Monroe Capital Corp (MRCC) 2017 Q1 法說會逐字稿

Welcome to Monroe Capital Corporation's First Quarter 2017 Earnings Conference Call. Before we begin, I would like to take a moment and remind our listeners that remarks made during this call today may contain certain forward-looking statements, including statements regarding our goals, strategies, beliefs, future potential, operating results or cash flows.

Although we believe these statements are reasonably based on management's estimates, assumptions and projections as of today, May 10, 2017, these statements are not guarantees of future performance. Further, time-sensitive information may no longer be accurate as of the time of any replay or listening.

Actual results may differ materially as a result of risk, uncertainty or other factors, including, but not limited to, the factors described from time to time in the company's filings with the SEC. Monroe Capital takes no obligation to update or revise these forward-looking statements.

I would now like to turn the conference over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation.

Hello, and thank you, to everyone, who has joined us on our call today. I'm with Aaron Peck, our CFO and Chief Investment Officer. Last evening, we issued our first quarter 2017 earnings press release and filed our 10-Q with the SEC.

I will first provide an overview of the quarter before turning the call over to Aaron to go through the results in more detail. He will then turn the call back to me to provide some closing remarks and then we will take some questions.

We are very pleased to have announced another strong quarter of financial results. For the quarter, we generated adjusted net investment income of $0.35 per share and net investment income of $0.36 per share, covering our first quarter dividend of $0.35 per share. This represents the 12th consecutive quarter we have covered our dividend. Our book value per share decreased slightly to $14.34 per share as of March 31, primarily due to the increase in unrealized mark-to-market decreases in the value of a couple specific assets in our portfolio, neither of which we view as a permanent reduction. At quarter end, our highly diversified portfolio had a fair value of $418.1 million and was invested in 65 companies across 23 different industry classifications. Our largest position represented 6.4% of the portfolio and our 10 largest positions were 35% of the portfolio. Our portfolio was heavily concentrated in senior secured loans, in particular, first lien secured loans. 94% of our portfolio consists of secured loans and approximately 84% is first lien security. Over the past several quarters, we have continued to migrate our portfolio towards first lien loans to take advantage of the better risk-adjusted returns in the senior secured part of the market. As we have discussed in the past, MRCC is very well positioned for future interest rate increases. Most all of our loan portfolio is invested in floating-rate debt with rate floors. Given the current LIBOR level, we have surpassed the level of the LIBOR flows on about all of our loans and, therefore, we believe, MRCC is well situated to meaningfully benefit from any increase in short-term interest rates going forward. In addition, we have $60 million outstanding in fixed-rate debt from our SBA debentures, which will allow a significant interest rate arbitrage on any increase in LIBOR in the future. As we have discussed in prior calls, middle-market companies and private equity firms continue to look at alternative lenders, such as Monroe Capital for lending solutions, instead of traditional regulated banks. As a result, we continue to see numerous origination opportunities across a variety of sectors. Our external manager, Monroe Capital, maintains 8 origination offices throughout the U.S., including one in Canada, and reviewed over 2,000 unique investment opportunities last year. The lending market remains highly competitive where new entrants as well as other BDC managers are being aggressive in an effort to put new assets on the books or to replace runoff. We continue to remain highly disciplined in our approach to new business origination. While we pass on over 90% of the investment opportunities we identify, we still have a considerable number of high-quality and attractive opportunities in our pipeline. In fact, 34% of our new fundings in the last quarter came directly from our existing portfolio company add-ons. That is a luxury that comes from the Monroe Capital platform with about $4.1 billion in current assets under management. Our co-investment exemptive relief from the SEC enables us to co-invest alongside the numerous private institutional funds we manage in order to provide comprehensive financial solutions to our borrowers. Our disciplined underwriting and focus on credit quality has helped us deliver consistent income and dividends to our shareholders. As we continue to ramp our SBIC subsidiary over the next several quarters, now that we have fully invested the equity portion, our ability to access the second tier of leverage associated with the recently approved increase in our SBA debentures should positively impact our per share net investment income, all other things being equal. Currently, we continue to maintain $0.43 per share of undistributed net investment income, which in our view provides a significant cushion in our ability to maintain a consistent quarterly dividend payment to our shareholders without returning capital.

I am now going to turn the call over to Aaron, who is going to discuss the financial results in more detail.

