Q3 2025 MidCap Financial Investment Corp Earnings Call

Speaker #4: Please stand by . Your meeting is about to begin . Good morning and welcome to the earnings conference call for the period ended September 30th , 2025 for MidCap Financial Investment Corporation .

Speaker #4: At this time , all participants have been placed in a listen only mode . The call will be open for a question and answer session following the speaker's prepared remarks .

Speaker #4: If you wish to ask a question at that time , simply press Star one on your telephone keypad . If you would like to withdraw your question , press star two .

Speaker #4: I will now turn the call over to Elizabeth Besen Investor Relations Manager for MidCap Financial Investment Corporation .

Speaker #5: Thank you . Operator and thank you , everyone for joining us today . We appreciate your interest in MidCap Financial investment Corporation . Speaking on today's call are Tanner Powell Chief Executive Officer , Ted McNulty president , and Kenneth Seifert Chief Financial Officer , Howard Ridgway , Executive chairman .

Speaker #5: And Greg Hunt , our former CFO , who currently serves as a senior advisor , are on the call and available for the Q&A portion of today's call .

Speaker #5: I'd like to advise everyone that today's call and webcast are being recorded . Please note that they either property of MidCap Financial Investment Corporation and that any unauthorized broadcast , in any form , is strictly prohibited .

Speaker #5: Information about the audio replay of this call is available in our press release . I'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward looking information .

Speaker #5: Today's conference call and webcast may include forward looking statements . You should refer to our most recent filings with the SEC for risks that apply to our business , and that may adversely affect any forward looking statements we make .

Speaker #5: We do not undertake to update our forward looking statements or projections are less required by law to obtain copies of our SEC filings , please visit either the SEC's website at gov or our website at MidCap Financial .

Speaker #5: I'd also like to remind everyone that we've posted a supplemental financial information package on our website , which contains information about the portfolio as well as the company's financial performance throughout today's call , we will refer to MidCap Financial Investment Corporation as either MFC or the BDC and will use MidCap Financial to refer to the lender .

Speaker #5: Headquartered in Bethesda , Maryland . At this time , I'd like to turn the call over to Tanner Powell chief Executive Officer .

Speaker #6: Thank you . Elizabeth . Good morning , everyone , and thank you for joining us for MidCap Financial Investment Corporation's third quarter earnings conference call .

Speaker #6: To begin today's call , I'll provide an overview of Mfc's third quarter results and the significant repayment from our investment in our aircraft lending portfolio company .

Speaker #6: Aircraft leasing portfolio company that we highlighted on our call last quarter . I'll also share some thoughts on the outlook for our dividend .

Speaker #6: Following that , I'll hand the call over to Ted , who will share our perspective on the current market environment . Walk through our investment activity for the quarter and provide a portfolio update .

Speaker #6: Kenny will then review our financial results in detail and recent financing related activities . Yesterday , after market close , we reported results for the third quarter .

Speaker #6: Net investment income , or NII per share , was $0.38 for the September quarter , which corresponds to an annualized return on equity , or ROE , of 10.3% .

Speaker #6: GAAP net income per share was $0.29 for the quarter , which corresponds to an annualized ROE of 8% . As discussed last quarter's call , we're pleased to report that Merck's our aircraft leasing portfolio company , repaid approximately $97 million to Emphyse during the quarter .

Speaker #6: Nav per share was $14.66 at the end of the at the end of September , down 0.6% compared to the prior quarter . The decline in Nav was primarily due to a handful of positions that were added to Nonaccrual status , partially offset by a gain on our investment in Merck's .

Speaker #6: The increase in Non-accruals reflects company specific issues , and we believe is not representative of a broader deterioration in credit quality during the September quarter .

Speaker #6: MFC made $130 million of new commitments across 21 transactions . We believe MidCap Financial strong incumbent position continues to be a significant competitive advantage , as evidenced by the fact that slightly more than half of our new commitments by number were made to existing portfolio companies in a muted M&A environment , incremental commitments are important .

