SLR Investment Corp (SLRC) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2015 Solar Capital Limited earnings conference call.

My name is Joyce and I will be your operator for today.

At this time on participants are in listen-only mode.

Later we will conduct a question-and-answer session.

(Operator Instructions).

As a reminder this conference is being recorded for replay purposes.

I would now like to turn the conference over to your Chairman and Chief Executive Officer, Michael Gross.

Please proceed.

Thank you very much and good morning.

Welcome to Solar Capital Limited's earnings call for the quarter ended March 31, 2015.

I am joined here today by Bruce Spohler, our Chief Operating Officer, and Richard Peteka, our Chief Financial Officer.

Before we begin, Rich, would you please start off by covering the webcast and forward-looking statements.

Sure.

Thanks, Michael.

I'd like to remind everyone that today's call and webcast are being recorded.

Please note that they are the property of Solar Capital Limited and that any unauthorized broadcast in any form are strictly prohibited.

This conference call is being webcast on our website at www.solarcapltd.com.

Audio replays of this call will be made available later today as disclosed in our earnings press release.

I would also like to call your attention to the customary disclosures in our press release regarding forward-looking information.

Statements made in today's conference call and webcast may constitute forward-looking statements which relate to future events or our future performance or financial condition.

These statements are not guarantees of our future performance, financial condition or results and involve a number of risks and uncertainties.

Actual results may differ materially as a result of a number of factors including those described from time to time in our filings with the SEC.

Solar Capital Limited undertakes no duty to update any forward-looking statements unless required to do so by law.

To obtain copies of our latest SEC filings, please visit our website or call us at 212-993-1670.

Now I would like to turn the call back to our Chairman and Chief Executive Officer, Michael Gross.

Thank you, Rich.

In the first quarter, macro factors including continued weakness in oil prices further Central bank easing, the Fed pushing off rate hikes and dollar strength dominated the investment landscape.

These factors influenced asset flows and contributed you to a choppy market environment.

While the exact coming of rate hikes continues to be a moving target, the US economy is believed to be on a positive growth trajectory in spite of a weather-related slowdown in the first quarter.

The combination of relatively low rates and healthy economic fundamentals should continue to support a benign credit environment for US corporate issuers.

Middle-market loan issuance in the first quarter was only $9 billion, off sharply from close to $20 billion in the comparable period a year ago and off significantly from almost $18 billion in the fourth quarter of 2014.

Light M&A volume and low refinancing activity added to what is a traditionally a seasonally slower quarter.

Against this backdrop, Solar Capital had modest originations for the first quarter of approximately $30 million and de minimis repayments of approximately $6 million.

Through a quarter of muted new issuance activity, we succeeded in maintaining our portfolio size and we are pleased with the portfolio's strong credit performance.

Solar Capital has made enhancements to our core US middle market origination business, developed our life science's lending capabilities and are poised for growth in asset-base lending through our investment in Crystal Financial.

Since year-end we have added a senior investment professional to the sponsor origination team.

In addition, our strategic joint venture with PIMCO gives Solar Capital the scale and origination capacity to underwrite senior secured unitranche loans of up to [$120] million making us a more relevant partner to the sponsor community.

Having this capability has definitely put us in front of an expanded opportunity set.

In addition at the end of the first quarter, we added three experienced healthcare investment professionals reuniting members of a team who built our very successful life science lending business at GE Capital.

Historically, Solar Capital has originated on average $400 million per year in its core cash flow lending businesses.

Our investment in these additional three distinct pillars of growth both enhance and diversify our origination capabilities.

At this point in time, we expect annual originations in our traditional sponsor business to increase to $500 million per year and life sciences to add approximately $100 million of senior secured assets in 2015.

Originations at Crystal continues to be strong although their portfolio tends to be lumpier and their portfolio experience has higher churn.

Together with the $600 million of equity commitments and anticipated leverage, the SSLP joint venture with PIMCO will have approximately $1.5 billion of investable capital to underwrite unitranche loans.

Our growth engines are in place and we continue to expect lower repayments in 2015.

We are excited about the current opportunity set and we intend to grow our portfolio in 2015 with attractive assets that meet our underwriting standards.

