New Mountain Finance (NMFC) 27 Feb 202019 Q4 Earnings call transcript

Good day and welcome to the New Mountain Finance Corporation Fourth Quarter 2019 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Rob Hamwee, Chief Executive Officer of New Mountain Finance Corporation. Please go ahead.

morning, Quarter welcome Earnings good Finance New and Fourth Corporation’s Call you everyone, to and Mountain Thank for XXXX.

with of Kajee, line President the me are today On John and COO of NMFC; CFO Shiraz and NMFC. here Kline,

to Our the but future call on join Chairman, us is rejoin today, Klinsky calls. Steve unable will

by to make to important statements like I’d some asking Shiraz call. regarding today’s

morning, Good Rob. everyone. Thanks,

note replay everyone that presentation, unauthorized that into is are in of and the earnings Before to the and your I our audio attention being X would about recorded. the I our is on to customary Page Corporation are we prohibited. to this strictly of February press Please call today’s broadcast property Harbor Safe statements. advise press call available the XX forward-looking they and a release form Finance disclosure in New would of slide webcast call get like Information in release. Mountain also regarding any any that presentation like

access not please to call, To the required forward-looking website this slide call to obtain will statements conference do undertake factors to that referencing SEC we forward-looking our statements statements our to law. refer with may and from throughout materially actual and update presentation unless recent include We to and at filings you that copies cause results latest could SEC most for ask by that our the or and projections filings of and be visit important our projections. differ those www.newmountainfinance.com. projections, we webcast Today’s

beginning Page presentation. Rob Hamwee, the turn give X to of back NMFC’s some Rob? like to will slide I’d over time, this At the CEO, who on highlights call

Thanks, Shiraz.

New the another presenting by Mountain highlights for of start me Finance. quarter solid Let

$X.XX our of per December share of was covering of and more guidance XX, New for than adjusted per quarter the above end investment income $X.XX our quarterly to XXXX, high $X.XX $X.XX share net ended share. the dividend Mountain Finance’s per

New limited stable per was $X.XX and down $XX.XX Mountain value of to reflecting valuation portfolio share changes. Finance’s conditions generally market company book financial

able to Friday’s $X.XX annualized per for dividend, which X.X% on last XXnd will also and We’re regular yield straight announce of again, based quarter, close. our approximately be share this

another this a origination had with million stock, historically large new range by generally Credit to quality a issuance be non-accrual members million new our our moderate $XX generation million. aggregate and repayments quarter half. deal funded continued Mountain equity shares. of did other some investing ownership name continue one fully early to growth part of our remains company QX quarter, non-accrual $XXX of target first keeps in The owners was of repayments. net and of levered in versus strong This XX.X New us balance very strong, sheet add troubled gross although in in October we year inclusive and I our of

overall. broader we New Mountain members. with performance with and NMFC over are billion continues the team assets pleased NMFC’s to progress Finally, of management In XXX supports under $XX and approximately summary, platform continued that grow,

review of a and details I’d the the quarter, into always, to give everyone diving of Before brief as like strategy. our NMFC

inception defensive As and managed to To Mountain’s already credit New We and well models conditions. returns of corporate that Capital, rates focus equity equity and resource. Mountain that taken a that market we utilize our business a investment achieve within approach industries simply approach that team and sustainable externally us debt extensive to generate is program adjusted we Mountain underwriting our we private really New really or it our invest existing known risk as a like. XXXX, outlined growth fundamental put, differentiated allows on attractive recession model X results the of in with New to primary have Since consistent leading presentation, are businesses Mountain mandate, we we Page this to on by across more firm. believe research of private investment the NMFC know in New the and our resistant cycles in changing applied

yield a index since Turning our generated X, May public we nearly total you to points annum risk-free In through higher investors IPO benchmarks. XXXX return XXX our nine have can February of performance Page meaningfully basis see the in from compounded peers in return the XX% to our per above and our XXXX. initial XX, relevant annual than approximately IPO, years our high

