New Mountain Finance (NMFC) 25 Feb 212020 Q4 Earnings call transcript

Good day and welcome to the New Mountain Finance Corporation Fourth Quarter 2020 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Rob Hamwee, CEO. Please go ahead.

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

with and Mountain line Chairman and Shiraz and the me of are NMFC; today On NMFC. CFO Steve COO of of NMFC John CEO Capital; New Kajee, of Kline, President here Klinsky,

our live country business a health public crisis families around is taking the update, to health. We everyone into a do diving hope want our that in remain and is through recognize human community, toll the globe. staying on significant good Before your and that we we across continue to that and you that safe

business, before some to to introductory make is I some statements ask make remarks, he today’s regarding Shiraz Turning important but call. going would Steve to does, like to

everyone. morning Good Rob. Thanks,

Before turn and unauthorized property call presentation, into today’s they about and would is webcast advise note of prohibited. We strictly latest undertake to to To New the update cause for being results of from or copies some the any the beginning actual please Mountain are access the by to X at call our audio statements those and Information this on like that materially any that will filings you our I everyone replay give recorded. of website disclosure broadcast slide Corporation Chairman required filings in our Please do Steve of visit to on At February gain the available call, and call referencing unless factors and we in that presentation to release. forward-looking important this and are presentation. to call refer to ask harbor include form not is highlights the we would could your our get release I statements this earnings be I press that attention law. regarding forward-looking recent projections projections. SEC our we SEC to call press our like Klinsky, projections statements. slide NMFC’s Page safe most customary X the like Today’s over who Steve. conference also time, www.newmountainfinance.com. and and differ the would with XX of Finance forward-looking statements throughout to to slide will that in presentation Page webcast may

a be great of Shiraz. Thanks, able Chairman you speak the to both all as It's today fellow to to of NMFC as shareholder. and

has as an always downside explicitly and returns, Mountain therefore unexpected organization growth industries market and that best can upside has to sought emphasized emphasize as controls, safety New defensive well as risk downturns. survive

all. beginning since of went has just or bought dividends both significant $XX.XX billion was had And over control of with total private history of as Happily, New of in have share $XXX have had our credit equity and X.X% assets, Similarly, our dividends, now part equity we the XX-years or paid rate. losses over have of both million since today, $XX Mountain cash default company we PE in NMFC debt realized credit. interest about a equity in bankruptcy we or had never started $XX per million XXXX, of private portfolio a private founding billion and ago total missed an private we of of Meanwhile, $XX and manages credit. arm effort. our equity NMFC XXXX. loss including in only have payment gains, public mission. Risk in the

business might as as risk mind growth industries defensive services loans with repetitive, described best in enterprise long are such hit. built NMFC's before and was tech-enabled Mountain control bulk great COVID that The New in of areas software. be

additional fully dividend regular in share of XXXX all share, was specifics per day-in paid December installed of on often $X.XX quarter this in $X.XX covering on their cash large this me portfolio December and the in growth XX. defensive of turn and times, on on QX that QX. do With to service non-accrual income times. background, who quarter. difficult placed anticipate dividend non-accrual was Every companies borrower industries for XX were users per prior right let our report in our are on guidance. attractive the ones particularly with the interest their $X.XX of types share not Page We line earnings The and ended the in X. of repeat borrowers that and companies at depend QX going no think we currently per Net new are bases paid client have day-out. Our investment any These

asset net March increase record XXXX as XX, holders the was $XX.XX to again of per Our of set XXXX on share, be from or $X.XX NAV an QX, of share of regular per was value $XX.XX $X.XX The XX December will XX September per dividend March share. and payable per XX. share X.X% for at

withstand in the of future call to and portfolio approximately Rob as team further I in confident be our did sheet crisis. million has Mountain prospects. NMFC. members With the let shares onset continue strong largest shareholder the with the has carefully holdings of highly competitive ownership of me one a and crisis other we In have Insiders been including to the support Hamwee, proud supportive of conclusion, balance and XX%. Mountain of and New work a advantages that I back to of to approximately resources, NMFC the remain that, to the manager New NMFC’s company turn building NMFC. our remain CEO own significant of since added the

