Q4 2025 PennantPark Floating Rate Capital Ltd Earnings Call

All participants have been placed in a listen only mode. The call will be open for a Q&A session.

<unk> session. Following the Speakers' remarks, if you'd like 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 on your telephone keypad. It is now my pleasure to turn the call over to Mr. Art, Penn Chairman and Chief Executive Officer of pennant Park floating rate.

Capital Mr. Penn You May begin your conference.

Thank you and good morning, everyone welcome dependent bark floating rate capital's fourth fiscal quarter 2025 earnings conference call I'm joined today by Rick <unk>, Our Chief Financial Officer, Rick. Please start off by disclosing some general conference call information and included discussion about forward looking statements.

Thank you art I'd like to remind everyone that today's call is being recorded and is the property of pennant park floating rate capital.

Unauthorized broadcast of this call in any form is strictly prohibited.

An audio replay of the call will be available on our website.

I'd also like to call your attention to the customary safe Harbor disclosure in our press release regarding forward looking information.

Our remarks today May also include forward looking statements and projections. Please refer to our most recent SEC filings for important factors that could cause actual results to differ materially from these projections, we do not undertake to update our forward looking statements unless required by law.

Copies of our latest SEC filings. Please visit our website at pennant Park Dot com or call us at 212905 1000.

At this time I'd like to turn the call back to our chairman and Chief Executive Officer Art Penn.

Thanks, Rick.

I'll begin today's call with an overview of our fourth quarter results and recent strategic initiatives, including the $250 million portfolio acquisition, and our new joint venture PSL too.

Speaker #1: Please stand by. Good morning, and welcome to the PennantPark Floating Rate Capital's fourth fiscal quarter 2025 earnings conference call. Today's conference is being recorded.

I'll then share our perspective on the current market environment and how <unk> is positioned for continued growth.

Speaker #1: At this time, all participants have been placed in a listen-only mode. The call will be open for a Q&A session following the speaker's remarks.

Rick will conclude with a detailed review of the financials and then we will open up the call for Q&A.

Speaker #1: If you would like to ask a question at that time, simply press *1 on your telephone keypad. If you would like to withdraw your question, press *2 on your telephone keypad.

For the quarter ended September 30 core net investment income for the quarter was 28 per share.

We previously announced the acquisition of a $250 million portfolio and the formation of a new joint venture with an initial targeted portfolio of $500 million.

Speaker #1: It is now my pleasure to turn the call over to Mr. Arthur Penn, Chairman and Chief Executive Officer of PennantPark Floating Rate Capital. Mr. Penn, you may begin your remarks.

These initiatives underscore our focus on enhancing <unk> earnings power through scale diversification and disciplined capital deployment.

Speaker #1: conference. Thank you.

Speaker #2: And good morning, everyone. Welcome to PennantPark Floating Rate Capital's fourth fiscal quarter 2025 earnings conference call. I'm joined today by Rick Allorto, our Chief Financial Officer.

Key pillars of our long term growth strategy.

The portfolio acquisition adds high quality, well known assets that are projected to increase net investment income by $1 <unk> per share on a quarterly basis.

Operator: Rick, please start off by disclosing some general conference call information and include a discussion about forward-looking statements. Thank you, Art. I'd like to remind everyone that today's call is being recorded and is the property of PennantPark Floating Rate Capital. Any unauthorized broadcast of this call in any form is strictly prohibited. An audio replay of the call will be available on our website. I'd also like to call your attention to the Customer Safe Harbor disclosure in our press release regarding forward-looking information. Our remarks today may also include forward-looking statements and projections. Please refer to our most recent SEC filings for important factors that could cause actual results to differ materially from these projections. We do not undertake to update our forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at pennantpark.com or call us at 212-905-1000.

Speaker #2: By disclosing some general conference call information, I will include a discussion. Rick, please start off about forward-looking statements.

Speaker #3: Thank you, Art. I'd like to remind everyone that today's call is being recorded and is the property of PennantPark Floating Rate Capital. Any unauthorized broadcast of this call in any form is strictly prohibited.

The JV with Hamilton Lane, a respected global investor enhances our funding sources and provides a scalable platform for future growth.

The PSL two JV began investing this month and closed $150 million revolving credit facility, which bears interest at so for plus 175 basis points.

Speaker #3: An audio replay of the call will be available on our website. I would also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information.

The credit facility has an accordion feature, allowing total commitments to increase to $350 million.

Speaker #3: Our remarks today may also include forward-looking statements and projections. Please refer to our most recent SEC filings for important factors that could cause actual results to differ materially from these projections.

Our run rate NII is projected to approximate our current dividend as we ramp the PSS L. Two portfolio.

Our game plan is to grow PSL too to be in excess of $1 billion in assets similar to our existing joint ventures.

Speaker #3: We do not undertake to update our forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at pennantpark.com or call us at 212-905-1000.

As we achieve this game plan, our NII should be well in excess of our current dividend.

Regarding the current market environment for private middle market lending, we are encouraged by a steady increase in transaction activity, which we expect will translate into a higher loan origination volumes in the quarters ahead.

Speaker #3: At this time, I'd like to turn the call back to our Chairman and Chief Executive Officer, Arthur Penn.

Operator: At this time, I'd like to turn the call back to our Chairman and Chief Executive Officer, Art Penn. Thanks, Rick. I'll begin today's call with an overview of our fourth quarter results and recent strategic initiatives, including the $250 million portfolio acquisition and our new joint venture, PSSL2. I'll then share our perspective on the current market environment and how PFLT is positioned for continued growth. Rick will conclude with a detailed review of the financials, and then we'll open up the call for Q&A. For the quarter ended 30 September 2025, core net investment income for the quarter was $0.28 per share. We previously announced the acquisition of a $250 million portfolio and the formation of a new joint venture with an initial targeted portfolio of $500 million.

Speaker #2: Thanks, Rick. I'll begin today's call with an overview of our fourth quarter results and recent strategic initiatives, including the $250 million portfolio acquisition and our new joint venture, PSSL2.

Additionally, we continue to provide additional capital to many of our existing portfolio companies as they execute their respective growth initiatives, demonstrating the depth and resilience of our origination platform.

Speaker #2: I'll then share our perspective on the current market environment and how PFLT is positioned for continued growth. Rick will conclude with a detailed review of the financials, and then we'll open up the call for Q&A.

We are optimistic that the increase in transaction activity will also result in opportunities to exit some of our equity co investments and rotate that capital into new current income producing investments.

Speaker #2: For the quarter ended September 30th, Core Net Investment Income for the quarter was $28 per share. We previously announced the acquisition of a $250 million portfolio and the formation of a new joint venture with an initial targeted portfolio of $500 million.

We believe the current environment will favor lenders with strong private equity sponsor relationships and disciplined underwriting areas, where <unk> has a clear advantage.

We continue to see opportunities to deploy capital into core middle market companies, where leverages lower and spreads are higher than in the upper middle market and the core middle market the pricing on high quality first lien term loans and silver plus $4 75 to $5 25, leverages reasonable and we continue to get meaningful covenant.

Speaker #2: These initiatives underscore our focus on enhancing PFLT's earnings power through scale, diversification, and disciplined capital deployment—key pillars of our long-term growth strategy. The portfolio acquisition adds high-quality, well-known assets that are projected to increase net investment income by $0.01 to $0.02 per share on a quarterly basis.

Operator: These initiatives underscore our focus on enhancing PFLT's earnings power through scale, diversification, and disciplined capital deployment, key pillars of our long-term growth strategy. The portfolio acquisition adds high-quality, well-known assets that are projected to increase net investment income by $0.01 to $0.02 per share on a quarterly basis. The JV with Hamilton Lane, a respected global investor, enhances our funding sources and provides a scalable platform for future growth. The PSSL2 JV began investing this month and closed a $150 million revolving credit facility, which bears interest at SOFR plus 175 basis points. The credit facility has an accordion feature, allowing total commitments to increase to $350 million. Our run rate NII is projected to approximate our current dividend as we ramp the PSSL2 portfolio. Our game plan is to grow PSSL2 to be in excess of $1 billion in assets, similar to our existing joint ventures.

Actions, while the upper middle market is primarily characterized as covenant light.

Turning to our current portfolio, we continue to maintain what we believe is one of the most conservatively structured portfolios and the direct lending industry. This.

Speaker #2: The JV with Hamilton Lane, a respected global investor, enhances our funding sources and provides a scalable platform for future growth. The PSSL2 JV began investing this month and closed a $150 million revolving credit facility, which bears interest at SOFR plus 175 basis points.

This is evidenced by having among the lowest pic percentages in the industry at one 8% for the quarter.

As of September 30, our portfolio's median leverage ratio through our debt security was four five times and the portfolio is median interest coverage was two times.

Speaker #2: The credit facility has an accordion feature allowing total commitments to increase to $350 million. Our run rate net interest income (NII) is projected to approximate our current dividend as we ramp the PSSL2 portfolio.

For new platform investments made during the quarter. The median debt to EBITDA was four four times interest coverage was two three times and the loan to value was 44%.

We had three investments on non accrual status and total non accruals represent only 0.4% of the portfolio at cost and 0.2% at market value.

Speaker #2: Our game plan is to grow PSSL2 to be in excess of $1 billion in assets, similar to our existing joint ventures. As we achieve this game plan, our net investment income (NII) should be well in excess of our current dividend.

Operator: As we achieve this game plan, our NII should be well in excess of our current dividend. Regarding the current market environment for private middle market lending, we are encouraged by a steady increase in transaction activity, which we expect will translate into higher loan origination volumes in the quarters ahead. Additionally, we continue to provide additional capital to many of our existing portfolio companies as they execute their respective growth initiatives, demonstrating the depth and resilience of our origination platform. We are optimistic that the increase in transaction activity will also result in opportunities to exit some of our equity co-investments, and rotate that capital into new, current income-producing investments. We believe the current environment will favor lenders with strong private equity sponsor relationships and disciplined underwriting, areas where PFLT has a clear advantage.

These strong credit metrics reflect the rigor of our underwriting process and the discipline of our investment approach.

Speaker #2: Regarding the current market environment for private middle-market lending, we are encouraged by a steady increase in transaction activity, which we expect will translate into higher loan origination volumes in the quarters ahead.

