Q1 2024 Carlyle Secured Lending Inc Earnings Call
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Operator: Thank you for standing by, and welcome to the Carlyle Secured Lending First Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again
Thank you for standing by and welcome to the Carlisle secured lending first quarter 2024 earnings call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you'll need to press star one on your telephone if your question has been.
Operator: I answered that you'd like to remove yourself from the queue simply press star One again as a reminder, today's program is being recorded.
Daniel Hahn: As a reminder, today's program is being recorded. And to introduce your host for today's program, Mr. Daniel Hahn, shareholder relations. Please go ahead, sir.
Operator: And to introduce your host for today's program Mr. Daniel Hot shareholder Relations. Please go ahead Sir.
Daniel Hahn: Good morning, and welcome to Carlisle Secured Lending's first quarter of 2024. With me on the call this morning is Justin Plouffe, our Chief Executive Officer, and Tom Hennigan, our Chief Financial Officer. Last night, we followed our Form 10-Q and issued a press release with a presentation of our results, which are available on the Investor Relations section of our website. Following our remarks today, we'll hold a question and answer session for analysts and institutional investors. This call is being webcast, and a replay will be available on our website.
Daniel Hahn: Good morning, and welcome to Carlisle secured lending first quarter 2024 earnings call.
Daniel Hahn: With me on the call. This morning is Justin <unk>, our Chief Executive Officer, and Tom Hennigan, Our Chief Financial Officer.
Daniel Hahn: Last night, we filed our Form 10-Q and issued a press release with the presentation of our results, which are available on the Investor Relations section of our website.
Daniel Hahn: Following our remarks today, we will hold a question and answer session for analysts and institutional investors.
Daniel Hahn: This call is being webcast and a replay will be available on our website.
Daniel Hahn: Any forward-looking statements made today do not guarantee future performance, and any undue reliance should not be placed on them. These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the risk factors section of our annual report on Form 10-K. These risks and uncertainties could cause actual results to differ materially from those indicated.
Daniel Hahn: Any forward looking statements made today do not guarantee future performance and any undue reliance should not be placed on them.
Daniel Hahn: These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the risk factors section of our annual report on Form 10-K.
Daniel Hahn: These risks and uncertainties could cause actual results to differ materially from those indicated Carlyle secured lending assumes no obligation to update any forward looking statements at any time with that I will turn the call over to Justin.
Daniel Hahn: Karloff Secured Lending assumes no obligation to update any forward-looking statement at any time. With that, I'll turn the call over to Justin. Thanks, Dan. Good morning, everyone.
Justin V. Plouffe: And thank you all for joining us. I'm Justin Plouffe, the CEO of the Carlyle BDCs and Deputy Chief Investment Officer of Carlyle's Global Credit Platform. As you may know, Arren LeeKong, who was previously CEO of the Carlisle BDCs, resigned to pursue new opportunities professionally. We have benefited from his industry expertise and leadership and thank him for his contribution. For those of you on the line that I've not spoken with before, I've been part of Carlyle's global credit team since 2007.
Daniel Hahn: Thanks, Dan Good morning, everyone and thank you all for joining I'm Justin plot, the CEO of the Carlyle Bdcs and Deputy Chief investment Officer of Carlyle Global credit platform. As you May know <unk> was previously CEO of the Carlyle.
Justin V. Plouffe: <unk> resigned to pursue new opportunities professionally we have benefited from aaron's industry expertise and leadership and thank him for his contributions to <unk>.
Justin V. Plouffe: Those of you on the line that I have not spoken with before I've been part of Carlyle Global credit team since 2007, besides focusing more broadly on managing growth and credit strategies at Carlisle I've also been a member of Carlyle's private credit investment Committee.
