Main Street Capital (MAIN) 23 Feb 242023 Q4 Earnings call transcript

Greetings, and welcome to the Main Street Capital Corporation Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Zach Vaughan with Dennard Lascar, Investor Relations. Thank you, Mr. Vaughan, you may begin.

Thank you, operator, and good morning, everyone. us Conference Street Call. joining Quarter Corporation's for Earnings XXXX you for Capital Main Fourth Thank

Chief Jesse With and Managing Dwayne Chief portion Officer; Private and of Hyzak, Street's today Operating Head Chief Officer; me with for Investment is Credit Executive of David prepared Officer. Also the Magdol, Main the Officer call Chief Director Financial Morris, comments participating are: Investment Group. and and Q&A President Meserve, Nick

afternoon yesterday results. that the Street available issued mainstcapital.com. release Main year of operating press quarter fourth and on section full at This details and company's Relations a company's is website the the financial Investor document

remain to release. available was replay an the the yesterday's hour available today's access included X. in after will of until on Information the will A March of replay how be beginning completion and call call

conference you the the be and advise can that also We is page. this through live being Internet home on broadcast accessed call company's

information Please no longer speaks therefore, time that reading. may information reported XX, or only time-sensitive listening you accurate are note at And replay February today, on of be the XXXX. that transcript of advised as call any this

date forward-looking management's identified estimates, statements. intends, assumptions and words on will this these call of as can may and of of or the future be call, no should, will, guarantees Today's contain as anticipates, statements statements performance. These by based are forward-looking of use there expects, the Many such believes, similar are of expressions. projections

of on website which statements Main the risks, and expressed these but can factors, at uncertainties filings with in any as from these unless result Actual not obligation no be Commission, sec.gov. the factors to of statements by the required the forth update including, results the company's in Exchange law. other implied set materially results company's limited found Street to, or and assumes or Securities a

net accepted U.S. will impact compensation income, investment including discuss GAAP, as with is the or non-GAAP expenses. income, or principles, financial NII, call, DNII distributable generally net investment account measures, noncash DNII. accordance or today's management of excluding During in determined

presenting performance Main measures. and compensation are supplemental for noncash of impact amount share not expenses appropriate financial cash yesterday's analyzing Street's upon disclosures to measures the in to directly do Management the release financial Main related DNII reconciliation since press for useful to comparable Please net settlement. believes that per GAAP Street these non-GAAP a refer most and result

also are NAV, management minus additional indicators performance and assets. basis. liabilities and call reported asset a net ROE value, increase the Main discussing as as net or average NAV assets by total Street quarterly this ROE. Two key the on return or that on total on resulting per from net share net defined total divided operations is defines in equity, assets will be is

Please on related note from was been that to independently not this call, including information third-party sources certain information has discussed companies, verified. and derived portfolio

Hyzak. And Main now the call CEO, to I'll over Street's Dwayne turn

this on for morning, thank that appreciate well. is participation everyone we us. doing everyone, Thanks, Zach. you call, morning's We Good your and and joining hope

call, also on for I year. other recent and forward, recent updates today's our few our performance our in declarations, the noteworthy current investment On activities, providing also regarding going asset and our expectations a usual full the quarter our my activities management dividend updates. I'll performance pipeline updates while will dividends for investment provide on several updates provide our

which, your quarter of additional to XXXX. investment provide the regarding comments comments, be and our questions. capital for our investment happy expectations financial Jesse will portfolio, we'll strategy, and take leverage David results, After structure Following my and first

fourth pleased our for record another us. which closed extremely year results, quarter with We're

share, XX% DNII year, approximately for equal the equity a NAV per resulted in share the consecutive performance record to we quarter earlier existing sixth quarterly our fourth for Our per and new on per record that quarter. quarter this of return for share NII new annualized a for record achieved quarterly an

of continued These of and management continued business and fourth first positive and benefits strength X for investment the the and share differentiated platform, of continued share year. unique Our results and portfolio the of sustainable our our of demonstrate XX% quality of on new return positive per performance the in records performance quarter resulted strength the and DNII NII underlying contributions a our in and overall in XXXX approximately for the our per annual strategies, the quarters our equity companies. diversified asset

dividends able are We during deliver capital intentionally are momentum position positive increased XXXX paid XX%. maintaining over value shareholders our to structure XXXX. significantly XXXX. allowed by platform increase, to to continued shareholders to and XX% in total The our increase returns total while the in our these our generate conservative our shareholders liquidity exceeded this with further to the us paid dividends DNII still pleased that a across Despite significant during we a

profile and from both In in relationships continued entered investment the the position are we liquidity with debt with our these growth January, and support results, excited private and for addition recent the about a strategies. market our offering lender middle record-breaking strong investment-grade in loan benefits long-term prospects a significant conservative the and to of lower new our leverage year

