Saratoga Investment (SAR) 10 Oct 232024 Q2 Earnings call transcript

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corp.'s 2024 Fiscal Second Quarter Financial Results Conference Call. Please note that today's call is being recorded. [Operator Instructions]

would Corp.'s turn Compliance Chief I to call Officer, time, Investment Saratoga Financial this like the to over Mr. At and Chief Steenkamp. Henri please ahead. Sir, go

everyone XXXX Thank Saratoga Conference to would you. welcome I Call. Investment Second Fiscal Corp.'s Quarter Earnings like to

call factors projections. ask do Today's materially actual to that refer could includes law. you the with from statements update recent our required unless so to statements undertake differ We most cause not our filings forward-looking and these SEC to and conference statements We to for projections. do forward-looking important results forward-looking to by

we presentation a during be Today, will our referencing call.

our quarter & earnings the page release can Please our our will is distributed website. of press You our replay A available. details. last be call presentation refer to in press Relations conference XXXX to Presentations fiscal of earnings IR section also for the this Events second in Investor find night. link shareholder release A

now like Christian Oberbeck, I Officer, over introductory a be making Chairman will remarks. Executive to few our call would Chief who and turn the to

largely and Thank to rates as fixed you, year to and everyone. margin Henri, performance This remained interest on financing significant and investment paid adjusted assets reflected rising contrast recent last dividend rates increases improvement outpaced our and rate from growth AUM to as quarter. compared unchanged in compared last increased share in largely our and income per net welcome, XX% liabilities. Saratoga's floating on

importantly, continues high-quality rates. terms increasingly flow attractive well absolute a and future We pricing, of portfolio, higher economic for general potential on available be abundant contraction opportunities credit and challenges. believe Higher of and producing and margins from improving rising Saratoga positioned sponsors rates are our to investment opportunities at and interest an

with environment, Most structure potentially XX our covenant-free, portfolio, for interest rising rate nature market of out maturities performance with foundation to environment. in and X.X% of the largely $X.X long-duration and higher-for-longer the has challenging billion particularly the marked years X which credit us cost volatility. interest-only, resilience down is coupled incorporating approximately this versus primarily importantly, debt positions at well Saratoga's been high-quality our overall

excluding Our cost, up strength our our solid is segments. X.X% our portfolio, portfolio and well-selected and versus underwriting BDC of reflecting sponsors industry CLO JV, growing the of companies core in and

unrealized reflects $XX.X our $X.X million unrealized quarter's This a offset Palace Pepper significantly portfolios. and appreciation of syndicated the broad depreciation million to related broadly depreciation investment, net rest across of our by core

continue as pricing portfolio and with value today. syndicated to we in fair if quarter-end, would broadly see of in that Consistent improvements QX that since the market marked loan at increase

million NAV million of our XX, Importantly, our as NAV a a and $XXX strong since leverage reduces basis. as we This of using regulatory equity today raised of on from to last $XX basis approximately provides increasing originations. sheet $XXX and supports million strength our May XXXX, additional August balance forma pro our as quarter-end, XXXX, equity XX,

on outlined last many XX% and is from increase issuances. These in remained $X.XX per including in equity share sequential this XX% per reflect ATM at adjusted quarter XX% NII resulting quarterly first, from from share, a performance XX% NII further share portfolio of year. -- dilution strength our adjusted unchanged QX, QX X, Slide count indicators QX, Our past manifested QX our $X.XX $X.XX increased in from earnings in the including, an XX% key following increases

quarter's $X.XX QX up up as last per per $X.X overearned grew $X.XX this share, management under last billion, and share share share XX% $X.XX largest X.X% a third, XX% year; dividend record Second, to per level. our adjusted in current by And our per increased yet, quarter; to approximately assets $X.XX compared dividend NII. from to from

our environment. current discernment continue and of We the terms in in commitments new prudence

an this high-quality this originations current credit sheets. one originated like are balance X new standards. there fiscal company portfolio investments We had pipeline, where smaller the our with know and quarter many portfolio do periods despite overall well we quarter strong robust in demonstrate investment XX meet existing follow-on models review that companies and we not Our investments of the business

totaled and repayments million $XX Originations of this quarter million $X amortization. with

enterprise Our X high stressed situations, credits by with quarter-end is and in now industries in our With remained portfolio total. performed to lien in at and nonaccrual of our rated for XX.X% uncertainty. and adding believe highest credit this X that first strong on additional a investments of supported well credit quarter nonaccrual in quality challenging at credit have XX% our debt for economic historically structured we values sheets balance and conditions in generally well leverage category,

