Blue Owl Capital (OBDC) 22 Feb 242023 Q4 Earnings call transcript

Company Profile

Participants

Dana Sclafani	executive
Craig Packer	executive
Jonathan Lamm	executive
Brian Mckenna	analyst
Casey Alexander	analyst
Erik Zwick	analyst
Paul Johnson	analyst
Mickey Schleien	analyst
Kenneth Lee	analyst

Call transcript

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Operator

Hello, and welcome to the Blue Owl Capital Corp. Q4 and Fiscal Year 2023 Earnings Call and Webcast. [Operator Instructions].

As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Dana Sclafani, Head of Investor Relations for Blue Owl. Dana. ahead, go Please

Dana Sclafani

Good Fourth and Quarter operator. Owl to Capital Corporation's Earnings morning, you, welcome everyone, Blue Thank Call.

our with independently presentation factors, SEC. website call company available Relations corporation. With during Operating Financial any or such representations Joining Chief me results today's our or earnings information. listeners OBDC's the Manager statements. Certain Craig. and Chief Chief Nicholson, and outside the Alexis warranties including on contain The that, and remind at our our information performance guarantee statements, of risks are of call earnings for which number Executive the our Blue discussed to been from has related the Actual results Lamm, made are Chief a involve release, third-party call Officer Portfolio turn may makes was The sources from Officer, not derived and Owl and company Craig Credit as statements differ section that well in materials, and I'll of this Packer; OBDC's of supplemental may forward-looking a respect and forward-looking of Maged, control. morning that as to a Investor number XX-K Officer, to described this Jonathan with no are this a OBDC. I'd Logan are to update materially few uncertainties as capital over in no obligation Officer; to in portfolio forward-looking earnings not our result those on companies, verified. remarks including those information filings assumes and company's like

Craig Packer

for and thank today. you morning, us joining everyone, Good all

quarter $X.XX report share, excellent up last from We another with was the across $X.XX of are continued very quarter. per portfolio. Net investment income pleased earnings to performance credit record

XXXX, of fourth we up consecutive $X.XX of generated NII quarter. XXXX, in Our each new NII earned year-over-year. XX% NII we record total, In increased quarter $X.XX in or for the

Our increase dividend is This rate and expectations approved future our our continued fourth the since year throughout from our management. our outcome per $X.XX of in credit great $X.XX incorporates on strong selection the reflects proactive another strong and a to results rate even to benefited more conditions. Based and $X.XX XXXX. the our normalized of base share. to has economic liability trajectory in a of results, the results third This these environment higher also earnings our Board strong quarter are approach the emphasis date for on Results environment. increase

declared quarter of the In quarter, of value. XXXX and meaningfully our are framework earnings addition, upside in dividend We also for the growing of over the Board share $X.XX pay supplemental to pleased fourth $X.XX. per predictable to asset shareholders last third dividends participate we in allow a while instituted in these a to quarters supplemental net manner, dividend supplemental X

NAV per in second the increased highest our we forward, in of asset from quarter. believe share benefit to share record framework. Net continue a since up value per the shareholders value. This represents the third $X.XX supplemental from row to net quarter Going dividend asset $XX.XX, will the inception

is the for at the we earnings with our Day expectations result XX.X% record the year. of right in resulting we growth, return strong May. As line ROE continued fourth annual earned equity on NAV in set an a of XX.X% a in in full and This Investor quarter,

into XXXX. borrowers economic We our portfolio at results, came environment. companies we for throughout cautious resilience Looking continued and prepared appropriately challenging year saw a the across our more

chain coming combat challenges. revenue well borrowers mid-single-digit XXXX. cutting and proactive we in quarter. costs positioned raising to where on both initiatives we delivered our average, to to pressure growth borrowers last prices in year. Further, These are and this and They contributed believe appropriate into Over the XX the each solid months, saw supply performance EBITDA our low were inflationary

Our of The be over and average portfolio our largest food serve sectors continue durable million, provides to all many which this as strategic $XXX health market software, leaders our markets. weighted we end and EBITDA diversified of and remain insurance sectors. stability companies their scale believe and borrowers brokerage, beverage is operational and benefits care, of within

potential elevated, while markets believe levels challenges. We rates to X.X coverage. as remain to in remain expecting X.Xx focused at forward, of Looking result first the now short-term trough coverage rates around will interest on decline, we portfolio a half XXXX are company

to who ahead. months continue may see small borrowers challenges have list of the believe we We a in

