Barings BDC - Earnings Call - Q1 2020
May 1, 2020
Transcript
Speaker 0
At this time, I would like to welcome everyone to the Barings BDC, Inc. Conference Call for the Quarter Ended 03/31/2020. All participants are in listen only mode. A question and answer session will follow the company's formal remarks. Today's call is being recorded and a replay will be available approximately two hours after the conclusion of the call on the company's website at www.barringsbdc.com under the Investor Relations section.
Please note this call may contain certain forward looking statements that include statements regarding the company's goals, beliefs, strategies, future operating results and cash flows. Although the company believes these statements are reasonable, actual results could differ materially from those projected in forward looking statements. These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks, including those disclosed under the sections titled Risk Factors and Forward Looking Statements in the company's annual report on Form 10 ks for the fiscal year ended December 3139, and quarterly report on Form 10 Q for the quarter ended 03/31/2020, each as filed with the Securities and Exchange Commission. Barings BDC undertakes no obligation to update or revise any forward looking statements unless required by law. At this time, I will turn the call over to Eric Lloyd, Chief Executive Officer for Barings BDC.
Speaker 1
Thank you, operator, and good morning, everyone. I first want to start by just saying I hope everybody is doing physically and mentally well in whatever situation you're currently in and that you and your loved ones are making the best of these unique times. We appreciate everyone joining us for today's call. Please note throughout this call, we'll be referring to our first quarter twenty twenty earnings presentation that's been posted on our Investor Relations section of our website. Today on the call, I'm joined by Barings BDC's President and Co Head of Private Finance, Ian Fowler Tom McDonald, Managing Director and the Portfolio Manager for our Liquid Credit and Global High Yield and BDC's Chief Financial Officer, Jonathan Bach.
Ian and John will review our first quarter results and provide a portfolio and market update in a few minutes. I'll begin today with some high level comments about the first quarter and the market volatility that we saw. Please turn to Slide five of the presentation. In the first quarter, the liquid credit markets and BDC stock prices experienced their worst quarter since the two thousand and eight financial crisis, falling roughly 1446%, respectively. The global fear and uncertainty created by the COVID-nineteen really drove selling across the board.
In the past, we've discussed the high correlation between liquid credit spreads and BDC stock prices, and this correlation proved true again in the first quarter, regardless of the underlying collateral held by BDCs. Just as the equity markets revalued risk in the BDC space in the first quarter, we believe that increased risk and corresponding price moves should be reflected in our net asset value. On Slide six, you see our first quarter highlights. As we would expect, the market volatility caused by COVID-nineteen had a direct impact on our net asset value, as NAV per share declined 20.8 in the quarter to $9.23 John will go through a NAV bridge later, but suffice it to say that unrealized depreciation in our portfolio was the driver of this decrease. Each quarter, we value our investments by taking into account market and portfolio company information and our internal valuation process that is consistent across the entire Barings platform and consistent quarter to quarter.
Our total investment portfolio is carried at 87.4% of cost at March 31 versus 98.3% of cost at December 31. Overall, we've been pleased with how the sponsors and management teams of our middle market portfolio companies have handled these challenging market conditions. All but four of our middle market debt investments are valued above 90% of cost as of March 31, with the remaining four valued above 85 of cost. We continue to have no nonaccrual investments, and all portfolio companies made their scheduled interest and principal payments in the first quarter. Additionally, we've seen improved conditions in the liquid markets since quarter end, resulting in appreciation in our broadly syndicated loan portfolio.
Ultimately, however, how quickly the country gets back to work will be the critical driver of portfolio performance in the second quarter. While portfolio performance was certainly the quarter the story of the first quarter, I do want to point out a couple of other key items. First, our net investment income per share of $0.15 was consistent with the fourth quarter of last year and 1% below our first quarter dividend of $0.16 per share. While we did see the expected increase in our investment income for the quarter as a result of our middle market deployments last December, the impact of further LIBOR declines and an overall slowdown in middle market lending in March resulted in relatively flat investment income and net investment income for the quarter. Second, in terms of our portfolio rotation, we had gross middle market originations of $93,000,000 during the first quarter, which were funded in part by $46,000,000 of net broadly syndicated loan sales.
Importantly, when we saw the slowdown in direct lending market in March, the breadth of the Barings platform allowed us to be opportunistic with strategic purchases of 22,000,000 of broadly syndicated loans and $12,000,000 of structured product investments at attractive prices that should generate increased returns in future quarters. It is during these times of market volatility that Barings' wide investment funnel across global markets and multiple asset classes and allow the Barings BDC to remain active in these markets and search for the most attractive risk adjusted returns. On Slide seven, we summarize some additional financial highlights for the first quarter and in each quarter of twenty nineteen. Despite the NAV decline during the quarter, our net debt to equity ratio was 1.2 times, still well below the regulatory threshold of two point zero times and providing a cushion to withstand additional pressure on asset values, meet our contractual commitments for unfunded capital and support existing and new investments with incremental capital. Ultimately, the decisions we have made since becoming the investment adviser to the BDC in August 2018, including our fee structure, our focus on high quality, true first lien senior secured investments as well as Barings' unique ownership by MassMutual, have positioned us to manage through these challenging markets and opportunistically take advantage of market dislocations that should drive long term shareholder value.