Page peer around the long XX BDCs against X as public that least as at we largest managed externally against detail a been little goes relative our performance have. more into set, benchmarking have

attribution. Page which cash turn return XXX% NII. shows driven cumulative continues our return X largely by in to Total more be by been covered has dividend, than

structured business equity; effectively bar net vast interest one, sheet a maintained right expensive on from dividends differentiated the and special alignment We to: dividend; accessing platform; with of fully our stable an cash two, value, four, the utilizing far public, our shareholders. our and As and our of covers a success cash-on-cash investment before income our more our on been three, amount that the have XX.X% leverage nine while management ability inexpensive, book the focus income our running shareholder always efficient of generate stable return in illustrates, our consistently appropriately majority an years over the balance underwriting interest. nearly generating attribute have for inclusive we we to

is believe Our to BDC and the over our which space. single differentiator continues control biggest in risk highest priority total focus the be on return credit in time performance, we

previously. for our mark quarter-over-quarter a a We this will number with of change we In name troubled we million. coverage recognized which been and material as per the X.XX put out to dividend meaningful to $XXX,XXX has impact quarter, diminution last quarter, on from value performance value on PPVA, Credit deterioration same fair has therefore, forward. this called years, be now this to not Furthermore, credit were have and NII only approximately strong, decided quarter accruing investment X.XX, $X.X continues moved have a historical on this only in been largely of going name non-accrual.

We’ve important accrued, it income, also but be will NMFC or write-off $X all million note XXXX, Capital XXXX. interest in collected for to fees is previously unpaid this XXXX this PPVA and we on million. which to quarter that decided of $X manager recognized income New as Mountain reimbursing incentive

an maximize mentioned entity as number time of spend our state. PPVA As continue trust to the we been ongoing Cayman a under troubled years. recoveries significantly lot from a law has to And PPVA of asset, quarter, liquidating for last effectively our attempting to one

of significant and complex while currently fairly mix the exists the midpoint. of litigation midpoint Given recovery scenarios, $X.XX valuation we of underlying likely around volatility the assets claims believe our reflects

since refer our XX, current Page investments achievement the the you what of our both in portfolio migrated again, inception If show credit once lay we has out to investments then ladder. business XXXX performance and our of cost the of the down basis and

we which have rated migrated our resulted which in representing $XX only of portfolio billion made inception, have XX% losses. on million $X.X realized non-accrual, portfolio currently our one in over just scale. default value to or of million thus is approximately cost investments of nine only $XXX at two four internal of far Since fair market cost have XXX representing Furthermore, of companies, of

entered investment of all for we multiples leverage the investment shows an same million when most leverage the the levels our holdings XX $X.X as end over recent reporting and of period. Page of for

and and is performance good helps provide While perfect of leverage snapshot of marks. degree not in credit internal support multiple a ratings trend a metric, empirical, fundamental the our asset-by-asset some for

you can looking with As few the at by in roughly table, a exceptions. trending right direction flat leverage multiples see are or the only

previously securities have turns represented had or which negative two are three in restructured. both previous have by quarters names been There more, migration X.X that currently have different and discussed of only that of been

division, with and first in meaningfully us continue enterprise improvement is operating results but operating key is providing UniTek, for secular operational XXXX, in where continue the strong few Edmentum, to financial missteps The weaker to the second XXXX. company’s results optimism to value where and led a trends improve; in be where

on the we At the its out track chart is covered income. being helps since economic of IPO. performance how dividend top investment page, overall XX quarterly The net the Page regular of show company’s the

can than of you more now XXX% out stripping after PPVA our even see, NII, of we cover continue that accrual. to out cumulative As regular reverse dividend

bottom the the On on the line items. of page, below we focus

we look realized First, at other realized and credit losses. gains and

success company dividends material typically by can loss in show we’ve not have generating and real generally been smaller selling losses, gains, equity the row, looking credits less realized to at poor a highlighted we losses, orange, green, default. combination default portfolio that trading through every actual had frequent, non-accruals of avoiding profits. economic gains are including in a prior Conversely, year you As see and at and highlighted

continue gain, net stands at to a $XX As cumulative highlighted have in blue, realized which we million. currently

in nine losses, further million loss, NII cumulative million. unrealized company, yellow, see all of in gray, earned highlighted we Looking at cumulative in against the of realized result net stands $XXX have and unrealized net total million. depreciation, as The page, our this including is million we highlighted that $XX at cumulative of down net only nearly unrealized, that and $XX years net public is a $XX can

