Ares Capital (ARCC) 30 Jul 192019 Q2 Earnings call transcript

Company Profile

Participants

Carl Drake	Head of Public Company Investor Relations
Kipp DeVeer	Chief Executive Officer
Mitch Goldstein	Co-President
Penni Roll	Chief Financial Officer
John Hecht	Jefferies
Rick Shane	JP Morgan
Finian O'Shea	Wells Fargo Securities
Terry Ma	Barclays
Chris York	JMP Securities
Ryan Lynch	KBW
Michael Ramirez	SunTrust
Robert Dodd	Raymond James
Casey Alexander	Compass Point

Call transcript

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Operator

Good morning and welcome to Ares Capital Corporation's Second Quarter Ended June 30, 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode.

As a reminder, this conference is being recorded on Tuesday, July 30, 2019.

I will now turn the call over to Mr. Carl Drake, Head of Public Company Investor Relations. ahead. go Please

Carl Drake

good and Thank afternoon. you

to Let me can during filings. words forward-looking be reminders. Many such subject made any identified in by some expressed SEC course will, with statements in these of statements are contain important the webcast such statements this for Comments and uncertainties. expects, believes, including start conference should, forward-looking and risks and of expressions. those similar its those and as materially actual company's from anticipates, reason listed The results intends, may, could differ forward-looking call

to Ares Capital is assumes any statements. no past results. market future obligation Please that also information performance of or update note forward-looking guarantee a not such

by or one SEC per use to G, core our conference earnings EPS. useful EPS performance as core because Reg this there's method operations. of the discuss call, certain defined During such share believe may regarding financial information provides financial results we company the We investors condition core and measure non-GAAP as to measures,

be no company information this to and found has the been warranty in relating in not was net accompanying accordingly call. operations, discussed our from or measures measures core decrease resulting also equity A reconciliation including earnings most stockholders' in makes for sources third-party release. verified presentation in to in from to these presentation, or increase per is found information. the be companies, this Certain information comparable EPS GAAP derived share portfolio can direct Reconciliation of the financial representation of slide this which of independently may respect the and

website link section. clicking the presentation homepage our on earnings QX second XXXX Resources our company's quarter be by Presentation can on Investor found the of Earnings www.arescapitalcorp.com The at on

Our earnings also release XX-Q on available are website. our and

call Kipp the CEO. the Ares now will DeVeer, Capital's turn I over

Kipp DeVeer

Financial Officer, call Mitch I'm management Penni the Good investment from teams. Carl. Chief afternoon senior other our Goldstein; team most Co-President, including the and here and joining our professionals for with our everyone finance, today. IR Thanks, thanks of and Roll;

start put recent second to conditions and the activity our detailed context highlighting over hopefully like our cover on turn and and thoughts call will some with results, who finally, our results, Penni quarter to then market investment portfolio metrics. financial Mitch, by in I'd them some

This morning for we performance. share. the quarter earnings of share results per GAAP of reported core $X.XX strong second strong stable Earnings interest earnings increased financial benefited fee credit and with and dividend income from income, $X.XX in per

record $XX.XX had of also a per We company the asset reaching quarter share. at another value for increasing net

volatility improve to The following the earnings the helped market us has of continues and the continue tremendous rebound end company. the to of we XXXX picture saw at this

prior below is capital inflows However, be long lending leading more the the haul. required this levels. experience the aggressive believe by gives some and The the volumes do and year's remain concerns us supported market of successful continued as these lack to competitive managers skill by behavior some over of other remains market This well we increasingly participants.

our and results this of than scale that and better others. drive years weather advantages the come platform over potentially our us experiences like differentiated market to well believe to We a informational cycles many from position through

consolidator eventually We be believe put a it there's to in a can also position and us a shakeout. if when

become of more these even selective. In markets, we aggressive types

rather our that's we approximately the is reflective see this of terms approach. we we half disciplined about to -- average over that Our our and lower that has time selectivity of deals those ratio which close X% of of see. trending refer quarter and that historical that of was It versus X% percentage we in been

well-positioned remained trend away toward public long-running private capital capital. has underwriting to to approach from benefit and the our consistent, While we're from

used to in that widen to as loan the continues and leverage high-yield Our fairway be see markets. from financed companies we opportunities more

instance software in be first of traded capital capital tranches on that billion second arranger lead the a as human our For of book lien runner We SaaS-based joint second stable we $X.X publicly provider. a Take-Private, our and client-hold Ultimate source a and were Hellman quarter the & to markets and ability management meaningful believe with enhances capabilities evolve. a Software, position large Friedman's

financial turn to a over to now going for I'm call review. the Penni more detailed

