Capital Southwest (CSWC) 30 Jan 242024 Q3 Earnings call transcript

Thank you for joining today's Capital Southwest Third Quarter Fiscal Year 2024 Earnings Call. Participating on the call today are Bowen Diehl CEO; Michael Sarner, CFO; and Chris Rehberger, VP Finance. I will now turn the call over to Chris Rehberger.

Thank you. I'd like to remind everyone that in the course of this call, we will be making certain forward-looking statements. on and currently beliefs. based management's information are assumptions expectations, statements current available conditions, and These that results They and statements. numerous assumptions are not subject cause are guarantees to risks, of uncertainties from differ materially to future results could such actual and

or information circumstances obligation uncertainties, this as Capital to Whether by revise hand changing forward-looking available risks future Officer, update Southwest's reason company does as and SEC. statements. of of law. with our or other now Bowen events, the date to Executive the The any Press after these will new and off Release, required a not Chief the concerning publicly For Diehl. see President filings undertake information, except call result any any I

thank to our joining us and fiscal XXXX Chris, for you earnings for year everyone call. quarter, third Thanks,

at this as to giving our of pleased portfolio, with of capital. Throughout Investor various which you be our to investment to update we refer Earnings will our are our our on an to in slides be We as your and of website section performance we found in can execute diligently the you look our strategy Relations prepared forward the and remarks, continue stewards www.capitalsouthwest.com. company Presentation, morning

our highlights the performance Presentation, key Earnings where You quarter. issued last summarized press X of of begin the find earnings the will evening also We'll release we quarterly Slide on our on website. for some have

ago December of The the net more $X.XX represented paid of XX% growth dividend our per During the share, share a quarter. and share $X.XX investment covered end as of which to in supplemental during dividend continue our quarter. we per of than earnings the share, strong over the income be the per of quarter, both per generated year $X.XX $X.XX pre-tax $X.XX share, quarter. Portfolio the per generated regular

share. taxable our end per was As income estimate $X.XX we of that quarter, undistributable of

share end increased per quarter fourth to for per the per the This value asset share, the per quarterly consecutive X.X% increase increase the the share of quarter. $XX.XX net Additionally, of $XX.XX Capital Southwest. from prior as NAV for share represented

pleased also has announce paid March the of over represents share, our share March X.X% dividend in a per $X.XX 'XX Directors Board declared the the regular $X.XX of for quarter. are ago We that a to This today quarter. growth year per

bringing per to again Board high In excess this our $X.XX total earnings our generated March dividends debt total which environment, for supplemental interest declared addition, quarter, dividends total the quarter. being declared the quarter, out by X% 'XX ago March has the to floating over investment in portfolio share rate for the of $X.XX a due in 'XX represents paid year dividend per growth in share,

it discretion of our distribute supplemental expectation at the the declarations intent dividend future Board dividend of continue While to Capital that and are foreseeable is quarterly Directors, our future. Southwest for will

While and portfolio. in base historical is from we our meaningful dividends are earnings which have by generated gains equity our rates and excess realized averages UTI, above of co-investment

quality than lower Southwest and during XX nonbank the continued increased to to where continue prepayments owners be the our as pace, source more business we the companies. quarter weighted $XX.X opportunities. to in and market while continue typically picked resulting middle million prepayments which investment activity commitments driven portfolio. Portfolio like million up commitments, and firms to well, to equity companies quality X a larger deal attractive $XX quarter, is and lenders the the Private and transact, investments, slightly quarter to new In well M&A XX of closing leverage generating at certainty Capital structures. That commitments provide exit in pricing the returned $XXX.X During during to growth XX million healthy able continue financing as lower of $XX.X end in IRR market, capital normal levels to was to lower spreads other X in largely the proceeds activity during has we more quarter, exit market across by competition structures. ago, in bank X This resulting portfolio the said, portfolio for traditional loan-to-value than equity closing average million of in the was a higher debt in from existing and XX.X%. new from as opportunities in middle consisting nonbank offset months lenders tighter by our seen

our On to the the credit upsized new the million we of during bank capitalization front, addition $XXX quarter, successfully are that the from one with facility lender announce $XXX revolving to syndicate. corporate to pleased we million,

million $XX.X quarter, per weighted share. equity through share We ATM a program, our of the NAV $XX.XX during of equity gross in per XXX% raised also price average proceeds the or at prevailing

the subsequent end, addition, quarter are Loan down Senior Fund. I-XX in facility repaid to In in process we winding of credit the currently was full the and I-XX