Thank you, Ted. Our investment portfolio continued to grow in the quarter and as of March 31, the portfolio was at $418.1 million at fair value, an increase of approximately $5.2 million since the prior quarter end. During the quarter, we funded a total of $41.5 million, which was due to 2 new deals and several add-on and revolver fundings on existing deals. This growth was offset by complete prepayments and sales of 7 deals and partial repayment from other portfolio assets, which aggregated $33.8 million during the quarter. At March 31, we had total borrowings of $136 million under our revolving credit facility, and SBA debentures payable of $60 million. The increase in outstandings under the revolver and the increase in SBA debentures are the result of portfolio growth and a build in cash in anticipation of additional deals that were funded shortly after quarter end. As of March 31, our net asset value was $239.6 million, which decreased slightly from the $240.9 million in net asset value as of December 31, primarily as a result of net unrealized mark-to-market decline in the portfolio. This was driven primarily by 2 discrete events. The first involved the culmination of our credit bid procedures in the fourth quarter and the continued turnaround in Q1 in a portfolio company called the Picture People, with a mark-to-market reduction of approximately $1.65 million. Monroe has now -- now has full control over that business, and we are encouraged with the changes to management and the new business plan being implemented there. The second is due to a $1.35 million reduction in the equity valuation for Rockdale Blackhawk, as Rockdale has reduced its projected EBITDA due to the reduction in reimbursement rates from certain payers. As a result, our NAV per share decreased slightly by $0.18 from $14.52 at December 31 to $14.34 per share as of March 31. Turning to our results for the quarter ended March 31, adjusted net investment income, a non-GAAP measure, was $5.9 million or $0.35 per share, flat when compared to the prior quarter. At this level, we continue to cover our quarterly dividend of $0.35 per share. During the fourth quarter of last year and during the most recent quarter, we had no distributions from our investment in Rockdale Blackhawk, which had averaged $0.09 per share per quarter for the first 3 quarters of 2016. As we have discussed on previous calls, the timing and amount of future distributions are out of our control and are difficult to predict. We also, generally have a robust level of prepayment activity in the portfolio, which is additive to earnings and returns, but quarter-to-quarter this activity can be volatile and unpredictable. While fees and other income due to prepayment activity was somewhat greater this quarter when compared to the prior quarter, it was still lower than our recent historical average level. Additionally, this quarter, we generated net income per share of $0.15 per share, a decrease from the prior quarter amount of $0.45 per share. The decrease is primarily attributed to an increase in net unrealized mark-to-market declines in the period as I've already discussed. Looking to our statement of operations. Total investment income for the quarter was $12 million compared to $11.2 million in the prior quarter. The increase in investment income is primarily as a result of the growth in the portfolio during the period and an increase in prepayment gains during the period. Total expenses of $6 million included $2 million of interest and other debt financing expenses; $1.8 million of base management fees; $1.3 million in incentive fees; and $867,000 in general, administrative and other expenses. As for our liquidity, as of March 31, we had approximately $64 million of capacity under our revolving credit facility. We also had access to $65 million of additional SBA debentures at quarter end.

I will now turn the call back to Ted for some closing remarks before we open the line for questions.

Thanks, Aaron. Given the current state of the market and the performance of many of our peers in our industry, I'm very pleased with the performance of MRCC. Since going public with our IPO in 2012, we have maintained a relatively stable book value, almost boring, while generating a 39.6% cash-on-cash return for our shareholders based on changes in NAV and dividends paid since our IPO, assuming no reinvestment of dividends. Based on the closing market price of our shares on May 8, investors that purchased stock in our IPO in 2012 have received a 46.2% cash-on-cash return, assuming no reinvestment of dividends. On an annualized basis, this represents greater than a 10.4% annual return for stockholders since 2012. We believe that these returns compare very favorable to those achieved by our peers and puts MRCC in a very small and elite group of BDCs that have delivered this level of performance on a consistent basis for shareholders. In closing, we continue to cover our dividend with adjusted NII. We have grown our per share NAV since the beginning of 2016 and paid out $1.75 in dividends since the beginning of 2016. We have one of the more shareholder-friendly fee structures in the industry. On every metric within our control, we have delivered solid value for our shareholders, and we intend to continue to do so. Based on our pipeline of both committed and anticipated deals, we expect to maintain our new investment momentum for the remainder of this quarter as well as into the third quarter. With our stock trading at a dividend yield around 9%, fully supported by adjusted net investment income and a best-in-class external manager, we believe that Monroe Capital Corporation provides a very attractive investment opportunity for our shareholders and other investors. Thank you all for your time today. And with that, I'm going to ask the operator to open the call for questions.

