Q1 2025 Crescent Capital BDC Inc Earnings Call

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Unknown Executive: Good morning and welcome to Crescent Capital BDC, Inc.'s first quarter ended March 31st, 2025 earnings conference call. Please note that Crescent Capital BDC, Inc. may be referred to as CCAP, Crescent BDC, or the company throughout the call.

Good morning, and welcome to your question capital BDC Inc's first quarter ended March 31st 2025 earnings Conference call at least not a question of capital BDC, Inc. May be referred to as she she AP crushing B D C or the company throughout the call I'll start.

Unknown Executive: I'll start with some important reminders. Comments made over the course of this conference call and webcast may contain forward-looking statements and are subject to risks and uncertainties. The company's actual results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in its SEC filings. The company assumes no obligation to update any such forward-looking statements. Please note that the past performance or market information is not a guarantee of future results.

With some important reminders comments made over the course of this conference call and webcast may contain forward looking statements and are subject to risks and uncertainties.

Actual results could differ materially from those expressed in such forward looking statements for any reason, including those listed in its as easy as violating.

The company assumes no obligation to update any such forward looking statements. Please note that the past performance or market information is not guaranteed Oh, yeah, it's not a guarantee of future original.

Daniel McMahon: I'll now turn the call over to Dan McMahon. Thank you.

I'll now turn the call over to Dan Mcneill.

Dan Mcneill: Thank you yesterday after the market closed the company issued its earnings press release for the first quarter ended March 31 2025.

Daniel McMahon: Yesterday after the market closed, the company issued its earnings press release for the first quarter ended March 31, 2025, and posted a presentation to the IR section of its website at crescentbdc.com. The presentation should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC.

Dan Mcneill: We posted a presentation to the IR section of its website crafting BDC dotcom breathing.

Dan Mcneill: The presentation should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC.

Unknown Executive: As a reminder, this call is being recorded for replay purposes.

Dan Mcneill: As a reminder, this call and recorded for replay purposes.

Daniel McMahon: Speaking on today's call will be CCAP's Chief Executive Officer, Jason Breaux, President Henry Chung, and Chief Financial Officer, Gerhard Lombard. With that, I'd now like to turn it over to Jason. Thank you, Dan. Hello, everyone. And thank you all for joining.

Speaker Change: Today's call will be see Gap's, Chief Executive Officer, Jason Brown, President Henry Chen and Chief.

Dan Mcneill: <unk> financial Officer, Gerhard Lombard with that I'd now like to turn it over to Jason.

Jason Brown: Thank you Dan Hello, everyone and thank you all for joining us I'll start today's call by summarizing our first quarter results follow that with some thoughts on the market and touch on our portfolio.

Jason Breaux: Let's start today's call by summarizing our first quarter results, follow that with some thoughts on the market and touch on our portfolio. In terms of first quarter earnings, we reported net investment income of $16.6 million, or $0.45 per share, compared to $20.5 million, or $0.55 per share in the fourth quarter. This quarter's NII decline was primarily driven by the following factors. The impact of lower base rates resulting from the two FOMC rate cuts during the fourth quarter of last year. the roll-off of certain one-time and non-recurring items. and a reduction in dividend income from the Logan JV resulting from the end of the reinvestment period.

Jason Brown: In terms of first quarter earnings we reported net investment income of $16 6 million.

Jason Brown: <unk> 45 per share.

Jason Brown: Compared to $20 5 million or 55 cents per share in the fourth quarter.

Jason Brown: This quarter's NII decline was primarily driven by the following factors.

Jason Brown: Impact of lower base rates, resulting from the two F O M C rate cuts during the fourth quarter of last year.

Jason Brown: The roll off of certain onetime and nonrecurring items.

Jason Brown: And a reduction in dividend income from the Logan JV, resulting from the end of the reinvestment period.

Jason Breaux: The last driver of the quarterly change in net investment income was our loans on non-accrual. which increased to 3.5% and 1.8% of our debt investments at cost and fair value respectively at the end of the quarter. Well, we are not pleased with the increase in non-accruals. The four names that were added this quarter are all first lien positions and represent less than 1.2% of the total portfolio at fair value and resulted from one-off credit events at certain borrowers that were independent from one another. We've consistently taken a preemptive and rigorous approach to both our watch list and re-evaluating the accrual status.

Jason Brown: The last driver of the quarterly change in net investment income was our loans on non accrual.

Jason Brown: Increased to three 5% and one 8% of our debt investments at cost and fair value respectively. At the end of the quarter.

Jason Brown: Well, we are not pleased with the increase in non accruals.

Jason Brown: Four names that were added this quarter are all first lien positions and represent less than one 2% of the total portfolio at fair value and resulted from one off credit events that certain borrowers that were independent from one another.

Jason Brown: We've consistently taken a preemptive and rigorous approach to both our watch list and reevaluating the accrual status.

Jason Breaux: of our investments that have not performed to underwriting expectations. recognizing that there are a wide variety of approaches to how managers think about these categories.

Jason Brown: Our investments that have not performed to underwriting expectations recognizing that there are a wide variety of approaches to help managers think about these categorizations.

Jason Breaux: Looking ahead, we believe that this quarter's earnings are reflective of our earnings baseline in the near term. We have potential near-term tailwinds from our SPV asset-based facility repricing and rightsizing that we completed at the beginning of the quarter, which Gerhard will discuss in more detail. as well as the full quarter impact of our portfolio at Target Leverage. As our baseline view, this near-term outlook does not reflect the impact of any further loans we may place on non-accrual or changes in base rates.

Jason Brown: Looking ahead, we believe that this quarters earnings are reflective of our earnings baseline in the near term.

Jason Brown: We have potential near term tailwind is from our SPV asset based facility repricing and right sizing that we completed at the beginning of the quarter.

Gerhard Lombard: Which gerhard will discuss in more detail.

Gerhard Lombard: As well as the full quarter impact of our portfolio at target leverage.

Gerhard Lombard: As our baseline view this near term outlook does not reflect the impact of any further loans, we may place on nonaccrual or changes in base rates.

Jason Breaux: Gerhard will take you through our financial results and outlook in more detail. So let me provide an update on what we're seeing in the market and how we are positioned. Q1 started off as an active deployment quarter. However, our near-term expectation for a sustained pickup in M&A has been tempered by tariff announcements by the White House. The 90-day tariff pause has prompted some of our sponsors to take a wait-and-see approach. with regards to new platform activity. Further adding to the backlog of deal activity that has existed for many PE-owned assets. However, we have still seen attractive investment opportunities, even following the Liberation Day announcements that fit our core investment mandate of first-line investments in portfolio companies backed by sponsors we have supported through multiple Thank you.

Gerhard Lombard: Gerhard will take you through our financial results and outlook in more detail.

Speaker Change: Let me provide an update on what we're seeing in the market and how we are positioned.

Gerhard Lombard: Q1 started off as an active deployment quarter. However.

Gerhard Lombard: However, our near term expectation for a sustained pickup in M&A, it's been tempered by tariff announcements by the White House.

Gerhard Lombard: The 90 day tariff Baas has prompted some of our sponsors to take a wait and see approach with regards to new platform activity.

They're adding to the backlog of deal activity that has existed for many P E owned assets.

Gerhard Lombard: However, we are still seeing attractive investment opportunities, even following deliberation day announcements that fit our core investment mandate of first lien investments in portfolio companies backed by sponsors we have supported multiple deals.

Jason Breaux: The recent volatility requires us to maintain our selectivity and underscores the importance of consistently applying our underwriting process. For our sponsors, we believe that our tenure in the direct lending space and depth of our relationships which have been cultivated over decades, underscore our value proposition and the ability to serve as a true partner in developing bespoke capital structures. We continue to lead the majority of our transactions and drive stringent documentation.

Gerhard Lombard: The recent volatility requires us to maintain our selectivity and underscores the importance of consistently applying our underwriting process.

Gerhard Lombard: For our sponsors we believe that our tenure in the direct lending space and depth of our relationships with.

Gerhard Lombard: Which have been cultivated over decades underscore our value proposition and the ability to serve as a true partner in developing bespoke capital structures.

Gerhard Lombard: We continue to lead the majority of our transactions and drive stringent documentation.

Jason Breaux: Attributes that are much more difficult to accomplish in the upper middle market BSL replacement segment in our Let's shift gears and discuss the investment portfolio.

Gerhard Lombard: Attributes that are much more difficult to accomplish in the upper middle market BSL replacement segment in our view.