appreciate business, our to continue teams diversified with superior in lower performance companies the work by We results will to allow deliver We future. efforts favorable the market the our us strategies. encouraged of asset and these in for structure of the our middle shareholders strategies, investment continue the employees to remain portfolio confident loan and be our of and operating together hard management companies management our cost-efficient private that at the benefits

favorable Board dividend our outlook later. in our our Directors detail discuss the for to positive I'll in more These combined announcements, for quarter, most with first results, recommendations our of resulted recent which

our certain increases portfolio, middle the quarter companies income quarter investments to significant the continued the of of our of in above equity companies. net in impact retention excess performance due in in our issuances equity of several another the of in factors, increased fair investment impact portfolio the dividends share per NAV and our NII appreciation our including dividend accretive Our value lower paid. and portfolio those fair strong contributions value The of market favorable resulted the

and forward opportunity look quarters, we future. we the companies in to next continued for excited value additional portfolio portfolio expectations few dividend our the fair As the our middle appreciation and about from market lower this for income remain

consistent and returned $XX in lower X $XX Our million middle investment the including increase levels to with normal expectations with investments totaling in activity. in market portfolio the a net companies fourth investment quarter, investments and after quarter of other new million our in $XX repayments million activity new of resulting

in loan in the of quarter included decrease in a private net of quarter investment higher-than-expected $XXX private Our new loan $XXX activity investments in together investments resulted activities million. million, the which repayment our with

management our the also and We've management in fourth to significant recurring income. advise continued business with to our to produce for experience significant net investment manager management in funds fifth our asset base quarter, resulting business. income results favorable investment The together our external consecutive fees, a incentive contribution continued asset attractive through quarter, performance for fee our we in the

due attractive fair and in and drivers. fee external execute combination excited performance the assets as we income, investment investment We for of from to funds market-based the of plans and providing we a the about And also We broader growth funds future value strategies significant appreciation manage of under management in our strategic the that the benefited the are value fund. are increased investors to manager remain the we returns each about our initiatives. other of optimistic we external

our management managed contributions our structure to strategy from and increasing stakeholders. for unique our We within Main about also internally remain business optimistic this our Street benefit growing asset the

made opportunities. strategy, part new incentive update happy on over progress the and second this As look this next the And activities of to fund. the fundraising recurring we've management continued fee loan the we few additional growth base growth our of and fund fees private quarters with continued to related we're forward that

investment upon supplemental share week, our of in our dividend the our a business, payable consecutive combined earlier outlook management for representing of results asset each Based our and per our our March, quarter, declared largest-to-date supplemental and Board this XXth strategies with favorable dividend. $X.XX primary fourth in for quarterly

for and monthly also second increase XXXX. quarter of second the of per dividends $X.XX declared of share representing June, payable the May regular Board quarter X.X% April, Our XXXX each of from a in

our the supplemental of our $X.XX quarter our result paid a performance DNII in per will $X.XX yield The our representing of quarter, in total XXXX trailing shareholders supplemental paid is regular additional strong and our which per the March exceeded March excess per which a in for implying by XX%. during to of dividends the period to share dividend XX% dividends regular monthly in resulted fourth total current XX-month monthly during or of dividend X%. dividends approximately share supplemental an result The paid shareholders share,

a increases or per paid for dividend paid dividends and during per dividends After our XX%. $X.XX monthly by significant our still share XXXX quarter December, supplemental multiple fourth share DNII our in to the exceeded total

further continued risks deliver the our to to We shareholders this uncertainty our investment conservatively NAV enhance general growth a capital the our of structure and value retaining support while able against to and still the pleased to to per significant earnings be are economic additional with excess our portion current portfolio of share. associated

NAV. future currently our As recommend the that June paid upon currently significantly expect first the DNII quarters anticipate declare an mentioned, in to dividends a we regular additional we Based supplemental positive XXXX. stable favorable monthly we've and dividend our Board extent for in the payable supplemental maintain quarter, future previously to exceeds in we our performance to proposing dividends expectations continued

investment turning our Now current pipeline. to

be average. Consistent we in result provide As middle to our owners and to we investment expect uncertainty, middle economic broad would attractive current Despite periods and that even of uncertainty, differentiated management and very flexible broad we I more market our lower the in long-term pipeline in solutions should the middle continue teams with financing opportunities. attractive strategy. and that companies be unique holding our an lower prior can the our periods permanent to believe market their of to as and current today, should characterize our market environment active solution investment in economic experience lower

future. about that to we excited are XXXX into maintain the opportunities. momentum And helpful be investment positive our from these our We will expect current we pipeline as work new

have We today, loan with I investment also as our continue would pipeline management asset they to team credit And performance of private business. our the very the for as results private and provided average. loan our private portfolio and be pleased characterize of our

