PNNT - Earnings call transcript Q1 2025 | PennantPark Investment Corporation

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Operator

Good afternoon, and welcome to the PennantPark Investment Corporation's First Fiscal Quarter 2025 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] It is now my pleasure to turn the call over to Mr. Art Penn, Chairman and Chief Executive Officer of PennantPark Investment Corporation. Mr. your begin may you conference. Penn,

Arthur Penn

Allorto, I'd Good discussion some PennantPark I'm general welcome please about Rick to conference call include statements. to Corporation's afternoon, joined off First a disclosing by Call. forward-looking everyone. Investment Conference Fiscal you Earnings Rick, and like Quarter by CFO. our information today start XXXX

Richard Allorto

strictly form disclosure attention PennantPark harbor call that this I'd to on Thank being An recorded. also is be is unauthorized website. information. you, safe customary in today's call prohibited. the our the this audio any that replay our your the is will call press call of Art. like release and I'd everyone call like Investment property to forward-looking available of broadcast regarding of note any to that Corporation remind in Please

undertake that Today's projections, and for our recent forward-looking filings at do conference with website refer to and copies unless obtain statements by projections. SEC we factors required We cause include may call forward-looking our To SEC to to call that you our or us differ please pennantpark.com materially update visit law. most could at latest filings, statements the from actual results also our XXX-XXX-XXXX. of ask these important not

Penn. this I'd Art and turn like Executive the to Chief call At Officer, time, Chairman back to our

Arthur Penn

of coverage environment then spend for going and dividend the a We're ended we open Q&A. to for is how few up upcoming current quarter a market financials review private in for balance, income middle quarters, portfolio it minutes on credit, market XX, Rick. detailed December Thanks, the comment spillover the fared and the our positioned how

over GAAP our undistributed dividend. spillover to per ended income PNNT time. of quarter are to income. of share. to the tax core share $X.XX we per below core has share, spillover rules, NII the with order distribute For December investment can our In which generate PNNT comply income quarterly $XX required $X.XX the We per or $X.XX is million continue to net XX, $X.XX believe was $X.XX and

NII current the per take spillover or to if level X fully However, of share, at the distribute years it quarters XX income. core $X.XX over would remained

and to to $X.XX. per GAAP share $X.XX adjusted increased NAV X.X% from

December of during investment billion. As attractive continue yield quarter, opportunities originate million at our average weighted portfolio and in companies $XXX invested XX, and totaled new And $X.X of to XX existing XX.X%. the portfolio a XX we

market. continue an We see to in attractive core middle the vintage

coverage in weighted debt-to-EBITDA portfolio was weighted investments the XX%. the companies, average average new and For weighted Xx, loan-to-value the interest was average X.Xx was

testament of on a average and XXX market on our weighted December portfolio's middle to ratio are the security core These lien term plus In average XXX was first middle SOFR conservative through attractive selectivity, have focus to and the X.Xx. yield appears in orientation credit XX, our the leverage market. core weighted stabilized statistics the market, X.Xx, interest portfolio's the range. to the was debt coverage our As loans

of upper highlighted is are just are higher spreads we believe excellent. lower, statistics vintage core market continue credit covenants the middle than As leverage indicate, market. is market, to the In the tighter and middle current the core that loans middle

are protections. still meaningful covenant we And getting

NII. from JV our million $X.X the quarter, PNNT. and And during grew JV to of grow portfolio billion. JV be $XXX significant million, portfolio At the December continues to XX, purchases a including Our contributor to invested $XXX the

that momentum billion, its JV portfolio, continued we enhance will the quarters. portfolio PNNT earnings to and months, XX.X% XX this return to expect last with the in capital on the has earned the capacity PNNT's an invested JV. growth JV investment $X.X the Over The in in future increase

investment our portfolio We of December at of value. had X and cost XX, of X.X% quality X.X% portfolio the market as credit nonaccruals which remains strong. represented of The

to let the environment. Now turn current market me

well States. lender, are United positioned We as a focused in preservation capital on the

on with provide core important market our attractive the provides middle where We to the we company opportunities continue to investment strategic borrowers. that our believe focus capital