Speaker #6: Source of deal flow . While sourcing assets is generally considered to be among the biggest challenges for many market participants in the market environment , MFC benefits from access to assets sourced by MidCap Financial , one of the largest and most experienced lenders in the middle market , which is consistently ranked near at the top of our league tables of the league tables , our affiliation with MidCap Financial provides a significant deal sourcing advantage for MFC .

Speaker #6: We are fortunate to have access to a significant volume of commitments originated by MidCap Financial, which allows MFC to select assets that we believe have the most attractive risk-reward characteristics.

Speaker #6: During the September quarter , MidCap Financial closed approximately $5.8 billion of commitments . MidCap Financial has what we believe one of the largest direct lending teams in the US , with over 200 investment professionals .

Speaker #6: MidCap Financial was founded in 2009 , has a long track record , includes closing on approximately 150 billion of lending commitments since 2013 .

Speaker #6: This origination track record provides us with a vast dataset of middle market , company financial information across all industries , and we believe that this makes MidCap Financial one of the most informed and experienced middle market lenders in the market .

Speaker #6: Key members of MidCap Financial management team have been working together for more than 25 years , resulting in strong collaboration and an enhanced ability to navigate challenging , challenging market conditions , leading to improved credit quality and risk management .

Speaker #6: We believe the core middle market offers attractive investment opportunities across cycles and does not compete directly with either the broadly syndicated loan market or the high yield market .

Speaker #6: MFC is affiliation with MidCap Financial has enabled us to successfully build a portfolio of predominantly first lean loans to sponsor backed companies . Moving on to our aircraft leasing company .

Speaker #6: As discussed on last quarter's call during the September quarter , Merck's completed a sale transaction covering the majority of its owned aircraft . In addition , Merck's received additional payments from insurers related to three aircraft detained in Russia .

Speaker #6: Both the sale transaction and the insurance proceeds exceeded the assumptions in Merck's June valuation , resulting in a $16.6 million gain recorded during the September quarter .

Speaker #6: Merck's were paid approximately 97 million to MFC on a net basis . During the September quarter , approximately 72 million of the Paydown was applied to equity , and the remaining 25 million was applied to the revolver .

Speaker #6: At the end of September , six , investment in Merck's totaled 105 million at fair value , representing 3.3% of the portfolio , down from 5.6% at the end of June , which reflects the $97 million paydown and a net gain recorded during the quarter .

Speaker #6: As part of the sale transaction , Merck's expects to receive approximately 25 million of additional consideration by the end of 2025 or in early 2026 , which will be paid to MFC in further reduce our exposure .

Speaker #6: Let me remind you about what remains at Marks Mfc's remaining investment in Merck's consists of four aircraft , plus the value associated with Merck's servicing platform .

Speaker #6: Merck's earns income through its servicing activities for navigator , Apollo's dedicated aircraft leasing fund , which currently owns 39 aircraft . Having fully deployed its equity commitments , navigator is in the harvest period and as such the fund is opportunistically monetizing assets to optimize fund level returns .

Speaker #6: Merck's received a remarketing fee on each aircraft sale at the end of September . The servicing business represented approximately 25% of the total value of Merck's .

Speaker #6: The servicing component of Merck's will naturally decline as servicing income is received . Turning to our dividend on November 4th , 2025 , our Board of Directors declared a quarterly dividend of $0.38 per share for stockholders of record .

Speaker #6: As of December 9th , 2025 , payable on December 23rd , 2025 . Before I turn the call over to Ted , I would like to take a moment and make a few comments about our dividend giving increasing investor focus in light of the recent fed cuts and market expectations for additional cuts and the resultant decline in the Sofr forward curve due to the asset sensitive nature of our balance sheet , all else , equal declines in base rates will put pressure on net investment income .

Speaker #6: For context , the current sofr forward curve is projected to trough around mid to late 2026 , at around 3% , which is roughly 80 to 90 basis points below current levels .

Speaker #6: As shown on page 16 . In the earnings supplement , 100 basis point reduction in base rates would reduce annual net investment income by approximately $9.4 million , or $0.10 per share , which includes the impact of incentive fees .

Speaker #6: We are actively working on a couple of initiatives to help offset the impact to offset some of the impact from declining base rates .