As most syndicated created initially to evolved, of this a favorable in further large place The a Michael been the success and the in in dissolution That has moment. small market as to through shareholders. our of view generate discuss timing will returns the I-XX for pieces market of longer detail know, of invest a and years. attractive no syndicated risk-adjusted mechanics for we I-XX you I-XX have was loans. loans

while diligent issuances. activity remained in ensuring investment our funding portion have we meaningful have strong accretive with of balance We also a equity sheet liquidity,

balance to managing We mindset economic both company liquidity full continue the and a maintain mentality. to a with leverage, BDC conservative sheet cycle

liquidity, to invest capitalization opportunities, liquidity, lower end BDC's to leverage while risk-adjusted the returns markets, volatile be it of the sheet when managing underwriting and to range, of particularly attractive. While new in our target ensuring can affords capital periods strong how balance this even starts with also applies platform investment the ability companies of our manage we us new in

Since illustrate it continued were our record track trade to below and Slide strong producing and consistent if of allows support coverage dividend NAV. back our also launch stock dividend the X, net Additionally, us time, since our opportunistically coverage the to it solid our income. investment value dividend, strong portfolio have of pre-tax quarterly cut regular On creation, while have that we XXXX. maintaining and regular of companies credit our with increased meaningfully dividend growth, XXx our January while never we regular repurchasing X all dividend in strategy

Additionally, as over investment from the portfolio. as in absolute multiple to March as for has demonstrated strategies, we investment consistently sustained excess well of or paid XX a sources access from the Board alignment 'XX or our the our portfolio, of We and declared our performance decisions including per the the record all quarter. company's the our our believe share, dividend, dividends, our growing All totaling as same declared realized our thoughtfully our per interest of period, $X.XX capital share has have gains supplemental $X.XX of generated and management with earnings special track strength solid shareholders. capitalization well the

Turning to of tenets Slide out X, investment core our lay the we strategy.

equity strategy investing majority the loans private in first core lending by of secured companies market, middle which the and vast lower to Our backed is in lien firms. is senior

minority for junior the XX% which provide portfolio is of In firms, believe the potential the new with carry support have backed we ] the thesis lower often guidance to private capital a needed. In private as we equity middle pursuit equity the firm, basis, fact, is leadership if invest important companies, in [ the when and portfolio the equity market, our as equity well opportunity by to compelling. credit on approximately

$XX.X fair consisted total XX value of per As co-investment which equity investments in with million million, appreciation end of share. a cost, at unrealized portfolio the representing of or of the was embedded marked quarter, of our $XXX.X $X.XX XXX%

in portfolio, to which provide the of the at portfolio attractive per our total share growth quarter, potential these the form NAV and businesses. will of continues Which lower equity value, represented our as middle shareholders of participation over Our of the supplemental upside of approximately X% market time. growing end dividends fair in come

on illustrated million at portfolio credit of billion, our sheet growth XX, of representing $X.X XXXX year-over-year As from Slide December XX%, the ended the $XXX quarter. as on-balance quarter

portfolio that credit credit portfolio investment discipline granularity originations risk maintaining granular posture was million of quarter continued sheet. to this a in of also quarter, to base detailed committed first expect will lien in this average our $XX.X debt debt conservative portfolio equity. invested companies, the included secured to company our of new remains total invested balance our of quarter. per of weighted senior the lien portfolio our committed fully end senior company were of during portfolio overall first We million committed senior in lien growth. On $X million secured. $XXX.X believe speaks XXX% companies as the For in the quarter, improve XX% which we X And to secured. a our XX, The Capital current new as grow first our and We at to Slide asset the capital X.X%. management we exposure of metric we continue as

committed also a senior existing to companies. portfolio first million million and debt secured of in XX total We lien $XX.X in equity $X.X

the across market the is premier lower broad capital relationships as as pleased consistency by sourcing of the team in strong a provider, are middle the activity. team as array opportunities, our well evidenced We established of with our the our from that position market origination which country as debt has equity quality and

coming we expect has end portfolio solid activity quarter. pace, In in continued fact, net healthy post growth quarter the deal a and at