have We government defense, have record know domain to a growing software financing we generating track in are of million and record. middle excellent $XX market, to tend is strong core companies services, compete value by loan high-yield ask long-term They technology. in right successfully track $XX where These healthcare an or flow. the have the middle been and X are markets, resilient does unlike and questions have sectors recession syndicated services below the substantial with our These not middle key million market. and EBITDA to sectors. business and In with a companies of peers consumer, expertise, generate upper free market threshold cash sectors broadly the

the partner, terms In package market core of we the attractive. an is receive process important are middle we strategic and lending because

many with credit have We care. sensible attractive equity to our thoughtfully meaningful substantial structure protect with do transactions spreads to diligence We cushions capital, equity and weeks covenants, our stats, co-investments.

the different. we of risky. is reality we a less market why intuitive bigger the originated state Many are a help those are peers had our and on financial us is a focus our that statements to upper monthly perception we monitoring stay perspective, help our loans reason top well This regard but positioned which companies. some middle may protect all covenants, in the meaningful first That market, the the on unlike from companies lien of Additionally, significant upper capital. erosion is to environment. who With middle make believe virtually sense, this of receive covenants, in

monitoring with tighter EBITDA have and of covenant with market where rate part believe careful the with less have that than million the higher a and default performance. companies a We been loans of of S&P, meaningful lower rate to more EBITDA. than companies $XX core According to protections recovery important an differentiated loans there's higher this diligence middle

of capital, cases, strategic many growth co-investment. an of of the our provider the fuels making in companies, by participate portfolio a company we the upside in equity it As

been nearly have basis our co-investments over ratio generated of on XX ago, has PNNT and time. December and excellent Since XX, Xx. invested has equity $XXX of for these approximately of billion from Overall, XX on invested million an a points yield capital over have XX.X% multiple inception years invested and returns IRR of loss through capital average invested co-investments an experienced inception $X.X Our XX% we've equity in a annually. at on platform

and With outlook, regard legacy that primarily are strong attractive. in new This our the to the debt subordinated we target global energy to prior recently loans record pandemic. the investments track of the investments made financial includes market crisis,

flow. and and experienced talented is team Our wide producing active origination funnel our deal

preservation on and that with long-term preservation we growing middle in of dividends We flow out form remains high We cash market pay instruments, those patient to being to primarily focus to that debt cash cash free returns our flow opportunities find companies continued want flows have and shareholders. to conversion. in goal seek through investors. capture reiterate generate We attractive capital. free Our the our income, coupled capital investment through risk-adjusted of

us take turn the CFO, over to the to call now me results. financial through our Rick, Let

Richard Allorto

Thank you, Art.

share. and investment $X.XX ended was For core the income XX, GAAP per December net quarter

interest quarter follows: full result For management million. were million. placing and of as fees were as General was incentive nonaccrual. for credit and Pragmatic were the and $XX.X impacted expenses expenses and million facility $X.X by for million, provision on the expenses negatively our quarter, $X.XXX base Institute investment Operating were NII was per administrative a $X taxes in $X.XX share excise

and change taxes, realized For XX, on was gain unrealized million. provision the quarter debt, December including investments of and net ended $X.X a for

was XX, As prior share, per is from quarter. share in December and $X.XX which X.X% $X.XX adjusted up of our per GAAP NAV the

As secured multiple XX, is capital was our and X.XXx, unsecured and including of debt-to-equity December funding debt. across our both sources, structure diversified ratio

second of key which portfolio follows: highly statistics investments on debt had industries. The XX weighted portfolio average portfolio nonaccruals, X% portfolio XXX comprised was diversified our interest debt, debt, with of XX%. preferred cost. As is of other at yield and X.Xx other X at XX, The XX% XX% X% X% our X.Xx. represent X.X% notes secured across PSLF, the our rate. Debt-to-EBITDA debt, and to equity. value. coverage is PSLF X.X% lien the portfolio of different lien remains were and floating debt We the companies in subordinated XX% is common secured subordinated portfolio equity and is first market December XX% on as

call to the back Art. me let turn Now

Arthur Penn

at for like for their to to and call commitment continued Rick. PNNT our this to you your open professionals questions. us. of and shareholders. Thank confidence today closing, investment up and for your I'd in In thank would That concludes team remarks time time. talented dedicated I its Thanks, to and like continued all our the

Operator

question [Operator Instructions] our take now Truist. from We'll Hughes first Mark with

Mark Hughes

curious, about as stable. commentary of the described sort or of I just any spreads I'm level middle in core you've competition the relatively think market? Art, capacity

the that's meaningful type seen of just pursuing So in curious indicator. market one folks whether But more these you've loans. I'm

Arthur Penn

question, It's a good Mark.