Page to Turning XX.

articulated repayments our in by assets portfolio as Consistent over We $X.X $XX shrunk statutory have increase increased on liens year this with securities growth assets from have shareholder basis we has more the an in billion. through when senior and we absolute come as first have of XXX% received by seen actually than the grown million, lien significant while the to non-first authorization growth leverage. last sales; strategy, leverage. we’ve

conditions now over President, discuss portfolio will John Kline, John? to market turn NMFC’s to the activity. I call and

Thanks, Rob.

QX the has strong somewhat seasonal outlined direct core and as year slowness the with of to due the flow associated normal lending flow our weaker was year. sectors in As for a QX in deal deal whole. beginning XX, Page the on been

is We demand have imbalance, which supply shouldn’t some months. we on new issued as temporary in become the active seen coming what recent to believe a more spreads loan due sponsors moderate and pressure

high We EBITDA. continue trade at historically the XX times businesses often range multiples, in times to XX to high-quality of see

there larger Additionally, a strong towards club lending continues the very trend deals. to market direct in be

business. have trend last we financings months, our multiple believe very seen we a is which positive for $X the club billion, six Over over

expect the we looking we and remained around to available acknowledge in forward, underwrite well improve and months uncertainty the the in deals the flow to access coming best select, While marketplace. we positioned transaction coronavirus;

Turning to page XX.

mix, basis additional year. the of current point decline LIBOR our decline market an a with months in in a liability XX three asset Given LIBOR the XXXX, our beginning XX experienced the headwind business. in been basis since has point

XX to basis currently volatile, decline quarters. in could LIBOR suggests forward by the LIBOR While an coming points the points month three XX additional curve that basis

Based on occur, represent page the declining LIBOR $X.XX $X.XXX sensitivity if XX on per would headwind. a quarter this earnings does shown to

due rates of However, our we continue together and lower in that will enable ramp we to offsetting the earnings increase debt-to-equity base investing will economy, migrate believe which to in risks maintain improved the spreads, continued level. us to heightened experience program, our loan our if SBIC mix an with materially target

originations NMFC Pages show offset the a strong total repayments, million million, of $XXX $XXX XX portfolio. in by XX very our $XXX million had sales and representing a increase and quarter of with

investments new purchase portfolio existing net deals club lease positions. highlighted of and number middle-market our were to purchases – adding to adding a addition Our secondary and by

are These our trends trading have as year, multiples attractiveness multiples, total enhanced defensive growth very enterprise amounts that portfolio fresh loan-to-value the the supported we price which indicate price. with ratios high purchase I support additions past value opening steadily increased consistent of most niches of the that strong in validate target. to the related a buyouts percentage sponsor the historically with on at that over market our my the remarks, healthy equity are and financings discussed of investments of purchase to

QX on average new in XX%. Our originations loan-to-value was

low repayments record $X of million XX, nearly driven page we record, originations level billion gross $XXX originations, which again, and over a by sales. shows annual report on net of our origination notably track

going portfolio more a will level forward; We line with in to trends. expect company-driven that increase repayments historical

expansion new shows club for for two transactions end companies of III. XX and add-on continued investment Software transactions and portfolio since financings the where repayments. acquisition-related $XX included Page company the we post origination have million quarter-end quarter, large our an SLP of existing X. invested MRI million in deals momentum with Notable the supporting $XXX of

of we forward, new Looking pipeline core solid verticals. have defensive investment in opportunities a growth our

of loans, page a XX% new total towards quarter. XX. skew Turning our originations to originations continues this mix of to first meaningfully accounting for lien

