Sixth Street Specialty Lending Inc (TSLX) 2014 Q2 法說會逐字稿

Good morning and welcome to TPG Specialty Lending Inc.'s June 30, 2014 quarterly earnings conference call.

Before we begin today's call, I'd like to remind our listeners that remarks made during the call may contain forward-looking statements. Statements other than statements of historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in TPG Specialty Lending, Inc.'s filings with the Securities and Exchange Commission. The Company assumes no obligation to update any such forward-looking statements.

For a slide of the presentation that the Company intends to refer to on the earnings conference call please visit the Events and Presentations link on the Investor Resources section of the Company's website, www.TPGSpecialtyLending.com, and click on the Investor Presentations link. TPG Specialty Lending, Inc.'s earnings release is also available on the Company's website under the Investor Resources section.

As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the conference over to Joshua Easterly, Co-Chief Executive Officer and Chairman of the Board of TPG Specialty Lending. Please go ahead, sir.

Thank you Ashley. Good morning, everyone, and thank you for joining us today. I am joined here by Mike Fishman, my partner and Co-Chief Executive Officer, Alan Kirshenbaum, our CFO, and our Investor Relations team.

Yesterday after the market closed, we issued our quarterly earnings press release for the second quarter ending June 30, 2014, and we posted a supplemental earning slide presentation to the Investor Resources section of our website. The earnings presentation should be reviewed in connection with our Form 10-Q filed yesterday with the SEC. We will refer to the earnings presentation throughout the call today.

I would like to begin today with a brief overview of our quarterly highlights and then turn the call over to Mike to discuss our originations and portfolio metrics. Alan will then discuss our quarterly financial results in more detail, and finally I will close with our outlook for conditions in middle-market lending before opening up the call to Q&A.

I am pleased to report strong financial results for the second quarter. Net investment income per share was $0.55 for the second quarter of 2014 as compared to $0.51 per share for the first quarter of 2014. The increase in net investment income per share was largely attributable to an increase in income related to the full pay-down of three investments.

Net income per share was $0.51 for the second quarter of 2014 as compared with $0.61 per share for the first quarter. The difference was primarily due to higher average shares outstanding during the quarter, a management fee waiver during the first quarter, and the reversal of unrealized gains on full pay-downs, which Alan will discuss further.

As announced on last quarter's call, our Board of Directors declared a second-quarter dividend of $0.38 per share payable to shareholders of record as of June 30, which we paid on July 31. The Board has also declared a third-quarter dividend of $0.38 per share to stockholders of record of September 30, 2014 payable on or about October 31, 2014.

During the quarter, we over-earned our dividend by $0.17 per share on a net investment income basis and by $0.13 per share on a net income basis. As Alan will walk you through in detail, net asset value per share increased by $0.19 to $15.70 from $15.51.

Consistent with the objective that we outlined on our last earnings call, during the second quarter, we dedicated significant efforts towards continuing to diversify and enhance the liability side of our balance sheet. In May, we upsized our revolving credit facility by $200 million to $781 million and in June, we issued $115 million of convertible senior notes due 2019. The notes offered additional flexibility, a 5.5-year maturity, and attractive all-in pricing of approximately LIBOR+ 253 on a swap-adjusted basis, in line with our credit facilities.

TSL has over $750 million of undrawn commitments under its existing credit facilities for future investments. We believe this liquidity positions the Company well into 2015 in light of the current investing environment and our high degree of selectivity.

With those highlights, I would like to turn it over to Mike, who will walk through our originations and portfolio in more detail. Mike?

Thanks Josh. Following a robust Q1, one of our largest originations quarters today, our investment pace was more tempered in Q2 due to pull-through of activity into Q1. Our model is to originate proprietary investments, conduct in-depth due diligence, and to be highly selective in determining which investments to make. This process inherently leads to variability in terms of the number of investments we make, and the dollar amount of our originations in any single quarter. We tend to focus instead on our originations activity over a longer period of time, typically two to four quarters.

Over the last four quarters, we generated average quarterly fundings of over $180 million. During the second quarter, we had gross originations of $157 million as compared to $370 million for the first quarter of 2014. We syndicated $41 million of investments during the quarter, resulting in new investment commitments for the second quarter of $116 million as compared to $315 million for the first quarter of 2014. These commitments were distributed across six transactions, which included $114 million to four new portfolio companies and $2.4 million to two existing portfolio companies. Of the $116 million of new investment commitments made during the quarter, $104 million was funded.

