Release Date: March 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: What are your thoughts on leverage going into 2025 and 2026, considering potential tariff impacts and changes in credit quality? A: Robert Ladd, CEO: We are operating at a lower leverage level than usual, targeting a regulatory leverage of 1:1. We remain cautious due to uncertainties from the government but are in a wait-and-see mode. Most of our businesses are U.S.-based, but some have cross-border activities, so we are aware of potential impacts.
Q: Do you think the first quarter EPS will cover the dividend? A: Robert Ladd, CEO: Probably not fully covered, but it will be close. We have substantial past earnings that haven't been paid out, which helps cover the dividend. We expect equity realizations to kick in, which will be beneficial. Todd Huskinson, CFO, adds that they expect to be off by a few cents due to the rate and spread environment.
Q: What was the driver for the decrease in investment yields in the first quarter? A: Robert Ladd, CEO: Spreads decreased from the 6s to the 5s over the year, SOFR declined quarter over quarter, and there was some impact from additional non-accruals. However, there is still over 10% growth.
Q: Are you planning to increase leverage given the low current levels and tightening spread environment? A: Robert Ladd, CEO: We are targeting a 1:1 leverage and are cautious about it. You may see an increase over time this year, with different ways to achieve that leverage.
Q: Are you going to re-up for more SBA lending capacity after paying off part of an SBA maturity? A: Robert Ladd, CEO: Yes, we are moving forward with obtaining a third license. After 10 years, our first license debentures are coming due, and we prepaid the first debenture payment in mid-February. We will continue the SBA program.
Q: Can you update us on the pipeline and the mix between new versus add-on opportunities? A: Robert Ladd, CEO: We had a busy fourth quarter and are off to a good start this quarter. The pipeline is strong, with good deal flow. About two-thirds of the transactions are new, and one-third are follow-ons or draws under delayed draw term loans.
Q: How are delayed draw term loans typically structured? A: Robert Ladd, CEO: They are true commitments subject to certain tests, such as compliance with covenants and an incurrence test to maintain leverage levels. They are typically used for acquisitions or expansion.
Q: What is the current level of spillover income? A: W. Todd Huskinson, CFO: We had $45 million of spillover at the end of the year, which we are working against during 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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