Gerhard Lombard: Let's shift gears and discuss the investment portfolio. Please.

Jason Breaux: Please turn to slides 13 and 14 of the presentation, which highlights certain characteristics of our portfolio. We ended the quarter with just over $1.6 billion of investments at fair value across a highly diversified portfolio of 191 companies. with an average investment size of approximately 0.5% of the total portfolio. Our private credit origination platform activity has provided us the opportunity to nearly double the number of portfolio companies. and our portfolio since listing. even after taking into account prior acquisitions.

Gerhard Lombard: Please turn to slides 13, and 14 of the presentation, which highlights certain characteristics of our portfolio.

Gerhard Lombard: We ended the quarter with just over $1 6 billion of investments at fair value.

Gerhard Lombard: Across our highly diversified portfolio of 191 companies with an average investment size of approximately 0.5% of the total portfolio.

Gerhard Lombard: Our private credit origination platform activity has provided us the opportunity to nearly double the number of portfolio companies in our portfolio since listing.

Gerhard Lombard: Even after taking into account prior acquisitions.

Jason Breaux: We believe that diversification is an important component of providing stability to our shareholders in order to help mitigate the impact of one-off credit events. on both our investment income and net asset value. Our top 10 largest borrowers represented 18% of the portfolio as we are believers in modulating credit risk through position size. believe has served Crescent well in previous credit cycles. We have consistently maintained an investment portfolio. that consists primarily of first lien loans since inception.

Gerhard Lombard: We believe that diversification is an important component of providing stability to our shareholders in order to help mitigate the impact of one off credit events on both our investment income.

Gerhard Lombard: And net asset value.

Gerhard Lombard: Our top 10 largest borrowers represented 18% of the portfolio as we are believers in modulating credit risks through position size, which we believe is crescent well in previous credit cycles.

Gerhard Lombard: We have consistently maintained an investment portfolio.

Gerhard Lombard: That consists primarily of first lien loans since inception.

Jason Breaux: collectively representing 91% of the portfolio at fair value at quarter Continue to focus our investing efforts on non-cyclical industries and remain well-diversified across 20 broad industry categories.

Gerhard Lombard: Collectively representing 91% of the portfolio at fair value at quarter end.

Gerhard Lombard: We continue to focus on investing efforts on non cyclical industries and remain well diversified across 20 broad industry categorization.

Jason Breaux: and we will provide some additional detail on this in his comments. But our credit framework has positioned our portfolio in a way that naturally limits our exposure to the most severe and direct impact.

Gerhard Lombard: And we will provide some additional detail on this in his comments, but our credit framework has positioned our portfolio in a way that naturally limits our exposure to the most severe of direct impacts.

Gerhard Lombard: Of the recent tariff announcements.

Jason Breaux: Finally, our investments are almost entirely supported by well-capitalized private equity .

Gerhard Lombard: Finally, our investments are almost entirely supported by well capitalized private equity sponsors with 99% of our debt portfolio and sponsored backed companies as of quarter end.

Jason Breaux: 99% of our debt portfolio in sponsor-backed companies has a quarter We have partnered with our sponsors to invest in well capitalized borrowers with significant equity capital beneath resulting in a 39% weighted average loan to value across our investments as a Please flip to slide 17, which shows the trends and internal performance rates. Overall, we have seen stability in the fundamental performance of our portfolio, resulting in consistency in our risk ratings and a weighted average portfolio risk rating of 2.0. On the right-hand side of the slide, you'll see that one and two rated investments representing names that are performing at or above our underwriting expectations.

Gerhard Lombard: We have partnered with our sponsors to invest and well capitalized borrowers with significant equity capital beneath us, resulting in a 39% weighted average loan to value across our investments as of quarter end.

Gerhard Lombard: Please flip to slide 17, which shows the trends in internal performance ratings.

Gerhard Lombard: Overall, we have seen stability in the fundamental performance of our portfolio.

Gerhard Lombard: Resulting in consistency and our risk ratings.

Gerhard Lombard: Weighted average portfolio risk rating of 2.1.

Gerhard Lombard: The right hand side of the slide you'll see that one and two rated investments representing names that are performing at or above our underwriting expectations.

Jason Breaux: continue to represent the lion's share, or 87% of our portfolio at Fairfax.

Gerhard Lombard: They need to represent the lion's share or 87% of our portfolio at fair value.

Jason Breaux: Moving on to our dividend, we declared a second quarter 2025 regular dividend of 42 cents per share. The dividend is payable on July 15, 2025 to stockholders of record as of June 30. Additionally, the second in a series of three previously announced $0.05 per share special dividends related to undistributed taxable income will be paid on June 13th to stockholders of record as of May 30th. We have earned our dividends since CCAP's inception, and we note that our NII continues to be in excess of our base dividend in the first quarter. We have prioritized consistency and stability over the long term, as opposed to simply delivering a high dividend.

Gerhard Lombard: Moving onto our dividend, we declared a second quarter 2025 regular dividend of <unk> 42 cents per share.

Gerhard Lombard: The dividend is payable on July 15, 2025 to stockholders of record as of June 30.

Gerhard Lombard: Additionally, the second in a series of three previously announced <unk> <unk> per share special dividends related to undistributed taxable income will be paid on June 13th to stockholders of record as of May 30.

Gerhard Lombard: We have earned our dividends since <unk> inception, and we note that our NII continues to be in excess of our base dividend in the first quarter.

Gerhard Lombard: We have prioritized consistency at NAV stability over the long term as opposed to simply delivering a high dividend yield.

Jason Breaux: This principle guided us to not aggressively raise our base dividend when the rate hiking cycle began in 2022.

This principal guided us to not aggressively raise our base dividend when the rate hiking cycle began in 2022.

Jason Breaux: This marks our 37th consecutive quarter of earning our regular dividend at CCAP. which we've accomplished while maintaining NAF per share within a tight We are proud of this track record and are focused on earning our dividend for the foreseeable Our view is that dividend yields in the BDC space remain elevated given the current base rate outlook and lack of meaningful fundamental headwinds that have been demonstrated in corporate credit portfolios to date. Our positioning has and always will be for the long term.

Gerhard Lombard: This marks our 37th consecutive quarter of earning a regular dividend C cap.

Gerhard Lombard: Which we've accomplished while maintaining NAV per share within a tight band.

Gerhard Lombard: We are proud of this track record and are focused on earning our dividend for the foreseeable future.

Gerhard Lombard: Our view is that dividend yields in the BDC space remain elevated given the current base rate outlook and lack of meaningful fundamental headwinds that have been demonstrated and corporate credit portfolios to date.

Gerhard Lombard: Our positioning has and always will be for the long term.

Henry Chung: With that, I will now turn the call over to Henry. Thanks, Jason. Please turn to slide 15 where we highlight a recent activity. Gross deployment in the first quarter totaled $105 million, as you can see on the left-hand side of the page, of which 98% was in first lien investment. During the quarter, we closed 10 new platform investments totaling $78 million. These new investments are loans to private equity backed companies with a weighted average spread of approximately 565 basis. Reflecting attractive opportunities we are still able to capture while applying the selectivity inherent in our underwriting.

Henry: With that I will now turn the call over to Henry.

Gerhard Lombard: Sorry.

Henry: Thanks, Jason Please turn to slide 15, where we highlight our recent activity.

Henry: Gross deployment in the first quarter totaled $105 million as you can see on the left hand side of the page of which 98% was in first lien investments.

Henry: During the quarter, we closed 10, new platform investments totaling $78 million. These.

Henry: These new investments or loans to private equity backed companies with a weighted average spread of approximately 565 basis points, reflecting attractive opportunities, we were still able to capture while applying the selectivity inherent in our underwriting.

Henry Chung: The remaining $27 million came from incremental investments in our existing portfolio. The $105 million in gross deployment compares to approximately $78 million in aggregate exits, sales and repayments, resulting in net deployment of approximately $27 million for the first quarter.

Henry: The remaining 27 million came from incremental investments in our existing portfolio companies.

Henry: $105 million in gross to point that compares to approximately $78 million aggregate exits sales and repayments, resulting in net deployment of approximately 27 million for the first quarter.

Henry Chung: The Liberation Day tariff announcements prompted a platform-wide, bottoms-up review of the potential tariff impact on all of our portfolio customers. Given our focus on service businesses with low materials components and cost of goods sold, and high free cash flow conversion, the overall direct material exposure is modest at 4%. Additionally, investing in the core and lower middle market, both for our US and European portfolio companies, naturally points us to businesses that primarily serve their respective domestic markets with limited exposure to cross-border trade from the revenue. who performed a review of the potential exposure through multiple lenses.