Justin V. Plouffe: Besides focusing more broadly on managing growth and credit strategies at Carlyle, I've also been a member of Carlyle's private credit investment committee since its inception. I look forward to taking on responsibility for the direct lending strategy, and I'll be working very closely with existing leadership, most notably Tom Hennigan and Mike Hadley. I worked with Tom and Mike for over 12 years at Carlyle, and I'm excited to continue our partnership in support of Carlyle Secured Lending and the broader Carlyle Direct Lending platform. And with that said, I'll focus my remarks today on three topics.
Justin V. Plouffe: Inception, I look forward to taking on responsibility for the direct lending strategy and I'll be working very closely with existing leadership, most notably Tom Hennigan.
Justin V. Plouffe: And Mike Hadley.
Justin V. Plouffe: Thank you, Tom and Mike for over 12 years at Carlisle and I'm excited to continue our partnership and support of Carlisle secured lending in the broader Carlyle direct lending platform.
Justin V. Plouffe: And without that I'll focus my remarks today on three topics first I will provide an overview of the first quarter 2024 financial results next I'll touch on the current market environment and finally, I'll conclude with a few comments on the quarter's investment activity and portfolio positioning.
Justin V. Plouffe: First, I'll provide an overview of the first quarter 2024 financial results. Next, I'll touch on the current market environment. And finally, I'll conclude with a few comments on the quarter's investment activity and portfolio position. Starting off with earnings, we continue to see our financial performance benefit from a higher base rate environment. In the 1st quarter, we generated net investment income of $0.54 per share, which represents an annualized yield of nearly 13% based on our 331 NAFTA.
Justin V. Plouffe: Starting off with earnings we continue to see our financial performance benefit from higher base rate environment in the first quarter. We generated net investment income of 54 per share, which represents an annualized yield of nearly 13% based on our $3 31 now.
Justin V. Plouffe: Board of directors declared a total second quarter dividend of <unk> 47 per share consisting of our base dividend of <unk> 40.
Justin V. Plouffe: Plus the seven supplemental.
Justin V. Plouffe: Our net asset value as of March 31 was $17 seven per share up eight or.
Justin V. Plouffe: Approximately 5% from the December 31st period, primarily as a result of our Q1 earnings outpacing our dividend.
Justin V. Plouffe: Our Board of Directors declared a total second quarter dividend of $0.47 per share, consisting of our base dividend of $0.40 plus the $0.07 supplement. Our net asset value as of March 31st was $17.07 per share, up $0.08, or approximately 0.5% from the December 31st period, primarily as a result of our Q1 earnings outpacing our given, Turning now to the market environment. Activity picked up in the first quarter of 2024 as the reopening of the syndicated loan market and tighter terms drove overall refinancing activity and the rebalancing of private and public credit markets.
Justin V. Plouffe: Turning now to the market environment activity picked up in the first quarter of 2020 for the reopening of the syndicated loan market and tighter terms drove overall refinancing activity and rebalancing of private and public credit markets. LBO activity has picked up in 2024 and the broader M&A market is expected to become more active in the.
Justin V. Plouffe: LBO activity picked up in 2024, and the broader M&A market is expected to become more active in the second half of the year, which we expect to result in an uptick in origination. While we do not try to predict interest rates, our chief economist at Carlyle, Jason Thomas, is one of the few that saw significant rate cuts as improbable back in November of 2023.
Justin V. Plouffe: Half of the year, which we expect to result in an uptick in origination volume.
Justin V. Plouffe: While we do not try to predict interest rates, our chief economist at Carlisle, Jason Thomas is one of the few that saw significant rate cut as improbable back in November of 2023 now that the market consensus is caught up with them. We are pleased to report that despite interest rate stabilizing at higher than expected level Carlile portfolio company data continues to.
Justin V. Plouffe: Now that the market consensus has caught up with him, we are pleased to report that despite interest rates stabilizing at higher than expected levels, Carlyle Portfolio Company data continues to show the real economy holding up well. Although we've seen pricing pressure increase, particularly in the U.S. upper middle market, the core middle market, where we operate, continues to be comparatively less volatile. Originations in the first quarter were up over 30% year over year, and our pipeline continues to expand with both regular way and differentiated deals.