Turning to Slide eight. I'll provide a quick update on our share repurchase program. You'll recall that we announced a new share repurchase program for 2020 on our last earnings call, whereby the Board has authorized the company to purchase up to five percent of its outstanding shares during the year if shares trade below NAV per share, subject to liquidity and regulatory constraints. This program kicked off in early March, and through yesterday, we have repurchased roughly 2% of our total shares outstanding or approximately $7,000,000 The volatility in our stock price created a strong buying opportunity as our average purchase price per share was $7.21 over the entire period, and the first quarter NAV accretion of $03 per share generated by these repurchases should provide a long term benefit to shareholders as loan prices reflate. As a reminder, Barings LLC continues to be Barings BDC's largest shareholder, owning 28.4% of the shares outstanding, another example of our commitment to long term shareholder alignment.
Let me finish by thanking the Barings team for their incredible tremendous efforts during this difficult time of uncertainty. We are focused on the health and well-being of our employees and of our communities, creating a work from home environment and flexibility to allow employees to do their job effectively while taking care of their families and loved ones and themselves. I continue to be impressed by the focus of our investors, portfolio companies and other stakeholders. And their tireless efforts, I believe, will prove to be a driver of long term success. I'll now turn the call over to Ian to provide an update on our investment portfolio and what we are seeing in the middle market today.
Speaker 2
Thanks, Eric, and good morning, everyone. I want to echo Eric's comments. I hope all of you and your families are well and safe. On Slide 10, we show a summary of our investment activity for the first quarter. Frankly, from a middle market investment standpoint, the first quarter consisted primarily of January and February as new investment activity largely came to a standstill in March.
New middle market investments totaled $93,000,000 with sales and repayments of $41,000,000 during the quarter. New investments included 10 new platforms, including four European platforms and 10 follow on investments. Regarding the follow on investments, dollars 9,000,000 was for the funding of previously committed delayed draw term loans and $6,000,000 was for new commitments to existing portfolio companies. And in all instances, the investments were made to fund acquisitions. Other than funding $1,600,000 of delayed draw term loans in April to fund add on acquisitions, Barings BDC has not made any additional investments in portfolio companies to support liquidity needs driven by the current economic environment.
It's important to note that Barings B2C does not have any revolver commitments. So there has not been a drain on our liquidity as a result of portfolio company revolver draws. John will discuss our liquidity in more detail, but we remain focused on our ability to meet all of our contractual delayed draw term loan commitments to portfolio companies. Given that our DDTLs are generally earmarked for acquisitions and require compliance with incurrence covenants, we would not expect material usage of these DTTLs in the current economic environment. As Eric mentioned, while middle market activity was slow in March, we did opportunistically take advantage of market conditions.
Of the 28,000,000 of broadly syndicated loan purchases in the quarter, dollars 22,000,000 was made in March, and we also made $12,000,000 of structured product purchases, which include CLOs and private asset backed securities. Given the prices of these assets, we believe the long term returns generated by these high quality liquid investments will generate some of the best risk adjusted returns available in the current market. On prior calls, I have emphasized the value of choice. And Barings' large investment funnel across high quality obligors and desperate asset classes has proven to be advantageous in this volatile market. On Slide 11, you can see that at March 31, we were invested in roughly $645,000,000 of private middle market loans and equity, which included $74,000,000 of unfunded commitments and $385,000,000 of liquid broadly syndicated loans.
I'll walk through how the portfolio changed during the first quarter in a minute. But first, I'd like to make some high level observations about our portfolio. The portfolio statistics on Slide 10 regarding leverage, interest coverage and EBITDA are all generally consistent with the statistics we reported last quarter. Given the timing of financial reporting, these metrics are primarily supported by portfolio company financial information as of December 3139. Even after they are updated to reflect first quarter portfolio company results, the COVID-nineteen impact in our economy will not be fully reflected.
That is why it is important to focus on items like seniority and diversification in this market. Our total portfolio was 96.9% senior secured, first lien assets spread across 29 different industries. The $571,000,000 funded middle market portfolio was spread across 62 portfolio companies and 18 industries in sponsored backed transactions, while the $385,000,000 BSL portfolio was spread across 94 portfolio companies and 20 industries. Our top 10 investments are shown on Slide 12 and reflect another aspect of the overall diversity of our portfolio as the top 10 positions represent only 21% of the overall portfolio and no investment exceeds 2.4% of the total portfolio. Thus, no single investment should have a significant impact on the company overall.
There are many unknowns heading into the second quarter and beyond, which is why a high quality, diverse portfolio is more important than ever. Slide 13 shows a bridge of our total investment portfolio from the 2019 to March 31. We've touched on the key origination and repayment components, but this slide also shows the impact of unrealized depreciation on the portfolio as a whole, which totaled $121,000,000 for the quarter. This unrealized depreciation is further broken out on Slide 14. You can see that approximately $83,000,000 or 68% of the unrealized depreciation was attributable to our liquid investments, while $35,000,000 or 29% was attributable to our middle market portfolio.
Within the middle market portfolio, dollars 26,000,000 was driven by higher spreads in the broader market for middle market debt investments based on our observations of a combination of high yield and middle market indices. We've classified $8,000,000 of the middle market portfolio unrealized depreciation as being attributable to underlying credit or fundamental performance. At this point, the vast majority of this is not driven by reported portfolio company results, but rather our ongoing proactive analysis of the impact of the current situation on our portfolio companies, including the effects on revenues and liquidity. Through our discussions with management teams and sponsors, certain investments have been impacted more than others, and our valuations have been adjusted to reflect this. As Eric indicated, all of our portfolio companies made their scheduled interest and principal payments in the first quarter, and we continue to remain in close contact with each company as the COVID-nineteen situation develops.
