SLR Investment Corp (SLRC) 2025 Q4 法說會逐字稿

Good morning, everyone. Welcome to today's SLR Investment Corporation fourth quarter 2025 earnings conference call. (Operator Instructions) Please note this call is being recorded.

It is now my pleasure to turn the meeting over to Mr. Michael Gross, Chairman and Co-CEO. Please go ahead, sir.

Thank you very much, and good morning. Welcome to SLR Investment Corp.'s earnings call for the quarter and year ended December 31, 2025. And I'm joined today by my long-term partner, Bruce Spohler, our Co-Chief Executive Officer as well as our Chief Financial Officer, Shiraz Kajee, and members of the SLR Investor Relations team.

Shiraz, before we begin, would you please start by covering the webcast and forward-looking statements?

Thank you, Michael. Good morning, everyone. I would like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of SLR Investment and that any unauthorized broadcast in any form is strictly prohibited. This conference call is also being webcast on the Events Calendar in the Investors section on our website at www.slrinvestmentcor.com. Audio replays of this call will be made available later today as disclosed in our February 24 earnings press release.

I would also like to call your attention to the customary disclosures in our press release regarding forward-looking statements. Today's conference call and webcast may include forward-looking statements and projections. These statements are not guarantees of our future performance or financial results and involve a number of risks and uncertainties. As performance is not indicative of future results. 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. We do not undertake 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.

At this time, I would like to turn the call back to our Chairman and Co-CEO, Michael Gross.

Thank you, Shiraz, and thank you to everyone for joining our earnings call this morning. We are pleased to report that SLRC's fourth-quarter results solidified a strong year for the company, showcasing another quarter of broad stability in our portfolio, slow but steady portfolio growth, and a shift to asset-based lending investments with primarily liquid current assets as collateral that are supported by actively monitored borrowing basis.

For those who've been following us for the last two years, we have showed a cautious view with our stakeholders about the increasingly fierce conditions within sponsor finance from an oversupply of capital. The broader investor community and media are now signaling their concern of these conditions. The potential risk to forward returns and ultimately an expectation of a wide dispersion in manager performance. While 2025 can be characterized by a surprisingly resilient US economy that withstood tariff uncertainty, geopolitical tensions and the government shutdown, the year in high side can also be marked as beginning of sea change for the maturing private credit industry.

Sitting here today, with investor concerns and skepticism running high, we feel relatively insulated from many of the risks facing many of our peers because of our deliberate decision to hold the line with their underwriting standards, particularly in the overcrowded sponsor finance market to safeguard SLRC's performance and capital.

We attribute the stability in our fourth quarter and full year results for multi-strategy approach to private credit investing and our tactical asset allocation framework, which enables us to maintain investment discipline and diversification across asset classes. Importantly, we're able to say no and pass an investment opportunities that do not meet our conservative lending standards as credit investors, we are obsessively focused on downside protection.

Turning to our fourth-quarter results. SLRC reported net investment income, or NII, of $0.40 per share and net income of $0.46 per share. Net investment income per share was flat quarter over quarter and net asset of value per share of $18.26 as of December 31 increased both quarter over quarter and year over year from both unrealized and realized gains. Our net income for quarter equated to a 10.1% annualized return on average equity. For the full year 2025, we generated net income of $1.70 per share, representing a 9.3% return on average equity, which we anticipate should compare favorably to publicly traded BDC and non-listed BDC peers as well as the broadly syndicated loan markets.

During the fourth quarter, we originated $462 million of new investments across the comprehensive portfolio and received repayments of $445 million for net fundings of [$70 million], resulting in a year-end comprehensive portfolio of $3.2 billion and annual growth of 7.2%.

New originations were the second highest level achieved on record, increasing 36% year over year and 3% quarter over quarter, continuing the strong origination momentum we have delivered throughout this year. Originations for the year totaled $1.84 billion. The primary driver of new originations continued to be led by our commercial finance strategies, which we believe currently offer more attractive risk-adjusted returns.