With that, the to David. turn over call will I

to extended opportunity to back and history and good shareholders Thanks, year-end to deliver at and of investment enabled Dwayne, look diversified everyone. good unique strategies and a period have our results these over returns how an attractive morning, Each time. provides our of highlight the our us strategies discuss

Since to our XXX% dividend our have share. monthly XXXX, IPO our dividends in our shareholders over of of share we have increased and or declared $XX X.Xx per we share per price total per by cumulative IPO $XX.XX

return invested. X.Xx since Our BDCs. the to and yesterday's money received This of compared calculated S&P our period same the assuming was for of the as over XXx XXX other significantly to all our is higher favorably to since dividends of very shareholders close when money price time IPO, total reinvestment IPO, using and invested stock compares our

also between the believe managed that interest our for discussed, our alignment stakeholders; shareholders management supporting we and an stakeholders business, focus strong success our and drivers result to been and the internally debt our structure, lower have be middle As our and equity market; clients making which our we continue of asset primary team's benefit in credit underserved stock both cost the private on long-term the our our will to employees of meaningful helps for industry-leading of which previously and as activities structure; a maintain benefits a ownership. our investments our of of

provides through strategy creating also yields companies attractive a and and first notably investments uniquely, while points aligned other owners on equity the management and teams equity lower income portfolio structures. partnership lien debt highly our with leverage Most market flexible our and true ownership of middle our our

make in our positions investments, benefits debt alignment preferred of This approach portfolio lien investments company we through through alongside protection equity partners. team upside downside potential these significant providing and still significant provides the our while which equity first management

able us middle underserved, to Main of continue will Street's gives track in for this of investing historical confidence investment our business. the to be our long-term view new with focus record market in investment continues market, we lower primary to that be opportunities that coupled area this find

Our that differentiated continues solutions exist family-owned a middle to for provide lower in capital ability differentiator predominantly be highly the and us. the for has and to been customized market businesses strong

in Street in market platform million XXXX, companies $XXX Main X existing, in representing strategy. lower million middle deployed remaining $XXX lower our invested In lower market seasoned was new million of middle investments the capital companies. with middle well-performing follow-on $XXX market and this predominantly

of Consistent with which in us. follow-on investments growth support some our investment highest-performing middle our lower exciting makes portfolio these comments market very our quarters, strategies to were this prior in companies, aspect made the activity of for

opportunities multiple acquisitions, and typically transactions. to Our objectives, geographic expansion used recapitalization are support follow-on or investments including product

to pose less significant managers companies. as capital achieve new participating these benefit risk to Most owners equity alongside importantly, support our proven companies, equity we are lower compared investments middle we providing teams in market from proven strive management portfolio businesses intrinsically these they meaningful believe Since the to investment when we follow-on creation. value in that

middle As deleverage with portion which free with our we've service, portfolio portfolio operations. for cash past, from a management market to flow benefit be lower companies market This larger debt can distribution middle the us, our partners, team owners. stated available they allows to perform flow time, cash the as companies' along over naturally portfolio generated lower from equity the after of in

expect long-term dividend portfolio and to many holding to in lower contributor strength to our income XXXX. a we be quality and our significant of continue the companies, middle Given our results for period of the market

given Additionally, net middle This $XX fair coupled from our to equity losses, non-investment-grade are fact achieve in XXXX lower underlying market with we investments companies, among of overall portfolio. which appreciation attractive portfolio for us classes. million market asset this fair value offset naturally our strategies, value the strong the deleveraging, middle with our market operating available incur the that results lower in we to unique will our BDCs is in middle appreciation in benefit investment investing allowed

unrealized that investment Our asset not value have. appreciation strategies simply Main of other to potential do provides upside the net BDCs also equity Street's

area are like credit important I'd the regarding last accomplishments our cover contributions The impressive to private XXXX the delivered team during that year. our

market growing as investments deemphasizing while strategy the loan to private dedicate on in larger resources Our loans. our portfolio, execute credit segment which, team a includes significant syndicated continued of to our private business towards reminder, our middle

business. belief the the Our environment and intentional and the is loan risk-adjusted by asset purposeful investments for return and portfolio X strategic shift clients lending private management growing Street for our private very provide loan over that last years profile attractive and an attractive to grow Main of driven direct our that our primarily a exists

cost middle invested $XXX loan basis. a by private During in decreasing market while Street Main XX% on XXXX, million our our strategy portfolio

total by year-end X% investments investments and to our points As of our market portfolio activities declined loan XX% result XXX cost year, a cost. only represent at basis portfolio total private these middle of of our our during investment represented at the at

strategic to to discussed Dwayne also earlier, grow private loan As support key our asset capabilities business. objective management continue our our

