Prospect Capital (PSEC) 29 Aug 182018 Q4 Earnings call transcript

Good day and welcome to the Prospect Capital Corporation’s Fourth Fiscal Quarter Earnings Release Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to John Barry, Chairman and CEO. Please go ahead.

Brandon. you, Thank you way, a job. great By are the doing

today Eliasek, and our Joining Kristin? Van me and Grier call the Officer. Financial Officer; on President are Chief our Chief Dask, Kristin Operating

We is John. prohibited. to of be is contains the a Thanks, laws Actual call call property impact Prospect required are from protection. Unauthorized Harbor factors. This not those of the outcomes the due to Capital by within statements could subject that update materially Safe of to and forward-looking differ forecast unless securities use many our do undertake statements Corporation. meaning results forward-looking law. to This intended

disclosure, corporate on Relations additional XX-K, tab our previously our website, the release, and presentation prospectstreet.com. Investor For our our earnings and see press filed available on

turn over to Now, call back John. I’ll the

Kristin. you, Thank

of For $X.XX prior the million and current $XX.X investment June from net interest increased the and $X.XX rate income. our per XXXX NII our quarter other income was or due to quarter, $X.XX per exceeding share. higher up NII share, or dividend

in which are served cycle to As but chasing our yield, remain risk seeking credit capital. to are reduce historic discipline, not economic ages, and well committed we us protect the the instead past. We has

believe returns robust low prudent ratio investments XX.X%, disciplined and and the and the prior objective range approach for protect so XXXX yield, we While underinvested down from year. our quarter, pipeline from credit our us of we with debt-to-equity continue prior in to remained well have June June quality of the risky to in chasing a we with a X% also potential to years. coming X.X% quarter the In our We serve XX. down risk maintained assets target net credit are will at not

including $X.XX in valuations share, to net was investments, income million CLO, estate, and of and increased the sectors. NII increased investment prior up or $X.XX the due for the certain consumer from finance $XXX.X Our per quarter real quarter,

goal of multiple We have disciplined adjusted risk future strategies our income. enhancing with the place in

plan asset estate and On structured multi-family cash the on Enhancing on including refinancing’s, extensions, NPRC’s flows pipeline of executing originations, management [ph] financings; including floating largely higher side, a improving in through LIBOR our cost. controlled accretive improving realizations two we rates. portfolio, through credit real results yields bolt-on new based portfolio including of supplemental robust performance and increasing and operating enhancing investments, acquisitions, enclosing rate

risk On of protecting on we while average management the capital revolver liability laddering markets weighted issuance a in our utilization, against plan through managing maturity side, liability through continued increased cost capital fashion. diversified

each plan We monthly representing IPO our of XXXX We distributions to $XX.XX share ago over of September $X.XX current shareholders, on XXX to share at October, our distributions will shareholders. for years are cumulative to share distribution Since November. in October through announcing next account, consecutive paid we exceeding out shareholders cash shareholder per announcing our billion of XX per in $X.X shareholder our distributions and all original series distributions. have

per $X.XX $X.XX up June share at stood the in quarter. prior NAV Our XXXX, from

XX, to us XXXX liabilities rate benefit floating from as increases. XX.X% and sheet consisted June assets balance fixed XX.X% Our earning interest positioning of rate rate of

over than income, combined shareholders demonstrating largest is since for X.X% share. fees. basis there and believe structuring to the to interest of in income Prospect’s sold XXXX and from our million on in shareholders cost Prospect stock, recurring investment significant December management of of of XXXX. affiliates a a basis XXX an $XXX percentage particularly stock when Management over the on the market. quarter, dedication management in is at June Prospect, never greater compared alignment and total increase million including stock prior same purchased from between continued one-time the in a other management purchase to Our shareholder income was amount has XX.X% has and management have the no open quarter We purchased as

in opportunities investment team management handling experience been decades business dynamic, for cycles. has by and challenges both provided rate with the Our interest economic, and

those call Grier. learned utilizing purchase is same and reduce reserved. when over powder provide to will At with Thank current we it dry have substantial to the is have than more I'll to one the for the the environment believe future yield, we opportunities time, attractive to We assets productive reach risk and turn periods. built now you. us of time