During the quarter, we exited commitments totaling $159 million due to the full pay-downs of three investments, including our investment in Global Geophysical which was discussed on the prior quarterly earnings call. Since inception through June 30, we have generated a gross IRR of 16.4% on fully exited investments totaling over $600 million of cash invested. And as Alan will discuss in greater detail, during the second quarter, we generated considerable economics as a result of these full pay-downs.

As with our originations activity, our level of repayments varies quarter to quarter. Over the last four quarters, our average quarterly repayments have been approximately $90 million. On an annualized basis, our net funded activity is approximately $375 million based upon the past four quarters.

As of June 30, our portfolio totaled $1.13 billion at fair value compared to $1.2 billion at March 31. 86% of our investments by fair value were first lien, and 99% of our investments by fair value were senior secured. Approximately 98% of our debt investments are floating-rate subject to interest rate floors. The weighted average total yield on our debt and other income producing securities at amortized cost at June 30 was 10.5% versus 10.4% at March 31 and 10.6% at June 30, 2013. Notably, the weighted average yield on new investments made during this quarter was 11%. These stable-to-improving portfolio yields are attributable to our ability to originate and structure non-intermediated investment opportunities.

The portfolio is broadly distributed across 31 portfolio companies and 19 industries. Our average investment size is approximately $36 million and our largest position accounts for 6.2% of the portfolio at fair value. Our largest industry exposure was to healthcare and pharmaceuticals, primarily healthcare information technology, which accounted for 14.8% of the portfolio at fair value. We continue to target industries with low exposure to cyclicality and the ability to perform throughout our credit cycle.

As of June 30, 100% of our debt investments were meeting all covenant and payment requirements and we had no investments on non-accrual status.

With that, I'd like to turn it over to Alan to discuss our quarterly results in more detail.

Thank you Mike. We ended the second quarter of 2014 with total portfolio investments of $1.13 billion, outstanding debt of $296 million and net assets of $837 million. Our average debt to equity ratio for the three months ended June 30 was 0.43 times as compared to 0.73 times for the three months ended March 31. At quarter end June 30, our debt to equity ratio was 0.35 times as compared to 0.50 times at March 31. Our debt to equity ratios are lower this quarter due to taking in the IPO and private placement proceeds at the end of March and the overallotment proceeds in April, and the small net reduction in investments we experienced this quarter.

As it relates to the right side of our balance sheet, we remained very active this quarter. In our Revolving Credit Facility, we took in $200 million through our accordion feature, increasing total commitments to $781 million. We exercised our option to extend the reinvestment period of our SPV Asset Facility, extending to January 21, 2015. And we issued $115 million of 4.5%, 5.5 year convertible notes. In order to continue to match our liabilities with the floating-rate nature of our portfolio, we entered into an interest rate swap matching the notional amount and term of our convertible notes. This opportunistic transaction was an important milestone for us as it demonstrated our ability to access the unsecured market, provided us term financing with no financial covenants, and was economically compelling on a swap adjusted basis, which at L+252.9 is just about our marginal cost of capital of our revolver at L+225.

Both our asset facility and senior revolver are floating-rate, and given that we entered into an interest rate swap related to our convertible notes, we believe we remain match funded from an interest rate and duration perspective.

Also to note, at the end of last month, we received an investment grade credit rating from Fitch Ratings. We now have investment-grade credit ratings from both Standard & Poor's and Fitch Ratings.

During the three months ended June 30, we had a number of factors impacting our net asset value per share. As you can see on Slide 8 of our earnings presentation, in April, our underwriters exercised their full overallotment option related to our IPO, decreasing net asset value per share by about $0.01. This decreased NAV due to the underwriters' spread and the reduction of the $0.38 dividend with a record date of March 31.

In May, our DRIP issuance increased net asset value per share by about $0.01. Our convertible notes issuance increased net asset value per share by approximately $0.06. This increase is driven by the accounting for convertible notes where you separate the debt and equity components, the equity side going through additional paid-in capital as a one-time adjustment and the OID amortizes down to earnings over the life of the notes by about $0.01 a year. You can see disclosure in our 10-Q for more information on this.

And finally, we significantly over-earned our dividend this quarter. We added approximately $0.55 per share to net asset value from net investment income. Our dividend for the quarter was $0.38 per share, reducing net asset value, and our net realized and unrealized gains and losses reduced net asset value per share by approximately $0.04. I'll talk a little more about that in a moment.