As in XX, industries. than XXX across spanning we of December investments XX had different companies more

portfolio investment investment our and income Our largest the than investments of X% year our our portfolio at year-end. our X.X% of and external manager, our value less the at total portfolio companies, investment of X.X% for assets. of Majority represented total income excluding represented only fair

which investments middle and decrease million, investments and market to a in $XX $XX We debt investments equity turning after a our million. on portfolio portfolio $XX fourth in market basis of a companies, in million new repayments made loss, realized investment quarter. lower of lower portfolio cost including return middle the resulted our middle X activity in total Now invested in market lower to our capital net due in of aggregate increase of

loan realized repayments private a loan our portfolio investments, million aggregate $XXX decrease a basis debt total and net a million. also in and in loss, cost after investments resulted due decrease sales in of During in we the completed private of quarter, which $XXX to

Finally, to our quarter, in continued a middle as portfolio a had during $XX market focus deemphasize strategy this of the net of decrease portfolio. and our million we result

representing lower was our in XX% $X.X in middle middle XX basis. investments $XXX companies, of fair investments We value included portfolio, value, loan companies, market our billion is market In fair year-end related $X.X at billion portfolio which year-end, value. XX% related our million representing fair and above XX cost At at above cost investment had representing of The basis. value. portfolio XX our investments total of companies fair in our portfolio, had we private

on in the press portfolio we at our yesterday. release details year-end investment Additional that are issued included

cover that, position. the financial to Jesse structure liquidity will and results, capital to over call With turn I our

Thank Street you, with comments, operating and net asset the David. for income results for income, fourth each quarter, achieved quarterly on year records a Main we which records To a David's capped in number investment a the echo investment of net included value Dwayne's and net which per and are basis. share distributable pleased

we the million demonstrated fourth experienced differentiated management quarters XXXX. increasing Our year a of and million, was levels first investment the quarter income, strength income the asset X.X% and our million continued the during fee strong the dividend for or total and in quarter of again XX.X% interest, by X fourth XXXX by with of continued from in third quarter quarter culminated and which the strategies. investment $XX.X $X.X fourth The or over positive of momentum $XXX.X

the investments nature, related in to quarter investments. and these including consistent accelerated considered of fourth debt included than from the XXXX. elevated nonrecurring aggregate, of X the million the our dividends quarter of comparable million of levels quarters quarter $X.X items third average $X.X income XXXX repricing higher activity equity In our such than prepayment, The less to items in $X.X and higher and totaled and or prior the or other fourth million certain were

a debt third primarily rates, primarily million accelerated The investments. million investments decreased and quarter. ago OID by year The elevated increase increase Interest index accelerated income. follow-on $X.X new $X.X and as the income and increases was end increased investment increase increased by quarter net by quarter of activity benchmark the year $XX.X driven third million over in by from interest-bearing in over levels prior the million levels in a partially at $X.X offsetting of repayments over result a OID income, of driven offset was

business. increased increased income million a or $X.X by unusual million dividends, $X.X unusual $X.X over increase including a underlying income year a and or asset third by or from dividend in XX.X% or benefits are X.X% Dividend management decrease in of $X.X our result the continued million strength our in The including of quarter, the ago, companies million increases nonrecurring from a and nonrecurring portfolio the dividends.

year third fees the strategy investment was XXXX. prepayment increased and lower $X.X driven by fees, comparable million was an driven our income and by middle investment ago quarter, from fee considered ago increased Fee from to closing comparable by and $X.X our Prepayment resulting repayment in year and by market the activity third to a increased nonrecurring quarter loan activity portfolio. increased of income from a private million in other

both amongst year expenses an expenses, quarter over increase operating X.X% the continues in total industry. expense the of by and lowest total interest partially compensation-related largely percentage basis external annualized our to increased the our expense, investment increases offset be fourth of driven by allocated The operating in XXXX, of average the the assets by an was in and $X.X million to Our our on manager. for and quarter interest expenses a as ratio excluding expenses,

for $X.X income of manager ago, increase resulted of an million $X.X investment total the $X.X to prior in year, increase fourth from representing million million million, external same a Our same our million during of investment for $XX.X $XX.X net year. prior the in an year, the and contributed $XX.X year the quarter, a $XX.X quarter quarter million fees $X.X by million XX% the manager the or and during periods increasing the earned year. over incentive the in over respectively, million The which

billion. management, ended assets the of result positive performance the management of a manager As under quarter under $X.X of assets the with total the

the unrealized million. from During the including recorded appreciation, quarter, in changes across net of increase we appreciation performance of largely portfolio the impact our value each fair net was the of $XX.X certain and on investment companies market appreciation of investment driven positive by net continued losses a spreads. realized portfolio, our This strategies, net by and driven

the the fair fees valuation of a the in was valuation our benchmarks of manager total for publicly increase We value of use investment the fair approximately quarter we and generated approximately fourth investment of investment value peers, X.X% on the of as result of The X.X% and in external investments a manager by status combination with portfolio purposes. traded ended external increases one the comprising which cost. nonaccrual the multiples at at