Switching gears to the broader market. Please turn to Slide 16 of the presentation. While average unitranche spreads saw a slight uptick in the first quarter, they remain near historic lows, while spreads for the other nonbank structures generally decreased during the first quarter. It is important to keep in mind, however, that the majority of this data was driven by market conditions in January and February. So the spread increases as a result of COVID-nineteen are muted thus far.
As you can see from the Credit Suisse Single B Leveraged Loan Index, we would expect spread increases across the board in the second quarter based on current market conditions. Slide 17 gives a graphical depiction of relative value across the BBB, BB and B asset classes. Recall, Barings' size and scale as a $327,000,000,000 asset manager provides our BDC with a unique investment frame of reference in both liquid and illiquid credit. The data here outlines spreads at three year highs across the spectrum, but it also shows the relative value opportunities that can exist for investors at different levels of credit risk. For an example, an investor looking to take single B risk can earn an investment spread of nine eighty one basis points invested in liquid corporate loans relative to approximately seven fifty basis points in direct lending unitranche.
In contrast to the extent an investor wanted a similar yield provided by that unitranche transaction, but improved their risk position, they could consider structured market investments in BBB CLOs at widespread. In short, the value of choice across markets provides a meaningful benefit to the BDC investors. In our core direct lending markets, we will continue to be highly selective, focusing on select sponsors and markets across The U. S. And Europe.
We will also continue to be opportunistic across the credit spectrum, but always maintaining diversity without an overemphasis on one product, obligor or geography. With that, I'll turn the call over to John to provide more color on our financial results.
Speaker 3
Thank you, Ian. On Slide 19, you can see the bridge of the company's net asset value per share from December 3139 to 03/31/2020. Now as Eric mentioned, our NAV was down by $2.43 this quarter to $9.23 per share, declined approximately 20.8%. Now this decrease was due to net unrealized depreciation of $2.44 which was offset by $01 for the net impact all the other drivers combined including $3 accretion from share repurchase including the $03 of share accretion from our share repurchase program. You saw that a breakdown of this unrealized depreciation on NAV per share basis was also shown when Ian discussed Slide 14.
Now at a high level, over 90% of the NAV decline was driven by broad market moves caused by spread increases for middle market loans and price declines for liquid investments. Also reflected on that chart was the fact that foreign currency fluctuations did not have a material impact on our financial results in the quarter, which you'd expect given our hedging strategy. Slides
Speaker 4
twenty
Speaker 3
and twenty one show our income statements and balance sheets for the last five quarters. From an income statement perspective, we've already touched on some of the key highlights, but I'd like to point out a few high level trends. On the top line, our consistent portfolio rotation has resulted in an increase in our total portfolio average spread of 84 basis points since March 3139, with the average spread increasing from three seventy three basis points to four fifty seven basis points. The average yield at par in our total portfolio, however, has decreased from 6.2% to 5.7% over the same time horizon as a result of lower LIBOR, resulting in a relatively flat total level of investment income. Now this market dynamic could have made it tempting to pursue higher yields in order to grow the bottom line, but it's during the turbulent markets we are experiencing today that we're happy we remain focused on a primarily first lien strategy.
Speaker 4
You can see on Slide 21
Speaker 3
our balance sheet trends. Excluding our short term investments, total investments at fair value were down approximately $106,000,000 compared to the fourth quarter due to the unrealized depreciation that we've discussed. Excluding this impact, the portfolio would have increased $15,000,000 based on the portfolio rotation. And similar to last quarter, our cash balance and short term investments balance at March 31 were largely transitory due to the timing of repayment of our BSL credit facility and debt securitizations with the proceeds from our BSL sales. During the fourth quarter, we lowered the commitment on the BSL facility from 150,000,000 to $80,000,000 and further lowered it to $30,000,000 subsequent to quarter end to rightsize the facility relative to our remaining BSL portfolio following a $20,000,000 repayment.
Also during the first quarter $27,000,000 of the CLO Class A-one notes were repaid bringing the total CLO debt principal balance down to $291,000,000 at March 31. An additional $65,000,000 of the CLO Class A-one notes were repaid in April, bringing the total current CLO debt principal balance down to $226,000,000 Details on each of our borrowings are shown on Slide 22. Our debt to equity ratio at 03/31/2020 was 1.42x or most importantly 1.2x after adjusting for cash and short term investments in unsettled transactions. Pro form a for the BSL credit facility and the CLO debt repayments in April totaling $84,000,000 our debt to equity was 1.23 or roughly in line with our net debt as of March 31. I'd also like to note that our only debt maturity in the next two years is the BSL credit facility that matures in August 2021, which is now down to its size of roughly $30,000,000 Now jump to Slide 23.