John. you, Thank

with deliver of business assets continues scale credit undrawn and billion over Our to X performance. solid

structured of team and investing, credit deep third-party and yield credit, With focus online a lending. of and XXX industry. representing groups experience, our investment in consists largest bench, Our professionals, market related direct strategy the to longevity, on estate continue financial covers scale, we and sponsor buyouts, private the one sponsored lending, real diversified experienced operating that Prospect equity approximately middle non-sponsor

June source high broad of attractive manner at and opportunities, a us investments fair we the a As of XX% a diversity range to controlled to volume bottoms-up disciplined on the opportunities our be our deem of XXXX, risk-adjusted basis. selected This allows most value at stood portfolio. then

manner opportunities percentage of in Our low-single-digit such team invests typically a and of disciplined evaluates in annually opportunities. thousands a

the for gives flexibility preference structure a levels multiple to and stack lending in of secured capital with senior the us corporate Our invest non-bank loans.

being yields, our pledge Prospect’s XXXX, prior lien, structured X.X% our our generates XXXX, June unsecured as than second at increase. generating annualized and resulting with credit value approach from first investments basis were secured XX an XX.X% of third June and underlying quarter lien risk-adjusted collateral, XX.X% debt, first portfolio straight benefiting yield lien, points XX% of the one XX.X% investments secured of As is of XX.X% XX.X% secured attractive investments collateral. debt fair up assets secured underlying equity with quarterly and that debt the in borrower comprised

generate investments to market selection continued and act yields differentiated through protect to prioritize while risk, that originations can approach. as gains certain and as in distributions. yield such We've capital positions senior with or equity our credit secured still origination hold above a also downside achieving enhancers We positions discipline against debt contributors

XXXX, portfolio prior As billion. we with fair of quarter of held from a XXX one X.XX the companies, value June up

diversified many largest in continue We company significant different invest also the fashion industries XX.X%. portfolio a concentration, is across to with no industry

a stood industry June June the in total approximately prior Non-accruals of XXXX, As of XXXX, zero our stood from at concentration our percentage percent. stood X.X% asset the quarter. the industry energy in concentration X.X% in at as X.X% assets retail up and at

the stood EBITDA, prior average portfolio weighted X.XXx at net Our leverage quarter. from down X.XXx

EBITDA market stood at in of a our consists million million portfolio prior. agented company XX.X from up June portfolio year years, XXXX, average and to sourcing market sole Our perceive middle per weighted broadly self-originated $XX.X higher prioritize majority to The loans. and proactive causing we be In compared agented, the reward our self-originated syndicated for anchor us investor risk-adjusted efforts. recent the non-anchor to opportunities, of

our in quarter Our XXX differentiated June call center aggregated million. initiative XXXX flow continues business. to deal Originations drive the for proprietary

million. We objective, XXX million of repayments exits resulting XX experienced capital of originations also and of preservation net validation as in a our

completely Today, sponsored have non-agented in acquisitions originations During arena corporate XX% an attractive quarter, alongside the NPRC's from REITs quarter, estate, increase NPRC real recapitalizations the XX-year buyouts. we programs, investments new credit, we with our Marin has our renovation Baxley, June property benefited cash estate debt, yields private non-sponsor this Matthews, made property occupancies, exited real acquisitions, with of redeploy including corporate agented businesses. Mission X% business validation yield NPRC. properties, credit debt, repeat has financing. manager and high June strong attractive our Park, with Central real relationships. resulting into into comprised structured including debt, financing XX% multiple agented income XXXX and rents, objective XX% focused X% X% stabilized Hillcrest, an and rising portfolio Vista, capital REITs, in to the returning in as certain our Abington, consolidated yield through In multi-family largely estate Gate, a value-added St. growth XXXX on

continue. both We recapitalizations and expect to exits

pursuing on has world-class stakes, the underwriting Our underwriting risk-adjusted structured management through majority with credit focusing attractive primary collateral providing with in-line working teams, business and performance expectations demonstrating benefits strong largely our opportunities. issuance, of performed

million we and over credit XX a portfolios XXX billion. loans over of of base across the asset June X,XXX credit total underlying structured comprised non-recourse structured XXXX, investments, XX As held