share over per NAV, year X.X% record when asset Net value, or at to $X.XX a NAV by per third year-end. to increased compared $XX.XX quarter a by and share $X.XX the of ago or

regulatory than X.X both and intentionally to our coverage long-term X.XXx. Our excluding calculated ratio X.XX, asset was to our more of value, and asset debentures X.X was divided by SBIC conservative X.Xx our target X.XX% leverage, debt regulatory total as net ranges debt-to-equity

our May fourth our million rate notes credit January $XXX program. unsecured we under the coupon proceeds quarter, under in borrowings through total We facilities. facility million commitments and under borrowings the maturity March notes XXXX SPV X.XX% to the year, fund equity the expanded intend In facilities. to primarily outstanding a repayment million repay During to at-the-market under utilized raised of currently of our credit at XXXX issued million $XXX issuances maturing of the $XXX this with from our we from $XX and of

the in excess including our facilities upcoming under entered of strong After XXXX, effect activities $X billion. in repayment cash XXXX XXXX issuance and XXXX capital notes liquidity, we availability of May to credit of the giving with the and notes, the our March

to strong and We that our for allow strategy believe strengths positioned to investment and of leverage, us portfolio. conservative our significant that to access well to capital or growth continue us investment and execute future continue continued our have liquidity the

liquidity, And to expect net our we financing. activity With of such, debt leverage this to the would expect investment proportion as of increase we fund the course current XXXX a in year. level through new during of greater

we to However, through year more our leverage long-term to conservative continue the at expect operate targets. levels than

to Coming operating back results. our

share of and the for exceeded of As fourth the quarter strong our DNII year, $X.XX year quarter share quarter for exceeded last X.X% basis a the for fourth the annualized $X.XX per share and the or performance X.X%. DNII the and by XX.X% or result our was for $X.XX quarter return for year. third on equity an per the on per DNII the by quarter XX.X% for

share last The combined and X or $X.XX the less third of of nonrecurring the quarters, the investment comparable same ago impact year average per $X.XX was on considered quarter per consistent quarter. above share certain to basis the income a in a above nature per share

the regular shareholders XX%. quarter year, by quarter the approximately share levels. share above per in paid share dividends for were items per share XXXX the For per to our $X.XXX DNII $X.XX exceeded per fourth monthly these or total

a supplemental XXXX. year per dividends, of per $X.XX payable paid Board dividends dividends supplemental week, This paid per March including increase Total share $X.XX approved XX% total over share, dividend for our were in our in an during of the share $X.XXX XXXX.

quarter quarter the a quarter dividends XXXX the increase share, over in supplemental dividends and were X.X% With a for fourth first dividends first declared over the of total total year. $X.XX total of the representing XXXX the paid in dividend, and the XX% last paid increase per

of supplemental the XXXX portfolio, $X.XX with and portfolio underlying per in share declare quarter income would activities it As expect by quarter DNII at line earnings during first driven dividend level expect that another we our least given either Board we our would the top the we look the upside of recommend forward, second investment with and expected strong quarter. And the quarter. of potential another to dividend strength the in of we

call we With that, questions. will operator, the over turn to I take the so now any back can

from question the James. Raymond first comes of Our Instructions] line [Operator Dodd Robert with

the on Congratulations quarter.

on still it, Income that business. you regarding but that how the question thought First there might Can in up that terms on be control largest give Fund. your mean, might to I any MSC of business update as -- contributor asset us the with management don't shareholders is you end process liquidity?

though I discussed Because before. the question you've it is think

that fee of be there, eventually could event the term? you in and things. with it's could during an there or connection One possibilities likely unlikely Or that financial there a is think other fee -- cut anything Do that a XXXX change? longer the structure the if relationship happens

Income Fund adviser part have I Fund, question. the of there. the there. us will Board for say MSC the obviously Thanks a what outcome huge Robert. on MSC would Sure, Income the like in heard is you've we're determining But say before,

some IPOs. with the public here encouraged through in We XXXX are by of new funds several recent going activity more

industry there standpoint opportunity of for an that's that from an Obviously, a space the years. last couple hasn't or been