From a liquidity perspective, our primary sources of liquidity continue to be the proceeds from planned rotation out of our liquid BSL as appropriate and depending on those market conditions as well as the borrowing capacity under our $800,000,000 senior secured corporate credit facility. Today's available borrowing capacity under this facility, which is all subject to leverage borrowing base and other financial covenants would allow us to borrow amounts up to the approved regulatory limit of two times. We certainly do not plan to increase leverage that level but I want to use that to illustrate that we have the available liquidity to support existing portfolio codes and remain active market participants today. The chart on Slide 23 shows the impact on our net leverage of funding our unused capital commitments. While Behring did not have any revolver exposures on our balance sheet, we have $73,500,000 of delayed draw term loan commitments to our portfolio company, as Ian mentioned, as well as our remaining $40,000,000 commitments to our joint venture investment.
These DDTL commitments are generally in place to support portfolio company acquisitions and also generally have incurrence tests limiting their total leverage. Thus we'd expect usage in those DDTLs to be limited to those companies generating very strong results and further limited by the depressed level of acquisition activity that you're looking at in today's market. Now while we'd expect limited usage, this table shows that we do have the available capacity to meet the entirety of these commitments if called upon, while maintaining cushion against our regulatory leverage limit. In addition, our $385,000,000 liquid broadly syndicated loan portfolio also provides additional liquidity if it was needed. While we could sell those investments to reduce leverage while not impacting current NAV, we can also sell those investments in order to redeploy the capital in other investments with improved risk adjusted returns.
Any sale, right, of course, would likely convert to an would convert an unrealized loss to a realized loss, but long term NAV could be improved with the incremental returns on those new investments. One final point regarding our liquidity and capitalization relates to our ability to issue shares of common stock pursuant to Board approval at a price below NAV, which was approved at our Annual Meeting of Stockholders yesterday. We appreciate the support that we received from our shareholders on this proposal, particularly during a period of such extreme market volatility and uncertainty. It was evidenced to us stockholders have placed their trust in Barings and the Board, and we take that responsibility to act in our shareholders' best interest very seriously. Slide 24 updates our paid and announced dividends since Behring took over as the investment advisor to the BDC.
We announced yesterday that our second quarter twenty twenty dividend of $0.16 a share will be paid on 06/17/2020. And this dividend level is consistent with the first quarter and represents two important points. First, the reality of the current market environment is that middle market originations will be lower than historical levels. The breadth of the Barings platform will allow us to take advantage of opportunities as the market continues to evolve, but we would not expect overall portfolio yields to increase materially in the second quarter. Second, maintaining a consistent dividend level represents our current expectation that our portfolio continue to perform in the second quarter given how well it was positioned entering into the crisis and how it's managing through the crisis to date.
Now Slide 26 summarizes our new investment activity during the second quarter and investment pipeline. Since April 1, we closed and funded one new middle market investment of $10,000,000 of equity and first lien debt with an origination margin or BM3 of roughly 9.6%. We've also funded $1,600,000 for previously committed DDTLs, primarily to one well performing European portfolio company in order to fund some tuck in acquisitions. The current Barings global private finance investment pipeline is approximately $110,000,000 on that probability weighted basis and is predominantly first lien senior secured investments. As a reminder, this pipeline is estimated based on expected closing rates for all deals that rest in the pipeline.
And lastly, I'd like to provide an update on our joint venture with the State of South Carolina Retirement System. This vehicle allows us to leverage the broader Barings platform and increases the investment diversity within the BDC. And March 31, the cost basis of BBDC's investment remained at $10,000,000 as we continue to ramp the JV using its subscription leverage facility, while the $4,000,000 of investment declined while the fair value of the investment declined to $6,400,000 Now this quarter's decrease in value is largely driven by the same technical price driven valuation marks that impact Ferring BDC as the JV portfolio consists of roughly 70% broadly syndicated loans, 21% middle market debt investments and 9% public and private ABS securities. We continue to evaluate the opportunities in areas such as European credit, structured credit and continue to make investments in these areas that all have attractive risk adjusted return profiles in this environment. And with that, operator, we would love to open the line for questions.
Speaker 0
Our first question comes from Robert Dodd with Raymond James. On
Speaker 4
the and I appreciate all the color you gave in the presentation and remarks, etcetera. On the NAV mark related to credit, like the $0.17 pretty small, right, compared to the overall mark because of the market. You mentioned, obviously, that's based primarily on twelvethirty one financials, but then discussions with portfolio companies to get more up to date information and expectations. Can you give us any color on kind of how obviously, there's marks in principle, the values at threethirty one. Can you give us any color about what you've heard either since then and that maybe differs from either better or worse, right, frankly, versus expectations that you built into those marks at the time?
Obviously, they were forward looking then, but we're a month later as well. So any color on that front would be really helpful.
Speaker 2
Sure. I can take this one. And Eric and John, if you want to jump in, go ahead. So just to provide a little bit of color here. I think when we have the benefit of being a global platform with businesses in Asia.
And so through our parent, MassMutual and Barings, this whole event that was occurring, the health care crisis, we were seeing it happen real time in our markets that we're in globally. And even our direct lending business, we have people on the ground in Hong Kong. So we anticipated that there was going to be potentially an impact to our market. Obviously, we would not have been able to anticipate the shelter in place and all those other factors. But we did assume that there could be demand supply shocks to our portfolio companies and potential operational disruptions.