Our of majority watch vast will the the be will portfolio our names believe this a we we ultimately our I as the are portfolio teams portfolio challenges borrowers and our on closely would throughout management positioning underwriting on these manageable we overall, visibility that list we Based of coverage and expect migrate monitoring remains strong note, the any have maintain had in period. whole. companies and but and solid rating borrowers, our few today liquidity metrics a consistent. lower scale, across situations adequate our

portfolio our value portfolio. Overall, While and fair of detail we more rate added of results. nonaccrual XXXX investment of on our very our X the for the in process. With our management low a to resilience record turn total the in portfolio nonaccrual demonstrates companies X to X.X% strength remains provide debt of to small names, of over quarter the financial position it our the that, Jonathan and year I'll at

Jonathan Lamm

$X.X outstanding billion. investments assets of We of $X Craig. billion, debt with net total Thanks, ended the total portfolio of billion and quarter $XX.X

NAV dividends. $XX.XX, from overall of continued $X.XX Our per share to quarter attributable total a the increase was $XX.XX our share of per third earning our NAV fourth quarter

our sizable largely a increase third was originations saw billion a In the which fully matched compared increased terms was to quarter of in quarter to to deployment, favorable ended $XXX $X.X repayments the We of consistent this that down maintain will timing prior we of of with the market to from fundings. net portfolio. by in continue in to with the the new we largely versus invested roughly match quarter increase of investment repayments quarter. Repayments This we with repayments X.XXx, refinancings. repayments see billion, the an as reflective for slightly belief be new leverage $X originations the This quarter. million at environment continues as is more

as fourth in prior interest Turning by $X.XX our a per in in a to as income, increases modest of up the from the share accelerated was income. The $X.XX repayments earned driven dividend driven income the increase quarter. roughly by quarter-over-quarter in record pickup statement. NII $X.XXX and increase We share per quarter, well in

X. dividend fourth the for to be fourth this of $X.XX March of XX share $X.XX paid per and quarter. the quarter, per For total $X.XX on supplemental the shareholders our on will March annualized to record which previously declared over equates regular and based supplemental shareholders XX% an yield Reflecting dividends dividend, the will dividend share of on receive NAV

income year to robust throughout declared will dividend XXXX, a of regular of dividend be our $X.XX, in remains paid overearning per as increased paid April we dividends as also the XX prior forma result quarter shareholders dividends, total the of from supplemental record The first share $X.XX inclusive of finished roughly our March of of Board $X.XX, regular dividends, year. the meaningful a year which For XXX%. full a XX% on an new We at our of of coverage XX. Pro with of for XXXX. spillover $X.XX increase

the balance sheet. to Turning

commitments raised robust A we to million quarter, will shareholders. increased new our This portion well our We maximize mature companies. April be of to continue In the position, unsecured to our the that liquidity notes. million capacity portfolio to to X-year to is fourth in January, maintain unsecured and increased returns excess proactively a of manage $X.X we our our our in $X.X which unfunded opportunistically billion liability to XXXX. structure used revolver billion. repay in to notes $XXX $XXX In proceeds continue

unsecured Taken modestly debt overall percentage together, of our unsecured our total and total XX%. will debt increase a to as actions of financing these cost improve

spreads well-laddered XXXX and treasuries. to this to and our relative liability of our S-plus which we structure We together the a of continue April very this financing financing with the lowering priced on tightest to maturity new costs. secured taken expand accretive is ROE attractively BDC maintaining XXX notes when were to new represents basis able current rate investors. focused bond spread points, deepen and shareholders The continues swap our costs. The to to at be our issuance for on market of issuance one Further, a with

high-quality We this investors issuance, us see higher pricing are rate recognition and drive environment. in a even performance, portfolio pleased of for improved allowed to OBDC's to which continued

to deepen liability I'll investor back for we at prove inception, As to addressing financing proactive and our comments. needs it continuing to continue costs. With we be and since closing our base that, turn Craig have our

Craig Packer

to seeing on spend minute Thanks, what today expect market Jonathan. To a I close, we're XXXX. in what and for we the wanted

to continue fourth pick in see activity We quarter. up deal

we OBDC. quarterly As quarters Jonathan to the $X level over originations Owl Across platform, first since $X in nearly quarter, deployed the billion combined. in in billion we This saw noted, Blue in activity repayments our highest had and equates lending both total over direct we the XXXX. the broader X

portfolio deployment new repayment including in and to PetVet, maintain for believe to Relic activity on scale quarters quarter, repayment deals financings billion-plus origination the Envoy efficiently quarter a fully Blue our across invested to up IFS to [ portfolio, these our which terms. Further, the attractive our continue advantage greatest to arranger equity order and on us role to for add-on importantly, positions significant where is believe as activity to quarter. firm's is as closed for in in an our allows of administrative platform frequent from $X influence administrative our and the and deployments ], as OBDC We fourth platform several with in our large higher. We We us all the documentation credit and agent New and in scale demonstrates deals confidence each agent effort of continue benefit lead the incumbency we on X Owl as private have current on. large maintain borrowers the activity our dialogue serves and match

