Barings BDC Inc (BBDC) 2015 Q1 法說會逐字稿

At this time, I would like to welcome everyone to Triangle Capital Corporation's Conference Call for the quarter ended March 31, 2015. All participants are in a listen-only mode. A question-and-answer session will follow the Company's formal remarks. (Operator Instructions) Today's call is being recorded and a replay will be available approximately two hours after the conclusion of the call on the Company's website at www.tcap.com under the Investor Relations section.

The hosts for today's call are Triangle Capital Corporation's Chief Executive Officer, Garland Tucker; President and COO, Ashton Poole; Chief Financial Officer, Steven Lilly and Chief Investment Officer, Brent Burgess.

I will now turn the call over to Sheri Colquitt, Vice President of Investor Relations for the necessary Safe Harbor disclosures.

Thank you, operator, and good morning everyone. Triangle Capital Corporation issued a press release this morning with details of the Company's quarterly financial and operating results. The copy of the press release is available on our website.

Please note that this call contains forward-looking statements that provide other than historical information, including statements regarding our goals, beliefs, strategies, future operating results and cash flows. Although we believe these statements are reasonable, actual results could differ materially from those projected in forward-looking statements.

These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks, including those disclosed under the sections titled Risk Factors and Forward-Looking statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and quarterly report on Form 10-Q for the quarter ended March 31, 2015, each is filed with the Securities and Exchange Commission. TCAP undertakes no obligation to update or revise any forward-looking statements.

And at this time, I would like to turn the call over to Garland Tucker.

Thanks, Sheri. I would like to welcome everyone to this morning's call. As we begin the call, I would like to ask Steven to discuss Triangle Capital's new format for disseminating quarterly information, including certain changes to our earnings call format.

Thanks, Garland. We're changing the way that we communicate our quarterly information in an effort to provide analysts and investors with as much information as possible in what we think is a more efficient manner.

Beginning this quarter, our participatory earnings calls will focus primarily on the key drivers and reasons behind our quarterly results and trends in the BDC industry, with less time being spent on recounting the raw financial statistics for the quarter.

Our meaningful statistical and financial information for the period will now be available on a pre-recorded on-demand podcast on our website. The goal is for our participatory earnings calls to be more informative, more efficient and more in-depth, in terms of providing color around Triangle's results and the BDC industry in general, as well as allowing more time for responding for analyst and investor questions.

You can access the podcast via the Investor Relations section of our website following today's call. In the future, the podcast will be available on our website at the same time we file our quarterly earnings announcements, which will allow analysts and investors to be fully briefed prior to our official earnings call.

And with that I will hand the call back to Garland for his opening comments about the first quarter of 2015.

Okay, thanks Steven. Coming off a robust fourth quarter of 2014, in which we invested approximately $128 million, the first quarter of 2015 represented a continuation of our active participation in the market as we invested approximately $100 million in Q1. We were especially pleased to achieve net investment income on a per share basis of $0.54, which as most of you know, is equal to our base quarterly dividend. From a background standpoint, for the last nine quarters, even as our investment portfolio has recycled in a meaningful way, we accumulatively earned our quarterly base dividend on an NII basis.

Other major achievements included our successful $86 million bond offering and our recently announced significantly expanded $300 million senior credit facility. Not only it was an active quarter and in my opinion a great start for the new year.

And with that I will turn the call back over to Steven.

Thanks, Garland. Let me jump in and provide some color behind our financial results. First, from a revenue standpoint, our first quarter's total revenue of $30.8 million was positively impacted by $4.9 million of non-recurring fees and portfolio company dividends. I should note that this level of non-recurring fees and dividends is similar to the $4.7 million amount that we received during the fourth quarter of last year. We're always pleased to receive non-recurring fees and dividends and with an investment portfolio of 90 companies, it's certainly reasonable to expect that we will have a certain amount of this type of activity in any given quarter. However, you should note as do we that the first quarter of 2015 represented the second largest quarter of non-recurring fees and dividends that we've experienced since our IPO over eight years ago. I would estimate that the positive non-recurring fee and dividend impact on our NII, during the quarter, to be approximately $2.6 million or $0.08 a share, as compared to the $0.08 per share that we experienced during the fourth quarter of last year.