And so like we said in our opening remarks, we did not use the twelvethirty one financials nor expected first quarter performance because that didn't really reflect the true impact of COVID, which really would have been felt in March, particularly the March. And as you pointed out, Robert, we had many discussions with management teams beginning in January, progressing through early March, as we tried to identify which companies had high, medium and low exposure to COVID and then also had to assume that there was going to be a subsequent economic recession that would follow. And every investment that we make, before all this, we obviously spent a lot of time on a downside scenario assuming a cycle. So what we try to do in our discussions was really bridge that downside cycle with the input that we were getting from the management teams through their analysis and their assumptions of this event. And as you point out, it's imprecise, it's not perfect.
I think directionally, it's more realistic. It's certainly not appropriate to be using Q1. You really want a Q2 projection because Q2 will really truly reflect the full impact of COVID. And beyond Q2, it's really hard to get a line of sight in terms of what the environment is going to look like. So we're having calls every few weeks.
We're adjusting our marks based on those calls. And I would say that in the number of cases, management teams when in mid to late March when this thing totally happened and people were really concerned about the event and it was really unknown how this was going to play out. I think some of the analysis that came back was very draconian and actually based on conversations, some of those businesses are doing much better than they expected. And others are on plan and maybe some others are a little worse. So it's kind of all over the board.
The one benefit we had going into this is that when you look at the industries that were the most vulnerable industries with this healthcare crisis, they are industries that we avoid or underweight on an ongoing basis. So through luck and discipline, we were able to avoid a lot of that. And I'll let Eric or John chime in.
Speaker 1
Well said. Robert, does that answer your question?
Speaker 3
That does.
Speaker 4
And that leads me to kind of the next one. To that point, Ian, on the rest of obvious industries conceptually where if you're gyms, hotels, hospitality, things like that, where there's obviously going to be a big issue. Are there any other industries that you've seen so far where maybe it's surprising on how either negative the impact has been or how well where they've weathered it so far? Mean, I it's very early, like meaningfully better than expectations.
Speaker 2
Yes. Great question. And again, this is all based on our conversations with our management teams. Obviously, it's not anything that we've actually seen in numbers. So we do get monthly numbers for most of our accounts.
I would say, for logistics, we have three logistics companies in our portfolio. They all seem to be doing very well. So we haven't seen any impact. One of them is involved in the shipment of food and the other one is chemicals and life sciences. So I would think essential items.
I guess that's probably what has been really surprising is depending on these companies and where they fall out from essential service or not. And those companies that are more discretionary, less essential are the ones that it's just really gotten bad. And so fortunately, we don't like retail and restaurants in the middle market because of risk when you're financing small businesses like that, where there's a lot of discretion. And you're seeing in this environment, even larger retail and restaurants where you would think critical mass and diversification would be protection, quite frankly, those businesses have just been crushed. I've never truly been a big believer in recession resistant businesses because I think every business does is somewhat impacted to the economy overall.
I think a lot of people look at health care as being somewhat recession resistant. So a surprise to me would be companies that are in the health care space that provide valuable services like dental management practices that are being impacted in this environment. So it's all over the board. We have one business that is in the business of dealing with crime scenes and just kind of cleaning up situations where unfortunately people have died or been killed. That business is obviously doing quite well in this environment.
So it's really all over the board and it's fluid. And just based on the shelter in place, it's really hard to predict the impact.
Speaker 1
Only thing I'd add to that it's real quick kind of like what we learned in February, right? It's there's the first order effects, which are the obvious ones. And as you look at your portfolio, as Ian said, we immediately went to every portfolio company and put them in three buckets based on the COVID impact, high, medium and low. Sounds simplistic, but sometimes simplicity works. But the first order impacts are the easy ones.
It's really the ones that are second and third order impact, right? You got to look through that company and say, okay, over their ultimate end customer, 25% of it is tied towards, let's just call, catering or something like that, right? Where that business is going to go away. And so I think what the team has done well is really looked through the company beyond just kind of the surface level, really understanding that company from our underwriting, engagement with the management team and sponsors and really having discussion on those kind of second and third order effects. And I think those will be the places where there'll either be positive or negative surprises because I think that certain other ones are just pretty obvious to everybody.
Speaker 0
Thank you. Our next question comes from Finian O'Shea with Wells Fargo. Please proceed with your question.
Speaker 5
Hi, guys. Good morning. First question for John on issuing below NAV. Can you give us some more color on where you would issue below book, including do you see this as a tool for defense where your own capital structure may be stressed or offense where the market opportunity would merit new equity?
Speaker 3
Thanks, Fin, for that. And just to bring those that are out there, I know we talked about in the proxy, we'd received approval to issue approximately 25% of shares below NAV, outlining some of the factors in the proxy and the benefits. Maybe a few high level thoughts, because what we want to outline is remember, dilutive issuance can, in certain circumstances, be seen as a benefit. That being said, history in the space might outline that its use could be a little bit checkered. And so our point in having the ability to do it, one, it's seen as a significant responsibility.
And for us, it always starts with alignment. So, Fin, you've seen the fact that we own over 28% of the shares, the largest shareholder, and so one would not be looking to dilute or harm that position in the future. And really, there's some afforded benefits to the extent that you think about dynamics and debt capital and credit ratings, etcetera, having that ability and that but also carrying a high degree of responsibility for having that ability. So I wouldn't rule out anything to try to say it's a set level here or there. It's always done to the extent it's ever needed in line with shareholders' best interest of which we are the largest one.