Justin V. Plouffe: So the real economy holding up well.
Justin V. Plouffe: Although we've seen pricing pressure increase, particularly in the U S upper middle market, our core middle market, where we operate continues to be comparatively less volatile.
Justin V. Plouffe: Originations in the first quarter were up over 30% year over year and our pipeline continues to expand with both regular way and differentiated deal flow.
Justin V. Plouffe: As a reminder, it has always been our goal to drive performance with a consistent approach to direct lending, anchored in disciplined credit selection and conservative portfolio management. We remain focused on our core middle market strategy and benefit from the differentiation provided by our access to the One Carlisle platform while maintaining our ability to be dynamic in response to market conditions.
Justin V. Plouffe: As a reminder, as it's always been our goal to drive performance with a consistent approach to direct lending anchored and disciplined credit selection and conservative portfolio management.
Justin V. Plouffe: We remain focused on our core middle market strategy and benefit from the differentiation provided by our access to the one carlyle platform, while maintaining our ability to be dynamic in response to market changes.
Justin V. Plouffe: While increasing origination activity is a positive for our strategy, we are most focused on the overall credit performance of our existing portfolio. Non-accrual has improved significantly in the first quarter, and as Tom will discuss in detail later, we completed the recapitalization of dermatology associates and successfully exited direct travel during the first quarter. Our portfolio remains highly diversified and is comprised of 174 investments in 131 companies across more than 25 industries. The median EBITDA across our core portfolio at the end of the quarter was $81 million.
Justin V. Plouffe: While increasing origination activity is a positive for our strategy. We are most focused on the overall credit performance of our existing portfolio non.
Justin V. Plouffe: Non accruals improved significantly in the first quarter and as Tom will discuss in detail later, we completed the recapitalization of dermatology associates and successfully exited direct travel during the first quarter.
Justin V. Plouffe: Our portfolio remains highly diversified and is comprised of 174 investments and 131 companies across more than 25 industries. The median EBITDA across our core portfolio at the end of the quarter with $81 million. The average exposure in any single portfolio company is less than 1% and 95% of our <unk>.
Justin V. Plouffe: The average exposure in any single portfolio company is less than 1 percent, and 95 percent of our investments are in senior secured loans. As always, discipline and consistency drove performance in the first quarter, and we expect these tenets to drive performance in future quarters. I will now hand the call over to our CFO, Tom Hennigan. Thank you, Justin.
Thomas M. Hennigan: Investments are in senior secured loans.
Thomas M. Hennigan: As always disciplined consistency drove performance in the first quarter and we expect these tenants to drive performance in future quarters.
Justin V. Plouffe: I will now hand, the call over to our CFO Tom Hennigan.
Thomas M. Hennigan: Today, I'll begin with a review of our first quarter earnings. Then I'll discuss portfolio performance, and I'll conclude with detail on our balance sheet position. As Justin previewed, we had another strong quarter on the earnings front. Total investment income for the first quarter was $62 million. Down slightly from the prior quarter, as a decrease in prepayment and amendment fees was offset by an increase in OID acceleration, primarily from the successful exit of our investment in direct travel.
Thomas M. Hennigan: Thank you Justin today I'll begin with a review of our first quarter earnings.
Thomas M. Hennigan: Then I'll discuss portfolio performance.
Thomas M. Hennigan: Conclude with detail on our balance sheet positioning.
Thomas M. Hennigan: As Justin previewed we had another strong quarter on the earnings front.
Thomas M. Hennigan: Total investment income for the first quarter was $62 million.
Thomas M. Hennigan: Down slightly from prior quarter as a decrease in prepayment and amendment fees was offset by an increase in OID acceleration.
Thomas M. Hennigan: Primarily from the successful exit of our investment in direct travel.
