Melissa Wedel • JPMorgan Chase & Co.

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President Ted McNulty stated that he does not expect a significant increase in repayments, as most portfolio companies are below the size where they would be refinanced by the broadly syndicated market. CEO Tanner Powell confirmed the Merx redeployment is a positive driver for earnings and that, given the current outlook, the company feels good about its dividend coverage.

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Executive Chairman Howard Widra confirmed that, consistent with peer commentary, the lack of M&A is expected to result in fewer prepayments and lower fee income. On government exposure, Mr. Widra stated that limiting exposure to government payments is a long-standing underwriting principle due to 'stroke of the pen risk.' He clarified that the portfolio has minimal to no direct government contractors and their healthcare investments are not directly reimbursed by the government.

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President Ted McNulty explained that repayment activity was on target and that the company is nearly finished recycling capital from the CEF mergers, expressing confidence in reaching target leverage in the coming quarters. CFO Gregory Hunt confirmed her analysis, stating that the realized losses were primarily a reclassification from unrealized to realized as assets were exited.

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CIO Greg Greifeld detailed that refinancing led to a ~$0.04 per share impact from higher interest expense, with $0.015 of that being a one-time cost. He and CFO & COO Thomas Raterman noted that historically, over 50% of unused commitments expire without being drawn. Mr. Greifeld also anticipates slightly elevated repayments in Q3, which should benefit NII for the quarter.

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Chief Financial Officer Tom Raterman explained the dividend policy includes a $0.33 base with a supplemental of up to 50% of excess NII. He stated the current focus is on building Net Asset Value (NAV) per share rather than maximizing the dividend payout. Raterman affirmed confidence in the portfolio's core earnings power to cover the base dividend, noting that quarterly NII will fluctuate with prepayments and portfolio growth.

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An executive explained the BC Partners combination expands the pipeline by providing more market access and expertise for different structures like revolvers, which will be additive to the existing strategy without materially changing return targets. CFO Tom Raterman confirmed the Gynesonics transaction resulted in a gain that was largely reflected in the fair value mark as of December 31, 2024.

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Greg Greifeld, Managing Director and Deputy CIO, stated that asset-level return targets are not expected to change. David Spreng, CEO, expressed optimism about the M&A environment, while Greg Greifeld noted their portfolio companies are both targets and acquirers. Thomas Raterman, CFO, explained that the post-quarter-end prepayments were anticipated and consistent with their H2 2024 forecast.

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CEO Stuart Aronson explained that companies are managing tariffs by negotiating with suppliers, moving sourcing from China to Vietnam, and being nimble. He noted the BDC's balance sheet is expected to be fully deployed, with the JV having ~$20 million in capacity, and confirmed there are no current plans to upsize the JV.

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CEO Stuart Aronson explained that companies are mitigating tariffs by negotiating with suppliers and moving sourcing, such as from China to Vietnam. He also stated that the BDC's balance sheet is expected to be fully deployed and there are no current plans to increase the size of the JV.

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Executive Stuart Aronson confirmed hopes to complete the Telestream restructuring by the end of May 2025, which would return a large portion of the debt to accrual status. He clarified that while the move will be accretive, the impact will be at a new market rate, not the original higher rate. Regarding repayments, Aronson noted that while market volatility temporarily slowed activity, the visible repayment pipeline is currently light, and they are not seeing heightened repayment activity at the moment.

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CFO Joyson Thomas attributed the Q4 yield decline primarily to lower base rates and later clarified that the portfolio resets roughly 50% monthly and 50% quarterly. Executive Stuart Aronson stated the goal is not to deleverage and that origination efforts, especially in the non-sponsor market, should offset repayments. Regarding the dividend, he confirmed the Board actively evaluates earning power but has maintained the current rate for now, supported by the spillover income.

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Stuart Aronson, an executive, responded that he does not anticipate portfolio shrinkage, as new mandates are expected to balance repayments, and highlighted significant undeployed capacity in both the BDC and the JV. Regarding PIK income, Aronson clarified that new deals prioritize cash income, and most existing PIK is tied to troubled accounts like Telestream, which are being restructured with the goal of returning them to cash-pay status.

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CFO Steven Lilly stated that spillover income is now in the mid-$400 million range and is expected to reach the target of approximately two quarters' worth of dividends by year-end. President & CIO Daniel Pietrzak described the ABF strategy as multi-asset class, with a small (2-2.5%) consumer allocation focused on high-FICO borrowers and secured deals, alongside investments in residential mortgage and hard assets like aviation.

