Justin Marcon

Justin Marcon inquired about the current state of underwriting conditions, specifically if there's pressure on deal structure or terms, and requested additional details on the new joint venture's targeted size and ramp-up timeline.

Answer

Michael Sarner, CEO, indicated no industry-specific pressure, with issues remaining idiosyncratic. Josh Weinstein, Chief Investment Officer, confirmed that while spread compression has occurred, structural aspects like credit agreements and covenants in the lower middle market have remained consistent and robust. Regarding the JV, Weinstein stated that it has already begun ramping up with three deals closed for contribution, is nearing a $150 million credit facility, and each party has committed $50 million in equity. He anticipates it will take about a year to reach full leverage, aiming for a mid-teens return eventually and double-digit by year-end.

Justin Marcon asked about the current state of underwriting conditions, specifically if there are signs of pressure on deal structure or terms, and requested additional details on the new joint venture, including its targeted size and expected ramp-up timeline.

Answer

Michael Sarner, CEO, and Josh Weinstein, CIO, confirmed that they are not seeing pressure on industry performance, with any issues being idiosyncratic. Mr. Weinstein stated that while spread compression has occurred, structural terms in the lower middle market, such as covenants, have remained consistent and solid. Regarding the JV, Mr. Weinstein detailed that each party committed $50 million in equity, a $150 million credit facility is nearing close, and it's expected to take about a year to fully ramp up, aiming for a double-digit return by the end of the year and a mid-teens return once fully leveraged.