Net investment income in the first quarter was $0.34 per share.

In our February earnings call, we anticipated that our net investment income would be lower in the first quarter reflecting lower portfolio balances resulting from the fourth quarter's heavy $224 million of repayments.

Approximately half the debt repayments were from high-yielding greater than 14% legacy subordinated debt investments including Graycon, Adams and Richelieu.

While we benefited in the fourth quarter for repayments of these higher yielding investments coming late in the quarter, they resulted in an anticipated step down in net investment income in the first quarter, which we expect to reverse in this quarter now.

Middle market finance activity has picked up.

Our originations are strong thus far in the second quarter and repayments remain modest which leads us to expect meaningful portfolio growth.

We remain confident that Solar Capital will cover its distributions for the full-year 2015 out of net investment income and are optimistic about our prospects for increasing distributions in the future as we invest our substantial available capital.

At the end of the first quarter, our debt to equity leverage was 0.24 times with net leverage of just 0.13 times.

Subject to borrowing based limitations, the total available capital for new investments was approximately $1.2 billion comprised of approximately $600 million of available capital on our balance sheet and approximately $650 million of off-balance-sheet, the majority of which is for unitranche joint venture and the remainder is available capital at Crystal Financial.

Having over $1 billion of available capital puts us in a unique position relative to our peers of not having to issue equity in order to fund significant portfolio growth or to increase our net investment income per share.

We tend to be aggressive and take full advantage of this competitive position.

Yesterday our Board of Directors declared a quarterly distribution of $0.40 per share which will be paid on July 1 (technical difficulty) record as of June 25, 2015.

At this time, I will turn the call over to our Chief Financial Officer, Rich Peteka, to take you through the financial highlights.

Thanks, Michael.

Solar Capital Limited's net asset value at March 31, 2015 was $930.5 million or $21.91 per share.

This compares to $936.6 million or $22.05 per share at December 31.

At March 31, 2015, our investment portfolio had a fair market value of $1.04 billion in 42 portfolio companies across 26 industries compared to a fair market value of $1.02 billion in 43 portfolio companies in 28 industries at December 31, 2014.

At March 31, 2015, the weighted average yield on our income producing portfolio increased slightly to 10.0% measured at fair value versus 9.9% at December 31.

For the three months ended March 31, gross investment income totaled $25.6 million versus $32.9 million for the three months ended December 31.

Expenses totaled $11.2 million for the three months ended March 31 compared to $16.2 million for the three months ended December 31.

Accordingly, the Company's net investment income for the three months ended March 31 totaled $14.4 million or $0.34 per average share versus $16.8 million or $0.40 per average share for the three months ended December 31.

Net realized and unrealized losses for the first quarter of 2015 totaled approximately $3.5 million versus a net realized and unrealized loss of $11.9 million for the fourth quarter 2014.

Ultimately the Company had net increase in net assets resulting from operations of $10.9 million or $0.26 per average share for the three months ended March 31, 2015.

This compared to a net increase of $4.9 million or $0.11 per average share for the three months ended December 31, 2014.

With that, I will turn the call over to Bruce Spoehler.

Thank you, Rich.

Today Solar Capital's portfolio has the highest credit quality profile ever.

Overall, our issuers are experiencing stable to modest earnings growth and the fundamentals are healthy.

Furthermore, we have no direct exposure to the oil and gas sector.

Our predominantly senior secured floating-rate portfolio construction should provide protection if the economic environment declines and/or interest rates rise.

At March 31, the weighted average yield on our income producing investment portfolio when measured at fair value was 10%.

The weighted average investment risk weighting of our portfolio remains at approximately 2 based on our 1 to 4 risk weighting scale with 1 representing the least amount of risk.

Our one investment on nonaccrual direct buy accounts for less than 0.5% of the portfolio at fair value with the other 99.7% of our portfolio performing at or above expectations.

Credit fundamentals are strong across the portfolio.

At the end of Q1.

the portfolio consisted of 42 companies operating in 26 industries.

Measured at fair value, our portfolio was comprised of approximately 60% senior secured loans, approximately 29% senior secured loans held by Crystal Financial, 7% subordinated debt, 2% preferred equity and just over 2% common equity and warrants.