Henry: Deliberation day tariff announcements prompted a platform wide bottoms up review of the potential tariff impact on all of our portfolio companies.

Henry: Given our focus on service businesses with low materials components and cost of goods sold and high free cash flow conversion. The overall direct material exposure is modest at 4%.

Henry: Additionally, investing in the core lower middle market, both for our U S and European portfolio companies naturally points as the business is that primarily serve their respective domestic markets limited exposure to cross border trade from a revenue perspective.

Henry: We performed a review of the potential exposure through multiple lenses.

Henry Chung: First, manufacturing businesses that source raw materials from abroad. Second, service businesses that source intermediate or finished goods from abroad. And third, business models closely tied to the transportation of goods or export of goods to the United States. For the vast majority of these businesses, we did identify mitigating factors with the ability to pass through price increases and limited supplier concentration by individual supplier or geography. The ability to increase prices was demonstrable for most of our portfolio during the recent inflationary periods experienced, particularly in labor, which represents a much larger component of direct costs in our portfolio.

Henry: First manufacturing businesses that source raw materials from abroad.

Henry: Second service businesses that source intermediate or finished goods from abroad and.

Henry: Third business models closely tied to the transportation of goods, where export of goods to the United States.

Henry: But the vast majority of these businesses, we did identify mitigating factors with the ability to pass through price increases and limited supplier concentration by individual supplier or geography.

Henry: The ability to increase prices with demonstrable for most of our portfolio. During the recent inflationary periods experienced particular labor, which represents a much larger component of direct costs in our portfolio companies and materials.

Henry Chung: and material. Although the full extent of tariffs, including knock-on effects, remain to be fully seen, we believe CCAP's portfolio is well-positioned to weather potential volatility.

Henry: Although the full extent of tariffs, including knock on effects remained to be fully seen we believe <unk> portfolio is well positioned to weather potential volatility.

Henry Chung: Turning back to the broader portfolio, please flip to slide 16. You can see that the weighted average yield of our income-producing securities at cost came down 50 basis points quarter over quarter to 10.4 percent, reflecting the impact of changes in basis. As of March 31st, 97% of our debt investments at fair value were floating rate with a weighted average floor of 79 basis points. compares to our 55% floating rate liability structure based on debt drawn with no floor. Overall, our investment portfolio continues to perform well with year-over-year weighted average revenue in EBITDA. The weighted average interest coverage of the companies in our investment portfolio at quarter end improved two times.

Henry: Turning back to the broader portfolio. Please flip to slide 16.

Henry: You can see that the weighted average yield of our income producing securities at cost came down 50 basis points quarter over quarter to 10, 4%, reflecting the impact of changes in base rates.

Henry: As of March 31, 97% of our debt investments at fair value were floating rate with a weighted average floor of 79 basis points, which compares to $4 55 per cent floating rate liability structure based on debt drawn with no floors.

Henry: Overall, our investment portfolio continues to perform well with year over year weighted average revenue and EBITDA growth weight.

Henry: The weighted average interest coverage of the companies in our investment portfolio at quarter end improved to two times.

Henry Chung: As a reminder, this calculation is based on the latest annual life. In terms of managing fixed operating costs, approximately 73% of aggregate revolving capacity was available across the portfolio at its quarter end. So our portfolio companies in the aggregate remain well positioned to address fixed charges with operating cash flows and available balance.

Henry: Minder. This calculation is based on the latest annualized base rates each quarter.

Henry: In terms of managing fixed operating costs, approximately 73% of aggregate revolver capacity was available across the portfolio this quarter and so on.

Henry: Our portfolio of companies and remain well positioned to address fixed charges with operating cash flows and available balance sheet liquidity.

Gerhard Lombard: With that, I'll now turn it over to Gerhard. Thanks, Henry and hello, everyone. Jason previously noted our net investment income per share of $0.45 for the first quarter of 2025 compared to $0.55 per share for the prior quarter.

Gerard: With that I'll now turn it over to Gerard.

Gerard: Thanks, Henry and Hello, everyone.

Speaker Change: Jason previously noted our net investment income per share of 45 for the first quarter of 2025.

Gerard: Compares to <unk> 55 per share for the prior quarter.

Gerhard Lombard: the four key drivers that drove the change in this quarter's NII. first driver with lower base rate. So our investments typically have their coupons reset at the beginning of each quarter, while our floating rate liabilities reset on a daily or monthly basis. There is a lag effect on the full quarter impact from changes in base rates on that investment.

Gerard: There are four key drivers that drove the change in this quarter's NII.

Gerard: The first driver was lower base rates, because our investments typically have their coupons reset at the beginning of each quarter.

Gerard: While our floating rate liabilities reset on a daily or monthly basis. There is a lag effect on the full quarter impact from changes in base rates on net investment income.

Gerhard Lombard: is best highlighted on slide 16. This was the largest contributor to the quarter's NII decline, resulting in approximately $0.04 of net income. The second driver was the runoff of one-time non-recurring income. Specifically, we had runoff of one-time PIC income from two portfolio companies. contributed $0.03 of NII loss. The third driver was the Logan JV, where dividend income declined by 3 cents per share quarter over quarter. As a reminder, we acquired the Logan JV in connection with our acquisition of the first Eagle BDC in 2020. It's largest investment is a middle market CLO.

Gerard: This is best highlighted on slide 16.

This was the largest contributor to the quarter's NII decline, resulting in approximately <unk> <unk>.

Gerard: Net impact.

Gerard: The second driver was the runoff of one time nonrecurring income specifically, we had run off onetime pick income from two portfolio companies, which contributed three okay.

Gerard: Okay NII last quarter.

Gerard: The third driver was the Logan JV, where dividend income declined by <unk> <unk> per share quarter over quarter.

Gerard: As a reminder, we acquired the Logan JV in connection with our acquisition of first Eagle BDC in 2023.

Gerard: Its largest investment is a middle market CLO, we preemptively ended the reinvestment period for the CLO at the beginning of the quarter almost five months before the official expiration of the reinvestment period, given the elevated probably syndicated loan prices at the start of the year.

Gerhard Lombard: We preemptively ended the reinvestment period for the CLO at the beginning of the quarter, almost five months before the official expiration of the reinvestment period, given elevated broadly syndicated loan prices at the start of Following the volatility in the broadly syndicated loan market after the Liberation Day announcements, we opportunistically reinvested a portion of the proceeds we had held back to take advantage of attractive entry points for high-quality BSL borrowers before the contractual end of the reinvestment. Going forward, our expectation is that the dividend income attributed to the Logan JV will reduce over time as the CLOD leverages.

Gerard: Following the volatility in the broadly syndicated loan market. After the liberation day announcements, we opportunistically reinvested a portion of the proceeds we had held back to take advantage of attractive entry points for high quality BSL borrowers before the contractual end of the reinvestment period.

Gerard: Going forward, our expectation is that the dividend income attributed to the Logan JV will reduce over time as the CLO deleveraging.

Gerhard Lombard: Potential lumpiness in quarter-to-quarter distribution.

Gerard: With potential lumpiness in quarter to quarter distribute you shouldn't amounts once the CLO is fully wound down which we estimate in our base case to take approximately 24 months, we expect to unwind the joint venture and redeploy the proceeds into crescent directly originated investment opportunities.

Gerhard Lombard: Once the CO is fully wound down, which we estimate in our base case to take approximately 24 months. Expect to unwind the joint venture and redeploy the proceeds into Crescent's directly originated investment. fourth driver. was loans we pledged on nonaccrual during the quarter, which drove a two cents per share decrease in NII on a quarter over quarter. As Jason noted in his comments, a diverse portfolio with minimal single obligor concentration helped mitigate outside impacts to our investment income.

Gerard: The fourth driver.

Gerard: Was loans placed on non accrual during the quarter, which drove a two cents per share decrease in NII on a quarter over quarter basis.

Jason Brown: As Jason noted in his comments a diverse portfolio with minimal single obligor concentration helped mitigate outsized impacts to our investment income from non accruals.

Gerhard Lombard: Our gap earnings per share for the first quarter of 2025 was $0.11 and net investment income of $0.45 was offset by $0.34 per share of net unrealized and realized As of March 31, our stockholders equity was $727 million, resulting in net asset value per share of $19.

Jason Brown: Our GAAP earnings per share for the first quarter of 2025 was 11 <unk>.

Jason Brown: Net investment income of 45 was offset by <unk> 34 per share of net unrealized and realized losses.