Penni Roll

afternoon. good and Kipp Thanks

for the the As quarter Kipp per earnings compared from for stated, quarter up of the was $X.XX and XXXX. of XXXX, $X.XX second XXXX second for first our share core quarter of $X.XX

share first Our GAAP the per compared XXXX. earnings quarter of to quarter the of second share and per for GAAP for $X.XX, for of XXXX the quarter of earnings were $X.XX XXXX second $X.XX

income, Our second average interest given quarter our strong the the capital quarter increase. earnings increased portfolio by largely growth in were over structure driven XXXX and core

million and of investments. to In core earnings, net from realized net and investments gains transactions other of addition $XX the included XXXX, realized losses which our we for reported totaling unrealized $X million, quarter on second

prior amortized producing and flat to amortized X.X% the cost XXXX, fair March portfolio our cost $XX was stayed XX, income value, billion XX. debt and June XX.X% June basically the ago of an a securities at at with Also flat the yield investment total weighted-average XX, from quarter at on at on investments XX% quarter. at yield X.X% of with increase As and was our the year other prior and weighted-average compared

June side of over over asset the of of Moving right-hand net was a the increase resulting year. balance billion, to $XX.XX, prior sheet, value per in our X% stockholders' the XX $X.X an share equity at

ratio cash respectively at to compared net As of times million and $XXX was XX, X.XX X.XX was times X.XX June debt-to-equity times available X.XX our March ratio XX. our of and times of debt-to-equity

effective Act us in became The Credit Small June. for Business Availability

approach of to we take to new months investing, target meaningfully that could leverage move Given into believe to times to and and times to market range discipline opportunistic it now from our that continue on X.X XX X.XX XX depends conditions. our

commitment we limit both remain strong risk and our Moody's, rated our S&P rated for and from rating leverage reflecting the effective investment-grade in structural agencies from investment-grade is CAA's us, a believe company. we higher flexibility, reduces outlook benefiting already We positive enhances manner invest -- with three to FDA throughout be ability our from a the cycle. that operate to major are all Now to which a greater

some take move time will already opportunities. leverage, take liquidity it in to to advantage prepared higher expanding While company's to on the we working of investing have be been

debt-to-equity approximately banks the billion a completed billion facilities, During we bank institutional of our various additional the debt we of total from available million reach liquidity $X.X XXXX, increased in our June. positions including by end as to quarter, of in us also June commitments XX, cash on was $XXX incremental second million credit $X.X $XXX X-year high capacity investors. investment-grade unsecured and nearly debt Anchored note from issuance borrowing which range. our closed the Therefore of $X.X billion

a XXXX. of per to we dividend paid declared morning the quarter of be that Shifting to Also declared This share. per third we regular dividends dividend declared the dividend quarter, quarterly third previously this our announced previously share per of during pay of share. $X.XX the third $X.XX additional is in $X.XX payable, our additional we will four

be record payable the third are share We The on of currently on as dividend that per to September regular well stockholders undistributed $X.XX later final or determination to will year dividend and September million XX. taxable is amounts per estimated these both XXXX until our remain quarter subject spillover share. return tax complete XX, XXXX as income additional $X.XX income change. $XXX not file The from we our therefore, this approximately

for investment now to to activities the the quarter. our walk through Mitch call I over turn will