$XX.XX XX.X% net second adjusted and of of against dividend Saratoga's price the on earnings recent NAV, overearning the stock on annualized $X.XX growth based adverse quarter, increasing yield quarter provides income by dividend events. an and share, $X.XX XXXX. this XX.X% or X, and per increases per dividend of dividend investment October a per The share level share $X.XX supports yield annualized and $X.XX a its imply of cushion

NAV currently sheet In experiencing, as conditions volatile us. for economic remain paramount strength, and such preservation balance are we liquidity

of $XX strong, of was million borrowings. million capital $XXX $XXX supporting of revolving SBIC non-SBIC of covenant-free equity; million million long-term, Our debt; covenant-free long-term debentures; at long-term, $XXX structure mark-to-market quarter-end and

and $XX portfolio lending with undrawn companies outstanding $XXX $XX facilities are funding committed million to million discretionary committed existing and discretionary. million total Our

a fund; our our newly expanded million had credit million with $XXX solid a revolving investment cash. rising rate $XX facility; capacity substantial through quarter-end, us positioning credit debt schedule at our terms, and $XXX support economic SBIC to arise. challenges both million we companies cost available X And primarily million to from favorable with for the Our maturity current at well providing III environment from overall or should $XX ranges fixed years, XX structure in approved and available of a portfolio

performance strong quarters key the our demonstrated May second indicators within XX, performance to compared August as Investment's XXXX. ended XXXX, and XX, Saratoga quarter

year up quarter. is Our up NII million from adjusted and X% last $XX.X this last from XX% quarter,

adjusted Our up and quarter, is last unchanged from quarter. XX% share from NII year $X.XX $X.XX $X.XX this last per

months the equity and on return X.X% last average is quarter of X.X%. X.X% industry beating from year up X.X%, up last from XX and Latest

And the later. million Our provide average $XXX last up NAV industry per equity raised share Henri X.X% is and detail NAV more $XX.XX to is X.X% year and $XX.XX down quarter since XX $XXX down in the will from and million latest ahead up $XX million including quarter, end. is last of $XX.XX months quarter from last X.X%. from our that substantially

of see under we credits consistently with has BDC can took assets our Slide and you credits steadily on X, ago the X As only and on high the quality over management years remains nonaccrual. risen our XX since

while deploy credit Our as into in environment. pipeline management diligently team available our positive this is growing we our the time working capital and cautious being trend to appropriately same at continue evolving volatile this

would now to our over performance call as With to financial and our back that, I results the review Henri turn of portfolio. to like well the as composition

Of most and QX XX.X million XX.X quarter for our key Chris Slide ended touched note, average from you, in of on. last which XX.X the XX, million quarter. outstanding the second fiscal metrics shares of highlights weighted common X last shares Chris. year increased August already XXXX, performance Thank million

XX.X% last primarily X.X% last interest yield investments but is from last quarter; first, of the Saratoga second, from impact down $X.X a other both year-over-year, assets BDC XX.X% XX.X% up year rates, quarter, but yield income quarter; received million from and unchanged weighted quarter, since to last X.X% and NII this up year-over-year increased Adjusted from: NII quarter and Investment XX.X%. venture. on from base This spreads, dividend third, by X.X% non-CLO the was up average year. increasing current X.X% BDC Adjusted XX.X% average increased rates last last coupon from included from with and higher joint a by from non-CLO

the Total on increase X.X% we year have compared the in have excluding through taxes, past from million the from fees income base of the expenses, again of and both and from the and end as presentation for for quarter. last and Also, and X down from interest balance $X.X maintained, sheet assets in added an year. annualized metrics XX KPI margin average million financing appendix this decreased fees that This million expenses represented XX% past and total the trends at to statement a excise incentive income last basis, year. Slides QX, we XX $X.X quarters to at interest over upward last increase X.X% last net $X.X our quarter, an QX and shows management the debt including

$XX.X a this of million last NAV same quarter year. $XXX.X $XX.X on Moving million the and last as Slide X. increase was increase to quarter-end, quarter from a from million

was million of losses $X.X under main equity by the $XX.X growth million and $XX.X net income million realized fully net the driver This offset million quarter, of dividends investment unrealized of the of of and with declared. ATM $X.X the program issued

were during were during the company's of distributions stock In No million made repurchased dividend plan. through addition, quarter. shares $X.XX DRIP QX, this

XX our how past with This also has per of includes chart QX down historical quarters highlights XX the slightly this $X.XX. NAV by important metric which increased share,

NAV since term, accretive net growth per by the asset as long value has this the our demonstrated And been in increased increase Over steadily has XXXX. consistent share.