repayments fourth company exits. market noted we and a active for up stepped the earlier, As refinancings materially more quarter saw in as

could repayment income OBDC. activity repayment these to revert more which higher, continue expect normalized for We meaningful to levels generate to

is companies market equity throughout consistent the been new we're markets, private the seeing dynamic, quarter seasonality seek in see which and spreads the across after Reflecting increased lighter, year-end. pressure public to see on to transact could and some many typical and activity opportunities. first capital to issuers private activity desire expect drive LPs by to we increased firms said, there to XXXX. believe return pent-up We rate substantial activity. That environment forward, Looking clarity date, more for exiting this with before is strengthening has we with investment on

However, remain and and quality highest on companies to doing see our larger larger we the the direct continue we've terms attractive. of new seen structures deals deals, the and some history credit is in

Finally, OBDC delivered want on behalf of the impressive of management pleased to reiterate we I how another are quarter to results. have entire team,

investment opportunities, who portfolio to companies, and the complex team entire company's management our monitor our We the structure support operations. grateful continues Corporate teams who portfolio optimize assess carefully to to the are Solutions who group the new continue liability and financing

a we We a raise NAV We're in we our a to providing be delivered portfolio. NII of our in share reflects per XX% to regular total year and our believe record shareholders. to XXXX. high continued As again of the XX.X% confidence return the to delivered for once these also efforts, result more a ultimately able shareholders which than ROE record dividend, pleased

well time entering your are thank we strong We and for will for questions. XXXX foot that, the you today, positioned year believe now are come. With open line for to and the we on

Operator

are conducting we session. [Operator question-and-answer Now Instructions]. our

question first from from is Mckenna Citizen coming JMP. Our Brian

Brian Mckenna

Okay.

the terms is the quality there a the one portfolio you level these. much related How a is update to But in position quarter? X strong today? given very portfolio just resolving nonaccruals team today? the company today. a last companies your talk of clearly on of then spending team you today broadly, maybe the And any on then could about to credit management you So more details then years? couple nonaccrual lot And grown And just on question other over in provide The size during the of any of is just can added of their just start. where the low headcount time is

Craig Packer

Brian, you questions X in like shoved there.

You're me we to to before portfolio. get be I going pleased remind Look, with to first continue the have overall, the to credit really couple.

striking. I think it's pretty

space. the ago, as year were they back as rates think a high I across

of minimis it in there the been would are similarly think we into direct it we're firms funds. a the we're in was and a with the was credit equity the is [ sponsors business put than couple challenges, -- OBDC. a really lot is direct testimony a a operational really would where private do plan we funding, I in We quality really the going cycle that a coming borrower as And concern de hold a into $XX the space higher that I happy this of it to company exposure And had really a quarter business was with position it the was is small and than -- as million And overall end ever through more image backed felt ] say of I we has credit just of several rates year And ideal quality lending up. a are across about here board. a exposures of than less quality by high the is it lot also some in had it's to had position which on higher appropriate companies been. We and space, forward. strong. working and think it's with that how other and

reflective a and of business credit-specific not to greater issues. that it's credit So issue any

X the them, other guess names, business. the that, I to Beyond them, case X taken of report, well, over nothing the in of we've one of

by call a of continue out to own on it's for and in And business business. the a for of the travel-oriented with interesting. the to [ the worked and capital light ]. I'll X patterns and that to several nonaccrual to CIBT other like, changing The and I name significantly been is because business one sponsors think vendors other continue hands rebuild really the impacted it's with sponsors will working just over that COVID to now, existing the X starts years travel diligently This last try we has as support the the work us and years the and business them. company was

hoping have have continue how up our we're a work to but But equity we'll companies, particular low avoid see, that position to at price. is very much firms just testimony better. see, to far very We it getting and the to to do model. private a marks to really We'll the that's central

asked you our to resources, management we portfolio our workout significantly think resources. have added and I

and people that investment team Our about overall probably whole is XXX doing portfolio are there's XX XXX management of time workout. those

some are the Our approach to here workout is, similar growth, have some different.