Including Crystal Financial's full portfolio, which again consists entirely of senior secured loans, approximately 90% of our portfolio is in senior secured investments.

At March 31, approximately 87% of our income producing portfolio was floating rate, which again includes Crystal's fall portfolio when measured at fair value.

With that, let me give you a brief update on Crystal.

At March 31, Crystal had a highly diversified portfolio of approximately $486 million of funded senior secured loans across 25 distinct issuers with an average exposure of approximately $19 million.

During the quarter, Crystal funded new loans totaling approximately $40 million and experienced repayments totaling approximately $30 million.

All of Crystal's financial investments are floating rate senior secured loans.

At the end of Q1, Crystal and had a net debt to invested equity ratio of 0.8 times and for the first quarter, our investment in Crystal distributed to Solar Capital in a cash dividend of $7.9 million which is the equivalent of an 11.5% annualized cash on cash yield consistent with what they paid in the prior quarter.

Now back to Solar.

During Q1, Solar originated approximately $30 million of investments across one new and four existing portfolio companies.

All of the assets we originated were senior secured and floating rate.

Investments prepaid during the quarter were de minimis at approximately $6 million.

Now let me highlight a few of our investments.

We funded roughly $6.5 million investment of our $10 million commitment to a life science investment and a first lien term loan for AgaMatrix, which is the designer and developer of a blood glucose monitoring system for people with diabetes.

The yield's maturity on this investment exceeds 10.5%.

We also funded $10 million of a $20 million delayed draw term loan to Varilease Finance, which is an independent equipment lessor.

As a reminder in Q3 last year, Solar invested in the same security.

The loan to value on our investment is approximately 85% and our yield to maturity is approximately 9.75%.

Together with the add-on investment, we have a total investment now of just over $37 million and are looking to increase that going forward.

We also increased our investments in Aegis Toxicology Sciences through an opportunistic secondary purchase of an additional $4 million of the Company's second lien term loan.

Solar had originally funded a $21 million investment in the company in the first quarter of last year.

Owned by [Avray], Aegis is a leading player in the specialty lab services segment.

Our incremental purchase brings the Solar total investment size to $29 million and our yield on the investment approximates 10%.

We also increased our investment in Datapipe by $5 million via an add-on term loan to support the Company's add-on acquisitions.

As a reminder in Q3 last year we invested in Datapipe, which is a managed service provider.

Solar's whole position is now approximately $27 million and the investment there is a yield in excess of 9.5%.

And finally, we funded a $5 million add-on term load investment to Argo Turboserve, which is a specialized inventory management and logistics system.

Solar initially funded our investment in Q2 of 2014 and now with the add-on investment, our old size is $15 million.

The yield on this investment is just over 9% and pro forma for this recent transaction, total leverage is under 2.7 times.

Now I'd like to provide a brief update on our life science lending business, which is an important component of our growth and diversification strategy.

During the quarter, we added three experienced healthcare investment professionals effectively reconstituting at Solar the core of the life science lending team at GE Capital that had been led by Anthony Storino, who joined our platform early last year.

Over the next several years, we believe there's a great opportunity to build a highly diversified portfolio of life science senior secured loans having very modest debt to equity ratios, significant enterprise value protection and a low loss given to default risk profiles.

The target yield for these loans is 10% to 12%.

Warrant and success fees are frequently provided to lenders as part of the financing which can often enhance those 10% to 12% returns over time.

At the end of Q1, we had a life science portfolio of approximately $65 across e-issuers with an average investment size of $8 million.

We are extremely pleased with the results of our initial year in this business and anticipate increasing our exposure to this attractive asset class.

On our February earnings call, we stated that our anticipated (technical difficulty) investment income in Q1 would be lower as we worked to prudently reinvest the proceeds from our significant legacy repayments in Q4.

We expected originations to be seasonally lower and repayments to approximate $5 million resulting in modest portfolio growth in Q1.

Sitting here today one month into Q2, we can say confidently that the pace of transactions has picked up in the second quarter and we feel very good about the level of repayments both in Q2 and the remainder of 2015 being relatively low.

Reduced repayments together with a solid origination pipeline should further facilitate portfolio growth.