We have not.

players. not and seen up chosen kind them of We've seen not We come exit space. larger market. to The have new players go down this have into

of who being to handful our company a the instance in for of there's plan this not of players then finance of kind a finance peers up of view a have those $XX that just EBITDA and plan And really growth of there's kind market. EBITDA. peers to million, able we of million, to So many and $XX company game million million frankly, that game as $XX $XX have willing

platform, I we're would growth able growth So we'll delayed players, term do the kind loan draw think, we initial of like to to an the to and fuel only couple will In of company. can of willing kind that many make cases, that loan of a of that financing. one the structure are and

Spreads have at competitors stabilized it's of meaning. a be XXX good to kind So pretty environment no and been new general, of lender. a in XXX,

Mark Hughes

the portfolio? going the or Is you're to be or a How appetite about your or private investment part equity that for more co-investments? equity the of that less? something companies pursuing stable Is appetite

Arthur Penn

grow, do We Yes. the those sponsors think and separately, equity less. we're try evaluate lot first investment to equity participating we that a a co-invest. to we loans. prototypical separate make deals as I helping In safe growth of with don't to a And these then fueling loan. where companies decisions. more can we're to makes our we're sense some or it They're it individual good upside in figure each we that and investment, create the extent if private be helping think out we and

though we of we're having co-invest we diversified And growth. even and and as something low, our instrument co-invests of think So we leverage it for form bit cases, upside in over a of portfolio in many and And of sense highly to those as IRR Xx will that's ask a that we're portfolio receive makes very some those said, we lot selective little like of to try we've time, equity we've XX% on matter had some a capture lift. a keep and MOIC. got because

helped to So that's over time. solidify NAV

Mark Hughes

Yes. positive that of will trend PNNT, think of investment the And took net PNNT then of a we Would we lot investment do half be net the investor, investments. in activity a to net kind obviously, first for think about down the How the when activity? year? expect JV you

Arthur Penn

still PNNT in X.XXx, the term be optimized. X.Xx I think debt-to-equity this leveraged PNNT point, should is we range. believe long At

holding now, right So PNNT that up going PNNT bit in venture. is little really growing a for joint just assets than that that a end are as to higher

it term, than So that but to down will venture. assets more back that that ultimately holds that up for zone, X.Xx bit still leverage leverage we're in now anticipating a little as temporarily PNNT's joint long end X.XXx,

Operator

Dodd James. We'll now question Robert from next with take our Raymond

Robert Dodd

helpful. On can't tax -- remarks, you've corporate that's least. in to I paying I dividend until mean, income that's point without rate, worked prepared the was down, question, $X.XX, I mean the not mean cut which basically the functionally, your means spillover your got at it you run dividend

like color dividend point, on the rate of like your it's many a for time eaten or of that how your that? going it's into. would that's where spillover to you But target be a getting income in mean take -- kind dollar I So just because us would quarters any to long what to level at number? down terms of work to give

Arthur Penn

$X.XX market? question. What's great what's the the rotation ] steady is And looking point, of [ think we're goes. the yield is more a it basis. kind as where opportunity, equity core a of It's she this At we in market should part earning than on our be We like?

we an some that opportunity you of $X.XX, the see up. equity. $X.XX, said, been have should be. rotate give us we We're As will marked names XXXX hoping And that to

turn those into hope we some would can cash. We of

through our So committed stream, in terms for steady, This of got I is is goes, keeping our to think kind have grind are up that of of year, it don't do and a as through you. shareholders We the and she continuously equity. way under our have it to it grind an like a we dividend the target. for is. market construct. plan But we've we platform runway doing on answer that current we'll we necessarily and I getting that in the know know steady plenty to dividend really and of stable see take XXXX, Board it of where we air It's kind overall a the rotation where XXXX, up speak some about try the understand where it, exact how try like to end goes. to and kind for rotate game don't come equity, is And a year, clear we the