Mitch Goldstein

providing Thanks, activity on Penni, and to and like again, second our end and detail our few investments then our portfolio quick update all. a backlog minutes performance. provide pipeline. afternoon I would good quarter more a spend I and post-quarter will on to

originated the of XX team second commitments transactions remained high-quality and companies. new defensively $X.X focus During across quarter, our on positioned our billion

and team range platform a market. diverse credit across new Our source of large broad enabled middle to us the transactions origination

find we the was However, in investments evident often our second existing borrowers. quarter in clearly to the backing XX risk-reward were as companies. portfolio made of existing XX superior This

give to to advantage me context some of this Let incumbency. recent two highlight transactions

production In platform, a Underscoring the only sponsor commitment company. not quarter, but our the repeat Partners support entertainment of in we us, which TPG's processes Partners to the scheduling, TPG accounting simplifies for acquisition of also existing was power industry. Entertainment management, second led portfolio is payroll, a Entertainment and an

This company of our the also capabilities to the to our knowledge mandate scaled benefit our our platform we and lead the the a across drawing financing. ability ARCC. included how complementary of capital illustrates Given were SDLP, awarded commitment of provide on which pull the

we've of engineered $XX products companies of Waterline long of credit secured new systems also senior lines. capitals benefits Technologies, this with our Holdings. that We a growing Again had portfolio million enables of portfolio very of Renewal a able the a leading the acquisition support waste is a underwrite provider to facility Triwater we're led relationship Behrman division one of repair Waterline former and incumbency. with and this company to sewer water effectively year financing

me portfolio quality. Now, the let to shift

million, XXXX. provide different average companies. fair The the reflecting to with borrower remain million $XXX weighted Comparatively ability a XXth, only diversified hold of $XX portfolio borrowers XXX ended value larger to was the average EBITDA our highly for of average Our solutions the portfolio June at an to quarter increased scaled position of to X.X%. the EBITDA

our believe illustrates have As middle core historic our thus market middle as previous Mike, that this focus a larger commitments. in we opportunistically higher and dollar Smith, we and in I EBITDA invest continued have companies market on discussed require upper quarters, metric even

Credit very quality continues stable. be to

past of and We to portfolio do the X.X% generate to fair second X.X% at value. the any in Our non-accruals amortized the stable EBITDA remain our of portfolio X% continues months. portfolio growth over quarter not total XX at non-accrual like of weighted add average and companies cost new

back activity. and new July post-quarter a XXth, of I $XXX our on July the realized Before net XXXX, made end of let we call million commitments investment generating Kipp, totaling $XX exited investment million through brief or $XXX approximately me million gains. Xst over investment to turn update on provide commitments repaid From

roughly As and pipeline $XXX of July respectively. stood million XXth, and our at million backlog $XXX

of As to also and documentation always subject sell post-closing. that close. Please are will note any we a there and may these transactions these approvals of investments these no is portion certainty that investments

the turn for over now some closing to will I remarks. back Kipp call

Kipp DeVeer

of pleased Thanks quarter closing, with strong Mitch. another we're performance. In

excess in well running recently increased are dividend. our of earnings Our

again is book credit remains stable. performance Our up value and

As recent believe to attractive low in and the remains we we our addressable Day, lower rates interest at even place with particularly perhaps Investor continue to an market our invest, discussed U.S.

We that businesses in to for invest is platform our our investment high-quality returns shareholders. also generate and opportunistically well-positioned feel to compelling

line our to be remarks. That happy for concludes open prepared questions. the We'd

Operator

available of at questions [Operator further Instructions] any address conclusion The Investor the Relations call. team to will be today's

John question will from Hecht go Please first ahead. come Jefferies. Our with

John Hecht

afternoon your my questions. Thanks …. guess I Morning, guys. my time. for Thanks regarding the for taking Kipp, just taking

Kipp DeVeer

Hi.

John Hecht

kind selectivity it structure, with it kind quality? to, that discipline, to at pricing, referred and color you on or … being it business of us And or environment? is what you of disciplined -- is more deal competitive is can the give tied

Kipp DeVeer

as Yeah. I I you mean, told, John. I think,

always one for we've us, that -- -- easiest said first the is I it the for to this thing wrong That -- years. get company. think thing the XX-plus picking wrong the

on to competed I the everybody are real be -- focused quality space in heavily perceives where think the you're first bifurcation we So in even seeing credits deals the And company. for large-cap high-quality market, for. of what

point. that there's follows to about think lower-quality be us tolerance credits. good for things less that I along are not And for it's other the perceived, very And very I about underwriting. pricing, your more for limited reason It's think,