We continue to believe that our focus on core middle market provides us with attractive investment opportunities, where we provide important strategic capital to our borrowers dependent part platform has a demonstrated track record of value creation through the successful financing a growing middle market companies across five key sectors.

Speaker #2: Additionally, we continue to provide additional capital to many of our existing portfolio companies as they execute their respective growth initiatives. Demonstrating the depth and resilience of our origination platform.

These sectors in which we possess deep domain expertise, enabling us to ask the right questions and consistently deliver strong investment outcomes.

Speaker #2: We are optimistic that the increase in transaction activity will also result in opportunities to exit some of our equity co-investments and rotate that capital into new, current income-producing investments.

They are business services consumer government services, and defense healthcare and software technology.

Speaker #2: We believe the current environment will favor lenders with strong private equity sponsor relationships and disciplined underwriting—areas where PFLT has a clear advantage. We continue to see opportunities to deploy capital into core middle-market companies where leverage is lower and spreads are higher than in the upper middle market.

These sectors have been recession resilient tend to generate strong free cash flow and have a limited direct impact to the recent tariff increases and uncertainty.

Core middle market companies typically those with 10 to 50 million of EBITDA operate below the threshold of broadly syndicated loan or high yield markets in the core middle market. Because we are an important strategic lending partner the process and package of terms. We receive is attractive we have many weeks to do our diligence with care, we thoughtfully structure transactions.

Operator: We continue to see opportunities to deploy capital into core middle market companies where leverage is lower, and spreads are higher than in the upper middle market. In the core middle market, the pricing on high-quality first lien turn loans is SOFR plus 475 to 525. Leverage is reasonable, and we continue to get meaningful covenant protections, while the upper middle market is primarily characterized as covenant light. Turning to our current portfolio, we continue to maintain what we believe is one of the most conservatively structured portfolios in the direct lending industry. This is evidenced by having among the lowest PIC percentages in the industry at 1.8% for the quarter. As of 30 September, our portfolio's median leverage ratio through our debt security was 4.5x, and the portfolio's median interest coverage was two times.

Speaker #2: In the core middle market, the pricing on high-quality first lien term loans is SoFR plus 475 to 525. Leverage is reasonable, and we continue to get meaningful covenant protections, while the upper middle market is primarily characterized as covenant light.

Sensible credit statistics meaningful covenants substantial equity cushion is to protect our capital attractive spreads and equity co investment.

Speaker #2: Turning to our current portfolio, we continue to maintain what we believe is one of the most conservatively structured portfolios in the direct lending industry.

Additionally from a monitoring perspective, we received monthly financial statements to help us stay on top of the companies.

Speaker #2: This is evidenced by having among the lowest pick percentages in the industry at 1.8% for the quarter. As of September 30th, our portfolio's median leverage ratio through our debt security was 4.5 times and the portfolio's median interest coverage was two times.

Regarding covenant protections, while the upper middle market has seen significant erosion. Our originated first lien loans consistently include meaningful covenants that safeguard our capital.

Our credit quality since our inception over 14 years ago has been excellent.

<unk> has invested $8 4 billion.

Speaker #2: For new platform investments made during the quarter, the median debt-to-EBITDA was 4.4 times; interest coverage was 2.3 times; and the loan-to-value was 44%. We had three investments on non-accrual status and total non-accruals represent only 0.4% of the portfolio at cost and 0.2% at market value.

Operator: For new platform investments made during the quarter, the median debt to EBITDA was 4.4x, interest coverage was 2.3x, and the loan to value was 44%. We had three investments on non-accrual status, and total non-accruals represent only 0.4% of the portfolio at cost and 0.2% at market value. These strong credit metrics reflect the rigor of our underwriting process and the discipline of our investment approach. We continue to believe that our focus on core middle market provides us with attractive investment opportunities, where we provide important strategic capital to our borrowers. The PennantPark platform has a demonstrated track record of value creation through the successful financing of growing middle market companies across five key sectors. These are sectors in which we possess deep domain expertise, enabling us to ask the right questions and consistently deliver strong investment outcomes.

And 539 companies and we have experienced only 25 non accruals since inception <unk> loss ratio on invested capital is only 11 basis points annually.

As a provider of strategic capital he fuels the growth of our portfolio of companies in many cases, we participate in the upside of the company by making an equity co investment our returns on these equity co investments have been excellent over time.

Speaker #2: These strong credit metrics reflect the rigor of our underwriting process and the discipline of our investment approach. We continue to believe that our focus on core middle market provides us with attractive investment opportunities where we provide important strategic capital to our borrowers.

Overall for our platform from inception through September 30, we've invested over $596 million in equity co investments.

And have generated an IRR of 25% and a multiple on invested capital of two times.

Speaker #2: The PennantPark platform has a demonstrated track record of value creation through the successful financing of growing middle-market companies across five key sectors. These sectors in which we possess deep domain expertise enable us to ask the right questions and consistently deliver strong investment outcomes.

As of September 30th for our portfolio grew to $2 8 billion up from $2 4 billion in the prior quarter.

During the quarter, we continued to originate attractive investment opportunities and invested $633 million in 11, new and 105 existing portfolio companies at a weighted average yield of 10, 5%.

Speaker #2: They are business services, consumer, government services and defense, healthcare, and software and technology. These sectors have been recession-resilient, tend to generate strong free cash flow, and have a limited direct impact from the recent tariff increases and uncertainty.

Operator: They are business services, consumer, government services and defense, healthcare, and software and technology. These sectors have been recession resilient, tend to generate strong free cash flow, and have a limited direct impact to the recent tariff increases and uncertainty. Core middle market companies, typically those with $10 to 50 million of EBITDA, operate below the threshold of broadly syndicated loan or high-yield markets. In the core middle market, because we are an important strategic lending partner, the process and package of terms we receive is attractive. We have many weeks to do our diligence with care. We thoughtfully structure transactions with sensible credit statistics, meaningful covenants, substantial equity cushions to protect our capital, attractive spreads, and equity co-investment. Additionally, from a monitoring perspective, we receive monthly financial statements to help us stay on top of the companies.

As of September 30, the <unk> portfolio totaled $1 1 billion and during the quarter invested $89 million in four new and 14 existing portfolio companies.

We believe that the increase in scale of PSS sales balance sheet, we will continue to drive attractive mid teens return on invested capital and enhance <unk> earnings momentum.

Speaker #2: Core middle market companies typically those with 10 to 50 million of EBITDA operate below the threshold of broadly syndicated loan or high yield markets.

From an outlook perspective, our experienced and talented team and our wide origination funnel are well positioned to generate strong deal flow our mission, our goal or a steady stable and protected dividend stream coupled with the preservation of capital everything we do is aligned to that goal, we seek to find investment opportunities and growing middle market companies.

Speaker #2: In the core middle market, because we are an important strategic lending partner, the process and package of terms we receive are attractive. We have many weeks to do our diligence with sensible credit statistics; care; we thoughtfully structure transactions with meaningful covenants; substantial equity cushions to protect our capital; attractive spreads; and equity co-investment.

That have high free cash flow conversion, we capture that free cash flow, primarily in first lien senior secured instruments and.

Speaker #2: Additionally, from a monitoring perspective, we receive monthly financial statements to help us stay on top of the companies. Regarding covenant significant erosion, our originated protections, while the upper middle market has seen first lien loans consistently include meaningful covenants that safeguard our capital.

And we pay out those contractual cash flows in the form of dividends to our shareholders with that overview I'll turn it over to Rick for a more detailed review of our financial results.

Operator: Regarding covenant protections, while the upper middle market has seen significant erosion, our originated first lien loans consistently include meaningful covenants that safeguard our capital. Our credit quality since our inception over 14 years ago has been excellent. PFLT has invested $8.4 billion in 539 companies, and we have experienced only 25 non-accruals. Since inception, PFLT's loss ratio on invested capital is only 11 basis points annually. As a provider of strategic capital who fuels the growth of our portfolio companies, in many cases, we participate in the upside of the company by making an equity co-investment. Our returns on these equity co-investments have been excellent over time. Overall, for our platform from inception through 30 September 2025, we've invested over $596 million in equity co-investments and have generated an IRR of 25% and a multiple on invested capital of 2x.

Thank you art for the quarter ended September 30th GAAP net investment income and core net investment income were both 28 per share Opra.

Speaker #2: Our credit quality since our inception over 14 years ago has been excellent. PFLT has invested 8.4 billion dollars and 539 companies, and we have experienced only 25 non-accruals.

Operating expenses for the quarter were as follows.

Interest and expenses on debt were $25 8 million base.

Speaker #2: Since inception, PFLT's loss ratio on invested capital is only 11 basis points annually. As a provider of strategic capital, we fuel the growth of our portfolio companies; in many cases, we participate in the upside of the company by making an equity co-investment.

Base management and performance based incentive fees were $13 4 million.

General and administrative expenses were $2 million and provision for taxes was <unk> 2 million.

For the quarter ended September 30, net realized and unrealized change on investments, including provision for taxes was a loss of $10 million.

Speaker #2: Our returns on these equity co-investments have been excellent over time. Overall, for our platform from inception through September 30th, we've invested over $596 million in equity co-investments and have generated an IRR of 25% and a multiple on invested capital of two times.

As of September 30th.

<unk> was $10 83 per share, which is down one 2% from $10 96 per share last quarter.

Speaker #2: As of September 30th, our portfolio grew to $2.8 billion, up from $2.4 billion in the prior quarter. During the quarter, we continued to originate attractive investment opportunities and invested $633 million in 11 new and 105 existing portfolio companies at a weighted average yield of 10.5%.

Operator: As of 30 September, our portfolio grew to $2.8 billion, up from $2.4 billion in the prior quarter. During the quarter, we continued to originate attractive investment opportunities and invested $633 million in 11 new and 105 existing portfolio companies at a weighted average yield of 10.5%. As of 30 September, the PSSL1 portfolio totaled $1.1 billion, and during the quarter, invested $89 million in four new and 14 existing portfolio companies. We believe that the increase in scale of PSSL's balance sheet will continue to drive attractive mid-teens return on invested capital and enhance PFLT's earnings momentum. From an outlook perspective, our experienced, intelligent team, and our wide origination funnel are well-positioned to generate strong deal flow. Our mission and goal are a steady, stable, and protected dividend stream, coupled with the preservation of capital. Everything we do is aligned to that goal.

