe aircraft sales and servicing income should allow for the pay down of third party debt and <unk> investment in merck's overtime as of March 31, our investment in <unk>.

Greg: Mark's totaled approximately $190 million, representing approximately 8% of the total portfolio at fair value.

Greg: During the March quarter, Merck's paid M. F. I see approximately $5 9 million, which included $1 9 million of interest and a $4 million return of capital.

Ted McNulty: With that I will now turn the call over to Greg to discuss our financial results in detail.

Gregory William Hunt: Thank you, Ted, and good morning, everyone. Beginning with our financial results, net investment income per share for the March quarter was $0.44, which reflects solid occurring interest as well as strong fee and prepayment. For the quarter, prepayment income was $2.2 million, and fee income was $1.7 million. Pick income remains very low, representing approximately 3% of the total investment income for the quarter.

Greg: Thank you Ted and good morning, everyone.

Gregory William Hunt: With our financial results net investment income per share for the March quarter was 44 cents, which reflects solid recurring interest income as well as strong fee and prepayment income for.

Gregory William Hunt: For the quarter prepayment income was $2 2 million in fee income was $1 7 million Pik income remains very low representing approximately 3% of the total investment income for the quarter GAAP net income per share for the quarter was 39, which reflects a five cent loss on the debt on our investment portfolio.

Gregory William Hunt: Gap net income per share for the quarter was $0.39, which reflects a $0.05 loss on our investment portfolio. Results for the quarter correspond to an annualized return on equity based on net investment income of 11.4%, and an annualized ROE based on net income of 10.1%. MFIC's NAV per share at the end of March was $15.42, up one cent, over the prior quarter, which reflects net investment income of $0.44, which is $0.06 above the $0.38 distribution, and a $0.05 per share loss on the portfolio. As Ted mentioned, the vast majority of our corporate lending portfolio continues to have strong fundamental performance.

Gregory William Hunt: Results for the quarter correspond to an annualized return on equity based on net investment income of 11, 4%.

Gregory William Hunt: On an annualized ROE based on net income of 10, 1%.

Gregory William Hunt: <unk> NAV per share at the end of March was $15 42 up one.

Gregory William Hunt:

Gregory William Hunt: Okay.

Gregory William Hunt: Prior quarter, which reflects net investment income of 44 cents, which is <unk> 38 cents distribution and a <unk> <unk> per share loss on the portfolio as Ted mentioned, the vast majority of our corporate lending portfolio continues to have strong fundamental performance.

Gregory William Hunt: Additional details on the change in unrealized gains and losses by strategy are shown on slide 17 in the Erring Supplement Deck. Net Inspect Expenses for the quarter were $39.8 million, down $2.4 million compared to the prior quarter, primarily due to lower general administrative expenses as well as lower interest expense and lower incentives. We recruited a diminished amount of excise tax in March compared to approximately 1.1 million in the December quarter. The weighted average interest rate on our debt for the quarter was 7.09%, up from 6.94% last quarter, which reflects a full quarter impact of the CLO notes and the baby bonds, which both closed during the December quarter.

Gregory William Hunt: Additional details on the change in unrealized gains and losses by strategy are shown on slide 17 in the earnings supplement deck net <unk> expenses for the quarter.

Gregory William Hunt: With $39 8 million down $2 4 million compared to the prior quarter, primarily due to lower general and administrative expenses as well as lower interest expense and lower incentive fees.

Gregory William Hunt: Recruited diminishment diminish amount of excise tax in March compared to approximately $1 $1 million in the December quarter. The.

Gregory William Hunt: A weighted average interest rate on our debt for the quarter was 7.09% up from 694% last quarter, which reflects a full quarter impact of the CLO notes and the baby bonds, which both closed during December.