And dialogue multiples against weakening you probably than of where absolute EBITDA, the documentation on an an a you're are leverage basis. higher it's of on adjusted basis, adjustment about, Again lots too. underwriting

not document It's weak we're or about lender best on with. companies. deal or a set So, pricing. more a to about find trying the that feel like the of who a we folks Cub It's protections for and competing so smaller uncomfortable much agreement credit a

John Hecht

the on seen signals changes any defensive portfolio And helpful. the the the Have some I more company Analyst a kind I know out? at guys Day, are companies in you you know companies. of monitoring. at that the guess Okay. that's you referred And of basis worth -- EBITDA to to performance I just time portfolio spending then of guys or calling trends referred second, back

Kipp DeVeer

is growth that the in out I a numbers The that EBITDA you're Well, portfolio, in we're last X% QX, QX this slowing seeing, was the for same number think about in for newspapers. we which QX, growth year. laid seeing and at X% X% the time narrative,

very issue. buyouts where number, pick modeling And equity like company. So up you been and growth whatever, that model, of X% but, we're high -- there us seeing sponsored a that's all X% your if sudden some that have an you're purchase portfolio prices, just X% now And feels a in for its or later for years a that more X%. built particularly

a You challenge and covenants for equity are have because growth. bit more that little little ours more have a slowing do companies the probably experiencing store. a of most certainly And that bit of of pressure

So, time of an don't non-accruals just abundance are we caution, no slightly more quarter. new watchlist. established. our a monitoring, of problems, right? this All maybe again, out But new We non-accruals really longer have any have

been look you non-accruals our cost them the if at minimums value, of down against amount. of And most fair have value the written to

our actually slow economy. positive growth think a on company. So, for works we And we're it fine just pretty

So...

John Hecht

much. very Thanks appreciate. I

Kipp DeVeer

you, Thank John.

Operator

JP Morgan. go ahead. question Our with Please from will Shane next Rick come

Rick Shane

this my funding just wanted morning. Hey, guys. for to about Thanks strategy. Penni, to taking talk the questions you

a notes in June. deal did guys earlier You

is higher balance given rate of sensitive many fixed sheet asset peers, than debt. Your more your a of percentage a

this a floating, really if should mix that Curious, towards take see more of function you funding rates? next that as is levering advantage capability, up the And lower anticipation base the over in months. we fixed-rate, XX of building shift of

Penni Roll

Yeah.

-- I leverage rate into three our into think reasons expectation if is on next two look the floating one borrowing moving higher the coming been why of to of working years. capacity, what substantially we've at, we increased over have the you

realize capacity, floating out and benefit of floating we to that. from or rates. a more sheet given from the so we we a portfolio. that of in balancing against places. we to to continue have rate that we do up We expected thought So, floating the how want we trends could lot resources of have unsecured-fixed-rate use predominantly are And rate be But to different point about, opportunity now note capital a trends want right can markets liabilities do view, end of rate capital balance have in interest or source and from capacity

Rick Shane

it. Got

of that those, market -- balance and to growth leverage the floating it as you rate go the So come funded the think side? be and instruments increased the that on you'll replace rate will will but the way mature increased on on the into sheet capacity really fixed

Penni Roll

just also we how layer debt in think $XXX by, and declining think we an about have if at rate issue I we But fixed-rate could we cost a patient Well, rate environment like deal opportunity where million, both. lower think, refinancing that's to to it additional and fixed-rate issued be will the fixed goes be I we think debt X-year debt around, as than in about recently X.X%. how time

have I we both So think balance capacity. of the to right to provide have

us rating a We investment-grade which also continue to think about as market issue would for to look lot investment-grade an unsecured-notes our well.

capital. our think strike about the hopefully cost that we'll we'll manage and way of we balance appropriate timing a in issuances doing So the of

Kipp DeVeer

-- just face – GDP Yes. understanding rate frankly this and Kipp. my have opinion, I'll is confusing would my uncertainty bit lack we about why Rick, this is of -- why a just me. little I'll growth The of a to add in decrease is the own X-plus-percent something