Robert Dodd

Got it. Got it.

for Pragmatic, that likely -- debt remainder asset? the the accrual. the on full medium for like that now, are outcome back of some that there, the prospects potential like on a equitization of the maybe where nonaccrual restructuring obviously, that of something to comes is a or Moving the some to or on I term mean in near, of debt what

Arthur Penn

figuring Yes. good speak. out we we're and a question, as It's

this quarter ended of some will the debt be during there, form converted there that a out quarter, be of that. and March, is some assumption there'll be coming current will Our instrument restructuring yield

Robert Dodd

Mark's on Got it. Got following from of it. And then just kind questions.

the to areas I you there are I But concentrations right? I mean exposure vintage. more really and in to ramp like Obviously, very industry are of about the do some terms you environment, within -- In in What that. active. portfolio? up you'd like that there's talked mean, areas there's attractive the mean, particular trying manage you things and as well, JV you're

the of attractive So on in that terms directly vehicle I sheet also concentrations kind to manage seeing industries in well? you of being mean your are and that right balance as

Arthur Penn

Yes.

finds we know, in respond value. the you equity of to us as being So kind middle where marketplace what's the and shown market private community

It's right is service of we types with try cost providers, to find we portion areas we containment, find that others. can And Health of care certain care, in and can are on high the can to and other our quality. cost deemphasize and of portion biggest certainly, lower So maintain try to, portfolio. emphasize a biggest that of reimbursement areas health still care the the side economy. health at providers the companies particularly try provide risk,

a So that's portfolio. just big probably something the part is that of

is our I than peers. probably think of in our performance care health even some better

on cost the containment or peers gotten are that having the picking leverage. it, credits our just side of right higher in some just think I have not whether right it's caught of

incoming loans for under is new our Xx. heard, debt-to-EBITDA you've As

or here So Xx vehicle. exactly -- when this in you

when or So can more reasonable leverage, deals you with deal X. curveball you with structure a

Government government care are what's aligned health So government the financing the containment remain. believe with on again, the driving on services, payment. topical right We going that's will and that for with side we're government. companies of are cost given

showing industries, proliferation dial a dial are shown. us. others business not sponsors can our up things whole what to do were of things responding down. and other But of that kind we types or we're -- we of Again, And consumer there's services,

lot it away going not if or Is beneath is this sponsors as is course, really keep anyone and we to with putting can stable possibly always equity low to then, that flow as leverage goes with, begins a steady, the and us. a cash company trying us, protected? care For it stream alignment of of in

Operator

We'll our Brian now with question Mckenna JMP. next take Citizens from

Brian Mckenna

Great.

within magnitude the longer where your loans? of So think capital ultimately, at opportunity, then I timing just percent this the about into does of portfolio guess, equity is the and redeploying equity investments? And of rotation on the there term? settling to any investments way And monetizing some portfolio

Arthur Penn

Yes.

part X% So at for that's I'll opportunities. you where which where this there can last to the targeting healthy of just in XX% might we of and return be that's deal monetization try there's some Certainly, cash. are terms We're equity the mean, But is which and targeting? that's look of goal been the equity book portfolio, the book, about leading a generating I in markups the kind question exclude less what equity, JV a JV is would of let's see the very and first, certainly with equity. indicator be

XX% And equity. other over in there's

Some of it's co-invested.