And analyzing our total operating expenses this quarter, there are no significant items to mention, other than simply allowing for the fact that our interest expense is a bit higher on a sequential basis owing to the issuance of our $86 million baby bond offering in February, which on an annual basis, adds approximately $5.8 million of additional interest expense and debt financing fees to our income statement. Furthermore, our debt financing fees will increase by approximately $3 million on an annual basis as a result of our newly closed $300 million senior credit facility, so you will want to be sure to include those items in your forward-looking models.

During the quarter, we generated net realized gains of $3.3 million, which brings our cumulative net realized gains since IPO to $48.7 million. Our NAV on a per share basis was $15.64 as compared to $16.11 at the end of last quarter. The primary drivers for the $0.47 per share change in our NAV are the $0.05 additional distribution to shareholders that we paid in March, unrealized depreciation in the amount of $0.38 per share, relating primarily to our non-accrual assets and $0.14 of stock-based compensation which occurred in February, partially offset by $0.10 of net realized long-term gains.

Our baby bond offering during the first quarter and our new $300 million senior credit facility provide us with significant liquidity as we move into what historically have been the most active quarters of the year. Including the effects of our new credit facility, we have total liquidity in excess of $350 million, which feels very comfortable at this point in the year.

And with that I'll turn the call to Ashton for some color on the investing market.

Thanks, Steven. The breakdown of our $98.2 million in total investments during the quarter is as follows. $79.2 million were new investments and $19 million were follow-on investments. The average size of our three new investments was $26.4 million and the weighted average interest rate associated with all of our new debt investments was 12.8%, which is consistent with the weighted average interest rate associated with the debt repayments we experienced during the quarter of 12.7%.

In terms of market activity, almost all of the industry participants with whom we regularly converse, described the first quarter as meaningfully below average from an M&A standpoint. While the first quarter is typically the slowest quarter of the year, most industry participants cited a pulling forward of transactions into 2014 as the primary reason for the first quarter's reduced volumes.

From a TCAP specific standpoint, our three new investments were generated by personal relationships, including one transaction where we enjoyed multiple personal and professional touch points with the portfolio company, which resulted in a $22 million investment for us.

From a macro standpoint, we believe the current M&A environment continues to favor sellers incrementally over buyers for several reasons. First, financial sponsors are still flushed with cash and eager to find high quality companies. Second, financial markets are opened for business and provide needed liquidity. Third, valuations can exceed expectations for high quality businesses, especially those with large addressable markets, demonstrable organic growth opportunities, high margins and strong free cash flow conversion.

Many companies which were not pulled forward for sale in 2014 were waiting to complete their 2014 audits before actively engaging in an M&A process. Now that most of those audits are complete, many M&A bankers and advisors have recently indicated to us that while Q1 activity was meaningfully below average, their pipelines are refilling and they are optimistic that increased activity levels will remain for the rest of the year.

However, we are seeing some potential sellers actively choosing to wait to go market, based on their belief that the underlying value of their businesses will improve over the next 6 to 12 months. Some operators are basing this view on positive underlying fundamentals associated with their businesses, while others are observing industry valuation multiples expand and they believe the expansion will continue. These data points, perhaps more than any other, illustrate to us that many long-term business owners are beginning to feel increasingly comfortable that the economy is in a much healthier position than it was just two or three years ago and that it is poised for a near-term path of slow growth, coupled with a still very benign interest rate policy.

So, on balance, we believe the healthy, cautiously optimistic M&A environment will continue to offer favorable transactions and investment attachment points for many BDCs, including TCAP.