Steve. Thank you,

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equity other and in significant where large our led The accounting to net driver rate lease in portfolio for $X.XX restructured particularly a material appreciation. further was cap in recovery rates asset our declines

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is our believe value there We further across book in equity portfolio and recovery the Edmentum, particularly to quarters also Benavis come in for restructured opportunity UniTek. and

we return yielding restructured and million slide of book the to require returned par increase the would if As to value illustrates across portfolio the $XX a pre-COVID value. assets to equity our

is of achievable of number securities. increase believe as from a we Given value medium just $XX in this million the represents trends these underlying operating in businesses current these the holding the a X% term

stake ... in allowed as the to Turning Edmentum strength to a fourth XX, significant business company noteworthy attractive and evaluation. Page quarter sell had a the the ongoing

you with loans second Plato provider the As Learning XXXX lien may $XX Edmentum NMFC a merger million leading In and invested of K-XX to support Edmentum programs. learning is recall Learning. online Archipelago of term

business. of now into million $XXX a significant multi-year cash inclusive performance growth meaningful invested to in a have at a total within the of NMFC industry continued Page sustainable and portfolio million XX% driving of we firm we is updated you portion a team ahead. the value of NMFC will new the and leverage creation. basically XXXX expertise in group a a for balance this shows summary in have $XX statutory due million. significant in of growth. In for In has equity significant further material resulting acquired Chicago-based proceeds business all our further In been NMFC quarters Edmentum strong stake we approximately to turnaround NMFC. the recent lack product into to at manage gains our in NMFC positive ownership. owner partially in and full developments a in private on set accrued XXXX flat. the and both a the and that a to investment [indiscernible] transaction [indiscernible] conviction level. the to and keeping and to proceeds significant of look $XX company sheet a change December Equity company in prior meaningful other the sale became the we point $XX a shareholder plus invested on of made reinvest deleveraging forward tailwind immediate of investment management tail put reinvest continue a and and which this company recovery dynamics further to Growth we installed COVID will products of XX chose very cumulative in this and growth the further XXXX quarter began a refresh the received Softness the significantly likelihood was of of what owners comfortable in leading million increasing hope a due capital and fourth We our business and ratio be position from competitive exciting innovation. the important the pick the

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$X.XX sheet income safety. While and priorities be in strength quarterly at that enterprise investment QX. first end continue investment while To stable to also income quality net our environment is continue to we asset in to preserving this maximize balance net want

mean turn other absent our John? conditions of change of I to in confidence will We to Kline and support per quarter generate dividend. business. ability the market to forward the to market $X.XX continue John With conditions NII going a over elements it to in discuss dramatic approximately that

ongoing Thanks direct Rob. improved. market the lending conditions year COVID despite the last health Throughout of steadily crisis, course

us of to After build result portfolio continue strong pockets While multiples see leading the to week as of interest we prospective there experience are ongoing pipeline robust sponsor a the spring. believe going January will week over stress in a quality slow we solid high the defensive into that pandemic seasonally seen have activity and companies. we

business grade subinvestment as growth the our some trading Companies healthcare in services well. of in levels. capital We software, these levels to significant be a Secondary, enabled surpassed that health attract technology forward-thinking investors market are technology particularly in core cases seek a credit nearly to post in believe maximize exposure sectors gauge such to performing XXXX continue we returned in will World. have which positioned view pre-COVID and companies well markets COVID defensive as sectors as broader will

highly we've and other classes. some compared seen yields to private returns marketplace While in most attractive credit pressure remain on the credit asset our

rate how in the Turning show changes could NMFC's to page XX. base impact earnings. We future potential now

balance fixed split vast mix the stable earnings rise remains current above floating-rate NMFC's investment majority our If as rates the X% can rate assets is our even base and NMFC's offers of if under upside X%. meaningful consistent shareholders between you evenly with As are normalizes sheet instruments. floating income. loans economy post-COVID liabilities to our and there LIBOR see net

example, mix XX% $X.XX for X% or if LIBOR historical per reaches XX% term X% share. long our asset shows record. increase earnings track our which liability increased and annual Page would For per would NII X% addresses share. by performance by credit LIBOR XX assuming At NMFC's current