Gregory William Hunt: As stated on last quarter's call, we intend to continue to evaluate and monitor capital raising transactions. Management fees totaled $4.4 million for this March quarter, essentially flat compared to the prior quarter. As a reminder, MFIC's base management fee was reduced to 1.75% on equity beginning January 1st, 2023, and it is one of the only listed BDCs. We charge management fees on equity, which we believe provides greater alignment and focus on net asset value.

Gregory William Hunt: As stated on last quarter's call, we intend to evaluate and monitor capital raising transactions going forward.

Gregory William Hunt: Management fees totaled $4 4 million for the March quarter, essentially flat compared to the prior quarter. As a reminder, <unk> base management fee was reduced to 175% on equity beginning January one 2023 and is one of the only listed Bdcs.

Gregory William Hunt: Charge management fees on equity, which we believe provides greater alignment and focus on net asset value.

Gregory William Hunt: Incentive fees totaled $6 million for the March quarter, as a reminder, our incentive fee.

Gregory William Hunt: On income is 17, 5% and includes a total return hurdle.

Gregory William Hunt: <unk> quarter look back.

Gregory William Hunt: Our current estimate of undistributed taxable income or spillover income at the end of 2023 with.

Gregory William Hunt: With $67 $3 million or $1 <unk> per share.

Gregory William Hunt: Moving to our balance sheet MSI season, net leverage was 135 times at the end of March compared to 134 times at the end of December reflecting 17 million of net fundings during the quarter. This concludes our prepared remarks operator, please open the call to questions.

Gregory William Hunt: Incentive fees totaled $6 million for the March quarter. As a reminder, our incentive fee on income is 17.5% and includes a total return hurdle with a 12-quarter look. Our current estimate of undistributable taxable income or spillover income at the end of 2023 was $67.3 million, or $1.03 per share. Moving to our balance sheet, MFIC's net leverage was 1.35 times at the end of March compared to 1.34 times at the end of December, reflecting $17 million of net funding during the quarter. This concludes our prepared remarks. Operator, please open the call to questions.

Operator: The floor is now open for questions. If you would like to ask a question at this time, please press star 1 on your telephone keypad. Again, you may remove yourself at any time by pressing star 2. Once again, to ask a question, please press star 1. Our first question will come from Mark Hughes on Truist. Please go ahead.

Gregory William Hunt: The floor is now opened for questions.

Gregory William Hunt: Would like to ask a question at this time. Please press star one on your telephone keypad.

Operator: Again, you may remove yourself at anytime by pressing star two.

Operator: Once again to ask a question please press star one.

Operator: Our first question will come from Mark Hughes with Truest. Please go ahead.

Mark Douglas Hughes: Yeah, thank you. Good morning.

Mark Douglas Hughes: Yes. Thank you good morning.

Howard T. Widra: I've seen much in the way of competitive moves, say, given the broadly syndicated market, a little more activity there, you've seen some lenders dip down more into the middle market and impacting spreads. And maybe, along with that, I think you talked about a 500 to 550 basis point spread today. Has that been relatively stable lately, or has it been fluctuating through the quarter? How would you say it is? you know, kind of the trend.

Mark Douglas Hughes: Seen much in the way of competitive moves to say given the broadly syndicated market the little more activity there you've seen some lenders get down more into the middle market and impacting spreads.

Howard T. Widra: Maybe along with that I think you talked about 500 to 550 basis point spread today is that does that been relatively stable lately or has that been moving through the quarter. How would you say it is.

Ted McNulty: Tanner, I'll comment on that; this is Howard. Not so immediately, and that's really because, obviously, you may see large sponsors that are covered and doing larger deals occasionally dip down in the middle market, but in order to cover the middle market, you need to have a comprehensive coverage effort and continuity in the market with a lot of those sponsors. And so you just don't see the capability of the people who are focused on the larger market competing directly, probably syndicated, with the capabilities to sort of just step into that market holistically.

Howard T. Widra: You know kind of a transaction.

Howard T. Widra: Ken Let me I'll comment on that as Howard.