Moving onto the income statement on the next slide, total investment income for the quarter ended June 30 was $45.7 million. This is up $12.2 million from the previous quarter, or just over 36%. This increase was driven by an increase in accelerated amortization and prepayment premiums due to the full pay-downs of three investments this quarter. PIK income is less than 2% of total investment income year-to-date.

On the next slide, Slide 10, you will see a breakout of revenues where we provide some additional transparency into the revenue increases I just discussed. What we have done here at the top of the slide is split out our interest from investments line between, one, interest income earned during the period and, two, income earned from prepayment premiums and accelerated amortization of upfront fees from unscheduled full or partial pay-downs, both of which run through interest from investments in our income statement.

As you can see, we experienced a significant increase in Interest from Investments-Other Fees this quarter from $2.2 million for the first quarter to $14.3 million for the second quarter. Although we generally expect a certain level of economics here, typically not at this level. But to note something important, we believe this is a higher quality of income. This income is not related to new origination activity but is embedded in our existing portfolio. And we continue to, driven by a strong direct originations platform, construct our portfolio with these embedded economics, which are a function of the average life of our investments being less than the stated maturity coupled with call premiums. We will also at times, like we did last quarter, have the opportunity to book syndication income, which is related to new originations activity that flows through Other Income on our income statement.

It's worth spending a moment talking about our unrealized gains and losses on investments for the quarter. When you look at the details of our unrealized loss on investments of $3.9 million for the second quarter, you will see that the reversal of unrealized gains on the three investments that paid down was $4.5 million, and across the rest of the portfolio, we had unrealized gains of $0.6 million.

To explain the reversal of unrealized gains for a moment, when we have a borrower that repays their loan in full, we reverse the "unrealized" account on the balance sheet and take in interest and prepayment premiums through investment income.

As for expenses, net expenses for the quarter ended June 30 was $16.0 million. This is up $1.3 million from the previous quarter primarily due to higher incentive fees as a result of higher net investment income than in the previous quarter, and as we noted last quarter, our Adviser is no longer waiving management fees.

A few final points in closing. We have continued to over-earn our dividend. As of June 30, we have an estimated $0.32 per share in undistributed distributions. As Josh and Mike touched on earlier, we remain highly selective in making investments. We are below our targeted debt to equity ratio, which we believe we will leg back into over time. As we discussed on our last earnings call, although there will be variability quarter-to-quarter, our board is focused on setting a dividend that can be earned over the intermediate term.

Josh, back to you.

Thanks Alan. Q2 was a strong quarter from an earnings and liabilities management perspective. Our illiquid market is not immune to the dynamics of the liquid market, including higher leverage and tighter pricing. We are able to mitigate these pressures by focusing on direct non-intermediated investment opportunities with our dedicated team. These opportunities are difficult to source, structure, diligence and execute. Our ability to navigate this complexity is one of our key competitive advantages and we believe a driver of strong risk-adjusted returns for our investors.

As Mike mentioned, over the last four quarters, we have maintained an average pace of over $180 million of fundings per quarter, though as we noted on the last call, we do expect to see some variability quarter to quarter.

As previously stated, we believe that return on equity coupled with the quality and risk profile of our portfolio is the appropriate measure of our ability to generate high-quality risk-adjusted returns over the long-term for our investors. For the three months ended June 30, 2014, we generated an annualized return on equity of 14.3% based on net investment income and an annualized return on equity of 13.3% based on net income. And for the six months ended June 30, 2014, we generated an annualized ROE based on net investment income of 13.8% and an annualized return on equity based on net income of 14.3%.

Q2 was somewhat of an outlier due to higher than normal investment income related to the portfolio. As Alan mentioned, we expect some run rate level of these economics each quarter related to the embedded value of the existing portfolio and not related to our current period originations.

Based on our current asset level yields and our target leverage ratio, our target return on equity is 10.5% to 12% over the intermediate term. This compares to our annualized dividend yield at book value of 9.7% as of June 30. We believe in managing our dividend with a long-term perspective and across cycles rather than on a quarter-to-quarter basis. That said, we continue to evaluate alternatives for maximizing return of cash capital to shareholders. Depending on the outlook of reinvestment spreads and pipeline for new investment opportunities, these alternatives may include increasing the level of our dividend or retaining capital to build net asset value. We believe the current portfolio is of very high quality and continue to believe that our primarily floating-rate, senior secured investment profile is well-positioned given the broader macro and credit market dynamics.