also by were repayments first the represented Our proportion. lien roughly sales same and assets in

increased X.X% on in As for shown XX level QX forma page asset positive points the the X.X% yield in basis pro QX. forward NMFC’s to change curve in from by portfolio XX,

represents rates movement the the rates. materially for While QX, the decreased which forward since in future expectation has LIBOR curve, in increased recent it with slightly downward

the While we portfolio our our continued volatility remain base comfortable potential mindful rate, quarterly that we in of the dividends. yield are supports

on sectors. the top balanced the page a by bottom section our junior are earlier of our chart in the line shift the to of our growth-oriented our broadly presents insight towards can of subsectors services lower defensive In call. see you we largest shows chart, in The portfolio structure. page of XX majority lien where the pie of the is we with The capital sector. portfolio type, only shows left break that expectations. one the The diversity third across the asset the significant investments into first discussed chart our on right Currently, in within the assets give performing better out oriented portfolio

and on top as XX, value. Finally, XX% XX largest for illustrated investments we fair X.X% of value portfolio the with a investment fair our diversified have at of accounting page

the see last position page, from right the to one on of the As in of more any we each risk quarters added our you decrease side lower can borrower. four have diversity

going We expect continue this to trend forward.

Shiraz I key to financial our that, the turn With to now it metrics. and over discuss Shiraz? will CFO, financial statements Kajee

Thank you, John.

today’s last financial with XX-K the refer the commentary, our on evening to form SEC. filed details more was in that For results please

drawn I’d like of billion, $XXX XX. value which liabilities billion December of turn approximately was in total Now, excluding debentures. investments statutory the had total $X.X at assets of and XXXX at attention your of Slide billion, to $X.X portfolio billion with $X debt fair million to XX, total outstanding SBA-guaranteed $X.X

was ratio was to our quarter. billion putting important due to down of it target as of is received to the our year X.XX that note repayments leverage value today, range. from XX, to $XX.XX X. asset $X.XX $X.X share or December within Net per At us prior statutory X.XX debt-to-equity our anticipated previously X is this statutory

On is we the the leverage stability show our historical NAV statutory our show quarters impact step over adjusted past historical current and IPO. up with dividends, which our ratios, our ratio. line XX, slide, on since target book debt-to-equity for of cumulative leverage the of also in Slide the our seven value we special shows

On our our that believe Slide volatile XX, below be losses statement unrealized we measure the most income and the can slide and This quarterly while performance. show appropriate our We results. that adjusted NII line. highlights realized quarterly is gains of

net to continue the above generate We income stable line. investment

prior net from from quarter, the million higher XX, quarter to income a fees. prior the million investment million, and total cost increase of quarter Total $XX.X interest from the December Focusing increase on ended we $X.X base. XXXX, of $X.X an to million, increased primarily asset borrowing approximately earned due $XX.X expenses income high the were the

quarter quarters, to advisor advisor certain important waive it this waived. the effective fee recoup our dividend NII above guidance more million per share, results share. in $X.XX of This than of for and weighted or regular covered which fourth adjusted continues the fees investment is The annualized X.XX%. management in quarter investment fees. previously $X.XX cannot management is $XX.X was note to As QX prior average our that

write-off previously prior associated GAAP years, inclusive with net weighted share. for income the quarter $X of for the average $X.XX NII PPVA our in mentioned million was interest accrued

for depreciation As the operations we resulting net increase in an in quarter XXXX, XX, $XX.X from net the December assets unrealized million. a result of of ended quarter, had the

annual summary XXXX, ended average. of our expenses like On million XXXX net for of weighted year per investment XXXX. XX, of had results of approximately net performance December all This the I’d total to Slide income in a of adjusted we $X.XX investment and give $XXX total million. $XXX brief XX, income or million total $XXX

net in year more resulting XX, the weighted covered in regular million. in our $X.XX GAAP approximately share, total was the assets Our average with for net December for XXXX. year total operations $XXX paid of $X.XX increase from NII XXXX, dividend per ended than which