I half debt we've where is of to other co-invested of equity converted equity. is and it kind think restructured the we where about co-invest half from

both marked that of of -- Some those some been have of up.

is this see to So some yield. activity going we number ultimately hope our 'XX Look, can we and to the that cash percent That's names convert monetize we're that in those to try can. core of and to goal, where market, that that over we'd cut in middle we year half more if where like M&A XX-ish equity time. get in half down

that It's long, honest you. met We us be with have taken to too not goal.

kind to do. control, target, And don't, of that's we and we some it our some got it to we're but going of that's to of what be try

Brian Mckenna

to Art, merge in similar and PFLT, equity and mean, looks I've kind you potentially Okay. Great. of this of do look I the helpful. maybe loans out ratio percent into That's the successful the and to rotating assuming of are but the past, then, ultimately similar mentioned And looks you X. kind that

there. get publicly you just I'd traded love have your one thoughts to BDC. updated So

Arthur Penn

to we've a portfolio. got update to do a arguments then kind differentiated All assess what's are there's certainly we've we'll got There bit are is a portfolio, certainly Yes. talked of something. difference We a not do and up to, to shareholders. at and scenario historically yields, bit in and difference here. try the always to come focus up best we'll underlying cleanup little Then our first, more There a what for of the and on table. it. nothing been arguments options We've job do little which of has on lift head than Look, in options. got look to something

Operator

Johnson Paul to move now We'll KBW. with

Paul Johnson

On some this quarters. was marked the quarter. that's again few over mean take noticed higher, we higher the has an of those interest just just that moving been result That's past that market investments I receiving? been Light that marked I By were as been of Is might indication up performance? that Or should the think a has more of you -- company of

Arthur Penn

and Yes. equity comment performing you've has are specific companies well. these on I seen the in I comment company performed the has can't been to sell. Look, for comment I -- hard can't M&A all name, by it's of that owned to on firms try markups. most ultimately And well, who the and me that a that. but can company private

Paul Johnson

Got sale in the and reinvested business. PennantPark I it. that Marketplace following loan Art, of the participated then company last the that PNNT question Events was, noticed the with

a lower previous don't yield, investment in given participated I believe PNNT time. this Just to I the PNNT curious why that as slightly it's was just and participated just

Arthur Penn

involved PNNT any Rick. Rick, defer Marketplace. in to that to don't I'm was color? think going I the

Richard Allorto

loan in venture. in realization, that and new ultimately the Paul, will there, at thought live again, but the terms that, did joint correct is, participate You're the PNNT loan of the

Arthur Penn

Yes. loan. the Yes, new

Richard Allorto

It's the new loan.

Arthur Penn

Right.

in A group and and other were sponsor was PFLT the and buyer was new private a there equity came bought lead a equity investor. new lenders shareholders So PFLT of there we Events. the loan of at knew an price. Marketplace attractive came attractive part a as very -- in, obviously company the that be that well. And to was bought an in made in that, company that

will that Events loan. ultimately, a joint So we Marketplace the piece own of across PFLT, did PNNT platform, buy that loan ventures and the

Paul Johnson

deal? was that Got a was loan it. that chose to company? loan over essentially that enact the carried that And you a was in the reinvest when made loan, that to you Or

Arthur Penn

was It transaction. separate Yes. a

So we loan where old co-invest Marketplace and allocated bought bought across and platform company, new And where the the platform. PennantPark Events Events the platform, make that across and the in then came sense. senior funds cash. were then new would new co-invest the debt in another And been the the in equity new equity evaluated and a got sponsor Marketplace that's new

Operator

We'll now move Mickey Schleien Ladenburg. with to

Mickey Schleien

you of the assume rotation Art, guidance? just of a fund's in NII equity sheet in balance questions couple from your What did terms core and leverage me.

Arthur Penn

for was actual this no quarter There's ended December actual XX. NII the of -- NII. kind Core

the said of continued venture. terms is forward forward, your just assuming that's guidance guidance going in In going just the of we question -- the kind about growth joint

Mickey Schleien

it And Okay. is? leverage the sheet balance where remaining

Arthur Penn

could And kind certainly over quarters, fill of joint equity some to we joint venture. realizations to X.X Yes, that could venture. hope venture. here of to down another which up number be will grow We joint be able getting that do yes. helpful. get in time, after the next We back We

Mickey Schleien

And sure. question, realized unrealized were drivers a Rick. maybe for just main the and the gains. What loss housekeeping of the For

Richard Allorto

Let's see.