Slide as prepayment mentioned refinancing greater activity. I XX, during the in than activity to Turning resulted average and M&A quarter increased earlier,

in the continued approximately exits, we generating portfolio prepayments the generated generated joint our for of and IRR during average exit IRR XX.X%. Since quarter, company of the I-XX Slide returns strong of these weighted our exits, track launch some on-balance quarter. of excluding our record have strategy proceeds, as million X XX.X%. On in years the weighted average debt detail end $XXX realized X sheet venture. of XX representing have X credit of we equity total, total In We proceeds, XX, with ago, exits million that our a key cumulative a $XX portfolio our steps on

end the senior our senior first The be secured weighted base the debt, coverage weighted environment. average through Cash a to leverage of secured portfolio fair despite to average across portfolio fixed high average and Xx debt quarter, second and XX.X% yield total continued the equity debt, rate debt As had portfolio With weighted obligations our of of of weighted was subordinated X.X% at X.Xx. to credit interest X.X% strong and coverage lien of the to security co-investments. to X.X% XX.X% X.Xx. value of weighted average of coverage charge flow lien

a our total Slide security asset an diversified continues As for with provides be which capital. investment portfolio mix, on industry strong seen well across shareholders' XX, to our

Turning XX. to Slide

migration the during quarter. our within out rating laid portfolio the have We

scale, in X-point portfolio As X X. signed with the fair highest X an a origination being initially rating We performance of of a are good reminder, X, all of a loans rating. with X at X XX% value, X our the and rated categories lowest top feel upon of being the investment the or of very the about on portfolio rating

weighted weighted and performance during for more now review In specifics call of quarter. X% of revenue fact, the quarter. Michael the average to of the portfolio EBITDA hand growth financial to average will generated growth I X%, over the our

to Thanks, income performance million $X.XX our quarter. by in increased to $X.XX or on compared we as XX% million Bowen. for summarized to pre-tax prior $XX.X per share quarter-over-quarter the per investment Slide share, quarter, or the Specific $XX.X net XX,

dividend. a we paid supplemental the out $X.XX share During dividend and $X.XX per share quarter, per regular a

As income mentioned to track dividend share covering per our for with earlier, our is dividend share Board Maintaining March the and strategy. a supplemental of quarter. per investment of has a dividend consistent our declared record meaningfully important $X.XX pre-tax net declared regular a investment $X.XX

regular our strong of continue the XXXX. We XX XXX% the credit in since and dividend track for XX, record XXXX, ended cumulative months XXX% January strategy December with coverage our coverage of last coverage launch

supplemental our As our to continue our a is the our regular a to pre-tax of shareholders excess quarterly dividend. reminder, distribute intent portion in dividend a quarterly to of NII over

UTI our future organically existing quarter each continue based supplemental our in over equity and we We unrealized foreseeable to per portfolio. total expectation will on our confident for the current harvest share the quarterly that our our balance by grow in ability share, upon gains ability time of distribute from dividends earning $X.XX $X.XX appreciation dividend per to are to UTI the over

increase our weighted $X.X basis of a we year quarter, $XX.X million, income. in and average XX.X%. investments, to debt increased increase yields on as investment all from dividend investment XX% quarter-over-quarter the income million investments Total primarily growth income higher was as XX% Weighted was by well For quarter this and driven an portfolio the growth in representing total ago. an average in cost the fee

