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CEO David Burton clarified that M&A typically refers to acquiring companies, not portfolios. He noted that the success and visibility of the Conn's transaction have led to more performing portfolio opportunities being presented to the company. On efficiency, Burton acknowledged that large nominal gains become more difficult but affirmed that continuous improvement is a core focus with a powerful operating leverage impact, and he expects to continue driving costs down.

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CEO David Burton clarified that the Conn's deal was a unique portfolio purchase, not traditional M&A, and that its success has attracted more similar opportunities. Regarding efficiency, he acknowledged that gains become harder but affirmed that continuous improvement is a core focus due to its powerful operating leverage, and he expects to continue finding opportunities to reduce costs.

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CEO David Burton distinguished between traditional M&A and large portfolio purchases like Conn's, noting that the success of the latter has attracted more similar opportunities. Regarding cash efficiency, Burton affirmed that while large gains are harder to achieve, continuous improvement remains a core tenet of their strategy due to its powerful operating leverage, and he expects ongoing enhancements rather than a plateau.

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Art Penn, Founder and Managing Partner, explained that any dividend evaluation would occur after the 12 to 18-month portfolio normalization and equity rotation is complete. He noted that new loans are underwritten at conservative leverage (e.g., 3.8x Debt/EBITDA), and while smaller equity positions are being realized, significant chunky positions are not expected to be sold in the immediate term.

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Art Penn, Founder and Managing Partner, stated that any dividend evaluation would occur after the 12-18 month portfolio normalization is complete. He noted new loans typically have lower leverage (e.g., 3.8x) than the portfolio average (4.7x) but can grow into it. He also mentioned that while smaller equity positions are beginning to be realized, no sales of the larger, chunkier positions are imminent.

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CEO Arthur Penn explained there is no specific target for reducing the $0.99 per share of spillover income, stating the plan for 2025 is 'steady as she goes' while aiming to rotate equity. He anticipates a restructuring for Pragmatic during the current quarter. Regarding investment areas, Penn noted they respond to market opportunities presented by private equity, with a continued focus on recession-resilient sectors like healthcare and government services, emphasizing low leverage and strong covenants.

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CEO Arthur Penn identified healthcare and government services/defense as key attractive sectors, emphasizing a strategy of selectivity and low leverage. Regarding spreads, he stated a belief that they have plateaued for senior loans in the 5.00-5.50 range over the risk-free rate, noting they remain attractive on a relative value basis compared to the broadly syndicated loan market.

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CEO Tanner Powell acknowledged that portfolio spreads would likely trend down but noted that improved liability costs and a potential M&A pickup could mitigate the impact on net interest margin. He agreed it would not be surprising to see sponsor leverage requests tick up. Management confirmed the company deployed capital ahead of the Merx repayment, bringing pro forma leverage to their target of around 1.37x.

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CEO Dwayne Hyzak and Nick Meserve, MD of the Private Credit Investment Team, attributed the private loan portfolio's decline to slower private equity industry activity and higher repayments, with Meserve noting they may have missed some deals on pricing. Hyzak explained that underperformance is concentrated in legacy, lower-end consumer investments and that the firm has been 'risk off' on new consumer exposure for about two years. Regarding gains, Hyzak stated that the mature lower middle market portfolio has several companies receiving exit interest, potentially leading to more significant realizations in the near term, especially for premium assets.

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Executive Dwayne Hyzak detailed the tariff exposure, noting it's limited and manageable. He explained that in the lower middle market, a high single-digit percentage of companies have meaningful exposure, with another 10-20% having some indirect risk, but management teams are experienced in mitigation. For private loans, the risk is similar and further mitigated by first-lien positions and existing fair value write-downs on some exposed companies. Regarding the pipeline, Hyzak and an executive from the private credit team explained that 'average' reflects strong add-on investment opportunities within the existing portfolio and a steady flow of attractive new deals, though the muted M&A environment does create uncertainty around deal closures.

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Dwayne Hyzak (Executive) acknowledged that while some portfolio companies would be impacted by tariffs, the portfolio's diversity and focus on U.S. domestic businesses should mitigate the overall effect. He noted that management teams are experienced in navigating such issues and that exposure to government efficiency initiatives is limited. Regarding capital gains taxes, Hyzak stated he has not seen this factor slow down M&A activity, attributing the current slowness more to general economic uncertainty.