Jason Brown: As of March 31, our stockholders' equity was $727 million, resulting in net asset value per share of $19 62 sites.

Gerhard Lombard: Now let's shift to our capitalization and liquidity. I'm on slide 19. In December 2024, we priced $150 million of new senior unsecured notes broken down into two tribes. 35 million of senior unsecured notes due February 2028 and 80 million of senior unsecured notes due February 2030. Both tranches were fully drawn during the first quarter of 2025. At the beginning of April, we right-sized our SPP asset facility from $500 million to $400 million and reduced the spread by 50 basis points. 45 to 195. This facility resizing provides us with sufficient capacity to address any potential draws on our unfunded while minimizing interest expense related to excess on funding.

Jason Brown: Now, let's shift to our capitalization and liquidity on slide 19.

Jason Brown: In December 2024, we priced $115 million of new senior unsecured notes broken down into two tranches.

Jason Brown: $35 million of senior unsecured notes due February 2028, and $80 million of senior unsecured notes due February 2030.

Jason Brown: Both tranches were fully drawn during the first quarter of 2025.

Jason Brown: At the beginning of April we rightsize, our SPV asset facility from $500 million $400 million and reduced the spread by 50 basis points from $2 45 to 195.

Jason Brown: This facility <unk> provides us with sufficient capacity to address any potential draws on our unfunded commitments.

Jason Brown: While minimizing interest expense related to excess on product capacity.

Gerhard Lombard: Our equity structure reflects our target size and leverage with our current equity base today, and we have ensured that our borrowing capacity is consistent with our initial goal. As you can see on the right side of the slide, 76% of total committed debt now matures in 2028 or later, a figure that was 42% two quarters ago, so we're pleased with our progress. The weighted average stated interest rate on our total borrowings was 6.36% as of quarter Pro forma for the SPV facility amendment, the weighted average interest rate would be 6.1%. This quarter's net deployment brought our debt-to-equity ratio up from 1.19 times in the prior quarter to 1.25 times, which is within our stated target leverage range of 1.1 to 1.2.

Jason Brown: Our equity structure reflects our target size and leverage with our current equity base today, and we have ensured that our borrowing capacity is consistent with our investment needs.

Jason Brown: As you can see on the right side of the slide 76% of total committed debt now matures in 2028 or later a figure that was 42% two quarters ago. So we're pleased with our progress here.

Jason Brown: The weighted average stated interest rate on our total borrowings was 636% as of quarter end.

Jason Brown: Pro forma for the SPV facility Amendment, the weighted average interest rate would be 617%.

Jason Brown: This quarter's net deployment brought our debt to equity ratio up from $1. One nine times in the prior quarter to 125 times, which is within our stated target leverage range of $1 one to one three times.

Gerhard Lombard: As Jason noted, for the second quarter of 2025, our board declared a regular dividend of $0.42 per share. Additionally, the second of three previously announced $0.05 per share special cash dividends is tabled in June. Our existing variable supplemental dividend framework remains in effect as well. PCAPP will not pay Q2 supplemental dividend as the measurement test cap exceeded 50% of the quarter's excess.

Jason Brown: As Jason noted for the second quarter of 2025, our board declared a regular dividend of 42 per share. Additionally.

Jason Brown: Additionally, second three previously announced five cent per share special cash dividend payable in June.

Jason Brown: Our existing variable supplemental dividend framework remains in effect as well.

Jason Brown: Pick up will not be that Q2 supplemental dividend as the measurement test cap exceeded 50% for quarters excess available work.

Jason Breaux: And with that, I'd like to turn it back to Jason for closing. Thank you, Gerhard. Historically in periods of market volatility, Crescent's focus on disciplined credit underwriting, capital preservation. Strong free cash flow generation and robust debt service coverage has enabled us to stay on the right side of performance and returns across the board.

Jason Brown: And with that I'd like to turn it back to Jason for closing remarks.

Jason Brown: Thank you Gary.

Speaker Change: Historically in periods of market volatility crescents focus on disciplined credit underwriting capital preservation.

Speaker Change: Strong free cash flow generation and robust debt service coverage has enabled us to stay on the right side of performance and returns across managers.

Jason Breaux: In closing, we believe Crescent and CKEP will continue to be on the right side of this performance dispersion spectrum over the long term. We look forward to delivering on that in the quarters to come.

Speaker Change: In closing, we believe crescent and seek App will continue to be on the right side of this performance dispersion spectrum over the long term.

We look forward to delivering on that in the quarters to come.

Unknown Executive: As always, we thank you for joining our call today and look forward to connecting with many of you soon.

Speaker Change: As always we thank you for joining our call today and look forward to connecting with many of you soon.

Unknown Executive: And with that operator, we can open the line for questions. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad.

Speaker Change: With that operator, we can open the line for questions.

Speaker Change: We are now opening the floor for a question and answer session. If you'd like to ask a question. Please press star followed by one on your telephone keypad.

Speaker Change: Star followed by one on your telephone keypad.

Paul Johnson: Your first question comes from the line of Paul Johnson of KBW. Your line is now open. Good afternoon. Thank you for taking my question. First one, just on one of the new rules this quarter, new era of technology, it was marked around 71, I believe. Does that reflect the restructuring that was recently announced for that company? And I guess second question to that as well is, it looks like it might be more of a non-traditional deal for you. It looks like it might be a potentially larger company than what normally is. do. They've gotten wrong there.

Speaker Change: First question comes from the line of Paul Johnson as Keith W. Your line is now open.

Paul Johnson: Yeah. Good afternoon. Thank you taking my questions.

Paul Johnson: First one just follow up one of the new non accruals this quarter new era technology.

Paul Johnson: It was marked around 71 I believe that.

Paul Johnson: Reflect the.

Paul Johnson: Restructuring that was recently announced that company.

Paul Johnson: And I guess second question to that as well it looks like it might be more of them.

Paul Johnson: Traditional deal for you it looks like it might be a potentially larger company than what normally.

Paul Johnson: You may.

Paul Johnson: But if you could give us your idea on that as well, that'd be helpful.

Paul Johnson: Maybe I'm wrong, there, but if you could.

Paul Johnson: Give us I guess your idea on that as well that'd be helpful. Thanks.

Henry Chung: Hey, Paul, this is Henry. Well, with respect to New Era, the, I think the mark as you noted here is kind of going to be in line with where we expect to ultimately restructure that name. Just given the timing here, that was reflective of the latest view on the earnings outlook. We did our marks, but I would expect that to be kind of roughly in line.

Paul Johnson: Hey, Paul this is Henry.

Speaker Change: Well with respect to new era.

Paul Johnson: The.

Paul Johnson: B.

Paul Johnson: Mark as you noted here is.

Kind of going to be in line with where we expect to ultimately.

Paul Johnson: Restructure of that name.

Paul Johnson: Given the timing here that that was reflective of the latest view on the earnings outlook at the time when.

Paul Johnson: We did our marks but.

Paul Johnson: I would expect that to be kind of roughly in line and could you for.

Henry Chung: And could you, for your second part of the question, could you...

Paul Johnson: For your second part of your question could you.

Paul Johnson: Repeat, which which company you were asking about? The same company. Yeah, it's just, you know, correct me if I'm wrong, but it looks like the company might be a little bit larger than traditionally targeted. Just wondering if that's kind of a nontraditional deal or off there.

Paul Johnson: Repeat which which company you were asking about.

Paul Johnson: The same company yes.

Paul Johnson: And correct me, if I'm wrong, but it looks like.

Paul Johnson: I think it might be a little bit market.

Paul Johnson: Traditionally targeted.

Paul Johnson: Just wondering if that's kind of a non traditional deal or lost there.

Paul Johnson: Okay Paul.

Jason Breaux: Paul, hey, it's Jason. I'm just trying to clarify your new era on our books has not yet restructured. It sounded like you were citing a company that had restructured recently. Yeah, I guess maybe, maybe I'm referencing the wrong one, but I thought that there was If I'm wrong, I can go to the next question. Interesting. We can we can certainly reconcile and take it offline with you. to better understand if we're talking. Yeah, that's fine.

Jason Brown: Hey, it's Jason I'm, just trying to clarify your new era on our books has not yet restructured.

Speaker Change: It sounded like you were citing a company that had restructured recently.

Speaker Change: Yeah, I guess, maybe maybe I'm referencing them all one by profit there was a.

Speaker Change: Potential restructuring or something going on with that company.

Speaker Change: <unk>.

Speaker Change: Im wrong I can go to the next question.