Based on our current visibility, we anticipate solid portfolio growth in Q2 and over the remainder of the year.

Now I will turn the call back to Michael.

Thank you, Bruce.

In conclusion, our well diversified portfolio of predominantly senior secured floating rate loans has the highest credit quality in our history.

Our multi-cylinder sourcing engine provides diversification and scale.

Our core underwriting business to sponsor back to private middle-market companies is an enhanced for the addition of origination resources as well as our ability to now underwrite unitranche loans.

We are confident that Crystal Financial and our life sciences lending businesses will continue to increase their contributions to our earnings.

Our origination efforts will continue to be centered on finding relatively higher quality credit investments that we believe will protect net asset value and adequately compensate us for risk.

While we remain disciplined and prudent in our credit underwriting, we intend to take advantage of our substantial available capital and significantly grow the portfolio over the remainder of the year.

Making good investments and building out our portfolio is the best path forward to enhance return on equity and drive incremental net investment income for shareholders.

We are already experiencing solid traction on our growth initiatives.

The pace of originations quarter to date is strong while repayments continue to be muted relative to experience over the prior six quarters.

We expect solid portfolio growth in the second quarter and are confident net investment income will cover our distributions in 2015 and position us for higher net investment income in 2016.

Solar's low leverage and significant available capital creates potential for sizable portfolio growth without equity dilution resulting from having to raise additional equity.

At the close last night, Solar Capital is trading at 0.9 times book value with a current distribution yield of 8.1%.

Our yield, duration and credit profile compares extremely favorably to the Barclays US Corporate High Yield Index, which is trading at a 5.96% yield to worst.

We believe Solar is cheap on a relative and absolute basis.

We have material earnings upside from our balance sheet capacity.

As we execute on our growth plans, we believe there is great potential for share price appreciation for SLRC.

At 11 o'clock this morning we will be hosting an earnings call for the first-quarter 2015 results of Solar Senior Capital, or SUNS.

Our ability to provide senior secured financings through this vehicle continues to enhance our origination team's ability to meet our clients' capital needs and we continue to see benefits of the value proposition in Solar Capital's deal flow.

Thank you for your time.

At this time we will open up the line for questions.

(Operator Instructions).

Troy Ward, KBW.

Michael, I will apologize up front if I ask you to repeat something, but I did miss the first couple of minutes of your prepared remarks.

Can I start with Crystal and the SSLP with PIMCO.

On the last call you commented regarding the joint venture that you expected to fund the first investment in the second quarter.

Is that still your expectation?

I think it could be Q2, could be Q3.

It's a little bit tight to pin it down that tightly at this point.

Okay.

And can you -- maybe you did this and I apologize -- but can you give us just some color around kind of what is the gating factor that is making that goal maybe a little slower than anticipated and can you talk about the ability to ramp that?

Once it does get started, will it ramp quicker than it's taken to get started and also how does that ramp compare with kind of the limited activity we've seen in the core portfolio?

I think you hit the nail on the head.

The market is the market.

As Michael mentioned in his opening comments, the market has been incredibly muted in the first quarter, more so than even the typical seasonal slowdowns that we typically see in Q1.

I think that is thematically what you will hear from most of our peers with midmarket loan issuance down meaningfully.

So that affects everything from the unitranche product to the first lien at Solar Senior to second lien and Stretch Senior over at Solar Capital.

That's just the market.

So it has been quiet.

I think we are pretty clear on our February earnings call that that is the environment we were in and expected experience in Q1.

The flip side of that, as you can appreciate, is repayments have been de minimis and while they will go up and down from that $6 million level, we still think it's going to be relatively low compared to what we have seen over the last couple of years.

So that's a great headwind removed from us.

And I think that going back to the joint venture, it is a new product and so it takes a little bit of time to get it out into the marketplace.

But that is a capability that we have.

We have begun to see a lot of flow but as you know we can't require an issuer to take a unitranche.

They may end up -- have decided to take a first lien, second lien structure.

We are proposing unitranche wherever we think it is appropriate but some of the activity you will see in Q2 will be a deal for example, Troy, where we proposed a unitranche in a first lien second and they just decided to take a first lien second.

I would argue we would not have seen that opportunity if we couldn't have provided both products.