So been. I we're trying around as now to right think be we've as rates agnostic

try to see things balanced directional not an this today rates, on we there than about we I as we're increase have be bit be think likely are did. very we to for that going took view how rates they think It have might we're try longer do a little that And going I unfolds. rates, to expected. which and taken impact a to to were now have some

Rick Shane

outlook an of this I've overall being this think Thank second rate the time Yes, right uncertainty but eventually sometimes and the I understand helpful category season, actually context there. during is guys. earnings fall the terms that's I said in we into you and

Kipp DeVeer

Yes, care. take

Operator

from Our go Please with comes ahead. Wells next question Finian O'Shea Fargo.

Finian O'Shea

Hi, my guys. question. taking Thanks Good for morning.

talk down, you if XX% strategy recent XX% this Can at looking investments, equity on if correctly. one first it's you I'm of reading the Just equity co-investment combine they presentation, or you to between about at provide? range, color up Because both, equity? but pretty Any versus into income-producing even could stack there you suitable a it's if split. them common preferred that break

Kipp DeVeer

Sure.

have some versus of common necessarily. preferred have we directional of We think strategy I both. don't any

think made decisions I a most basis. are those on of company-by-company

-- I think only and construct can in. mean real I jump the or Mitch Mike

appropriate, So that upside times we're I composition does some of portfolio being like the think of portfolio the as company -- are with that care building we losses portfolio to with so of to XX% asymmetric equity and not of range feel never ours some run an more wanted are debt that XX% take the tougher. to inevitable with than in no of

So we to more company-wide that. and we just the of a strategy overall you there's do deal-by-deal do then on really on this no basis. much to exposure want stated It's want basis a versus manage basket

Finian O'Shea

then could a quarter a was sorts? or Okay. That that helps. tag of -- Doctor Shock was that that refinancing restructuring And was around regular we this

Kipp DeVeer

It was a refinancing.

Finian O'Shea

and one then the the allocation, shareholder you. third -- before be Thank BDC question. advisor does the Okay. a just of And would've that part uncourteous capital a and if the fee form to upfront like ask allocating for of structure and gone I fee ever example other capital On take funds? more may, any

Kipp DeVeer

No.

follow here All capital. of our our fees

advisor on origination So, you're any if you deal fees. get keep the in origination a investing a or side doesn't fee

Finian O'Shea

my Thanks for taking question.

Kipp DeVeer

You’re welcome.

Operator

Terry Our Please Ma with go next come from question Barclays. ahead. will

Terry Ma

afternoon. Good Hey.

quarter, about of is higher structure historically. the on X% this Just there's on the the end and range fees, capital the question of which commitment

part just in was that transactions driven by of companies. larger think I portfolio

saw you XX XX increase still your months? size quarter, deals trend to continue a that sheet we this the that balance function expect a you -- the over next was So, just as is of or

Michael Smith

Yeah.

conclusion. a dug We it's it's funny, I since on people up this coming lot -- question. We Terry. good around think different they're -- a to actually with and

Let in thoughts last share quarter I'll upfront general, a If and then four it you I generated look fees. me just for think $X.XX so on fees at what quarter of per you years couple the our average, XX give about is, a which you tell is we've

north This down total because at was commitment quarter, dollar was on last quarter and that's again versus $X.XX that the gross and bit number little basis obviously was of a down. a

figure I deal to that existing the of close activity was though as it's new around So, happen kind it this even than it i.e. what to by to we natural flow as just a more fee net was much it. dollars it the mix versus trying wrangled and the of out divided net circumstance nothing we there's quarter nothing that higher did seems commitments just really think, generate like

Terry Ma

given Okay. Got looks then rate earnings the follow-up of it. the couple current outlook, of on so rate's outlook, past have That's modest used just which a tailwind is been helpful. to years, a a forward. the that going And headwind more the for like it's it we're

continue So managing worry or get worrying your to what point at about go talk about just more start you will probably cautious rates think can how at that? down? you Will of floors maybe while hit before to you up end point you kind you move a some you bid. And to if little have