Thomas M. Hennigan: Total expenses of $34 million were flat versus the prior quarter. Of note. Total interest expense was down modestly as base rates stabilized during the quarter and we had a lower average outstanding debt balance. The result was net investment income for the first quarter of $28 million, or $0.54 per share. And while that's down two cents per share compared to our all-time high from last quarter, it's still well above the prior year comparable period.
Thomas M. Hennigan: Total expenses of $34 million were flat versus prior quarter.
Thomas M. Hennigan: Of note.
Thomas M. Hennigan: Total interest expense was down modestly as base rates stabilized during the quarter and we had a lower average outstanding debt balance.
Thomas M. Hennigan: The result, with net investment income for the first quarter of $28 million or.
Thomas M. Hennigan: <unk> <unk> 54 per share.
Thomas M. Hennigan: I won't that's down <unk> <unk> per share compared to our all time high from last quarter, it's still well above the prior year comparable periods.
Thomas M. Hennigan: Our board of directors declares dividends for the second quarter of 2024 at a total level of 47 cents per share. That's comprised of the $0.40 base dividend plus a $0.07 supplemental dividend. We just paid a dividend of $ 0.05 payable to shareholders of record as of the close of business on June 28. This total dividend level reflects our new variable supplemental dividend policy of paying out at least 50% of excess earnings, which allows us to be flexible as the portfolio evolves and base rates fluctuate.
Thomas M. Hennigan: Our board of directors declared the dividends for the second quarter of 2024 at a total level of 47 per share.
Thomas M. Hennigan: That's comprised of the 40 base dividend plus the <unk> supplemental which.
Thomas M. Hennigan: Which is payable to shareholders of record as of the close of business on June 28.
Thomas M. Hennigan: This total dividend level reflects our new variable supplemental dividend policy of paying out at least 50% of excess earnings which allows us to be flexible as the portfolio evolves and base rates fluctuate.
Thomas M. Hennigan: Our base dividend coverage of 135% for the quarter remains above the BDC peer set average, and we've grown the base dividend by 25% since 2022. At the same time, the total dividend level also represents an attractive yield of nearly 11% based on the recent share price.
Thomas M. Hennigan: Our base dividend coverage of 135% for the quarter remains above the BDC peer set average.
Thomas M. Hennigan: And we've grown the base dividend by 25% since 2022.
Thomas M. Hennigan: At the same time.
Thomas M. Hennigan: Total dividend level also represents an attractive yield of nearly 11% based on the recent share price.
Thomas M. Hennigan: In terms of the forward look for earnings for the rest of 2024, we continue to see support at a 50-cent-per-share level based on the latest interest rate curves and our current conservative positioning on leverage. We've maintained a conservative, disciplined approach that we believe will enable us to continue consistent dividend payouts in a variety of rate environments, including when rates normalize, to remain highly confident in our ability to comfortably meet and exceed our 40-cent-based dividends and continue paying out supplemental dividends each quarter.
Thomas M. Hennigan: In terms of the forward look for earnings for the rest of 2024.
Thomas M. Hennigan: We continue to see support at a <unk> 50 per share level based on our latest interest rate curves and our current conservative positioning on leverage.
Thomas M. Hennigan: We've maintained a conservative disciplined approach that we believe will enable us to continue consistent dividend payouts and a variety of rate environments, including win rates normalize.
Thomas M. Hennigan: So we remain highly confident in our ability to comfortably meet and exceed our 40% base dividend and.
Thomas M. Hennigan: And continue paying out supplemental dividends each quarter.
Thomas M. Hennigan: On valuations, our total aggregate realized and unrealized net gain was about $1 million for the quarter. Supported by Net Positive Movement and Valuation. This increase in valuations, combined with Q1 earnings exceeding the dividend, resulted in an ad increasing from $16.99 to $17.07 per share.