On behalf of myself, Mike and Alan and our Investor Relations team, thank you for your continued interest in TSL, and for your time today. Operator, would you open up the line for questions?

(Operator Instructions). Doug Mewhirter, SunTrust.

Hi, good morning. Most of my questions actually were answered in your preamble. I guess two questions more big picture I guess.

First, in general, do you see loan activity in the middle market and in your pipeline picking up in this late part of the summer? I've seen it through a couple of sources that the middle market seems to have caught a second wind in July and August. And also if you could discuss sort of the terms and the competitive environment in that market right now.

First of all, thanks, Doug, for your question. Appreciate your participation. And I'll turn it over to Mike -- I'll give my view. From our perspective, our portfolio originations are pretty idiosyncratic. We had a huge Q1 originations quarter, which pulled through. When you close three to six investments a quarter, when you pull through one or two, that obviously affects any single quarter originations.

I would say our pipeline today feels very, very healthy and it feels like -- not having total visibility into prepayments, but we're less susceptible given the embedded call protection of our portfolio-- that we should see portfolio growth in the quarter, given the healthy nature of our pipeline. But I can't speak for the broader market.

As it relates to competition, there surely has been capital formation in this space. That capital formation obviously creates competition, so it's subdued a little bit or the rate of change of that competition I would say has slowed. And you see that in spreads for example this quarter, or I think, again, a small sample size, but our new investments in were 11% on an amortized cost basis, which was -- and we increased our portfolio yield on an amortized cost basis from 10.4% to 10.5%. Again, it's small numbers. So I would say the rate of change of competition is slowing. There is capital formation, and we feel good about our Q2 portfolio.

Mike, do you have anything to add?

Yes. I think, Doug, to your point, at the end of Q1 going into Q2, there was a dip down in activity. And to your point also, more recently activity has picked up. The portfolio right now -- the pipeline right now quarter-over-quarter is more active, and we see, over the next two quarters, that continued activity.

Thanks Doug.

Thanks. That's all my questions.

Jon Bock, Wells Fargo Securities.

Thank you so much for taking my question. Maybe focusing a little bit on the asset specifics and then one more global perspective. Josh, can you walk us through kind of Longview as an investment? Given the 7.5% coupon in today's environment, what makes that attractive, and how one can work 7.5% coupons on the BDC balance sheet in light of the current cost structure of what one operates at, that would be very helpful.

Sure. So, I'll let Mike walk you through the specifics of credit. As you know us very well, we look at our portfolio on kind of a portfolio basis. So, if we'll find good risk-adjusted returns that meet the bottom of our hurdle, we'll do that and we look at our portfolio construction on an average basis.

So when you look at Longview, I think you've got to take a step back, and although the weighted average yield -- the yield to maturity is 8.5%, the yield to average life is kind of 9%, which when you look at our cost of equity and our cost structure and given that our fee structure is 10% less than most other guys out there, that it is most definitely accretive on a single-name basis- although it's below our weighted average portfolio yield, but it's -- from our perspective, the risk merited that.

And Mike can talk to the credit from a credit perspective.

Yes. From a credit perspective, Longview, which is in corporate performance management and tax software, is something we're very familiar with. We have a long history in lending and these types of credits have a high degree of recurring revenues. We're actually advanced at less than 2 times recurring revenues and so we are well protected against the recurring revenue base. So for us, we think it's an interesting opportunity and an appropriately priced deal and an appropriate risk-adjusted return for us.

Just when you run the math on what our cost of equity is and our weighted average cost of capital plus our fees, I think our hurdle is somewhere around 7.5% to 8% on an asset level. Quite frankly, this meets our hurdle on a yield to average -- a yield to maturity and yield average life. And quite frankly, we think it's one of the better risks in our portfolio.

Got it. And then maybe a similar coupon, but I'd say a different return based on a few unique things that I know are specific to TSL. Ascent, which I see as a $7 million -- $35 million investment- large this quarter at 7% yield. Can you maybe walk through some of the other drivers of that loan that can push that 7% coupon above your current cost of equity?

Yes. So, I think we've talked about this before, Jonathan, with you, that in the schedule of investments, those coupons, if you look at the footnote, those coupons don't include any effect of back leverage. So you're going to have a difficult time triangulating. So the first investment you talked about, Longview, had no backlog leverage. The second investment, Ascent, does. So the economics are much more significant there -- for our shareholders.

Got it. So, what would the actual return be? 7% coupon, it is not with backend leverage. Where does that put in the all-in rate of return to you?