X% page side at million left currently X.XX less portfolio of we $XX value the the fair with portfolio non-accrual. our billion of on of the current state for where On have we show the Investments of than

place not This quarter did we borrowers new non-accrual. on earlier any mentioned as

the right placed our non-accrual. NMFC's that list been inception $X.X watch of since that in have On to XXXX, XXX cumulative performance with our which we have total of across page the present million we amount credit migrating that on million shows side billion investments of $XXX

million plus companies is over have All XX XX based course realized of underlying portfolio view year losses the performance Page to on relative accruals history. only EBITDA. LTM of of credit the non our XX a become our leverage

a As have our despite support the a are than consistent have very cases of can either minor and with of a that second negative vaccine are half have with names result that the suffered that of positions past underwriting which our a There which has marketing leverage There even services are but material in its orange see or seven given business, Two more of- scale plan. on in the prospects are you leverage liquidity underperformed securities these that the have increases of half two for many companies COVID, two COVID have to XXXX. to read COVID rating but which distribution terms we have operational impact the material our business names continues decreases. COVID experienced challenges mentioned and is long-term significant long-term majority results drift. various shown other projections exhibiting drift. name as leverage very One company, is materially with have

through enrollment well names education trends. It and long the to UniTek BZ segments, has its UniTek. pre-K core construction headwinds a year positioned business. attractive include as have BZ in pre-K multiple related yellow to is telecom a XXXX but Company experienced exposed over business XX materially positively growth expects is remains Company in Our improved term.

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$XXX the In we realized show two of realized compared portfolio items highlighted has line of have since positive page last on This unrealized where of $XXX total million box On represents representing million we we in of line show points losses. net the $XX combined our portfolio fair losses. a million gray by quarter inception markdowns that in cumulative half NFC blue has and $XX in losses. net million change discussed these million experienced that NMFC's the in unrealised we recovered $XX the focus number below improvement lower NMFC QX, bottom Since driven that numbers unrealized we earlier the to detail marks low the presentation. in XXXX value the

that Rob positions time chart net appreciate the a believe unrealized discussed stock return can Page if remaining most certain equity to loss As detailing IPO. cumulative be overall returns our over we Historically since continue par. recover positions to to XX of troubled recovered value and of the continue names MNFC's performing modestly. shows

public compounded the final a returns Page index high at XX peers. to While X.X% of materially the yield in fears economy well that IPO material return of long investors individual peers become improvement as annual provides gain XX U.S. portfolio. confidence least trajectory cumulative have pandemic as ago share exceeds the recently index and impacted the seen as NMFC's have Since the price at of return our attractive nearly of we around an were of that NMFC has the BC look yield a our and with our we as of in have performance which of shares have. by our the been years compared as stability comfortable

we have that see among As tracked peer second since been has you the NMFC performer IPO. the group the can best

which X.X%. an of $X.XX dividend stock the this on performance yield approximately return build price current with annualized to based per on continue dividend our total share We represents

on activity our XX this by million quarter net portfolio. page we invested $XXX originations of $XXX total of tracker originations million new investment our our repayments. just $XX were In offset million reflecting Turning and to fully had sales

consisted SBIC good the details we've which New the QX lease SLP the program, volume that lease investments of in of investment believe and a that financings. net stable of X.X%. of in inclusion of year financings approximately net Benavis, at continue On was sbic-related to represents investments Page and XX our club average an so yield further to Edmentum REIT This expansion to a which and include this XX subsidiary portfolio the deal originations new a one origination an expansion from the into our primarily made show far deal perspective we new we accelerate new that our in for investment add-on eligible in several spring. group several program. will the portfolio from year heading was NMFC's QX start of successful page

yield For investments. was of the assets weighted a able This to supported net quarter we estate and lien purchase a X.X%. of average Edmentum by originate and Benevis financings healthy real group the were with our second yield lease

the services on give our overall industry healthcare NMFC's back to revert industry and forward our heavy pipeline strategy of mix first chart our origination based believe shows on will The page lean and our and business traditional we right into within have current diversity left exposure charts XX, pie we where Going center more detailed that the the orientation. several verticals. exposure. insight On breakouts overall

the successfully avoided COVID sectors nearly most the high resistant sectors exposure the we troubled most see As maintaining of within U.S. you to economy. defensive have all can while

with show lean in assets. XX% lower our degree approximately portfolio half invested a have page of senior to portfolio the the the we continues high exposure of On first oriented of that

the ratings of Additionally, the presentation. in of we match breakout risk maps present beginning our heat that a shown

to name turn of of largest have and diversified over statements value. as now on to top Finally, with accounting X.X% financial With our XX fair will Shiraz? we a XX% key page value portfolio discuss that fair the investment illustrated metrics. financial CFO, the our XX investments with at Shiraz single for Kajee I it

