SLR Investment Corp (SLRC) 2016 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the third-quarter 2016 Solar Capital Ltd. earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator instructions) As a reminder, this conference call is being recorded.

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

Thank you very much, and good morning. Welcome to Solar Capital Ltd.'s earnings call for the quarter ended September 30, 2016.

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

Rich, before we begin, could you please start off by covering the webcast and forward-looking statements?

Of course. 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 Ltd. and that any unauthorized broadcast in any form is 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'd 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 they 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 Ltd. undertakes no duty to update any forward-looking information unless required to do so by law.

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

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

Thank you, Rich.

As conservative credit investors, our investment philosophy centers on preservation of capital. We believe this prudent approach has served us well throughout the past several years of heated credit market conditions, as evidenced by our near-nonexistent nonaccrual rates and stable net asset value.

Consistent with the prior quarter, Q3's recurring net investment income per share meaningfully exceeded our quarterly distribution. We expect this trend of over-earning our distribution to continue.

Specifically for the third quarter, net investment income per share totaled $0.45, excluding $0.05 per-share net impact of one-time expenses related to the amendments and extension of our credit facility. A portion of our outperformance came from income associated with investments repaid during the quarter.

As you know, portfolio activity in our business tends to be lumpy. However, over the long term, redemptions are a regular source of our incremental income.

For the fourth quarter, we continue to expect net investment income per share to exceed our $0.40 per-share distribution. Our current run rate of net investment income is approximately $0.42 per share. As we achieve portfolio growth, we expect our run rate of net investment income to reach the mid to high $0.40s per share.

We believe growing net investment income into the mid to high $0.40s per share is achievable through the allocation of our available capital across our strategic initiatives, namely Crystal Financial, life science lending, and our stretch senior loan program.

Including expected leverage on our interest in SSLP and SSLP-2, we have approximately $800 million of capital available to invest as of September 30. Given the low- to mid-teen expected return on equity for all these ventures, as well as dollar-one [risk] senior secured nature of their underlying investments, we believe that investing through a proprietary channel enables us to deliver attractive returns while maintaining our conservative investment philosophy.

Equally important to our ability to grow our net investment income is our credit quality. Our book value per share of $21.72 represents a 1% increase of the prior quarter. At September 30, over 99% of our portfolio was performing on a fair-market and cost basis. Furthermore, we continue to have no direct exposure to the energy or commodity sectors.

At September 30, our comprehensive portfolio stood at $1.6 billion with approximately 96% senior secured and approximately 95% floating rate. The increase in these percentages from the prior quarter were primarily the result of the repayment of a large, unsecured, fixed-rate loan, which Bruce will discuss.

This August, we expanded our stretch senior loan program with a new strategic partner. Solar Capital's equity commitments to SSLP-2 is $75 million, $43.6 million of which we funded during the third quarter.

We anticipate beginning to utilize leverage in the fourth quarter, and we expect to achieve a low- to mid-teen return on equity once the vehicle is fully ramped.

Our stretch senior loan program, including our partner's ownership and anticipated leverage, has a capital base exceeding $725 million. When considering our strategic partner's appetite for investing alongside the program, we have the capital necessary to successfully compete in the upper-middle market, where we believe investments offer better risk reward.

Overall, we anticipate growth in both net investment income and net asset value. And once we believe we've achieved a sustainable level of net investment, the next (inaudible) distribution we'll increase our quarterly payout.

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

Thanks again, Michael.

Solar Capital Ltd.'s net asset value at September 30, 2016, was $917.6 million, or $21.72 per share, compared to $908.8 million, or $21.51 per share at June 30.

During the third quarter, we amended our credit facility. The amendment extended the maturity to September 2021. We modified the rate to a grid of LIBOR plus 2.25%, and increased the size of the credit facility at closing from $540 million to $555 million. The credit facility continues to include its [accordion] feature, going to $800 million.

At September 30, our investment portfolio had a fair market value of $1.36 billion and 66 portfolio companies across 26 industries, compared to a fair market value of $1.48 billion and 74 portfolio companies across 30 industries at June 30.