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Executive Dwayne Hyzak confirmed that ATM usage is expected to be lower in Q4, as the company had pre-funded the deals that slipped from Q3. Regarding dividend income, Hyzak and Executive David Magdol clarified there was no concerning thematic reason for the dip; it was normal variability caused by portfolio companies reinvesting for growth and by lower incentive fees from the asset management business. Hyzak stated the $26 million realized gain occurred within Q3 and did not impact incentive fees.

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CEO & Investment Committee Chair Edward Ross noted that M&A deal flow began improving in late Q2 and continues into Q3, though it is not yet at robust levels. He anticipates lower repayment activity in Q3 compared to Q2, creating an opportunity for portfolio growth. Regarding competition, Ross acknowledged it has increased but stated Fidus rarely competes directly with large asset managers. CFO Shelby Sherard confirmed that the Q2 prepayment fees and accelerated amortization, totaling approximately $1.9 million, were episodic and are not expected to repeat at similar levels in Q3.

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Executive Edward Ross clarified that direct tariff exposure is minimal, at just over 5% of the portfolio, and that portfolio companies have manageable, prudent mitigation plans. He stated that market stability and certainty, rather than the complete removal of tariffs, are needed for an M&A rebound. Regarding financing, both Edward Ross and Executive Shelby Sherard explained that recent capital raises provide near-term flexibility, though a long-term refinancing of unsecured notes is still planned. Sherard added they have multiple options to handle maturities if market conditions are unfavorable.

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Executive Edward Ross stated that while Q4 2024 is expected to be active, it is too early to confirm a more robust M&A environment for 2025. He noted that spread compression is not accelerating, with new originations yielding 13.2%. Ross attributed the higher amendment fees to a high level of general activity within the large portfolio, such as acquisitions and refinancings, rather than specific credit deterioration, though he acknowledged pockets of economic softness.

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Chairman, CEO & Co-CIO Phil Tseng responded that TCPC will continue to benefit from the larger platform's influence by receiving allocations of larger deals where the platform is a lead or co-lead lender, noting this has already been the case for about 90% of deals in the last two quarters. Regarding restructured assets, Tseng stated that outcomes are case-by-case and can be impacted by the macro environment, such as prolonged high interest rates. He emphasized that recoveries are not linear and the team is working diligently with these companies to improve performance.

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Chairman, Co-CIO & CEO Philip Tseng projected that the aggregator restructurings should be completed within the next few quarters, noting positive signs of improvement at companies like SellerX. He confirmed that TCPC is definitively shifting its strategy to focus on investments where it can exercise significant influence, avoiding the 'errors of the past' associated with broadly syndicated loans where their influence was limited.

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CEO Philip Tseng stated that while the large Razor markdown was an unexpected surprise, most credit issues have been concentrated in the previously discussed cohort of assets. President Jason Mehring clarified that Renovo's issues are both operational and macro-related, but its focus on smaller projects and domestic supply chains provides some insulation from tariff risks. Tseng asserted that the timing of the fee waiver was not related to the HPS deal and was part of a broader set of shareholder-aligned actions.

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President Philip Tseng stated that the portfolio mix is not expected to change, as TCPC already benefits from global sourcing. Chairman and CEO Rajneesh Vig and CFO Erik Cuellar described the special dividend as a capital allocation decision to balance distribution requirements and excise tax management. Regarding prepayments, Mr. Vig noted that while hard to predict, current market conditions are conducive to more activity. He also explained that while a better M&A market could help, resolving restructurings often requires time and patience to optimize outcomes.

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CEO Robert Ladd expressed high confidence in the equity realizations, as the underlying businesses are performing well and are already being actively marketed. For loans rated 'three', he clarified that by definition, the company expects to receive all principal and income. Ladd also reiterated that the pipeline is robust enough to support portfolio growth by year-end, despite the inherent uncertainty in the timing of closings and repayments.

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CEO Robert Ladd characterized the M&A slowdown as a 'temporary disruption' caused by tariff uncertainty and expressed confidence that the deal activity would return. On the topic of debt, Ladd clarified that the company will need to issue more unsecured debt before the end of the year to address the 2026 bond maturity, but noted the new issuance would likely be less than $100 million.

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Executive Robert Ladd confirmed the transaction is expected to close in Q4 and clarified that the $42 million in spillover income was as of Q3 end, with Q4 gains being distributable separately. He acknowledged that new loan spreads have compressed from the 6% range to the 5% range but have recently stabilized. Ladd expressed high confidence in meeting the Q4 portfolio guidance of $930-$950 million, citing a significant pickup in deal activity.