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Chief Financial Officer Steven Lilly clarified that Q4 fee income of $7 million would have been closer to $10-11 million if not for a couple of delayed deals. Chief Investment Officer Daniel Pietrzak noted that while repayments may continue due to the open syndicated market, the balance of new deals versus repayments should be better in Q1. He stated that 'urgency' is not the right word for relevering, emphasizing that discipline is key. However, he confirmed the plan is to trend leverage back up from 104% net debt-to-equity toward the midpoint target of 115% over the coming quarters.

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Daniel Pietrzak, CIO, and Brian Gerson, Co-President, explained that fair value marks are determined on a case-by-case basis, driven by a company's overall financial performance and capital decisions, not just its PIK status. Regarding rate cuts, Pietrzak stated that a slightly slower pace of decline is not expected to have a material impact on credit quality, though Gerson noted higher rates for longer could extend private equity hold periods.

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CEO Justin Plouffe confirmed that Q4 is expected to be stronger for originations than the seasonally slow Q3 and that he does not anticipate a significant change in prepayment activity. CFO Tom Hennigan detailed several factors supporting the dividend, including upside from leverage, non-accrual resolutions, and JV growth, which should offset rate headwinds. He also confirmed the Q2 mark on Maverick was reflective of its July restructuring economics.

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CFO Thomas Hennigan explained that the CSL III portfolio, being newer vintage and nearly all first-lien, has a slightly lower yield, which will reduce the combined portfolio yield by approximately 15 basis points. He noted the near-100% asset overlap and said the primary rotation strategy will be to move lower-spread assets into the joint venture to improve returns. Hennigan projected that CGBD would reach its target leverage of 1.0x over the next two quarters, citing a strong Q2 pipeline and a slowdown in repayments.

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CFO Thomas Hennigan stated that fee income and OID acceleration were actually about $0.01 per share lower than the historical average. He did note an incremental dividend from a JV being wound down. CEO Justin Plouffe explained the yield spread was due to this extra JV dividend, noting the normalized yield is closer to 11.3-11.4% and that the two yield metrics should converge next quarter.

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CEO Justin Plouffe described the credit environment as 'benign' and 'constructive,' stating that portfolio companies have generally managed the rise in interest rates well. He elaborated that while past growth was in the low-double-digits, it has since stabilized to a healthy mid-single-digit rate for both revenue and EBITDA as inflationary pressures have subsided.

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Co-CEO Bruce Spohler addressed the questions, stating that high barriers to entry make it unlikely for banks to quickly re-enter the ABL market. CFO Shiraz Kajee confirmed that NII would have covered the dividend with a full quarter's benefit from the new deployments. Bruce Spohler also explained that the portfolio's shift to higher-yielding specialty finance assets, which are less correlated to base rates, provides a cushion for earnings. He clarified that the equipment finance portfolio's fair value declined due to a strategic decision to shrink it, a trend that is now beginning to reverse.

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Co-CEO Bruce Spohler stated that less than 1% of the portfolio has direct tariff exposure, as it is heavily focused on domestic service-based businesses. He emphasized that the firm is more focused on healthcare policy risk. For the equipment finance portfolio, Spohler confirmed that lease extensions contributed to the higher yield but clarified that onetime gains from asset sales were also a significant factor, making it too early to determine a new run rate.

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Co-CEO Bruce Spohler characterized the Q4 repayments as idiosyncratic, noting the repaid loans had a long average duration of four years. He highlighted that a significant portion ($60 million) were temporary paydowns on revolving facilities, not a permanent loss of borrowing relationships, and emphasized the overall stability of ABL yields.

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Co-CEO Bruce Spohler explained that the acquired assets are all floating rate and consistent with their existing platform. He noted the portfolio adds diversity with 94 borrowers and an average investment of $1.3 million. Spohler emphasized the attractive risk profile, long-tenured relationships, and expansion into new industries. He also confirmed that SLRC is not constrained by the 30% cap due to structural flexibility and the ability to utilize the broader platform's capital.

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CFO Teddy Desloge stated that Q2's 5% annualized repayment rate was abnormally low and he expects it to normalize higher as M&A activity increases. Co-CEO Brad Marshall reiterated that spillover income is for managing short-term earnings volatility and that long-term dividend policy is driven by the broader market outlook, not temporary fluctuations.