The company's strong commercial finance originations furthered our portfolio mix shift to asset-based specialty finance strategies over the last couple of years, which we believe provide greater downside protection from strong credit agreements, borrowing bases, and underlying collateral. As of December 31, 2025, more than 83% of our portfolio investments were in senior secured specialty finance loans which represents the highest percentage in our 20-year history.

Our direct industry exposure to the software industry remains low, so low, in fact, that the approximate 2% exposure as of December 31 is among publicly traded BDCs. For investors concerned about the uncertainty of technology obsolescence risk and enterprise value destruction for the software industry, the burgeoning threat of artificial intelligence, SLRC's portfolio with its lack of software exposure can be viewed as a safe haven. Overall, we remain pleased with the steady expansion and further diversification of the portfolio which has produced an annualized growth rate of 10.1% since 2020 and a risk profile that is highly differentiated from other middle market lenders.

Direct corporate asset-based lending, or ABL, a strategy we've been in since 2012, contains high barriers to entry to the complexity of both underwriting and collateral monitoring. This makes it difficult for private credit managers who are latecomers to the strategy to build a book of asset-based loans that can withstand the pressures of changing economic and borrower conditions. We believe it is difficult to replicate expertise in our 20 offices spread across the country makes us the first call for both sponsors and non-sponsors who are seeking corporate financings for ABL solutions.

For the fourth quarter, asset-based lending originations of $247 million were almost double the originations in the prior year period, while originations for the full year of $1.1 billion were close to double the originations in all of 2024. SLR's ABL strategy continued to offer all-in returns of SOFR plus 600.

As a reminder, early in Q4, we hired a well-known respected industry veteran as President of Asset-Based Lending at SLRC's Investment Adviser. Mac Fowle is focused on expanding SLR's asset-based lending capability beyond the platform's existing ABL franchise. We believe our investment in people and infrastructure over the last couple of years have contributed to our expansion and investment opportunities and a greater recognition of SLR's leadership in the ABL marketplace.

SLRC's ABL platform provides the infrastructure and strategic growth capital to further grow our comprehensive investment portfolio, including through potential portfolio and business acquisitions as well as geographic and industry expansion.

With sponsor finance conditions competitive and illiquidity premiums tight, we passed on the refinancings of several cash flow investments in our incumbent portfolio, allowing our sponsored portfolio to further shrink. With cash alone representing just 14.5% of the comprehensive portfolio, the allocation of cash for loans remains at the lower balance of our historical mix. We will, however, continue to approach to investments in cash flow lending opportunistically.

Our deep industry expertise in the healthcare sector, along with trends in private equity fundraising at dedicated health care focused sponsors and deal activity should continue to present selective opportunities for us to be active and attractive cash flow lending during 2026. Moreover, our healthcare industry expertise and cash flow lending serves an important information resource and referral source for SLRs Life Science and Healthcare ABL investment teams. Overall, we remain pleased with the composition, quality, and performance of our portfolio and direct results of SLR's multi-strategy approach to private credit investing.

At year-end, approximately 95% of our comprehensive investment portfolios was comprised of first lien senior secured loans, 100% of our investments are cost performing with zero investments on non-accrual and PIK income continue to comprise a de minimis percentage of total income. We believe these credit quality metrics compare very favorably to peer public BDCs.

At December 31, including credit facility capacity at SSLP and our specialty finance portfolio companies, we have over $850 million of available capital to deploy. Our liquidity profile puts us in a position to take advantage of either stable economic conditions or softening of the economy.

I'll now turn the call back over to Shiraz, our CFO, to take you through the fourth quarter highlights.

Thank you, Michael. SLR Investment Corp.'s net asset value at December 31, 2025, was $996 million or $18.26 per share compared to $18.21 per share at September 30, 2025, and $18.20 per share at December 31, 2024. At year-end, SLRC's on-balance sheet investment portfolio had a fair value of approximately $2.1 billion in 100 portfolio companies across 31 industries compared to a fair value of $2.1 billion and 109 portfolio companies across 31 industries at September 30.