John. you Thank

the results our on last filed and to commentary financial XXK was more today's refer evening form details SEC. with that the please For

NII $X.XX diventures. portfolio slide billion XX the had value of at investments December sheet leverage total fair Now was approximately most is pro $X.X statutory leverage losses Net or $XX.XX quarter. the was XX, On would measure the of excluding XXst gains I'd we $X We of below on X.XX:X. we to drone total performance. results. income ratio available our billion and slide mentioned special cumulative debt line. We was to attention show XXXX $X.X line ratio in historical and net December the show net equity quarterly to turn guaranteed for can XX our NAV prior forma billion unrealized of above highlights liabilities believe On our total our of the ratios like cash assets the statutory continue stable balance asset our billion slide XX. had while This per be $XXX debt impact dividends. At appropriate your of that and which of income $X.X $X.X in outstanding realized generate slide that X.XX:X and historical The the at adjusted be our value and million investment SBA of quarterly as statement share volatile up we to billion.

December quarter XXXX income million approximately consistent increase $XX.X investment quarter from million fee ended million of from investment XX, $XX.X the the due to primarily quarter with $X.X higher prior were the expenses Total $X.X we net in earned total increase on million Focusing the income. prior increase of income. an a

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

slide of operations brief so an assets of XXXX. appreciation our of the quarter, to XX, annual I'd performance On a unrealized result increase a we As had for million. in in quarter XX, summary ended the from XXXX give resulting like net $XX.X the net December

we're million results had net million. net XXXX. total net dividend which and December $XXX In ended XX, assets regular investment of year net December or weighted investment demonstrates average $XX.X of adjusted total income For share total of over covered year approximately $XXX the $X.XX XXXX $X.XX million XXXX income and expenses in total $XXX investment This for all operations nature paid increase slide for total we from of resulting ended XXXX is in total the in paid million. XX, recurring in predominantly income our cash. The approximately XX in

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

Turning QX approximately will for our Based be XX, quarter per our estimates preliminary our we slide XXXX $X.XX the fourth briefly NII discussed anticipate earlier on covered share. to QX, NII dividend. as

X.XX% million available lower by maturity million we based to successfully XX, that the our attractive an unsecured into of X.XXX% of a on QX, revolving borrowing end a at due lines per at cost near-term January, to paid to our XXXX. $XXX total Taking to notes million XX and sources. march XXXX SBA share over In unsecured were our record that issued calling XX in Slide year over notes our capital as of billion address we $X.X declared our dividend our Given XX, capacity On we highlighted of on directors of board rate overall of which with debentures subject XXXX limitations. of $X.XX $XX account various XXXX. borrowing million has had hold be entire March financing $XXX on will guaranteed

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

Finally leverage our on show schedule. maturity we slide XX

turn with As to at mentioned over repaid we've one end diversified to maturity near-term successful to notes back our we manage liquidity. Rob. been had debt our better call proceeds would like from We issuance that that January previously at have With I year maturities issuance. the we the have laddering recently

years In Thanks for months optimistic increasingly about in NMFC Shiraz. the closing, and are we the prospects ahead.

lending on supported continue Our to well. us long-standing focus businesses serve strong should to by sponsors growth defensive

unequivocally transparent more in thank turn are the more health these While difficult cannot good stakeholders is challenging our believe support and Operator? model risks times to elevated environment. with for for the the all and wish suited we and maintaining discount We I than interest and once your scenarios dialogue things continuing look days in now past our again well we to you the ahead. current to forward you back begin of open will all Q&A. an in operator