consistent from and realized gains. benefit of We continue to unrealized our history

income from rates base reconciliation driven from and by of increase per changes net NII despite in On dilution $X.XX non-CLO Starting the offering the originations decrease increase Slide NAV the a see and adjusted this quarter net a on $X.XX $X.XX from with top, X, share interest simple income and other in in at major sequential share $X.XX fees you equity management a higher NII a by was a quarterly in AUM unchanged basis. AUM. ATM will of lower the higher adjusted offset per

dividend due half lower unrealized the decreased NAV to in recognized $X.XX per the $X.XX NII. the On GAAP depreciation by offsetting share $X.XX $X.XX the primarily in slide, and quarter, of in the

available of $XXX.X the debentures secured credit between and dry powder which us Slide This undrawn to undrawn quarter-end, X SBA available million. outlines facility. spread was totaled as our cash,

debentures level available also available, XX% cash with SBA quarter-end of its and allows assets of million us This by pricing, very quarter-end liquidity that's $XXX an need accretive additional our grow of NII $XX.X million with accretive. to the and fully low-cost external available deployed, for to when financing without

diverse debt that no of almost and maturing We remain and conservative especially that within way all important that rate term nature both including importantly, have stressed covenants our is X private all during debt balance pleased access in leverage account overall debt the and a with next fixed with be nature in into debt position, on liquidity with almost liquidity rate no volatile Also, taking structured BDC in sheet. public interest non-SBIC and our X available call our can our years rising is environment. our coupons, long our fact next our is such the higher with and rate The options almost the to we sources that years, of debt available such times. the this in

on X we of now have and Now like joint would through investment CLO XX I value. X invested is of yield the X fair companies, and our fund move $X.X to review portfolio and billion XX at Slides that portfolio. composition AUM Slide And X venture. this in to highlights

our percentage last-out positions. is first XX% of total first lien which lien in is investments, of XX% Our

time, our how you CLO, core yield excluding this assets, X, past especially the Slide year. can over On on see has changed our BDC

to This yield quarter, Palace rates and decreased The value more reflecting improved increase XX during CLO current. slightly slight performance. CLO quarter, The in yield QX from slightly XX.X%. offset the down in The on than increase X.X% core was Pepper to is going BDC performing X.X% nonaccrual. by bps market last from our was

these interest-earning used the also recently. SOFR X.XX% rising QX SOFR SOFR how assets close X.X%, the the the Slide with continue of the with will as QX of rates to rate XX of by $XX X.XX%, but in XX% benefit earnings not and of of which X or while average have rates our stay rates. of future in shows in QX these our is months using stand rates fixed but we rates, rate base impacted about million There gain will levels the borrowings quarter-end is price for and past recently, to our rise and portfolio is both to rates, continue to elevated. variable stabilized average not Despite from higher uncertainty of X-month rate increases all be

as over spread and our Slide total portfolio the our industry are in breadth how XX equity joint finance investments U.S. which diversity diversified portfolio, distinct of you investments venture, which represents, see Of the important Slide interest, consists included an can securities. the shows addition And currently overall strategy. part CLO X.X% remain of our to XX investment throughout our our structured that in investment on are and XX, industries

Slide the past consistent net credit of fiscal sale million XX grow $XX.X long-term highlights or performance we This our in reflected is or from of shows realized and that XX helped the combined portfolio healthy of redemption equity NAV a for our gain interest quality investments. ROE. realized years, had sale other has gains our early

my of now to the Investment market. the investment Michael an turn Chief concludes portfolio Officer, over That financial Grisius, will call I overview and review. for our

portfolio our perspective Thank on state take describe you, of and minutes the investment to strategy. current Henri. on the current I'll a and our market comment performance then few

market it to has happens remained bit a macro holding in see be deal broader to a since unchanged update relatively in our what environment. seems last pattern as The of the overall

private firms deal for costs new elevated economic While high levels which remains credits. the drives private and of market, an the abundant, liquidity much to outlook, among opaque equity constrain inflation equity demand continue financing of

lending remain their banks enterprise are some their stance on off a pace and, historically greater well harder of and volatile more the vacuum sectors multiple capitalizations especially of the which equity cases, capital, positions. lenders use Lenders, regardless a as reduced Overall, taking have requiring of for deployment backing in as hold borrowers. risk-sensitive, creates

as as are fill opportunities more the very been gaps a we market. And have positive of we seeing attractive that way All these actionable our in us come have we arisen deal factors for pipeline. have

some of to SOFR experiencing to been increasing with to for offer down points economic mandates. margin appear have fears levels spread had XX continue remain during grow quarters come second remained market strong widening another have dampening appears fiscal we have seen among lenders but Leverage and at the quarter we Absolute The full recent slowdown basis tighter stabilized. participants, spreads to absolute an there. in our With credits. some have win yields

making affect being And team the particularly disciplined through A made has natural experience our remains has keeping number cycles. of, in aware the being a follow-ons. inflationary of the managing rates very continued when of investment through first, Saratoga management credit portfolio. us And decisions; importance second, a proactive that successfully managed and economic existing slowdown eye both portfolio We're how prospective on and watchful rising potential pressures existing currently and supporting on labor companies companies. could costs, portfolio and focus

to high remains opportunities yet to capital. usual, bar underwriting as Our we continue find deploy

strong the as calendar The first from of X our deployment models XX exceeding draws. delayed sheets efforts borrowers origination was XXXX investments with to year. environment in months very including continued Follow-on XXXX, balance avenue a of strong deployment calendar be follow-ons capital already of last business healthy demonstrated and existing with since us, year for beginning