SLRC's investment portfolio is funded by a combination of revolving credit facilities and the issuance of term debt in the unsecured debt markets to institutional investors. The company is investment-grade rated by Fitch, Moody's, and DBRS, and more than 40% of the company's debt capital is comprised of unsecured debt at December 31.

During the quarter, the company was active in the management of various credit facilities with multiple banks, including the closing of a new credit facility at the SSLP that enhanced the joint venture's borrowing flexibility and reduce the spread to 75 basis points. These actions, combined with others taken during the year have improved borrowing flexibility via better advance rates, expanded the unsecured investor base and extended maturities. The company does not have any near-term refinancing obligations, the next unsecured note maturity occurring in December 2026. We expect to continue to prudently access the debt capital markets and issue unsecured debt as and when needed.

At December 31, the company had approximately $1.2 billion of debt outstanding with a net debt-to-equity ratio of 1.14 times, which was within our target range. We believe we have ample liquidity to support our unfunded commitments.

Moving to the P&L. For the three months ended December 31, gross investment income totaled $54.5 million versus $57 million for the three months ended September 30. Net expenses totaled $32.9 million for the three months ended December 31. This compares to $35.4 million for the prior quarter.

Accordingly, the company's net investment income for the three months ended December 31, 2025, totaled $21.6 million or $0.40 per average share, the same as the prior quarter.

Below the line, the company had net realized and unrealized gain for the fourth quarter totaling $3.5 million versus a net realized and unrealized gain of $1.7 million for the third quarter of 2025. As a result, the company had a net increase in net assets resulting from operations of $25.1 million for the three months ended December 31 compared to a net increase of $23.3 million for the three months ended September 30.

On February 24, the Board of SLRC declared a Q1 2026 quarterly base distribution of $0.41 per share, payable on March 27, 2026, to holders of record as of March 13, 2026.

With that, I'll turn the call over to our Co-CEO, Bruce Spohler.

Thank you, Shiraz. As Michael shared, we've continued to shift the portfolio toward our specialty finance strategies throughout 2025 due to their more attractive risk-adjusted returns. Our pipeline also reflects this continued momentum.

Our specialty finance strategies currently offer higher pricing than sponsor finance loans and greater downside protection through their underlying collateral support and tight documentation. We view these more favorable terms as a complexity premium that we earn through investing in structures that require significant expertise and infrastructure that most private credit firms don't have.

Turning to the portfolio. At year-end, the comprehensive investment portfolio consisted of approximately $3.3 billion with an average exposure per borrower of $3.8 million. Measured at fair value, approximately 98% of the portfolio consisted of senior secured loans, with 95% invested in first lien loans. The 3% of our portfolio invested in second lien loans consist entirely of asset-based loans with underlying borrowing bases and no second lien cash flow loans. At year-end, our weighted average yield on the portfolio was 11.6%, which was down from 12.2% in the third quarter and 12.1% at the end of 2024.

Sequential decline in yield was primarily due to two factors: the decline in base rates in the fourth quarter that began to impact results, as well as timing due to the funding of our new investments towards the end of the December month and receipt of repayments earlier in the quarter.

Overall, we believe our portfolio has been less impacted by changes in base rates and spread compression compared to the BDC peer group because of our lower allocation to cash flow loans made possible through our current focus on the less competitive specialty finance investment sectors.

Based on our quantitative risk assessment scale, our portfolio continues to perform well. At year-end, the weighted average investment risk rating was under 2, based on our 1 to 4 risk rating scale, with 1 representing the least amount of risk. Just under 98% of our portfolio is rated 2 or higher at year-end. Importantly, 100% of the portfolio was performing with no investments on non-accrual.

Now let me touch on each of our four investment verticals, starting with our Specialty Finance segments.

As a reminder, we dynamically allocate across our strategies based on market and economic conditions, which allows us to source attractive investments across market cycles. Let me first discuss Asset-based Lending. Given current market volatility as well as investor sentiment, I'd like to take a moment to review the investor protections inherent in our ABL asset class that serves as the bedrock of our conservative investment philosophy. In old school ABL lending, which we define as bilateral corporate lending by teams with significant infrastructure support as well as experience in evaluating and monitoring collateral. We're able to structure credit agreements and borrowing bases with terms that have integrated in lockstep with the ballooning of private credit cash flow-focused AUM.