of XXX all bips, includes June As of quarter and amortization our than cash June from X this to while distributions also from the up basis. up due X.X% default prior from GAAP rate yield quarter, an XXXX annualized such XXXX, of the of structured In experienced the a from the credit reductions and default XX-month cost GAAP trailing broadly subtracts market bips quarter, basis portfolio rate of spread prior points points. resets, basis out the to less yield of due liability XXX generated an syndicated from portfolio largely quarter, Cash yield XX.X%, resets. up yield X.X% a prior investment, XX.X%, cash XX

we've June $XXX of average of investment. XX% and X.XXx. has our representing June structured original to cumulative IRR portfolio XXXX, XX realized existing XX.X%, As exited cash-on-cash multiple $X.XX billion totaling of us, over an generated of credit investments also our cash distributions Through million in XXXX, with

because positions majority tranche. fee structured we Our holdings owned entirely compared In of consists can cases, to credit significant many enjoy rebates positions, such same in portfolio majority our the benefits minority position. received of

discretion in ability the transaction the a add and such we to control sole we options holder, majority future our a value our call substantial in As portfolio. to believe

an of We more We, in terms asset or a enhance advantageous investment in baskets valuations the XX than to resets when exchange temporarily and bond liabilities remove investor have and might in period deal, in refi’s the extend refinance optimal on completed call past debt We've be can years from value. transaction low. loan rather two the to as majority the for waiting option fashion investors reset years. better terms,

has XX.X% paid credit average ending an us yield portfolio XXXX. structured XX-months June Our equity the XX, in cash

booked current of net million. far current September have received the So XXXX in quarter, the resulting million, quarter, XXX repayments we in million originations XX originations and XXX of in

sponsor XX% estate. Thank over structured the you. X% comprised turn call Our I'll agented originations have and XX% Kristin. debt, X% debt, to non-agented real now credit,

Thanks, to attractive to well balance fixed believe book toward sheet Grier. funding, strengths, both liquidity rate mass demonstrate as We of and access waiting opportunities. leverage debt unsecured substantial diversified prudent our on capitalize as majority unencumbered asset, substantial

of years in XX liabilities locked the a extending ladder has Our into fixed future. company rate

as rates flow While the rise. potential significant to LIBOR providing loans our upside of with majority shareholders interest

unsecured construction towards sheet. of we taken other company We differentiated the in and issue issue acquire institutional a first to bond, were a develop leader another BDC, marketplace. our industry We bond, program, innovator our notes an of a are our in the have side the and many alike which in our convertible thoughtful Shareholders approach appreciate right-hand first. balance should lists creditors and of industry,

by X.X revolver representing As approximately June assets extension approximately as billion where of our with we pledged are XX% a feature prospects basis reducing size interest years XXX amounts on funding, X.X XXXX, points. at XX completed portfolio. million one-month of unencumbered an from we of of assets held banks our our the assets, of XXX LIBOR billion commitments have We recently currently capital plus rate option. to drawn to remaining accordion our X.X total The

and more of The from us. Prospect revolver our bonds, adding debt, allowed targeting program and revolves including recently distributions continuing multiple Outside amortization of issued facility at we've assets, with of are convertible two-years unencumbered March our types unsecured We followed including Corporation, grade notes. until bonds, to benefiting lenders. bonds, institutional investment XXXX additional be interest by commitments from to baby Capital

duration of investment debt grade investment an an and unsecured years. investment grade an financial and on no have our We've term defaults the our and asset grade liability now market no extend from multiple covenants, We rating rating occasions latter XX restrictions, revolver. S&P. Egan-Jones, to types our no these from Kroll, from BBB debt with tapped of to rating BBB negative BBB enjoy unsecured All maturities cross out

With extend tranches, risk across maturities we've debt substantially XXXX. many Our many counterparty banks the reduced our so investors years. so debt through over and debt

principle note we our and XXXX; including amount note refinanced in March quarter. had five fiscal we repaid in In our we volatility. ranging maturities million and year XXXX, originations X.X billion, remaining seven debt in We latter of could notes our our repayments exits million not allow two and in our million note repurchased years, the we in in convertible decrease XXXX we year, to notes we million come repurchased and August at XXX.X the need repurchased not XXX.X in notes June XXXX In past the ratio, to XXXX have recently our significantly XX believe ordinary our additional July October X% which XXXX, an the program million our half XXXX, of amount repurchased XXXX December March issued XX.X from slow convertible XX.X of our of term also bond We January course notes. note convertible If million also demonstrated including notes. our separate May XXXX, in but in only convertible repurchased XXXX XX.X XXX market And the XXXX arise during past June leverage program May with October XXX.X baby notes XXXX the coupon we of in In XXXX million June maturity, XXX issuances XXXX, XXXX, million XXXX notes. our issued January July convertible million debt and to notes. program have convertible million now first March June as convertible in should non-program our we maturities aggregating of million our and unsecured calendar notes additional principle XXX.X issued the XX of XXXX our XXXX. during three