Ted McNulty: The.

Ted McNulty: Not not so immediately and that's really because you know.

Ted McNulty: Obviously, you you may see large sponsors that are covered by <unk> and doing larger deals occasionally get down on the middle market, but in order to cover the middle market you need to have a comprehensive coverage effort.

Ted McNulty: Which is you know and continuity in the market with a lot of those sponsors.

Ted McNulty: And so you just don't see the capability of the people who are focused on on the larger market competing directly probably syndicated with the capabilities to sort of step into that market.

Ted McNulty: Holistically.

Ted McNulty: It doesn't mean it doesn't happen on occasional deals. I mean, as a separate matter, there's capital being created in the middle market all the time, and then those teams may or may not have comprehensive coverage as well. So there is definitely competition that's causing compression, but it's not really the result of the broadly syndicated market. The middle market is, one of the strengths of it, is being sort of insulated from that variation.

Speaker Change: Doesn't mean, it doesn't happen on occasional appeals I mean as a separate matter there's capital being created in the middle market all the time.

Ted McNulty: You know and then either.

Ted McNulty: Those teams may or may not have comprehensive coverage as well. So so there is definitely competition thats, causing compression, but it's not really the result of the broadly syndicated market.

Speaker Change: All right.

Ted McNulty: Middle market is one of the strengths of it as being sort of insulated from that goes with that.

Ted McNulty: That variation.

Ted McNulty: And then any comment on the trajectory of spread.

Ted McNulty: This year, if you think about where they were in January to where we are today.

Howard T. Widra: Yeah, I'm happy to take that. So, yeah, Mark, I would call your attention to the fact that deals are between $500 and $550. And in the quarter, we actually executed at 624. And that has to do with what we talk about a lot. There's a gestation period for deals getting done, and that reflects a lot of sale processes that have been initiated last year. And so, you know, so that's a pretty significant tightening that we see.

Speaker Change: I would say yeah, let me take that so yeah, Mark I would I would call your attention to we alluded to the fact that deals are between 500 and 550 and in the quarter, we actually executed at six 624.

Howard T. Widra: And that has to do with what we talked about a lot. There's a gestation period for deals getting done and that reflects a lot of sale processes that have been commenced last year and so you know so that that's a pretty significant tightening in that that we see what we are seeing is some.

Howard T. Widra: What we are seeing is some modicum of stability at this juncture, you know, post-December where conditions improved and you saw some of the spread tightening and rally in markets more broadly. Those sale processes are hitting, and we're now at a point where we're able to create new credit assets, and our pipelines are very full. So I would say, you know, certainly my initial comment there reflects the tightening overall that we've seen in the middle market, but we are seeing some stability now that sale processes have had an opportunity to run their course and the opportunity for new credit asset creation.

Howard T. Widra: Some modicum of stability as at this juncture post December.

Howard T. Widra: Sure.

Howard T. Widra: Conditions improved in and you saw some of the spread tightening.

Howard T. Widra: In rally in markets more broadly.

Howard T. Widra: Those sale processes are hitting are now.

Howard T. Widra: At a point, where there were able to create new credit assets and our pipelines are are are very full so I would say certainly that my my my initial comment there reflects the tightening oh overall that we've seen are in and in the middle market, but steenson stability now that.

Howard T. Widra: Sale prices have had an opportunity to run their course, and and and the opportunity for new credit asset creation.

Mark Douglas Hughes: Yeah, thank you for that. One more question. You probably have addressed this, but I wonder if you could update us on the kind of seniority profile you certainly emphasize the focus on First Lean. Once you do the merger with the other Apollo funds, how will that look, roughly speaking?

Speaker Change: Yes, thank you for that one more in.

Mark Douglas Hughes: You probably have addressed this but I wonder if you could update us on the kind of the seniority profile you've certainly emphasized.

Mark Douglas Hughes: Focus on first lien once you do the merger with the other Apollo funds, how would that look roughly speaking.