And with that I will turn the call over to Brent to discuss certain aspects of our investment portfolio in more detail.

Thanks, Ashton. From a high level, our investment portfolio with a fair value of $877 million looks almost unchanged from last quarter's fair value of $887 million. However, after allowing for almost $100 million of new investments, approximately $90 million of repayments and $3.3 million of net long-term gains, there actually was a lot of activity in the quarter. From a portfolio analysis standpoint, we experienced $9.2 million of net unrealized depreciation on our current portfolio which falls into two buckets. The first bucket relates to our underperforming investments, which had write-downs totaling $6.4 million. The second bucket relates to our other 82 companies which experienced a total net write-down of $2.8 million.

So, as you can see ,the vast majority of our investment portfolio from a valuation standpoint was basically flat quarter-over-quarter, while our investments which we previously placed on non-accrual, are continuing to experience some write-downs. Also of note, our current investment portfolio has fewer seasoned equity investments than perhaps anytime in our eight-year history.

Within the portfolio today, we have equity positions originated in the last 18 months totaling $37 million that are being valued either at cost or very near cost. These investments are on average only six months old. As a result, from a valuation standpoint, our current non-accrual assets are weighing more heavily on our portfolio than we expect them to in the next 12 to 24 months, as our new equity investments mature and hopefully begin to accrete in value.

From a credit quality standpoint, we removed one account, Minco, from non-accrual, as our debt investment was fully repaid. We were pleased to exit that investment at a value $700,000 higher than our carrying value at the end of 2014 of $5 million. Offsetting this good news was the addition of one account, Eckler Holdings, a $7.3 million investment to non-accrual status. You will notice on our scheduled investments in our 10-Q, this account has been carried at 76% of cost, which is a higher valuation than we have typically had for non-accrual accounts. The reason for this valuation is that while the company has underperformed its budget, it is not in our view an overly-strained asset. We were blocked by the senior lender after our covenant violation occurred. Based on our overall assessment of the company and the other participants in the company's capital structure, we believe Eckler Holdings will work through its operational challenges without a meaningful restructuring of its balance sheet.

As a result of the following activities, our non-accrual assets as of March 31 totaled 6.1% of our portfolio on a cost basis and 2.9% on a fair value basis, as compared to 5.8% on a cost basis and 3% on a fair value basis at the end of the prior quarter. More than 15% of the cost basis value of our non-accrual assets relates to CRS, which went on non-accrual in September of last year. Since that time, we've been working diligently with the company and the other stakeholders of CRS in a cooperative manner to provide the company with operating liquidity. While the company's business plan remains attractive, albeit at lower levels of sustainable cash flow, the company's stakeholders are actively negotiating how best to provide the company with an opportunity to move forward with an appropriate capital structure. We expect to be in a position to provide more of an update on this situation during our second quarter earnings call.

There are no meaningful updates with our other non-accrual assets other than to say that we're closely monitoring each situation with the focus of maximizing value. Over the years, we've found that while some BDCs are tempted to act quickly and recognize realized losses on their non-accrual assets, we've had more success working alongside portfolio companies and our investing partners in an effort to realize the best outcome for all parties. And frequently, we've found that while our approach takes more time, on average yields a better financial outcome.

So in summary, we're pleased with the overall health of our investment portfolio. We are happy with our newer equity positions and believe they will appreciate in value as the underlying companies to which they are attached continue to perform well, and we're working diligently to maximize value in our non-accrual accounts.

With that I'll turn the call back to Garland for any concluding comments before we take questions.

Thanks, Brent. In closing, let me say that we hope you've found our new conference call format informative and that you'll find the prerecorded information on our website useful. The first quarter represents a great start to the new year for Triangle and we look forward to continuing to update you as we move through the year.

And with that operator, we'd like to open the call for questions.

(Operator Instructions) Ryan Lynch, KBW.