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CEO Craig Packer stated that for any new acquisition, integration would be rapid, measured in a month or two post-close, but emphasized that current new strategies are already live. On market dynamics, Packer described the environment as a 'healthy traditional market' where both private and public markets are viable options for sponsors, noting the secular shift to direct lending continues and the flow between markets is currently balanced.

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CEO Craig Packer emphasized that their underwriting is always downside-focused but acknowledged that recent economic uncertainty has led them to factor a potential slowdown into their base case, increasing caution. He confirmed they plan to grow exposure to diversified strategies like asset-based lending from the current low-double-digits to potentially 15% of the portfolio over time, aligning the combined entity with OBDC's historical strategy.

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President Logan Nicholson estimated that about 10-15% of the portfolio could still be at risk for opportunistic refinancing, noting that the company has already worked through the majority of these higher-spread names. CEO Craig Packer added that strategic equity investments are in specialized, low-risk lending businesses that are accretive and non-correlated. He confirmed plans to increase the allocation to these investments in the larger post-merger portfolio and is open to adding new verticals over time, though no immediate plans are in place.

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CEO Craig Packer described this trend as a positive indicator of their investment strategy working as intended. He explained that companies are typically excluded early in their life cycle while investing for growth; the reduction in exclusions shows these companies have matured and improved their credit quality, allowing them to be included in the metric without skewing the results.

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President & CIO Daniel Pietrzak stated there is no single theme for re-defaults, as each situation is idiosyncratic, and only PRG is expected to undergo another restructuring. He agreed that the current deal pipeline would likely convert later in the year or in 2026, and noted that while fee income should see an upside from Q2's low level, upfront fees on new loans are tighter than a year ago.

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Chief Investment Officer & Co-President Daniel Pietrzak expressed satisfaction with the recent partial paydown on JW Aluminum and acknowledged the business tailwinds, but stated the team will remain conservative about returning the asset to accrual status. Regarding interest coverage, both Pietrzak and Chief Financial Officer Steven Lilly attributed the perceived divergence to a lag effect in how coverage metrics are calculated and reported as underlying interest rates change.

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Chief Investment Officer Daniel Pietrzak highlighted that asset-backed finance is a significant business for FSK with a large team and AUM, noting its growth feels like the direct lending market did 5-10 years ago. He explained that portfolio issues have been more idiosyncratic to specific issuers rather than broad-based. While constructive on the economy, he mentioned that risks like tariffs and wage inflation are being closely monitored at the portfolio company level.

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CIO Josh Weinstein confirmed that banks are currently in a 'risk-on' phase, increasing competition and contributing to spread compression. CEO Michael Sarner indicated the company is pursuing strategic initiatives to enhance earnings on larger deals, possibly through partnerships. CFO Chris Rehberger affirmed that due to the strong origination pipeline, ATM usage would likely be at the higher end of the typical range, around $50 million for the quarter.

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CEO Michael Sarner stated he does not expect material spread compression, though the environment does not support widening either, with new deal spreads averaging 5-7%. Regarding the high UTI balance, which is expected to grow past $1.00 per share, Sarner explained the strategy is to use it to support the regular and supplemental dividends rather than issue large, one-time special dividends. He emphasized a preference for programmatic shareholder returns through the supplemental dividend, which could increase if the UTI balance continues to grow significantly.

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CEO Bowen Diehl and CFO Michael Sarner affirmed they are constantly evaluating staffing and typically add 3 junior deal professionals and 1-2 back-office staff annually to support growth. On federal contractor exposure, they estimated it was minimal and not a primary concern. Sarner explained the plan for the UTI is to continue increasing the supplemental dividend slowly, with the potential for a larger increase if anticipated realized gains materialize later in the year, a strategy unaffected by the convertible notes.

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CFO Michael Sarner clarified that compensation is not based on origination volume, so he does not expect dramatic changes to bonus accruals, as shareholder returns and dividend stability are prioritized. CEO Bowen Diehl identified two general themes of pressure: businesses serving the low-end consumer and slower B2B purchase decisions due to economic caution. However, he balanced this by highlighting positive overall portfolio health, including strong rating migration, solid interest coverage, and a lower percentage of PIK interest income.

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CFO Tom Hennigan stated the goal is to fully deploy the current JV's equity in the next two to three quarters, noting a second JV would likely be a 2026 event. CEO Justin Plouffe explained that the structure of a future JV is not yet decided but will leverage the broader strengths of the Carlyle Global Credit platform. Plouffe also affirmed that they have not seen a material change in the quality of companies in their pipeline, which remains strong.