(Operator Instructions) Our first question comes from the line of Leslie Vandegrift of Raymond James.

So you discussed it in the prepared remarks earlier, but just a quick refresh on the outlook for Rockdale, if you could. I know the timing of dividends can be spotty, but you talked about their EBITDA expectations changing and that leading to the markdown there. So kind of what do you see as a catalyst, if they need one in the next few quarters, where we're going?

Sure. Thanks, Leslie. So let's just first make sure we're really clear on something that. The change in mark that we're talking about was the mark on the equity piece. The debt piece is still marked really close to par. I can't remember the exact mark, but very solid on the debt piece. I'll also recall that the equity piece was not a piece that we invested in, but is the piece that we got in -- for making the debt investment. And you'll see an allocated cost to the equity piece, but that was more of an allocation of original costs. But we funded principle debt and received equity in exchange. So just add that as a backdrop to remind people. And so yes, it's true that the future forecast for EBITDA has been muted a little bit for Rockdale based on some changes in reimbursement rates. Anyone who invests in health care knows that reimbursement rates always change and they usually go down. So that's always anticipated when you're involved in a credit like that. And the third-party firm that does evaluations certainly was considering a possible future reduction in reimbursement rates when they looked at valuation. And so some of the issues around trying to value the Rockdale Blackhawk equity was that it's always been very difficult because there was always a projected decline in future reimbursement, which made it difficult to know what EBITDA to pin to in terms of making a valuation. And so the good news is that we feel at this point that, if you will, the other issue is dropped on reimbursement and so there's a lot more clarity on reimbursement going forward, which gives the EBITDA numbers that they're using a lot more certainty. And I think the valuation part, we obviously, are the ones who sponsor the valuation at the end of the day feel comfortable that the valuation reflects sort of the current state of the environmental reimbursement and it's sort of at the right spot now.

Okay. All right. The one dividend -- the one communicated dividend and that was education core, again, correct?

Right. So that's the preferred -- that's a dividend on the preferred, which has a contractual rate. So that all things being equal, the credit continues to perform, which it has, should be consistent level every quarter unless something were to change in that credit, but that's not variable based on earnings like Rockdale's is.

Okay. That's what I thought but I just want to make sure. And then, on the add-on loans to the two nonoccuring debt amendments, so InterCore and the Picture People. Each one had a bit of an addition this quarter, but the overall marks went down slightly, only a few percentage points there. But could you walk me through the reasoning behind the -- if, yes, they weren't looking better after that?

Sure. So as it applies to TPP or Picture People, as we talked about on the call, we're now in control of this name, and we're in a turnaround with the new management team. And that company has always had a seasonal need in their first part of the year, as a lot of their revenues and EBITDA come at the end of the year. And so it's very traditional for the lender to need to fund into that deal. So that's what's happened here. And so the expectation and hope will be that the company's performance and data will continue to improve through the year. They will have a strong end of the year, which will allow the company to be in a position to repay some of that funding need. So that's that one. Answers as a -- is a more syndicated club deal that went through a bankruptcy, and so they were funding through a debt and that thing has now emerged. That was a very small funding amount, like $100,000, which was money good funding and then, that now is coming out of bankruptcy due to emergence and you'll actually see the entire Answers piece that we hold, have a very different look as we get to the end of the quarter as the company has gone through a full restructuring. And so something more to talk about, I think, as that becomes clear at the end of the next quarter, but -- or this coming quarter that is, but that's a deal that we don't control.

Okay. All right. Now that makes sense. And then on -- just a last question. You mentioned on the call and I think I missed the number, but how much of the originations in the quarter were from add-ons rather than new companies?

Right. So I believe the number is about just a little less than $11 million in terms of add-ons. Well, let me get back to my notes.

I think, its $14.5, Leslie, out of 41, which was 34%.

I'm sorry. Yes, that will -- just a little bit less than add-ons, term loans and delayed draws and about $3 million in revolving fundings, which may -- gets you to that $14 number. And then, about $26 million, 2 new deals were added in the quarter, Echelon and Midwest Wholesale.

Our next question comes from the line of Christopher Nolan of FBR Co.

Ted, when you mentioned in your closing remarks, the expectations maintain investments yields for the rest of the quarter or something along those lines. Can you clarify on that a little bit?

Yes, sure. What I think I said was that I expected to maintain our new business originations at a consistent performance. Our investment yields, I think, if you look at quarter-to-quarter were flat. And given where we sit today, we're seeing more consistency in that as well. So I think that you can expect to see more of the same in Q2 and into Q3 from the pipeline of where we sit.