XXXX, XX, we October through of maturities million outstanding program notes June of XXXX. XXX staggered with As had

Now, over the I'll to call turn back John.

now answer Thank We you, can questions. Kristin. any

We Please have Raymond ahead. with go Robert Dodd James.

financing quarter. income. or Hi worked quarter, was – the product in amortization big one-time there that interest and on income, obviously improvements premium like up in income any some of accelerated CLOs sequentially that was on give from step-up from the was prior The that else [ph] the anything quarter guys, us obviously in sequentially this but – can structured interest make-whole congrats of the see in color that terms big you anything on you’ve the can a because or we net step

can nothing because a maybe Kristin don’t Grier, mind that, item. for you take to single you me, identify why jumps or

reaping that it zero is Yes, and near benefits with in when rate the what a capital years some we think of Robert I really, structure structure. seeing was put ago are assets rate place is, liability having floating we fixed predominantly LIBOR

to rate beneficiary to reducing were So, of upward our we [indiscernible] addition quarter are big yields in full liability credit Fed that the structured near our the quarter correspondingly LIBOR boosting that the cash movement and a of a spreads drivers big, primarily benefit, as and funds GAAP revenue. of function in a in for

and on It's that’s on on mean, the a significantly sources points credit just certainly up I those million and basis XX other from sequentially three large average calculated pretty Okay. months, up just sense, I X structured million XX were obviously surprisingly your pretty you’ve for yields, simple benefit. rates on understood. but but business to point – finance yields sequentially, restructuring another the

can undistributed sheet? tell just a income one, just one, us than could undistributed other rather spillover what you the I now The is that’s housekeeping your balance find on income taxable NII the

lag structured always tricky book not tax et tackle take that, I Kristin, credit in have our et for one? want in the because reports, will our of fingertips. trustee to the you because is business it’s out getting lag cetera, We predominantly Kristin cetera. of might to calculating that let to that and such a

Yes. something I and have it that my might to on we fingertips back. don’t actually. check respond be to at spill want want back, the don't I mis-speak there

It me… one is that. appreciate for I problem. a Not complicated. Last

upfront debt, and when with you is Robert, a sense. and sorry, you to place or direct there in add pay you that do a credit give business, it. associated to – just a the When general structured bankers the is extension that I an – investment will cost just required lawyers reset an to

For of cost GAAP the is the over purposes, deal. life amortized that

the that income. there means many deduction is had charge tax on That For resets, In fulfilling tax not a it purposes, from taxable immediate a a is standpoint an from is taxable and basis, temporary against cases, short-term investment. XXX% IRR’s but over against deduction income. these a we’ve good

amortization Another over where cash that acts goodwill business has a in which of that First is ago, in for impact for tax we our no from years six just tax deduction is purposes, effect but Tower with several a years that’s there an as been bought place standpoint.

a at have of the From standpoint dividend looking distribution. return taxable depressed standpoint, income. we’ve those and income So, more direction economic a from and the moved years, net the dividend standpoint from coverage standpoint effects away and over bit investment required a tax a minimum and

Is any required to safe above I reasonably we distributions. think helpful? say, minimum it is that are

Very double it. with restructuring say mean, double not part cost the leverage, obviously those helpful. revolver, a – today, those there that of as a BDC, et to covenants some work change of work that imminently, adjust the the process do Is you’ve during say converts of of well got Obviously, you're is coverage in that to leverage, doing you. I you potentially refinancing revolver, on asset I going I in can? you Got ratio you one, respect the Thank of lowered the to later. the the so restructuring cetera. future? of lot that in mean, Last more and in of of are flexibility but liability when if the are work terms the the side I