As had portfolio portfolio representing on companies of X.X% our X fair the loans of the with quarter, value. we Investment nonaccrual, at end of

absolute the for Slide maintained cost believe to on X.X% best quarter. XX, the in will model leverage, We this BDC. in leverage continue internally LTM shareholders. allowing infrastructure alignment managed operating operating seen real with has best-in-class a second to industry. benefits we people the BDC to in put and As perspective, of entire model leverage the and build speaks is metric fixed at current and our internally to while for To significant resources our X.X% invest metric this managed the produce to continue also BDC The

grow to over forward, As the leverage, improvements we time. operating sheet balance continue we we expect further look in as

per the quarter NAV The share the by of compared $X.XX the our primary share share portfolio. to depreciation increase of issuance quarter in for end The Turning and partially increased an per earnings offset per of X.X%, company's the the were unrealized to total NAV share, Investment common the prior increase to per drivers net premium of of quarter stock paid our a $XX.XX, the to from Slide at by at NAV excess on quarter. dividends XX. accretion representing for

to Turning XX. Slide

an end We in to that revolver of of with significant to capacity we commitments and on liquidity facility one million, balance further bringing balance up quarter. growth prior million of the credit $XXX full million We allowing are our and report of to borrowing total continue completed increase have our lender recently capacity. credit the in an $XXX our undrawn to $XXX commitments as revolving to facility cash to leverage The our with accordion facility. debentures, we revolving the and access in approximately for increase have credit pleased an $XXX lockstep $XXX revolver base, facility adding allowing our the million feature both commitments overall from the new SBA to quarter. Based on has us of sheet total current aggregate revolver grow sheet. the million

during the the the quarter, upon we from leverage amount $XX received can in commitment which additional the from addition, future. draw in an of FDA In we million

bonds structure January XXXX. our liabilities end the were earliest our the of maturity December of in As unsecured of covenant-free debt quarter, XX% in capital with

end, facility at the Finally, as Bowen full was the joint the of repaid credit mentioned venture earlier, in subsequent to option I-XX quarter partners.

fund of in the We in by are allocating currently the fund process venture the winding down the assets partners. I-XX the joint to residual

fund. from Assets from eliminate the Capital balance sheet impact in with a a in Southwest each the the be capital. The their slightly the I-XX invested pay and partner, due to fund to assets, joint as small higher increase to venture consistent facility be the of credit leverage down modest of to will increase we costs subsidiary earnings, related frictional allocated the financing will

Slide to on brought I-XX's ratio as seen X, our ago down. of and below range, to ended December X, We in down the leverage end quarter, X.XX of X.XX the payoff the a meaningfully as quarter. debt-to-equity XX, at to facility wind December year leverage, from credit slightly regulatory as part I-XX of accommodate fund opportunistically Our of the the quarter target

capital equity some to to significant call unsecured well covenant maintain methodically adequate comments and leverage We to I now continue conservative raise and continue as to through cycles. cushions capital, will economic the as Bowen final debt we ensure throughout program, ATM for and opportunistically secured hand back all will our liquidity,

today. our provide and the portfolio thank on to opportunity you, the environment. you for Thanks, joining business, update again, appreciate Michael. our market We an us everyone, And

demonstrate continue and origination to management team a job capital company deal a portfolio and robust strong building as be impressed Our in done by performance, the continue we to and our as structure. well capability, has portfolio flexible base asset

senior debt, feel and we up we the equity have future broad private market. performance, In growth have positioned portfolio and very believe is how firms. XX% companies we for a about first Over by We of and which allocated is industries. made our in array good lien shareholders' credit a secured our well of of company across predominantly capital summary, backed prepared

While multiple have lower these market structure. we the of and remarks, with many participation our also balance strong capital of growing sources, middle enjoying upside capital liquidity a in businesses. Further, sheet flexible equity well-capitalized This concludes very operator. a prepared

for We Q&A. are open up the to ready lines

with line Mike first Burg the Our from Schleien Alan. Instructions] [Operator of question comes Latin

Bowen, theory there we and not until down M&A obviously, the inflation up that their I'm have target. in still don't was And that certainty rates come the Fed this at rates was volumes there is camp yet. cut really that would and pick know wouldn't not

your has this So the into perspective, you quarter? over first spilled mentioned which from what's driving increase,

you exits, were X interesting. of look them it's I Yes, at them mean X our if X of are sales refinancings. and

these private strategic On sales, the the There's mean equity-backed interest in assets. I firms. are

sales I think strategic all looking at them. were they

just just candidly, performing. to in firms it's it were prep they So gains was private equity -- that are companies trying