At September 30, 2016, the weighted-average yield on our income-producing portfolio measured at fair value was 10%, compared to 10.2% at June 30. The weighted-average yield on a cost basis at September 30, 2016, was 10.3%, compared to 10.5% at June 30.

For the three months ended September 30, gross investment income totaled $39.8 million, versus $41.4 million for the three months ended June 30.

Net expenses totaled $22.8 million for the three months ended September 30, compared to $21.8 million for the three months ended June. The increase in expenses for the three months ended September 30 was primarily related to the nonrecurring costs of the amendment and extension of our credit facilities during the quarter.

The Company's net investment income for the three months ended September 30, 2016, totaled $17.0 million, or $0.40 per average share, versus $19.5 million, or $0.46 per average share, for the three months ended June 30.

Excluding the net effect of the $2.7 million of nonrecurring expenses related to the amendment and extension of our credit facility, net investment income for the three months ended September 30 would have totaled $19.1 million, or $0.45 per average share.

Net realized and unrealized gains for the third quarter of 2016 totaled $8.6 million, versus net realized and unrealized gains of $15.6 million for the second quarter of 2016. Ultimately, the Company had a net increase in net assets resulting from operations of $25.6 million, or $0.61 per average share for the three months ended September 30. This compares to a net increase of $35.2 million, or $0.83 per average share for the three months ended June 30.

Finally, our Board of Directors declared a Q4 distribution of $0.40 per share, payable on January 4, 2017, to shareholders of record on December 15, 2016.

With that, I'll turn the call over to our Chief Operating Officer, Bruce Spohler.

Thank you, Rich. I'd like to begin by providing an update on the credit quality of our portfolio.

Overall, the financial health of our portfolio of companies remains sound, with the trend of continued modest growth and deleveraging continuing through the third quarter.

On average, including our stretch first-lien senior secured program, the most recently reported organic LTM revenue and EBITDA for our portfolio of companies were up around 7% and 11%, respectively, year over year. Measured at fair value, weighted-average interest coverage for our portfolio of companies was just under 3 times.

At the end of the third quarter, the fair value weighted-average EBITDA across our portfolio was just over $90 million. And the average leverage through our investment security was just under 5 times.

At September 30, the weighted-average investment risk weighting of our total portfolio was 2.0, based on our 1 to 4 risk rating scale, with 1 representing the least amount of risk. Measured at fair value, 99.9% of our portfolio was performing at September 30. On a cost basis, our one investment on nonaccrual accounted for 63 [BPs] of the portfolio. Excluding this one legacy asset from 2007 direct buy, our portfolio is performing very well.

On a current cost basis, the weighted-average yield on our income-producing portfolio was 10.3%. Our average mark on our income-producing debt investments as a percentage of par increased to 97.7% of par at September 30.

We believe there is additional net asset value upside above our current $21.72 per share, as our loans that are marked below par due to technical factors are repaid in full.

Now I'd like to provide some color on the composition of our comprehensive investment portfolio, which includes Crystal Financial's portfolio, as well as our stretch first-lien senior secured loan program.

At the end of the third quarter, our $1.6-billion comprehensive investment portfolio included 95 borrowers across 36 industries, with no exposure to direct energy or commodities. The average investment size per borrower is $16.7 million, or just over 1% of the comprehensive portfolio, indicating a high degree of diversification. Our single-largest loan is 3.5% of the portfolio.

Measured at fair value, roughly 96% of our portfolio consisted of senior secured loans, a 3% increase from the June quarter. The remainder of our portfolio was comprised of roughly 2% subordinated debt and 2.5% equity and equity-like securities. At September 30, approximately 95% of our income-producing portfolio was floating-rate on a fair value basis.

Before I turn to our investment activity, let me provide a brief update on our strategic initiatives.

During the third quarter, SSLP funded $5 million of new stretch senior loans, bringing the total portfolio size to just under $140 million. At the end of September, we had just over $42 million drawn under our new $200-million credit facility on this joint venture.

Our annualized yield was 6.4% for the quarter, up from 5.8% in the prior quarter. We continue to expect to achieve a low-teen ROE on this vehicle once it is ramped.

Also during the third quarter, we created a new SSLP-2, which invested over $65 million in stretch senior loans. We expect to close on a credit facility for this joint venture in the current quarter and also expect to achieve a low- to mid-teen ROE once the vehicle is fully ramped.