way tender, Act on pertain XX to down and our lettering non-recourse risk are transactions net was focused only one right. in and the capital desire seller we to bankruptcy through have loans our how company pretty covenant. of XXX stated the is some as recently being that improves and closed year, our our consistently deal clearly come If of pertaining economic the interest these in We March entity, covenants capital the we of do and fact remarks de-risking desire opposed market removed and now, Corporation. We deals flexibility Prospect anything, just rest that our liability and in have of them for investors. to I facility, certain remote actual call the a to in downturn, think the That as business started people extend certain said, to to we’re cost issued term we originator primarily an actually tangible to credit increase the leverage prepared no a ordinary go institutional, leadership a we part a capital only in there months, quarter our several of test particular around leverage. I designed management in positive did extend financial preferences, course our bit of bond. investors continue out have, XXXX first would longer being balance program for financial still a of we to not an we add-ons of to there no the deal, ABL we and that issuance, go to sheet to deals so know year. in mean including you baby sector have maturity, said, This issue to of which that change a markets across agency something the and significant a If not calling issue company new credit partially. any change a In moves In the straight termed if you and preferences, say are markets, by to and strength case we about were demonstrate with said in covenants is that in associated worth our cleaning two bond, the those say of able revolving in them. we’ve with convert our our March, funding I last management covenant, XXXX believe – is said into after, existing as then Capital simple is having leverage due backdrop notes the there sort in out, have that could we the the markets, fact but last to for were liability flexibility. profile I was That and to the debt is adhere being multiple with We we multiple adhere want in and rating you a million. case

– such and always maturities during managing in downturn even with is an to where of position to the care We We few way. are our our glass take a to we have very revolver with other to liquidity to be empty debt along is there shut the intention our economic looking think have So, And risk of good at sources entirely. half accordingly. downturn. handle the that markets if will capital we won’t

else logic it So, Robert. more than that’s behind anything really the

I appreciate you. it. Thank

anything see John Kristin or have as to if Let's to that add well.

adds one is apparently item add me both to beyond yet I balance asset the was up. what liability reason of can't after of on of important the I in dollars. side did – most thing thing think and and blocking which said, you modest mention, guess mentioned, is it terms right, I had tackling sheet, resetting think one you I anything CLO's, maybe these the Robert, would to one cumulatively these the another I

Yes, material. that was

each added to cumulatively one up you they to Okay. few to of Yes, million one but dollars, add a have Kristin, providing anything that? in in do and – of each really have significant individually individually is is work a terms dollars. lot

with other Robert, we One the business. real quarter the book, pertaining you are questions very we estate had results estate of happy some last I out are addendum in excellent real think getting to our

in said called just this monetized an asset, Matthews. one Charlotte we As with we in remarks, NPRC our another prepared

future. grow standpoint, our just confident them dividends and we not in ability of increasingly are MPV’s dispositions then and the as that from assets, well got an are well to where are assets have as We approach NPRC selling from deals about look working new recycling at the in feeling at of course we we at recapitalizing actually retaining we sustain asset, real-time on other the but potentially not-too-distant at recycling looking to sustain them,

but any think to moment, have give at So, we NPRC. about on specific that I positive the you we’re don't guidance

stability, can has back quarter have asked I the through about If and we to you I the the when clearly looking months of NPRC indicated next but the the well you I'm end from you here that is you the potential trying I performed well. to now. Not BDC? to – trying the quarter, that done dividend in future, last conceivably XX a or think could say grow REIT how it not-too-distant distribution could mean, longer-term the where you –

the In next XX months.

We have gotten some real time exits result we’re working increased an on that distribution. could

Thank it. Got you.

Say from Robert, so be book out. boats, built shoes, your been rising tides rates if that I is rising in tides declining, would in large the go prospect have surprise with – and come But solved interest I benefiting were tide. thinking, has that tides rather no multi-family

once. for intensive we Fowler is don't I dividends is day-to-day does these change the and because and have my does call this that again have and now while Curtis, surprise And say Scott able want more team, are Dan, surprise credit just Repeat things is been I position to Grier, largely our It to you I team Peter, seem something to of to has and it a have anything, but would hesitate Repeating estate still thought I from it you? and Grier, right. the real what are repeat, me. We these than see a, they blocking often. commend all that future. CXB, Ted book. value-add really tackling merely and management don't to So, stealing I – strategy a a just But that great to it CXB

the one meaning Well, is create that place, XX rate floating refi years, do financing my in we of we’ve to for locked that can those put for XX multifamily assets. years multi-family, I some short-term I mean in assets there declined have to is financing is, and guess