And will be we with to Board next conversations activity. that activity that in for what meeting to MSC the contemplate about Income Fund it may Fund. encouraging mean very it's Board see having our MSC So Income

think with To Fund charge a the fee Income consistent management these Street. evidenced Main requiring Income as than strategy we your what you for lower remind I point has I MSC base recent on IPOs, by fees, MSC the is do to that Fund. market, will been more currently

a includes loan but healthy more activity market investment also of credit, combination what a amount a you others that private akin includes incentive would the the warrant higher consistent more equity of it well annual BDC is in So with private industry is activities see lower middle in structure marketplace for most on fee think as investment fee. private fee consistent base we that that or as both more the strategy the a with

portfolio another I on us the be market IPO desire if tell MSC the then overall the was the Board. seek and driven conversations long at event the think or there drivers think and conclusion what composition fee that with we be of a liquidity forward, with we would the look structure. those term we of the would Fund composition Income to happens So What think be how would going will fee by our today an what

for because Changing it. of market an you the Got It in House pipeline quite I has people do pipeline do you effect maybe that rules an year? it, impact an tax the It's -- a often lower and in middle are the of year flip. average. that on appreciate any White market sunset a year. election color. going Do changes, looking you potential in completely, lower rules the business' and possible 'XX. -- think that's second There what I is to mentioned mean, demand system think there could half have tact you being the is the lot election to currently tax it the transition. got of middle

a to really what Robert, be what business Yes, individual rate impacts hard activities it's activities that of arguments those lower stronger could always families have owner-operators, say for predict demand active hard or a whether other activities I'd to predict or Washington, drive changes partners market what to middle an for more own or activity. on it's or they'll We -- in types those them election have driving desire for a tax can it's make impact increased changes, transaction.

someone a that to valuation. going goes in marketplace result the full if also view to in market, could it uncertainty they're realize more But not and

is. those until So an changes compelled take more what impact after or the of after election wait on be to see the place to may they marketplace any

a past, the whether can rate been types uncertainty, markets, you've in and to got economic and think solution we think heard and financing is uncertainty. market uncertainty be, that's very the partnership market to tax applicable different. in past, good, has provide standpoint from very market we lower change a whether all We uncertainty, As middle of more the political our a very, do point productive companies or what us if it's that a that's or should it's say

predict to it's the and those in a have lower our but But activity, don't to confident be to I know deal you specifically continue flow -- add know happens lower and if on would strategy. David, hard anything will I in what flow we covered deal that. I market what don't all market be middle So in activity strategy will overall that that lot, applicable impact markets. Washington middle really

I'd when All we that, has Robert, about that. election we is, is last landscape rates and visibility Yes. interest had year, the about when concerns towards impact on rising as think add the does outcomes, yes, an

year. stabilizing environmental might at as in issues say have they probably always one impact any moment interest lead positive to a offset time. we bit are So -- election But various a we're that relative I'd rates that that hoping has have concerns any some looking we will

more, if of feel factor you indication that running that I to from other an drove rates, better is bit that Or that some in. your leverage decision the year. indicated I maybe Got to increase low, is still the low interest little environment, could ], this there intentionally one drop But high somewhat is level economy the you about sneak mean, interest you've [ currently? it. that the plan been expect returns. just that is stabilizing indication One to where leverage you To it I is? with comfort a point, rate up producing mean, leverage take the

Sure, Robert.

past, driven the less shareholder leverage. and produce to us on in we've the based through more as ability As viewed say always returns our approach our and financial strategy you've investment to marketplace upon heard engineering

a and expect to in don't whether consistently wanted have liquidity forward, that. profile significant time going conservative always and maintained that's a change very that always we And XXXX any or to we've So after position. leverage

than of flexibility dealt we been over last with with unsecured or so. debt a less conservative or I'd And we XXXX create overall by issues to of maturity. the last that was driven pressure first -- kind a based in less with of XXXX part more that fact wanted months intentionally for more a deal new have portfolio-related been lot it And really XXXX May XX that the issuance. economy the to that have maximum other Obviously, the May say We is would a upon and that. had XX here have months. the of we've

likely driver for our still taking below really us still being ending the be that and So conservative would some leverage up targets. year the but leverage

with the Riley B. line Our Bryce Securities. Rowe of comes next question from

maybe run end around continued just the you to of know of do pretty a have try liquidity. some XXXX? here recent all, Dwayne, you past, that Robert's the I to questioning to at processes some shareholders to manager. the follow-up in external some tender those Have give particular

redemption introduced liquidity options through continue have providing have that Income iteration consistent proceeds. quarterly that now active be we're our to liquidity MSC Yes, executing that by your I the of the our Dutch the we've months options think point, added in over fourth and on DRIP Those been then -- that. Bryce, fund's the Fund. to funded the shareholders is of last And we're to auction we

for have who to activity provide to need continue for desire think it's been we productive. liquidity good those And liquidity. us have and or shareholders So heightened those activities think try options we for a additional a

the activities. goal we that perspective. successful was productive of the behind intent been from our they've So those think or And

three it Okay, the think of in fourth Of between we external under and you've that's about manager's to the what's a in breakdown And help those prepared then increased talked market-based valuation of about And valuation, obviously, factor? quarter. three? valuation? Or what's increased even biggest the kind increase as and income 'XX in is us management, then assets well fairly kind the driving about remarks, approach fee Can the a valuation. you that the of think split factors, seen you your material in helpful.

drivers quarter. there was significant a to to that QX. been of are traded in would in asset were managers, you contributor increase say increase contributing would valuation quarter, those if fourth at in the go those three factors say a look the to performance I our in all would significant in But that the the publicly I for the And valuations. increase fourth have

we an as valuations. is It's it don't reminder, that obviously of our input. one use a inputs, the as Just the only benchmark but to drive

traded peers So those going when value, see valuation. that come significantly increase we're in our through see to you publicly

Got it.