Your debt investment in specialized (inaudible) was marked at 83% of cost in the quarter. However you guys have an equity piece that's marked at over two times your cost basis. Can you just help us reconcile the thinking behind that investment where you've a sizeable markdown in the debt investment, but the equity is still -- [went up] substantially?

Ryan, it's Steven. Brent, is in a remote location today, so I'm going allow him to answer your question since it relates to a portfolio, a specific portfolio investment, but just wanted you to understand that we're in a different location so that's why I'm doing the hand-off.

It's currency related, the investment was made in Canadian dollars. So, the company is actually, as you can judge from the equity mark-up are performing very, very well and as is the debt and so no concerns there.

And then CRS took another write-down in the quarter, can you just give us an update on that business and maybe specifically related to CRS' largest customer and that reorganization process, and then also does the new mark-down in CRS kind of represent what you would expect to get if that investment was eventually restructured?

Ryan, it's Steven. I will take a stab at CRS. We really, I think, should keep our remarks to the prepared comments that we had earlier, I think we tried to be very specific there in what we said. And the second part of your question as it relates to, does the mark or the move in value relate to what we would expect to get for the investment. I mean fair value is fair value every quarter. So, I would keep that portion of my remarks there I guess. Sorry, we can't say more at this point, but I'm sure you can appreciate the reasons why.

And then just moving to the right side of your balance sheet for a minute, you guys have $70 million of baby bonds outstanding with a 7% cost that have become callable in March. Is there any appetite on your part to call this bond with the new closing of your new, much larger credit facility?

We're delighted to have the flexibility under our credit facility which closed on Monday of this week to be -- I guess I would say like we did in the press release, to analyze our balance sheet and have the capacity to think strategically about things like what you just raised. There hasn't been any announcement to that effect, but certainly we do have the capacity and the flexibility.

Bryce Rowe, Robert W. Baird.

Ashton, I was hoping you could comment on yields and yields on new investments. Understand that the weighted average yield on the new investment this quarter was attractive at 12.8% and above what we have seen for the previous two quarters, just wanted to get a sense of what you kind of expect, given market conditions now going forward? Thanks.

You're right, the yields that we were able to achieve on our new investments were attractive, they were all subordinated debt investments on the three different transactions, as I mentioned in my remarks. I think the debt-weigh on those was around 12.8%. So, we felt very good about that. On our add-on investments for the debt-weigh was a little bit north of 13%. So that's the beauty of add-on investments as you get to often invest at rates that were previously agreed to. So, overall, we feel very good about the yields that we were able to convert on in Q1. I'd say that there is a lot of compression of yield out there, it's very competitive. So we typically, as you know, target sub-debt yields in the 11% to 14% range. I think, when we look at the market today, we're seeing on unitranche anywhere from [L650 to L850], usually with the LIBOR flow of 1% and I would say that general yields that we are seeing in subordinated debt are anywhere between 10% and 13%, even though that historic range of 11% to 14% is what we have stated in the past.

So I would say a slight tick downward into the more competitive range is what we're seeing. There is just a lot of cash out there, a lot of competition. But, as Steven mentioned upfront, the three deals that we -- the new investments that we were able to make in Q1 were personal relationship deals, the ones that were not heavily shopped and really where all the parties valued relationships, trust, partnership that often trumps price. So, we feel very good about where we are and we intend to stay very focused on maximizing yields on behalf of our investors.

Great. I appreciate it. I like the new format too. So, thanks for that.

Robert Dodd, Raymond James.

Just focusing on the repayments for a moment, obviously you had a very high number for [fee] originations. I mean can you give us any color on -- I mean are we seeing another phase of your portfolio going through a refinancing, because as you say, people are more optimistic in terms of -- still pretty aggressive and it certainly doesn't sound like it's M&A activity at this point taking out your portfolio company. So, is this refinancing, and can we expect another sort of long cycle of refinancings in the portfolio?