In addition, invested this far investments platform nine year. have calendar new we so in

And especially remain companies this our contact close portfolio in important. teams, with in and market our be to actively we environment. continues critically management management with uncertain Portfolio engaged

of are interest as placed this on their for payment All portfolio terms, after paying period August time, for we have PIK missing interest Pepper loans moved that our except that to in Nolan our according to a its remains have investment payment. quarter of nonaccrual on nonaccrual and Palace we our

overall above durability. BDC significant bolster Saratoga's asset overall our CLO certain portfolio we our on strong assets, cost. now performance of net cost. believe that depreciation of this core the portfolio are attributes the the write-down recognizing quarter, overall is and portfolio including its Despite overall below still one After X.X% reflects JV, X.X% unrealized this its quarter, And our

portfolio by our generally that is supported debt strong values of in first have historically in enterprise performed lien well industries and stressed in XX% situations.

We have commodity energy or no exposure. direct

businesses In degree that majority of a revenue of have our demonstrated the addition, portfolio retention. strong historically and of comprised is high produce recurring revenue

net gains as on being space And in of approach of our see portfolio approach at has of focused resulted the Our cost. Slide can percentage XX, respect has as stay BDC our quality portfolio on to been top the realized always to at with this a the underwriting. performance you

that number currently fourth only We have XX positive years, the BDCs are of past over overall. a X X

rating of quality of shows our rating portfolio XX.X% current credit at credit volatility reflects impact internal and quarter-end. our highest Our the of market as

for slide is selectively protection also previous but This this one. investment as our continue strategy our to of equity only upside Part our believe given overall and strategy this And to returns the when served on equity not meaningfully portfolio the in co-invest equity we're strategy. of the demonstrated companies portfolio we augmented as and potential. has when yield intend co-investment that portfolio opportunity we in our

Now have around levels. their Total while on and leverage industry XX, Slide looking come historically our multiples overall see X.Xx, leverage. now down leverage the for portfolio Xx Nolan that at from debt you was Palace, year is industry high this can excluding Pepper

slide addition, and over the new ever-changing increasingly investments to our long consistent In dynamics. generate and our term flow this the market deal ability of strength illustrates despite competitive

second follow-on the and new investments. we made quarter, portfolio company XX added During another

we're the increased emphasize, attractive portfolio as we macro Despite the especially for grow growth's having always, important sake, simply seeing, environment. success this our uncertain it deal in we're and and investing highly face to to in aiming growing not the flow are is businesses of

investment healthy shareholders. durable Our to capital a deployment and high business is in confidence accretive bar that and always is our conditioned incremental be each is upon will

have our deal continue to has experience our new sources become our previously and to focus business Now flow on demonstrating discussed, relationships deals. how that new Slide mature significant led development XX data strategic set, provides and more on skill relationships multiple for team's

in and companies notable to our our newly screen relationships, because highly months progress building flow is ability What development progress significant the The us our strengthens expand deeper X we've on opportunities of and the broader reinforces over the marketplace we investments. business it the remain are X as is formed past as pleasing best of reflecting is we dependability XX relationships noteworthy portfolio to made new especially efforts. rigorously in deal to the execute selective from

see you is $XXX gross Saratoga remains quality management overall realizations. Slide on investments on The of by unlevered made credit unrealized XX, As Investment million team our XX.X% IRR the solid. portfolio can

of right, over IRR chart the $X.X billion the XX.X% on weighted combined since BDC took unlevered is and on Saratoga the On can total management. SBIC our unrealized you see investments gross

on Palace And downgraded quarter, investments yellow interaction year. depreciation As been does no only current Nolan the company reflects while two of for business. dependent from has change The and for yellow of prospects being this since red. nonaccrual performance Pepper current unrealized QX. There more but not the the our was a to we change view to the long-term since COVID, our from remain status last remains significant investments. on mark the business yellow. these non-green Nolan in-person now fundamental of