Thomas M. Hennigan: On valuations, our total aggregate realized and unrealized net gain was about $1 million for the quarter.
Thomas M. Hennigan: Ported by net positive movement in valuations.
Thomas M. Hennigan: This increase in valuations combined with Q1 earnings exceeding the dividend resulted in our NAV increased from $16 99 to.
Thomas M. Hennigan: The $17 seven per share.
Thomas M. Hennigan: Turning to credit performance, we continue to see overall stability and credit quality across the portfolio. Similar to last quarter, there were no new non-accruals and no additions to our watch list, which deals with risk ratings four or five. The major headline this quarter is that total non-accruals fell to only 0.2% of total investments at both fair value and amortized costs.
Thomas M. Hennigan: Turning to credit performance, we continue to see overall stability in credit quality across the portfolio.
Thomas M. Hennigan: Similar to last quarter, there were no new non accruals and no additions to our watch list.
Thomas M. Hennigan: Richard deals with risk ratings four or five.
Thomas M. Hennigan: The major headline this quarter as the total non accruals fell to only 2% of total investments at both fair value and amortized cost.
Thomas M. Hennigan: The lowest level since our IPO in 2017. This was aided by the successful recapitalization of dermatology associates in February, which we previewed during last quarter's call. And we also completed the sale and exit of Direct Travel in 2.1.
Thomas M. Hennigan: The lowest level since our IPO in 2017.
Thomas M. Hennigan: This was aided by the successful recapitalization of dermatology associates in February which.
Thomas M. Hennigan: Which we previewed during last quarter's call.
Thomas M. Hennigan: And we also completed the sale and exit of direct travel in Q1 and.
Thomas M. Hennigan: Another successful turnaround story, which came off non-accrual back in mid-2022. We continue to proactively manage the portfolio and are working with sponsors to ensure borrowers have adequate liquidity as we expect rates to remain higher for longer. While we're not immune to credit issues, transactions like DERM and direct travel highlight the capabilities of the broader Carlyle platform to maximize recoveries when challenges arise with portfolio companies. I'll finish by touching on our financing facilities and leverage.
Thomas M. Hennigan: Another successful turnaround story, which came off nonaccrual back in mid 2022.
Thomas M. Hennigan: We continue to proactively manage the portfolio and are working with sponsors to ensure borrowers have adequate liquidity.
Thomas M. Hennigan: We expect rates to remain higher for longer.
Thomas M. Hennigan: While we're not immune to credit issues transactions like Durbin direct travel highlight the capabilities of the broader carlyle platform to maximize recoveries when challenges arise with portfolio companies.
Thomas M. Hennigan: I'll finish by touching on our financing facilities and leverage.
Thomas M. Hennigan: We continue to be well positioned on the right side of our balance. Leverage is down quarter over quarter, and we are intentionally running leverage conservatively at the lower end of our target range to maintain the flexibility to invest in attractive opportunities. Statutory leverage was about 1.13 times.
Thomas M. Hennigan: We continue to be well positioned on the right side of our balance sheet.
Thomas M. Hennigan: Leverages down quarter over quarter.
Thomas M. Hennigan: And we are intentionally running leverage conservatively at the lower end of our target range to maintain the flexibility to invest in attractive opportunities.
Thomas M. Hennigan: Statutory leverage was about one three times.
Thomas M. Hennigan: And net financial leverage, at the end of the quarter, modestly lower at 0.95 times. Dispositioning allows us to remain opportunistic as the macroeconomic environment evolves, and Deal Activity looks to pick up in the second half of 2024. With that, I'll turn the call back over to Justin. Thanks, Tom.
Thomas M. Hennigan: And net financial leverage ended the quarter modestly lower at <unk> 95 times.
Thomas M. Hennigan: This positioning allows us to remain opportunistic as the macroeconomic environment evolves and deal activity looks to pick up in the second half of 2024.
Thomas M. Hennigan: With that I'll turn the call back over to Justin.