Speaker Change: Interesting, we can we can certainly reconcile and take it offline with you.

Speaker Change: To better understand if we're talking about the same company.

Speaker Change: Yes, that's fine.

Jason Breaux: You know, and then I guess just kind of going along with with just the non-schools though, I'm wondering if you could just kind of tell us maybe about the Crescent's just kind of overall approach to working toward a resolution, if it's kind of the drive fast toward a a solution to protect value or, you know, this is a firm kind of take the longer game approach here and are willing to fight it out to salvage value here. But wondering kind of what the underlying approach is here with some of these workout situations.

Speaker Change: And then I guess, just kind of going along with just the non accruals though.

Speaker Change: I was wondering if you could just kind of tell us.

Speaker Change: Maybe about the cross since just kind of overall approach to working towards resolution.

Speaker Change: Resolution, if it's kind of the the drives fast Florida.

Speaker Change: Our solution to protect value or.

Speaker Change: The firm kind of take the longer game approach here and are willing to fight it out the salvage value here, but.

Speaker Change: Wondering kind of what's.

Speaker Change: The underlying approaches here with some workout situations.

Jason Breaux: Yeah, maybe I can start and Henry can chime in. Crescent's approach to difficult situations, typically restructurings, is really first and foremost to Preserve Our Capital. And there are a variety of ways that we can do that. Ideally, if we're partnered with a private equity sponsor that continues to want to support the company. in the form of capital and stewardship. If we feel like they're equipped to do that and the right group to do that, we will try to be constructive and find ways to come to an arrangement to allow them to stay in. That said, if that is not an available option or it's not, in our view, a value maximizing option.

Speaker Change: Yes, maybe I can start and Henry can chime in.

Speaker Change: [noise] crescents approach too difficult situations typically restructurings is really first and foremost to.

Speaker Change: Preserve our capital.

Speaker Change: And there are a variety of ways that we can do that.

Speaker Change: Ideally if we're partnered with a private equity sponsor that.

Speaker Change:

Speaker Change: Continues to want to support the company.

Speaker Change: In the form of capital and stewardship.

Speaker Change: We feel like they are equipped to do that in the right. The right group to do that we will try to be constructive and find ways to come to an arrangement to allow them to stay involved.

Speaker Change: That said, if if that is not an available option or it's not.

Speaker Change: In our view a value maximizing option, we can go in a different direction, which could be a few different alternatives. It could be to put the company up for sale.

Henry Chung: we can go in a different direction, which could be a few different alternatives. It could be to put the company up for sale. At that point in time, it could be to reorganize the company. through a balance sheet restructuring and take ownership. We've done all of those things in the past and I would expect to use all of those options at our disposal in any given situation really with the foremost interest and priority in being to protect our Yeah, I think just to add to that, you know, one thing that we don't do when it comes to taking the approach of non-accruals is just looking to exit via a secondary sale as quickly as possible.

Speaker Change: At that point in time, it could be to reorganize the company.

Speaker Change: Through our balance sheet restructuring and take ownership we've done all of those things in the past and I would expect to use all of those options at our disposal in any given situation really with the.

Speaker Change: Foremost interest in priority being to protect our investment.

Speaker Change: Yes.

Speaker Change: Just to add to that one thing that we don't do when it comes to taking the approach in non accruals or just looking to exit via <unk>.

Speaker Change: Secondary sale as quickly as possible.

Henry Chung: You know, generally, given where our investment focus is, being top of the capital structure, there's still significant enterprise value at play in a non-accrual situation that, you know, requires work and time. And both of those are factors I would want to contribute, as well as capital to the extent that there's some short term capital needs of the business that we can help solve. So I think to answer the first part of the question, more succinctly, like yes, we do take the longer term view. And we're able to do so because of how we're positioned within the capital structure, and able to make sure that we're not doing in a rash manner.

Speaker Change: Generally what given where our investment focus is being top of the capital structure. There is still significant enterprise value add play in a nonaccrual situation.

That requires.

Speaker Change: Work and time and both of those are.

Speaker Change: C C.

Speaker Change: Factors that we're willing to contribute as well as capital to the extent that there is some short term capital needs of the business that we can help solve.

Speaker Change: So I think to answer the first part of your question.

Speaker Change: More succinctly, yes, we do take the longer term view and we're able to do so because of how our position within the capital structure.

Speaker Change: And unable to make sure that we're not doing anything.

Speaker Change: Rash manner.

Paul Johnson: Peace. Thank you for all that.

Speaker Change: Okay.

Speaker Change: Thank you for all that.

Paul Johnson: And then this last one for me, could you just tell us maybe roughly how much of the portfolio has been sort of Crescent led or Crescent sort of originated deals?

Speaker Change: And then just last one for me could you just tell us maybe roughly how much of the portfolio.

Speaker Change: That's been sort of Crescent, Brad or.

Speaker Change: Russian sort of originated yields.

Henry Chung: That's all for me today. Thank you. Yeah, so as I say here today, about 8% of the total fair value is acquired assets, the remaining 92% are loans that we acquired. We acquired from either First Eagle or Alcantara. There's only really only one. Exercise from the Alicentra. The vast majority is Crescent.

Speaker Change: Not for me to say thank you.

Speaker Change: Yes, so as I sit here today about 8% of the total fair value is acquired assets. The remaining 92% are loans that we acquired.

Speaker Change: We acquired from either first eagle or all central Theres only.

Speaker Change: Really only one position of size from Dallas Central acquisition to date, but the vast majority is crew.

<unk> originated assets.

Robert Dodd: Your next question comes from the line of Robert Dodd of Raymond James. Your line is now open. Hi guys. One on Logan first. I mean, can you explain, I mean, I get you preemptively ended the reinvestment period, but I mean, effectively the dividend dropped almost 50% sequentially. I get, you know, it's going to wind down and perhaps, you know, over the next 24 months, right? I mean, I would have expected the dividend to decline over that kind of time period, rather than suddenly as soon as the... decline further from that lower level. So can you explain what was the driver of the big sequential decline, given, I mean, the fair value of the portfolio was written, or the position of the equity position was written up in the quarter versus where it was last quarter.

Speaker Change: Your next question comes from the line of Robert Dodd Raymond James Your line is now open.

Speaker Change: Hi, guys one on Logan first I mean can you explain.

Speaker Change: I mean, I guess, you preemptively ended the reinvestment period, I mean effectively the dividend.

Speaker Change: Most 50% sequentially.

Speaker Change: I guess, it's going to wind down and go ahead over the next 24 months. So I mean, I would've expected the dividend to decline over that point in time periods, rather than suddenly as soon as the and then.

Speaker Change: <unk> further from that.

Speaker Change: Lower level, so can you explain that.

Speaker Change: What was the driver of the big sequential decline given I mean, the fair value of the portfolio was written or the position of the equity position was up in the quarter versus where it was last quarter. So what was behind that that big sequential decline just because of the investment period ended.

Robert Dodd: So what was behind that big sequential decline, just because the reinvestment period?

Henry Chung: Yeah, so there's two components. This is Henry. Thanks for the question. There's two components to the Logan dividend, the two largest components. We hold two tranches of the underlying middle market CLO. There's a mezzanine tranche, which provides kind of a stated consistent coupon and then there's an equity tranche. pays out based on residual cash flows. The determination date of what the residual cash flows are, there's actually about a month and a half timing mismatch between our quarter end and when those payment determination dates are. So as a result, what you'll see is the most kind of lumpy part of the cash distributions, which are related to the equity tranche.

Speaker Change: Yes. So there's two components. This is henry thanks for the question, there's two components to the Logan dividend for.

Speaker Change: The two largest components, we hold two tranches of the underlying middle market CLO Theres, the mezzanine tranche, which provides kind of a stated consistent coupon and then there's an equity tranche, which pays out based on residual cash flows the determination date of what the residual cash flows are theres actually.

Speaker Change: So out of a month and a half timing mismatch between our quarter end and when those payment determination dates are so as a result, what youll see is the most kind of lumpy part of the cash distributions, which are related to the equity tranche.

Robert Dodd: We've seen that really kind of bump around on a quarter to quarter basis. And with the end of the reinvestment period, I think our expectation here is that that's likely going to continue to be the case as the structure de-levers. So it's not as if the equity tranche has like a stated coupon per se, and it's consistently paying out over time. One component of the dividend that we received. going to have a little bit more volatility while we're in. The Leveraging Period for that. Understood. Right. I mean, and, you know, the equity just distributes your own, roughly speaking, your ownership share of the residual cash flows.