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Co-CEO Brad Marshall explained that dividend decisions are based on long-term signals, not short-term rate fluctuations, and noted the company has significant surplus income. Regarding spreads, he stated they are influenced by capital supply/demand and public market tightness, and emphasized that BXSL will maintain its focus on high-quality assets rather than reaching for riskier, higher-spread deals.

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Co-CEO Brad Marshall attributed the optimism to a confluence of factors: a lower cost of capital, a clearer economic outlook, significant private equity dry powder, and anecdotal confirmation from bankers and sponsors. On spreads, he argued they are not 'extraordinarily tight' but rather in line with 2021 levels, and that spreads per unit of risk are actually more attractive now due to lower leverage in deals.

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CEO John Kline clarified that the downgraded company was the one previously flagged for material tariff exposure and was already underperforming. While he expressed long-term optimism for a full recovery, the current situation necessitated the downgrade. COO Laura Holson added that analysis shows tariff risk across the rest of the portfolio remains minimal. Regarding the post-2026 outlook, Kline expressed strong optimism that the company will make significant progress on its strategic initiatives over the next six quarters, focusing on controllable factors like asset quality, liability mix, and PIK monetization to improve core earnings, though he noted the broader yield environment is harder to predict.

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CEO John Kline clarified that the consumer products company was already an underperformer before the tariffs, which exacerbated the issues, but he remains optimistic about a full recovery long-term. COO Laura Holson added that tariff risk is minimal across the rest of the portfolio. Regarding the dividend, John Kline expressed confidence in making significant progress on improving asset quality, liability mix, and monetizing assets by 2026, while noting the broader yield environment is harder to predict.

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COO Laura Holson stated that spreads are currently stable due to a lack of deal supply despite significant dry powder. Executive John Kline addressed dividend sustainability, highlighting levers like optimizing SLP financing, monetizing non-yielding equity like Office Ally, strong Q2 deal flow, and the dividend protection program. He added that upcoming debt maturities offer an opportunity to refinance at lower rates, providing a hedge. Regarding UniTek, Kline explained that co-investors prevent a unilateral write-off of the junior preferred tranches, which had minimal cash investment.

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Executive John Kline confirmed the UniTek valuation was modestly higher than the Q4 mark and expressed confidence in reducing PIK exposure despite a slow market start. He also stated the senior asset mix would remain consistent. Executive Laura Holson added that credit spreads have stabilized and believes most potential portfolio repricings have already occurred.

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Laura Holson, COO, explained that lower portfolio leverage is due to interest coverage constraints on new deals but emphasized their focus on the stable loan-to-value metric. John Kline, CEO, stated that PIK reduction will come from exiting legacy 100% PIK assets, aiming for a long-term PIK ratio under 10-12%. Laura Holson also clarified that the SLP dividend variance was merely a matter of timing and not indicative of any performance issues.

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Bob Marcotte, President, expressed cautious optimism for a strong Q4 but noted that a sustainable quarterly origination pace is $50-$100 million due to the manpower required for their smaller deal sizes. He elaborated on the first-lien, last-out structure, explaining that Gladstone achieves attractive second-lien pricing with a superior risk profile, as its attachment point is within a conservative first-lien leverage multiple (e.g., inside 3.25x) and it controls the loan documentation.

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President Bob Marcotte estimated a six-month timeline for the EGs resolution but hoped for a quicker outcome. On leverage, he stated the immediate goal is to manage high portfolio turnover, and increasing leverage toward the 1:1 target in the second half of the year depends on finding deals with appropriate yields and managing capital costs, including a potential bond refinancing. Regarding external risks, Marcotte noted that while most of the portfolio is in relatively insensitive sectors like aerospace, the firm is closely monitoring two smaller auto market investments due to potential tariff and supply chain turmoil.

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President Robert Marcotte stated that the current deal pipeline is expected to exceed the cash proceeds from recent exits, with a target of keeping the portfolio size roughly flat, and noted that the high turnover should drive significant fee income. He confirmed they would consider various structures with banks, including first-in/last-out, and may increase subordinated financings as rates compress. Regarding concentration, Marcotte said vintage is not a concern, but they actively monitor sector concentration, using their selective process to avoid overexposure to any single area.

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President and CEO Martin Sjolund responded that the company is striking a balance between returns, volume, and leverage, and is not simply chasing volume, emphasizing a disciplined approach. Regarding cost savings, Sjolund clarified that the initiatives are not all cost-focused; for example, the U.S. restructuring is about execution speed. He noted that the overhead cost review is a smaller part of the total cost base and that while important, its financial impact will take time to materialize and expectations should be tempered.