Howard T. Widra: It will look similarly. Those funds, which are obviously publicly available, have some more broadly syndicated type loans, but predominantly first lien. And then, Mark, as we've talked about, both in our prepared remarks in the filings, as well as also in our investor decks, that the intention is obviously, over time, as those loans mature, or we can sell them out of them, to obviously reposition them into our core strategy of mid-cap loans, you know, first lien floating rate loans that are sourced by the mid-capital.

Speaker Change: Yeah. It will it will it will look similarly, those funds are.

Howard T. Widra: Which is obviously publicly available have have some more.

Howard T. Widra: Broadly syndicated type loans, but predominantly.

Howard T. Widra: First lien and then mark as we've talked about.

Howard T. Widra: Yeah, both in our prepared remarks and in our filings as well as also on our investor decks that the the intention is obviously over time is as those are loans mature or are we can we can sell out of them to obviously reposition them into our core strategy of mid cap law.

Howard T. Widra: Loans first.

Howard T. Widra: First lien floating rate loans that we source for their source by that the midcap platform.

Howard T. Widra: Yes.

Speaker Change: Thank you very much.

Kyle Joseph: Thank you. Our next question will come from Kyle Joseph with Jeffries. Please go ahead.

Howard T. Widra: Thank you. Our next question will come from Kyle Joseph with Jefferies. Please go ahead.

Kyle Joseph: Yeah, great. Thanks for taking my questions. And sorry if I missed this, Joe; I'm still running. But did you give a sense for proforma leverage or ballpark?

Kyle Joseph: Yeah, great. Thanks for taking my questions and sorry, if I missed this teledyne Ryan this morning.

Kyle Joseph: But did you get a sensor pro forma leverage or ballpark area.

Kyle Joseph: Merger.

Howard T. Widra: It will be somewhere around, you know, between 1.15 and 1.30. I'm 0.2 times levered.

Kyle Joseph: It will be somewhere around.

Kyle Joseph: On between 115 and one.

Howard T. Widra: On 0.2 times Levered.

Howard T. Widra: Okay, got it. Helpful. And a good segue to my next question. You know, over the last couple of years, you guys have been focused on reducing core and lowering all leverage. And now, especially with the merger, are we kind of at the point where you can think about more transitioning to kind of the offensive side, if that's fair to ask?

Howard T. Widra: Okay got it helpful and gets segue M&A.

Howard T. Widra: Over the last couple of years, you guys have had a focus on reducing core end and lowering our leverage and now, especially with the merger. We can add that at the point, where you can think about more transitioning to kind of the authentic side is that fair to ask.

Howard T. Widra: Okay.

Howard T. Widra: So Kyle, I mean certainly we're really excited by the prospect, should it, should we be successful, of having an opportunity to deploy even more capital. Yeah, I wouldn't attach an offensive or defensive valence to it, per se, because, you know, our strategy, since we got the ability to go up in leverage, has been 100% focused on sourcing, or sorry, participating in, or investing in loans that are originated at mid-cap.

Speaker Change: So Kyle I mean, certainly we're really excited by the prospect should it should we be successful of having an opportunity to.

Howard T. Widra: Did you play even more capital yeah, I wouldn't attach the offensive and defensive Valens to it per se because you know our strategy.

Howard T. Widra: Since we got the ability to go up in leverage has been 100% focused on on sourcing sorry participating in or investing in loans that are originated at mid cap and so are our approach doesn't change I think this is just a very elegant opportunity.

Howard T. Widra: And so our approach doesn't change. I think this is just a very elegant opportunity to do even more of it and to, you know, kind of create an even bigger percentage of the portfolio with those mid-cap source loans.

Howard T. Widra: Could you even more of it and to.

Howard T. Widra: Kind of create that.

Howard T. Widra: An even bigger percentage of the portfolio with those tap source loans.