So in the interest assets. -- and is strategic there

general don't a number in out And have same we of mean trends a out, clippings know, random. increase had activity so our portfolio that there. that the are attribute sales seen it. as I part you just as I true do. of probably press in I you it's little but laid M&A to Those a we've

deal our being We also really as see strong. well flow

of extent delevered we portfolio, even turn a half We've the companies, the turn. to the have significant Xx in also of grade X.X to seen loan number our have companies ones. that underneath top our These half that

were they maybe we option, a when guys And so where them. those will potentially find lower-yielding than originated

just a and assets. those activity, just at get looking those private true, been sell interest sure. pay But names, in monetize, there M&A firms, of for performance don't until That's That's aspect. equity carry. I these obviously, they mean, the has Yes. and paid their they more company

the hit they So bid.

I portfolio? these That's in noticed quality trends there downgrades credit during what couple X I were -- of in a X the the describe there understand. X general about? credit particular, helpful. in quarter. Can And were were you

not if a excellent. credit at as whole [indiscernible] you had if number was downgrades, downgraded one We and trends say a I'd is back look and term of at and the in already and revenue the Yes. X of upgrades at a if B upgrade other downgrade A. it. I EBITDA was and -- we step our a the term bumping one and look loan take we you portfolio took a mean our basically kind challenge. you downgrades, company loan go growth, in along decided can The just versus ahead performance portfolio, a look to that's And

trend it's not perspective, if it million new say XX at I'd of downgrade, existing. But okay. downgrades, you So an a a XX looks again, general and it's look million something upgrades

And on statement. the loss but much Fair on my there's more enough. a realized Can the realized there's realized Investor you last meaningful of loss income understand reconcile more gain, help you Page Presentation, housekeeping. me a Can net that? net question, XX because the just

One had debt their portfolio of equity. companies was a restructuring, of which converted to our portion a

realized kind quarter. -- accounting for you'll reconciliation of of of what as that comes the so the -- perspective, a full companies. that's And show happened to the going the you'll quarter XX-Q to a out, each from see of when And an see loss see you'll for up

and nonaccrual, that it's I that nonaccruals, the and in we our -- have in happened... fact, call of prior calendar been think earnings expected one a to voiced restructuring was it on year we we that And

tonight? is Michael, coming Q the And out

Yes.

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

You be might Robert. mute, on

was bad. I on my Yes, that's apologize. I mute. Yes.

well. range. at any on that your you better than certainly the see you're bottom give in do the the comfortable So I you below end you Or doing Your of for very you bottom credit of below on us range -- more may You leverage, us right? planning bottom still think be an hanging is or quality you where Obviously, update the I-XX. of mean, leverage? if could economies for can some the thought? target give feel target is the

give see So that I-XX thoughts I you adjusted. term? the where can mean, conceptually you some us on medium in

Sure, of course.

adjusted. was I-XX So

X.XXx. were we think more at I

end the our the the think to see in quarters. a that's skies clear tick $X.XX honestly, in the X.XXx our us are kind one basis, X.Xx to up several you I performing like you moment, of well, -- moment, would really go-forward at to productive related $X.XXX like of BDC our But the produce essentially stay for we're give of we're NAV, see higher more at we could I ahead you we'd to space, leverage. if closer -- look on at range said, portfolio we'd to the in. next where earnings is companies you the And able

press we don't pedal. the to need gas So really

So the that you of see us somewhere range. along probably middle

existing mean, are $XX -- the Got depreciation depreciation is onboarded going fair stay? When assets onboarding I i.e., million, Or be going that to the when value during of the it. I in it currently. it. any at unrealized got of Got to process? unrealized Then basis, crystallized on and it's I-XX, the onboarded, it's are think, in cost be they

Sure.