We have the they connectivity that even company very credits into team workout, the in and valuable maximizing know to if the underwriting best, is consistency involved that our they think we and stays recovery. is existing go

if workout different will. our you team, into workout So receptive approach a other beyond our we whole really than -- enough group, pushing a is the have more firms little which more use size, they're team. My

So capacity, It's restructured. on marks over not the and a top is anymore. business equity that of in the our PLI debt been of It's it's business will I take business took took was feel the own walk we although we that value you loan. the our you company pretty accrual original during position, very comfortable way realized first see made if that you through if position, today, COVID. what today. basis in our much a back equity there's loss of XXXX, that the that what in that we We But we combined when -- an have

think creation. of to to that scale horizon business, able headed testimony we declaring to And core Part I declaring point a with are on maximizing business our new it's direction think we of the realized long-term a to team is supplement at very we'll play our so are. a a or take value report that's direct management think lending that And team. I'm recovery. over yet, a value existing work proposition again, some where time I -- that but have with victory. And We for management in it's, not victory, haven't to I be that being that ability to to long

realize I case that. our we study think PLI when will ability be hopefully it do great a to on

most know I think got I I I'll Brian, if you and missed it. give I one of more So don't that shot.

Brian Mckenna

Yes. that No, that's back I great. all appreciate I'll into another and color. hop the queue And on quarter. great congrats

Operator

Alexander Your Compass question from coming is Casey from next Point.

Casey Alexander

X because is Brian's understand question sort interconnected. Again, like sounded that everything everything I

what you private that about discussion of the money market. the refinancing work return that broadly see contributing Your And is market? back want Does little in up, some bit to in spreads, equity fact a syndicated to, that upper spreads the you all some upper guys tighter the that middle loan to of the like seems tighter private is and of equity of combine middle rejuvenation the market.

Craig Packer

of for very and bid end there a The deals. commit good. commit loans, I to rejuvenation. healthy leverage completely has the function buyers is the of strengthening year to the market CLO markets to think this the been deals quite And year a is and towards confidence that's the finance creation quite from is bank's to last giving bank's CLOs, primarily syndicated and being great of since willingness word

price in And willing so that be attractive commit, certain and to the banks are market distribute the for companies. can

open normalization I The normal tracked has have direct going public and environment. It certainly business most and more existence, of the history of on open. natural direct the have direct. most fully to has functioning public making been does and seeing, choices. market in been healthy private half a contribute have to increasingly That been been the are those you're execution a flows, environments lenders of say, mix as the market. banks and And last some deals since towards public private the that our is today execution. finance got been functioning markets normal year, market sponsors ourselves, and the they've market environment trend. markets so spread for first shot the choices, fully and growth But trend that's and impression a and in corporate the decidedly more has of markets would the And market they're our on market trend were lending But environment, a charge our such of think picking this of have can I

there to price there's to And forthright. contribute and that so that a can spread compression be

spread of function and think also rates I of the capital, are is markets. it's a compression going owners private competition. to of other come Expectation capital, we there's generally just the really credit has raised a economy. direct capital, have But have health good down, so

on we're of tight end the that So we've the range direct seen spreads in of lending.

tighter it's kind but things is it of think end probably I the it's where where troughed of on are. now,

cyclical little a think think a it and to be lending. that and balance. going more markets, I So to a pretty it's skews little continue to the about trend along The the the public the like Right There'll to forth. periods private swing the is markets. be I back time I'd direct ends talk where of to we'll now, cyclical. more secular healthy secular

tightening. And so some you're seeing spread

Casey Alexander

normalized generally face consensus follow-on very quarters, are times. the you as of going helpful. base mentioned, of last dividend that, some. raised that a X question My a is In couple the That's what to you've is, rates

that JV able is rates growth one and to way of your the got and Board the be the the again. right finance going the What I'm to all leverage cover going dividend now? ratio confidence gives the So together way. raise sure dividend verticals? those how rates curious specialty Or But of you expanding going is or somewhat you're down, kind modest things holistically, mix base -- adequately ratio to other to make a it it has the come that maintain base as of and to that potential confidence you

Craig Packer

Sure.

X.X dividend. thoughtful be to how only we we have tried notion felt shareholders. of really would So much more the I we it our And thought really when a -- not about years gone up, that share that income. about does way was portfolio to we of ago, rates set really perform the I lens that generate think introduced to right do with this the And and -- higher higher clear than back to pull we've about to confident a level function, what's supplemental dividends.