JF are write-ups. So the write-up drivers larger Partners. was and unrealized, in there for the in the Federal Advisory Intermediate the X write-up Those a main a

the down, main large additional write-down investment on write-down drivers Pragmatic the and equity side. netted that on that Cascade Environmental in the On X the write-downs were

driver gain Purchaser. restructuring loss the for main or terms -- PNNT sorry, quarter. was In a realized of realized STG for was That goes during a that the also the loss realized Reception for by

Operator

We'll now Wedel with JPMorgan. Melissa move to

Melissa Wedel

have of I a been up would mine things. I follow thought Most of asked, couple and clarify but

was pretty look of JV, assets growth the looks the from like that quarter-over-quarter, JV, the when the flat except at to on the we at that portfolio BDC dividend it that income that had BDC should the the the pretty growth since from of about the even How and to in dividend PSLF decently September JV grown XX. cadence think the we forward? going like Firstly,

Arthur Penn

book over we growth actually don't distributed. the JV to unless in should match PNNT, the great Yes, income what and it's comes a underlying it's question but portfolio

a reason create creating that a reserve you growth bit the we joint in of just cash in and would investment time venture. where excess over dividends. joint growth would have a no reserve. joint will bit we're to than the there. yield imagine There's venture of certainly -- a the in particular and have But there's at reserve venture that that we And other it a normalize there's So the so

Rick, I this don't any know particular phenomenon why if explanation Melissa have talking for quarter. in you is about particular the

Richard Allorto

Yes, mentioned. out sure. Melissa, adjustment recurring. the some because I'll reserve of quarter I just was, that last that And distribute say, did Art last NII quarter, as JV a believe that core we detailed of less portion kind

-- Additionally, debt JV the we through fund equity. the both and

So back of economics us fund portfolio, the portion a that is we instrument. that JV capital to in fuel -- the as debt growth to additional

that it income on So dividend see statement. line just don't item you the in

Arthur Penn

One comprehensively is and the look the way it debt between equity at instrument to instrument.

Melissa Wedel

portfolio exposure in government Yes. defense there to at any care that's to Have taken of I a that? to potential -- services It's segment on defense followed or even how companies. government the and is the comments in sort segment quite your more of risk, you in the whether And health do the exposure then clarify, critical the look you segment fully much just sure portfolio. I and wasn't reimbursement --

Arthur Penn

at looking it... we're No, Yes.

Melissa Wedel

as exposure well. in as for tariff any Sorry, potential

Arthur Penn

the and a during Tariffs, of exposure yes. run of are the ones limited that tariffs tariff be kind that we involved Most exposure. Yes, in last dry would Trump of were the had really companies we impacted tariff administration. have not by

limited. So of U.S. health biggest the Biggest is our of part tariff economy very the exposure care. is and portfolio very, part

sure, for So care. is government reimbursement in there risk health

lower that care we try in reasonable is ourselves on with that health companies are focus driving to quality. The we way comport costs

we're the in that us. be beneath at the of layer The right in cost, on least is likely keep And portfolio leverage this okay. we with debt-to-EBITDA if new equity side reasonable we quality lower. fact loan which lower Xx XX% then is average environment, on So we're that, any to

have our occasionally of peers we're may stumbled So care, where relatively of in facts. health clean some date, those to X because

the side. not When at government So not we're We're that missiles. look doing same applies defense on and tanks. services doing portfolio, you

individuals, into you We are technology companies where focused on people walking doing and satellites, have intelligence, things maneuvering cybersecurity, sitting behind computers, typically service like updates. doing offices

what those are cost, get you call government we when being one paid they create layer plus, typically typically of with And down very again, then side cost and margin Those, would is deeper into and going that. they the X defense. on where provide the contracting ways. efficient the drill in taxpayer One side companies, on right in of right above they dollars, cost a

where they get is through essentially they companies, And single-digit margins large, price, those making on their cases, on how then lower a earn plus. go their they margins depending plus, those companies to take taking and were cost If and more excess paid companies, at they those dishing the They're fixed priced In on price, not risk, case on cost by making way are providing making relative EBITDA would excess for be margins. they And risk. could off other is those in service also could the cost. along the service risk. margins a provider, government fixed provider to the which earn companies is higher they the margins risk

fair they're you taking generating they're good long of piece service. Again, to not at and risk margins going we very but the operators exorbitant, that and portfolio, government a who if have are seem off margins, fair look that

a government day that insulated, Xx exposure new which side cost they of as we're keeping layer we've know. you debt-to-EBITDA of relatively right appropriately. We the and on is industries, day, But be then on X focused kind think but So could containment every we be don't comported dealt curveballs, the there to if of below are with add or know. well so have ourselves those in