Gregory William Hunt: Got it. Very helpful. And then one follow-up question for me, probably Greg, on rates. I'm not going to ask you to predict where rates are going to go, but just how you think about the right side of the balance sheet in the mix between floating rate and fixed rate liabilities.

Kyle Joseph: Got it very helpful. And then one follow up for me probably Greg.

Gregory William Hunt: That's where we are on rates I'm not going to ask you to predict where rates are going to go but just how youre thinking about the right side of the balance sheet and the mix between a floating.

Kyle Joseph: And that's it for me. Thanks, guys.

Gregory William Hunt: Floating rate and fixed rate liabilities and that's it for me thanks guys.

Gregory William Hunt: Okay, I mean, from our point of view, we do have on. You know, our $350 million 10-year note coming due in March of 2025, which is a fixed rate. I do think, you know, we did our baby bond, which was a fixed rate, and we didn't swap it because we have a two-year call option on it. I do think that as we go out, we'll match our liabilities with our assets.

Speaker Change: Okay, I mean, I think that from our point of view, we do have.

Gregory William Hunt: <unk>.

Gregory William Hunt: Our $350 million 10 year note coming due in March of 25.

Gregory William Hunt: Which is fixed rate.

Gregory William Hunt: I do think we did our baby bond.

Gregory William Hunt: Which was fixed rate and we didn't.

Gregory William Hunt: Didn't swap it because we have a two year call option on it.

Gregory William Hunt: I do think that as we go out we will match our.

Gregory William Hunt: Liabilities for their assets.

Kyle Joseph: Great. Thanks for taking my question.

Speaker Change: Great. Thanks for taking my question.

Operator: As a reminder, if you would like to ask a question, please press star 1 at this time. Our next question will come from... Apologies. Our next question will come from Robert Dodd with Raymond James. Please go ahead.

Kyle Joseph: As a reminder, if you would like to ask a question. Please press star one at this time.

Robert James Dodd: Our next question will come from.

Operator: Yes.

Operator: Apologies. Our next question will come from Robert Dodd with Raymond James. Please go ahead.

Robert James Dodd: This morning, Credit quality obviously looks really good, right? Picks are not going up, loans are getting paid down, etc. Have you seen or heard any initial increased discussion from sponsors? I mean, it was five months ago; it looks like there were going to be six cuts, and sponsors could afford to sit on their hands, so to speak, and wait, maybe for interest coverage. And I think the possibility of no cuts, but, you know, the curve is saying one, that the high interest costs are gonna live longer in the portfolio.

Robert James Dodd: Good morning, all.

Robert James Dodd: Credit quality, obviously looks really picks up going up no one's getting paid down et cetera have you seen any.

Robert James Dodd: Any.

Robert James Dodd: Initial increased discussion from sponsors I mean, it was yes.

Robert James Dodd: Five months ago, it looks like they were going to be six sponsors.

Robert James Dodd: Could afford to sit on Manhattan, so to speak.

Robert James Dodd: And when maybe interest coverage.

Robert James Dodd: It's still above one but.

Robert James Dodd: Moving Mike might resolve itself.

Robert James Dodd: But with the.

Robert James Dodd: Possibility of no cuts, but cause same one.

Robert James Dodd: The high.

Robert James Dodd: High interest costs.

Robert James Dodd: Loans in the portfolio.

Robert James Dodd: So has there been any change in... What sponsors are doing proactively? You said there was no increase in amendment requests yet. Are there any preliminary discussions there? Or any color you can give on what the outlook is given, it looks like rates are going to stay extremely high for quite a long, long time.

Robert James Dodd: And any change in.

Robert James Dodd: What sponsors are doing proactively.

Robert James Dodd: We see an amendment request yet is there any preliminary discussion is there any color you can give on what the outlook is given it looks like rates are going to stay extremely high for quite a long way at this point.