We're also able to maintain greater visibility and influence during the life of our investments. Simplistically, with cash flow lending, we are viewing portfolio companies through a quarterly rearview mirror, whereas in asset-based facilities with borrowing base requirements, we are essentially using binoculars. We can get to the table at the first sign of a problem, and our teams have decades of experience in structuring our investments to ensure that the V or value in loan-to-value sufficiently covers our principal, even in severe downside scenarios. Old school ABL requires significant in both people and infrastructure. We began this build-out in 2012 with our first control stake acquisition, which then followed by 8 additional tuck-in acquisitions.

Our collaborative ABL and Equipment Finance strategies provide a moat that newer entrants cannot easily create.

At year-end, our ABL portfolio totaled just under $1.5 billion across 252 issuers, representing approximately 45% of our comprehensive portfolio. For the fourth quarter, we originated approximately $250 million of new ABL investments and had repayments of approximately $235 million. In the fourth quarter, the weighted average asset level yield of the ABL portfolio was 12.6%.

Now let me touch on Equipment Finance. Quarter end, this portfolio totaled just under $1.1 billion, representing approximately a third of our comprehensive portfolio and was highly diversified across 585 borrowers. The credit profile was unchanged quarter over quarter. During the fourth quarter, we originated just over $150 million of assets with the majority of them coming from our business that provides leases predominantly to investment-grade corporate borrowers for their mission-critical equipment. We had repayments of just over $120 million.

The weighted average asset level yield for this asset class was just under 11%. We remain encouraged by some of the trends we're seeing in our Equipment Finance business. Our investment pipeline has expanded, and we're seeing demand from our borrowers and sponsors to extend existing leases on equipment rather than buying new equipment at higher tariff-adjusted prices.

Now let me turn to Life Sciences. Over the last few years, Life Sciences venture debt market has been characterized by fierce competition as asset managers look to make a splash in perceived adjacencies. As we see it, this influx capital into Life Science lending has led to the prevalence stretch deals where some market participants prioritize enterprise value methodology over credit discipline. Throughout this time, we've chosen to maintain a strict late-stage investment approach with a focus on drug discovery that are in or approaching commercialization and that posses structural protections that have historically mitigated risk throughout market cycles and FDA risks. The broader life science industry has seen a surge in healthcare services/IT transactions, which are predominantly software company loans to health care borrowers.

We have intentionally avoided this segment. In contrast to the high FDA barriers that are present in drug discovery and medical devices, which entails several year-long FDA approval process. The barriers to entry in software are lower and IP protections are more limited.

As a result, the reliance on software IP is (inaudible) presents elevated risks of technological obsolescence and valuation volatility in Life Sciences that we have avoided. Given those market dynamics, we have consciously allowed our Life Science portfolio to shrink across the SLR platform. In 2025, we made first lien term loan commitments approximately $500 million and partnered in the origination of $60 million of ABL facilities for Life Science borrowers issued by our Healthcare ABL team. During that same period, we had over $400 million in repayments.

Looking ahead, our pipeline of opportunities is notably larger than it was at the beginning of last year. We think the drug discovery pipeline is poised for a re-acceleration after a period of relevant sluggishness in public market valuations ongoing uncertainty regarding the FDA's direction, a recent wave of high-profile acquisitions has significantly bolstered public market valuations for bioscience companies. Furthermore, the integration of AI technology holds the promise of shortening the drug development time line and create a more dynamic investment opportunity set, although we acknowledge that this will take time to evolve.

We will remain disciplined, leveraging our 25-year track record to identify late-stage development companies with robust clinical data and clear path to commercialization. At year end, our Life Science portfolio totaled approximately $180 million across 7 borrowers. Importantly, 100% of these portfolio companies are revenue generating, with at least one product in the commercialization stage, which significantly de-risks our investment. During the fourth quarter, the team funded $26 million, one to a new borrower and had just under $60 million of repayments. At quarter end, the weighted average yield on our first lien Life Science portfolio, including success fees, but excluding warrants, was 12.3%, consistent with the prior quarter.