Speaker Change: We've seen that really kind of bump around on a quarter to quarter basis and with the end of the reinvestment period.

Speaker Change: I think our expectation here is that.

Speaker Change: Likely going to continue to be the case as the structure de levers.

Speaker Change: So it's not as if the equity tranche has like a stated coupon per se and it's consistently.

Speaker Change: Paying out over time of it.

Speaker Change: One component of the dividend that we receive is just going to have a little bit more volatility while we're in this deleveraging period for that structure.

Speaker Change: Understood.

Speaker Change: The equity just distribute your own but roughly speaking your ownership share of some residual cash flows, but I mean did did the cash flows within Lugano Lugano sites.

Robert Dodd: But I mean, did the cash flows within Lugano, Lugano, sorry. Got something else on my mind. Did the cash flows within Logan drop materially, right? Or was it a timing misfaction? Like, I mean, basically, it's the dividends. Is this 1.2 kind of for now like the low and you could see the equity, is it the low end of the equity volatility range? Or it just seems like a pretty big drop given it doesn't sound like, I mean, we don't see the details of the portfolio of Logan anymore, but it doesn't sound like the portfolio itself.

Speaker Change: Got something else on my line did the cash flows within Logan.

Speaker Change: Drop materially right.

Speaker Change: Timing mismatch I mean, basically it's the dividend.

Speaker Change: Is this one to kind of it for now like the low end you could see the equity is at the low end of the equity tranche volatility range or it just seems like a pretty big drop given it doesn't sound like I mean, we don't see the details of the portfolio of nuc it anymore, but it doesn't sound like the portfolio.

Henry Chung: You just sell some assets, but then you reinvest it. I mean, with the income within that vehicle down materially in Q1. Yes, your observation is correct. The overall holdings of the portfolio and the credit profiles did not change materially on a quarter-over-quarter basis. As you may already be aware, there are overcollateralization tests within CLOs, and part of the residual cash flows for this particular distribution in this quarter were retained as part of the overcollateralization tests that are in place within the structure. So that was really kind of the driver there is those tests are not tested at quarter-end, they're actually tested about a month after quarter-end, and that's just based on when the underlying CLO is at.

Speaker Change: Itself you did sell some assets, but then you reinvest it I mean, it would be income within that vehicle down materially in Q1.

Speaker Change: Yes.

Speaker Change: Observations correct. The overall holdings of the portfolio and the credit profile did not change materially on a quarter over quarter basis.

Speaker Change: As you may already be aware, there are overcollateralization tests within <unk> and part of the.

Speaker Change: The residual cash flows for this particular distribution in this quarter.

<unk> retained as part of the Overcollateralization tests that are in place within the structure. So.

Speaker Change: That was really kind of the driver there is.

Those tests are not tested at quarter end, there actually tested.

Speaker Change: About a month after quarter end and it's just based on when the underlying CLO was actually priced so I think the view there is that.

Henry Chung: Priced. So I think the view there is, or that's, that's really kind of what drove the difference in this particular quarter. And that's why we kind of think of the distributions related to the structure as starting to be a little likely potentially lumpier on a quarter over quarter basis. I will say to the second part of your question, with respect to the $1.2 million I do think that there is some near-term upside. We did mention this during our prepared remarks, but we were able to redeploy some of the cash or the reinvestment proceeds. at a pretty favorable time post-liberation day, which is obviously after quarter end, which we think will provide some lift in terms of the near-term outlook for Logan.

Speaker Change: Or is it that that's really kind of what drove the difference in this particular quarter and.

Speaker Change: And that's why we kind of think of the distributions related to the structure as is turning to be a little likely potentially lumpier on a quarter over quarter basis, I will say to the second part of your question with respect to the $1 2 million distribution.

Speaker Change: Kind of.

Speaker Change: A low relative to.

Speaker Change: Our expectations I do think that there is some some near term upside. We did mentioned this during our prepared remarks, but we were able to redeploy some of the.

Speaker Change: The cash or the.

Speaker Change: Investment proceeds.

Speaker Change: Yeah, and a pretty favorable time.

Speaker Change: <unk> deliberation day, which is obviously after quarter end.

Speaker Change: We think will provide some lift in terms of the near term.

Speaker Change: Outlook for Logan, but.

Robert Dodd: But overall, when we kind of think about from now until full wind down, we do expect just some lumpiness with the equity issue. Got it. Thank you. I appreciate that.

Speaker Change: Overall, when we kind of think about from now until four wind down.

Speaker Change: Do expect just some lumpiness with the equity distributions.

Speaker Change: Got it got it. Thank you I appreciate that no one on the non accruals.

Robert Dodd: On the non-accruals. So, you know, obviously went up to 3.5% on a cost basis, and, you know, when I look at your internal ratings, right, for last quarter, right, the ratings 4 and 5 were under 1%, right, which was basically what one of the non-accruals were at that time. So, I mean, on these new non-accruals, was there just... Zero visibility heading into Q2, that there were no warning signs at all on these new problem assets. I mean, can you give us, you know, any color on that? Because I mean, obviously, if new protocols aren't visible in the internal risk ratings the quarter before, it does raise the question of, are there more to come that we just don't know about?

Speaker Change: So you know obviously went up to three 5% on a cost basis.

Speaker Change: Two I'm sorry about it.

Speaker Change: Look at your internal meetings right.

Speaker Change: The last quarter.

Speaker Change: Yes.

The highway meetings, four and five well under 1% right, which was basically one on non accruals were at that time. So I mean, all of these new non accruals was that just.

Speaker Change: Zero visibility.

Speaker Change: Heading into two Q2 that there was any that would no warning signs at all on these new.

Speaker Change: So I mean can you give us any.

Speaker Change: Any color on that because I mean, obviously.

Speaker Change: New non accruals are visible in the internal risk ratings for the quarter before it does raise the question of.

Speaker Change: All of them more to tell them that we just don't know about and you don't know about yet.

Henry Chung: And you don't know about? Yeah, that's a fair question. And I think how I'd characterize that is the non-accrual that we designate as non-accrual this quarter, they were all prior watchlist names. So in terms of the concern around did these just come completely out of left field, that is not, I would say that's not the case. These are companies that we've kind of noted as watchlist companies, some for several quarters now. I would say that when you think about how we determine a company going on non-accrual, it's From our perspective, it's, do we think that there's efficient near-term headwinds, that sitting here today, we think that there is risk to us recovering our cost-based investment?

Speaker Change: Yes.

Speaker Change: That's a fair question and I think how I'd characterize that as I'm. The non accruals are we.

Speaker Change: Designated as non accrual this quarter they were all prior watch us names so.

Speaker Change: In terms of the concern around diseases coming completely out of left field, although it is not.

Speaker Change: I'd say that's not the case on these are companies that we've kind of.

Speaker Change: Noted as watch list companies some for for several quarters now I would say that when you think about how we determine our company going on non accrual.

Speaker Change: From our perspective, it's do we think that there's sufficient near term headwind that sitting here today, we think that there is risk to us recovering our cost base and investment and I would say that.

Henry Chung: And I would say that, you know, for each of these names, there were developments at the respective borrowers, not related to one another, but just at the... are aware that warranted that redetermination. And as a result, we made that election. given that there was a further deterioration. Award. Got it. I mean, I think that's being prudent. I mean, flipping it the other way, were any of those assets that were placed on non-cruel still paying cash in Let us get back to you and take that off. Fair enough. Thank you. Cheers.

Speaker Change: For each of these names there were.

Speaker Change: Developments at the respective borrowers not related to one another but just that.

Speaker Change: Specific borrowers are warranted that redetermination.

Speaker Change: And as a result, we made that election, just given that there was a further deterioration in the situation of the awards at that time.

Speaker Change:

Speaker Change: Type classification.

Got it got it.

Speaker Change: Being prudent I mean flip it the other way what any of those assets that were placed on non accrual still paying cash interest.

Speaker Change: Let us let us get back to you and take that off.

Speaker Change: Thank you.

Speaker Change: Yes, yes.

Finian O'shea: Your next question comes from the line of Finian O'Shea of Wells Fargo. Your line is now open. Hey, everyone. Good afternoon. And if you could Let me know what the take is on the cash interest as well. I'd appreciate it. But sticking with the non-accruals, Henry, you named a few challenged, potentially challenged sectors last quarter. Software wasn't one of them, but three of these were. I know you just sort of outlined to Robert that it was a sort of ongoing determination on their performance, but seeing if anything is going on there. More broadly, if there is a reckoning on these being too far behind, sponsors not supporting and so forth, just given the concentration in sector and the sort of surprise here.