Speaker #6: These initiatives , including pursuing additional paydowns from Merck's and resolving certain non-accrual and other earning assets post quarter end . We made a couple of enhancements to our capital structure , which will also improve Mfc's earnings power , which Kenny will discuss .

Speaker #6: With that , I will now turn the call over to Ted .

Speaker #7: Thank you . Tanner . Good morning everyone . Starting with the market backdrop , the US economy has remained resilient , which has helped ease concerns about a recession .

Speaker #7: Inflation remains elevated . Consumer spending and business spending have been strong . Although consumer sentiment is worsening in response to rising unemployment risks , the Federal Reserve cut interest rates by 25 basis points in September , the fed cut another 25 basis points in October .

Speaker #7: Torsten Slok , Apollo's chief economist , says private labor data suggests that the labor market is doing okay . He also sees growing upside risk to inflation , driven by tariffs , a weakening US dollar , a strong economy and wage pressures in certain sectors .

Speaker #7: As the significant tariff driven volatility has eased . And there's more clarity with respect to the trajectory of rates . We're increase in sponsor M&A activity .

Speaker #7: That said , given the significant capital raise for direct lending , we continue to see pressure on both spreads and OID . We believe the core middle market where we are focused does not compete directly with either the broadly syndicated loan market or the high yield bond market , regardless of recent M&A activity levels .

Speaker #7: We see that many of our borrowers continue to have add on financing needs , which is an important source of deal flow . Next , I'm going to spend a few minutes reviewing our third quarter investment activity and then provide some detail on our investment portfolio in the September quarter , we continued to deploy capital into assets with what we believe to be strong credit attributes .

Speaker #7: As mentioned , Mfc's new commitments in the September quarter totaled 138 million , with a weighted average spread of 521 basis seeing an points across 21 different companies .

Speaker #7: Despite the competitive environment , MidCap Financial has remained disciplined in its underwriting . The weighted average net leverage on new commitments was 3.8 times in the September quarter , down from four times in the prior quarter .

Speaker #7: Our fee structure , which is one of the lowest among listed BDCs , allows us to generate what we believe to be attractive , Roes even at current spreads .

Speaker #7: Gross fundings , excluding revolvers and mercs , totaled 142 million . Sales and repayments , excluding revolvers and mercs , totaled 197 million .

Speaker #7: Net revolver fundings were approximately $3 million, and as previously mentioned, we received a $97 million net paydown for mercs in aggregate.

Speaker #7: Net repayments for the September quarter were 148 million , excluding the 97 million net repayment for mercs , net repayments for the quarter totaled 51 million .

Speaker #7: Shifting now to our investment portfolio at the end of September , our portfolio had a fair value of 3.18 billion and was invested across 246 companies , across 48 different industries .

Speaker #7: Direct origination and other represented 95% of the total portfolio, up from 92% at the end of June, primarily driven by the Merc's paydown.

Speaker #7: Mercs accounted for 3.3% of the total portfolio at the end of September , down from 5.8% at the end of June . At the end of September , the Non-directly originated loans acquired from the closed end funds represented approximately 2% of the portfolio .

Speaker #7: All of these figures are on a fair value basis with respect to recent headlines , we have no exposure to either First Brands or Tricolor specific to the direct origination portfolio .

Speaker #7: At the end of September, 98% was first lien and 91% was backed by financial sponsors, both on a fair value basis.

Speaker #7: The average funded position was 12.9 million . The median EBITDA was approximately 51 million . Approximately 95% had one or more financial covenants on a cost basis .

Speaker #7: Covenant quality is a key point of differentiation for the core middle market . As substantially all of our deals have at least one covenant .

Speaker #7: The weighted average yield at cost of our direct origination portfolio was 10.3% on average for the September quarter , down from 10.5% for the June quarter .

Speaker #7: At the end of September , the weighted average spread on the directly originated corporate lending portfolio was 559 basis points , down nine basis points compared to the end of June .

Speaker #7: Underlying portfolio company credit metrics showed a slight improvement quarter over quarter . Although we saw an uptick in investments on Non-accrual status . We observed a modest decrease in borrower net leverage or debt to EBITDA , with the weighted average leverage decreasing to 5.29 times at the end of September , down from 5.32 times at the end of June .