poor Pepper of investments. is which mark first to significant Palace loan depreciation lien This $XX.X continued a $X.X the to investment the to X/X results in quarter's suffer value its approximately since $XX.X at fair about write-down million, And performance. total our this on leaving million resulted cost, equity overall overall and term reduced million. the from of

and issues the This cash current markdown reflects experiencing. company is the flow performance

aimed on to resources company We is business brought and plans. undertaking engaged has assess significant and future improving the at performance. restructuring are with execute The the sponsor company options actively to initiatives new the and

company unrealized approximately of quarter's $X.X offset of across appreciation the of loan million company's evenly depreciation $X.X by relatively Pepper the depreciation in syndicated the on current Palace investment, CLO unrealized depreciation net of million primarily $XX.X volatility JV broadly driven unrealized equity the remainder spreads net and company's as the million reflects reflecting market unrealized million the of portfolio, quarter-end. $X.X and by and This investments, market performance the on

and overall invested investment Our approach recovery realized capital. yielded our has returns exceptional of

Moving XX. on to Slide

are funded second our You and deployed. fully licenses first can see and SBIC

available, our license up III U.S. small support SBIC new ramping to currently undrawn allowing are of debentures million to with We $XXX continue businesses. us lower-cost

CEO. like to Chris? the concludes And over call This turn of review back market. I'd the to my our

you, Thank Mike.

dividend share ended on outlined August on $X.XX our per XXXX, Slide the of As paid was XX, quarter XX, XX, latest for September XXXX.

the reflects basis, in rates and past increase Board The continue is over evaluate XX XX% including near-term the factors, dividend least general will on XX% dividend years respectively. level history and and earnings. of economic rising largest both and X a latest our quarterly considering company quarterly months, base the impact on Directors to and at This of the our increased a spreads the

levels overearning future $X.XX economic provides substantial Recognizing on of in the dividend decline. rate economic any the versus by circumstance, per deteriorate this XX% divergence or share of direction should its quarter cushion conditions Saratoga's performance, interest overall base and or QX opinions of rates $X.XX

Moving to Slide XX.

which XX both XX% last Our capital index period. has return the total for BDC dividends, returns months, appreciation total XX%, generated the for the includes of outperforming of and same

performance longer-term slide, our next outlined on is Our XX.

Our X- both and X-year in horizons. quartile the returns of time place for BDCs all top us

past years, XX%, index' past versus of the X has over Over the while industry's XX% the years, the X of the return total our exceeded XXX% index management return took Since XX%. Saratoga in the been average XXX% exceeded average XXXX, over our BDC return XXX%. return the our of

the of to and specific context can further our broader placed metrics. in XX, performance certain industry Slide the see On you performance key

long-term to reflects share, on NAV of focus are NII yield growth, receiving. on such equity, shareholders which growing return continue the metrics, per and dividend all We as our value

we year-over-year, down only quarter, BDC While down this share X.X%. NAV are decreased the industry per X.X% while is X.X%

months And of on be NAV double X.X% almost to one accretively. our have we industry's grown Palace it done return the markdowns Pepper continue term. have and over average. latest to X.X% And of long this XX CLO the BDCs is the despite equity We year, the few

Slide to on Moving XX.

adding help performance designed markets is make characteristics on call All leading include this including to industry previously investor to BDC institutions. shareholders. differentiating slide the outlined of management levels drive highest Saratoga this ownership base, many in on our a that one we the characteristics, capital discussed Investment of our our the the of are at more our We ensuring maintaining that aligned differentiated will attractive discussed, of are XX%, quality and with size community. initiatives These believe

ahead Slide and and We in the well that strategy market-tested future and XX. in experienced reputation, that environment underwriting investment team, Saratoga's will through balance long historically term. navigating opportunities on sheet, and standards will challenges our in uncovering structure the Looking the us strong our current management and capital confident time- near remain serve and shareholders liquidity benefit and

would for closing, In And again I the their like to thank like ongoing now open shareholders to all for would of call support. questions. our I

our [Operator of first from B. Instructions] Riley. Bryce coming line And the question, Rowe with

the below the at I to with to equity equity will sense subsidize level manager Can ATM quarter. for, the slightly still maybe to of And the of especially last about at the wanted wanted the equity that raises get use trading those stock I NAV. to maybe you ATM, then a kind NAV? ahead decision end continue the go which use the ask guess, of to and speak since

Sure. Well, thank you for that question.