Robert, hi it's Steven. A quick answer and you may get more color from Ashton and Brent. Personal opinion, I think that's all you're going to be able to get, because we obviously can't forecast repayments with any degree of accuracy. Personally I don't think so. We have had some amount of, I guess, more elevated repayments intermittently in the last couple of quarters but not like what we saw back in 2013. And as you look at our portfolio, I think 50% of the value of it has been originated in the last 12 to 15 months. So our weighted average life of investments is still 2.6 to 2.7 years, which hasn't moved meaningfully really since our IPO. So, to me, statistically that would bear out that we might be moving towards some quarters, maybe second half of this year and beyond where we might be a little below lower than average, but obviously, time will tell. But Ashton, I don't know if you'd add anything to it?

I think you've captured it.

Just on the new revolver, in the past you've been -- you tended to underutilize -- I think that's a heavy one -- your revolving capacity on the old facility. This new one, if I read it right, if the use is under 25% there is a 100 basis points non-use fee, which is obviously pretty pricey. So, is this flagging an intent essentially to be a bit more aggressive on the use and that's relative as well, on the use of revolver for liquidity and a willingness to actually kind of consistently carry a somewhat larger balance on that facility?

Robert, its Steven. The two things there, number one on the unused fee, I think if you kind of look around the industry, BDCs like us, it is I think a pretty typical unused fee, if the facility is not somewhat utilized, we actually I think have a lower breakpoint than many do in terms of at what point of usage the unused fee would actually contract. So I guess first point is we feel pretty good in terms of the transaction the banks were willing to offer us and we just are really proud of our bank group and the leadership that BB&T and ING and Fifth Third provide in that facility.

In terms of usage, we certainly have, as you point out, then less willing historically to have a meaningful percentage of our capital structure in floating rate bank debt and frankly, more of that has been because of the size of our overall capital structure. And I think we said for three plus years that having anywhere from 10% to 15% of our capital structure at any point in time in floating rate bank debt feels appropriate to us and it's really just been the timing and the cycling of opportunities. We have obviously been, as I alluded in your prior question, we have had more heavy repayments back in 2013 and we're building the portfolio back in much of 2014 and we have had other forms of capital available to us and our facility was smaller.

So I think today if you look at the capital structure at about $1.2 billion, rough numbers, you know if you had a couple hundred million dollars of bank debt outstanding, not to imply we will get there overnight or have a set financial plan to get there, but we -- I think that would be about a 15% range, which is right in the middle of our glide path. So, does that give you the color you're looking for?

Absolutely, very helpful. Thank you.

Alright, thank you Rob.

Chris York, JMP Securities.

So, I did want to follow up a little bit on the senior credit facility, did have a question on non-used fee, but we just talk about that. Is there a floor like there was on the previous facility? I believe the previous facility had a 200 basis point floor.

There is not a floor on this facility and I know that you were covering a lot of BDCs, Chris. So in deference to that, but there was not a floor on our old facility either. So it's consistent with this and so you may have been thinking about somebody else.

And then can you talk a little bit about competition, or competition more specifically in the lower middle market, so we have seen a lot of private funds enter the lower middle market. How has that kind of changed competition and potentially term sheets, what have you guys been seeing?

Chris, hi. Thanks for your question. It's Aston. Yes, we are seeing increased competition from a lot of different areas on the non-bank side and your point on private funds is a good one, there has been a host of announcements recently by competitors forming private funds, sidecar funds, however you want to describe them. I would say that often those announcements have been in conjunction with competitors that are smaller in market cap and therefore have a needed ability to write larger checks and the way to do that is to have private or sidecar fund adjacent to any publically traded business like a BDC.