Speaker #7: This trend reflects the lower leverage on new commitments , which helped offset increases in certain existing investments . Additionally , the weighted average interest coverage ratio improved slightly to 2.2 times , up from 2.1 times last quarter .

Speaker #7: Looking ahead , all else equal , if base rates decline is currently expected , we anticipate a positive impact on portfolio company credit quality through even higher interest coverage ratios .

Speaker #7: These metrics are generally based on financial information . As of the end of June 2025 , we believe the steady revolver utilization rate we see from our borrowers is an indicator of greater financial stability and provides us with incremental and more frequent financial information , revolving facilities provide insight into a company's liquidity position through draw behavior .

Speaker #7: At the end of September, the percentage of our leveraged lending revolver commitments that were drawn was essentially flat compared to the prior quarter.

Speaker #7: During the quarter , we reinstated a portion of our investment in New ERA to accrual status following a restructuring , which converted our first loan debt position into a combination of first lien debt and preferred equity .

Speaker #7: Conversely , we place five investments on Nonaccrual status due to company specific challenges , noting that one of these investments was acquired in last year's mergers .

Speaker #7: Portion of our investment in Lendingpoint was moved to Nonaccrual status in anticipation of a forthcoming restructuring . In total investments on Nonaccrual status represented 3.1% of the portfolio at fair value , up from 2% at the end of the prior quarter .

Speaker #7: Subsequent to quarter end , we were repaid on our position in Global Eagle , a position acquired in the mergers , which was on Nonaccrual toward the end of October , we became aware that one of our portfolio companies , Renovo , would be filing for bankruptcy .

Speaker #7: The company filed an early November . As of September 30th , MFC had a $7.9 million exposure to the company . Pic income declined to 5.1% of total investment income for the September quarter , and 5.8% over the LTM period .

Speaker #7: Our Pic income remains relatively low compared to other BDCs , which we view as a positive indicator of portfolio health and reflects our focus on cash pay investments .

Speaker #7: With that , I will now turn the call over to Kenny to discuss our financial results in detail .

Speaker #8: Thank you , Ted , and good morning , everyone . Total investment income for the September quarter was approximately $82.6 million , up $1.3 million , or 1.6% , compared to the prior quarter .

Speaker #8: The increase was primarily driven by higher prepayment and fee income, partially offset by a decline in recurring interest income, which is due to a tightening of base rates.

Speaker #8: A modest uptick in non-accruals , and a slightly lower average portfolio size requirement . Income was approximately $3.2 million , up from 1.2 million last quarter .

Speaker #8: Our fee income was 458,000 , up from $220,000 last quarter . Dividend income was $200,000 , flat quarter over quarter . The weighted average yield at cost of our directly originated lending portfolio was 10.3% on average for the September quarter .

Speaker #8: This is down from 10.5% last quarter due to the aforementioned tightening in rates . Net net expenses for the quarter were $47.3 million , up from 44.9 million in the prior quarter .

Speaker #8: This increase was primarily driven by higher incentive fees , mythic stated . Incentive fee rate is 17.5% and is subject to a total return hurdle , with a rolling 12 quarter lookback .

Speaker #8: Given the total return hurdle feature and the net loss incurred during the lookback period , incentive fee for the September quarter was $5.8 million , or 14.1% of incentive fee , net investment income .

Speaker #8: Other G&A expenses totaled $1.6 million for the quarter , and administrative service expenses totaled $1 million , both figures are essentially unchanged from the prior quarter and in line with our previously communicated expectations of 1.6 million and 1 million , respectively , for the September quarter .

Speaker #8: Net investment income per share was $0.38 and GAAP earnings per share were net income per share was $0.29 . These results correspond to an annualized ROE based net investment income of 10.3% , and an annualized return on equity based on net income of 8% .

Speaker #8: Results for the quarter , including net loss of approximately $7.9 million , excuse me , or $0.08 per share , primarily due to losses on a handful of investments .

Speaker #8: As previously mentioned, turning to the balance sheet, at the end of September, the portfolio had a fair value of $3.18 billion.