As of September 30, our debt to equity ratio was one six times and our capital structure is diversified across multiple funding sources, including both secured and unsecured debt.

Subsequent to quarter end, we sold $118 million of assets to the <unk> joint venture and $191 million of assets to the new <unk> to joint venture.

Speaker #2: As of September 30th, the PSSL1 portfolio totaled $1.1 billion and during the quarter invested $89 million in four new and 14 existing portfolio companies.

We used the net proceeds from these sales to pay down our revolving credit facility and reduce our debt to equity ratio to one four times, which is at the lower end of our target range of one four to one six times.

Speaker #2: We believe that the increase in scale of PSSL's balance sheet will continue to drive attractive mid-teens return on invested capital and enhance PFLT's earnings momentum.

Speaker #2: From an outlook perspective, our experienced and talented team, along with our wide origination funnel, is well positioned to generate strong deal flow. Our mission and goal are a steady, stable, and protected dividend stream coupled with the preservation of capital.

As of September 30, our key portfolio statistics were as follows.

Our portfolio remains well diversified comprising 164 companies across 50 industries.

Speaker #2: Everything we do is aligned to that goal. We seek to find investment opportunities in growing middle-market companies that have high free cash flow conversion. We capture that free cash flow primarily in first lien senior secured instruments, and we pay out those contractual cash flows in the form of dividends to our shareholders.

The weighted average yield on our debt investments was 10, 2% and approximately 99% of the debt portfolio is floating rate.

Operator: We seek to find investment opportunities in growing middle market companies that have high free cash flow conversion. We capture that free cash flow primarily in first lien senior secured instruments, and we pay out those contractual cash flows in the form of dividends to our shareholders. With that overview, I'll turn it over to Rick for a more detailed review of our financial results. Thank you, Art. For the quarter ended 30 September 2025, GAAP net investment income and core net investment income were both $0.28 per share. Operating expenses for the quarter were as follows: interest and expenses on debt were $25.8 million, base management and performance-based incentive fees were $13.4 million, general and administrative expenses were $2 million, and provision for taxes was $0.2 million. For the quarter ended 30 September 2025, net realized and unrealized change on investments, including provision for taxes, was a loss of $10 million.

Pik income.

Only one 8% of total interest income.

We had three non accruals, which represent 0.4% of the portfolio at cost and 0.2% at market value.

Speaker #2: With that overview, I'll turn it over to Rick for a more detailed review of our financial results. Thank you, Art. For the quarter ended September 30th, GAAP net investment income and core net investment income were both 28 cents per share.

The portfolio is comprised of 90% first lien senior secured debt.

1% second lien and subordinated debt.

Speaker #2: Operating expenses for the quarter were as follows: interest and expenses on debt were $25.8 million; base management and performance-based incentive fees were $13.4 million; general and administrative expenses were $2 million; and provision for taxes was $0.2 million.

2% in equity of PSL and 7% in equity co investments.

The debt to EBITDA on the portfolio is four five times and interest coverage was two times.

Now, let me turn the call back to art.

Speaker #2: For the quarter ended September 30th, net realized and unrealized change on investments including provision for taxes was a loss of 10 million. As of September 30th, NAV was $10.83 per share which is down 1.2% from $10.96 per share last quarter.

Thanks, Rick and in conclusion, I would like to thank our exceptional team for their continued dedication and our shareholders for their trust and partnership we remain committed to delivering strong performance preserving capital and creating long term value for all stakeholders that concludes our remarks at this time I would like.

Operator: As of 30 September 2025, NAV was $10.83 per share, which is down 1.2% from $10.96 per share last quarter. As of 30 September 2025, our debt to equity ratio was 1.6x, and our capital structure is diversified across multiple funding sources, including both secured and unsecured debt. Subsequent to quarter end, we sold $118 million of assets to the PSSL1 joint venture and $191 million of assets to the new PSSL2 joint venture. We used the net proceeds from these sales to pay down our revolving credit facility and reduce our debt to equity ratio to 1.4x, which is at the lower end of our target range of 1.4x to 1.6x. As of 30 September 2025, our key portfolio statistics were as follows. The portfolio remains well-diversified, comprising 164 companies across 50 industries.

To open up the call to questions.

Speaker #2: As of September 30th, our debt-to-equity ratio was 1.6 times, and our capital structure is diversified across multiple funding sources, including both secured and unsecured debt.

Thank you.

I would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow the signal to reach our equipment again press star one to ask a question we'll pause.

Speaker #2: Subsequent to the quarter end, we sold $118 million of assets to the PSSL1 joint venture and $191 million of assets to the new PSSL2 joint venture.

Cause for a moment to assemble the queue.

We will take our first question from Robert Dodd with Raymond James.

Speaker #2: We used the net proceeds from these sales to pay down our revolving credit facility and reduce our debt-to-equity ratio to 1.4 times, which is at the lower end of our target range of 1.4 to 1.6 times.

Okay.

Hi, guys one.

The portfolio acquisition, particularly I mean, how.

I guess, how did that come about and said we all are there more opportunities like that in and what we did some patterns.

Speaker #2: As of September 30th, our key portfolio statistics were as follows: The portfolio remains well diversified, comprising 164 companies across 50 industries. The weighted average yield on our debt investments was 10.2%, and approximately 99% of the debt portfolio is floating rate.

Obviously, you've got a pool of assets that you don't get to pick and choose I presume.

The value.

Of an acquisition, which in LNG in Vietnam.

Operator: The weighted average yield on our debt investments was 10.2%, and approximately 99% of the debt portfolio is floating rate. PIC income equaled only 1.8% of total interest income. We had three non-accruals, which represent 0.4% of the portfolio at cost and 0.2% at market value. The portfolio is comprised of 90% first lien senior secured debt, 1% second lien and subordinated debt, 2% in equity of PSSL, and 7% in equity co-investments. The debt to EBITDA on the portfolio is 4.5x, and interest coverage was two times. Now let me turn the call back to Art. Thanks, Rick. In conclusion, I'd like to thank our exceptional team for the continued dedication, and our shareholders for their trust and partnership. We remain committed to delivering strong performance, preserving capital, and creating long-term value for all stakeholders. That concludes our remarks.

As to deploying the capital into individual investments.

Thanks, Robert just to take a step back that was a that was another joint venture that we we had with a third party.

Speaker #2: Pick a equal that only accounts for 1.8% of total interest income. We had three non-accruals, which represent 0.4% of the portfolio at cost and 0.2% at market value.

With all of the same assets itself originated assets that we originated actually those were originated a couple of years ago. So spreads are high.

The portfolio very well.

Speaker #2: The portfolio is comprised of 90% first lien senior secured debt; 1% second lien and subordinated debt; 2% in equity of PSSL; and 7% in equity co-investments.

So that was really just an acquisition or more of the same type of assets.

Do you have in <unk> and in fact, many of the same assets that we already have in <unk>.

Got it got it.

And then just.

The point on the market I mean, it does seem like it's.

Speaker #2: The debt-to-EBITDA on the portfolio is 4.5 times and interest coverage was 2 times. Now let me turn the call back to Art.

<unk> ramping up but are you seeing any kind of <unk>.

Vacation I mean, I think obviously.

Logistics companies have been an issue post COVID-19.

Speaker #1: Thanks, Rick. In conclusion, I'd like to thank our exceptional team for the continued dedication and our shareholders for their trust and partnership. We remain committed to delivering strong performance preserving capital and creating long-term value for all stakeholders.

Right.

Yes.

Are you seeing any kind of again.

<unk>, what you would like to do with what is coming to market in terms of still some things happening COVID-19 <unk> or late <unk>.

Speaker #1: That concludes our remarks. At this time, I would like to open up the call to questions.

Operator: At this time, I would like to open up the call to questions. Thank you. If you would like to ask a question, please signal by pressing Star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow the signal to reach our equipment. Again, press Star 1 to ask a question. We'll pause for a moment to assemble the queue. We will take our first question from Robert Dodd with Raymond James. Hi guys. On the portfolio acquisition particularly, I mean, how—I guess, how did that come about? Secondly, are there more opportunities like that? In what way do you think that is a—you obviously get a pool of assets there, not—you don't get to pick and choose, I presume.

Yes, so look.

Logistics as you mentioned is an area that is still dealing with post COVID-19. There is a general reversion to the mean that we're seeing throughout the economy.

Speaker #3: Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow the signal to reach our equipment.

Where we're seeing softness and this has been broadly reported in the media.

The consumer the average consumer.

Speaker #3: Again, press star one to ask a question. We'll pause for a moment to assemble the queue. We will take our first question from Robert Dodd with Raymond

<unk>.

<unk> is relatively soft inflation has remained high and the tariffs did not help that so the average consumer in America is a little soft which.

Speaker #3: James. Hi, guys.

Is it kind of in the back of our mind as we as we underwrite credit.

Speaker #4: On the portfolio acquisition, particularly, I mean, how—I mean, I guess, how did that come about? And secondly, are there more opportunities like that? And in what way do you think that is a—you obviously get a pool of assets there, not you don't get to pick and choose, I presume.

We have very little amounts in consumer brands, we do have a consumer services consumer services, we tend to have or more related to the home, which generally is hanging in there pretty.

Pretty well.

That's what we think about the other areas that we focus on government services defense healthcare those are those remain pretty strong.

Speaker #4: So, I mean, what's the value of an acquisition, which is obviously a big lump, versus deploying the capital into individual investments?

Operator: I mean, what's the value of an acquisition, which is obviously a big lump, versus deploying the capital into individual investments? Thanks, Robert. Just to take a step back, that was another joint venture that we had with a third party with all of the same assets, itself originated assets that we originated. Actually, those were originated a couple of years ago, so the spreads are high. We know the portfolio very well. That was really just an acquisition of more of the same type of assets that we already have in PFLT, and in fact, many of the same assets that we already have in PFLT. Got it. Got it. Just to the point on the market, I mean, it does seem like it's ramping up. Are you seeing any kind of bifurcation?