Kipp DeVeer

worrying. then perhaps will it's a meaningful a It's definitely so, – this ways I us I basis Well, not see a think points headwind reduction It's it and XX for headwind. mean week, off a here. we're

be to a are? accurate to of rates the do lower, asset materially if they in lot where classes try question more compensate I and the absolute to will return spreads will widen keep go think

way of don't happens you the rates benefit as get the full widening on some down. that the spread up, LIBOR That's increases offsetting tend go to typically you what same way get

-- Again to before forecast, the team our I am see. -- a time we'll it's mean kind worried at today. So but very bit our comment spending I real I'm personally of little -- is not and confused, looking

ago, But Definitely change. see a everybody think was unexpected. I months thought takes it where we'll definitely mean us. six something I quite that

Terry Ma

helpful. Very you. Thank Okay.

Kipp DeVeer

welcome. You’re

Operator

ahead. go from Our question JMP next Please York with will Securities. come Chris

Chris York

guys. Hey. Good morning,

Kipp DeVeer

Hey, Chris.

Chris York

Hey.

has So question got about a Kipp, which grown quite strategic the I attractively. SDLP,

JV in provide in and So set up I was so essentially loans, you think like to that $XXX XXXX, the million. tranche get then larger you

over three above lenders market sponsors $XXX maybe the years deals the larger last think has that from million. seeking evolved scaled checks can directly I the write with

SDLP the And time. for then at second in appears a financed larger $XXX million deal the quarter, first it

do do is the to at size good need checks at the So what the today? a think commitment to you you differentiated by of portfolio is balance lender of management larger adhering JV? sponsors direct write how question the truly then, while And

Kipp DeVeer

Yeah.

I can are who of these plenty there write $XXX commitments. think $XXX million days people million,

a it's of So million-plus, I differentiator. it becomes think $XXX a very limited such That's group north of that folks.

feel lien, question offer question end up unitranche just answers source the is try sort venture. we I use the to do doesn't lien, SDLP that have they partner it second free a first it is to by we our the day, But things being transactions client's right? deal be can we where to in think we situation circumstance circumstance up of We it that? of and a structured. follow-on. we show that your in to how at that or with whole them on with that case at end how products your use the end joint hope as choice, host really I SDLP and of can it different Obviously it's

Chris York

it No, does.

million, of success appreciated. were follow-up and yeah drove assets $XXX there? I there And is insight is dividend million a million rate, in Ivy that on thinking in modeling your the under increase much million the $X in was one-time then fees And So a new other Hill's what management? fees to by away or increase run $XXX in from question terms this so sizable size it so maybe $XXX moved there then

Kipp DeVeer

transaction coming increased dividend then QX There And the in secondly, it two coupon of driven the the up have participated from with because equity a really dividends preferred through Ivy in things. The really doing contractual that well. does was a Athenahealth by Hill, which – scale company's dividend dividend increase its security in was a the as and comes we income. income's increase modest the profitability,

Chris York

Got it Thanks, Thanks for it. That's me. Kipp. guys.

Kipp DeVeer

Yeah.

You’re welcome.

Operator

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

Ryan Lynch

guys. afternoon, good Hey,

kind retouch the declining to of just of want go First rates. topic

presentation So rate investments looks as a a percentage look slide quarter number overwhelmingly still investments floating investments this if lower. you of like quarter I new it bit increased but percentage your in or it's of new little at made, ticking majority a portfolio XX this new made as of the it looks like

that So if guys what of the with And to is structures? a new coincidence, the are from starting some is case your has origination is feedback fixed efforts focus you borrowers? or rate been what that –

Kipp DeVeer

don't there's – been be sort don't it haven't going we I now. on team. about Mitch and in because the lot of fixed rate rates down, for a certainly but look can would think trying. I of at paper get met coincidence I let's jump Mike investment others so and think its into discussion right all, Ryan, not are

Ryan Lynch

then significantly the from changed from you a but the of feel you it you a borrowers. Would I XX was know being for was ago? where it's this XX to a like We to from that. existing period made time, today selective highlighted X%. quarter has really said competitive And say this year I new year long standpoint, a that selectivity the competitive surprised more And were comments environment been little investments ratio X% guys – made are I moving think your of down competitive landscape