Speaker #8: Total principal debt outstanding of $1.92 billion , and total net assets stood at $1.37 billion , or 14.6 $0.06 per share . Company ended the quarter at net leverage of 1.35 x , with average net leverage , excluding the impact of Merck's equating to 1.37 x .

Speaker #8: This was up slightly from the prior quarter's average of 1.35 x gross fundings for the quarter , excluding revolvers , totaled $142 million .

Speaker #8: Net repayments for the quarter were $148 million . Excluding the $97 million repayment from Merck's net repayments for the quarter would have been 51 million .

Speaker #8: Turning to the liability side of the balance sheet , we have been focused extending our debt maturities and reducing our financing costs . On October 1st , we amended our revolving credit facility and extended the final maturity to October 2030 .

Speaker #8: Part of this amendment , the funded spread on the facility was reduced by ten basis points from 197.5 basis points to 187.5 basis points , just a reminder , this includes the ten basis points of credit spread adjustment .

Speaker #8: The unused fee was reduced from 37.5 basis points to 32.5 basis points . Size of the facility was reduced by $50 million to $1.61 billion .

Speaker #8: The remaining material terms of the facility were unchanged as a result of this amendment. We expect to recognize a one-time expense of approximately $1.5 million in the December quarter due to the acceleration of unamortized debt issuance costs associated with one lender whose commitment was reduced.

Speaker #8: In addition , in October , we upsized and repriced music Bethesda one CL , which originally priced in September 2023 , we increased the size of the CLO collateral from 400 million to 600 million .

Speaker #8: As part of this reset , we sold through this single tranche , generating approximately $456 million of relatively low cost secured debt , which equates to a blend advance rate of 76% .

Speaker #8: The blended cost of the notes sold was 161 basis points . Spreads on middle market CLO debt chances have tightened considerably since this CLO originally priced spread on the senior tranche on CLO reset was 149 basis points , compared to 240 basis points when the CLO originally priced .

Speaker #8: Tightening of 91 basis points . CLO has a reinvestment period of four years , and the net proceeds from CLO transaction were used to repay borrowings under our revolving credit facility .

Speaker #8: As discussed on prior calls , we continue to view Clos as an attractive source of term financing . We will recognize a one time expense of approximately $1.8 million in the December quarter related to the reset , which reflects the acceleration of Unamortized debt issuance costs for the original CLO .

Speaker #8: As always , MFC benefited from MidCap Financial and Apollo's experience and expertise in CLO management and structuring . This transaction . While these financing transactions will result in approximately $3.3 million of one time expenses in the December quarter , the expected reduction in financing costs is expected to lead to a rapid payback period .

Speaker #8: Weighted average cost of debt for the September quarter was 6.37% , weighted average spread on our floating rate liabilities will decline from 195 basis points as of September 30th to 176 basis points , a 19 basis point reduction .

Speaker #8: This decrease is driven by both the amendment of the revolving credit facility and the CLO reset . This concludes our prepared remarks . Operator please open the call to questions .

Speaker #4: Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two.

Speaker #4: Once again , that is star one . To ask a question and we'll pause for just a moment to allow everyone a chance to join the queue .

Speaker #4: And we will take our first question from Aaron Ciganovic with Truist Securities . Please go ahead . Please go ahead . Aaron , your line is open .

Speaker #9: Apologies that it needed . I'd just like to to discuss the increases in in Nonaccrual . There . It wasn't a lot . You know , you know , up maybe a percent or so on .

Speaker #9: It cost . But there were several companies , you know , is this if you could just talk a little bit about what is driving this , is there any kind of theme between them ?

Speaker #9: Are they tariff related ? Maybe just a little bit more detail around the issues that were affecting those companies ?

Speaker #7: Yeah , sure . Aaron , this is Ted . Thanks for the question . You know , if you look at the companies that went on Nonaccrual , there's not really a theme that ties them all together .

Speaker #7: You know , we have , you know , one that was impacted by tariffs . You know , we have one that does have some pressure from , you know , weakened consumer sentiment .

Speaker #7: But overall , you know , not a real theme . Very idiosyncratic across each one .

Speaker #9: Okay . And in terms of the , you know , the increase in M&A activity that you're seeing in the marketplace , is this something that you feel like will be sustainable through 2026 ?