Got it.

But you do have.

Speaker #1: Thanks, Robert. Just to take a step back, that was another joint venture that we had with a third party. With all of the same assets, it's self-originated assets that we originated.

Some good exposure.

Government Con.

Contracting et cetera.

Shut down.

I mean, if you went on.

While.

Have any impact on on any of the portfolio companies.

Speaker #1: Actually, those were originated a couple of years ago, so the spreads are high. We know the portfolio very well, so that was really just an acquisition of more of the same type of assets.

We have very little exposure to so called civilian government.

Activities, it's more defense intelligence.

Speaker #1: That we already have in PFLT. In fact, many of the same assets that we already have in

Speaker #1: That we already have in PFLT. In fact, many of the same assets that we already have in PFLT. Got it.

Things of that nature, where the shutdown did not have.

It did not really have an impact.

Speaker #4: Got it. On the— and then just to the point on the market, I mean, it does seem like it's ramping up. Are you seeing any kind of bifurcation?

So.

No pun intended we we're well defended there.

Thank you. Thank you.

Thank you.

We will take our next question from Brian Mckenna with citizens.

Speaker #4: I mean, I think obviously logistics companies have been an issue post-COVID for not just you, right? I mean, so are you seeing any kind of bifurcation about what you would like to do or what is coming to market in terms of still some things having COVID hangovers or late hangovers and any thoughts there?

Operator: I mean, I think obviously logistics companies have been an issue post-COVID for not just you, right? I mean, are you seeing any kind of bifurcation about what you would like to do or what is coming to market in terms of still some things having COVID hangovers or late hangovers, or any thoughts there? Yeah. Look, logistics, as you mentioned, is an area that's still dealing with post-COVID. There is a general reversion to the mean that we're seeing throughout the economy, where we're seeing softness, and this has been broadly reported in the media. The consumer, the average consumer, is relatively soft. Inflation has remained high. Tariffs did not help that. The average consumer in America is a little soft, which is kind of in the back of our mind as we underwrite credit. We have very little amounts in consumer brands.

Thanks, Good morning, Art and Rick I appreciate the disclosure around the $310 million of assets that were sold to both Jv's post quarter end I am curious one one where these loans initially originated and I'm just trying to figure out the NII contribution from these assets in fiscal <unk>, and then really the starting point for NII.

Speaker #1: Yeah. So look, logistics, as you mentioned, is an area that's still dealing with post-COVID. There is a general reversion to the mean that we're seeing throughout the economy.

In fiscal <unk>, given the sales the scaling of the second JV as well as the full quarter run rate from the portfolio acquisition.

Yes so.

Speaker #1: Where we're seeing softness, and this has been broadly reported in the media, is that the average consumer is relatively soft; inflation has remained high.

I think we sent out a press release when we did the portfolio I think it was kind of mid quarter.

Mid quarter, So we did not get a full quarter of <unk>.

Of ramp from those assets that we bought the $250 million portfolio. So in our comments when we said four.

Speaker #1: Tariffs did not help that. So, the average consumer in America is a little soft, which is kind of in the back of our mind as we underwrite credit.

Quarter should add about one to two <unk> per share of NII for a full quarter of those assets. The JV starts to become much more accretive as it scales. So day one it's.

Speaker #1: We have very little amounts in consumer brands. We do have consumer services. The consumer services we tend to have are more related to the home which generally is hanging in there, pretty well.

Operator: We do have consumer services. The consumer services we tend to have are more related to the home, which generally is hanging in there pretty well. That's what we think about. The other areas that we focus on—government services, defense, healthcare—those remain pretty strong. Got it. On that, you do have some good exposure to the government and contracting, etc. Did the shutdown, which obviously went on a while, have any impact on any of the portfolio companies? We have very little exposure to so-called civilian government activities. It's more defense, intelligence, things of that nature where the shutdown did not really have an impact. No pun intended, we were well defended there. Okay. Thank you. Thank you. Thank you. We will take our next question from Brian McKenna with Citizens. Thanks. Good morning, Art and Rick.

It's not really accretive, but as it gets to 500 million $7 51 billion.

$1 billion to like the other Jv's Thats when you start to see the benefit of the scale of it the financing that you get you can see the returns that our other two jv's are generating the JV, we have in <unk> and then the JV we have in <unk> <unk>.

Speaker #1: But that's what we think about. The other areas that we focus on—government services, defense, and healthcare—those remain pretty.

Speaker #4: Got it. And strong. On that, you do have some good exposure to the government and contracting, etc. Did that shutdown, which obviously went on a while, have any impact on any of the portfolio?

<unk> model of 15%.

And a return on that junior capital.

When you deploy a reasonable amount in that in the Hamilton Lane, JV, where 75% of the junior capital it starts to become.

Speaker #4: companies? We have very little

In a very very attractive.

Speaker #1: Exposure to so-called civilian government activities is more in the realm of defense and intelligence—things of that nature—where the shutdown did not really have an impact.

In addition to the NII, but it's.

It probably takes a year or two before you start to get the benefits of that ramp.

Certainly want to ramp up but we also want to be careful and conservative along the way and.

And make sure we're putting really solid assets into that joint venture so.

Speaker #1: So we were no pun intended. We were well defended

Speaker #1: there. Okay.

So the NII contribution for that is probably over.

Speaker #4: Thank you. Thank you.

Speaker #1: Thank

Speaker #1: you. We

Call it a year or two.

Speaker #3: We will take our next question from Brian McKenna with

Pending on deal flow and all of that so I don't know if I answered your question with that Brian but please continue to ask if I didn't.

Speaker #5: Thanks. Good morning, Art and citizens. Rick, I appreciate the disclosure around the $310 million of assets that were sold to both JVs post-quarter end.

Operator: I appreciate the disclosure around the $310 million of assets that were sold to both JVs post-quarter end. I'm curious, when were these loans initially originated? I'm just trying to figure out the NII contribution from these assets in fiscal Q4 and then really the starting point for NII in fiscal Q1, given these sales, the scaling of the second JV, as well as the full quarter run rate from the portfolio acquisition. Yeah. I think we sent out a press release when we did the portfolio acquisition. I think it was kind of mid-quarter. Mid-quarter, so we did not get a full quarter of ramp from those assets that we bought, the $250 million portfolio. In our comments, when we said full quarter, it should add about 1 to 2 cents per share of NII for a full quarter of those assets.

Yes, no. That's helpful. I appreciate it and then I guess just a follow up on the dividend I think in the prepared remarks, you said as the second JV scales NII should be well in excess of the dividend and so I. Appreciate your prior comments, it's going to take a year or two to fully ramp what you're thinking about that Amit.

Speaker #5: I'm curious, when were these loans initially originated? And I'm just trying to figure out the NII contribution from these assets in fiscal Q4 and then really the starting point for NII in fiscal Q1, given these sales, the scaling of the second JV, as well as the full quarter run rate from the portfolio.

SaaS are well in excess of the dividend I mean is that contemplated in the forward curve is that contemplating any other kind of credit quality changes and then what other kind of core assumptions are in that.

Speaker #1: Yeah, so acquisition. I think we sent out a press release when we did the portfolio acquisition. I think it was kind of mid-quarter.

Yes look we could we can run models with each other.

Speaker #1: We did not receive a full quarter of ramp from the assets we acquired in the $250 million portfolio. Therefore, in our comments, when we mentioned a full quarter, it should have reflected about one to two cents per share of Net Investment Income (NII) for a full quarter of those assets.

Certainly well in excess with the existing with.

With the existing center for curve certainly the market indicates we have some room to add downward with sofa.

I think even if you take the market's assumption of where silver is going to be a year out I think we should based on our numbers and we can compare models and I think we're still covering the dividend reasonably well.

Operator: The JV starts to become much more accretive as it scales. Day one, it's not really accretive, but as it gets to $500 million, $750 million, $1.2 billion, like the other JVs, that's when you start to see the benefit of the scale of it, the financing that you get. You can see the returns that our other two JVs are generating, the JV we have in PFLT, and then the JV we have in PNT. If you model a 15% return on that junior capital and you deploy a reasonable amount in that, in the Hamilton Lane JV, where 75% of the junior capital, it starts to become a very, very attractive addition to the NII. It probably takes a year or two before you start to get the benefits of that ramp.

Speaker #1: starts to become much more accretive. The JV, as it scales, initially isn't really accretive, but as it reaches $500 million, $750 million, and $1.2 billion—similar to the other JVs—that's when you start to see the benefit of the scale of it and the financing that you get.

Okay I'll leave it there thanks so much.

Thank you.

We will take our next question from Doug Harter with UBS.

Yeah.

Thanks.

Speaker #1: You can see the returns that our other two JVs are generating: the JV we have in PFLT and then the JV we have in P&NT.

Talk about.

Kind of where youre seeing new new loan spreads.

Sure.

Any stabilization there and then how that compares to what Youre seeing.

Speaker #1: If you model a 15% return on that junior capital and deploy a reasonable amount in the Hamilton Lane JV, where we're using 75% of the junior capital, it starts to become very, very attractive.

Our new financing costs.

Yes, So I think we talked about our new JV got a credit facility to silver plus 175, so thats kind of our most recent.

Speaker #1: Addition to the NII, but it probably takes a year or two before you start to get the benefits of that ramp. We certainly want to ramp it, but we also want to be careful and conservative along the way and make sure we're putting really solid assets into that joint venture.

Comparable.

Kind of a loan that we can access.

Operator: We certainly want to ramp it, but we also want to be careful and conservative along the way, and make sure we're putting really solid assets into that joint venture. The NII contribution for that is probably over, call it a year or two, depending on deal flow and all of that. I don't know if I answered your question with that, Brian, but please continue to ask if I didn't. Yeah. No, that's helpful. Appreciate it. I guess just to follow up on the dividend, I think in the prepared remarks, you said as the second JV scales, NII should be well in excess of the dividend.

I think we said in our stated remarks that we've seen it kind of in the 475 million to $5 25 range.

On average in our World now our world is a little bit lower risk.

Speaker #1: So the NII contribution for that is probably over a call a year or two, depending on deal flow and all of that. So, I don't know if I answered your question with that, Brian, but please continue to ask if I didn't.