rates shareholders on have that would that how understanding rates predictable flow of of a to thought higher -- through it. a So [indiscernible] great and lot very our got all we We and feedback them. earnings

that mechanism worked well. has think I really

had base earnings, ], to extremely in We've XX raised some And we since then stay doing for generated supplemental. And so XX, a earnings the portfolio is is for well the our at X dividend time, terrific happened row. what we that we have record higher [ and quarters longer, [indiscernible]. rates

what shareholders growing And enjoy so covered. is our would what adequately that was -- you base supplemental than more a in

wanted expect hard hard. you payout don't We [ And thoughtful enough some peers further? around And have right appropriate we would cushion at have comfortable so think an ] looked and have our around lower insensitized did we the about cushion that a of we to We lot as $X.XX assumptions we assumptions to more us dividend think even complacent in that a work and making a share. to and with a to than balance do we some our we portfolio felt their making -- not -- drop, environment ratios, we wanted we're quality performance. and Do as about and raise success. credit the to, that the rate dividend additional really rates raise credit just

we And so that. did

selling in as base we base of to to very would our should We just that's dividend rate in curve. of continuing in the over raised tend supplemental is a And share. up. cushion invest that. $X.XX earnings will that the if come rates BDC going plenty shareholders forward look Rates up, investing understand supplemental. We Naturally, be is expect fundamentals went come I the to not rates comfortable rates down. some assets. what or isn't down, floating And we share. -- a are But We putting we're down, our down. this go the It's but there. come earnings time If if a it's complicated. up at dividend like BDC went put $X.XX a lower and There We base of earn more think feel cushion ours.

so we comfortable. And felt really

doing range, our your fundamentally, credit fundamentally, at environment. new We we continue doing. of we finance question, performance, But we would will our in So feel just as to that are said, those in what great about dividend accretive, we lower we to just our invest keep like do rate good to to especially continue looked and tweak verticals, what model. some continue sure the We're exactly stay higher, we specialty deliver going We certainly holistically. levers, portfolio. don't we're change it feel any have really confident in to target to need leverage in the

Operator

Group. from next Our question is Eric Zwick coming today from Hovde

Erik Zwick

I just of also that companies activity curious, pipeline add-on new wanted and themes a in I what of opportunities the kind normal. of like attractive are of the any the whether today. in seasonally is with kind pipeline of the seeing in versus you of but comments, or the mentioned that not first commonalities type I'm start, know to in today, in look mix terms start of out and of you're industries the range as the pipeline, look has to been prepared at slow you question on terms

Craig Packer

that moderate. new up return that, year, Sure. economy to dividend new a ] in selling buyout add-ons, in companies imperative think rate hope/expectation should capital pick it's and LPs have and new stable that a It's an pickup it's to environment they're that their for new capital should really the reflect itself will at tell a generally you significant would to in we'll result I mix, deploy, financings. more see a my refinancings, buyouts, that point [ mix. sponsor that remains this activity opportunities, And I some

I wouldn't some, was I might first So at that this but lower seeing we starting say in a year, hopeful see I But point the we will. [indiscernible]. it's some quarter, think

some increase -- healthy point to some I over robust. skewed would it's are more mix, would time. at wouldn't There a activity. those, I buyout of think it's So new but reasonable I say it's a environment will not of it sort call it that be

Erik Zwick

equity in at embedded and gains just and your terms to the you realize of are as common investments inclination some of total terms -- what concentration these both Next, dollars continues your percentage overall grow portfolio what in in looking a about how potential frame? is the over the to of assets, and time

Craig Packer

Sure.

the So the look, assets to you're senior pools I investments, are companies typically essentially majority loans. common are company, portfolio of of that underlying verticals. lien are OBDC, think are vast that where first investments Where investments all less technically, familiar our finance equity with while for shareholders them those their secured referring equity in specialty

characteristic in. income with deep of more teams that companies by domain the it, our underwritten the stream, the and of it's is expertise common And equity, diversified stream they're investing portfolio, so loans credit in of an management half than majority of dividend of vast a a

way. that assets owner, but an that of very are consistence, very stream indication These And and that in economic, as generate of we a our diverse part of have investment an are to So standpoint, it's methodical And stake ] which of getting portfolio we to pools that our and addition of from but ROEs. And which of invest to I is job, Amergin, are continue portfolio. teams on realize value and newer, key creating more, a generate We for as those to we that again, think have we this account number equity their all in of earn that. X% a so, equity that's our valuable is any where is, grown the plans do good either business. think us, ago, examples, lending we equity have we growing are to also standpoint, but valuable minute our asset-based it that combination equity like a pool of a is predictable smaller de really building income. of through enterprise common we insurance as will pure of those to business, couple you been income assets would others an generally will each do and a season, [indiscernible] as sort our or it PLI sort certainly equity more. No rail like from an over but [ our an be X%. we valuable asset if that to settlements and off co-investments, positions. It's essentially income mentioned who aircraft a minimis. we're us stream, of We business, took ownership have call life double-digit I'll have going really to and business, be do of that generate much companies income to asset business. we it of very We've what these,

to to it. do long-term on OBDC, Day It did with this long-term understanding we'll think this. been we minute Investor could and a did so, be and really powerful would generator. gain continue come I for has I we a happy to away, whole year, a urge shareholders So it spend but a section return our last income When and

website. still think of I on available that is our all

a take listen. you're So again, newer, if please

it. would us come a a I specialty will to sure these relief, e-mail we're not in -- you're get of away building not Which go think if have I of hold We what some excited about but verticals. how