I at looking business, given we there. of think away our turning really lot tremendous opportunities, what a our overall we see in out are view,

And equity. to keys for growth is -- is the of the key one so the more --

I to of thought such very it very was we shareholders what from equity we've a of issuance think, described point good as the set opportunity new robust view so issue company. And help support, for our the investment to a

the was and will. were if And from interest our very NAV, is saw pocket, the opportunity, the from discount idea. And amount. size. a manager's what often We $XX to covered we we some million predict. happy and was manager is we arise decided in good slight a opportunity. that in with to significant they it. But substantial the a can't judgment saw a demand, and saw we which was opportunity future in support subsidize standpoint, something arise those so that Whether quarter in meet it we opportunities the you to how we And interesting

like healthy at and there. there's pipeline sounds a And That's a a helpful, Chris. eye It maybe discerning clearly follow-up Saratoga.

leverage ATM work? put leverage a quarter you you leverage maybe of in with, seen guess, Do balance down money as last we'll up with come -- the to of usage. saw than of last quarters? level we there again more target? saw see comfortable You've couple the creep lower of particular feel I sheet think do back the the -- Or here a over operating Is you kind kind you

think dynamic that, kind is I that of Well, a situation.

in period we our saw as quarters, some many really the as we Clearly, equity, have things. we with magnitude to leverage the opportunities of of over And a do. we've pointed when want set. have greater as opportunities. opportunity a over said we we think time, last really our did time. fair past to our out, to address I raise have year balance And haven't balanced past And had opportunities in amount our the we opportunities. correctly And increase balance lot leverage of we you what to

recently, we just And did.

of our terms able we're one different position. that balance new we much to market we there our leverage two raise. the a again, situation originations markets, a to we market absolutely is so And for But put we're solid keep it's for not very And advantage right, take something equity remain in are we're time. how dynamic over the decided to and else. ourselves balanced want as them thing precisely necessarily in to -- obviously going match of to And how time, in able that. can't much versus And we on equity sheet

Casey line the coming question, from Alexander Research. Point next our Compass with And of

Yes.

gross around Your is Xx. still leverage

Your net leverage X.Xx. around is

the you're loaned to year? to certain the the now, for So limit. a extent, without outlook for one repayments sort repayments, could at that, of What right of least the argue is balance

going a the originations. the of end fairly is we're traditionally, of into that robust Because period a time for year period generally

also, that? is to to are And as repayments? investments What outlook the there and put in So what for you the JV the is to be capacity originate remaining going participate in well? able for to investments you able be

the to group keep sponsors determine mentioned that. of that and want as exact been manage with. that And start we And with to flows want base. a I growing flow those are question, have I of Bryce's with, work we've we opportunities think keep our Again, to just things I'll that the we that off sponsors been, XXX% have as don't working to we come of Maybe origination supporting, opportunities. we

that's can we in that So quarter predict necessarily fourth this not precisely. something

leverage, Mike, in And a feel position, of issuances. repayments, improvement significant we what terms do our we -- the leverage is In you of terms do a given in to... have want equity

it that. should I try rule to the a then never lot X/X just portfolio over thumb of that think a everybody a this roughly. over heard generally turns super turn really where Casey, is level. bullish, our of me turn over That's thumb. always that. dynamic can I of markets it you've And that take feeling of rule say in about But really is The year faster kind type me Yes, at let before, apply, than

In are not turnover. this shareholders as market, us benefit our much getting experiencing the of

where there's to got there's feel not generally market, where and are well. the deciding for in the and continuing interest are willing pay time But they're where historically and the where owners between best pay sellers a the was to so sell it things. And companies us healthy disconnect because performing a value we've portfolio are to is really now buyers

getting And are payoffs. the benefit so fewer of we

horizon We to that on bound Now are meaningful. are of aware the payoffs. some that having said have that, certainly are we're

think feel also have at our well, mentioned constraint as I a SBIC all. and very though that we significant that being under the is I to us availability we this don't license. And Chris as think thing important for recognize,

business If it's invest strong, to advantage capital take through opportunity we of really really that. and vehicle that's we're a going good that see a to

Chris part sort you of leverage, the those we're of deal, think I well. that SBIC we of like payoffs of we certainly, outside get license, capital that how of the get amount availability, be as when will equation And balancing, as some much mentioned, factors. the

of gross as SBIC you perspective asked did debentures. the that noticed we about $XX leverage thinks you repaid about joint that net impact obviously from deployment. And the Yes. sort a And leverage, up probably venture. the And doesn't III Casey, free SBIC also there capacity our of million I one just although

into requirement or at additional point this need the no in have put joint venture to We capital time.

you of liquidity a going going now. the be at necessarily X of time state market. quarters joint unusual venture now on in to But obviously, in of loan of volatility you subject return, see a a if at not the moment, sort dividend income operating there's it's And near the It's it's a term. becoming steady in to syndicated drain And to the at more than So the generating broadly that's this will, row. the nonrecurring. or steady-state point that

is little portfolio the And happening credits the bit just Mike what's picking seasoned of in our repayments, a on percentage what of normalized is effect, up said that growing. mean, sort prior in or absence I about investments of

these are credits experience we have a And so lot of that we know, with.