But given the past of certain dilution for investors, which can in some which is harmful. And even rights offerings are dilutive. It's just the different part of the class that gets diluted. You end up kind of realizing that it's a tool to have, but one that you wouldn't put on the front burner is one to use as much as it's just a part of a dynamic plan. And really, you look at the current liquidity position where we sit, which we feel very comfortable about to both acquit new investments and support our portfolio cost.
So less a hard and fast line and more of a broader picture to look at. For us, it's all about alignment. We've proven that. We want to continue to stick with it given our shareholder ownership. We appreciate the benefit that we'd receive having that option, see but that is an enormous responsibility to our shareholders and we choose not to in any way, shape or form take advantage of that unharm investor trust.
Fin, does that answer your question?
Speaker 5
Sure. Thanks. And a follow-up Hey, for
Speaker 1
Fin, this is Eric. I just want to be crystal clear, make sure we are we asked for that right, and we're grateful that people gave it to us for that liability management that could occur down the road, and what flexibility it could give us. We have no intention, as John said, in these times, we didn't it just are asking for that approval just happened to coincide with this market volatility. We intended to ask for that six months ago, three months ago at this time. So I don't want anybody to read into the timing of that request and this market volatility that somehow those two things are connected.
They weren't connected at all.
Speaker 5
That's helpful. And then, for Ian or Eric, you touched on the opportunity in liquid or structured products. Can you give us any views on expanding your commitment to a joint venture where you can approach this in a more tailored fashion on asset selection, leverage and so forth? And if you agree, would you have the appetite to set up another joint venture where you hold more of an economic interest?
Speaker 3
I'll start with the joint venture question and then I'll lateral it over to Eric kind of talking about the broader platform and how we see opportunities. For us, we're very thankful and appreciative of our joint venture with South Carolina. But remember, what happens here is often joint ventures can, in certain circumstances, become the tail that wags the dog to where too much of an economic interest in a JV that drives one earnings with high levels of leverage can end up walking people into a situation where that becomes the primary driver of return. For us, it's about diversification and having that ability even at our commitment size, we feel very comfortable at that level that we both receive diversification into other asset classes that the BDC can't easily participate in given Barings wide investment funnel, but also not creating the situation where tails do wag dogs and you lose that benefit of the diversification overall. And so that's one major point.
And then to pass it to Eric on kind of relative value, really the fact that we've had such a wide funnel and sit across a number of global asset classes that report to Eric, this is the opportunity to look across those to generate returns, and we're finding opportunities both for the BDC and the JV. And oftentimes, they can co invest together. But I'll lateral that one over to Eric.
Speaker 1
Yes. So Ben, I would answer to be specific to your question, we have no intention right now of setting up another JV with anybody or having a larger stake in any of that. I feel like our real focus is on the asset quality and portfolio management of the existing portfolio and making sure we perform exceptionally well with those assets. I think what we tried to show in this quarter was that we begin to show the shareholder base that the Barings platform has the opportunity set that's broader and different than some other people. And we didn't want to go too deep into that structured products initially, but wanted to show the type of opportunities that would exist.
And so and I think over time, could you the heart of your question maybe is, could you see us doing more of it? We're always going to go to where we think the best risk adjusted returns are. We have a liquid and Tom can speak to this. We have a liquid high yield portfolio relative value committee that typically would meet every couple of weeks, been reading more frequently, as you mentioned, these days, where we look at loans versus bonds, we look at Europe versus U. S, so U.
S. Loans, Europe loans, European high yield, U. S. High yield and all of the structured credit components in there. It actually includes our emerging markets business and the like in that discussion.
And so as a firm, in our DNA, it's always about relative value. It's always about where is the best risk adjusted return given the situation. So as John mentioned, if you look to what could happen or did happen in March, you saw some opportunities where frankly the liquid market provided materially better risk adjusted returns than the middle market did. And so we're always going to go to where that best relative value is.
Speaker 0
Thank you. Our Tim, next question your line is live.
Speaker 1
Said, Tim, did I answer your question? Yes. Thank you. Okay, good.
Speaker 0
Thank you. Our next question comes from Kyle Joseph with Jefferies. Please proceed with your question.
Speaker 6
Hey, good morning guys and thanks for everything you provided in the deck, very helpful. I just wanted to get a sense for given another drop in rates this quarter, give us a sense for where we are in terms of LIBOR floors on your portfolio and remind us what percentage of your portfolio, both the BSL and the middle market portfolio do you have LIBOR floors?
Speaker 1
Turn it over to Ian for the middle market and Tom for the liquid side. I don't have an exact percentage for you on the middle market. Would tell the majority, the vast majority of ours have a LIBOR floor. It's typically 1%. We saw some pressure, I'd say, three to six months ago, where people are trying to take those out and maybe just put a floor of zero in there.
I would say it's the vast majority, but I don't have a specific number that I can give you. Don't know, Ian, if you know the exact percentage off the top of your head.
Speaker 2
I don't want to give an exact percentage, but I think if you've looked at sort of 80% to 90%, that would be kind of directionally in the ballpark. And certainly, I can tell you today, any document that we open for whatever reason, we're making sure that floors are in there as well as tightening other items in the documentation. I'll turn it over to Tom on the liquid side. Yes, I'd say on the liquid side, it's kind of the exact opposite of that. Almost 90 of the deals have 0% floor.
So there's a floor, but it's at zero. And so we don't have the benefit of that 1% floor for the majority of the market in the broadly syndicated side.