Speaker Change: Your next question comes from the line of Finian O'shea.

Wells Fargo. Your line is now open.

Speaker Change: Hey, everyone. Good afternoon.

Speaker Change: And if you could.

Speaker Change: Let me know what.

Speaker Change: <unk> is on the cash interest as well.

Speaker Change: Appreciate it.

Speaker Change: Sticking with the non accruals.

Speaker Change: Henry you named a few.

Speaker Change: Challenged.

Speaker Change: Potentially challenged sectors.

Speaker Change: Last quarter.

Speaker Change: Software it wasn't one of them, but three of these were.

Speaker Change: I know you just sort of outlined to Robert that it was a sort of ongoing determination on their performance.

Speaker Change: But seeing if anything is going on there.

Speaker Change: More broadly if there's a reckoning on on these being too far behind sponsors not supporting and so forth.

Speaker Change: Just given the concentration in any sector in the sort of surprise here. Thanks.

Finian O'shea: Yeah, and maybe to clarify the comment on the three being in software, Finn, because I'm looking at the, the names here and these were all in different industries, and they're not Two of them are software, but I guess it is a question here. Are we seeing something more broadly within the software space as a whole? Yeah, I mean, sounds like I have one wrong. So but yeah, I guess sort of still question applies. It's recent trend, we're seeing that a lot of the let's say smaller software companies at least are seeing headwinds.

Speaker Change: Yes.

Speaker Change: Maybe you could clarify the comment on the three being in software.

Speaker Change: Because I'm looking at the.

Speaker Change: Aims here and these are all in different industries in.

Speaker Change: They're not.

Speaker Change: Or two of them are software but.

Speaker Change: I guess is a question here or are we seeing something more broadly within the software space as a whole.

Speaker Change: Yes, I mean, it sounds like I have one wrong, so, but I guess sort of still question applies.

Speaker Change: Recent trend were seeing that a lot of the let's say smaller software companies at least are seeing headwinds.

Henry Chung: Yeah, so I think I'll take that in two parts. The first is, for one of the non accruals within the software space, I'd say that was really just related to the end market. We were just seeing some more challenging kind of demand drivers within specific end market that that software company was serving, which we're not heavily indexed to across kind of our broader software allocation as a whole. The other which I think Paul referenced as well, when you are that's, that's a managed services provider business. So I would kind of think of that as not like a pure play SaaS business, so to speak.

Speaker Change: Yeah, So I think I'll take that in two parts. The first is.

Speaker Change: For one of the non accruals within the software space I'd say that was really just related to the end market. We were just seeing some more challenging kind of demand drivers within specific end market that that software company was serving.

Speaker Change: We're not heavily indexed to across all kind of our broader software allocation as a whole.

Speaker Change: The other which.

Paul Johnson: I think Paul referenced as well when you are.

Speaker Change: That's a managed services provider business. So I would kind of think of that as not like a pure play SaaS business.

Henry Chung: And what I would kind of comment on with what we're seeing more broadly in that space as well as there were kind of more is a company specific drivers there versus any particular issues that we're seeing like more broadly across the the MST space as a whole. Okay, that's helpful.

Speaker Change: So to speak and what I would kind of comment on with what we're seeing more broadly in that space as well as.

Speaker Change: We're kind of Morris.

Speaker Change: Company specific drivers there versus any particular issues that we're seeing like more broadly across the.

Speaker Change: The MSP space as a whole.

Speaker Change: Okay. That's helpful.

Finian O'shea: And then just a small one on the top line. I know you mentioned the one time items were light. Was there any? additional headwind with with timing of fundings. or is it or spread compression as the portfolio moved, just seeing if there's any other headwinds on the top. terms of deployment. Yeah, well, it felt like a bit more of a drop than many. I know there's the non-accruals, there's the one-time, but seeing if there's any just, you know, thinking about the sort of exit rate into second quarter, if there were any irregularities in, yeah, deployment.

Speaker Change: And then just.

Speaker Change: A small one on the.

Speaker Change: Top line I know you mentioned the <unk>.

Speaker Change: One time items were light was there any.

Speaker Change: Additional headwind with with.

Speaker Change: Timing of fundings.

Speaker Change:

Speaker Change: Or is it or spread compression as the portfolio moved.

Speaker Change: Just seeing if there's any other headwinds on the top.

Speaker Change: Right.

Speaker Change: Yeah.

Speaker Change: In terms of.

Speaker Change: Deployment.

Speaker Change: Yeah.

Speaker Change: Yeah well.

Speaker Change: It was a bit felt like a bit more of a drop in many I know there's the non accruals. There is the one time, but seeing if theres any just thinking about the sort of exit rate into second.

Speaker Change: Second quarter, if there were any irregularities and deployments so average portfolio.

Henry Chung: So average portfolio. or or spread. Um, yeah, so average portfolio for the quarter, our portfolio is obviously or was We were a net up this quarter. So I think if you kind of were to look at Q2, just assuming all else being equal, there should be a little bit of a kind of pickup just based on aggregate portfolio size. On the spread piece, the weight average spread of our new investments for the quarter was 565, which was actually in excess of what we've seen over the past two or three quarters here. So with respect to the spread piece of the equation, we actually saw some kind of good origination.

Speaker Change: Or or spread.

Speaker Change: Yes, so the average portfolio.

Speaker Change: For the quarter our portfolio.

Speaker Change: Or was <unk>.

Net up this quarter.

Speaker Change: So I think if you kind of look where to look at Q2, just assuming all else being equal I'm there should be.

Speaker Change: A little bit of a pick up just based on aggregate portfolio size on the spread piece the weighted average spread of our new investments for the quarter was $5 65, which was it was actually.

Speaker Change: In excess of what we've seen over the past.

Speaker Change: Two two or three quarters here so.

Speaker Change: With respect to the spread piece of the equation, we actually saw some good origination in.

Henry Chung: Origination Activity and Attractive Spreads During the Quarantine. Yeah, that was a little bit spreads were actually a bit wider in terms of deployment, platform deployment in Q1 versus for us. We were low 500s in Q4. Henry said mid-clap.

Speaker Change: Origination activity attractive spreads during the quarter.

Speaker Change: Yes that was a little bit spreads were actually a bit wider in terms of.

Speaker Change: Deployment platform deployment.

Speaker Change: In Q1 versus Q4 for us, but I think we were low five hundreds in Q4 and as Henry said that mid five hundreds for Q for Q1.

Finian O'shea: Okay, very good. All for me. Thank you so much.

Speaker Change: Okay very good all for.

Speaker Change: For me. Thank you so much.

Speaker Change: <unk>.

Mickey Schleien: The next question comes from the line of Mickey Schleien of Landenburg Spalman. Your line is now open. Yes, good afternoon. Jason, I wanted to ask you about your sentiment toward the overall market. We've seen, you know, large growth in private PDCs and all that capital that's been introduced into the market. But at the same time, risks have increased. Obviously, volatility has increased. We saw some spread stability. So do you think the market's more imbalanced? And what is your outlook for spread? Yeah, thanks. Thanks a lot, Mickey.

Speaker Change: Our next question comes from the line Nicky Schlang blending Baird.

Speaker Change: Your line is now open.

Speaker Change: Yes, good afternoon.

Speaker Change: Jason I wanted to ask you about June.

Speaker Change: Sentiment towards the overall market, we've seen large growth in private bdcs and all of that capital that's been introduced into the market.

Speaker Change: At the same time.

Speaker Change: Risks of increased.

Speaker Change: Obviously volatility has increased.

Speaker Change: Saw some spread stability.

Speaker Change: Do you think the market's more imbalanced and what is your outlook for spreads.

Speaker Change: Yeah.

Speaker Change: Yeah. Thanks, Thanks, a lot Mickey.

Jason Breaux: I'd probably try to segment the market a bit into... to different. rises up the middle market. Your first comment on on the non traded BDC inflows, that's no doubt significant. Last time I looked at that, we were looking at probably $3 billion or so a month of inflows and those are all coming in. immediately and so that's forcing deployment into the market. right away, as opposed to, you know, capital call structure. where where capital is called as deals become available. That does put pressure, certainly on spreads. And what I would say, though, however, is in that segment of the market, We think about where the $3 billion is coming in.

Speaker Change: I would probably try to segment the market a bit.

Speaker Change: Into.

Speaker Change: Into different.

Speaker Change: Sizes of the middle market.