that inflows ago the is housing business monthly say core do Class they a institutions plurality we part potential, be largest attractive than did, inflows to why something suburban estate lot secular average multifamily experiencing space B, attractive share its ago office our it creates let’s more in other that like bit years compared think a a during during growth much is stable positives. potential, capital cyclical a Class credit, which about last boom, real can capital to reasonably reason The spectrum both gains to downturns, the I volatile real decade of every of C the credit workforce make normal yield. addition sector resilience market middle of bull course private I opportunities. so, the estate would rents, so-called you challenges of and yields, about say more Secondly, current historically sector, middle attractive from a – of little about low expanded think allocating more into as multifamily is X tends more just into big and flows October, that to a the during finding markets, we X, cash in sector current to to market having difference cash all that real or with estates cyclical with award and compared risk

speaking saying, more of but attractive XX on in to to with swings the in adds million at generally we are to non-recourse not portfolio doing cases, way value long value more basis estate financings, million be relative means a but real a going sizes a deal we it to we composition not tend is also We it So, found are that of XX look large diversity of portfolio middle one large deals but to find those, market sort the because within acquisition. space. doing in we're equivalent generally have, we're many that

I color. appreciate the

is still his do estate Whereas upgrades, side, the better whole them, comment if tackling. when ROE do may you you the is make and do refrigerator, a a blocking change that have Grier, discover about and team that you everything loan hard. and you on Fowler you that great myself, and a mistake and attitude buildings, anything to the very often work the that lot better of from have made They the change the Ted Again have do, It the to roof, asset how an real no drive Robert, on is about you paint of I the can can and with. it. always in team mistake it have this signs they stove, you inevitably news We the if that. these power

So, in we more with I us love for just real see doing very estate the are booking, estate. to real would happy be myself,

a inevitable just right. is comes it think don't when. the downturn good It’s I know when XXX% to place as and likelihood. be, if We

Understood. Yes. Thank you.

next from go National Corporation. is ahead. with Our Securities question Testa Christopher Please

for good taking Hi, you Thank questions. my morning.

Just ask you questions a about couple InterDent. wanted to of guys

at September, December XX, cost points. marked Then about maturity modestly marked was was loan down bips was from had guys XXXX the reduced XX, to spread term you August by XXXX, for than XX, March to So, X.X was term down very XXXX, up B back out marked quarter. XXXX B, the loan by X, XXX from the it and pushed next

it further. customer sided attrition is and was marked down there Now

out caused So, and in last that of changed year just curious as the the been what’s the what over spread I'm kind and ebb business, what well? line that and reduction push in time flow maturity and

want Grier? take to You that

Sure.

payoff more two InterDent, Medicaid primary of investments really larger to are process more centric had growth. that the in keep is, is the about for exit pretty we concentration other a profit The company, and in is that in and reinvest private that states a but northwest business through looked that for to potential and excited other we sale is has dental a the reasonable projects program, a overall likely services company contiguous one, company invest the the a in of business. So, pay business parts: is team more potentially growth business for decided

So, that services is dental in capital adjusting structure component, debt Obviously, and or picking IRR to the are not ride service model, that subject for ultimately where the recurring cyclicality. grow away a can we that going business area than we’re see is extreme higher business. prioritization concluding that’s projects revenue value an

take on can So, where right that with execution, optimistic we’re the we business. cautiously

spread XXX LIBOR, controlled before business? the reduced was over was But Got bips that after it. you the by

to the know control timing, reinvest grow the I business I that cash you don’t the the forgot assume, months. exact in last if timing did so recall exact having few reduced of projects. general can but change. we by spread the We value is construct the in

it. got And NPRC. just about to talk wanted Okay,

year, give So, this since other from wondering drove this? you million on during you this fiscal could XXXX, guys or what there some fiscal color if other was just X.X recognized no recognized income income,

Sure.

about dividend from So, distributions. NPRC standpoint, an we talked the

robust a distinct That’s well. if have We activity other and correct income separate array both well fee dividend been from quite income, income exit in NPRC deal also activity. as I'm it as has of within from for new generally, Kristin, as shows activity, There wrong, NCRC. me

Kristin collaborations Let's other Kristin? see there. any has if

restructuring investments. see to there good our I fees the is it No, different else, for is anything royalty don't think kickers?