So, yes, we're seeing and that's the reason why those are there. In terms of sidecar funds that are focused on the core market that we have historically played, which is the mezzanine or subordinated debt market, we haven't seen some -- really any of those get formed, it's been more on the second lien and unitranche side where typically -- or even more on the senior loan fund side, where we are seeing those private funds get formed. So, it's the banks have continued to retreat from the lending arena, as GE has announced their strategic initiative, you're seeing a lot of competition go up the balance sheet and try to get more senior. So that's where we're seeing most of the action, if you will, around these private funds that are getting formed.

And then last quarter we talked a little about the use for the investment portfolio, you guys thought that potentially a $1 billion was achievable. Now where we stand today with Q1 behind us and I think $15 million in activity in quarter to-date. Are we still kind of thinking that $1 billion level is achievable?

Chris, it's Steven. Let me just level-set for other folks who are on the call with your good memory there. I think Garland at the end of our last call had said that if the market plays out the way we think it could in 2015, then we would, in all likelihood, end the year with a portfolio greater than $1 billion. You know with a cost basis today of [$926 million] and fair value of [$877 million] and three quarters to go, I think we would say there is still certainly that likelihood. I think it is also fair to say, certainly some other BDCs have seen their portfolios contract in the first quarter. We were effectively flat, but the overriding comment I would leave you with is, I think what Ashton was trying to hit on earlier in his comments that it's always in doing what we do hopefully, quality over quantity, and that's what we try to focus on, and always have, and I think that will be the biggest guide post as we move forward. Ashton, I'm not sure if you would add anything or --

No, I think that's right. I think with three quarters to go and where we sit, we had a good first quarter of originations. If you look, at $100 million that's better than two of the four quarters in 2014. So we feel very good about the investments that we made in Q1. And going forward, as Steven said, there are two inputs here, there is the external input of just the absolute flow of deals that we see, which we have no control over, and then there is the internal assessment of the quality of the deals that we see. And that is always obviously a major driver of what we choose to ultimately pursue and go after. So we always take both of those in balance and quality is always going to be at the top of our list, and we're not going to push for a $1 billion just to push for $1 billion sake. If we get to $1 billion because we've quality investments to make, then we will get there, hopefully, with some good luck and hard work.

Definitely can understand that don't want to pursue asset growth just to grow assets in spite of credit quality. And then lastly, I believe we had 25 employees at TCAP at year-end. How many investment professionals do you have as of March 31, and what are your thoughts on potentially adding one or two throughout the year?

Well, the top-down first, we still have 25 team members today, so there have been no changes. I think as we look out with both what we would call internally, the investment group and the finance group, there are opportunities to add a person or two around the organization as we move through the year at the right time for the right person. But I don't think we've ever been accused of being overstaffed, Chris, though, but I do think that we're a portfolio in terms of number of companies and assets has not moved materially in the last three months. So it's not a three-month decision for us, it's been more of a longer-term strategic one. But a year from now, if we had between 25 and 30 employees, not that we would be at 30, but something higher than 25 a year from now, I certainly would not be surprised by that.

Greg Nelson, Wells Fargo Securities.

A couple of quick ones for me. Obviously, after the equity raise last year, you had talked about kind of opening up the investment funnel doing more unitranche deals, given you could take lower yields and utilize the leverage to make it accretive to shareholders on an NOI basis to get earnings in-line with the regular dividend and the supplemental dividend. Now, we've kind of seen the shift back towards more subordinated, and you mentioned more competition upon the balance sheet making those deals, I guess, less attractive. So are we seeing that funnel close back -- that wider funnel close back up with less opportunity in the unitranche now, which will make it slower portfolio ramp?

Greg, it's Steven. I'll let Ashton respond to you on this front and chime in if anything else --

Greg, it's a great question, and it's interesting, Robert asked last quarter when we had more of a mix of unitranche, whether or not we were as a company shifting our strategy and my response to him at that point was, no that we were not, that we always look opportunistically on behalf of our shareholders to structure transactions in a way that can achieve ultimately the best outcome. And in those transactions during Q4, those were ones that were either requested by the sponsors or we were given the opportunity to structure it the way we wanted to, and we felt unitranche was better in selected situations. Unitranche is a very, very formidable and competitive product in our space today, so I don't see that product going away anytime soon, and it's certainly part of extra consideration that we see today and are actively looking at.