involved so and credits what that producing And are solid those we we're tremendous is are very feel pretty earnings. with

we while And across earnings at yield yield earnings portfolio. very substantial our XX% some... do have is Our

a level high But accompanied with mean... I of Chris, which leverage, is

Correct, correct.

it's go I not same leverage. amount regulatory what or a no with to to your investors is -- unlimited earnings leverage investors that whether a uncomfortable number can't in mean, be an are. be number mean, necessarily it I makes of business will counterproductive, leverage, going comfortable the your that the you're are right, as matter that gross

to you in that that have keep think mind. I

gross one we is discussions, us leverage that. another. many leverage for I same our conference think absolutely do understand keep on BDC it And We in as you've as for not calls these given of mind. gross Yes, the heard of of And rates we and things leverage, the our our believe like makes manageable portfolio. context gross the our amortization the the covenants, leverage, the in of duration absence leverage absence leverage, quite term that, our of of our in structure

okay. Yes,

Secondly, expect with are of mark some a here? broad restructuring where to likely you just is at for be said going going you're think to your should to you form to Palace. end here? we in keys up be And Mike, equity supportive of guys type looking Or turn into -- you continue role? forward of Pepper are Do to you that some the

challenging possible additional Casey, it been are it's end the improve are recently time. the I've been of There obviously, can't situation. certainly who that's some of long to right we've a thing all details. uncertain it's for that lenders this keys? company, a Is lot brought to because taking do. to -- maybe I in performance, to a sponsor certainly, the business fearful get now best into could mean, overly are with perhaps resources it's position ownership when a working we But trying that private end. bear I so with we the up

right And under so consider the that that's we something certainly would circumstances.

performance. working improve with and For now, the the working we're we're sponsor, to

really and add and to the thing vast experienced up portfolio, is not that that broader its up is the of or our think that's to it I that's quarters. to unique -- challenges at anything seeing I'd that additionally prior portfolio that the note majority in we're are important performance are connected --

portfolio. unique feeling is This working about that circumstance hard. we're good we're very So very, a our on

trading these executing afraid investors ATM lastly, are Yes, that that are are impacting you where adding And bled you're difference? whether or these into the sales, okay. the of know below trades investors to seeing are actually back day-to-day NAV, are guys want the ought equity point that not then the And single them will being you're is as market these or to stock? out the institutional not misunderstand

very comment that's I think I can a precisely It's think not obviously on. and astute interesting. something question we

to of happened. XXFs And visibility that evidence will But been happened reporting on the something of I reporting don't what's what shortly. periods of time. have But more on SEC standards the exactly be according think on. will have we XXX% are we different and filed there have it's when we be

confidentialities what's some and since quarter-end happened of as who's and have it. of of then We doing the

give exactly So what it's on terms volumes. a trading you us for read precise difficult to happened of the in

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here my question Well, call. not answer to that other for report. analysts I'll my on the the to educate reserve I'm

Mickey coming line of next from our Thalmann. And with question, Ladenburg Schleien the

Pepper with issues understand else your just portfolio its consumer of in I that on the companies to is manifested your that portfolio appreciate respect to are comments confronting the is Mike, retail-oriented? to -- that, also if that want terms are Palace. in company exposure anywhere being

Mickey. question, good a That's

As consumers. to to head to don't think well many portfolio Almost of all at that. even we're question no, your any the I'm performing so that up certainly that of not -- evidence really -- I in our said, direct our is directly, portfolio of or one. vast generally, scratching is our is periods. of up are seeing my companies exceptionally is and have majority answer portfolio and prior We BXB

-- there your issues quarters? is the seeing and over reimbursement relatively health the about inflation How developing risk all? Or wage several that from or further in helpful. developing care sector, Mike, last are are insulated that we've that's Okay, been at investments the there

We that. experienced have not

care one is as for we've been to by you that the is our the demand been strong, not that any I will. affected those persistency market of attracted services reasons areas we larger so think quite the of that macro the focus trends, that experience if health it's on and

care some directly reimbursement steer areas if the that rates. dependent health investing Those on we're deals are to tend businesses also We of generally on generally focus of they're that we in at care. the where clear health not you look

that So we've not experience well had either. as an that's

say would really business is labor that difficult. middle is market, the that which almost are I experiencing a is challenge now, any broad it any markets