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President and CEO Vik Atal stated the company is not seeing any new adverse macro trends impacting consumer behavior, a view echoed for the European market by Martin Sjolund, President of PRA Group Europe, who noted cash collections there were slightly ahead of expectations. Regarding the merger, Vik Atal declined to speculate on the actions of specific lenders or the potential impact on future portfolio supply.

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Vik Atal, President and CEO, responded that attrition rates for offshore collectors are currently lower than for their onshore counterparts. Rakesh Sehgal, EVP and CFO, noted that it is still too early in the tax season to identify definitive trends but they are closely monitoring key dates. Regarding technology, Atal confirmed the company is aggressively pursuing efficiencies across the board but is not launching a single new 'whizbang' initiative, instead focusing on continuous improvement of existing processes.

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CEO Vik Atal clarified that the '$1 billion plus' guidance is a cautious starting point as they are still in their planning cycle and the spot-driven European market is variable. He also noted legal costs will likely rise as recent large portfolio purchases move through the legal channel. EVP and CFO Rakesh Sehgal added that the primary use for future capital capacity will be reinvesting in portfolio purchases, stating that dividends or buybacks are not a current priority.

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CEO Joshua Easterly clarified that his repayment outlook was for Q3, while the ROE guidance was for the full year. Regarding the ROE threshold, he expressed a strong belief in long-term market efficiency, arguing that fiduciaries will eventually favor the superior risk-adjusted returns and liquidity of public BDCs over less liquid evergreen funds if a performance gap persists.

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CEO Joshua Easterly clarified that his comment on elevated repayments was a near-term Q3 view, while the ROE guidance was for the full year. On the ROE question, Easterly expressed a firm belief in long-term market efficiency, arguing that fiduciaries will eventually steer clients toward better risk-adjusted returns, such as publicly traded BDCs with daily liquidity and potential discounts to NAV, over gated, at-NAV non-traded funds if a performance gap exists.

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CEO Joshua Easterly stated that while retail flows may have slowed, TSLX's resilience stems from its large, diverse origination funnel and disciplined capital allocation. He explained that retaining spillover income is preferable to returning capital, as holding capital during volatility is strategically valuable despite the 4% excise tax cost. Easterly noted that deglobalization is inflationary and will slow growth, impacting asset valuations and requiring a more rigorous underwriting approach, though TSLX's services-focused portfolio is well-positioned.

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CEO Joshua Easterly reiterated his supply-demand framework, suggesting market signals from poor ROEs should eventually correct the imbalance. He clarified that TSLX's guidance is intentionally conservative, assuming current conditions persist, and highlighted the company's track record of over-delivering on its forecasts as important context.

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CEO Joshua Easterly detailed the supply-and-demand framework for spreads, suggesting a combination of reduced capital supply (due to poor ROE signals) and increased M&A demand should eventually push spreads wider. He cautioned against interpreting their guidance as a market forecast, emphasizing that their guidance is intentionally conservative and reflects a history of aiming to over-deliver on expectations.

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CEO Joshua Easterly explained that the interest coverage metric applies to most of the portfolio, with adjustments mainly for growth-stage software companies. He clarified that Q3 nonsponsored deals were all 'off the run' asset-based transactions, not traditional cash-flow loans. Regarding credit risk, he stated that fundamentally challenged companies in the portfolio already have a near-100% overlap with existing non-accruals, suggesting the risk of new surprises is low.

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CEO Kort Schnabel clarified that the new non-accruals were due to idiosyncratic, company-specific factors rather than a broader economic trend or issues with club deal restructurings. He stated that the capital injection into Ivy Hill was part of its normal-course, long-term growth plan and not a specifically opportunistic move based on Q2 market volatility.

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Incoming CEO Kort Schnabel stated that exposure to retaliatory tariffs is minimal, and the company relies on its conservative underwriting, which always models recession scenarios. Regarding veterinary roll-ups, he noted that the company's exposure to the entire physician practice management sector, including veterinary, is less than 2% of the portfolio, limiting specific industry risk.

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Then-CEO Robert DeVeer noted it's early but they are vigilant. CEO Kort Schnabel added that specific analysis on tariff exposure from China, Canada, and Mexico showed a 'very small impact' on the portfolio. He also highlighted that ARCC is generally under-weighted in product-based businesses that heavily import and export, further mitigating risk.