Yes, that’s right.

is a edition. it when on yield when collect which income certain well, top One income, dividend as of profit. earnings out is income, a which and kickers note is in paid of royalty our interest also paid We taxable recognized as is other up shows

occurs board as like or it’s go all investment of something estate hoops other real whether uncontrolled controlled tax across So, the a investment that the through NPRC well. or to has is that any

Got it.

So, commentary it next this for and income more NPRC the other driving elevated recycling, remain the to like on activity we and expect given then year? seems your sales likelihood over of fiscal is should

Those dividend as think to a more that the one well than assumption. of a Chris. think in things, me I some is that’s some but reasonable give side assumption as perhaps that interest, variability reasonable I

you asset, optimize, the look so as it imagine, start at sense to or process through as and each not. doesn’t we We make are, look can

in standpoint, in candidates an base of has are this, attractive that of is finding XXXX. cases, from of number economic that that generally one time we and next couple sort reason for consistent and of the and an underwriting the exit a are a corporate way buyer and that actors, the closing. one businesses, but some just are and call of extent risk to be the increasing that think assuming at our any to other strategic Then in other plan crystal ball seller we’re We why reason course, years, no it And a with credit recession free are each a management lives assume at financial, value buyers that our future. expected of can there happy, least is otherwise downturn reasonable

we know end will banked come. and if within processes now I don't you transpiring you realizations will they eight what’s that’s be So, you up NPRC uncertain, hope to think value that M&A we hope can exactly and where get the have more for, but

it. Got

PIK give induced guys Tower can added of the during was you on that that was the percentage quarter, points to color some First that? X loan And just Okay. what

Sure.

seen to The improvement been First is back, Tower, pre-tax X states. when XX has business business one started then of can really income turn charge-offs some in a at much learning now states state originations. we’ve there seen be position; is, least what and now, First we the type led to we business. Tower, factors staffing for primary really human Chris. get in space expand significant bought Tower, that this not you in a profitable into right of to expanded reduction to of the up to sort regulatory reasonable the branch-based have I also optimize, for increase connect role states build since only to into where it’s over and model the One of other months entry. become have your lend business a and goes but and standpoint, year curve mean improvements manage was your by So, really net right, aspect we've an in resource in when and new There a core how more from of solid

Tower is completed few ago, purchasing So, gone that standpoint from result that is well has integration an Harrison, an one. add-on which item quite a acquisition two standpoint. months Item and a

is So, the at a and time-to-time move there that some the PIK, an In case out means pick to to that we for are cash instrument to PIK as seasonality an is as to the adding going option adding, cash to of there of well, payment of often we’re is – able to general paid a there able to a tower. decent tower, be so case from business. take elsewhere we be the option but in kind There this payment. though election is prefer what interest even in receive up is an the

lot because So, is come in the it a is place for partial consumer good to refunds for borrowings have place a tax construct at case repayments you holiday of in been when in. in businesses season surge the long, That get and time. then the of a long a least PIK

So the adjustment capital positive structure there that’s really saw rationale for you the Chris.

beneficial cost most you been in next as book over, and this Okay. XXXX? down credit that upfront might expect we around reset the the a remain to the amount to the the significant already has have still call of guys, yields would cause they through been a you the refinance should that do less that refinanced? set And benefit on been road your to in some fiscal have guys as let's have upfront So, are cost well cash sector vintages you that as where obviously say further vintages will or the be you structured and year front, of through year refi-ed whole,

and rational happens again. years, there’s non-call Yes, is there to of time to deal two-year we by a is, generally what you continue, and get reset to expect the and then end two more resets period, reset a the

it constant So, is aren't these and one optimization. a done features,

activity I frenetic a the August. deals we’re have took of did at It I last more in a, see little we pace in months bit – first a the interested during pause six during resetting. July would year. say So, occurred the potentially the of that and

bunch quarter a the with a in-part you digestion and spreads some of a because one X, in for In work kind slowed has documents have as match part, we liability the because asset done September deals bit weeks teed-up to potentially that’s a compression the spread got reset a recent been it date. of payment think way been the to dynamic is there I bit date. have sticky. little up period We’ve have has got

is deal a favorable, so. So, deal the statement, little our numbers we're bit favorable going it’s not you And is reset do kind become an going to to of less unless are within overall a the a and be The to we majority of are recent out. significant number bit of PSEC there, votes, of of aspect our advantages have most little to for numbers strategy so penciling the candidates because much to highly queue different obviously validation where is a has desks every be from because the deals non-reset lose we investor do equity drive there period from the we prioritization queue digestion and the economically gain with reset majority a cetera. can with out that equity and done to a organized the or if so in a a et getting providers liability speak

an in these getting the credit we’ve in had the So, about that in to We been down through. positively yields aggressive and seeing has book and our message expect results we're for come deals structured improvement folks real time.