Justin V. Plouffe: I would like to finish by highlighting the consistency of our investment approach and to reiterate our overall investment strategy. We're primarily focused on making senior-secured, floating-rate investments to U.S. companies backed by high-quality sponsors, primarily in the core middle market. Market demand for private credit remains high, and we continue to focus on sourcing transactions with significant equity cushions, attractive leverage levels, strong documentation, and attractive spreads relative to the market and historical originations through our disciplined underwriting, prudent portfolio construction, and conservative approach to risk management.
Justin: Thanks, Tom I would like to finish by highlighting the consistency of our investment approach and to reiterate our overall investment strategy. We're primarily focused on making senior secured floating rate investments to U S companies backed by high quality sponsors primarily in the core middle market market demand for private credit remains high and we continue to focus on.
Justin V. Plouffe: Sourcing transactions with significant equity cushions attractive leverage levels strong documentation and attractive spreads relative to the market and historical originations through our disciplined underwriting prudent portfolio construction and conservative approach to risk management.
Justin V. Plouffe: With attractive new originations, a stable portfolio, and reduced non-accruals, we've benefited from the continued execution of our strategy and remain committed to delivering a non-volatile cash flow stream to our investors through consistent income and solid credit performance. I'd like to now hand the call over to the operator to take your questions. Thank you.
Justin V. Plouffe: Attractive new originations, our stable portfolio and reduced non accruals. We benefited from the continued execution of our strategy and remain committed to delivering a non volatile cash flow stream to our investors through consistent income and solid credit performance.
Justin V. Plouffe: Like to now hand, the call over to the operator to take your questions. Thank you.
Operator: Certainly, and as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. And our first question comes from the line of Bryce Rowe from B Riley. Your question, please.
Speaker Change: Certainly and as a reminder, ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone.
Operator: And our first question comes from the line of Bryce Rowe from B Riley Your question. Please.
Bryce Wells Rowe: Hi, good morning. Wanted to maybe start on the comments around kind of market activity and the pickup that we've seen. I think we've certainly heard that from many other market participants. Can you talk about your appetite for taking part? Obviously, the balance sheet is pretty well-positioned with lower balance sheet leverage, and you could certainly step in if you wanted. I just kind of wanted to get a sense for how you're thinking about pricing today versus maybe what's in the portfolio and how you kind of view risk-reward of investments today.
Bryce Wells Rowe: Hi, good morning.
Bryce Wells Rowe: Wanted to maybe start.
Bryce Wells Rowe: On the comments around kind of market activity and the pickup that we've seen I think we've certainly heard that from many other market participants can you talk about.
Bryce Wells Rowe: Your appetite for.
Bryce Wells Rowe: We're kind of taking taking part obviously the balance sheet is pretty well positioned with lower balance sheet leverage and you could certainly step in it.
Bryce Wells Rowe: If you wanted just kind of wanted to get a sense for how you're how you're thinking about pricing today versus maybe what's in what's in the portfolio and how you kind of view risk reward.
Bryce Wells Rowe: Other investments today.
Justin V. Plouffe: Hey, Bryce, this is Justin. Thanks for your question. Yeah, we're active. We're participating.
Bryce Wells Rowe: Hey, Brian This is Justin Thanks for your question, Yes, we're active.
Justin: Active we're participating as you said, we're in a good position to put capital to work.
Justin: And our pipeline is really picking up and we're excited about that.
Justin V. Plouffe: As you said, we're in a good position to put capital to work, and our pipeline is really picking up, and we're excited about that. In terms of pricing, pricing has come in somewhat. There's a lot of activity in the broadly syndicated market that's priced much tighter than our market, but it does kind of come over to us a little bit in the form of tighter pricing. But ultimately, what we want to do is deploy capital through cycles into great companies, and we're going to do that whether or not pricing is as attractive as it was 12 months ago or whether the market has moved slightly tighter as it is today.