I E. Our average debt to ebitdas in the mid fours.

We're not stretching for we're not stretching for yield.

Our loan to values or kind of 40 ish percent. So.

Speaker #5: Yeah. No, that's helpful. I appreciate it. And then I guess just to follow up on the dividend, I think in the prepared remarks, you said as the second JV scales, NII should be well in excess of the dividend.

And our box we're okay taken.

We're okay, taking a little lower yield if the credit is really really shown so we will do a 475 or 500, if we really feel good about the credits along the value and the low leverage again thats that shows up in the <unk>.

Speaker #5: And so I appreciate your prior comments. It's going to take a year or two to fully ramp, but thinking about that comment in excess, or well in excess of the dividend, I mean, is that contemplating the forward curve?

Operator: I appreciate your prior comments, it's going to take a year or two to fully ramp, but thinking about that comment in excess or well in excess of the dividend, I mean, is that contemplating the forward curve? Is that contemplating any other kind of credit quality changes? What other kind of core assumptions are in that? Yeah. Look, we could run models with each other. Certainly well in excess with the existing SOFR curve. Certainly, the market indicates we have some room to head downward with SOFR. I think even if you take the market's assumption of where SOFR is going to be a year out, I think we should, based on our numbers and we can compare models, I think we're still covering the dividend reasonably well. Okay. I'll leave it there. Thanks so much. Thank you.

Percentage.

One 8% were probably among the lowest in the industry in terms of the amount of Pik. Obviously, if you have higher leverage than your book, whether it's six times seven times, our loans whenever you want to call them.

Speaker #5: Is that contemplating any other kind of credit quality changes? And then what other kinds of core assumptions are in place?

Speaker #5: that? Yeah.

Speaker #1: Look, we can run models with each other. Certainly well in excess of the existing surfer curve; certainly the market indicates we have some room to head downward with Surfer.

<unk> is more of a requirement.

It gives us a higher leverage.

Alright, thank you.

Speaker #1: But I think even if you take the market's assumption of where Surfer is going to be a year out, I think we should, based on our numbers, and we can compare models, I think we're still covering the dividend reasonably well.

We will take our next question from Erin <unk> with <unk> Securities.

Thanks, following up on some of the prior questions the.

The portfolio acquisition boosted leverage too.

Speaker #5: Okay. I'll leave it there. Thanks so much.

Speaker #1: Thank you.

Around 1.6 times and then.

Speaker #3: We will take our next question from Doug Harter with UBS.

Operator: We will take our next question from Doug Harder with UBS. Thanks. Could you talk about kind of where you're seeing new loan spreads and sort of kind of any stabilization there, and then how that compares to what you're seeing on new financing costs? Yeah. I think we talked about our new JV got a credit facility at the SOFR plus 175. That's kind of our most recent comparable kind of loan that we can access. I think we said in our stated remarks that we've seen it in the 475 to 525 range on average in our world. Now, our world's a little bit lower risk, i.e., our average debt to EBITDA is in the mid-4s. We're not stretching for yield. Our loan-to-values are kind of 40-ish percent.

Subsequently.

All of that so we went back down to 1.4 does that 1.4.

Speaker #4: Thanks. Just talk about kind of where you're seeing new loan spreads and sort of kind of any stabilization there and then how that compares to what you're seeing on new financing costs.

Does that run rate cover the dividend.

And how much.

If you were just to exclude PS.

So too does that.

Cover the dividend I'm just trying to.

So kind of.

Have the puts and takes.

Speaker #1: Yeah. So I think we talked about our new joint venture (JV) getting a credit facility at the Surfer plus 175. So that's kind of our most recent comparable loan that we can access.

Yes.

To your comments.

Yes look we're happy to.

To go through model inputs and such are general leverage range is $1 four to one six so.

As you saw with sometimes we'll take it up to 106 will.

Speaker #1: I think we said in our stated remarks that we've seen it kind of in the 475 to 525 range. On average, in our world now, our world is a little bit lower risk; i.e., our average debt to EBITDA is in the mid-fours. We're not stretching for yield.

Move assets into our <unk>, and we'll get down to one four.

So I guess, if you wanted to model one five is.

And then kind of.

Middle of that range and yes, if you kind of model our belief as you model one five.

If you grow the JV over time, we should be able to.

Speaker #1: Our loan-to-values are kind of 40-ish percent. So in our box, we're okay taking we're okay taking a little lower yield if the credit is really, really solid.

Operator: In our box, we're okay taking a little lower yield if the credit is really, really solid. We will do a 475 or 500 if we really feel good about the credit, the loan-to-value, and the low leverage. Again, that shows up in the PIC percentage. 1.8%, we're probably among the lowest in the industry in terms of the amount of PIC. Obviously, if you have higher leverage in your book, whether it's six times, seven times, ARR loans, whatever you want to call them, PIC is more of a requirement because of the higher leverage. Great, thank you. We will take our next question from Aaron Saganovich with Truist Securities. Thanks. Following up on some of the prior questions, the portfolio acquisition boosted leverage to around 1.6 times and then subsequently sold some of that, so it went back down to 1.4.

We cover our dividend.

And even if you.

So for a reduction to that and we believe soon so we can go through the model. We can go through models with you and go through scenarios, you, but that sir.

Speaker #1: So we will do $475 million or $500 million if we really feel good about the credit, the loan-to-value, and the low leverage. Again, that shows up in the pick percentage.

As we look at the scenarios.

Ramping the second JV.

Speaker #1: 1.8%—we're probably among the lowest in the industry in terms of the amount of pick. Obviously, if you have higher leverage in your book, whether it's six times, seven times, or ARR loans, whatever you want to call them, pick is more of a requirement because of the higher.

We do hope we do get some equity rotation is M&A happens, we believe we should be able to get some equity rotation, which can help out a lot.

If you take this joint venture and new model without similar to our other two joint ventures.

Speaker #1: leverage.

Kind of where we land.

Speaker #4: Great. Thank

Speaker #4: you.

Got it.

That's helpful. Thank you and then credit quality has been solid.

Speaker #3: We will take our next question from Aaron Saganovich with Truist Securities.

Really for the industry.

You have some.

Small one offs here and there.

Speaker #5: Thanks. Following up on some of the prior questions, the portfolio acquisition boosted leverage to around 1.6 times and then subsequently sold some of that.

Maybe you could talk a little bit about the strength of your underlying portfolio companies and what youre seeing in terms of trends.

Average ebitdas and revenues for your portfolios.

Speaker #5: So it went back down to 1.4. Does that 1.4, does that run rate cover the dividend? And how much, if you were just to exclude PSSL2, does that cover the dividend?

Yes.

Now if we put in our prepared remarks, we are seeing double digit growth in revenues and probably single digit growth.

Operator: Does that 1.4, does that run rate cover the dividend? How much, if you were just to exclude PSSL2, does that cover the dividend? I'm just trying to kind of have the puts and takes and foot those to your comments. Yeah. Look, we're happy to go through model inputs and such. Our general leverage range is 1.4 to 1.6. As you saw, sometimes we'll take it up to 1.6. We'll move assets into our two JVs, we'll get down to 1.4. I guess if you wanted to model 1.5 as kind of middle of that range, then yes, if you kind of model, our belief is if you model 1.5, if you grow the JV over time, we should be able to easily cover our dividend. Even if you took a SOFR reduction and put that in, we believe so.

Mid single digit growth in EBITDA.

Again.

It's kind of when we chatted about it earlier.

It's industry and company specific of course.

Speaker #5: I'm just trying to kind of have the puts and takes and put.

Logistics, we talked about there's a couple.

And your credits there we're focused a lot on the consumer.

Speaker #1: Yeah.

Speaker #5: Put those to your comments.

Speaker #1: Yeah. Look, we're happy to go through model inputs and such. Our general leverage range is 1.4 to 1.6. So, as you saw, sometimes we'll take it up to 1.6.

And how the consumers carrying in this environment. So.

Focus on that by and large the portfolio's healthy.

No.

All the names that we have well over 100 and I have a handful of chop. Your names is totally expected, it's what we model and of course work.

Speaker #1: We'll move assets into our two JVs. We'll get down to 1.4, and I guess if you wanted to model 1.5, that's kind of a middle range.

Any of these portfolios you're going to have a handful of names that are.

<unk>, one way shape or form.

Experiencing issues, sometimes they rebound sometimes they don't but we think the number of chop your credits is relatively minor.

Speaker #1: And yes, if you kind of model our belief is if you model 1.5, if you grow the JV over time, we should be able to easily cover our dividend.

At this point.

Watch list of things that were kind of looking is there's nothing really unusual about what's going on right now we're not seeing any systemic.

Speaker #1: And even if you took a surfer reduction and put that in, we believe so. So we can go through the we can go through models with you and go through scenarios with you, but that's our as we look at the scenarios of ramping the second JV, we do hope we do get some equity rotation.

Issues with credit at this point in the economy or direct lending at this point in the economy.

Operator: We can go through models with you and go through scenarios with you, but that's our—as we look at the scenarios of ramping the second JV, we do hope we do get some equity rotation. As M&A happens, we believe we should be able to get some equity rotation, which can help out a lot. If you take this joint venture and you model it out similar to our other two joint ventures, that's kind of where we land. Got it. That's helpful. Thank you. Credit quality has been solid really for the industry. You have some small one-offs here and there. Maybe you could talk a little bit about the strength of your underlying portfolio companies and what you're seeing in terms of trends in average EBITDAs and revenues for your portfolios. Yeah.

The same old story here.

Got it okay. Thank you.

Thanks, Karen.

We will take our next question from Paul Johnson with K B W.

Speaker #1: As M&A happens, we believe we should be able to get some equity rotation, which can help out a lot. If you take this joint venture and model it out similar to our other two joint ventures, that's kind of where we.

Hey, good morning, Thanks for taking my questions.

It happened with.

The your investment in <unk> quarter over quarter. It looked like maybe there was a little bit of a payoff there or some sort of realization but.

Speaker #1: land. Got

Speaker #5: Got it. That's helpful. Thank you. And then the credit quality has been solid, really, for the industry. You have some small one-offs here and there.

Just curious what happened in that company.

Yes, there was there was a dividend.