It is 11% plus. We don't want to get in the habit -- we set up our schedule of investments -- for a particular reason, right, which is -- and we want to be consistent with how we disclose that. And so if we wanted to disclose all the returns on every single investment, we would have set up our schedule of investments differently. Obviously, we think how we finance our portfolio is a competitive advantage, and so -- but it's significantly above our cost of capital.

Great, great. And then more of a global question as it relates to dividend policy. I know, Josh, you kind of alluded in the end comments about looking at the potential for cash distributions to either go up or for a BDC to also build NAV to the extent that you continue to run NOI above the dividend, which is very well -- a mark of a good management as well as a well-diversified portfolio. Maybe a sense of just your views between the two, what you think, and in terms of the pluses and minuses that one might choose to go in one direction. A little bit more color there would definitely be helpful to me and I imagine the investor community and the shareholders.

So, it's easiest to think about this in poles. So -- and an obviously there's a spectrum in between the poles. But it's obviously kind of multidimensional. First is we always do look at the quality of our revenues, the quality of our income and how sustainable that is.

If you think about an environment where in the near term you're over-earning your net investment and you're over-earning your dividend on a net investment income, but you don't have visibility into reinvestment spreads or the pace of your originations to stay levered, in that environment, quite frankly, we would not increase our dividend because we would deem it kind of not sustainable.

If you think about another pole being that you're in an environment where reinvestment spreads are constant, that you think you can keep constant leverage and you're over-earning your dividend on a net investment income basis with high quality dividends, in that case -- but you're not growing significantly, you're kind of running in place or growing a little bit. In that case, our view would be, given reinvestments that are stable in that environment, we would choose to actually increase our dividend and return cash capital back to our investors.

Okay.

In the environment where reinvestment spreads are stable, there is a ton of opportunity to grow. In that environment, which we don't think we are in, just to be very clear, which is, given the investment environment, given capital formation, given that we think we are mid-cycle, we don't think we are doubling TSL's asset base in the next 12 months. And quite frankly, I would hope that our investors don't think we do that either given the environment. In that environment, if we were in that environment, we would choose probably to not increase our dividend, retain capital because the excise tax is cheaper than accessing the public market.

And so those are the dimensions and the poles that we constantly think about and constantly debate. So it's a mix of quality of revenues and quality of earnings plus what environment, we are really focused on reinvestment spreads, and our ability to keep leverage. Does that help, Jonathan?

It does, very much so. Thank you very much, guys.

Chris York, JMP Securities.

Good morning. Thanks for taking my questions. So, Josh, you stated that your goal for ROE is 10.5% to 12%. I'm just trying to get an idea for the numerator for that. Is that net investment income or is that GAAP net income?

So, that is net investment income, net investment income, so excluding unrealized.

Got it. And then secondly, just kind of a --

Just real quick, it's net investment income plus realized, so plus realized, net realized gains and losses. It excludes unrealized.

Okay, that's helpful. And then secondly, just a housekeeping item. Last quarter, you provided some portfolio statistics such as average EBITDA and your EBITDA margin. Could you update us on that?

Yes. So, average EBITDA in the portfolio is around the same as -- so no real changes. I think, last quarter, it was $33 million. This quarter it's $30 million, and EBITDA margins are very similar, kind of high 20s%.

And then attachment points, last quarter, it was that 4.1x, and then cash interest coverage was at 2.9x. Any changes there?

No, very similar. So the net attachment point is below 1 still. Given that Trident paid off, given that was low levered, the last dollar attachment point went from 4.1x to 4.4x. That is not a reflection of new portfolio activity. That's a reflection of Trident, the repayment in Trident, and the interest coverage is the same.

Sure. That's it for me. Good quarter. Thank you.

Thank you. I'm not showing any further questions in queue. I'd like to turn the call back over to Joshua Easterly for any further remarks.

First of all, again, thank you for everybody's time and effort. Oh, I think we have one late pop up.

Derek Hewett, Bank of America Merrill Lynch.

Good morning, everyone, and good quarter. Sorry, I thought I was dialed in, but most of my questions were asked already. But maybe given the second investment grade rating and the recent convertible offering, is there any interest in returning to the capital market for maybe some longer duration funding, or is that still considered an intermediate term opportunity at this point?

I think it's a function of our port -- look, so our perspective is when you think about what we have available to us and you look at what's most attractive is I guess two things. One is we will continue to look at the SBIC. For bigger guys it is less impactful but we continue to look at that.