Speaker Change: Your first comment on the non traded BDC inflows, that's no doubt significant.

Speaker Change: Last time I looked at that we were looking at probably $3 billion or so a month of inflows and those are all coming in.

Speaker Change: Immediately and so that's forcing deployment into the market.

Speaker Change: Right away as opposed to capital call structured vehicles.

Speaker Change: Where where capital is called as deals become available that does put pressure.

Speaker Change: Certainly on spreads and.

Speaker Change: What I would say, though however is in that segment of the market.

Speaker Change: If you think about where the $3 billion is coming in it's generally coming in.

Jason Breaux: It's generally coming in into managers that are deploying into the upper mid-market, typically companies with EBITDAs north of $200 million. And not necessarily surprising, when you're taking in significant inflows, you've got to deploy and scale. But our estimation is 90% of the inflows are focused on the upper mid-market. So that's one piece that I would relay.

Speaker Change: Into managers that are deploying into the upper mid market typically companies with EBITDA north of $200 million.

Speaker Change: And not necessarily surprising when youre taking into significant inflows you've got it you got to deploy and scale, but.

Speaker Change: Our estimation is 90% of the inflows are focused on the upper mid market.

Speaker Change: So that's that's one piece that I would I would relay in terms of.

Jason Breaux: In terms of outlook and deal activity... We started the year. with pretty good activity. And I think there was a fair amount of optimism around activity for the balance of the year that that was certainly impacted. April 9 and the 90 day pause and we're seeing news trickle in daily or weekly on that, but what I do think that that has translated into a fairly meaningful slowdown in deal activity. What did happen was good companies that still came to market were getting deals done in the private market because the public market was shut for a number of weeks.

Speaker Change: Outlook.

Speaker Change: And deal activity we.

Speaker Change: We started the year.

Speaker Change: <unk>.

Speaker Change: With pretty good activity and I think there was a fair amount of optimism around it.

Speaker Change: Activity for the balance of the year that that was certainly impacted.

Speaker Change: Bye.

Speaker Change: April night.

Speaker Change: And in the 90 day pause and we're seeing news trickle in.

Speaker Change: Daily or weekly on.

Speaker Change: On that but but I do think that that has translated into a.

Speaker Change: Fairly meaningful slowdown in deal activity.

Speaker Change: What did happen was good companies that still came to market, we're getting deals done.

Speaker Change: In the private market because the public market was shut for a week.

Speaker Change: It seem to you saw somewhat.

Jason Breaux: That has seemed to thaw somewhat at this point. And what our observation is on the public market is that spreads are a touch wider than where they were pre-liberation day, maybe 25 bits or so. I wouldn't say that we've seen material widening or any widening, frankly, on the private side, which always tends to lag a bit. But my hope is that after we get some resolution on tariffs and or trade deals, that will give some more certainty to the market to start to transact again, which would bring that supply demand imbalance maybe more in line.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Our observation.

Speaker Change: Is that spreads are wider.

Speaker Change: Yeah.

Speaker Change: Or are they.

Speaker Change: Integration.

Speaker Change: Maybe.

Speaker Change: So.

Speaker Change: I wouldn't say that.

Speaker Change: Sure Whiting.

Speaker Change: Frank.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: But.

Speaker Change: But my hope is that after we get some resolution on tariffs.

Speaker Change: <unk> great deals.

Speaker Change: That will get some more certainty to market too.

Speaker Change: Dr Transact again.

Speaker Change: Bring that supply demand balance.

Speaker Change: Maybe.

Jason Breaux: Where we tend to focus is in lower and core, less competition from certainly the non-traded BDCs with the significant inflows. So we are still seeing activity and we are going to be very selective in terms of what we're doing particularly because CCAP on its own is a fully ramped portfolio at this point. So we sit next to a $35 billion private credit platform that is still very active in the market and transacting. For CCAS purposes, we will be very selective in picking which field to participate in.

Speaker Change: Where we focus.

Speaker Change: Is it lower.

Speaker Change: Less competition from certainly the non traded BDC.

Speaker Change: With a significant.

Speaker Change: No.

Speaker Change: We are seeing activity.

Speaker Change: And we are going to be very selective in terms of what we're doing.

Speaker Change: Excuse me.

Speaker Change: Alright.

Speaker Change: It's a fully ramped portfolio at this point so.

Speaker Change: I think it's five.

Speaker Change: $5 billion.

Speaker Change: Credit platform.

Speaker Change: Very active market.

Speaker Change: Thanks.

Speaker Change: Purposes.

Speaker Change: We will be.

Speaker Change: First of all David picking, which which which which skills.

Speaker Change: Yeah.

Mickey Schleien: Jason, if I could follow up. Given all the uncertainty that's out there, a lot of folks are focused on follow on investments, you know, basically investing in their existing portfolio, particularly since everyone's chasing anything that doesn't have any tariff risks. So those spreads are probably not as interesting. But another way to invest in your portfolio is to buy back your stock. Is the board You know, thinking about that, you know, is the discount meaningful enough for that to start to occur? You know, any guidance you could give us on that would be helpful. Yeah, thanks.

Speaker Change: Just a quick follow up.

Speaker Change: So given all the uncertainty that's out there.

Speaker Change: Hi.

Speaker Change: Folks are focused on.

Speaker Change: So on investments.

Speaker Change: Particularly investing in their existing portfolio.

Speaker Change: Since everyone's chasing anything.

Speaker Change: Does it have any tariff risks.

Speaker Change: So probably not as interesting.

Speaker Change: But another way to invest in your portfolio was to buy back your stock.

Speaker Change: The board.

Speaker Change: Thinking about that.

Speaker Change: Okay.

Speaker Change: Full enough for that to start to move.

Speaker Change: Guidance, you could give us.

Speaker Change: It would be helpful. Yes.

Jason Breaux: Thanks, Mickey. This is something that we continue to evaluate. especially now where our shares are trading relative to where they were trading. at the beginning of the year. The buybacks certainly provide short-term benefit, and I would note that we... You've always taken a long-term view with CCAP and positioning it for the long term. which includes having a stable equity base. Our goal is to keep our portfolio invested in high quality assets, not chase yields, earn our dividend and generate a stable NAV. We're also mindful of the amount of buybacks we could do given where we are in terms of the size of the portfolio.

Speaker Change: Thank you.

Speaker Change: This is something that we continue to.

Speaker Change: Evaluating.

Speaker Change:

Speaker Change: Especially now where.

Speaker Change: Trading relative to where they were trading.

Speaker Change: At the end of the year.

Speaker Change: So buybacks certainly provide.

Speaker Change: Short term benefit.

Speaker Change: And I would note that we have.

Speaker Change: We've always taken a long term view with.

Speaker Change: <unk> been pushing it to the long term.

Speaker Change: I would include.

Speaker Change: Stable equity base.

Speaker Change: Our goal is to keep.

Speaker Change: Our portfolio investing in high quality assets.

Speaker Change: T O.

Speaker Change: Our dividend.

Speaker Change: And generate stable now.

Speaker Change: Where.

Speaker Change: Mindful of the amount of buybacks.

Speaker Change: Given where we are.

Speaker Change: The portfolio.

Mickey Schleien: uh... the leverage profile that we have today So, the short answer is we will continue to look at it, but there are various considerations that we think about in light of Biden.

Speaker Change: The leverage profile.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Well to answer it.

Speaker Change: We will continue to look at it.

Speaker Change: There are.

Speaker Change: Great consideration that we've taken out in light of that.

Speaker Change: Okay.

Mickey Schleien: I understand.

Unknown Executive: Those are all my questions. Thank you for your time this afternoon. Thank you. Thank you so much.

Speaker Change: Thanks, Tim.

Speaker Change: Those are all my questions. Thank you for your time.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you.

Jason Breaux: I'd now like to hand back the call over to Jason for final remarks. Well, thank you everyone for your time and attention today and for the questions. We certainly appreciate your interest in CCAP and we look forward to speaking with you soon.

Speaker Change: I'll hand back over to Jason for final remarks.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Thank you everyone.

Speaker Change: Your time and attention today.

Speaker Change: We certainly appreciate it.

Speaker Change: You're interested in.

Speaker Change: Seek app.

Speaker Change: And we look forward to speaking with you soon.

Unknown Executive: Thank you for attending today's conference call. You may now disconnect. Goodbye.

Speaker Change: Thanks.

Speaker Change: Today's conference call you may notice.

Speaker Change: Goodbye.

Speaker Change: Yeah.

Speaker Change: Okay.

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Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.