Speaker 6
That's very helpful. Thanks. Obviously, the majority of the mark at threethirty one was it sounds like primarily driven by BSL movement. Can you give us a sense of how much of that has come back quarter to date?
Speaker 2
Yes, this is Tom. I'll take that one. We've had roughly kind of call it a 4% recovery on prices in broadly syndicated loans. It's generally the CS Index is a good measure of that. It's up about 4.2% in the month of April and we're roughly in line with that.
Speaker 6
Got it. Thanks. And then one last one for me. Obviously, depends on ultimately the duration of this impact and whatnot, but just want to get your initial perspective on how this disruption impacts the competitive environment and any sort of outlook for potential consolidation?
Speaker 1
I'll jump in there and then turn it over to Bach. So two years ago or so, I was on a panel for in super return over in Europe, and someone asked about volatility and what my view of that was. And I said, was actually looking forward to it. I'm not sure I was looking forward to this kind of this level of volatility or in this sudden, but I was looking forward to it because I do think part of your question is, it's an opportunity to separate the better quality managers from others, right? And I think there'll be I think everybody's going to have challenges in their portfolio.
As I've said to our team for years and to any investor I talked to, institutional, shareholder, you name it, it's like you really don't make your money on having a 8% origination yield versus a 7.75% origination yield or 8.5% versus an 8%. I mean, you really make it by managing downside risk and being having the experience base to manage that downside risk and having the deliberate portfolio construction that helps you protect from that because it helps protect from the unknown. As John mentioned, we have a large amount of diversification in our portfolio. I our single largest investment is plus or minus 2.5% of our portfolio. And so I think that volatility will be, I think, ultimately good for the industry, because I think they'll create some separation.
As far as consolidation, I mean, we'll see where that goes. It's a difficult industry to consolidate, given the way structures are in these businesses. But I do think that they may provide some opportunities out there as shareholders look at just how certain managers perform during this period of time. John, I don't know what you would add Yes. To
Speaker 3
Eric, I'd echo your comments. And Kyle, I know you're familiar with this. But really the economic challenges come in two parts. The first is a crisis of liquidity, and you've seen that on the part of the industry. There are liquidity issues, right?
And then the second is a point on credit, and that usually takes several more quarters and months to bear out. The potential for acquisitions usually comes in the on the industry on that credit wave, right, which we've yet to see. Always, just like anyone will mention on the call, always open for opportunity to the extent it's shareholder accretive. But the goal here for us is to always realize that we've got great opportunities in our core market sets. And so any such acquisition would need to be very compelling from a shareholder perspective.
And it might get there. But right now you have the credit wave coming first and as you dive into NAVs and others, I think we'll all understand in the future kind of where the chips fall for the entire industry. But Kyle, does that help?
Speaker 6
Helpful, guys. Thanks very much for answering my questions.
Speaker 0
Thank you. Our next question comes from Casey Alexander with Compass. Please proceed with your question.
Speaker 7
Hi, good morning, everybody. And hope everybody is feeling well during this. And thank you for the granularity of your presentation. I think investors should really appreciate particularly the breakdown of unrealized marks. I think that's extremely revealing.
I've got a few quick questions here. One, you'd only touched on it lightly in your presentation, but what have your conversations been with the sponsors of your portfolio companies? And how did that contour your bucketing from high, medium to low in terms of kind of risk rating where your portfolio companies are at?
Speaker 1
Ian, do want
Speaker 2
Yes, take that I'll take this one. So as I mentioned, we had multiple conversations with management teams. And then the second stage was having conversations with sponsors because part of the analysis and again, what we were trying to bucket initially was exposure to COVID from a high, medium and low perspective and kind of think of that as kind of the first wave and maybe the most disruptive wave with the assumption that we're going to have some kind of recession. The severity of that recession obviously dependent on the duration of the health care crisis. And so as we identified companies with high and medium exposure to COVID, then the conversation was with the sponsor, okay, you have this company, it has exposure, what's your game plan, how are you going to support it, both in terms of oversight, strategy and also capital.
And the reality is on the capital side, sponsors have finite amount of capital. And so part of our analysis was getting a perspective from them in terms of where does this investment reside, which we would know. Is it an older vintage or a newer fund? And if it's an older vintage, then therefore, they have less capital available to support that company. So then you get into analysis of what other companies are still active in that portfolio and how much capital do they have.
And then it's kind of game theory about which ones do you think they're going to support and which ones you don't think they're going to support. Obviously, with newer funds, they have more capital to support those companies. So that was the analysis that we went through. And it doesn't change the high, medium, low impact of COVID, but it changes our playbook in terms of what our approach is going to be if this company gets into either a liquidity crisis or a big R restructuring. The other thing I'll point out, which I didn't mention, is that all the discussions that we had with our management teams and sponsors, we basically took all that information to our high yield team.
We have almost 50 high yield industry experts and basically had them validate what we were hearing in terms of the industries and the comments that we're getting around the company's ability in that industry to withstand any kind of liquidity issues or COVID issues and maintaining that value proposition. Does that help, Casey, with your question?
Speaker 7
Yes, it does. And in a follow on, in a situation where a sponsor is at the end of the rope in the fund and obviously they have rules about cross investing, does the sponsor yet still participate with you in sort of game planning for additional forms of capital to that company? I mean, it seems to me that just because they can't do it themselves doesn't mean that they're necessarily so willing to just kind of let it go. And do any of those options include government sponsored lending programs?