investment demonstrates nature predominantly our paid XX recurring total incomes in and Slide cash. in

can XX% income our of this quarter. investment at We XX% of see, predictability remains and and consistency investment this is strong cash total As recurring stability you shows income income. believe the

of XXXX turning discussed given to the to guidance Slide NII within XX, our our briefly as adjusted for earlier, quarter our that per NII fall covered QX share. our dividend. fourth belief $X.XX our $X.XX QX will

per Our XX, on XXXX. paid us be board record hold March to dividend will directors of March which QX XXXX a has on $X.XX of XXXX declared XX, share,

XX, various SBA-guaranteed our and borrowing respectively. $X.X account credit into taking Deutsche sources. over we upsized Slide and both facilities Bank successfully had financing capacity billion by On debentures, at end. quarter we highlight during we million million our NMFC total QX, of $XX $XX

will $XX Additionally, access we an II by million prove in SBA debentures SBIC under program. our additional to

are Fargo of credit As the investments of the lend the a than our we rather generally tied time. Wells to performance that our and Deutsche bank facilities businesses both marks any to at covenants operating reminder, given underlying

Finally, a leverage on schedule. we maturity XX, slide show

manage our diversified we’ve been issuance, currently maturities. to our successful We lowering we’ve maturities have As the better near-term no liquidity. at debt

to the would Rob. back that, to call over like With turn I

consistently for our the future covers current as pay continues Thanks, quarterly Shiraz. quarters, the with our is a to expectations. It share in NII long remain so on $X.XX dividend intention to per line basis

you pleased say closing, our quite credit for and your like Most that to-date. Once overall to a continues with In we interest. importantly, thank be we’d just portfolio healthy. be perspective, to like to continue from I performance would to again, support our

operator? and things to operator to at point, the back Q&A. turn begin this

ahead. comes The Lau go question of Oppenheimer. first Owen Instructions] Please from [Operator

taking thank my questions. and morning you for Good

Yes.

to first that marked Global seems us to and XX% So, Services, it down you lien for UniTek to debt preferred the XX%.

Maybe, the Thank spread the two? about see you. you could was wider spread don’t please between why we a So, X%. explain

Yes. to both mean, it do different debt. I lot I of yields of tranches has think on the with the a underlying

junior tranche wider So, the a has yield. much

we marked should. did as the UniTek, wider down we structure, create gets when So, you if – it implied yield go the capital

different is coupons the on And difference really so debt. the the of just pieces

your how little very it. you from Thank here? may you but the portfolio be And do in sign risk a complete? Medicaid another of early fear And see much. here, early still impact you Got assess then Okay. on question bit potential any would you coronavirus

Yes. that in a We be second impact we’ve chain But out when order in We days. markets kind prospectively, obviously think we have something does the too we if to in relative anything might Listen, And it the well of KPIs. have on impounding it’s impact, flash last don’t been coronavirus basis. folks early or portfolio, do that and believe few order anything that We that it the issues, at might coronavirus, even about it’s numbers certain thinking don’t of even lot don’t manufacturing ships you’re sea. in leisure the are or see right; and or travel have. think very reported have we’re have a supply positioned logistics, should first right? have

of fact about to the things impacted software, up about healthcare, that in feel we focused does very are to by said some turn the should we’ll make be lead defensively an that good is should think to services those find So, positioning quite of catalyst downturn, We’ve out, right. U.S. coronavirus And light our that. we enterprise the if thesis the nor if our you economic atypically this in business portfolio continue a impacted directly be believe vast and they when majority coronavirus. we of portfolio, directly always technology-enabled is things like constructed that

Thank for it That’s very right. you much. All me.

Yes. Thank you.