Recapitalization and we are in the equity Thats, one where we.

Speaker #5: Maybe you could talk a little bit about the strength of your underlying portfolio companies and what you're seeing in terms of trends, average EBITDAs, and revenues.

We have an equity co invest so there was a realized gain of about four cents a share.

Speaker #5: For your portfolio?

Speaker #1: Yeah, I don’t know if we put in prepared remarks. We are seeing kind of double-digit growth in revenues and probably single-digit growth in mid-single-digit growth in EBITDA.

Got it.

Operator: I don't know if we put it in prepared remarks. We are seeing kind of double-digit growth in revenues, and probably single-digit growth in mid-single-digit growth in EBITDA. Again, kind of what we chatted about earlier, it's industry and company specific, of course. Logistics we talked about, there's a couple of choppier credits there. We're focused a lot on the consumer, and kind of how the consumer is faring in this environment. We're focused on that. By and large, the portfolio is healthy. To have all the names that we have, well over 100, and have a handful of choppier names is totally expected. It's what we model. Of course, any of these portfolios are going to have a handful of names that are in one way, shape, or form experiencing issues. Sometimes they rebound, sometimes they don't.

At <unk> in terms of dividend income this quarter or is it just the realized gains.

Take care.

That was not that was not an income element that was Ellen.

Speaker #1: Again, it's kind of what we chatted about earlier. It's industry and company specific, of course. Logistics, we talked about. There are a couple of chopper credits there.

Element so.

We had some realized gains we had some realized losses Walker Edison was the big realized loss that was already written down.

That was unrealized became realized.

Somebody call them Levy gear.

Speaker #1: We're focused a lot on the consumer and how the consumer is faring in this environment. So we're focused on that. By and large, the portfolio is healthy.

Was realized and went through a restructuring so that was a realized <unk> Walker Edison was realized 12% per share.

Speaker #1: So, to have all the names that we have—well over 100—and have a handful of chopper names is totally expected. It's what we model.

Gear was realized <unk> <unk> per share.

And then this by light was realized positive for this year.

Speaker #1: Of course, any of these portfolios are going to have a handful of names that are, in one shape or another, experiencing issues.

Got it okay. Appreciate it that's all for me. Thank you very much.

Thanks, Paul.

We will take our next question from Christopher Nolan with Ladenburg Thalmann.

Speaker #1: Sometimes they rebound; sometimes they don't. But we think the number of chopper credits is relatively minor at this point. The watch list of things that we're looking at shows nothing really unusual about what's going on right now.

Operator: We think the number of choppier credits is relatively minor at this point. The watch list of things that we're kind of looking at is, there's nothing really unusual about what's going on right now. We're not seeing any systemic issues with credit at this point in the economy or direct lending at this point in the economy. It's kind of the same old story here. Got it. Okay. Thank you. Thanks, Aaron. We will take our next question from Paul Johnson with KBW. Hey, good morning. Thanks for taking my questions. Hey, what happened with your investment in Bylight quarter over quarter? It looked like maybe there was a little bit of a payoff there or some sort of realization, but just curious what happened in that company. Yeah. There was a dividend recapitalization, and we are in the equity.

Hey, guys.

It's not correct to hurt here that the EBITDA coverage was four five times four four times.

Yes.

One four would be the debt to EBITDA.

Speaker #1: We're not seeing any systemic issues with credit at this point in the economy or direct lending at this point in the economy. It's kind of the same old story

Interest cover.

Correct.

So it seems like either the leverages going down on these portfolio companies or the EBITDA is going up I presume. The EBITDA is going up is that a fair assumption.

Speaker #1: here. Got it.

Speaker #5: Okay. Thank

Speaker #5: you. Thanks,

Speaker #1: Aaron. We will take our next

It could be both it depends on the company EBITDA and as we just said EBITDA is going up a bit in the portfolio.

Speaker #3: Question from Paul Johnson with KBW.

And also of our underwriting correctly, the companies are deleveraging and paying paying debt down which is which of course is our goal.

Speaker #6: Hey, good morning. Thanks for taking my questions. Hey, what happened with Your Investment and Buy Light quarter over quarter? It looked like maybe there was a little bit of a payoff there or some sort of realization, but I'm just curious what happened in that company.

We love to see that pay down.

And then on the new deals the new deals that come in are again relatively low leverage and kind of in the low to mid fours.

And those.

On the stock prices trading 17% below book.

Speaker #1: Yeah, there was a dividend recapitalization, and we are in the equity, that's one where we have an equity co-invest. So, there was a realized gain of about $0.04 a share.

Any consideration in terms of buybacks or does all the joint ventures for restrict your ability to do that given the leverage ratio.

Operator: That's one where we have an equity co-invest. There was a realized gain of about $0.04 a share. Got it. That's $0.04 in terms of dividend income this quarter, or is that just the realized gain that was taken? That was not an income element. That was a NAV element. We had some realized gains, we had some realized losses. Walker Edison was the big realized loss that was already written down. That was unrealized, it became realized. A company called LAV Gear was realized and went through a restructuring, that was a realized $0.05. Walker Edison was realized $0.12 per share. LAV Gear was realized $0.05 per share. This Bylight was a realized positive of $0.04 a share. Got it. Okay. Appreciate it. That's all for me. Thank you very much. Thanks, Paul.

We and the board of directors always consider all options, including bye.

Buybacks.

Speaker #5: Got it. And that's $0.04 in terms of dividend income this quarter, or is that just the realized gain that was...

Insiders.

Continue.

Continue to buyers of.

Speaker #5: taken? That was

Of our of our portfolios.

Speaker #1: Not an income element; that was an AV element. So, we had some realized gains and some realized losses. Walker Edison was the big realized loss that was already written down.

Public funds and private funds. So is it does it does appear to be good value right now.

Okay. Thank you.

Speaker #1: That was unrealized; it became realized. A company called LAV Gear was realized and went through a restructuring. So that was a realized 5 cents. Walker Edison was realized at 12 cents per share.

There are no further questions at this time I will now turn the conference back to Mr. Penn for any additional or closing remarks.

Thanks, everybody for your participation in this Thanksgiving season, we are certainly grateful.

Speaker #1: LAV Gear was realized at $0.05 per share. And then this Buy Light was a realized positive of $0.04 a share.

For the trust.

That our shareholders have given us we wish everyone a terrific Thanksgiving and holiday season, and we'll speak to you in early February.

This concludes today's call. Thank you for your participation you may now disconnect.

Speaker #5: Got it. Okay. I appreciate it. That's all for me. Thank you very much.

Speaker #1: Thanks,

Speaker #3: We will take our next question from Christopher Nolan with Lattenberg Foman.

Operator: We will take our next question from Christopher Nolan with Ladenburg Thalmann. Hey, guys. Did I correct to hear that the EBITDA coverage was 4.5 times, 4.4 times? 4.4 would be the debt to EBITDA, yes. Not the interest coverage. Am I correct that that sort of seems like either the leverage is going down on these portfolio companies or the EBITDA is going up? I presume the EBITDA is going up. Is that a fair assumption? Well, it could be both. It depends on the company. As we just said, EBITDA is going up a bit in the portfolio, and also, if we're underwriting correctly, the companies are deleveraging and paying debt down, which, of course, is our goal. We'd love to see debt pay down.

Speaker #7: Hey, guys. So I correct her here that the EBITDA coverage was 4 and a half times, 4.4 times?

Speaker #1: 4.4 would be the debt-to-EBITDA, yes. Not the interest.

Speaker #1: coverage. Am I correct

Speaker #7: That, that sort of seems like either the leverage is going down on these portfolio companies or the EBITDA is going up? I presume the EBITDA is going up.

Speaker #7: Is that a fair

Speaker #7: assumption?

Speaker #1: Well, it could be both. It depends.

Speaker #1: On the company, as we just said, EBITDA is going up a bit in the portfolio. Also, if we're underwriting correctly, the companies that are deleveraging and paying debt down— which is, of course, our goal.

Speaker #1: We love to see debt pay down, and then, on the new deals, the new deals that come in are, again, relatively low leverage and kind of in the low to mid-fours.

Operator: On the new deals, the new deals that come in are, again, relatively low leverage and kind of in the low to mid-4s. Okay. On the stock price, it is trading 17% below book. Any consideration in terms of buybacks, or do all the joint ventures sort of restrict your abilities to do that given the leverage ratios? The board of directors always considers all options, including buybacks. Insiders are continual buyers of our portfolios, both public funds and private funds. It does appear to be a good value right now. Okay. Thank you. There are no further questions at this time. I will now turn the conference back to Mr. Penn for any additional or closing remarks. Thanks, everybody, for your participation in this Thanksgiving season. We are certainly grateful for the trust that our shareholders have given us.

Speaker #7: Okay. And then, as the stock price is trading 17% below book, are there any considerations in terms of buybacks? Or do all the joint ventures sort of restrict your abilities to do that, given the leverage ratios?

Speaker #1: The board of directors always considers all options, including buybacks, insiders, or continual buyers of our portfolios, both public funds and private funds. So, it does appear to be a good value, right?

Speaker #1: now. Okay.

Speaker #7: Thank

Speaker #7: you. There are no further

Speaker #3: Questions at this time. I will now turn the conference back to Mr. Penn for any additional or closing remarks.

Speaker #3: remarks. Thanks, everybody, for your

Speaker #1: Participation. In this Thanksgiving season, we are certainly grateful for the trust that our shareholders have given us. We wish everyone a terrific Thanksgiving and holiday season, and we'll speak to you in early February.

Operator: We wish everyone a terrific Thanksgiving and holiday season, and we'll speak to you in early February. This concludes today's call. Thank you for your participation. You may now disconnect.

Operator: Hello, and welcome to the meeting. Please wait for the next available operator.

Thank you for calling. May I have your conference ID?

Rachel Smith: Hi, sure. I have 4,736,718.

Operator: Okay, just one moment while I pull up the information for your call.

Rachel Smith: Okay, thank you.

Operator: May I have the spelling of your first and last name?

Rachel Smith: Sure. It's Rachel, R-A-C-H-E-L, Smith, S-M-I-T-H.

Operator: Okay, just one second here. Let me look and see. May I have your company name?