And from a capital markets perspective, what is most attractive when you look at baby bonds or when you look at the institutional market, for us, when you think about the costs on a swap-adjusted basis or for us to be accretive, the baby bond market, although the duration of the financing is attractive, the cost per duration is not that attractive. I think you would expect our next transaction to be, given the two investment-grade credit ratings, and it's really timing of portfolio growth, and need for capital would be in the institutional bond market if that's open. Alan, do you have anything to add?

I agree with that.

Okay, great. Thank you very much.

And the calls keep coming. So, operator?

Terry Ma, Barclays.

I thought I was dialed into. You guys touched upon this maybe in your prepared remarks, but I understand prepayments and prepayment fees are just part of the natural churn of your portfolio, but it should be pretty lumpy from quarter to quarter and probably not as high as this quarter. So how should investors think about the recurring earnings power of the portfolio in relation to the dividend?

Yes, so we have a good slide in one of our presentations. Not to talk about your competitors, so there's a good slide [from a presentation to] one of your competitors. There's a good slide on our presentation about what we think the earning power of the business is.

I talked about it in our presentation, the way to think about it is as it relates to unit economics of our business, the average life our portfolio investment is somewhere between 2.5 years to 3 years. And so at that average life, plus the current spread, asset level returns and the current leverage targets, it's a 10.5% to 12.5% ROE business versus a 9.7% dividend yield on book value. And so that leads to one of two things, which I think gets to Jonathan's question, is what do you do with that excess earnings power of the business? You can either build NAV, which we obviously built now this quarter I think 1% on a quarter-over-quarter basis, or you can return that to -- that cash capital back to investors through increasing your dividend. So I mean the quarter again on a net income basis or net investment income basis was 13% or 14% ROE. That is -- we don't think about that as the long-term earnings power of the business. We think of it in the 10.5% to 12% range, or 10.5% to 12.5% range. Is that helpful?

Yes, that is. Thanks. That's it for me.

One other comment on that, which I think that it's not [just] the quantum of your return. It's the quantum of your return compared to your asset level mix. And so we actually like our risk-adjusted return of our portfolio, given that quantum level of our return, but mostly related to the asset level mix, which is 86% first lien, and given the portfolio statistics we went through.

Chris York, JMP Securities.

Yes, thanks. Just a follow-up here. So, it looks like new investments originated in the quarter were weighted towards energy investments. Now, as you focus on the right side of your balance sheet, can you give us an update on your interest in potentially pursuing an SBIC license, and then issuing SBA debentures with that?

Yes, so I heard two questions. I heard the question about the right-hand side of the balance sheet but the lead-in was related to the sector originations. Did you want me to talk about the sector originations? Or I didn't get the connection between the asset level sector comment versus the SBIC.

Yes, so thinking about your energy investments, a lot of those at some of your peers can be pledged in SBIC.

Got you.

-- so considering your pipeline for there.

So, first of all, our net exposure to energy decreased quarter-over-quarter, just to be frank about it. When you think about Global Geophysical, which was a service deal, and you think about Trident, which was an E&P guy, those two investments I think together were about $104 million, and we added Mississippi, which was $33 million.

And so we like energy, or some segments of energy, and we'll continue to invest in energy. And so I wouldn't read anything into a single quarter's origination activities. And quite frankly, when you look at the totality of our portfolio, energy exposure netted down quarter-over-quarter.

On the SBIC, there is - we've run the math across our portfolio. It's just not energy investments but a lot of our investments, or, quite frankly, the majority of our investments fit into the SBIC program. We are dealing -- we are thinking about that piece of capital which was one license I think is $75 million related to our total portfolio, and how should we think about that, and related to process and management's time. And given I think the SBIC is less accretive for big guys than it is for small guys just because it's less impactful, although if you can get multiple licenses, that changes the dynamic. So, we are still looking at it and the vast majority of our portfolio would fit into the SBIC. But I would say we are in the fifth or sixth inning there.

Great. That color is helpful, especially considering your recent investment grade ratings. Thanks. That's it for me.

Thank you. I'm not showing any further questions in queue. I'd like to turn the call back over to Joshua for any further remarks.

Great. So, thanks for everybody's time. I think I wished everybody Happy Mother's Day last time, but I hope everybody enjoys the rest of their summer and the upcoming Labor Day. And we look forward to seeing people in the fall at the conferences and the next earnings call. Thanks.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.