But one caveat, I'll make to that, Chris. As you recall we've said in the past that as we fund into the SBIC subsidiary, it gives us the flexibility to do -- to put on some more lower-risk loans that have slightly lower yields and still maintain our ROE. So as we have been -- as it stands today, we've been consistent and flat, but it wouldn't necessarily shock me if we saw a little decline in yield as we continue to ramp SBIC sub-deals as we are using the extra leverage as a way to maintain our yield and not increase the risk.

Got you. That's good stuff. I guess, the second question and just generally, I know you guys like to use your revolver facility, but given the prospect of possibly higher debt costs or higher interest rates, could we see a term loan facility or something on those lines? Or is it just going to contain the lines of the revolver?

It's possible. Chris, it's possible. Aaron and I are very -- we monitor the rates side of our balance sheet very carefully. And we've got a number of alternatives that we've been examining. And I think that helps up until now we've made the right decisions and how we've used the right side of our balance sheet, and we'll continue to monitor that. And if we see the opportunity to do some term loans here at attractive prices for us, I think we may take advantage of it, but right now, I like the capital stack in the rate side of our balance sheet.

I'll also remind you that we do have significant fixed rate debt in our SBIC debentures. So we are already basically taking advantage of the low rate environment for a portion of our liabilities, and we'll continue as we take down the rest of the debentures through the year.

Final question. I've noticed with a fair amount of banks that cover as well as BDCs, is everyone sort of taking these knocks in terms of either realized or unrealized write-downs? Are you guys seeing anything broader in the economy in terms of weakness in C&I originations or asset quality or coverage ratios, something more almost systemic you would say?

I think that it depends on -- Chris, on what part of the market that you're investing in. I can speak to the lower-middle market where we play, which is that $30 million EBITDA size company and below. In that market, I think, the companies are more -- have been more stable. And earnings have been more stable, suppliers have been more stable and generally, if you look at our portfolio, which is about 230 companies, we see more consistency at that level. Once you go above that and start looking at the larger size EBITDA companies, kind of $50 million and above, many of those companies are generating sales overseas as opposed to the lower middle market. And the companies that are generating sales overseas are very impacted by a stronger dollar. So if you look at our portfolio, especially the CRO portfolio that we manage, many of the larger sized EBITDA companies and the names are seeing some softness in revenue and some issues with gross margin in the larger EBITDA size companies. So that being said, I think there's a difference between kind of company size. And number two, which is, I think, just across the industry. I think, the valuation firms, at least, the high-quality valuation firms are taking an increased focus on valuations, and I think are attempting to be more thoughtful and that's why, I think, you're seeing some minor valuation adjustments across the board as an industry, notwithstanding some of us play at different parts of the capital that soft EBITDA size companies.

Our next question comes from the line of Mickey Schleien of Ladenburg.

Ted, another high-level question perhaps along the lines of Chris. Certainly, the new administration has more of a pro-growth strategy. I'm interested to know if that is increasing your level of interest in second lien opportunities. In other words, do you think the risk-reward ratio there is improving?

That's a good question, Mickey. And I will tell you that I do not believe the answer is yes. And the reason why is because second lien is a great business when you're coming out of a downturn and you're going into a growth-mode economy. The challenges, is today there's lots of capital chasing deals and the risk-returns that we're seeing in second liens don't justify the extra leverage that are being put on the companies. If you look at our portfolio across the board, we're catching it probably a little less than at 4 turns of EBITDA. And when I talk about that, I'm talking about across our entire platform. Second liens today are anywhere around 5.5 churns. And given what could potentially happen in the marketplace, I don't think you're getting compensated fairly at 9% or 10% for a second lien loan today, given where we could be investing at the first lien. And if you look across the industry, many of our peers, I think, are seeing reductions in valuations and some risk in their portfolios where there's heavy second lien.

That's very helpful, Ted. And talking about first liens, your weighted average yield on the portfolio actually was up slightly for the quarter and that's despite a higher waiting in first liens in a market with decreasing spreads. Can you help me understand that trend given that you just said you're not taking on more risk?