Now finally, let me turn to our Cash Flow Lending business. Middle market sponsor activity improved modestly in the fourth quarter and the momentum appears to be carrying over into 2026. Yet competition for quality assets remains intense, and the looming '26, '27 maturity wall continues to shape borrower behavior. In casual lending, all eyes are currently on software exposure. Michael has already provided specifics on our under-weighting to that sector. I'll touch on the why and how we avoided this sector.

As the software sector was experiencing its heydays in the COVID economy era, and private credit leaned into the massive capital deployment opportunity. We, too, evaluated the potential for developing a core expertise in the software sector. However, we determined that loans to SaaS businesses do not offer the same downside protection as our existing investment strategies. For example, unlike in our Life Science strategy where loans are backed by IP that takes typically 10 to 15 years to create and hundreds of million dollars of investment. The technology backing IP software faces a far greater risk of obsolescence.

The risk/reward profile of software loans is less attractive also to our asset-based lending strategies, which are typically backed by accounts receivable or liquid inventory. Additionally, we viewed our existing health care expertise across Cash Flow Lending, Healthcare Asset-based Lending and Late-stage Life Sciences, as a means of a capitalizing on an investing edge that we possess in an essential sector.

In short, our existing strategies have enabled us to avoid the soft industry while still delivering portfolio growth and steady income. If software leads to broader cash flow dislocation, we too will be opportunistic investors, once again in the cash flow market. At quarter end, our sponsor finance portfolio is just over $475 million across 27 borrowers, including the loans held in our SSLP or just 15% of the total portfolio.

With 100% of our cash flow loan invested in first lien loans, we believe that we are well positioned to withstand tariff or economic headwinds. Our borrowers have a weighted average EBITDA of just over $100 million and carry low LTVs of approximately 40%. Our borrower fundamentals are trending positively with portfolio company average EBITDA and revenue growth in the middle-single-digits year-over-year. Overall, our portfolio of companies have successfully managed the transition to an environment with higher cost of capital as well as input prices. Weighted average interest coverage on our sponsor portfolio was 2.3x, up from the prior quarter.

Additionally, only 1.1% of our fourth quarter gross investment income is in the form of capitalized PIK from our cash flow borrowers, resulting from amendments. During the quarter, we made new investments of $37 million in cash flow loans and experienced repayments of approximately $30 million. Quarter end, the weighted average yield on the cash Flow Portfolio was just under 10% compared to just over 10%, the prior quarter.

Lastly, let me touch on our SSLP. During the quarter, the SSLP revolving credit facility was refinanced, lowering our interest rate from SOFR plus 290 to SOFR plus 215. Adjusted for onetime credit facility charges associated with this refinancing, the company would have earned $1.5 million in the fourth quarter, representing an annualized yield of 12.6%. During the quarter, SSLP invested $13 million and had $19 million of repayments. Net leverage was just under 0.9x.

We expect to continue to rebuild this portfolio this year. And at quarter end, we had roughly $55 million of undrawn debt capacity. Now let me turn the call back to Michael.

Thank you, Bruce. With hindsight, we think 2025 has the appearance of being marked as a consequential year for the private credit industry and for the value proposition of SLRC. Over the last couple of years, we've been vocal about how the seemingly limitless access to private credit for investors, could lead to the unsatisfactory achievement of marketed outcomes, especially given the two key drivers of outperformance in private credit investing comes from avoiding and minimizing credit losses and the use of leverage.

As we see it today, the markets are clearly demonstrating and understanding of the private credit markets maturation and the recalibrating expectations to a more normalized default loss experience. While the private credit landscape has shifted dramatically, our core philosophy remains unchanged. Stakeholder alignment drives every decision at both the SLR Capital Partners and SLRC.

Last year, SLRC surpassed its 15-year history as a publicly traded company, and this year, SLR Capital Partners will surpass 20 years of operating history. As co-founders of SLR and co-CEOs of SLRC, Brice and I continue to lead a team that has largely worked with us since the start and are now responsible for more than 300 employees, including professionals at the 5 Specialty Finance affiliates within SLRC. Our platform's value proposition has attracted very high-quality senior talent, such as Mac Fowle from JPMorgan and others.