Melissa Wedel

for the source until a one all I treasuries. equity also funds elevated rotation? occurs into detail that appreciate hoping It something you coming you as yielding you. balance final of something higher a I quarters there. on looking take question that -- point equity pretty some your have in to the in though that Actually, get be could said. for Is you me to rotation deploy that

Arthur Penn

do are optimize bucket end, Thank and other want assets. type XX% Good management for JV we question. for that temporary balance quarter to you. our at We XX% sheet The treasuries optimize bucket. XX% the typically our that's to

a use that optimize we to So that bucket. technique is

Operator

with now We'll Compass Casey Alexander move to Point.

Casey Alexander

got you. a I've for few Art, questions

which base that suggest XXX sheet. basis percentage they First gone What all, that basis you rates but way points through balance XXX would of delay in has flowed know a of the we have points, in down there's already through? flow your

Arthur Penn

good Rick, any -- a or Rick sense? don't you certainly off I'll can defer on I That's know to the or Casey, to any cuff Rick. later if an you, estimate, back get have really but question. we

Richard Allorto

off isn't contracts. the cuff. the majority of I LIBOR X-month borrowers It are say electing would the

of So all quarter basis. but roll the they that already X-month -- do throughout there's XX% a a are in it's ends they cuff, kind end, period. flowing through numbers. on a quarter roll kind in the is the I that Off number borrowers say to are higher the higher of volume, contracts of towards would their XX%

Casey Alexander

through. That flowing guess. your the through halfway maybe through you're way X/X would So of flowing be to

Arthur Penn

have liabilities, also we well. floating that And as are obviously, Yes.

some So floating have have we and some we fixed liabilities.

So matching on. going there's some

Casey Alexander

think that JV Do near this capacity. I'm and basically amount to you'll end you're the quarter? or Yes, quarter, going you the the that calendar be of that by like that, to down another aware. you capacity first be quarter upon the at at Based shipped

Arthur Penn

evaluate we're us ramped say it takes get time us to options, I'd say quarters and gives optimized, once expecting now and financing X everything time the some gives then. rotation equity to we But we're I'd to value probably we'll X kind to more hoping evaluate that do then can optimized, next between we're thereafter. equity to of JV And add options. for fully of us -- kind rotation and optimized, and

Casey Alexander

compare slower a to relative going to the thinking last be should quarter? of pace we it couple next quarters the So over we JV down little this about bit if

Arthur Penn

busy. flow. activity Yes, the what The just part levels. normal We're I'll was quarter December it seeing is yes. very a And of call quarterly a,

we're think bit very in in seasonal That's a that year, that is a slower. We 'XX can a this active right today but quarter little now March the saw, you we're slower. is a As normal quarter be still bit activity. little

Casey Alexander

Right.

Okay.

switching a dividend to to negative a way your treat distribution the the switch year-end Have doing some tends in as spillover appear perhaps a though have have guys pretty about you're you clear as you option? rightsize year-end rightsizing you you chronically and considered if to the you're the valuation off valuation current dividend that. power could your would a let's and earnings that your market an special So it's up market to your because the that distribution, the dividend, special I'm when knowledge underearning curious, relative impact of distribution. conversation common because to you just considered dividend better. And

Arthur Penn

trading to we you to have. policy And the And Casey, time figure try any about even consider happy get stock happy it you dividend optimal our talk and like way we're to better. to out and to

shareholders, but talk And it Board have we do our and about talk know, the we about about want? with in be? always prefer what's there's institutional we call retail can people and about that all talk reaction stock our like if have have it, the have -- the as going do our the there are to shareholders, would other and it So that what methodologies front to shareholders I to you going have and discussion help So to different don't what's happy ways can or here of community, is preference, to things you trade we're what we'll ears. -- better. other talk What's to