Rachel Smith: Oh, sure. Aiera, A-I-E-R-A.

Operator: Okay, I do. Thank you. I will join you to the or place your line on hold for the PennantPark Floating Rate Capital Quarterly Earnings call.

Rachel Smith: Okay, thank you.

Operator: This conference will be recorded. Please stand by. Good morning and welcome to the PennantPark Floating Rate Capital fourth fiscal quarter 2025 earnings conference call. Today's conference is being recorded. At this time, all participants have been placed in a listen-only mode. The call will be open for a Q&A session following the speaker's remarks. If you would like 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 on your telephone keypad. It is now my pleasure to turn the call over to Mr. Art Penn, Chairman and Chief Executive Officer of PennantPark Floating Rate Capital. Mr. Penn, you may begin your conference.

Art Penn: Thank you and good morning, everyone. Welcome to PennantPark Floating Rate Capital's fourth fiscal quarter 2025 earnings conference call. I'm joined today by Rick Allorto, our Chief Financial Officer. Rick, please start off by disclosing some general conference call information and include a discussion about forward-looking statements.

Ric Allorto: Thank you, Art. I'd like to remind everyone that today's call is being recorded and is the property of PennantPark Floating Rate Capital. Any unauthorized broadcast of this call in any form is strictly prohibited. An audio replay of the call will be available on our website. I'd also like to call your attention to the Customer Safe Harbor disclosure in our press release regarding forward-looking information. Our remarks today may also include forward-looking statements and projections. Please refer to our most recent SEC filings for important factors that could cause actual results to differ materially from these projections. We do not undertake to update our forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at pennantpark.com or call us at 212-905-1000. At this time, I'd like to turn the call back to our Chairman and Chief Executive Officer, Art Penn.

Art Penn: Thanks, Rick. I'll begin today's call with an overview of our fourth quarter results and recent strategic initiatives, including the $250 million portfolio acquisition and our new joint venture, PSSL2. I'll then share our perspective on the current market environment and how PFLT is positioned for continued growth. Rick will conclude with a detailed review of the financials, and then we'll open up the call for Q&A. For the quarter ended 30 September 2025, core net investment income for the quarter was $0.28 per share. We previously announced the acquisition of a $250 million portfolio and the formation of a new joint venture with an initial targeted portfolio of $500 million.

These initiatives underscore our focus on enhancing PFLT's earnings power through scale, diversification, and disciplined capital deployment, key pillars of our long-term growth strategy. The portfolio acquisition adds high-quality, well-known assets that are projected to increase net investment income by $0.01 to $0.02 per share on a quarterly basis. The JV with Hamilton Lane, a respected global investor, enhances our funding sources and provides a scalable platform for future growth. The PSSL2 JV began investing this month and closed a $150 million revolving credit facility, which bears interest at SOFR plus 175 basis points. The credit facility has an accordion feature, allowing total commitments to increase to $350 million. Our run rate NII is projected to approximate our current dividend as we ramp the PSSL2 portfolio. Our game plan is to grow PSSL2 to be in excess of $1 billion in assets, similar to our existing joint ventures.

As we achieve this game plan, our NII should be well in excess of our current dividend. Regarding the current market environment for private middle market lending, we are encouraged by a steady increase in transaction activity, which we expect will translate into higher loan origination volumes in the quarters ahead. Additionally, we continue to provide additional capital to many of our existing portfolio companies as they execute their respective growth initiatives, demonstrating the depth and resilience of our origination platform. We are optimistic that the increase in transaction activity will also result in opportunities to exit some of our equity co-investments, and rotate that capital into new, current income-producing investments. We believe the current environment will favor lenders with strong private equity sponsor relationships and disciplined underwriting, areas where PFLT has a clear advantage.

We continue to see opportunities to deploy capital into core middle market companies where leverage is lower, and spreads are higher than in the upper middle market. In the core middle market, the pricing on high-quality first lien turn loans is SOFR plus 475 to 525. Leverage is reasonable, and we continue to get meaningful covenant protections, while the upper middle market is primarily characterized as covenant light. Turning to our current portfolio, we continue to maintain what we believe is one of the most conservatively structured portfolios in the direct lending industry. This is evidenced by having among the lowest PIC percentages in the industry at 1.8% for the quarter. As of 30 September, our portfolio's median leverage ratio through our debt security was 4.5x, and the portfolio's median interest coverage was two times.

For new platform investments made during the quarter, the median debt to EBITDA was 4.4x, interest coverage was 2.3x, and the loan to value was 44%. We had three investments on non-accrual status, and total non-accruals represent only 0.4% of the portfolio at cost and 0.2% at market value. These strong credit metrics reflect the rigor of our underwriting process and the discipline of our investment approach. We continue to believe that our focus on core middle market provides us with attractive investment opportunities, where we provide important strategic capital to our borrowers. The PennantPark platform has a demonstrated track record of value creation through the successful financing of growing middle market companies across five key sectors. These are sectors in which we possess deep domain expertise, enabling us to ask the right questions and consistently deliver strong investment outcomes.

They are business services, consumer, government services and defense, healthcare, and software and technology. These sectors have been recession resilient, tend to generate strong free cash flow, and have a limited direct impact to the recent tariff increases and uncertainty. Core middle market companies, typically those with $10 to 50 million of EBITDA, operate below the threshold of broadly syndicated loan or high-yield markets. In the core middle market, because we are an important strategic lending partner, the process and package of terms we receive is attractive. We have many weeks to do our diligence with care. We thoughtfully structure transactions with sensible credit statistics, meaningful covenants, substantial equity cushions to protect our capital, attractive spreads, and equity co-investment. Additionally, from a monitoring perspective, we receive monthly financial statements to help us stay on top of the companies.

Regarding covenant protections, while the upper middle market has seen significant erosion, our originated first lien loans consistently include meaningful covenants that safeguard our capital. Our credit quality since our inception over 14 years ago has been excellent. PFLT has invested $8.4 billion in 539 companies, and we have experienced only 25 non-accruals. Since inception, PFLT's loss ratio on invested capital is only 11 basis points annually. As a provider of strategic capital who fuels the growth of our portfolio companies, in many cases, we participate in the upside of the company by making an equity co-investment. Our returns on these equity co-investments have been excellent over time. Overall, for our platform from inception through 30 September 2025, we've invested over $596 million in equity co-investments and have generated an IRR of 25% and a multiple on invested capital of 2x.

As of 30 September, our portfolio grew to $2.8 billion, up from $2.4 billion in the prior quarter. During the quarter, we continued to originate attractive investment opportunities and invested $633 million in 11 new and 105 existing portfolio companies at a weighted average yield of 10.5%. As of 30 September, the PSSL1 portfolio totaled $1.1 billion, and during the quarter, invested $89 million in four new and 14 existing portfolio companies. We believe that the increase in scale of PSSL's balance sheet will continue to drive attractive mid-teens return on invested capital and enhance PFLT's earnings momentum. From an outlook perspective, our experienced, intelligent team, and our wide origination funnel are well-positioned to generate strong deal flow. Our mission and goal are a steady, stable, and protected dividend stream, coupled with the preservation of capital. Everything we do is aligned to that goal.

We seek to find investment opportunities in growing middle market companies that have high free cash flow conversion. We capture that free cash flow primarily in first lien senior secured instruments, and we pay out those contractual cash flows in the form of dividends to our shareholders. With that overview, I'll turn it over to Rick for a more detailed review of our financial results.

Ric Allorto: Thank you, Art. For the quarter ended 30 September 2025, GAAP net investment income and core net investment income were both $0.28 per share. Operating expenses for the quarter were as follows: interest and expenses on debt were $25.8 million, base management and performance-based incentive fees were $13.4 million, general and administrative expenses were $2 million, and provision for taxes was $0.2 million. For the quarter ended 30 September 2025, net realized and unrealized change on investments, including provision for taxes, was a loss of $10 million.

As of 30 September 2025, NAV was $10.83 per share, which is down 1.2% from $10.96 per share last quarter. As of 30 September 2025, our debt to equity ratio was 1.6x, and our capital structure is diversified across multiple funding sources, including both secured and unsecured debt. Subsequent to quarter end, we sold $118 million of assets to the PSSL1 joint venture and $191 million of assets to the new PSSL2 joint venture. We used the net proceeds from these sales to pay down our revolving credit facility and reduce our debt to equity ratio to 1.4x, which is at the lower end of our target range of 1.4x to 1.6x. As of 30 September 2025, our key portfolio statistics were as follows. The portfolio remains well-diversified, comprising 164 companies across 50 industries.

The weighted average yield on our debt investments was 10.2%, and approximately 99% of the debt portfolio is floating rate. PIC income equaled only 1.8% of total interest income. We had three non-accruals, which represent 0.4% of the portfolio at cost and 0.2% at market value. The portfolio is comprised of 90% first lien senior secured debt, 1% second lien and subordinated debt, 2% in equity of PSSL, and 7% in equity co-investments. The debt to EBITDA on the portfolio is 4.5x, and interest coverage was two times. Now let me turn the call back to Art.

Art Penn: Thanks, Rick. In conclusion, I'd like to thank our exceptional team for the continued dedication, and our shareholders for their trust and partnership. We remain committed to delivering strong performance, preserving capital, and creating long-term value for all stakeholders. That concludes our remarks. At this time, I would like to open up the call to questions.

Operator: Thank you. If you would like to ask a question, please signal by pressing Star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow the signal to reach our equipment. Again, press Star 1 to ask a question. We'll pause for a moment to assemble the queue. We will take our first question from Robert Dodd with Raymond James.

Robert Dodd: Hi guys. On the portfolio acquisition particularly, I mean, how—I guess, how did that come about? Secondly, are there more opportunities like that? In what way do you think that is a—you obviously get a pool of assets there, not—you don't get to pick and choose, I presume. I mean, what's the value of an acquisition, which is obviously a big lump, versus deploying the capital into individual investments?

Art Penn: Thanks, Robert. Just to take a step back, that was another joint venture that we had with a third party with all of the same assets, itself originated assets that we originated. Actually, those were originated a couple of years ago, so the spreads are high. We know the portfolio very well. That was really just an acquisition of more of the same type of assets that we already have in PFLT, and in fact, many of the same assets that we already have in PFLT.