O’Shea Instructions] from We Fargo begin now the Our session. [Operator first question-and-answer Please comes will question Wells Finian with Securities. ahead. go

everyone. morning. Hi Good

question on were like felt John that you situational major the so the more it quarter upgrade that First Robert, one a measured forth. UniTek ability bit name last was on your and to recover

still. there there's significant to recovered amount a and be provide all you could also So

I can outlook happened there expand any in you bit change two-part recovery on potential. and little on a guess question So what

that Yes. John John? Absolutely. on UniTek. more over Finn I'm going one day-to-day as to to he's turn really

contracts state in is a XXXX had we were a and contract. I Finn. exited the completely that of out UniTek. we both Yes, I in past Sure. Thanks think we've bad got decline unit business articulated perpetual some had tough really happened We business years and was bad also in and for what's XXXX, as XXXX that of think we've was the the declining also

reasonably southeast southern fiber of make is industries believe So operating growth we the well. and of market construction and have U.S. they're that those end collection now up end businesses we all business throughout units really all all now and that at a that in they're are states the one are market on healthy, focused right UniTek UniTek

now. Some units are operating right very well

feel So do complexion I changes little UniTek. We've are make of really the business it's that are markets Does businesses essentially the we in bit capital investment in to more and had but said with been throughout which like to support as good help? that's remaining healthy. these a a the these change which the growing in

Yes.

Yes.

impacted was just to to the they've I more -- think at by in degree a on the some company the to businesses many well add full would able as has thing company XXXX. this been COVID has run I like much COVID that as and companies only UniTek earlier is than clearly rate receded good utilization adopted

well Sure. just see And outlook your of we're market wave addition then you, pipeline and that a helpful. on today? can activity the lot that your coming. on analysts REFI you in some hearing question from that peers as do What's on That's your if is you. a and Thank you take a for comment

sure. Yes

we we in REFI the to it certainly it definitely spreads wave seeing seeing credit think and the in amount right think stay pretty meaningful We compress. are what REFI some are degree. portfolio. market of I the the syndicated but penetrates degree way X activity. that to acknowledge that midst So not private now that We're side would market a of to activity see across M&A if is have conditions The expect flip to attractive we all I

pipeline from quite So now. it's right a robust perspective

your just came also from slide. market mind the to Awesome Okay. conditions question and that final

the down see you money you software? that's accentuated that a and seek market your they its is a those still certainly see? that become private business go these good I continues to something think yours up you see for high, higher of private and leveraged, become impacting but a necessarily trend these some see just businesses enterprise category higher recent equity a strength you or years of if major software Do like you or way it quality? was been sort of in mentioned you the something businesses there credit in for as currently the solutions like line as by thing find So COVID. of this businesses quality such part that market that's Do obviously

been a think we've Listen, has I seeing years. of changed asset I lending the think years. for to mean in it lot enterprise software number I business of a XX an like notion

change that we're an the lend I in even been attractive models that a but to agree entities has seen. further they're that's cast to business a with have COVID perspective. and overall ongoing don't think thing the you So seeing quality lending function why of onto we soon from market evolutionary light I step those

like number there's always to I been change I who ground got expect market obviously our us years see have in business of to. models. to do and what's increasing The businesses. and think think those last we competitive is stake of there's flows that lend and will in those We've would share ones guys plenty good good good for to not I lend to been have the the for that continue to buyouts into capital of

dedicate to private percentages equity their and large in on. like sizes the that So just our of we increasing and become general larger as fund that industries addressable expand then to market continues funds focus we

Rob. Thanks for That's Okay me. so all much.

Great. Thanks Fin.

go Ryan ahead. with next Our comes KBW. question Please from Lynch

Thanks my morning. questions. Hey, for good taking

potentially sectors being was a I of had I businesses and the credit it be out one those downturn investing and on of kind out of did structures the that look types but do focus years changing upswing of was capital you thoughts that this of have credit would of three invest on where of cycle two the businesses versus anticipate you hitting? First helpful. on don't question we to I you going coming anticipation Just the really guys coming any or cycle are changing you but ago forward would in kind that one anticipate now

Yes. It's a good question.