Justin: In terms of pricing.
Justin: Pricing has come in somewhat there's a lot of activity in the broadly syndicated market.
Justin V. Plouffe: It's priced much tighter than our market, but it does it does kind of come over to us a little bit in the form of a tighter pricing, but ultimately what we want to do is deploy through cycles integrate companies and we're going to do that.
Justin V. Plouffe: Whether or not pricing is as attractive as it was 12 months ago or whether the market has moved.
Justin V. Plouffe: Tighter as it is today.
Justin V. Plouffe: I mean, to put it in context, right, we're still making first lien senior secured loans at potential returns that historically look like equity-like returns. And anytime you can do that, where you can invest in credit at something that looks historically like equity-like returns, we think that's an attractive environment, and we're going to be very active in this environment.
Justin V. Plouffe: Put it in context, right, we're still making first lien senior secured loans at potential returns that historically.
Justin V. Plouffe: Looked like equity like returns and anytime you can do that where you can invest in credit debt.
Justin V. Plouffe: It's something that looks historically like equity like returns, we think that's attractive environment and we're going to be very active in this environment.
Justin V. Plouffe: Okay, and I think you know over maybe the last few quarters you've tried to take advantage of your incumbency position, mining the portfolio for opportunities within. Is that playing out, or are there still some opportunities within the portfolio as well right now?
Justin V. Plouffe: Okay.
Justin V. Plouffe: I think over maybe the last few quarters.
Justin V. Plouffe: If you tried to take it take advantage of your incumbency position.
Justin V. Plouffe: Mining the portfolio for opportunities within.
Justin V. Plouffe: Is that has that played out or are there still some opportunities.
Justin V. Plouffe: Within the portfolio as well right now.
Justin V. Plouffe: Incumbency is always a very strong factor. I think it's definitely benefited us this past quarter. But I would also say that I think there's more to come. I don't think it's completely played out. And it's also not just incumbency in individual companies but your relationship with that sponsor across the portfolio. We're very, very focused on that. And it hopefully will lead to some great origination opportunities for the rest of the year.
Speaker Change: Incumbency is always a very strong factor I think it's benefited us this past quarter definitely but I would also say that I think theres more to come I don't think it's completely played out.
Justin V. Plouffe: And it's also not just incumbency in <unk>.
Justin V. Plouffe: Individual companies, but your relationship with that sponsor across the portfolio, we're very very focused on that and.
Justin V. Plouffe: Hopefully will lead to some great origination opportunities for the rest of the year.
Bryce Wells Rowe: Okay, great. A couple more for me.
Speaker Change: Okay great.
Justin V. Plouffe: Couple more from me.
Bryce Wells Rowe: You all successfully did a baby bond offering I guess last year.
Bryce Wells Rowe: You all successfully did a baby bond offering, I guess, last year and swapped to a floating rate. You've got some debt that's coming due at the end of this year. Any thoughts around that maturity, especially considering what feels like a pretty open market for, or at least open debt capital markets?
Speaker Change: And and swapped to a floating rate you've got some you've got some debt thats coming due at the end of this year just any thoughts around.
Bryce Wells Rowe: Around that around that maturity, especially considering what what feels like a pretty pretty open market for or at least open capital debt capital markets at this point.
Thomas M. Hennigan: Hey, Bryce. Morning, it's Tom.
Bryce Wells Rowe: Hey, Brian Good morning, its Tom a couple of thoughts.
Bryce: Number one as you noted our bonds mature at the end of this year, we're in active dialogue with our bankers and we've been earmarking a potential index eligible deal later in 2004 early 'twenty five.
Thomas M. Hennigan: A couple thoughts on that. Number one, as you noted, our bonds mature at the end of this year. We're in active dialogue with our bankers, and we've been earmarking a potential index-eligible deal later in 2024 or early 2025. I'll also note our CLO, which is a big part of our capital structure, went out of its reinvestment period at the end of last year. Now, the AAAs are very attractively priced for that vehicle.