At the end of the third quarter, together SSLP and SSLP-2 had over $200 million of stretch senior secured loans to 11 different borrowers. As of the end of the third quarter, 100% of this portfolio was performing.

Now let me turn to life sciences.

At the end of the quarter, our life science portfolio totaled approximately $215 million at fair value and consists of first-lien, senior secured loans across 25 issuers, with an average investment size of just over $8.5 million.

During the third quarter, our life science team originated approximately $24 million of new senior secured loans. Repayments and amortization totaled just over $37 million during the same period.

The average yield at cost, excluding potential exit or success fees, as well as any potential warrant gains, is running at 12%. The blended IRR on our realized life science investments to date is just under 24%.

Now let me give you a quick update on Crystal Financial.

At September 30, Crystal had a diversified portfolio consisting of approximately $480 million of funded senior secured loans across 29 borrowers, with an average exposure of approximately $16.5 million.

During the third quarter, Crystal funded new loans totaling approximately $33 million and has reductions totaling approximately $70 million. All of Crystal's investments are senior secured loans, and over 99% of their portfolio is floating-rate.

For the third quarter, Crystal paid Solar a cash dividend of $7.9 million, consistent with the prior quarter.

Now I'd like to turn to our third-quarter portfolio activity.

During the third quarter, Solar Capital originated approximately $54.5 million, consisting predominantly of senior secured, floating-rate loans across 9 different borrowers. Investments repaid during the quarter totaled $158 million.

Starting with originations -- we originated a $12-million investment in the first-lien loan, Polycom, a manufacturer of voice and video communication equipment. Across the entire Solar platform, we invested just under $40 million in this loan, which has a yield of approximately 8.5%.

The financing [back to] take private of this company by Siris Capital, which has demonstrated expertise in telecommunications, media, and technology companies. The EBITDA is approximately $275 million for this company, and leverage through our investment is 2.5 times.

Additionally, our life science team originated a $50-million investment in the first-lien term loan of Scynexis. Scynexis is currently developing a novel drug for the treatment of life-threatening invasive fungal infections. Our loan carries a yield in excess of 11%.

Now let me touch on our repayments during the third quarter. Our most significant repayment was the repayment of our [$48-] million investment in the unsecured, fixed-rate, private notes of WireCo. These notes were redeemed at par, which resulted in an IRR in excess of 11%. Equally important, the repayment of this investment significantly reduced our exposure to both unsecured and fixed-rate assets in our portfolio.

Also during the third quarter, our $30-million commitment to Aeropostale, which was sourced through Crystal Financial, was repaid, resulting in an IRR in excess of 40%, albeit only over a five-month investment period.

We were also repaid at par on our $[16]-million investment in the second-lien loan to [LANDesk]. Rather than rolling our proceeds into the Company's new covenant [like] dividend recapitalization transaction, we decided to allocate these proceeds to our strategic initiatives, which we believe have more attractive risk-reward profiles. The IRR on our investment in LANDesk was over 8.75%.

And finally, we were repaid on our $18.5-million investment in the second-lien loan to [Concentra], which was repaid at a premium to par in section with the company's refinancing.

Similar to LANDesk, we chose not to roll our proceeds into the new sets of lien transactions. Instead, we intend to reinvest the proceeds in dollar-one risk assets via our proprietary sourcing channels. The realized IRR on this loan to Concentra was just over 11%.

As evidenced by our decision not to reinvest proceeds from these investments back into the Company's refinancing, highlights that we are focused on originating first-lien loans with more attractive pricing and terms to our strategic initiatives.

Overall, the middle-market environment remains competitive, given muted sponsor activity year-to-date. In the advanced stages of the current credit cycle, we believe it is imperative to remain highly disciplined in our investment process and exceptionally prudent in deploying our available capital into new investments that meet our strict underwriting criteria.

Our strategic initiatives with life science lending and Crystal platforms create attractive growth opportunities while reducing our reliance on the sponsor [backed] community.

Longer-term, we believe the record amounts of private-equity dry powder that's been sitting on the sidelines and the continued retreat of banks from mid-market leverage lending create a very attractive supply-demand dynamic for cash flow lending to middle-market companies.