Yes. I would not read too much into 0.1% of 1% increase in yield. Some of that, Mickey, could relate to deals that were getting paid out of deals where we earned prepayment penalties or deals where we generate other types of yield throughout the term that may be amortized or not. I think that where we are right now is a good place. If you look at first lien across the board in our industry, I think we're at the very high end of generating first lien deal returns, yet, also at the very high end of generating lower attachment points of our debt at under 4 turns of leverage. So part of the reason, again, is the platform. I talked about this in past calls. We generate -- we've got about 2,000 investment opportunities that our origination team looks at each year and of those 2,000 investment opportunities, we tend to execute somewhere between 2% and 3% of those investment opportunities. So we're able to, I think, really carefully select the very best risk-return opportunities for us to invest in with the very best companies. So that's why, I think, you see a unique combination of strong yield, but very low leverage attachment points when you look at our portfolio.

That's helpful, Ted. And just one sort of housekeeping question, maybe for Aaron. I realize Answers is not a particularly big position. But based on your comments in the prepared comments, was it reasonable to assume that's going to go up nonaccrual in the coming quarter?

I have to get back to you on that. I think, what will happen is that it will change completely in terms of the tolerance. Some of the debt was equitized, some of the debt was reinstated. And so my suspicion is once we go through all that analysis and get to a final conclusion sometime later in the quarter, we'll make a determination about what should be on accrual and what shouldn't. But it would be incorrect for you to look at the full balance of answers, and say all that comes back on accrual because that will not be the case. So unfortunately, for your modeling purposes, it's going to be a bit of a black hole until we get to the end of the quarter, and we'll make some determinations in the next few weeks here about what can accrue and what can't. And I do think some of this will be accruing again. The first piece of reinstatement, I just don't have an answer for you today, unfortunately.

That's fine. I mean, it's not a really large position, but I do try to model it at that level.

Our next question comes from the line of Brian Hogan of William Blair.

The first question is focused on credit quality. You've done, I think, a great job of managing credit quality ever since we've known you. And so I just think the last several quarters we've seen the kind of a weighted average risk rating gradually creep up and it's still very good. I was just thinking what's driving the moving parts within there? I mean, obviously, grade 3 moved up a decent chunk and grade 2 moved down. Can you just kind of explain the moving parts here?

Sure. I would be happy to. Good question. So there's a couple of things I'd put here. One is as you ramp a portfolio, given the nature of debt and given the fact that we -- I don't remember ever moving something from a 2 to 1. The natural migration is that some -- everything comes on as new as a 2 and some things invariably will not perform as well and will move down in rating. So I think it's the natural season of a new company will see some decline in its average risk rating. So that's part of it. And the other part is that we're actually pretty conservative about how we mark things in terms of risk ratings. I always say, it's kind of a like a roach motel. It's easy to get in, hard to get out. So it's very easy for a credit to move down to a 3 and move from a 3 to a 4, but it is very hard for us to have something up from a 4 to a 3 or a 3 to a 2. And so we tend to be very conservative about those moments, and I don't think it's anything more than that.

I appreciate that. And then a question on, I guess, Ted, where are you seeing opportunities today? I mean, what sectors, what is most appealing today? Where is the highest returns today? Or is it just broad-based?

And that's a hard question to answer, Brian. It's not -- we're not necessarily looking for highest returns. I realize that many of our or some of our peers in the industry may be doing that, but that's not our business model. We look for consistence, good companies that cause us no headaches. That's our game plan here. And as part of that, we tend to want to have a diversified portfolio across lots of industries and tend to finance companies that have a reason to exist in their particular industry and have good management. I think if you look at it, as opposed to the kind of the return side of the equation, it's good companies that have a reason to exist that have good management. And over a long period of time, the returns take care of themselves. I mean, we've been doing this in the public side for -- since 2012 with our private funds, we've been doing this since the year 2000. So I will tell you over that period of time, in and out of many credit cycles, it's really the quality of the company that matters. We've got a good mix between private equity-sponsored companies and nonsponsored companies, and we tend to have, as I said earlier, pretty deep origination and a sourcing coverage throughout the U.S. But we also have industry vertical sector coverage, and I will tell you that the industry vertical sectors that we operate in have been positive contributors to our overall return in yield. And the industries that we cover on a sector basis are health care, technology and software, specialty finance, retail, ABL, consumer and the last one is media. So within those specific industries, we've been able to take deep dives and try and identify the very best companies in those spaces.

All right. I appreciate that. I mean, there are more, just little housekeeping things. But did you mention, and I guess, probably maybe missed it, the spillover earnings that you've carried over?

We did. We have approximately 40, what's the number?

$0.43.

$0.43.

Of the spillover earnings that we are carrying over.

All right. And then, in addition to your $64 million of capacity on your facility and $55 million of SBA debentures available, what would you classify as being transitory assets that you could maybe swap out of?