So the capability is incredibly strategic and it really is situational as to whether the sponsor wants to take that unitranche.

I think the other thing I would say going forward, tough to say how it will specifically impact but clearly I think the announcements by GE around their sponsor business as well as their unitranche product only creates more opportunity for us in that vehicle.

Great.

That's great color.

And you spoke about your commentary in the last conference call and I went back and listened and read the transcript.

I didn't come away with the fact -- you said it was going to be seasonably slow but the $30 million in this quarter was I think the second or third lowest in the last five years.

And I also say how do you look at that quarter and then have so much confidence that you are going to have portfolio growth in order to drive NII for the rest of the three quarters?

Like you say the market is the market.

What gives you the confidence that you can actually deliver the portfolio growth?

I made a couple of comments.

And you might have missed the early comments.

But new loan issuance in the middle market was $9 billion in Q1 compared to $20 billion a year ago in the same quarter, so it is significantly off but what gives us the confidence is we're kind of telling you real-time where we are in this quarter sitting here in early May, so we know the numbers are right.

We know we are going to originate significantly in multiples that we originated in Q1.

So we feel good about it.

And I think the other thing Michael commented on was in his opening remarks, was we have further expanded at the end of Q1 the life science lending team brings three additional professionals over behind Anthony Storino who we've moved on our platform early last year, so we now have more feet on the street there.

Anthony alone originated $60 million last year.

We expect him to increase that significantly this year with his team now on the platform.

We think the dynamic at Crystal is very favorable.

One of their significant competitors has some significant portfolio challenges that can open up the doors.

I think they are also seeing some of the regulatory pressures on the banks open up this figure for banks asking Crystal to refinance some of their loans that might be a little noisier than the regulators want to see on the books.

But yet fully collateralized and satisfied Crystal's underwriting from an asset-based perspective.

So we just feel that the multiple sourcing engines together with some of the competitive dislocation positions us well.

That doesn't mean that if issuance is down that we can create issuance the way it was down in Q1, but we feel extremely well-positioned and to reiterate Michael's comment, we have seen early signs of the fruits of those labors in Q2 here.

Great.

Thanks, guys.

(Operator Instructions).

Doug Mewhirter, SunTrust

You covered my big question as far as what you're seeing right now.

If I could maybe take it in another direction, so your pickup in activity in the second quarter, which is like you said, Michael, you're seeing in real time, obviously some of that is attributable to your individual initiatives.

Is that also -- is that more also a general industry trend that is sort of rebounding?

And why do you think the first quarter was so dead, so to speak?

Was it more on the financing side where people -- there was too much volatility on the lending markets or the private equity firms just weren't busy?

It's a combination of factors.

As you know new issuances is a driver based on new M&A activity, based on refinancing activity.

I think it's fair to say also that Q1 tends to be a bit seasonal in our business because Q4 tends to be a bit elevated for whatever the reason may be that given year where people are driving to get transactions closed by year end.

So you have the normal seasonal slowdown.

You had a low M&A activity.

You had very little refinancing because let's face it we've had low rates for long enough that most people who can refinance and lower their cost of capital have done so.

And so I think what we have seen and have heard what we went through in Q1, most of what our financing activity was, albeit only $30 million, was across four different portfolio companies doing add-on acquisitions.

So I think thematically sponsors are trying to rather than pay 13, 14 times for a new platform given how elevated purchase price multiples have been, they are trying to create value in their portfolios by buying in smaller tuck-in acquisitions at lower purchase prices.

And for people like us that may be an incumbent, that creates an add-on financing opportunity to grow our exposure.

And so that, I think, is thematically what you saw in Q1.

It seems to us as we are getting into Q2 -- again, it has only been a month -- but our activity has been more M&A activity, less refinancing again but new M&A activity has picked up a bit and then it's a matter of being well-positioned to win that transaction.

So I think that's really been the driver.

Great.

Thanks for that.

Very thorough answer.

I just had a follow-up question.

I just wanted to clarify something.

Michael, you said in your opening remarks, you said normally you have about $400 million of gross initiations per year in your core business and you say now you think you could make that a pace of $500 million a year.