to the specific the and credits well and will approach we're great that up now we're bottoms we're that We to do place more continue and are should industries businesses, cycle. on I really going going is weighted be we're structure risk is to say the at we know capital the really security. focus PE be time to I we more that think That function think companies not really junior through opportunities. That's specific to in different what say a I wouldn't XX% what do. going is. adjusted opportunity of in where to think

of get think in I exposure risk-adjusted possible one way we best the know best we models to that the want the to best. business

may to a us our different in based cycle. may in expect I so on structure target would the credit position not of not the read we where a or be And capital

Congratulations long time. Okay. been the been guys on for you investment investment. period with a Understood. Edmentum obviously That's of have

Thank you. Yes.

on just based on to a it's kind it investment. the this turned of I'm supported good out business you be that really and guys – outlook curious of of and transaction kind to with of you bottom as obviously the well. recommitted at capital to first business have of some recommitted and kind that exposure structure your business that debt preferred and equity some

So portions can committing opportunity capital you that of felt decided structure? the return just recommit talk you to comfortable higher of riskier and some why about to business also that in obviously and

Yes.

been business superstar. a kind years, we gotten we've all or that COVID to to strong our really the been So arms trends revamped then COVID three two just and a just of strong as as put around CEO last the Edmentum really trends the just on performer virtually when had came who's those a prior secular And get particularly management steroids. of was has some it pretty it business

at as want outlook So say multi-year the yes also can't you to about guaranteed all that drive of you when company's as they're we see Edmentum all growth you be. green a never look for but prospects one say can the factors

think ahead the done best in solid thought we time or fact didn't is take despite good Edmentum structure either maturing and bring think frames an exposure but waited believe show your success want the the opportunity that is I don't to to in give there specific one just potential to we term world. year at with something table five to, and growth debt to the our bulk valuations don't good the equity play to value given to have because winners the time ride capital and of just We've incredible XXXX we would and we want if we transaction but a much take is, this the last going that had and was to think have it winners have the of frankly chips REFI some not best creation. a in we wanted this as generally we very you years just off it's out. want in we is future on we some do years of growth had to the firm exposure a there's medium to really investment we three a we growth but and we've recommit had work more Edmentum So of that the so last we we that that the think new

obviously a yes. Yes business Understood.

and knowledge with deep fundamentals have deep You there. experience

what kind comments kind kind of recovery XXXX to of recovery positive the make stressed guys Do the of have sounded reopening. in some what those look reopening recover your of on like? You used on guys sort to a and that of would businesses that somewhat depending you of the baseline economic a you more ability even any baseline and that

narrower that red all and to those is few think dental COVID orange remaining if the think significantly final hotel of it's by the and of a not issue and ultimately full exposed in-person or business education benefit font name recovered. vaccination those because whether of it's getting around COVID, of the stressed it those an whether around or mentioned COVID I All it's our assets one else getting remaining COVID levered because really some utilization education things more names. materially it's to are based equal kind you whether reduced more by the but exposed getting like will business

we So more versus up up or have of two that the GDP five. handful it's there about things whether it's

else and it's happening help that think remaining induced reading so those not a are increasing those that we're epidemiology same you and things So that not vaccines we're should crazy second heat about where map. COVID and few half XXXX to our headwinds businesses reduced materially the anyone that of on are is optimism are vaccine optimism the and everybody about than and just smarter else but

a it's COVID where I to were relative really driving Ryan guess changed we that ago that's quarter tone So the

appreciate I this questions Understood. the time Okay. I Rob. are morning. my Those that appreciate

Great.

appreciate you. we interest your Now thank

Our next Pilot Winston with Please Advisors. comes question from ahead. Arthur go

the Thanks results excellent. excellent disclosure. of the and for and It's Okay. amount transparency

you. Thank

portfolio The that fact? rates down because and are the higher rising course rate whatever interest is going yet he it future. foreseeable for level sounds definitely originations of of prepayments a like to the yield and go had of Is in interest overall