So losses that retained get and portfolio fair our earnings. been will have a just over amount of of cost that at from reclassified in already to unrealized will to the are companies assigned of incurred that come or balance value, assets exited being of that have sheets portion the equity each the gains

go sorry, ahead. Got -- it. And then

apologize. ahead, I go No,

us of mean, Yes. to $X a it's performing start or -- has your of anything. performance on of there last one where in with one income portfolio was was onetime something companies nonrecurring was like $X Or get sales or dividend? it It the portfolio consistent to it the a going the going company dividend million one million like. color you paying highly one-off? Can changed kind you I any -- that to the maybe maybe is kind looks housekeeping, be give quite is was do

No.

yes. So

probably companies we had of that the quarter, than It's Xx our successful this to dividend most one less essentially portfolio levered had company. recap. So one portfolio

have equity with We on company. appreciation an the position significant

to in $X.X of onetime participated occurrence. we dividend the that's so tune a And that million, and

comes line question Joseph Jefferies. of Our from next Kyle the with

Most inflows answered, you mentioned you restructuring do or to -- know think coming on in through just have a us value outflows but there I there fair mind just running was basis basis, ticked nonaccrual. help is know it the out, I been but Q and outflows. whatever, any just of points and terms XX a the out or up but I inflows

Yes.

So we portfolio off, that nonaccruals, the restructured for A, we another came and was then portfolio term already that nonaccrual. company had had realized B had where one off. I portfolio that came company that is -- on company a that the the loan portion earlier, think noted loss, the we And

Cowen went think nonaccrual. mentioned it on I earlier. It

million million was coming coming a on. think I it at and basis $XX $XX cost So off

So cost and reduction then the a value basis slight on the higher. was fair slightly

and curve about Got the pretty how you you're since time know we but going the here? guys has over obviously, have thinking dividend, coverage, from adjusted dramatically But forward it. strong -- as dividend the especially run rate you're thinking then forward, the last about dividend I the spoke. And are

Yes.

bifurcated supplemental dividend. regular So the the and obviously, dividend we between

had this the $X.XX. quarter, regular would like dividend $X.XX which was the absent run really on dividend, rate we So dividend, that tell obviously, cash we you

pay. we $X.XX to $X.XX that compare we So

it's So significant coverage still there.

come room NII XX rate to to months, expect noted approach the in reductions. would we neutral XX next spot neutral that We to the does, of so feel see low the a if that trough for XXs, of still pace plenty -- growth there's still in You in on would what regular a of to the dividend. our kind the rates the down a comfortable we're wait-and-see see Fed

we play out. things will And having that, see just to said how wait

On the our dividend, by bank UTI we dividend. over-earning supplemental continue to

of something the $X.XX sheet beyond. have portion would We hope unrealized balance exit $X.XX between either depreciation a of or we to on that

or And but vacillate the currently, will may we program going this we so down, very that coupled $X.XX today, into $X.XX have, the we forward. feel future feel that that, with continue comfortable program UTI comfortable up at that about of

credit. Got any We just it. We and Helpful. last with classified then me. But we growth sort or revenue changes for in the about of about ratings. And of one last terms spoke? talked EBITDA in, since talked

I we revenue noted remarks, Yes. X%. we quarter-over-quarter the quarter-over-quarter growth X% of our across as had EBITDA growth in had and mean I portfolio, at

about sure. So some the good portfolios performance feel of portfolio's general the pretty for

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

wanted exit to some on Bowen, start of Maybe, the activity.

couple Or equity I stubs What's over exit guess, equity there? stay after a got, those opportunities of investments? that You've term? Is near to here the the investment plan those the potential remain those are exits. plan in

matter, the a for firms. vast are equity question. Thanks private are as Yes. I mean, general by obviously, there owned of companies, them the majority

then have And equity so an the we company, obviously stuff. sell the don't

ones are equity refinanced stuffs we've the So that of. been out

firm. curve, the with the will, equity so And just liquidity if -- the ride it's pretty much private rule that we you will

know, as they really exit. get firms, their we paid carry all equity don't private So until

to then exit and they're looking looking And to when so exit. value to maximize prudent it's