Speaker #9: Maybe just a little a little more ? Your thoughts on on the outlook for for investing environment ?

Speaker #7: Yeah , I .

Speaker #10: Mean I think yeah , sure . Go for it .

Speaker #6: No . Go ahead Ted . .

Speaker #7: Okay . Sure . Yeah . I mean , Aaron , I think , you know , there's a couple factors at play . You know , one , you have , you know , some private equity companies or held companies that have been in the portfolio for a long time .

Speaker #7: You also have dry powder . And so you need a combination of putting money to work , as well as returning capital back to the LPs .

Speaker #7: So that so from that perspective , you know , there should be ongoing demand . You also have with , you know , kind of tariffs , not going away , but at least you know , some of that volatility being muted as we talked about a little more certainty , which could narrow the bid ask spread between buyer and seller .

Speaker #7: And then with rates starting to come down and you're kind of some consensus around where , you know , the curve is going to shake out , I think Tanner mentioned , you know , troughing mid next year , around 3% , you start to see , you know , the financing costs come down and the financing , the cost , the certainty of that financing or the cost , you know , starts to stabilize .

Speaker #7: So all those factors should lead to ongoing activity .

Speaker #9: Great . Thank you . Appreciate it .

Speaker #4: Thank you . And we will take our next question from Melissa Waddell with JP Morgan . Please go ahead .

Speaker #11: Good morning . Thanks for taking my questions . I wanted to revisit the comment you made about some of the mitigating actions that you're you're taking to help offset the impact of lower base rates .

Speaker #11: I realize that those things can take a while to ramp up , and it can take some time to rotate assets . I'm curious how your team is evaluating the timing difference there and how that could impact dividend decisions .

Speaker #11: Essentially , how long might you wait to , give those efforts time to kick in ?

Speaker #6: Yeah , sure . Thanks , Melissa . When we look at deployment , you know , as as we've alluded to , quite a bit , we're very lucky to be roughly 3 billion of a sourcing engine for , for 50 billion .

Speaker #6: And so have a lot of opportunities for deployment in a improving M&A market . And importantly , when we look at deployment and I think this rhymes with our approach with respect to the proceeds , we generated from the sales of the broadly syndicated and high yield loans , we want to do it in a deliberate manner .

Speaker #6: And importantly , instead of just getting right back to to target leverage from the proceeds immediately , we want to continue to one not overindexed in any one market .

Speaker #6: And then also take the opportunity, which we're afforded by virtue of that really wide origination funnel, to be very granular in what we're doing.

Speaker #6: And so importantly , all things being equal , you'd love to get right back up to to target leverage . And in the case of Merck's , we've gotten $97 million back .

Speaker #6: And we anticipate another 25 million , which was otherwise only earning 2.5% on our balance sheet . So clearly , a nice accretion opportunity .

Speaker #6: But when we go to deploy , it's got to be balanced by . And even if it does take a little bit of time , we want to on the side of of creating a really , really granular portfolio .

Speaker #6: And importantly , the other aspect of that is , of course , now , as Kenny alluded to , having reset our first CLO down 90 basis points and upsized are all in secured cost of capital , which is our financing strategy to become more secured , heavy in our in our liability side is roughly 1.75 and putting us in a good position to be able to still generate nice nim in the in the in what is very clearly a tightening spread environment or a tight spread environment .

Speaker #6: So the conclusion is we can do it quickly . We want to be we want to be measured and we want to do it consistent with how we've deployed across a really diverse pool of 244 Obligors in our portfolio .

Speaker #11: I appreciate that detail. You mentioned portfolio leverage as part of your answer. Can you give us an update on how you're thinking about portfolio leverage in the context of this environment, given where spreads are right now?

Speaker #11: Thanks .

Speaker #6: Yeah . The the our target for leverage is unchanged . And we would endeavor over the next period of time to to get back to the one four level .

Speaker #6: You know , we do think , as we've said in the past , that the execution through very , very attractive levels of investment grade within the CLO is , is , is indicative of our confidence in being able to run at a little bit higher leverage level .