Our current portfolio leverage is .48 relative to our target leverage of .65 to .75. Including the available capital through our strategic initiatives, Solar has ample capital and the diversified origination engine to continue to grow its portfolio.

We have originated on average just over $475 million per year in new investments over the last five years, and our portfolio has grown over 33% since the beginning of last year. Importantly, we have more than doubled our assets in the stretch senior loan programs in 2016 and grew our life sciences portfolio to over $215 million from a standing start two years ago.

We are encouraged by the pick-up in sponsor-driven M&A activity during this current quarter, and we remain confident in our ability to prudently grow the portfolio in the near term.

Thus far during the fourth quarter, we have seen visibility on only $70 million of repayments and continue to expect portfolio growth in the fourth quarter.

Now let me turn the call back over to Michael.

Thank you, Bruce.

As we've outlined, the third quarter marked another successful one for Solar Capital. By staying true to our investment discipline and strategic vision, we've constructed a comprehensive investment portfolio that is extremely defensive in nature, with approximately 96% in senior secured loans and 95% in floating-rate loans. We built our diversified sourcing engine and partnerships that should enable us to increase return to equity for our shareholders while maintaining a conservative investment approach.

In the coming quarters, we expect to continue to ramp our stretch senior loan program, as well as our life science loan program. We believe that the senior secured investment profile of these strategic initiatives provide us with the best risk reward in today's investing climate.

Additionally, Crystal Financial remains well positioned to continue to generate an attractive return on our investments. Based on current visibility, we expect our net investment income in the fourth quarter to also exceed our $0.40 per-share [quarterly] distribution. As we grow our portfolio, we believe we will achieve a sustainable level of net investment income in the mid $0.40s per share. At that time, we currently anticipate raising our quarterly distribution.

Our shareholders have reaped the benefit of our disciplined underwriting, as evidenced by the low nonaccrual rate, strong overall credit performance, and stable net asset value per share.

For those investors who've been with us since they bought the shares at our IPO, we provided a 77% total return, or a 12.2% annual internal rate of return, based on last night's closing share price.

Importantly, our net asset value has increased over 4% since our IPO, representing top-tier performance relative to our peers over this same time frame.

We've always taken a long-term view in managing our business, including our people, our balance sheet, and our portfolio. It truly is a marathon and not a sprint.

We believe the future is even more promising, given the earnings power of our current portfolio, the capacity of our future growth, and our diversified origination engine.

Through the management team's 5.7% ownership in Solar, we've remained tightly aligned with our fellow shareholders and are focused on building long-term value.

At 11 o'clock this morning, we'll be hosting an earnings call for the third-quarter 2016 results of Solar Senior Capital, or SUNS, as we call it. Our ability to provide traditional middle-market senior secured financing through this vehicle continues to enhance our origination team's ability to meet our clients' capital needs, and we continue to see benefits on the value proposition in Solar Capital's [deal flow].

Thank you all for your time. Operator, could you please open up the line for questions?

(Operator instructions) Jonathan Bock, Wells Fargo Securities.

Good morning. Joe Mazzoli filling in for Jonathan Bock here. The first question -- we see that you've assigned a $50 million commitment to a new SSLP-3. So there's really two questions here. Are you actively seeking a new partner for this third fund is the first question. And the second question is, from a lender's perspective, is it more difficult to obtain a credit facility for a smaller fund like this? Would pricing be more expensive? Or is it similar to the first SSLP, as long as you kind of meet the diversification requirements?

Really good question. In terms of SSLP-3, we will continue to be opportunistic and look at ways to optimize the use of that capital, so more to come, stay tuned.

I think in terms of credit facilities, that's actually a good question. The challenge in getting credit facilities is not necessarily the size of any individual joint venture. We have large and small, as you know, across the entire Solar platform.

But I think it does highlight a bigger question, which is -- as Rich mentioned, we were successful in terming out Solar's revolver during this period. We opened a facility at SSLP-1. We will be opening SSLP-2 credit facility this quarter, as we mentioned. And as we talked about with SUNS shortly this morning, we also expanded credit facilities there.