Based on our team's investment experience through multiple cycles over the past 30-plus years and our multi-strategy approach to private credit investing, we believe we are well equipped to continue outperforming across shifting private credit markets. SLRC achieved a net income ROE of 9.3% in 2025 and a total economic return of 8.1% over the last 3 years, which we expect to be at least 200 basis points wide of the public BDC peer group average when results for year-end 2025 are fully released. We believe that the disciplined we've exercised to SLRC's history, can be seen to the backward-looking lens of performance as well as the forward-looking lens of portfolio quality.

With credit quality top of mind today, we remain pleased with our portfolio, which sits to the midpoint of our target leverage, is 100% performing and its exposure to software of approximately 2% and restructured PIK income of approximately 2% of total investment income.

Moreover, our portfolio companies continue to experience both top line and EBITDA growth and should benefit from recent reductions in SOFR. We continue to acknowledge that our results are not fully immune to the impact of recent reductions in base rates by the Federal Reserve in Q4, but we believe SLRC's earnings sensitivity to changes in base rates is one, if not the lowest amongst our peers. Fourth quarter 2025 originations and our pipeline in 2026 continue to reflect new investment opportunities at spreads that exceed our cost to capital. Our North Star continues to be protecting capital, avoiding losses and not chasing higher spreads at the expense of structural protections.

While maintaining dividend coverage is important as many of our investors align the distribution of our income, we believe it must be done in a way that does not compromise credit quality. We've made significant investments in resources across the platform and continue to see some levers to pull at SLRC that can help offset base rate declines. Importantly, we have the available capital to be opportunistic in market dislocations.

In closing, SLRC trades at approximately an 11.2% dividend yield as of yesterday's market close, which we believe presents an attractive investment for both income-seeking and value investors and offers a more diversified investment portfolio compared to direct lending-only private credit strategies. Our investment adviser's alignment of interest with SLRC shareholders continues to be a hallmark principle. The SLR team owns over 8% of the company's stock and has a significant portion of their annual incentive compensation invested in SLRC stock each year. The team's investment alongside fellow institutional and private wealth investors demonstrates our confidence in the company's profile, portfolio, stable funding and earnings outlook. Thank you again, for all your time today as we hope to see you in person at a conference in 2026.

Operator, will you please open the line for questions.

(Operator Instructions) Eric Zwick, Lucid Capital Markets.

One, thank you for all the detailed comments on the individual lending vertical and kind of outlook there. A bit of a follow-up maybe in terms of the pipeline within the ABL and Equipment Finance and more from the inorganic perspective. I know sometimes you review opportunities to acquire portfolios and/or (inaudible) teams. I wondering if you could just update us on any recent activity or outlook for 2026 there?

Yes. Great question. We have been very active -- we don't win them all because we're as disciplined in our acquisitions as we are in our individual investments. But I will say that the quality of potential opportunities is high. And as you may recall, one of the strategies that we have is to lend into some of these potential platforms as a way to get to know each other and see if there's an opportunity to bring them on to the SLR platform.

rather than just lend them capital. So we have a number of those in the pipeline that are currently in portfolio that we have an active dialogue. Those take time to germinate. So I would say that we don't see anything imminent but we are very actively engaged in potential acquisitions.

And then I'm just curious in terms of the tight spreads that are being witnessed in the public debt markets, are those impacting spreads in the ABL and Equipment Finance opportunity you're seeing today? Or because it's about structural defense mechanisms you have in place have you been able to kind of maintain new spreads relative to the existing portfolio?

Yes. As Michael mentioned, the overall return has come down a little bit across all the strategies, but we still believe 11.5% or so compares extremely favorably to the market more broadly and specifically the cash flow market. So we still like the opportunities. It's -- the structural protections help us on the risk side. It's really the -- as we touched on, the lack of capital flows coming into these markets that allows us to maintain our competitive position.