Speaker #6: And so we would endeavor to get back to that , that that one four level again , drawing on the comment to your previous question again , but but doing it in a , in a measured way .

Speaker #11: Thank you .

Speaker #4: Thank you . And once again , if you would like to ask a question , please press the star and one on your telephone keypad now and we'll pause for just one more moment to allow any further questions to queue .

Speaker #4: And we will take our next question from Paul Johnson with KBW . Please go ahead .

Speaker #12: Hey . Good morning . Thanks for taking my question . I only have just one . I mean , with the the recent just liability amendments and I guess , you know , addressing kind of looks like you're making room to kind of address the upcoming bond maturity , but kind of getting your ducks in a row , I guess on the liability side , does that , does that change anything around ?

Speaker #12: You know , your interest and potentially repurchasing shares ?

Speaker #6: Yeah . Thanks , Paul . I think , you know , when we look at share repurchases , which are obviously , you know , very topical now , in light of where BDCs have , have have traded as , as of recently , you know , we have been , you know , an active repurchase historically .

Speaker #6: It is a very compelling tool for driving shareholder value , which of course needs to be weighed against liquidity . And where we stand in terms of leverage and outlook .

Speaker #6: Importantly , of course , weighed against the opportunity to to deploy and to to new to new loans . But but that said , you know , we we do believe , you know , as we have in the past , that it is a is a compelling , compelling tool .

Speaker #6: And , you would note also on on share repurchases , Paul , historically , it has been our view that instead of implementing a ten B five , we would prefer to to to to utilize , share repurchases when when the window is open .

Speaker #6: And thus we can have the latest and greatest information , which obviously limits the amount of time you can be repurchasing . But but notwithstanding , we do , we do believe it's compelling and we have nice room under our current authorization .

Speaker #12: Thank you . Very helpful . That's all for me .

Speaker #4: Thank you . And once again , if you would like to ask a question , please press the star and one on your telephone keypad .

Speaker #4: Now . And we will take our next question from Kenneth Lee with RBC Capital Markets . Please go ahead .

Speaker #13: Hey . Good morning . Thanks for taking my question . This may have been already covered . Unfortunately , I'm just juggling a few calls .

Speaker #13: What's the latest and any update thoughts around dividend coverage ? Just given the current rate outlook there ? Thanks .

Speaker #10: Yeah , sure .

Speaker #6: You know , when when we look at the the dividend , Ken , you know , we were able to meet $0.38 . You know benefiting from a slightly lower incentive fee in the current quarter .

Speaker #6: And then as we mentioned in the prepared remarks , we do have a considerable proceeds from Merck's that were yielding on our books a significantly lower yield .

Speaker #6: So that's a nice accretion opportunity for us . And then we've also undertaken an opportunity in the current market environment , which is is though spreads on our assets have come down .

Speaker #6: We've been able to remark our liabilities . And as that plays through our numbers between those dynamics and then in addition to the fact that there is an opportunity to work through our our nonaccrual positions , those those three drivers give us an opportunity to to mitigate the effects of lower base rates .

Speaker #6: And so the board has made a decision at the at the current moment to leave the dividend intact . And then as we see those , those three levers that we have playing through and we assess importantly the the actual trajectory of rates versus what's anticipated , you know , we will continue to to reevaluate .

Speaker #6: We also did call out , you know , 100 basis point decline in rates would be about $0.10 of annual NII . And thus , you know , taking into account , you know , what the actual directory of rates is against those , those three levers will enable us to make kind a more informed decision as we move forward over the coming quarters .

Speaker #13: Gotcha . Super helpful there . That's all I had . Thanks .

Speaker #6: Thanks , Ken .

Speaker #4: Thank you . And that is star and one to ask a question . We will pause for just another moment to allow any further questions to queue .

Speaker #4: And at this time, there are no further questions in the queue. I will now turn the meeting back to Tanner Powell for any closing remarks.

Speaker #6: Thank you . Operator . Thank you everyone for listening to today's call . On behalf of the entire team . We thank you for your time today .

Speaker #6: Please feel free to reach out to us with any other questions and have a good day .

Speaker #4: Thank you . This brings us to the end of today's meeting . We appreciate your time and participation . You may now disconnect .