Please next Fargo. Instructions] Finian question The comes O’Shea [Operator go from ahead. of Wells

the – the Hi morning. remind of non-accrual. I’m you? guys. agreement? simple first on the How resell sure nature us you Good there. are collateralized Just why answer of it’s a question the the Can

how or this recovery your structure much this does underlying into does importantly, scenario? the weaker play on probably More

play into doesn’t scenario. recovery Yes. the it really

court We have in there crystallized the restructuring. claim – a in

So, well the on of secure significant been off proceeds secure claim, little that we debt very received. debt and has there’s ahead positioned paid are all the there state based but that our majority in of cash

millions. the effectively structure ahead of literally, are the we of bit at right us, sitting So, little now, up top a but single-digit

they to as in in we’re So, year in working to claim here receive the proceeds down. coming the begin line come

may court partially non-accrual That I – the my year. itself news Okay. it for answers this in proceeds of of based what where assessment was earlier evaluation was ask kind just the last is a development there that’s – answered telling of from But year. You going any sort going ask there’s trickling in to was courts your you least that on I that out there will was the us over to ongoing just there development start was in emerge follow on. had you’ll at or soon be? that been

So, of what conclusion a somewhat we’re I period. assume at

beginning too it’s the inclusion think is not I of maybe, but the of would – It’s Churchill the beginning. end Winston strong. the probably it’s end, say,

still side. a major it’s civil through investigation it litigation over and in around precedent obviously process procedure criminal this a obviously the to moves starts, takes multiyear that whole So, fits and there’s because play

refine. around but the quarters don’t timing, progress too precise ahead further expect So, to and good we’re to updates making to certainly help want get in I have

Okay. That’s fair enough.

couple the on market. Just a

and I This think kind context views flow. for late the John high and mentioned with equity the of – couple concerns. concerns improving there’s heard least private I’ve opposing deal managers in outlook multiples cycle a of at

I of activity? say support guess a rebounding the you would or would what how buyout view So, you

Yes.

right? if continues side, trying get its then not to So that. I coronavirus impact has to own right? And that of a and explode, we’re that going I to mean, think couple factors, put And I’m to the

we’re a private equity major in to the put to as seller private market market, think in companies. I day So, a, we’ve we’re, ordinary But an course every the sponsored that equity that moment. a of for side buyer, view is – got by supported

are of different pretty And a is folks, it the maybe, pipeline. view who have different we maybe, industries. well-informed So,

moved direction. There’s As flow just that I’ve in we there. on, said has our focus of but increasing market past, sort areas the the a the in mix in issue maybe,

And in – confidence is of think thing is formation the increased years, that continues in macro really to the more just the private very, timelines And dramatically then I capital that’s last one we couple other of increase rarely of the that given of very and back those view sort And anyone equity very, know, equity, funds. private money. there’s to bigger capital history funds, has as ever put finite the in to work. gives

all for to have side. So, think the competence coronavirus that reasons, those again, I off we

of Yes. LIBOR And commented think for difficult year. then so curve. of LIBOR a of has in a of the and you question more forward one at sliding spreads, one sort well related as little been that on bit on But had spread-widening confidence least final context – there’d I perhaps the you down

of lot to So, compression at quality a just we’ve mid-to-higher on least credits. seen it’s say fair I return think

level you awhile. that So, sort would you – here things lending of for out been the you’ve should is balancing and indirect Are saying demand off? and supply

and just to end we course I the John year. of did in pre-corona said, that therefore, the course in again, obviously see year, spreads right. expansion the seen like abrupt modest Last an So spread. compression as we’ve LIBOR factually, highlighted, compression January, came you we credit where year over in of mean, saw, meaningful And rally a last over

we compression again, maybe, typically of for Feb spread LIBOR both compression it’s anomalous, Jan spreads is obviously, have maybe, and X what And can continues that through which seems XX, some to be widening sort weeks, but but has did anything that are fall. to ongoing never coronavirus, now happen, and long-term catalysts So, LIBOR occurred. six there’s always is

of So the two time our of here case for two – those And after – that sort over are again, things we was you kind that behavior. accessed don’t the correlated. it is weeks and we’re a been run, like long the experience, that’s things inversely XXXX why we’ve move those in long of anomalous six seeing say, – long

spreads when The low you going market. only a add signals that record the aversion I’d risk levels treasuries thing in to about clearly is that think in down

for just us. just us it’s go that there’s impossible think so make to That doesn’t to going marketplace spreads risk are that aversion in And generally, tighter. the sense if to

the So, is why wider in wider current environment. that’s be to going aversion risk optimistic in and we’re about spreads spreads

for well. all thank me you Very color. from the and That’s

thank you. Yes,

from of ahead. The KBW. next Please question comes go Ryan Lynch

Hey, Ryan.