Ted McNulty: Yeah, yeah, happy to take that. So, there's a couple things going on. One, you know, in the kind of, I would say, economic environment over the last few years, the sponsors and the companies have focused on, you know, really becoming more efficient so that, you know, they could prepare for, you know, a longer-term hold if necessary. And then, as you alluded to, when there was a view that there were going to be, you know, five rate cuts, people got excited about doing M&A So, with the process of rate cuts going away, I think we can at least kind of fall back from a, you know, fundamental performance standpoint that the companies are doing well.

Speaker Change: Yeah, Yeah happy to take that so.

Ted McNulty: There's a couple of things going on one you know over the.

Ted McNulty: Kind of I would say.

Ted McNulty: Economic environment over the last few years, the sponsors and the companies are focused on.

Ted McNulty: Really becoming more efficient so that they could prepare for a longer term hold if necessary.

Ted McNulty: And as you alluded to when there was a view that they're going to be five rate cuts people got excited about doing M&A.

Ted McNulty: So with the prospect of rates cuts going away I think we can at least kind of fall back from a fundamental performance standpoint that the companies are doing well and then secondly.

Ted McNulty: And then, secondly, if you think about the technical aspects of the private equity market, you still have a lot of dry powder that needs to be put to work. You still have a number of sponsors that need to return capital in order to be able to raise their next fund. So, that's going to drive transactions. And, you know, there's going to be a period of time, like any time that there is volatility in rate expectations or market valuations, for the bid-ask to come together.

Ted McNulty: If you think about the technicals of the private equity market you still have a lot of dry powder that needs to be put to work are you still have a number of sponsors that need to return capital in order to be able to raise their next fund so that's going to drive.

Ted McNulty: That's going to drive transactions and there's going to be a period of time like anytime that there is volatility in rate.

Ted McNulty: Mutations or market valuations for the bid asked to come together and so I think that's happening and then that that'll take a little bit of time to play out and then the third thing that we're seeing.

Ted McNulty: And so I think that's what's happening. And then, you know, that'll take a little bit of time to play out. And then the third thing that we're seeing, you know, is more and more continuation vehicles where sponsors, you know, have companies within their funds, and they need to hold on to those longer to really realize the multiples that they're looking for. And then, I guess, finally, the last thing I would say is that in terms of discussions with sponsors about other alternatives, you know, there are some early conversations around extensions and repricings, where they're coming back and saying, you know, we thought we were going to monetize this year, but we're going to look to next year. You know, they're not at the point in their fund where they need to do a continuation vehicle, And so, you know, there are very constructive discussions around the lending groups, extending the maturity, and addressing the overall structure. So, I would say those are kind of the four dynamics at play.

Ted McNulty: As more and more continuation vehicles where sponsors.

Ted McNulty: Have companies within their funds and they need you.

Ted McNulty: Hold on to those longer to really realize the.

Ted McNulty: The multiples that they're looking for and then I guess finally.

Ted McNulty: <unk>.

Ted McNulty: The last thing I would say is that in terms of discussions with sponsors about other alternatives. You know there are some early conversations around extensions and re pricings, where theyre coming back and saying you know we.

Ted McNulty: We thought we were going to monetize this year, but it is we're going to look to next year theyre not at the point in their fund where they need to do a continuation vehicle or they don't feel the pressure to return capital and so are very constructive discussions around.

Ted McNulty: The lending groups, extending the maturity and addressing the overall structure. So.

Ted McNulty: I would say those are kind of the four dynamics at play.

Ted McNulty: Really helpful, thank you. I mean, a quick follow-up to that one. Does a continuation vehicle constitute a change in control and a mandatory refinancing? I mean, does that get you refinanced out, or is it automatic that you get ported across to the new vehicle with the existing load?

Speaker Change: Really helpful. Thank you I mean quick follow up to that one.

Ted McNulty: Yes, a continuation with vehicle constitute a change in control and the mandatory refinancing I mean does that that you would finance that with automatics that you get ported across the EU vehicle with the existing loan.