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Co-President Kort Schnabel explained there is a lag in the impact of base rate declines, with most of the effect to be seen in subsequent quarters. CEO Robert Kipp DeVeer stated that while spreads have compressed, the typical range is 450-550 basis points, which remains attractive. Schnabel added that spreads stabilized in Q3.

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President Henry Chung explained the Logan JV dividend decline was due to timing mismatches and overcollateralization tests affecting the volatile equity tranche, but noted potential near-term upside. Regarding nonaccruals, he clarified they were previously on the watch list and were reclassified due to specific, deteriorating events at each borrower.

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President Henry Chung explained the Logan JV dividend decline was driven by the lumpy nature of the equity tranche distributions, which are based on residual cash flows and subject to timing mismatches and overcollateralization tests. He noted that some cash was retained this quarter due to these tests but suggested potential near-term upside from recent opportunistic reinvestments. Regarding the nonaccruals, Henry Chung clarified they were all previously on the watch list and were reclassified due to specific, idiosyncratic negative developments at each borrower, not a sudden surprise. The question on cash interest payments was deferred.

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President Henry Chung explained the Logan JV dividend decline was due to the lumpy nature of its equity tranche distributions, which are affected by the timing of payment determination dates and overcollateralization tests that retained cash this quarter. He added that the new nonaccruals were previously on the watch list and were reclassified due to specific, independent negative developments at the borrower level. The question regarding cash interest payments was deferred.

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CEO Jason Breaux noted that the new watchlist additions had company-specific issues. President Henry Chung elaborated on challenges in subsectors like third-party logistics, packaging, and early-stage med-tech. Regarding external risks, Chung stated that exposure is limited, with about 12% of the portfolio having material foreign sourcing and less than 5% having direct government revenue. On repricing, Chung linked the risk to LBO volume, suggesting it would subside if deal flow increases, while Breaux noted pressure is concentrated in the upper-middle market.

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CFO Gerhard Lombard confirmed the components of nonrecurring income, including prepayment fees and back PIK from two names returning to accrual status. President Henry Chung stated that the rotation of First Eagle assets should accelerate with an expected M&A market recovery. CEO Jason Breaux and President Henry Chung both expressed optimism for a significant pickup in 2025 deal flow, driven by pent-up demand, but noted it would differ from 2021 due to higher base rates and a more muted PE fundraising environment.

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CFO Gerhard Lombard confirmed that while the current low-coupon debt is attractive, they are actively managing the capital structure and plan to ladder the 2026 maturities to diversify refinancing risk. President Henry Chung added that liquidity needs are concentrated in a small subset of the watchlist, not a broad portfolio issue. CEO Jason Breaux affirmed that sponsors in their market segment continue to provide capital for short-term needs.

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CFO Joyson Thomas reported year-end spillover income of $28.4 million against a Q1 dividend shortfall of approximately $2.1 million. Executive Stuart Aronson added that the Board is weighing potential earnings upside against persistent non-accruals before deciding on the dividend. Regarding the M&A market, Aronson noted that high-quality companies are trading at high multiples, but deals with tariff or recession risk face wider bid-ask spreads, and he expects overall M&A activity to remain muted for the next 60-90 days.

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CFO Joyson Thomas confirmed the pro forma spillover income was $26.8 million. Executive Stuart Aronson addressed the market, stating competitors are underwriting based on aggressive growth and rate-cut expectations, a view he is skeptical of. Regarding American Crafts, Aronson explained that the loss of a major customer made a standalone recovery unviable, forcing a shift in strategy towards a sale, which he acknowledged was a disappointing outcome and a departure from their typical successful turnarounds.

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Arthur Penn, Chairman and CEO, explained that the capital raises were to prepare for a robust 2025, but market activity slowed, leaving the company with a substantial 'war chest' raised at an accretive price. He stated that general market certainty, more than specific tariff resolutions, is needed to restart M&A. Penn also detailed that the non-accrual restructurings are expected to recover about 60% of the lost income, contributing approximately $0.01 per share on a run-rate basis, which helps position NII to comfortably cover the dividend.

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Arthur Penn, Chairman and CEO, explained that shadow ratings are updated annually by S&P, or more frequently if a material event occurs. He emphasized the value of a diversified funding mix, using revolvers for flexibility and securitizations as a term-out facility. Penn anticipates 2025 will be an active year for M&A and exits, and projected that the PSSL joint venture could reach its $1.5 billion capacity within the next 9 to 12 months.

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CEO Christian Oberbeck acknowledged that outsized redemptions have impacted earnings but stated the spillover provides flexibility, with a decision on a potential special dividend to be made by year-end. Regarding the baby bonds, he explained that the current spread to reissuance costs doesn't justify a call, given the favorable terms of the existing debt (covenant-free, long-term). Executive Henri Steenkamp added that cash is earning over 4.25%, mitigating the negative carry.