unfold, when will to to well exactly we So, see and we’ll what next it’s bit beyond. September slowdown the a when hard happens wave as get and tell little summer of

it. the income sold? contract was Got priority And manage to

completely subject a here. something separate Capital fund I on Corp, Prospect cover distinct mean a different I can that’s That’s confidentialities. are and call from to not so unfortunately we agenda

And for I to coverage and equity. basket more if would guys CLO to butter, just become which asset seems contribute equity, of may. of NPRC reduce if guys The one were has and your you the bread greatly and driver between expand NPRC between kind Okay. basket, you CLO greatly that towards XX% which you be would kind earnings obviously

approval TPG, without seems the guys you have a triggered leverage. when had concern for you to reduced leverage wondering, went by the board couple available S&P, your which initially of Ares had earlier downgrade be just in I'm increased your you a when through we’ve peers, a the ratings know and year gotten So,

is, the and So, my further? then grow asset book why question not NPRC and CLO coverage equity reduce the

there few Well are there. things

than XXX BDC REITs more not a as private public are they this XX% good basket with a REIT. cap, predicate. REITs a market basket, Mortgage NPRC of XX% property NPRC right and private First, but companies are, Property company. course qualifying not is assuming companies clarifies is are investment. portfolio assets a for

So, that’s driver. a not really

have We capacity. basket XX% unutilized

percentage represent discussions our can see meaningfully from to unlikely understandings agencies see – CLO's you today with say, comfortable book. et of and where that unlikely it’s have as that We’re it cetera. to in with I the imagine increase would percentage we is us rating us highly certain

on as the people You agency rating industry, I to some a in be actors going different well is even responds noticed. today. bit the same in come didn't in that to meaningfully an dropped self-imposed jointly have little greater constrains restrictions results so they mentioned aren't that different perhaps or with they people issuer other agency, imposed as much where might every mean rating the are Other much back then leverage I more be agency just issuer like rating

to enhance right it here. know any as risk at commentary more return your at don't look cycle lever add the just when out something just us don't like take necessary that. from take or equity, a it management on to but the point seem like and if desirable you'll John to view doesn't on it other guess we least can view business I doing paper stand for more, So, in you risk. time Chris on be the long we wants I

our did some it whatever at valuation response maybe a XXs, takes us it I economic and surprise above as now reducing the XXs, loaded with we the the might be the point XX% sudden and an with a beyond mark-to-market could say with we sure, in limit, Well, in statutory as you arsenal the but balance assets that prior go option of would statutory, that one-to-one. I in a guess generate could take leverage an situation from above in or valuation mark-to-market downturn, option a would where the mark-to-market share higher is, we reducing for did. risk The XX, people it us my viewed sheet to adding existing that have view merely risk

statutory value simply having not any, to the as too intent limit. deal the having other we or that a option option. So, Without give without high Well, situation. of cost one-way us us the for obtain such to existing option to we unable struck this with thought flexibility that go a any beyond the more would were

new why live is that’s the option Every being. data. incoming will day for we’ve day, So, a time without there the new is we decided,

relook book. will our at We

it the are. we at comfortable relook we things. rethink where but option should have at When currently. the on you. at costless – may it and we a becomes least We we’re or become our projections, re-examine relook will often now, industry, costless basis, could costless, it's will We wish that. maybe But we right as not economic Grier we costless, said, will Thank

thank All you. right, Okay.

turn like This for question-and-answer would I Barry session. closing the concludes back to remarks. to conference our John over any

you thank Have Brandon much Bye thank wonderful afternoon Well, on call. Sure. very we a now. everyone. our and for people year-end joining us

all. you Thank

attending conference is for you Thank now presentation. The included. today's

disconnect. now may You