Hey, Rob. morning. Good

First question has do with to your leverage.

how you are have to You don’t on additional that are leverage your your into target you to regulatory balance sort had – component you at. or play focused of your that real of towards mentioned now operate are leverage Do that’s guys does putting leverage sheet. the guys And million however, balance Do where just much access that on statutory ratio? Or business? regulatory set you $XXX debentures. your count of you on leverage where guys those Obviously, sheet? statutory guys all, SBA your pretty – usually take that’s that’s you though, consideration solely you that total guys any at or debt-to-equity

question. the good on look do We But nor up wouldn’t both number. fluctuations and mean been both. We even wouldn’t fluctuations, the Yes. we to do regulatory versus prioritize XX, we a and to be on No, quarters. absolute haven’t the track may I we those expect radical expect has radically slight some between leverage regulatory SBA overly Delta There as I been to the recent grow, be than expect in but it’s ramp divergence, it’s as be at material. absolute business beyond that different continued I and Page an

has It going regarding come to And LIBOR comments following helpful. trend It’s then kind to LIBOR, looks on continue Okay. going forward. a like of your it’s up lot. down lower

assets. guys comments, do your You do profile the dividend leverage a and portfolio of like done – any non-first you shift level shift you clearly curious, comes this and support think it it. at there can fantastic to lien in to given guys I’m you potentially job bet that just things appetite to your guys this historically anymore covered guys if your are is that, more

lien at have going have Slide the look as you there that non-first those fantastic I Is it if had job appetite those of you of in guys But we’ve move a LIBOR, you XX, into talked like to guys leverage assets shift pretty given as more grown about. to done looks non-first continue. reducing necessary As it’s lien dramatic assets?

Yes.

it’s another think good I question.

were obviously, to be, you moved lot think, and I think peak, – at we a we our we’ve under our like I said, used XX% at senior.

to Could But back down we can – bottoms-up that few standards. We’re we it But to XX% you fit if go I not points come from now XX% to – high it’s with only that around of find our zero-loss edges, underwriting the the going mid-XX%? kind a that. only securities tell but senior. percentage – XX/XX.

we’re we’re to discipline – underwriting. around do, what to the no So, going going we matter maintain absolute

to on We’re asset a to not portfolio risk taking at expense yield incremental level going the of and solve at the level.

But not that, then both are having. is, for going are know Mountain higher New monitor you’ve of mentioned, borrowers, on ask, Okay. how have what more I’m your are the given the do it’s what to and show question and fluid. fluid too of think that just global kind how takes the to specifically, your on That the us to a far but steps early it’s up I portfolio a this in as companies? so at monitor out? it’s a that what and do platform far do the impacts data and you think And not a of coronavirus. impacts just with very I any while going situation makes Because sense. want coronavirus plays one many And now. too to then you guys unknowns underlying I level processes it’s

you borrowers? to with specific are how So, that monitor actually trying though, your

Yes.