Erik Zwick

And for explanation. last That's a one me. helpful

the rated XX, either in portfolio companies Just X. there or $XXX a increase looking about million at Slide X was

you the during downgrades developments drove little a wondering those recent quarter. at talk that So companies bit if could about the

Craig Packer

this Yes. of one calling but I nonaccrual nonaccrual our alluded our the call, But note percentage one X% name, for in I those point more increase a X%, a the those we movers to marks midst this so rate name. don't is the each Xs the X%, put i X%, We overall stayed you'll names on ratings on the that us out have same. couple out down on significant a individual certainly call made and was on disclosure of underperformance, X%, quarter. -- did an we X%, X%, of have It was which at category.

the the this a So I in earnings given that had how mentioned and is calls issues, are, mentioned expected our would the offer we given rates this wouldn't, we just it again few I on point credit to consistently have at on pretty expect I -- you we move. rate it what and cycle, call

grouping faster a really well And We're I press the problems combined credit with names for essentially, have say losses above a loss higher were off cash a by adding X% stable, expectations them. But rate the downgrades of so stable. environment. our performing that's concern new burden continue what those a growing of fact handful have X%, to of couple have a names the stayed and X%, just stayed not that reflected -- debt as concern. a because would than the list their concern year, been starting that that There's and is, our less as high been that is

what areas these, a about our course portfolio that's time portfolio, But went and I ] talking we are can on they again, that the overall of a is. reverse of bundle that team workout don't press concern. want with the hope the aggregate. So of you're on but These X.X% it. couple minimize in to are [

a very of a lot spend small pool few on. names to to we're So it's a time going that of continue

Operator

Instructions]. [Operator

question is from coming Our next KBW. Johnson of Paul

Paul Johnson

a in just year Obviously, but overall, was income fee potential do of $XX active income think decline mean, I maybe term, you I potential fee a very Kind generate near the it the forward. relatively fairly on of $XX meaningful a there's rates? so slower guys, mean, you year, income over this to of some million there quarter from or for portfolio. looking to on offset billion going some fee

Jonathan Lamm

of increase as that we the prepayment-related Yes, that there expect certainly very was income, relative activity, muted and we said, fair you have amount of repayments this driver of I And earnings. last and and quarter, had some an $X the was for think can year, sales of some say to of that billion those some in where pickup the But couldn't will in represent to income rates. dampen rate-moves, income the certainly, from mute Depending offset dollar a on we magnitude an overall rates. fee or for the decline dollar, be activity depending to it will rate activity that certainly, those moves. route in the on will we of

Craig Packer

see it I a pickup accretion. hope stand activity And as where there's at and meaningful fees pickup we as would a that some in well in that talked point, now M&A role reason a I a role, real about

at saying number to been So it's bit point M&A don't necessarily happen robust but at low. happen this first environment, some expect a much a not it I little quarter, either, point. happen will I it frustratingly the expect but more want should to -- in pick of it better myself. quarter sort since it's I up to some

Paul Johnson

that markets? syndicated as do to leveraged the potentially potentially there's of starts liquid to pipeline the guess today, you loan the activity? to flip I back, are market more And expect see deals come And over some in the

Craig Packer

We see [ -- I are It's today. to wild again, to happened wait not ] It's to we have now. happening expect public markets see. is already something -- the

they them. deals Our for they want making how choices direct looking the public deals. about of open certain today, public market a to in money at, we're deals And to wide actively finance are market, despite certain for continue choose sponsors pipeline the

can course gets We decision that choose refinance it of and there we'll They quality get expect that's a making. to from this ordinary to in seen as environment portfolio continue markets. little that a companies in execution. it would As and company's high that, has repaid have be, particularly, some for and I that, will see of really the in -- good expect performed, public a been some We've while. delevered I

So that may of the continue expect will. to to us that. normal life, if sort do you generally us I come of from circle

a I normalized So it's just think market.

of it getting state new back, If go direct. affairs. Everything that had we harm. have ago was going and continue normal a This payments deals an and affairs. assume That a would one we is an to forever. you, way our can when And is that that stay remaining portfolio of to and an invested. not keeping success year overall really wasn't think environment I good a we we state would cautioned one not of healthy have