It just so happens that the three new transactions that we closed in Q1 were all sub-debts, and sub-debt for good reasons and we feel very comfortable about the way that they were structured. So, I'd say, on average, we're maintaining a balanced approach, as we have a pretty big funnel of transactions that come in the door. Often it is sub-debt only, often it's unitranche only, or often we're given the choice to provide term sheets for both structures. And so, ultimately -- what the ultimate end result is, they are based on many factors and the inputs, some in our control and some out of our control, and it just so happens that the ones we closed in Q1 were all sub-debt in nature.

And obviously, the deal that was closed after quarter end was also a sub-debt, but -- so are you still willing to go a little bit lower on the yield side for unitranche, and I guess on that note, how are you kind of seeing the flow in sub-debt first unitranche right now?

The flow on both -- I'd say, if you look at certainly the external publications, they will note that sub-debt, right now, is on the lower side in terms of market share. When you look at the transactions that are being done in a market that sub-debt is accounting for lower share of the securities used in the buyouts. But as one of the more active sub-debt providers in the country, we still see a meaningful flow of opportunity in that product as evidenced by what we closed in Q1. So I'd say our radar is good, it covers both products. We're willing to -- for the right transaction and the right structure, go the unitranche route and we're committed to doing that, and we've made that very clear with our sponsor partner. So I'd say that we're able and flexible to consider both opportunities.

And then finally, could you just talk briefly about capital contractors? Obviously, we saw [another] non-accrual, but I believe it had somewhat of a slight markdown during the quarter?

Yeah, I'll turn that one to Brent in his remote location. Brent, you still with us?

I am. Not really a lot to say here. The change in mark was pretty small and not a big change in company performance. As with our other companies, have some more challenges, we're working actively with our partners in the deal. And we're pleased with overall what's happening with this account.

Greg Mason, KBW.

I want to talk a little bit on GE, there has been a lot of discussion around it, particularly in the larger market given their massive size and domination there, but I'm curious your view of the lower middle market and the GE impact. Was GE there? Were they meaningful? How do you think the lower middle-market is impacted by the GE exit?

Greg it's Steven. You may get different answers from each of us here, but personal perception is they -- it's not going to have a significant impact on where we typically play. I think the only touch points would be in certain transactions where folks like Triangle Capital and even Triangle specifically is we might have a smaller percentage of our portfolio companies that are meaningfully larger in size. For us that would mean a portfolio company with $25 million to $50 million of EBITDA. Certainly you would see some intersection there or would have historically. Ashton, I know you and Brent may chime in too.

Sure, Greg, I agree with Steven's assessment. I think the impact on the lower middle-market is going to be muted. I think where you will see more of an impact is on the larger middle market. I was last week at a conference that where 90 or 100 private equity shops were present and many of them focused on the middle-market and had utilized the GE JV in the past for unitranche investments and many of them are trying to think through what their options would be going forward. So I think it's much more of a larger middle-market related issue versus one that affects us in the lower middle-market.

Greg, this is Brent. I actually think it will be a positive, we have certainly seen a lot larger groups moving down from the middle market into the lower middle market. We have seen a little bit of that activity from GE as well. I think with GE leaving the middle market, there is going to be plenty more opportunities there. So, I think the people -- the big guys that have been coming down into our market will move back up and they will help our market.

Great, thank you guys.

And with no further questions in the queue I would like to turn the call back over to Garland Tucker for any closing remarks.

Operator, thank you. Again we thank everybody for participating, there have been good questions and we look forward to staying in touch as we move through the new year.

Ladies and gentlemen, thank you your participation in today's conference. This does conclude the program. And you may now disconnect. Have a good day everyone.