Ted McNulty: Yeah, so it is typical that that would be a change of control, but it's also typical in the direct lending space that you don't just show up one day at your desk and get a notice that it's going to happen, right? There's an ongoing dialogue about what the strategy is, what the financing is going to be, and, you know, there's some visibility around. The sponsor will come and say, hey, do you want to support this going forward, and sometimes we say yes, and sometimes we say no, at which point they launch a financing process that aligns with their continuation vehicle.

Speaker Change: Yes. So it is typical that that would be a change of control.

Ted McNulty: But it's also typical in the direct lending space that you don't just show up one day at your desk and get a notice that it is going to happen right.

Ted McNulty: Ongoing dialogue about what the strategy is what the financing is going to be.

Ted McNulty: And you know there is some visibility around.

Ted McNulty: You know the sponsor will call them and say Hey, do you want to support us going forward, but sometimes we say, yes, and sometimes we say no at which point they loss of financing process that aligns with their continuation vehicles.

Robert James Dodd: Got it. Thank you. And then one more question, if I can. If, hypothetically, the mergers close sometime in the not-too-distant future, has there been any change in the competitive environment out there, BSLs, etc., has that changed your plan about how fast you would churn the assets within those acquired vehicles if they were to be sold? Bye.

Speaker Change: Got it. Thank you and then one more if I can if hypothetically if needed.

Robert James Dodd: The merger's close sometime in the not too distant future.

Robert James Dodd: The.

Robert James Dodd: Something of a change in the competitive environment <unk> has that changed your plan about how fast you would.

Robert James Dodd: Churn the assets within those acquired vehicles, if they were to close.

Robert James Dodd: Okay.

Ted McNulty: Thanks, Robert. I think... I would say... No, I think that you should rely on us or expect us to always be evaluating risk-reward in the context of the market environment and what makes sense. And then furthermore, as we are faced with, as we think about investing, we're always cognizant of vintage and wanting to do things with a measured approach. And that would be the same if, hypothetically, these were to close.

Speaker Change: Thanks, Robert I think.

Speaker Change: I would say no.

Ted McNulty: No I think that you should rely on us or expect us to always be evaluating risk reward in the context of the market environment and what makes sense.

Ted McNulty: And then Furthermore.

Ted McNulty: As you know faced with you know as we as we think about investing we're always cognizant of vintage and wanting to do things with a measured measure measured approach and that would be the same if hypothetically these were to close and so.

Ted McNulty: And so if we were confronting an environment such as what we do today, we would be evaluating the market in a similar fashion and evaluating risk-reward. And our intention has always been to not take outsized exposure to any one particular vintage and would expect to conduct ourselves in a similar manner should the emergency arise.

Ted McNulty: If we are confronting in environment, such as what we do today, we would be evaluating the market in a similar fashion and evaluating risk reward in and our intention would what has always been did not take outsized exposure to any one particular vintage.

Ted McNulty: And I would expect to conduct ourselves in a similar manner should should the margins be be successful.

Speaker Change: Got it thank you.

Operator: Thank you. We have no further questions at this time. I would like to turn the call back to management for closing remarks.

Speaker Change: Thank you we show no further questions at this time I would like to turn the call back to management for closing remarks.

Tanner Powell: Thank you, Operator. Thank you, everyone, for listening to today's call. On behalf of the entire team, we thank you for your time today. Please feel free to reach out to us with any other questions, and have a good day.

Speaker Change: Thank you operator, thank you everyone for listening to today's call on behalf of the entire team. We thank you for your time today, please feel free to reach out to us with any other questions and have a good day.

Operator: This does conclude today's call. We thank you for your participation. You may disconnect your line at this time and have a wonderful day.

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Speaker Change: This does conclude today's call. Thank you for your participation you may disconnect. Your line at this time and have a wonderful day.

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