Paul Johnson

public contrary been growth maybe Appreciate private a feel the markets going that. what's in kind then little been as into valuations sector, like this broader the mean, a upper seen to guys in to higher I'm affects expansion peak rates. markets? adjustment you Or multiple surprisingly have that's I I year year tech last market, of curious, of you're public I how the the And in really this to today? on market the just we've strong how that the the bit the last in? markets public whole. that affect had market, have you at year that I'm and in does with middle mean, that market play kind just the that looking companies curious

Craig Packer

-- And opportunities track very and to We great Private to a a returns have tremendous a market amount really firms like have years. all last capital, the that that institutional markets work significant over a equities some a terrific the it's exposures quite deploy to the quite go their to we many, see is equity tremendous generate ]. bust continue often equity finding like, wasn't public bit, LPs a have expertise, for really They market record at sort years. [ choose of private were capital, of tremendous that closely private with That's of many amount they equity year. got generated really we the point, excess and Brazil. returns in in It We firms. of were active back.

anyway. point, one, want but is obvious an But to it I just make which a I'll make

valuation loan want resources. have the equity private a lending get to return, Their repaid. form loan of in downside a firms very have lot a is cushion value. to feel the to We're XX% We lenders. and confident drive capital really and form great can is our to we we role that from get we are a average our at quite scenario, of on commitment they We equity whether in goal

resuming much is that think as reason see M&A what sponsors, the going I the patient. being some a market they're they're I of as private seeing. of see high, you you're think needs they valuations can really deserve. doing wait confident the part not they X to haven't year, They to or pulp that valuation they the we're why seen companies to That get that. sell rush feel and months They

problem. dumb don't sound of part to that's want down. But I but has think it's tried our [indiscernible] M&A not it, or about I why slowed

until value be or to are equity And [indiscernible] is even valuations distracted beneath private how at and problem underwriting lower that meaningfully if significant money public it. don't we back good even I Our us, thesis, our with sure that's backing might going down and making bit are be just we're central that's or market assume go analysis, we just comes operational look market will which downside get off, high value, we're, we too multiples results think companies a by our covered. get and to valuation we our through

Operator

from from coming Thalmann. Schleien Ladenburg Mickey is question Next

Mickey Schleien

calls. I'm that already impacting I'm see BSL apologize the been market that capture understanding but to you And if interested next in may has and asked, into be juggling Craig, I is year? my spreads the year normalizing. you how going that multiple question the mentioned as able progresses you

Craig Packer

Sure, I my about open. not mentioned normalized. don't because remarks, Mickey. a tight been see They're They normalized. they're They're in hike. We did public We markets this in -- It's spreads talk open. we bit. have prepared are normalizing,

markets capital, a price-check moderate some deal of capital, lot it's compression. lot firm public of a that seen environment a generally, a that's spread higher so private at. you've look equity And so in markets the And

on I don't of than very current higher ranges. is remain much go already high. end to that tight because on think short-term It's very are just the know remain deals. lending almost high going our I returns of taken effect all in now. new historical And rates we Absolute

base all rate there's a that do at in that meaningfully current so even And XX-plus base be of will [ of percent, we lower. ] at unitranche X that years we're earning rates, if recognize a likelihood the good but over still X we

earn And a But there. will a like. last that over bit how will By think exactly forward markets the down the the rates come there's and way, coming what look look of assuming maybe we're reconsideration so time. are we'll we for curve. And fast I at

in -- tighter, picking companies We work [ returns, market it's a So category markets. and typical for with between private get ] still than livable and returns in on the sponsors back more and spreads are great just to they're us. public more

that solutions. ] We continue a OID that slated underwrite you, premium the to [ at. not premium And spread, get guys, but higher only essentially

is, always but be clients and it continue where basis, We we relative tightened premium. not a and to as all on we're return the stay in should earn the market conditions. about still the remind we relative like but earning to all a shareholders market around markets think on But will running premium the a a and environments and based got you may I to premium offer same, asset -- will nice premium, much, move

a gives of that little context. bit hopefully, you So

Operator

Next coming question Markets. today from is Lee from RBC Kenneth Capital

Kenneth Lee

normalization of to kind the or the perhaps loan of could focusing piggyback questions. Do types shift you're on any markets. ] or given writing capital you or you syndicated anticipate the sectors be on investments making within size of on either Just in of the [ the probably the loan leveraged either structure the just