Okay.

progress of progress? that kind numbers some continued with Can you loan number us fund around private two. mentioned give You

Sure.

we at commitments, huge where And time LPs. equity total number. numbers it significant But about in was conversations LP the we we productive a a $XX year-end, have were are increase. on what continue of relative not is think very with point to So to this PLF at so additional million still X, it

equity is from that commitment million $XXX to and our be want everyone, between we that just standpoint somewhere to fund So million. goal, an remind $XXX

reminder As of $XXX million million a -- $XXX and LP equity.

of execute $XXX our north reminder, end PLF X is dictate from a $XXX activities million being activities max continue or we they over that couple million. $XXX up be of As quarters, to million. And large standpoint. would the an just to We million $XXX hope next over with fund, obviously fundraising for equity the as being commitment LP the we how something

then reminder, marketplace level. as debt-to-equity a of leverage X:X a allow just the will And we to think continue kind

we'll assets. Obviously, And move that's of up that's So as on couple quarters. intent. then it's to million work the if to of million continue we're successful of and equity, $XXX go million goal you of next the assets. that through of But if equity, we $XXX $XXX million at $XXX

helpful. That's it. last And maybe for then Got me. one

kind portfolios. driven lower activity. assume lower marry and not, private some up of nonaccrual quarter-over-quarter come realized down some that? you that the You If out nonaccruals loan kind levels all exit being activity help Can of market of those by with think called then together about of can and having you also middle in -- I the

Sure.

then leads credit give here. activities, our if on if he a So on, maybe I'll of wants private comments. add who he can add Nick, couple And to

When at because you say So we're of super it the because quarter. I excited a would improved would I say not loss it the quarter-over-quarter, realized nonaccrual it activity, look about obviously, it's an improvement. in

$XX most off quarter. in of loss movement and a about investment was the an by came that So on I it was restructured think driven it that realized million nonaccrual we

from or frankly, with of we number haven't long, a a I think private capital we very just attractive, portfolio. an the transaction on despite that the XX refinanced out have M&A the saw the through replacement even us specifically of high-quality number lender. that or a past, you've some names us names, that credit really, repayment we side, marketplace, months, and say uncertainty activity, which, of in very, we've well significantly either think lower just a went performed been that heard continued the got really XX went of in in as And cost

which portfolio. from to standpoint -- Nick, we portfolio had of bad. But when and So is our repayments, obviously, shows income forward. you if you'd look don't quality very the it's know going an good a it's at kind high It that. add of the I good elevated not anything But interest

of Yes, the only the most I late thing Bryce, repayments in in add would came there is really those quarter.

moved of say in versus December the targeted And quarter them we repaid We first late so 'XX. we're just an names early to the fourth to And I'd for quarter. be or names 'XX. those perspective, basically we December, average from second are in where had wanted to get kind of

just and I should be. want be, balance think in some I here so to the a the money be back first from -- we need to And think we where quarter where spend to

Got it. that other heard I is 'XX. calls we've perspective all or BDC that for expectation perspective think mean, you on sentiment? I activity in repayment increased from the prepayment Do share a

do. We

private for I quarter what usually think of quarters, total at that repayments X if were, our you the under would in I'd fourth up. you business, we the average side The first picked say, the look see. loan well

continue But average probably X/X hit more annual level the rate expect we our of that basis. repayment a basically we'd last an average repayment for on to level we've decade. so year, that the seen on And

[Operator Truist of Instructions] Our Hughes Mark from with Securities. next comes the question line

I were be the any talk we assets portfolio, Is XXXX? territory? early loan your feeling more private But think repayments, that. the about into On in the back didn't to going the down about that positive quarter, what's

Nick. It's appreciate the Yes, Mark. question,

I date think be to quarter. from the at where we're to quarter, for close third we'd flat

So for up quarter. we're the first

quarter. from flat that and be a third up And to continue to third from quarter to grow back so we'd to really expect

good. tend are that And that seeing follow-on it that does health? sure the of in underlying portfolio activity, indicator broader terms there activity -- very trends varies are to any Is picture? with imply are I'm noting? the then of investment you reasonable trending? economic is a how Sounds anything your it And this worth follow-on But existing companies. again, about seeing the investment rationale. you that And Does

to had Mark. very, number you a that perform appetite that have at to they compound look increased of to you've or at Sure, their been grow acquisitions through this, companies, middle you lower have very, and some companies have those organic When portfolio, also supplement market an continue look heard say When growth. of we in our us well. portfolio very