Yes, I mean, basically, the way I think about the transitory assets is it's mostly anything that's a first lien loan, sort of below 7%, is typically transitory. So you won't see a lot. We have -- we had one we sold in the period for a small gain, as we saw some opportunities to fund into direct yields. But there's not a ton of what I'd call transitory assets right now.

(Operator Instructions) Our next question comes from the line of Christopher Testa of National Securities Corporation.

Just curious on your ABL platform, whether you're seeing increased better opportunities there? And whether we should anticipate any pickup on that composition within the MRCC book?

Thanks, Chris. We're looking at lots of opportunities there. And the question that we're always focused on is in ABLs, extended to general ABL, that's a very competitive market from a return standpoint because the banks -- the traditional regulated banks are very active in that space. So it's very competitive and the challenge there is to find opportunities that we can generate the required risk-adjusted returns that we need for the MRCC portfolio. And then in the retail space -- the retail and consumer goods ABL space, all you have to do is pick up the papers to read about what's happening there and we're very, very focused on liquidity, not only collateral coverage, but liquidity in those companies. And when you put the 2 together as underwriting standards, collateral coverage and liquidity, many of those companies don't meet the screens. So we've been highly selective in that space in the last 12 months, and I would assume we're going to continue to see a similar pattern there, where unless we can find companies that have good collateral coverage and good liquidity, we're probably not going to see an increase in this type of asset in the MRCC book.

Got it. And just curious, do you think that the pickup in competition in ABL is somewhat similar to cash flow base-lining or less, or more so, just curious on how that stacks up?

It's probably the same, if not more, because you've got the regulated banks coming into that space more heavily, again as well as some of the nonregulated players. So what's happened is that's caused yield compression there probably at a greater rate than in the cash flow lending business.

Okay, got it. And just curious, I know you had said that you're finding the best opportunities obviously, in sub-$50 million EBITDA borrowers. Are there any deals that you're seeing where you're using the exemptive to relief and co-investment to take on larger bite-sizes, larger borrowers and finding some good opportunities there as well?

Oh yes. Oh yes. Because of our platform, we've got an active capital markets group that's seeing lots of opportunities in the larger EBITDA size companies, and we've executed on many of those as a platform and some are in the BDC and MRCC. And from there, it's really a question of, as I said earlier, 2 things, pricing and leverage attachment points. That market tends to be a little more competitive both at pricing with higher leverage, and we're not going to sacrifice our core underwriting criteria, But I'll tell you that there are spots that we identify and there's deals that we're able to do, because we're part of the club and a lot of these kind of privately negotiated, almost high-yield placements, private high yield where we're able to provide a financing solution together with a couple of other club participants to some of the larger EBITDA size companies.

To frame this, I mean, I don't think there's more than 1 or 2 assets on our balance sheet where the key is the sole enroll lender.

Got it. That's great color. And then just looking at the investment mix, obviously, unitranche has been something that you guys haven't done a lot of originations in. Just curious if you see this picking up again, and if you've been holding back on this because you're not liking the pricing and structures or because the sponsors are not demanding that as much as maybe a bifurcated structure given there's not a lot of growth acquisitions going on?

So unitranche is an important part of our business as a platform. We do quite a bit of it. Again, the BDC underwriting criteria is very specific. We're focused on maintaining yield, and we're trying -- at responsible leverage levels. So some of the unitranche that we generate in agent is appropriate for MRCC and some of it is not appropriate for MRCC.

Okay. And last one for me. Just you guys have mentioned that most of your originations were add-on investments. Just curious if you have an estimate on what the uses of capital were for your existing portfolio companies?

Yes, I think, I covered that in my remarks. I said about 34% of the originations in the last quarter related to add-on. So the remainder were new fundings and the advantage that we have is a portfolio is with 230 names across our portfolio and over $4 billion. We generate a robust level of activity each quarter just in dealing with our portfolio companies. I expect that to continue throughout the remainder of the year as well.

Just to be crystal clear, Chris. The majority of the fundings in the quarter were new deals, not add-ons. We got $26.3 million in new deals, $14 million as add-on to revolvers.

Thank you. And I'm showing no further questions in the queue at this time. I'd like to turn the call back to Ted Koenig for closing remarks.

We certainly appreciate everyone who joined the call today. And we look forward to speaking to you in our next call as well as off-line to the extent you have any specific questions. Have an enjoyable day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the call. You may now disconnect. Everyone, have a wonderful day.