Craig Packer

really recession of market. an predictable our really part. sort activity. very this. parts sectors trying resistant like We not of thought I on earnings and we on track of cycle, it's time noncyclical like not We're the equity boring with -- private We're lack economical to in

years, we for find distribution where brokerage, and of activity. businesses, most our food spot. a opportunities, parts our a we software, continue health lot care, been some see Those sweet services lot businesses, sectors significant of And to consistently have best so and beverage, of that's insurance the

several We be from it's our but space, funds to many And industry going seems deviate software offset factor a that. Our not biggest like the software continues we're to is of the that we that funds lot. sector that for single have. best

X cyclical a not be that economy X-year good conditions reassuring for loans, to willing to thought years. economical really should make underwrite if So we we might we're year [indiscernible] the I for investors, be think X, for or

that right growth. the think we so And that's

underwriting lend So variety our and really businesses serve a is lot types predictable can And what revenue That's what stream. we of find do a single markets, those a no We underlying you and recurring of that they process. very economic that's the factor that of end feature defining businesses out. of on change. the depending seek

Kenneth Lee

Got you. I if Very helpful there. And X may. follow-up,

a give given new I any documentation the terms been investments, and terms you change bit investments? seeing on just what the wonder you've little new of current in In just landscape. of could more in been And if color then terms whether there's

Craig Packer

business Overall, areas That's in about our We terms we of the what not nearly need underscore in collateral the the the exposure what's and than We draft credit cash have. and sort are fundamental protecting protections, and actions better to this, like. have credit that the ourselves, public don't significantly And different, in the but pragmatically given protections. they in public remain around only lending. same strong significant given to returns simply the that for that I get care do. the very flow can that markets. really a It's protections the to companies position we our leakage the liquidity protect buy CLOs be particular, to we loans,

fundamental. is just -- just much we better we So got a

can will they are not. There we now, and the won't agreements You as rest last Subtly, when if strong no X been on deals we the doing as which markets But sacrifice can that and we've not are are edge, leverage economics are things in credit the that, deals, or change. of X consider what actions creep will a do. there the few fundamentally are fundamental, on credit evaluate years, our in the appropriate. how

not market a that quality. for small couple and really feel will I those every a that about we reasonable deals We credits, to There's fundamental I pick. to us, very in. for It's we not to really It's we or do, are it. overall of see if only loan really, very we're and ability do on in our And conditions, of but but sacrifice nothing that about way. of matter. wrapped couple think circumstances read of credit in for will the a do You'll willing do those that that high-quality markets our number reflective it, very, good you won't credits, right be, features

Operator

Next question from is coming Truist from [ Mark Securities. ] Hugh

Unknown Analyst

for you we've specific in several that calling ratio you for seen range Is ramping down, for presumably the Mark there mind last activity leverage 'XX, quarters. in In ticked the as starts a mentioned the I'm 'XX remarks, Hugh. prepared up? had investment net which

Craig Packer

said roles time, X.XX ] been same at the a range, The long [ quarter. we've we in as

deal it billion billion margin, ratio the This that look quarter, on prefer be there's little flow. nothing can't to with about lower. [indiscernible]. higher, leverage We we tweak had $X origination, a the but deliberate $X of [indiscernible] It's on I bit bit a manage to just I us repayments. trying

try a I think it's little just a function of the deal low and bit. we'll optimize to

Our returns are record returns, record NII, record ROE, terrific. putting up We're record NAV.

is bit if a us of rate We [ returns. ] our of reduction. comfortably a little reassuring it arrow And we quiver all to [indiscernible] that peak. not be so to on do have attract not and it stretching little and We're leverage, be time gives can out more it there do should deals. that at a I do We're stretching offset and bit can mass but not think levers to

Unknown Analyst

Yes, that's helpful.

the you credit are industries there attractive, having find mentioned your but portfolio that industry And issues so you that in more particular are others? any

Craig Packer

We issues. have credit very few

couple competition there's or of up, consent couple more and those really are There's maybe overall, of low supply of I facing loosening EBITDA chain some all businesses no board say, industrial commodity they're consumer-facing single-digit when that price revenue that would a factors some a pressures a across bit challenges. growth. but are So benefiting and X. having there's are were having supply chains struggle. the was businesses There

of think a our well, weakness, broad would strength thematic portfolio. list. speaks of that to So every about we comments company there's Aires But great the I'd I say is doing loss [ have perfectly ] no and I make

Operator

of session. to end I'd the comments. for any closing over floor like further to question-and-answer management the our turn back reached We

Craig Packer

everyone, much, joining. so Thanks pleased for really quarter. with the We're

look If questions, you we again you have any soon. other and seeing you with to I forward and with love you, please, speaking to engage

Operator

webcast. Thank and you. That does the teleconference conclude

this We day. your participation have disconnect time, thank today. a at your and you may wonderful for lines You

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