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CFO Teddy Desloge confirmed that net leverage is at the lower end of their target range and that the fund is well-capitalized to take advantage of market volatility, which has shifted some deal flow to private markets. Co-CEO Brad Marshall added that while they were cautious in Q1 with a high 'pass rate' on deals, the current pipeline is strong, and they are seeing some spread widening in lower-quality assets.

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Chief Financial Officer Teddy Desloge acknowledged that repayments were relatively light for the quarter and full year, at approximately 6%. He explained that since much of the Q4 activity involved incumbent portfolio companies, it did not drive repayments. He positioned a potential pickup in M&A and repayments as an upside driver for future returns.

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Co-CEO Jonathan Bock responded that the ATM program's usage is not based on a fixed run rate but is managed dynamically to maintain an optimal leverage level. He emphasized that while they anticipate a 'super cycle' of deal activity, the timing is uncertain. Therefore, the program will be used to ensure they have the capacity to invest when those opportunities arise, balancing leverage and the need for deployable capital.

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President Matt Pendo stated that after adjusting for one-time items, the combination of deploying capital from a strong pipeline, increasing leverage, and monetizing non-earning assets provides comfort with the current $0.40 base dividend. Co-CIO Raghav Khanna described the asset-backed pipeline as diversified, including rental car leases and HVAC financing. CEO Armen Panossian added that the focus is on corporate-related assets in familiar industries like telecom, rather than consumer unsecured debt.

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CFO Christopher McKown noted that leverage is at the low end of their target range, providing room for growth. President Mathew Pendo added that they are focused on increasing deployment into the JVs. CEO Armen Panossian acknowledged that while repayments should generally slow in a volatile market, OCSL has had some idiosyncratic exits and sees opportunities to deploy capital into the JVs at attractive prices.

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President Mathew Pendo confirmed that investors should assume roughly 50% of the income above the base dividend would be paid out as a supplemental dividend. Co-Chief Investment Officer Raghav Khanna stated that a strong pipeline should allow for the new equity and associated leverage to be deployed 'fairly quickly' over a couple of quarters, net of repayments. CFO and Treasurer Christopher McKown confirmed the incentive fee calculation will include all capital gains and losses, including foreign currency movements.

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CEO Armen Panossian responded that while it's difficult to predict activity for a single quarter, the velocity of conversations with sponsors has picked up, suggesting a stronger environment over the next 12-24 months. Regarding the JVs, Panossian confirmed they are always looking to optimize them and see an opportunity to gradually increase leverage from the current 1.4x level, particularly by rotating the portfolio more towards broadly syndicated loans.

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CEO Joshua Easterly stated he expects repayments to remain elevated in the near term, which he views as a positive because TSLX's exposure to post-2022 vintage assets means early repayments generate excess income from call protection and accelerated fees. President Robert Stanley confirmed that tariff exposure remains very low and has decreased since the prior quarter, as one of the three previously identified companies has been paid off.

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CEO Joshua Easterly stated he expects repayments to remain elevated in the near term, which is beneficial as it generates activity-based fees from call protections on newer vintage assets. Vice President Robert Stanley confirmed that tariff exposure remains very low and has decreased since last quarter, as one of the three previously identified companies with direct exposure was paid off.

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President Bo Stanley estimated the portfolio might be flat to slightly down in Q2, but noted the change would be marginal and is reflected in guidance. CEO Joshua Easterly addressed the opportunity set, explaining that while there is a lag in private credit pricing, TSLX's broad platform allows it to capture volatility in other areas, such as more liquid markets, without having to wait for the private market to adjust.

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CEO Joshua Easterly noted that call protection has been a stable feature, particularly in non-sponsored and off-the-run deals, and that the portfolio's embedded economics from this protection are at a high level. He clarified that their healthcare exposure is focused on tech and specialty pharma, not services, which mitigates direct reimbursement and wage inflation risks.

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CEO Joshua Easterly noted that while call protections remain a stable feature, especially in off-the-run deals, the portfolio currently has significant embedded economic value as the fair value is low relative to the call price. He also clarified that their healthcare strategy focuses on tech and pharma, not services, which largely insulates them from the reimbursement and wage inflation risks affecting the services sub-sector.

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CEO Kort Schnabel reported that the company feels better about tariff risk, with estimated exposure to high-risk names now in the low-single-digit range, down from mid-single digits, due to portfolio companies' ability to mitigate impacts. CFO & Treasurer Scott Lemm and CEO Kort Schnabel clarified that the Ivy Hill subordinated loan functions like a working capital line, allowing for capital to be recycled, which explains the inflow during the quarter and subsequent outflow.