Kipp DeVeer

conventional that a earlier terms and It's I think per covenants it of folks really really was documentation, it's – are compete record just loan market. way don't like institutionalize. this lot conversation, lacks things. that we on we've there. obviously, of long of I think things and they pricing. just But – pretty not we're the we're seeing – markets And in the Of that and to just things of sort change, doing do not a built track

structure need to real of documents allowed where we're to I allow to. than time a achieve for actually playbook So position, conservative enforce recoveries that having we've losses covenants a it's us with the fewer And loan competitors. us long better to to trying and and think had in we that stick

more know of good strong school, much network trying and is lot don't But And news The it's things it's a we very old no so but resist we're we're it that challenging So possibly origination a just maybe of as anything of robust source where of I to as can than else. – those can. doubt. we a deal we've is relationships got team flow. yeah, it's today much

Ryan Lynch

Understood. today. Okay. time the Appreciate

Kipp DeVeer

Yeah.

sure, questions. thanks the For for

Operator

with Our will question come SunTrust. Michael Ramirez Please from ahead. next go

Michael Ramirez

disclosed year? you you are Thanks my fourth higher-yielding afternoon. you remaining implies now good ACAS-light ACAS asset, it if core $XXX into acquisition you investments guess of taking a last Hey, in And and I for us We that market rotation which additionally, please your for the on everyone. questions, give understand was you investments. consider could believe million quarter But horizon? assets if sense opportunities of as the limited give additional could sense the below please us current I these see another the a M&A

Kipp DeVeer

Okay.

can core. answer current the yes, ACAS? I'll clear think market? assets I'm first So of left. as refinancing I question done portfolio just it I a Yes. in it's lot past. we'll we harder. or get quickly this see it out Acquisitions go natural mean, a of activity, said are as challenging particular, I've a But I it's that's below what's it there Does so sort yield the we've I remaining from think and -- deem mean, of its but the mean, so as thing push let's not I would the any through it's I -- but couple not pay

more and situation the into lot with there We after into folks transferred and of trouble management inherently that its time sort the with think governance room new difficult that of for a lenders. bought a it's that folks with where probably and was of the happen. just success got have SBCAA, think transferred We belief I a for it's financial was and a operate equity less likely more to the years were company there team. that hands that who ACAS wasn't many to the looking one over The

there So situations out there of think not-wonderful I definitely performance.

Some move super happened I BDC's but I've way our similar and the perhaps as -- around looking just us not at boards the around hostile go run that acquisitions. day-to-day. American or competition, view for calls, I it's what do hard it's past just see don't Capital, mean, we QX not to And something something shareholders predict. in the said to it's think that to you'll do job

And We've amounts growth mean we'd lot acquisition and or got I at better horizon at relative way. material in acquisition scale of capacity quickly of part a invest to discussion. see I value about room it I the tremendous if better do along anything will for a debt But be on don't having that accelerate an of think the comes rather more that relative value. right? would without that

Michael Ramirez

seems to one comes for And quite been the two hearing, there a but sort of bit the last we're last great. Okay, over we've the it of toward in now for have know especially one, end may. eight more quarters. like been six if might I the questions getting cycle I

your in? senior positions, lien underlying regards defensible to your from your how the in I constructed? a portfolio give you industries sense us companies could say of please is aside So like operate guess

Kipp DeVeer

long been this time. we've obviously materials in a prepared doing I out our mean Yes. laid we've

key. in which sub-debt being is and positions we from not industry page away frankly at think two unsecured now. away and in on from XX stay frankly keys we And the for industries think portfolio Our stage is selection that the to stay cycle are this cyclical and

from playbook it's to cycle think the late as been And in our the were trying the not the to So spending from years last we've same it be plan. go-around. continues portfolio we performing exit that to companies

today happy with invest anything in change to lot the term we're here So a good we what kind relative are. income there's where rate quality. see an near the credit risk-free We where is and don't place to attractive of of that's

Michael Ramirez

taking for our Thanks Great. questions.