X we meaningful was in portfolio what company So of total were that think the that attractive, XX% strategic portfolio we follow-ons had a very in probably the highly a fourth that quarter company X executed or follow-on, is XX% acquisition.

multiple acquisition a in that opportunities one companies, from If debt the require in portfolio, pipeline that again executing that number a market we performance you pipeline additional investment from our is look actively the of are at about of standpoint that us things financing the have Street. today, lower most good feel the makes companies, of would that upper being portfolio end Main of them middle on

We expect quarter. close those to in fourth the

come over it to QX, successful XX and changes dividend additional activity. acquisitions importantly, But benefits we XX happen. don't by in the and to in months really obviously, future. companies' if but income And of there, results significantly next those think the for we're hopefully fair portfolio into even through flow the value the always our there's order or as that that have that more But a see control we us pieces we're that will of lot in encouraged place we benefit

on the you -- things impact with to assuming investment is of material marginal XXXX? what manager, effect in there's going no What's And external can then sight, a here XX% in in and go described us what have the as have you positive NII. they been the give of the sense you line be change, some increase

on you're not followed your give you detail question. more Can me Mark, of I little have looking a may what kind fully for?

Yes, the external yes, manager. investment from impact just the NII

heard to XXXX. million in said XXXX, some you was if the -- was think in trend I to million went going think sense to of how from it that you that's get properly. $XX it I trying just up I $XX

Thanks, I to And our apologize, sure correctly side. want I make I on the Mark. answered Sure. question

which by you of So lows at the is whole as the million, was highs the NII variability contribution million, surprise. kind really just standpoint, high and $X.X $X.X look low high a over quarter-to-quarter quarter. the fourth a if XXXX a just and from was quarterly give driven you the big incentive in fees, The was not the probably

the one AUM, grow fees, move that don't and quarter-to-quarter, management find management move over additional base attractive management clients But the they reasons they we of grow just much. base we time. so The business we is will fees as really asset much additional those Obviously, don't move quarter-to-quarter.

fees. So real the real driven by incentive driver, the is all the volatility

continue -- the we favorable you for at Jesse's to -- first the performance comments Main our have about So to expectations the Street heard extent quarter.

bit between little of earlier, of I MSC lot our expectations apply and not Fund's our XXX%. and you can read-through a from our portfolio overlap there's But As a MSC portfolio. said a Fund's. It's results Income to Income

well generate we incentive to that, standpoint. to given positive Fund fee So MSC to expect and perform contributions continue continue Income to from an us

funds that that coming but versus loan incentive manage. year-over-year by to But the that of fee private also not real performance be Income number going the dictated we referenced growth just more or is the off MSC really you the productivity $XX million Fund

the positive of to to to that produce results driver really is ability outcome. going be there continue Our

of question line from Zwick Hovde the next Our Erik comes Group. with

for morning. question this one me Just

for and magnitude fact DNII potential both update the XXXX, that can each your basis the wondering, obviously, rate interest for I'm of futures XX terms declines interest and the remain point an the during on impact projecting sensitivity share to are some in reduction? maybe per point the at rates short-term in debate. Fed you Given provide market timing up

general, know, to sensitive is SEC all you'll predominantly this a rate XXX%, and is both BDCs. than floating. as lower historically the when most to see view a our floating, thanks the if position table We, as pretty I market we BDCs, think the in for other attributable purely our we XXX%, we XXX% post later that to joining Thanks not That's and whereas opposed what in presentation, in middle space, our that morning. morning. close Erik. continue fact all think of and question, have for the is us less -- little filings our other provide be granular fixed to strategy you to Sure, But that so this like investor other

So have less a bit we do we little sensitivity. think

we same So impact or space seen XX less over of we've -- should have you're going last if year. not the forward. look seeing if that XX you an as the the benefit, may would down, be at months. But of But point rates our $X.XX our come XX/XX/XXXX, basis obligations as so for portfolio XX of your a be and year-end, change just over benefits a

I think it's $X.XXX. about

you a if it, $X.XX get kind to annualize that you So of and year. look at

over the likely wouldn't it you balance and it Obviously, Just assumes happen. remember, the on current given X that quarter aggressive the that those It year. of calculation assumption the wouldn't happen. And year. is also will because rates practice, of the change of curve, happen as know, a basis in day kind very, a very

the way historically best interest BDCs be to the rate we likely will that that that's been to sensitivity and other continue provide impact But have it the I that. than deliver able So think, today. lower and,

the last question there. was That

participation, again, the questions. So appreciate love to questions. everyone's We responding appreciate we really

questions. that to forward to talking our the appreciate XXXX and we So first individuals results May are look in we'll after And released. join those quarter again ask everyone

gentlemen, your and for This you teleconference. does thank conclude ladies And participation. today's

You a and have may wonderful day. lines, your disconnect