Thomas M. Hennigan: Also note, our CLO, which is a big part of our capital structure went out of reinvestment period at the end of last year that the triple A's are very attractively priced on that vehicle. So as those notes amortize out becomes less attractive.
Thomas M. Hennigan: So as those notes amortize, they'll become less attractive. A couple quarters ago, it made sense to continue to keep that structure in place, but now that AAAs have come down materially for the middle market, we're actively looking at resetting that vehicle to position the overall capital structure for the long term. So we anticipate that our two big focus points in 2024 will be a bond deal and then resetting the CLO. Okay.
Thomas M. Hennigan: A couple of quarters ago. It makes sense to continue to keep that structure in place, but now that triple H come down materially for the middle market. We're actively looking at resetting that vehicle to position the overall capital structure for the long term so.
Thomas M. Hennigan: Anticipate that'll be our tubing.
Thomas M. Hennigan: Two big focus points in 'twenty four is a bond deal and then resetting the CLO.
Bryce Wells Rowe: Okay. All right, last one for me.
Speaker Change: Okay. Okay.
Speaker Change: Last one for me.
Bryce Wells Rowe: You've stepped up the dividend here.
Bryce Wells Rowe: And dividend coverage looks quite healthy and I think even based on the asset sensitivity tables.
Bryce Wells Rowe: You know, you've stepped up the dividend here, and dividend coverage looks, you know, quite healthy. I think even, you know, based on the asset sensitivity tables, even in down rate scenarios, you look pretty good, at least from a base dividend perspective. Any thoughts around, you know, continuing to step up the dividend? You know, and it just feels like there's some room for it to move higher, and that's going to look a lot different than most of your BDC peers.
Bryce Wells Rowe: Even in down rate scenarios, you look pretty good at least from a base dividend perspective.
Bryce Wells Rowe: Any thoughts around.
Bryce Wells Rowe: Continuing to step up the dividend.
Bryce Wells Rowe: It just feels like it feels like there is there is some room room for it to move higher and that's going to look a lot different than most of your BDC peers.
Thomas M. Hennigan: You know, on that point, it's something we discuss every quarter. We feel very comfortable at 40 cents at the base. We noted that now we'll call it a variable floating rate on the 50% plus on the supplemental. So something we'll continue to evaluate, but we think, at least for right now, we're certainly in a very comfortable conservative position where we are with the 40 cent base and the 50% plus on the excess. Okay, great. Thanks for your time.
Bryce Wells Rowe: But on that point, it's something we discuss every quarter, we feel very comfortable with the 40.
Thomas M. Hennigan: At the base.
Thomas M. Hennigan: We noted that now we'll call it variable floating rate.
Thomas M. Hennigan: The 50% plus on the supplemental so something we'll continue to value, but we think at least for right now.
Thomas M. Hennigan: We are very comfortable conservative position, where we are with a 40 <unk> base.
Thomas M. Hennigan: The 50% plus on the excess.
Thomas M. Hennigan: Okay, great. Thanks for your time.
Operator: Thank you. And once again, ladies and gentlemen, if you have a question at this time, please press star one one on your telephone. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Justin Plouffe for any further remarks.
Speaker Change: Thank you.
Justin V. Plouffe: Once again, ladies and gentlemen, if you have a question at this time. Please press star one on your telephone.
Justin V. Plouffe: And this does conclude the question and answer session of today's program I'd like to hand, the program back to Justin <unk> for any further remarks.
Justin V. Plouffe: Thank you so much. Thank you everyone for joining the call. We appreciate your support, and we'll speak with you again next quarter. That will conclude the call. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Justin V. Plouffe: Thank you so much thanks to everyone for joining the call. We appreciate your support and we'll speak with you again next quarter that will conclude the call.
Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Justin V. Plouffe: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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