Robert Dodd: Got it. Got it. Just to the point on the market, I mean, it does seem like it's ramping up. Are you seeing any kind of bifurcation?

I mean, I think obviously logistics companies have been an issue post-COVID for not just you, right? I mean, are you seeing any kind of bifurcation about what you would like to do or what is coming to market in terms of still some things having COVID hangovers or late hangovers, or any thoughts there?

Art Penn: Yeah. Look, logistics, as you mentioned, is an area that's still dealing with post-COVID. There is a general reversion to the mean that we're seeing throughout the economy, where we're seeing softness, and this has been broadly reported in the media. The consumer, the average consumer, is relatively soft. Inflation has remained high. Tariffs did not help that. The average consumer in America is a little soft, which is kind of in the back of our mind as we underwrite credit. We have very little amounts in consumer brands.

We do have consumer services. The consumer services we tend to have are more related to the home, which generally is hanging in there pretty well. That's what we think about. The other areas that we focus on—government services, defense, healthcare—those remain pretty strong.

Robert Dodd: Got it. On that, you do have some good exposure to the government and contracting, etc. Did the shutdown, which obviously went on a while, have any impact on any of the portfolio companies?

Art Penn: We have very little exposure to so-called civilian government activities. It's more defense, intelligence, things of that nature where the shutdown did not really have an impact. No pun intended, we were well defended there.

Robert Dodd: Okay. Thank you. Thank you.

Art Penn: Thank you.

Operator: We will take our next question from Brian McKenna with Citizens.

Brian Mckenna: Thanks. Good morning, Art and Rick. I appreciate the disclosure around the $310 million of assets that were sold to both JVs post-quarter end. I'm curious, when were these loans initially originated? I'm just trying to figure out the NII contribution from these assets in fiscal Q4 and then really the starting point for NII in fiscal Q1, given these sales, the scaling of the second JV, as well as the full quarter run rate from the portfolio acquisition.

Art Penn: Yeah. I think we sent out a press release when we did the portfolio acquisition. I think it was kind of mid-quarter. Mid-quarter, so we did not get a full quarter of ramp from those assets that we bought, the $250 million portfolio. In our comments, when we said full quarter, it should add about 1 to 2 cents per share of NII for a full quarter of those assets.

The JV starts to become much more accretive as it scales. Day one, it's not really accretive, but as it gets to $500 million, $750 million, $1.2 billion, like the other JVs, that's when you start to see the benefit of the scale of it, the financing that you get. You can see the returns that our other two JVs are generating, the JV we have in PFLT, and then the JV we have in PNT. If you model a 15% return on that junior capital and you deploy a reasonable amount in that, in the Hamilton Lane JV, where 75% of the junior capital, it starts to become a very, very attractive addition to the NII. It probably takes a year or two before you start to get the benefits of that ramp.

We certainly want to ramp it, but we also want to be careful and conservative along the way, and make sure we're putting really solid assets into that joint venture. The NII contribution for that is probably over, call it a year or two, depending on deal flow and all of that. I don't know if I answered your question with that, Brian, but please continue to ask if I didn't.

Brian Mckenna: Yeah. No, that's helpful. Appreciate it. I guess just to follow up on the dividend, I think in the prepared remarks, you said as the second JV scales, NII should be well in excess of the dividend.

I appreciate your prior comments, it's going to take a year or two to fully ramp, but thinking about that comment in excess or well in excess of the dividend, I mean, is that contemplating the forward curve? Is that contemplating any other kind of credit quality changes? What other kind of core assumptions are in that?

Art Penn: Yeah. Look, we could run models with each other. Certainly well in excess with the existing SOFR curve. Certainly, the market indicates we have some room to head downward with SOFR. I think even if you take the market's assumption of where SOFR is going to be a year out, I think we should, based on our numbers and we can compare models, I think we're still covering the dividend reasonably well.

Brian Mckenna: Okay. I'll leave it there. Thanks so much.

Art Penn: Thank you.

Operator: We will take our next question from Doug Harder with UBS.

Doug Harter: Thanks. Could you talk about kind of where you're seeing new loan spreads and sort of kind of any stabilization there, and then how that compares to what you're seeing on new financing costs?

Art Penn: Yeah. I think we talked about our new JV got a credit facility at the SOFR plus 175. That's kind of our most recent comparable kind of loan that we can access. I think we said in our stated remarks that we've seen it in the 475 to 525 range on average in our world. Now, our world's a little bit lower risk, i.e., our average debt to EBITDA is in the mid-4s. We're not stretching for yield. Our loan-to-values are kind of 40-ish percent.

In our box, we're okay taking a little lower yield if the credit is really, really solid. We will do a 475 or 500 if we really feel good about the credit, the loan-to-value, and the low leverage. Again, that shows up in the PIC percentage. 1.8%, we're probably among the lowest in the industry in terms of the amount of PIC. Obviously, if you have higher leverage in your book, whether it's six times, seven times, ARR loans, whatever you want to call them, PIC is more of a requirement because of the higher leverage.

Doug Harter: Great, thank you.

Operator: We will take our next question from Aaron Saganovich with Truist Securities.

Arren Cyganovich: Thanks. Following up on some of the prior questions, the portfolio acquisition boosted leverage to around 1.6 times and then subsequently sold some of that, so it went back down to 1.4.

Does that 1.4, does that run rate cover the dividend? How much, if you were just to exclude PSSL2, does that cover the dividend? I'm just trying to kind of have the puts and takes and foot those to your comments.

Art Penn: Yeah. Look, we're happy to go through model inputs and such. Our general leverage range is 1.4 to 1.6. As you saw, sometimes we'll take it up to 1.6. We'll move assets into our two JVs, we'll get down to 1.4. I guess if you wanted to model 1.5 as kind of middle of that range, then yes, if you kind of model, our belief is if you model 1.5, if you grow the JV over time, we should be able to easily cover our dividend. Even if you took a SOFR reduction and put that in, we believe so.

We can go through models with you and go through scenarios with you, but that's our—as we look at the scenarios of ramping the second JV, we do hope we do get some equity rotation. As M&A happens, we believe we should be able to get some equity rotation, which can help out a lot. If you take this joint venture and you model it out similar to our other two joint ventures, that's kind of where we land.

Arren Cyganovich: Got it. That's helpful. Thank you. Credit quality has been solid really for the industry. You have some small one-offs here and there. Maybe you could talk a little bit about the strength of your underlying portfolio companies and what you're seeing in terms of trends in average EBITDAs and revenues for your portfolios.

Art Penn: Yeah. I don't know if we put it in prepared remarks. We are seeing kind of double-digit growth in revenues, and probably single-digit growth in mid-single-digit growth in EBITDA. Again, kind of what we chatted about earlier, it's industry and company specific, of course. Logistics we talked about, there's a couple of choppier credits there. We're focused a lot on the consumer, and kind of how the consumer is faring in this environment. We're focused on that. By and large, the portfolio is healthy. To have all the names that we have, well over 100, and have a handful of choppier names is totally expected. It's what we model. Of course, any of these portfolios are going to have a handful of names that are in one way, shape, or form experiencing issues. Sometimes they rebound, sometimes they don't.

We think the number of choppier credits is relatively minor at this point. The watch list of things that we're kind of looking at is, there's nothing really unusual about what's going on right now. We're not seeing any systemic issues with credit at this point in the economy or direct lending at this point in the economy. It's kind of the same old story here.

Arren Cyganovich: Got it. Okay. Thank you.

Art Penn: Thanks, Aaron.

Operator: We will take our next question from Paul Johnson with KBW.

Paul Johnson: Hey, good morning. Thanks for taking my questions. Hey, what happened with your investment in Bylight quarter over quarter? It looked like maybe there was a little bit of a payoff there or some sort of realization, but just curious what happened in that company.

Art Penn: Yeah. There was a dividend recapitalization, and we are in the equity.That's one where we have an equity co-invest. There was a realized gain of about $0.04 a share.

Paul Johnson: Got it. That's $0.04 in terms of dividend income this quarter, or is that just the realized gain that was taken?

Art Penn: That was not an income element. That was a NAV element. We had some realized gains, we had some realized losses. Walker Edison was the big realized loss that was already written down. That was unrealized, it became realized. A company called LAV Gear was realized and went through a restructuring, that was a realized $0.05. Walker Edison was realized $0.12 per share. LAV Gear was realized $0.05 per share. This Bylight was a realized positive of $0.04 a share.

Paul Johnson: Got it. Okay. Appreciate it. That's all for me. Thank you very much.

Art Penn: Thanks, Paul.

Operator: We will take our next question from Christopher Nolan with Ladenburg Thalmann.

Christopher Nolan: Hey, guys. Did I correct to hear that the EBITDA coverage was 4.5 times, 4.4 times?

Ric Allorto: 4.4 would be the debt to EBITDA.

Art Penn: Yes.

Ric Allorto: Not the interest coverage.

Christopher Nolan: Am I correct that that sort of seems like either the leverage is going down on these portfolio companies or the EBITDA is going up? I presume the EBITDA is going up. Is that a fair assumption?

Art Penn: Well, it could be both. It depends on the company. As we just said, EBITDA is going up a bit in the portfolio, and also, if we're underwriting correctly, the companies are deleveraging and paying debt down, which, of course, is our goal. We'd love to see debt pay down. On the new deals, the new deals that come in are, again, relatively low leverage and kind of in the low to mid-4s.

Christopher Nolan: Okay. On the stock price, it is trading 17% below book. Any consideration in terms of buybacks, or do all the joint ventures sort of restrict your abilities to do that given the leverage ratios?

Art Penn: The board of directors always considers all options, including buybacks. Insiders are continual buyers of our portfolios, both public funds and private funds. It does appear to be a good value right now.

Christopher Nolan: Okay. Thank you.

Operator: There are no further questions at this time. I will now turn the conference back to Mr. Penn for any additional or closing remarks.

Art Penn: Thanks, everybody, for your participation in this Thanksgiving season. We are certainly grateful for the trust that our shareholders have given us. We wish everyone a terrific Thanksgiving and holiday season, and we'll speak to you in early February.

Operator: This concludes today's call. Thank you for your participation. You may now disconnect.