Plus our peer group here is smaller, but also extremely disciplined. Our peers share the same decades-long experience in asset-backed lending and appreciate that discipline is critical for their performance. So we find people to be very disciplined and not many new entrants.

And last one for me, just your portfolio remains very clean from a credit perspective from almost any metric you would choose to look at it. I'm curious, are you seeing anything that might be kind of an early sign of concern in terms of greater (inaudible) request or increased revolver usage or anything noteworthy from that perspective?

So the short answer is no. Private credit is a business of not sleeping at night and worrying about every name in your portfolio. So as we mentioned, we do have a watch list. It's roughly 2%. And that's a constant.

But what I would say is in our ABL strategies, and we touched on this in the comments, you have metrics that allow you to see more real time, the underlying performance of your borrowers and get a window into the broader economy domestically. And specifically, we get to see inventory turns, we get to see receivable collections because we're monitoring those underlying pieces of collateral on a weekly, monthly basis. And I would tell you that we're not seeing any themes coming out of that. It's very idiosyncratic, one-off borrower here or there, but nothing that we can call a theme.

Rick Shane, JPMorgan.

Look, one of the advantages that you guys have is that your leverage is relatively low and you have capacity to flex that as you choose. You also talked about being opportunistic during market dislocations. If we sort of stay in this environment right now, would we -- should we expect you to be opportunistic? Or should we expect the portfolio leverage to be roughly flat, and you would be sort of waiting for a more severe environment to take advantage of that liquidity?

So I'm going to answer it two ways. Part of what we're doing to Eric's questioning, is we always try to have a little bit of dry powder for potential acquisitions. And so that does inform how we look at the leverage ratio at any moment in time, based on what we're seeing out there on the acquisition front as well as individual investment opportunities. We're blessed that we have multiple strategies. We're seeing good opportunities in the Specialty Finance strategies, particularly ABL, although we did mention that we're seeing Life Science pick up.

And we also could see, as we get deeper into 2026, cash flow dislocation create opportunity for us as we took advantage of back in 2023, when there was a dislocation in the cash flow market. So we're happy to take leverage up either through acquisitions or individual investments throughout 2026, the high end of our target range, which is 1.25 times. So whether that will happen or not we'll see because the other side of that equation is obviously repayments.

As a lender, we celebrate repayment, that generates a memo internally, not so focused on deployment. We're more focused on getting repaid, and as you can see, we've had an elevated level of repayments and that's been very intentional where we have the ability to make that decision. Do we stay or do we get repaid? By and large, we've been choosing to get repaid because either terms or structures or pricing has been less attractive than we like. So that's the unknown for this year, although our crystal ball says we probably will see less repayments because I do see less capital coming into the market and a bit more discipline.

So long-winded way of saying we would like to see that leverage ratio come up in this environment because of the very attractive opportunities.

Okay. No long-winded is fine. I've asked a few long-winded questions in my time. So I appreciate the answer.

(Operator Instructions) Heli Sheth, Raymond James.

You mentioned M&A opportunities in the ABL business remain high. Any sort of shift in sentiment or outlook there? Does it seem more or less likely that some players may be willing to sell with all of the recent market (inaudible)?

Dislocation always kind of force people to kind of rethink their business and access to capital. So I would -- if we go through a period of time for quite some time like this, I think we will see more opportunities at better pricing. And we have a team that's actively looking at many situations all the time. So we're hopeful something happens in the relatively near term.

And then could you quantify how much spillover you have as of year-end?

We don't have any to speak of.

And gentlemen, it appears we have no further questions today. Mr. Gross. I'd like to turn things back to you, sir, for any closing comments.

No closing comments at the time other than thank you for all your time today. We realize it's a big earnings season and with all the turmoil in private credit its been quite busy. But if everyone has any questions or people who are listening to this call after the fact, please feel free to reach out to any of us to continue to dial. Thank you.

Thank you, Mr. Gross. Again, ladies and gentlemen, that will conclude today's SLR Investment Corporation fourth quarter earnings conference call. Again, thanks much for joining us, everyone, and we wish you all a great day. Goodbye.