Operator

will with come question next Robert go Our from Please James. ahead. Raymond Dodd

Robert Dodd

Obviously, lien? a up. your not some a it's But on portfolio it has going been EBITDA percentage -- much. us weighted-average give obviously appetite you the bit second Can as increased your guys. color over for last tiny Hi, also of been year

is So size the can company? second for to lien the on any your us give appetite what of you say color relative

Kipp DeVeer

very you generally, large the Yes, -- for to are we're -- portfolio said defensive longer protection have not larger better most have We industries our think of trying in this we've past the with they of we cyclical. be think deals tend in in been to of Robert downside I businesses the be lien and companies period to we that mean, that a tend as in and that time. second

Robert Dodd

higher if second Got is kind Got it. obviously, a on credit there, mean do the either of maybe the And what a -- you've last or deal you with it. low of to first lien's or what's lien. SDLP. with on lien I regard and i.e. kind then a yield first for unitranche lien, paralleling the the the on appetite second balance out structure first lien quality the quite you out do scale business -- structure? sheet first the do a that Or -- to Like and large got do put can

the the that evolved businesses how the having those with terms of so -- and your terms in fees on larger the last But -- deals your it I even risk keeping depending very of for with large maybe is evolved from case mean do the more willingness taking on over check how not anything piece excess of balance to structure higher your sheet higher you ability of to structure keeping some the has sheet over yield structure to kind right how in write I how year you in larger appetite mean on and those checks that point the two? it? getting But high-yield scale balance the to or of

Kipp DeVeer

to that it changed equity we a or just certainly structuring whether about to bring or solution to a first project others our as preferred like want to think whatever a private we Capital that's a things Ares power may I'd and bear. is the family -- than way available and right? much $XXX more say all changed say capital foremost have today folks bought $XXX readily Yes, bring certainly eight solution firm We client million different can have can seven about a often works. more that's be. others. have pick have ability or And million ago pretty that perhaps views to is as it the a how And is they that to or was years I'd number unitranche do

then do was all equity of or bought buy you so lenders found way companies or back are really we the without with funds magic quickly game. lot that far of changed that can SSLP to trying the a as And that's information deals private sharing host if when it of that as back

second market by market middle say EBITDA million in under. and I'd define as and I'd of because middle probably lien that less $XX the there's it the So, --

side banks clearly truly investors. by think get on deals talk million and I first and to $XXX million and start that above $XX underwritten days to really you the are going these lien to the about rated sold

structuring just by and banks rate from we're of the leading loan cetera. is some We're we're on you directly so stepping combination lower on capital good lien others lien right? which in Less in. negotiating et lot deals capital those we're on obviously cost Investor senior the bigger get too second about And only tending first syndicated a capital. us a talked that them banks And Day transactions the we're to like of syndicated not and are situations we there, of those doing lien the buying where our trend those paper achieving is placed news and with and the folks and first deals are documentation are the junior

solutions-oriented much in So it more feels nature. more much and private

Robert Dodd

any yes color. unrelated. appreciate done its Got news I one much since the I One in more it. companies I analysis really, Brexit portfolio Have back you again? that really quick to your have can if on exposure how

Kipp DeVeer

both that Brexit I'm if day going doing for – for Yes. the and save question answer you. on all issue. on of another lot We're the that's the a have tariff to work right because don't I

Robert Dodd

Thank Okay. that. appreciate I you.

Kipp DeVeer

question. the for Thanks Sure.

Operator

with Casey Please Our next Compass ahead. Point. question come go will from Alexander

Casey Alexander

asked Good My okay. questions answered. afternoon. That's were and

thank you. So

Kipp DeVeer

Casey, thanks. afternoon. great Have a

Operator

session. would closing remarks. any turn DeVeer Kipp to I back over like the Mr. our for This conference question-and-answer to concludes

Kipp DeVeer

the I'll here sentiment echo pitcher. Have everyone another thank for we everyone's a afternoon. just time Yankees end I'll great their hope starting sure up and with that

Operator

this call concludes our and Ladies for conference gentlemen, today.

domestic will If X:XX XX, conference P.M. you've approximately missed to international any by part of August of call the today's hour through call call, Eastern of replay an Time, and XXX-XXX-XXXX the XXXX be dialing this one call by at after available XXX-XXX-XXXX. end at callers to dialing callers this archive

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