You are saying in any given twelve-month period, do you think you could actually hit that hurdle this year knowing that you are already sort of in the hole starting out in the hole in the first quarter?

Yes, we do.

We have always -- and we have been consistent about this since we've been public.

This is a lumpy business and you saw last year we had some quarters of de minimis, other quarters we had close to $200 million of activity.

So you can't predict in which quarter deals will happen but we are comfortable that in the 12-month calendar year 2015 that those are numbers that we can hit.

Yes, and just a last quick question, you said $100 million of life sciences.

It sounded like that was -- you said that would be actually on a net basis, so that would be a portfolio growth number not a gross origination number?

Exactly.

Yes.

Okay, thanks.

That's all my questions.

Chris York, JMP Securities.

Good morning, guys and thanks for taking my questions.

My questions on originations have been asked but just wanted to get a clarification on some of your commentary for your prepared remarks.

You thought net investment income will cover your dividend by the end of the year, so does that mean that you expect NII to cover the dividend in Q4 or in totality in 2015?

In totality.

Okay.

That's great.

Thank you very much.

Jonathan Bock, Wells Fargo Securities.

I will echo the distinguished Troy Ward's questions or remarks early on and maybe wanted to take a slightly different tact because understanding that the market today is effectively a bit hot for a number of reasons and there is the potential for the future to get some spread widening as effectively McDonald's is no longer in the hamburger business.

What I want to understand is why you wouldn't choose to buy back your own stock and effectuate earnings and dividend accretion that way considering it would be a very compelling and shareholder friendly item to do when you are not originating much business?

Again Jonathan, we didn't originate much business in Q1, which is a point in time.

I think we said a couple of times on this call that this quarter is actually very strong and from our perspective when you trade at 0.9 times book buying back a modest amount of stock frankly is just supporting your stock price.

You're not going to buy enough to make a dent in your earnings or building book value, just because of volume limitations in what you can and cannot buy.

And our view is that given that 90% of our peer group is significantly capital constrained today because of their extreme activity over the last couple of years in investing that returning capital at this point when we are in what could be a very volatile market given that McDonald's is no longer in the business of making burgers, is not the right long-term shareholder friendly decision.

Okay.

Appreciate that.

It's a question we get from folks.

(multiple speakers).

Another one, just as we look at a few writedowns whether it is WireCo or Bishop, just kind of a view on maybe some of the technical versus fundamental marks as you think about the building products sector in general and as well as we won't call them energy centric, we know you have definitely mitigated that risk but we will call it tangential exposure to some areas that might be undergoing stress even though everything is effectively reflated.

Sure.

As we have said to your point, we don't have any direct energy exposure but it doesn't mean that various portfolio companies don't in some way shape or form touch energy end markets to some extent across their revenue base.

SBP and Wire Rope are the two businesses that sell indirectly into energy amongst a wide variety of industrial sectors.

So Wire Rope is a name you may be failure with.

It has been in our portfolio, in and out in various times and different securities, a company we know and like since 2007 owned by Fox Paine.

It is the manufacturer of wire rope that can be used in rigs, it can be used in suspension bridges, all sorts of manufacturing applications.

But there is a small piece that goes into rigs and drilling.

Historical performance -- as recent historical performance show no degradation in earnings.

They do have public bonds outstanding and traded bank debt.

The bonds are carried to our private placement of bonds, which is the security we hold and because people or the market at March 31 was expecting, I am assuming, that there may be some pressure going forward depending on your view of oil prices.

The paper was marked down and we always take a technical mark alongside that public bond.

That's the Wire Rope story.

Coincidentally or not so coincidentally, SBP is the number one distributor as opposed to manufacturer, of wire rope.

So obviously a very large customer of Wire Rope's.

This is owned by AEA, another top-tier sponsor who has significant equity in this business for the exact same fundamental reasons I just mentioned on Wire Rope.

They have indirect exposure selling into the energy sector amongst other sectors.

It's a small second lien that was privately clubbed with us and a couple of other people.

It does not trade but we watched the first lien trade down a little bit again because of concerns about extended low oil prices and will that have effect on forward earnings.

Again, LTM earnings are up actually to flat, so we haven't seen it in the numbers yet but we though conservatively let's take a mark to reflect the first lien trading down a little bit.