I think the answer, though, is that what we're finding is that credit providers to entities such as ourselves are being that much more selective. I think they're taking their lead from the rating agencies, as well as the equity markets as to backing certain managers. And I think it will be more challenging for some platforms going forward to tap into bank capital.

I think it's less about the size of the facility, to your specific question, and more about the breadth of the platform and the platform's performance.

We get the benefit of our corporate pricing across the credit facility, regardless of whether an account is $50 million, $100 million, or $200 million.

Okay, that totally makes sense. Thank you. And just to clarify -- you mentioned you don't have a credit facility yet at SSLP-2. What's the difference between the $54 million of equity committed as of September 30 and then the $68 million of assets? Is there leverage there at all?

Not in SSLP-2 yet. It's probably their share versus the total assets.

The $54 million is ours and the $68 million is the total, with the $14 million being our partnership.

Okay, fantastic. And just one more question, here. You're obviously in an enviable position with the platform easily exceeding the dividend over the next several quarters by quite a bit, by most folks' estimates. Now, how do you balance retaining spillover income, which a lot of folks in this community view as an attractive way to retain capital and deploy into the platform, versus increasing the distribution to shareholders? How do you think about that from a broad perspective?

We, frankly, don't look at it as it pertains (inaudible) capital. That's never actually entered our conversation. For us, it's more about -- we want to make sure that we have a portfolio in place that can demonstrate consistent earnings so that we're comfortable raising the dividend to a certain level.

We've now seen our dividends last two quarters. I think we want to see another quarter or two of that before we consider raising our dividend to that level.

Fantastic. Thank you both so much, and congrats on a great quarter.

Thanks for your questions.

Ryan Lynch, KBW.

Good morning, gentleman. First question relates to competition. You guys are in a position where you guys have a lot of capital to deploy, both -- some on the balance sheet as well as in the SSLP and other funds. So as you look at the environments to deploy capital into -- we've seen private funds being raised. We've seen different competitors coming back into the market, and maybe we can see a little bit of that maybe in the big repayments you guys experienced this quarter. So how do you guys think about going forward with a significant amount of capital raised and maybe a more increasingly competitive environment?

I think -- from 30,000 feet, we find that the competitive environment in the sponsor business is driven more by the dearth of deal activity this year as it is by the capital that's out there to be deployed.

I think that once deal activity picks up -- we've begun to see a pick-up this quarter -- but I think that it's more about deals. Because the amount of bank capital that's been exiting the system meaningfully dwarfs any capital raised. And particularly where we play at the large end of mid market, our focus continues to be playing for those larger companies, where the ability to be relevant to the borrower means you can take larger and larger hold positions.

And so that's our strategic direction with the creation of these joint ventures is to expand our balance sheet. And we see less competition up there.

But I think the real driver is going to be deal flow picking up. We've seen that this quarter. It will continue over time. It's hard to predict the particular quarter; but given that there's a substantial amount of un-invested private equity on the sidelines, that will get invested over time, and that will really be what drives the investment opportunity for us in that vertical.

As you know, we're blessed with having diverse origination engines with our life science business as well as Crystal's asset-based lending platform, both of which go to a different issuer base and borrowers than the sponsor-backed community. And so, as we've seen year-to-date, that has allowed us to continue to grow our portfolio in spite of muted sponsor activity.

So we feel very good long term and really feel blessed short term by having the diverse origination engines and asset niches.

Okay, great, understood. You guys -- your portfolio has actually changed significantly over the last couple of years, and you guys are diversified both from an investment standpoint, but also you guys have a couple different investment strategies or verticals in your guy's portfolio with the middle-market loans you guys hold on your balance sheet. You guys have the SSLP funds. You guys have the life sciences portfolio and then the Crystal portfolio.

So as we sit here today, you guys have a current mix in those four different strategies or funds. How does the portfolio look in a year from now? Do you guys expect that same sort of mix that we have going on today? Or are you guys expecting to grow any one of those strategies more than others going forward?

That's a great question. Just to be clear, we view our activity and our SSLPs the exact same as we do the middle-market loans we hold on your balance sheet. So that's kind of one asset class, if you will, for us.

If you dissect the three businesses -- today, life science is about $250 million in our portfolio size. We think, given the nature of that business and the frequency that those assets churn -- that will probably peak out in the 300-ish range, and so there's some growth there.