And ride we with of that kind them. train

And those stubs has really to, are equity or So I exits. answer probably and well. yes. refinanced, it's been usually, mean, long-winded the future doing company growing potential

it's X, because for that or exit. exit train be curve say would just ride today, the exit marked than with private equity ride But firm year so another higher the and equity likely X, X but X. owning be to it could is that they I highly we probably And firm when it's at little or pretty to private

Got it.

a And maybe That's Okay. more helpful. for me. couple then

you, to obviously, from an come those opportunity have will that out those in different create the in than profile look balance what I-XX a do like to Or sheet exit on assets your well? In of to put you liquidity? for some your you might terms fact, portfolio as ride -- today

credits bigger the companies we But would still out, over get that most names won't liquidity. as at for names for in companies, the shareholders, I-XX, grow over one assets and hope attractive to generate most I we'll for on the those time, they're that. say, hand, so the syndicated And exit but the that But Certainly, look are for yes, of refinanced change. part, need Well, there returns part. those in there's values. will I sell. opportunities other those course, don't

assets maybe end our on spread certainly X.X%, fairway. these yield slightly the of LIBOR to And lower the which on on is is the but continuum, it's

Yes, that's good.

And Okay. one you, helpful. Michael. for maybe That's more

and I-XX the You you with on economic feel range to I range kind more million now leverage guess, coming I'm of equation? $XX out kind of look the balance of a to Can ability assets of give about debentures regulatory the what kind the kind debt-to-equity And at? might works SBA sheet. thinking in laid that the of for us potential, draw how

say Yes. I mean, earlier, that summer. to the not and probably to $XX the I will on what finish SBA would -- of the the it add X. anything by this is have probably We'll million I don't midpoint it's in be kind said up I it

other so our And be you'd times. economic think points the there premium the in around And, certain pull there's at opportunities XXX today. are to a Look, the capital in Xx the at vacillate. I raise regulatory range. range back leverage bit opportunities time, so something -- then with will delever be will It book leverage to when at and

asked, of was things the liquidity saying -- lot balance the just on we a have I just of just you sheet. I one mean,

not the into So and net SBIC fund do. to the that's commitments, borrow to ability subsidiary leverage hard

our have starting but repaid, That's We is the other away, years like 'XX that probably X obviously I'd just to at So. point make on we're look to we ability eye maturities. longer there's Yes. an One clip today. future. term planning be

to financing. comes from that collateral comes going the and for we're to on back opportunities secured increase look sheet, balance I-XX our So

if market, like us what's fund always markets facility. unsecured bonds, to we don't in the of pay it So on down we you give you when if those with and can capital in that, terms going want unsecured

The additional our with continue gives I-XX sources. to diversify consolidation us work collateral to to really capital

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

sure longer? have you may Will in did caught I current would the in a if I quarter? winding have I of the this frame? but little Or at not bit comments, I-XX, down end the just terms provide earlier. of of be that that earlier may missed take it this I'm a time done

done credits, Our quarter. others. do expectation with do for we the end faster agents the we the is some assignment, of some that put that, it -- of allocation of But the said having work and we at essentially would when the in than these be

extent that get in get not small at so it basis earnest asset accomplished. we we try the to are quarter, another on assigned, working that could to moment all to every are able but live And to a the very for

higher run than something talk that wonder And onetime expect that That's if I just we've noticed And we about the is there of that run kind could seen or anything should the $X -- or income to just so was along kind of I going then above PIK something about rate quarter, increased you there what drove helpful. recently, higher? just million if forward? rate in

Yes.

have they handful. have up put got PIK PIK to the a of So in mean, I little but don't I it's portfolio, our to a in options mean higher small toggles just a of bit -- one. portfolio companies this in perspective, but picked we've quarter, it X lot We the

couple a And picked. them of so

affected the was of strike, rider us. by company that's behind them One obviously

turning the strike. one rider actually so obviously the for And is company it around, was