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CEO Christian Oberbeck acknowledged the high spillover but stated any decision on a special dividend would depend on performance for the rest of the year, noting the 4% excise tax can be viewed as low-cost financing. He explained that calling the baby bonds is not currently attractive due to call costs, reissuance costs, and the bonds' favorable terms. CFO Henri Steenkamp added that cash earns ~4.25%, reducing the negative carry, and the current bond market doesn't offer favorable refinancing rates.

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CEO Christian Oberbeck explained that the company has until year-end to manage the spillover, potentially through a special dividend, and views the 4% excise tax as a form of low-cost financing. Regarding the baby bonds, he stated that the current market for reissuance and the costs of calling the debt do not present a compelling enough opportunity, valuing the flexibility of the existing long-term, covenant-free debt. Executive Henri Steenkamp added that cash earns ~4.25%, mitigating the negative carry.

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Chief Investment Officer Michael Grisius stated that Saratoga conducts more front-end diligence than competitors before issuing term sheets, leading to fewer being issued but a higher certainty of closing. He expressed cautious optimism for the Zollege and Pepper Palace turnarounds, highlighting the new management teams and capital but noting it will take time. Executive Henri Steenkamp confirmed that the company currently has over $3.00 per share in built-up spillover income that will need to be paid out at some point, which is a factor in dividend considerations.

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Chief Investment Officer Michael Grisius confirmed the Zollege restructuring was a continuation of previously disclosed issues and that the company remains on non-accrual. He explained that most of the 16 follow-on investments funded tuck-in acquisitions for existing portfolio companies. Both Grisius and CEO Christian Oberbeck attributed the PE focus on add-ons to the ability to acquire smaller companies at lower, accretive multiples, while platform sellers await better market valuations. They also noted that sellers of smaller add-on companies often have different, non-market-driven motivations, such as retirement.

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President and CEO Ashish Masih responded that there was nothing unusual in the Q1 payment mix, with all collection channels and payment types remaining consistent with historical trends. Regarding the potential new seller, Masih noted it would likely take a long time for the merged entity to align strategies and that any new market entrant would probably start selling slowly, though the eventual supply could be meaningful.

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President and CEO Ashish Masih explained the ERC change was a broad-based, holistic review of older vintages, not product-specific. The IT impairment related to U.K. servicing business projects. He expressed high confidence in the recent large purchase, noting recent vintages are performing well. He also highlighted that the legal channel's share of U.S. collections is at a record low of 36%, demonstrating increased efficiency in call center and digital channels.

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President and CEO Ashish Masih acknowledged that as the volume of portfolio purchasing rises, legal expenses are expected to steadily rise as well. However, he emphasized that the company remains focused on resolving accounts prior to the legal process and expects to continue seeing improved overall operating leverage, as reflected in the cash efficiency margin.

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Executive Theodore Koenig reaffirmed the manager's commitment to supporting MRCC, stating that future fee waivers remain an option and the use of spillover income was a specific quarterly decision. CFO and CIO Lewis Solimene explained the SLF is being allowed to delever as they are not constructive on its upper-middle market assets. Koenig also indicated that the company is continuously exploring strategic ways to create shareholder value, suggesting a potential evolution for the BDC following the Wendel Group partnership.

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Executive Theodore Koenig affirmed the manager's commitment to supporting MRCC, stating that fee waivers remain an option despite the decision to use spillover income this quarter. CFO Lewis Solimene confirmed the SLF portfolio has been allowed to decline as they are not constructive on that end of the market but are evaluating its future. Koenig also noted that the company is constantly exploring strategic ways to create shareholder value, suggesting an evolution of strategy is possible under the new partnership.

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Executive Theodore Koenig explained that MRCC will benefit from new, synergistic investment strategies from the broader Monroe platform post-partnership. He also affirmed the manager's history of being shareholder-friendly and expressed his belief that support for MRCC, if necessary, would continue.

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CFO and CIO Lewis Solimene stated that the goal for non-accrual assets is to maximize long-term recovery value, not necessarily achieve a short-term fix, by leveraging their internal workout team. Deputy Portfolio Manager Alex M. Parmacek added that the non-accrual assets are in various stages of the turnaround process, with some in early stages and others closer to a resolution, but expressed confidence in achieving successful outcomes.