Crystal tends to bounce around between $400 million and $550 million. Maybe we can get that business to $600 million. So those are kind of where we think those will grow to.

The middle-market direct stretch senior lending business, frankly, has a lot more growth ahead of it. And if you look at the capital we have available, there's where you'll see the vast majority of it coming from. So as a percentage, that will increase as those other two businesses kind of get capped out.

Okay, that makes sense. And then just one last one -- you mentioned the 7% and 11% revenue in EBITDA growth, which is very strong in its environment. I understand you guys don't have any energy or commodity exposure to your portfolio, so that's certainly beneficial. But are you guys -- and the 7% and 11% growth is very strong in this environment -- but are you guys seeing any particular weakness or slowdown in any particular industry?

No, we are not, actually. We're not seeing outsized growth, necessarily. I think that growth was broad-based. But I would say across the portfolio, no real systemic signs of either slowdown or acceleration.

But as you know, we have a very defensive portfolio. In addition to not having any energy or commodities, we really don't have much in the way of anything cyclical or consumer discretionary. So really what we're seeing is the benefit of high free cash flow and businesses being able to drive EBITDA through both the top line as well as economies of scale dropping down (inaudible).

And to just put it a little bit more bluntly, I think -- we're seeing the benefit of the asset selection we put in place. I think the reason we're outperforming the middle market [in terms of how our Company is doing] at 7% and 11% is that we've been very picky about the companies we put into our portfolio, that are defensively [built].

And I think we're also benefitting from the fact that we are at the upper end of the middle market with our average EBITDA of $95 million. And those companies tend to do better than smaller companies, in general.

Okay, great. Thank you. Those are all the questions from me, and really an excellent quarter, guys.

Thank you.

(Operator instructions) Casey Alexander, Compass Point Research & Trading.

Good morning. I think you did answer my question. I was going to ask -- with Crystal and life science and the three SSLPs, if that was sort of a reverse commentary about the traditional middle-market lending market. But it seemed -- if I understood your answer right, it was more kind of an issue of current deal flow. Is that -- I got that right?

You did.

Exactly.

Okay. In the traditional middle-market deal flow that you are seeing, what are some of the competitive and credit dynamics that you're seeing in the right now, as compared to what you maybe saw six months ago?

I would say it hasn't changed much over the past six months. Early days, but I think, as we mentioned, in this quarter we're starting to see a little bit more activity, particularly at the large end of midmarket, which is where we play, and where there's generally less competition, just because of the capital base that a lender would need to have in order to take down large loan hold positions for these larger companies. So we see a little bit more activity, which had been consistently quiet throughout 2016.

Again, we don't look at this as a quarterly business because it does ebb and flow, and it's extremely lumpy. But we do look at the fundamentals that drive this sector, and that is a combination of sponsor dry powder that is looking to invest in middle-market companies that drive the M&A transactions.

I think -- as we've talked about throughout this year, a lot of the volume that we have seen has been driven by add-on acquisitions into these sponsor companies, rather than the creation of new platforms, and we think that's in large part as sponsors are trying to add value and -- equity value for themselves and their investors by growing these businesses and driving down their investment multiple from the original acquisition that they may have had made a year or two ago.

So we're seeing a lot of add-on acquisitions, which drive the need for additional debt capital, as well as retooling their existing capital structure.

So that is still a significant driver, and we see tremendous opportunity as a result of that. Again, tough to predict which quarter, but we are seeing some pick-up this quarter.

And then secondarily, as we touched on earlier, the competition is driven by the creation of capital that can play in these large loans and can actually provide large capital bases. And there are a few platforms that can do that, and we're blessed by the fact that the banks are not competitors from that perspective. They have very small hold positions, given their regulatory pressures, so we feel very good long term about the competitive dynamic. But it's really about watching the flow pick up.

All right, great. Thank you for taking my question.

Our pleasure.

(Operator instructions) I am show nothing further questions. At this time, I'd like to turn the conference back over to Michael Gross, Chairman and Chief Executive Officer.

Thank you all for your time and attention this morning, and we look forward to talking to those who are involved in Solar Senior in 15 minutes. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.