Casey Alexander

conversation would I you. that more happy have to with than be

it BDC there the its that it's JV. you another capacity mentioned this the enact on-balance technical when completed reaches than might given that going JV is I'm -- capacity, itself. has larger just You be any its JV to that limitations when sheet

the there's on-balance so just itself? BDC sheet relative you any limitations balance sheet how wondering to And to size of much take I'm off if practical the can

Arthur Penn

So vehicles. great than of our And bucket, sheet in XX% a of one it's can It's of be XX% overall part balance A, at question. these couple limitations. no there's of right? a the PNNT certainly, more

a that PNNT or there or with is it and can but grow capital. PNNT's And can investor peers can owning XX%. JV more get JV continue right, little The XX% large -- very large, JV ownership quite that than can than BDC own XX% itself the where who less different of I the PNNT you're it. our BDC of owners number, a be correct are bit mean a XX% of XX% of to the some have third-party XX% can or that be

we're in the is these bucket it, management charging JVs And that how of is type fee -- incremental of incremental for it. much of think all up the XX% form have are shareholders relevant It's generating companies management accretive investment kind been you for here. XX%, and structure. the just about thing So not and accretive a very It's JV showing an PNNT. our is The our been assets, us ROE. when managing which to what's in

some it thing has PNNT, thing and good benefits. be it's for we've other it good seen a think we for So BDCs. been a

So bucket we'll to mechanism continue at figure XX% it. JV using we out value continue to We'll can continue if to our so. look to and the through look add do at

Casey Alexander

in since the there have have taken any quarter? portfolio the that end been credit notable of events the Lastly, place

Arthur Penn

marks. information. Car our It It's that it's bankruptcy. Wash, and there, There's XX/XX has as prepackaged is a in company called of in was the material. filed but big particularly here, which it believe, Zips public marked, It's we is not out not a appropriately vehicle

through If income to share. flow you be the impact, might were $X.XX potential a it

Casey Alexander

the Zips JV? is That that includes located the of within amount

Arthur Penn

and balance JV sheet. on Yes,

Operator

a follow-up James. with from now Raymond Dodd Robert We'll take

Robert Dodd

to a couple Just so your gap And of I there follow-up extra a Melissa's a reserve, stocking there in terms quick point to out June. actually. of visible an in from mean was paid is of speak. that question million

distribution you captures partner mean, a we whenever is that? be be true-up is distribution to the going true-up annual from be there mean expect JV an to is it's once should and decide to Or a kind in it while? appropriate? I just going year? Or it a So it the from of once of is that going vehicle a that I kind

Arthur Penn

of More been vast on kind the distribute because a majority often we we'll there. good appropriate. and excess NII credit the have has just out so a to quarterly basis, of try distribute of latter, of performance bit little We every really the it when

Operator

And follow-up Wedel we'll now Melissa from with a JPMorgan. take

Melissa Wedel

One ever combined about sense follow-up Brian's more whether a question to PNNT and in more make vehicle. PFLT actually would

to what there's And do. just a multiples to understand else? equity that the work of that past, that bit referenced gotten now. probably means I nonaccruals, that number you. of Is the a exposure, wanted and I cleanup mentioned And the function you you've to know years. little ask an in better a In You the that between times that of of because to the seems and issue X vehicles, had question I past, the disparity over multiple be on something less

I So on you clarifying appreciate have thoughts any that.

Arthur Penn

NII right? derisk rotation, get be it's will the be to. of reasonable equity Yes. And then some Melissa, is, look And different thing, we take evaluate the options. portfolio, the can and That I'm referring same believe, maybe will that that I a derisk can could which -- kind be which the cleanup, we cleanup if will all

Operator

I'd question-and-answer Mr. to like for back session. comments. Penn That turn any today's or to does over closing conclude additional the conference

Arthur Penn

rest to that again Have as with community some for discuss very questions. look winter. Just interest. the your speaking there's in May we the excellent much. we you forward research for to thank all It's to their March early the next good thank good numbers. really want everybody Thank participation. a And of you I and engagement want

Operator

that conference. again, your thank conclude We once does you today's for And all participation.

disconnect. now may You

PennantPark Investment (PNNT) 11 Feb 252025 Q1 Earnings call transcript