So, very insights, I good mean, think, we mean, had it’s pretty at I critical I because already. have actually actually have, conversations footprint some issue. the do platform healthcare. we our internal it’s large obviously some We – we’ve level, in a of

both, minds as epidemiologists. both. just you space some I the as we when are to about we’re, around human table lot the And in world, We track even cetera. best the actually investors, to we it this well to able as as and So, talk beings et incredible anyone. epidemiologist uncertainty have a None of as care very think, and have best the this of there’s you and said, like in access us

So, level, we I from a well-informed. think stay quite can platform

taking from we’re entitled the that right, pursuant Now, to credit that agreements. credit to the borrowers a layer we’re down hard. entitled into to information mean, business is I our our

with the the to have the we have of a more most real opposed are Now, backwards as with we up trying to looking with borrowers overview our sponsors management, a dialogue to real-time qualitative ramp interaction and numbers.

allow doing to So, we’re want in our everything do. what but don’t I ultimately to can us that oversell power,

comfort individual our take honestly gone most this, borrowers. we’ve I’d – through done we’ve as

and most bad them to case, by at If the part is legacy say case you assuming, eight, likely entity impacted the not a for you coronavirus look line an line and is of but is no. worst that be is business answer the that this maybe, model

So, think that the the me, in gives comfort. is what team I most here,

my I helpful. are Okay, all that’s today. color time the good appreciate questions. a Those and

thank you. Great,

The next of Please from question go comes Investment David Confluence Management. Miyazaki ahead.

David. Hey,

something Hi, to shareholders let right and kind and want question. still Thank to the the taking didn’t thing a income of time, that incentive shareholders treat the things I good reversing I have pic be for your you think my but all slip you that applauded. thoughtful kind expect is you investors thing way, morning. morning. though handle of it’s – the I Good should even properly guys do and for that guys think

for that. doing you thank So,

Not to hard Thank Yes. do. a you.

through, market beat been just Ryan but for spread yet, of we so be equity really to of it. on public like little debt thinking bit you if little horse too kind in the of And following dead up this [indiscernible] be response to here sort wider. I much, to debt would has a things, a coronavirus want see were Well, the what markets, but markets the middle the tend was issue public a example, things A and in lagged. of don’t to in probably, kind But the about. early appreciate to talking couple

other seeing have the that share would or they applied the banks how might in equity language might think any credit valuations And that and private pause transactions? would you side facilities perspective side So, have I probably, deals? are viewing it from they’re equity be then that things, investors how advanced the and body I on it’s on way equity from or you viewing leverage creating that to corona, the rates? Does to you private and underwriters the side be some impact if could any exposure be considering private is on and some of it wonder

Yes.

quickly you, looking equity down the second of in measure on the that, radical seen capital at five the have equity again, so reaction market. on mix, So, in private XX% if it, looking move, XX-year it’s at moving in such you it’s days it’s market, and whether the we’ve and the part a it’s, the side

reevaluating I everyone’s think everything.

months. in a So, the timeframe private equity of moves typically

I day play things it’s very it debt day impact out on for rates of could of and debt well quantum It – So, could sure, think people just and to seeing leveragability, kind impact are right. how valuations.

I for decrease are But going the develop. John to things basis. public markets whipsawed private not is the going be It’s certain. in the like, going in As people risk get markets day-to-day on how appetites to reflected mean, said, to see that a

thing. of transient weeks know we’ll a is as sort more is whether in a a think a this I of or So, long-haul lot this whether thing couple

to future to improve to the When changes. tap are expect our than to we’re course. got no debt about foreign But that other market things we if prices see. terms think we’re our near of we’ll looking and term out the incurring our on opportunistically, not we both better of market road, based underlying the see and In a having not changes rates subject fortunate assets, advanced position sentiment or any even as of nor debt there’s that really we borrower, terming have medium could to cost, in anytime down that into

exposed So, I that be asset we’re like there. to reaction will any a would again, that. some not expect really to degree class, But there

All for you great. that Thank much color. right, very

Yes, you. David. for Thank sure,

session. I to remarks. to like for any Rob question-and-answer Hamwee conference our back closing turn would concludes over This the Instructions] [Operator

markets Great. obviously, Well, We everyone appreciate thanks be the We for very closely. today. it. the monitoring interest will

right of updating and So, battle looking folks to it’s forward kind in of the we’ll ahead. now time a be weeks months to

So, a Bye-bye. thank you day. great have and

The today’s Thank conference concluded. for has presentation. now attending you

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