PIK It a very toggle. it's company. did healthy So

The one next years. is very the that other effective in the company few is

big this to should so big year. And have -- very it's year going you have a a

quarter. picked So they a

X, If PIK X% took income, the at So were look at income. are But income those to you of it's the aspects. about pick those you the of what's to were if look our if trend? rest you

cash XX%. is And so the portion

the in it's XX%, If been XX% you look of several quarters, cash. we've where back kind last over

to help in is we're just of that so trending. put how perspective kind And

for are the only the indefinite for toggles few quarters. not generally -- PIK cash the a Those are pay loan. also And

off roll the they've they either will or those lot take a to So because along be reached end cash the choosing way. of will

then Got you. just it. last And for one one

opportunity least to seem the new new optimistic fairly at quarter. You make and about fund commitments for the loans, next

you're could you a just today? you little if broad-based it at provide pipeline, seeing of So as is where in there you more commentary, at is -- industries wondering look point? terms if Or kind any of this the commonalities strength the

are activity as vast about, is that the the rollovers businesses to controlling firms, interest entrepreneur business majority talked thing. It's founders right our pretty selling pretty It's question. it's good situations. heavy an which a is is pretty and It's the from that now, equity family-owned, business in private are of The we broad-based. pretty majority The But vast robust buying broad-based. broad. interesting

The and drumbeat going on last steady be other the over thing several other too, in a the the add-ons decent is thing of future. portfolio, which is the should -- quarters continuing of we've got a in kind amount

probably our kind just on regular of are mean basis. I of X/X add-ons a originations

end on So quarter but also definitely since well. the quarter activity as is is [indiscernible] up the this

with expect trend. the last continue. a of that's is think size And that today, that the portfolio quarters. we X been over to probably We've And I seen it the

a the our Yes, equity talked aspect families the to competitors. the prime the mean opportunity and founder private rolls business one these equity about. one business, or family of founders a buy over their X and I founder reasons of of that chunk business and the or in that big controlling And have equity that like their model. the of over family-owned and business in firms things equity a the the the roll by because we to -- to it's want interest And of then firm accretion is ability it's entails. they and of X keep the then as

that it's of expect But it's credit of to we to should nature because because that's we know. continue add-ons. in so about. It's that's we've seen performance. kind not And learn have to new a amount a business platforms we additional see And deal that great meaningful know flow of always we our commitment businesses generally

portion general. attractive deal very of a it's flow so in And

delayed making loans, And a doing draw generally on these diligence are these we to not add-ons decision. i.e., are term investment new

Yes. That's right.

next Our from the Abraham line UBS. with comes question Vilas of

Hey, everybody.

for one me. Just

guys nature the it just that that ago. a competition of on to over into months more prepared few competition color XX give coming next to the think XX back mentioned a bit spread remarks, was Can little you where in your translates quarters? You about you and how

mean competition has XX of from is financial like But mainly just months markets. is we've of I kind said, back market. the X years. ago, it's with just strengthened for It's to a it's I of the It dealing Yes. health nonbank been the definitely in lenders. overall competition was where which reflection it kind

So it's not really necessarily new players.

And so I the feel pretty about spreads. good

they kind of stay. is where this they'll are where I quarter mean, of kind

so earnings to wanted for so just It necessarily mean, coming has think been we I that to and an or not And -- have express last that. anything don't the quarters, I certainly it's quality the -- I of bad can and like based to we of of capital We've kind the our spreads our and for we but But say generate -- next compete returns. should risk-adjusted nice kind where cost expect quarters. be few on deals several lighter, where it's they're a tightening it's which like issue institution are fine the thing. I to point competition and starting them back, would

were in but that we XX% the the the XXX-ish the LTVs September around now. well, was have at XXX. and spread And X closed, over of deals just XX% last deals of is XX the XX% year had were the for XX the half first to overall year little been looked a around -- actually and like whole Yes, months, essentially we the last

we saw maybe LTV to kicking the XX%. So up is XX% and

is. for about time. think of just was correct, where It is period Bowen I it's things a usually it's So significantly -- lower it

to I'm like I you back the in the call now would Bowen showing closing Diehl over remarks. for no to Thank further turn questions

Well, everyone. thank you,

As and always, we business about questions. your our business, enjoy talking your

give time to continuing everybody's quarterly And so look you we updates. all forward appreciate to and

Ladies for conference your participation. and gentlemen, you today's Thank this concludes call.

disconnect. now may You