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or to at it's are someone up. so be big to historically rates going to start with And more end to gone as whenever but levels, up. happen comes if far, win or some articulated then are us. back they've year normalize for curve, going that it whether end if short across some where and John up more that the would next a then So we year before short not tail credit the down really seen end this point tied this what's spread we've short year the this does of the go Certainly

to in couple be as sense. yields driver of that really the makes overall going we're the level that asset to think I So tracking next and will quarters be very carefully that if

environment side better be expand [indiscernible] is taking leverage the that seeing. why bit it the we're opportunity little a But is than your to that rather to on with the supposed

couple things. there's think I a Well of

think we're seeing gonna pastured all then pre-COVID want materially an more were an to opportunity get the our what be we what there that's borrowing somewhat that leverage be there's may opportunity lower is at than there again I things we keep think until still may or screw reduce if slightly level expenses. at be it our true-true a we defensively running may we up no to clear what I new mutation and be

So we're as those math off that monitoring trading that and well.

are things kind driving right makes leverage sense. we of the those where So the think now

you. Thank Okay.

Yes.

welcome. You're

Chris comes with Our [indiscernible] from Instructions] question Please go next [Operator ahead. Oppenheimer.

I for kind is I to rising I yielding there of equivalent converting of would liked that? trying net to to guess the path thank but XX what about short elements and obvious drawn? would was and map equity map mean a I a investment I slide level you. an your of investments, of into and recovery would draw And be corresponding Good XX be mean Yes. key and the mentally what the morning then be the recovery rates, candidates also be the of distribution pre-COVID your process

Yes.

that X% are XX like bips two which where to Those You to but not it X% drivers bips from were hit the to XX LIBOR go us going get back to dead center. tough. needed is we is

re-plowing that that's exposure and that equity is yield is still that math what you driver and is powerful. compounding back some exactly two ultimately this very has one said, monetizing recycling assets. that So yielding of no And driver it's into but

to time. took, you If over round numbers know, stuff you just you

really dollars Because of you leverage that a that management yielding million there's that more bottom right? no extra need that. hundred equity is assets fee million exposure X% into no for line blows recycled the that. $X extra You more on There

that's powerful. pretty So

combination of two future And obviously sure there would so offsetting those a that. no is default making is in really future it things earnings on deterioration be

It will the is those the are rough, that drive. that's So that that factors will drive.

on think you're that. I dead So

that's me. it Okay. you. for Thank Alright,

Yes, you're welcome.

Our next question comes Bryce group, with from go please [indiscernible] ahead. Rowe

Thanks. everyone. Good morning

Hello.

you okay? hear can me Hi,

we well. can hear you Bryce Yes

Okay.

unsecured comment curious able costs so made to that potentially nice being reduce I'm at clearly just of and interest some issuance to about rate recently follow wanted you up I we you your is where potential of here some do revolving saw now kind of sheet Rob the some and further is comment know Sorry. a you it the on coming on or that to of facilities, targeted? for structure. the debt down balance the Is targeted kind the within that capital of kind see is spreads within

Yes.

obviously unsecured secured of the market a as CLO tough tends AAA seen predominantly side the secured was come the do the we liabilities out it's off side on think year the what and in there's and on market. we've we former as think benchmark that decline room the of but well dramatic to I

opportunity is [indiscernible] think potential there there. there's we a So yes

term on I both opportunity but unsecured So sides for the potentially is it's more think long the dramatic the side.

kind an just Okay us I notes. to prepay? of and the in to next down and of some July you the obviously what is when is XX of think pay unsecured opportunity to about so those look there you those refinance can mean trying if to fact remind maturity is opportunity might

and big timing gets is and provisions mean into the you right. you mean I the rate early maturity make now. I the like wall Yes. different baby a pull ability see be can but can instance forward that math you to are of in XXXX but is that magnitude for enough bit some little board in call can across which gap know the it's prepay doing you if may the work bonds there we're with

So next months it's I be think the it. would be timing X XX or to would that think to that about the way

I all for Great. comments. appreciate me. That's Okay. the

Absolutely. Yes.

[Operator remarks. Instructions] I would turn closing As any concludes session. Rob there for like Hammwe question are our questions this conference and to no answer to the back

a in again us. everyone. and always in everybody forward the as time to we're about the interim and you thanks QX months and of and to to course available to where of talking appreciate Thank look to people know find attention always talk couple the I

So thank rest you great a have of and Bye-bye. day. the

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

You may now disconnect.