And high. so constraining degree. that are rates labor to margins some is And certainly

value-add of underwriting. very the things these our portfolio that we businesses. look high hard thankfully, in For at one companies, are It's

what So manage we've And usually the that's certainly of power a way to seen they of that through can have and they in margins. can they preserve their a tend lot our pricing performance where portfolio. in

of helpful, is actually Can ratio have us do which with segue where That's ratio a is? interest of a coverage coverage. question, companies X? sort portfolio you portfolio's give the a an interest meaningful my average you sense And and into of below is next coverage interest amount

interest total look strong. you can quite number. that feel I portfolio we in across something give the certainly that very coverage at. we that No, But no. is underwriting. And at can't the we look the comfortable portfolio That's

looking it the portfolio. as think, as last Mickey, be not in as interest probably our the impact some in change rate mean, -- Yes, change people one the level, of X.X high coverage has of change. think resulted It's because just I sort significant, very rate I no, some at like it's of the perhaps might year of turn over or -- in interest just rates

just to a the was Pepper that's sort And modest question, interesting. I housekeeping to in on there Palace. suspect it's But case. I lastly, confirm want of if just Okay, due average. that's a And decline weighed portfolio

Mickey. that's in Yes, my highlighted right. that's why well, Yes, I comments as

lot then offset overall But so. drives change. the QX-ish. like the You from down happened decrease slight was a on impact that Palace, Pepper of of had obviously, which by the a XX or the really putting But yield to rate X%, bps change that obviously,

Raymond And the from of question, Adams Sean-Paul our coming next line with James.

Pepper One result was support the Or been relationship deteriorating? sponsor quick for of like troubled a It any Palace. back question company-specific just the But at it's looks was it a a markdown major continued to asset problem? while. all

interest together August. the to with relationship is the performance that in We're change sponsor. our enough working the no declined performance. though try the improve significantly paying been happen stopped What in did to There's sponsor the that

write-down on valuation of reflective go to needed having. the But business it challenges so in the continued is And as a was nonaccrual the result. that

it of the in guys idea year? dividend do to is this XXXX sometime regarding by any declaration And spillover, have Okay. the a or going you high end because be of quite special

Yes. increasing. I mean, I is think the spillover

in in management. prior we've spillover think I mentioned our been we've calls, conservative as

to the and earnings And what will XXXX. BDC this that. November RIC managing one by owed we to determined don't we spillover November. determining reconcile of our plans there's time any next haven't and so be with spillover. fully rules have clearly, spillover But one's And does relative And

And our the question, line Zwick Hovde from with next coming of Erik Group.

volume commentary just than kind in quarters, of to primarily the you've prior reviewed the number credit of had standards. with it origination was start that opportunities in out the been to a meeting Wanted slower not due

of questions two kind maybe So there.

you're reviewing? opportunities And there add between and seeing has so to the shortcomings it that meet to the more were you portfolio? two, was your Or criteria quarter? versus that kind this company? commonalities far criteria what your across One, any improved would potentially diverse Are of of the kind

that, look that say I with can was the in, of the where at more business quarter company assign not that platform we're would that. and experience one of X in new much the where something it's you to reflective nature trends just too

to continue that in new overall we good of have we very quality in we've done past. expect of with consistent a portfolio the feel pace and pipeline capital think the companies that the I kind what about we'll at deploy

all we're in reasons certainly we've for outlined, fact pretty that banks a retreated in in that flow benefiting general the is significant have way. the deal down the from While market

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of on efforts pipeline plus development have that the the so side And kept pretty all full. that our business made we've

that that anything we're seeing in So really to say, marketplace, could with have the We're there's not historically. we would not approach the taking I we're that point same x underwriting to "Oh, and that." thematically, comfortable

at in kind questions looking portfolio little debt offset any just burden pressures. discussion ratio have from other couple curious the as or then companies service higher EBITDA a recent or as And KPIs of for maybe interest terms growth could ago, going characteristics from give that average inflationary the other other kind of had, the coverage perspective of question I these kind of at kind color to curious if you of coin, or a you other helpful. look the helped only of it companies or well your side That's back of bit that

well. portfolio have we they're If And businesses that businesses now a there's from ones gravitate and even case the environment. one mousetrap XXX% a thematically, therefore, say that's they have portfolio toward are well of I in those and differentiated what pretty is is business challenging we our if growth even -- for that theme that the look And environment models a trends, performing isn't in i.e., bit portfolio. perform often secular general, better our benefit challenged macro the common that would are across this but is we're to every company, that seeing going across in

to of EBITDA safe the that are of seeing So assume it's across metrics? in and growth you terms kind portfolio other

-- Yes, above I prior where they than think as portfolio I've were up said, the of periods. or is at our vast majority

the questions no I time. remarks. like turn back at I'm queue this to in showing further any over Oberbeck would for closing now to the call Mr. And

for look we we and forward Thank speaking to everyone Well, us with you. next thank you today, joining quarter. to want

your Ladies you conclude and conference participation. for Thank that does our gentlemen, for today.

disconnect. now may You