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Incoming CEO Kort Schnabel described a proactive playbook that includes collaborating with private equity sponsors for liquidity injections, offering temporary relief like PIK interest in exchange for new equity, and being prepared to take ownership if necessary. President Jim Miller added that while M&A volume may slow, private credit's certainty becomes more valuable, potentially increasing ARCC's market share of completed deals.

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Robert DeVeer, then-CEO, stated that Q4 activity was relatively flat compared to Q3 and that deal flow remained strong into January. He clarified there is no fundamental change in the portfolio mix strategy; the recent skew towards first-lien debt reflects market conditions favoring large unitranche deals over junior capital, where spreads have compressed and many opportunities are non-cash PIK.

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CEO Robert Kipp DeVeer explained the trend is about deepening relationships with key clients, not a focus on refinancing. Co-President Kort Schnabel specified that the activity was primarily add-on capital for M&A and growth, which increased ARCC's share in those deals. DeVeer noted that the timing of originations in the quarter was not unusual.

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CFO David Pessah clarified that Q1 results largely reflect prior base rate changes, with a $0.04 per share impact from expired IPO-related fee waivers and a minor residual impact expected in Q2. President Michael Occi described the share repurchase plan as a formulaic, accretive tool to support the stock, noting approximately $10 million was repurchased in Q1 via a 10b5-1 plan.

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CFO David Pessah explained that approximately two-thirds of the portfolio's base rates reset in Q4, with the remaining one-third subject to a lag. He attributed the sequential NII decline entirely to rate changes, noting Q3 had benefited from nonrecurring income. On liabilities, Pessah stated the company targets a roughly 50% mix between secured and unsecured debt and will opportunistically address its upcoming September 2025 unsecured note maturity.

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President Matt Bloomfield explained that while Q1 earnings were impacted by portfolio shrinkage, the current environment of wider spreads and lower refinancing activity bodes well for future earnings. He confirmed that the formulaic stock buyback program will continue as long as the discount to NAV persists. Bloomfield attributed the NAV decline primarily to unrealized mark-to-market losses on syndicated loans in late March, which the firm expects to recapture over time.

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President Matt Bloomfield stated that while they aim for consistency, the company is being prudent and not stretching for risk in the current market. Chief Investment Officer Angie Long clarified that her comments on tariffs were meant to explain the rationale for patience in a market not pricing in macro risks, rather than a concern about specific portfolio holdings. Matt Bloomfield added that the portfolio's direct tariff exposure is 'de minimis' and that they see no major difference in exposure between the broadly syndicated and private credit markets.

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President Matt Bloomfield attributed the yield movement to a combination of refinancing activity, a strategic rotation into higher-spread private credit, and fair value adjustments. He clarified that accelerated OID income was not 'overly material' in Q3. Regarding Q4 seasonality, Bloomfield expects a more 'muted' quarter than is typical, noting that the election had slowed recent activity and some deals were likely pulled forward into the summer.

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CFO Jason Bengel stated that the Home segment's strong margins, driven by high-converting home equity products, are generally expected to be sustainable. COO Scott Peyree noted that consumer demand has remained 'pleasantly strong' across most products, with the exception of some caution in mortgage purchase and refi searches. CEO Douglas Lebda added that marketing and content strategies are performing well.

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Jason Bengel, CFO, confirmed that the Consumer segment margin is expected to normalize to the mid-to-high 40s in 2025 from Q4's peak, while still delivering double-digit revenue growth. Scott Peyree, COO, and Douglas Lebda, CEO, clarified that new car shoppers are a minority of insurance traffic. They emphasized that the primary driver of shopping behavior is the semi-annual policy renewal cycle, which is not directly tied to new auto sales.

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COO Scott Peyree explained that while lenders have been opening credit boxes 'around the edges,' the more significant recent change has been their willingness to increase spend for the same high-quality consumer demographics. He noted that personal loan traffic was up 50% YoY while revenue was up only 7% due to tight credit. He expressed optimism that as rates fall, lenders will open their credit boxes more broadly in the next 6-12 months to accept a wider swath of the consumers LendingTree is already generating.

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Mark Casale, Chairman and CEO, stated that the company has not quantified the risk as they haven't seen defaults from those storms yet, expecting to provide an update in February. Chris Curran, President of Essent Guaranty, clarified that the COVID forbearance program ended in November of the previous year, so its favorable impact on cure rates has concluded. Casale added that the process for new forbearances is now more stringent, leading to a normalization of default and cure activity.

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