So that is the specifics on those two.

Much appreciated, guys.

Thanks for taking my questions.

Troy Ward, KBW.

Just quickly, just a quick question on Crystal.

Mike I know you had talked about what was a net leverage there.

Can you speak to what is the ability or desire to increase the size of your investment in Crystal on SLRC's balance sheet?

Is there a need or a desire to do that?

There is currently not a need because we have debt capacity within Crystal itself but we have had for some time had a standby commitment of $50 million of additional equity into Crystal, which would give us an additional roughly $100 million of buying power there, which we think is adequate for what their growth prospects are.

So is the targeted leverage for Crystal kind of 1 to 1 -- is that what you are thinking about?

Between 0.5 and 1.0, yes.

As you know it varies.

And they are currently at 0.8 net?

Yes.

Okay, great.

Thanks.

Casey Alexander, Gilford Securities.

Sorry to ask such a mundane question, but I can't seem to find the table in the Q where your loan buckets are based upon your internal ratings.

Just to clarify, are you looking for ratings on a loan by loan basis, or loan classifications?

Yes, you generally -- don't you have a 1, 2, 3, 4, 5 scale by which you put your loans into buckets based upon how you -- and I can't find that in the Q, or the press release.

Yes, we haven't disclosed that historically with regard to loans on a per rating basis, that's why it's not in there.

But we adjust our guidelines on what those risk ratings are, are published in our registration statements on Form N-2, but historically we don't break out which is a 1, 2, 3, or 4 on a by loan.

Not on a by loan, I don't see the table that just packages your whole portfolio.

Listen, I am happy to give you a call and just make sure you get what you want but I know the average rating is a 2. I think we have said that historically on calls as performing as expected.

(multiple speakers)

But you do not have a table that breaks down 1, 2, 3 and 4 -- (multiple speakers)

No, we never have and we are not required to.

Okay, thank you.

David Miyazaki, Confluence Investments.

I just wanted to revisit the topic that you had mentioned or briefly described regarding share repurchases and it is sort of frustrating as a shareholder to hear those kinds of comments because are you communicating to us that share buybacks are just ineffective and there is no place for them?

No, not at all.

I think in fact we are probably the only BDC or one of two or three BDCs over the last several years who've actually announced a stock buyback and did it.

We bought back close to $60 million of stock over the last couple of years.

So we are believers in it at the right point in time.

In fact we are one of the largest shareholders of this Company owning about 6% of the Company.

So we want to do things that our shareholder friendly and drive shareholder value.

Our point is is that we have a lot of initiatives to commit capital to to grow and today in this environment that is a huge competitive advantage relative to our peers.

Things change, times change.

If it turns out we are wrong about our ability to originate and we're sitting here a year from now and still ridiculously under levered, then we will definitely sit down with the Board and talk about doing something like this again.

And I guess my suggestion, my [cross], is to have that discussion now, not a year from now to find that you're still under leveraged because the shareholders, we have seen that you have been under leveraged and had a lot of capacity for quite some time.

And although I respect your credit underwriting and your decisions to try and be strategic in developing the right businesses and deploying the capital properly, there's a huge cost to us as shareholders to hold your name.

And if a look at the performance drag that you've had in our portfolio over the past several years, it is hard to use the same adjectives when I describe to my clients why we hold your position.

I just hear that you are pleased, you are proud, you are confident and you are optimistic looking forward.

I can't use those adjectives in describing how your stock has performed in our portfolio.

And I appreciate that you bought back some of the stock unlike many of your peers that you've utilized your repurchase program, but I think that you should have this discussion with the Bored right now and you were at $0.87 on the dollar this morning and tomorrow we could wake up and you'd be at $0.85 or $0.81 on the dollar and that's not when we want to hear you having a discussion about maybe buying back stock.

We would like you to have the ability to do that right then and there.

So noted.

Thank you.

(Operator Instructions).

There are no further questions in queue at this time.

I would like to turn the call back over to Michael Gross.

Thank you, everybody, and thanks for your time this morning.

We look forward to those of you who will continue on our conference call in 15 minutes on Solar Senior Capital.

Thank you.

Ladies and gentlemen, this concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great day.