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An executive stated that a detailed analysis revealed only low to mid-single-digit percentage exposure to policy impacts, as the portfolio is mainly U.S.-focused software and services companies. Regarding PIK interest, the executive noted that overall portfolio credit health is stable to improving, with metrics like leverage and interest coverage showing slight improvements, and that PIK can be a feature of restructurings.

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Co-Chief Executive Officer Alex Chi projected that while M&A assessment would be busy in Q1 2025, significant deployment would likely begin in Q2 or later due to deal cycle timelines. On recycling, Co-Chief Executive Officer David Miller expressed low concern for adverse selection, stating that portfolio companies are showing growth that should support their valuations and facilitate future exits or refinancings.

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Portfolio Manager Bryan High stated the focus remains on rotating out of non-Barings originated assets to acquire income-producing ones, noting the market pace will influence timing. CEO Eric Lloyd addressed uncertainty, estimating that 60-75% of the portfolio is likely unimpacted by regulatory shifts, but acknowledged that uncertainty has caused private equity firms to pause on new deal activity, slowing net deployment opportunities.

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Portfolio Manager Bryan High stated the focus remains on rotating out of non-Barings originated assets to acquire income-producing ones, thereby improving ROE. CEO Eric Lloyd addressed the economic uncertainty, noting a preliminary analysis suggests 60-75% of the portfolio is unimpacted. He added that the firm is closely monitoring the most exposed issuers and has observed a slowdown in private equity sales activity due to the uncertain environment.

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Matthew Benton, Chief Operating Officer, quantified the potential drop in the weighted average cost of debt to around 5.5% from the reported 6.2% once all changes are effective. David B. Golub, Executive, added that while higher M&A will increase churn, it will be manageable alongside new originations, and reiterated GBDC's strategic preference for the core middle market where it sees the best opportunities.

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Executive David B. Golub explained that documentation terms are currently borrower-friendly, especially in the large market segment, which is why GBDC is focusing on its core middle market strategy. Regarding 2025 M&A, Golub detailed both tailwinds (lower rates, sponsor pressure) and headwinds (geopolitical uncertainty), stating it's too early to call a 'super cycle.' He also confirmed that while significant work has been done on the balance sheet, the company is never 'done' and continuously seeks optimization opportunities for both secured and unsecured debt.

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David B. Golub, Executive, responded that while it's too early to tell if volatility will be sustained, it is causing some rethinking in the private credit market and may temper the recent trend of spread compression. Regarding Pluralsight, he clarified that he does not view it as a case of a sponsor misusing documentation, but rather a situation where a supportive sponsor ran out of time. He emphasized that in the private credit market, strong lender-sponsor relationships and market norms, rather than just documentation, serve as the primary deterrents against aggressive liability management transactions.

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Executive Elias Sabo expressed strong optimism for the M&A market in 2025, believing that pent-up demand and improving financing conditions will lead to a rebound in deal flow. Executive Patrick Maciariello indicated that while the 2025 strategic plan for Lugano is not finalized, they are evaluating several locations, including internationally, and guessed they might open 'maybe two' new stores next year.

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Executive Elias Sabo expressed strong optimism for the M&A market over the next year, believing that pent-up seller demand and a more stable interest rate environment will lead to a bounce-back in activity. Executive Patrick Maciariello estimated that Lugano might open approximately two new stores next year, confirming that the company is actively evaluating several locations, including at least one international opportunity, though the official 2025 plan has not been finalized.

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Executive Elias Sabo acknowledged the situation as a 'high-class problem' driven by Lugano's exceptional return on invested capital, making it difficult not to fund its growth. He stated that the concentration will likely increase unless CODI pursues creative options like a divestiture or a special financing structure, similar to past strategies. Sabo also clarified that another way to manage concentration is through further acquisitions in any of their verticals, not just smaller healthcare deals, which would help diversify the portfolio.

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Executive Elias Sabo acknowledged the 'high-class problem' of Lugano's concentration, driven by its exceptional return on invested capital. He stated that its share of CODI will likely grow unless they pursue creative solutions, mentioning historical examples like divestitures or partial public offerings. Sabo also noted that another path to diversification is through further acquisitions in any of their verticals, which they are actively pursuing while balancing leverage. He clarified that they are looking at both large and small deals in healthcare.

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The turnaround at PrimaLoft is driven by a mix of new products and customers in the performance segment, as well as a general supply chain improvement. BOA's rebound is roughly half from new SKUs and half from existing SKUs taking more market share. The company is not willing to name specific future international locations for Lugano but confirmed that other cities have been scouted.

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