Speaker 2
So I'll take it. And then if anyone else wants to jump in, please go ahead. The reality is, yes, I mean, hopefully, we've done a good job on the front end. We underwrite the sponsors that we work with. So we're really focused on sponsors that have operational expertise, treat us like a partner, not just like a supplier.
And so I historically, through other cycles, I've had sponsors that were unable to put money in but really worked those companies to help maximize recovery. At the end of the day, if additional capital comes in, if it's the right sponsor, they have a choice. They can be diluted or they could lose their equity completely. And the right sponsors are going to be supportive in terms of working a holistic plan, whether it's them putting in the capital or someone else putting in the capital, but all of us working together to preserve that company and maximize recovery. And the only thing I'll say on government plan is that's obviously new and kind of a changing environment.
That's really up to the company and the sponsors to determine if that's a program that they want to participate in or not.
Speaker 7
Okay. Thank you for that, Ian. John, from a maintenance standpoint, the discussion of the debt pay down as a subsequent event post the end of the quarter, should we look at that as coming from short term investments? Or is that more being taken from capacity on the credit line to repay those other forms of leverage?
Speaker 3
Yes. No capacity on the credit line. One, it comes from short term investments in cash. And we've been active in sales to the extent that we've generated a few that were still trading at attractive levels to where we bought or if there was some moves in and out. But by and large, no, using your revolver capacity to pay off SPV lenders is a bad idea.
Speaker 0
Our next question comes from Ryan Lynch with KBW.
Speaker 8
Hey, good morning. Hope you guys are all doing well. First question just has to do with your securitization CLO. As we obviously, you guys were in compliance as of Q1 with all your covenants in that CLO. But as we kind of get further down the road, and I'm assuming that we will have more defaults just across the board and more ratings downgrades for credit investments down the road, How comfortable are you all with maintaining your CCC bucket or your OC cushion for that securitization going down the road?
Speaker 3
Sure. Brian, this is Buck. That's a great question and one that how folks are financing is extremely important. Very comfortable with the OC cushion, very comfortable with available CCC to the extent that downgrades persist. And I just want to outline kind of the timing.
That came that CLO is really a function of just proper financing. It's not designed to over lever or to generate churn, but mostly just protects a tight pay down. That's the form of a static CLO. And when it was done, it was done around that April timeframe that had a lot of the year end malaise that occurred in loans in the latter part of 2018. So there was a lot of conservatism built into that structure.
So very good from a liquidity perspective and that securitization is built with a high level of cushion to make sure that even to the extent downgrades persist and are heavily elevated that the cash flow NIM actually flows through to the investors. Does that answer your question?
Speaker 8
Yes. That's helpful. And then kind of following up on an earlier question from Robert. You mentioned earlier that you guys don't have Q1 financials yet really for most of your portfolio companies. And so I think that would assume that next quarter, you're probably not going to have Q2 financials yet for your portfolio companies, which that's going to be kind of the real tell of how these portfolio companies are performing.
So in your discussions though that you are having, as you mentioned, are you guys getting formal forecasts for 2020 from your portfolio companies? Are these just more informal dialogue that are going on? And at this point, even if you guys are giving forecast or just having kind of these informal dialogue calls with portfolio companies, I mean, how reliant can you be on really anybody's ability today to forecast what the economic picture looks like going forward? And how is that going to specifically impact specific portfolio companies that you guys are operating just given the unprecedented levels of uncertainty that we have going forward?
Speaker 2
Yes. So I'll take that question. So again, most of the companies that we have in our portfolio, we get monthly financials. And so we're able to bridge those monthly financials with the baseline projections that the management teams are giving us. So while it is a discussion, we're actually getting, receiving and then walking through actual projections.
I think what I would point out, you highlighted this, is we don't I mean, it's such a fluid situation. There's obviously the initial impact. There could be secondary impacts. We could have flare ups. We could have another wave.
I mean, at this point, a full year twenty twenty plan is really going to be difficult to put together that has that is accurate. So our focus is really on the second quarter as the initial step because that should be a quarter where if there is a COVID impact, it's fully reflected in the numbers. And as we continue to see trend lines, we can start expanding those projections from that second quarter into the third quarter. But it's going to have to be step by step. It actually means we're having conversations every other week with these management teams and going through their projections and looking at the monthlies and tying those monthly projections into the forecast they've given us to see if there's any deviation at all.
And I think, honestly, that's the only way you can manage through something like this because every cycle is different. This one is obviously a very different cycle. And we just we don't know how it's going to play out.
Speaker 1
So let me add a little bit to that. Me try and add something to connect the dots here, and I can make sure we're clear. As Ian said, we do get monthly financials on a number of our portfolio companies. We said that we didn't have financials. Really, the March monthly financials, you don't have March '30 or '31 when you go through it.
And so I think that we're referring to the actual the first month that had material COVID impact. You don't really get those financials until more around now and most of your portfolio companies, but we did have the monthly financials prior. So in our conversations with management teams, we really, as Ian said, focused on kind of what do you think April, May, June look like, because that really gets to the heart of the liquidity of the company, right, which is really the most important thing in times like this, particularly for ones that are materially impacted. And I want to tie that back to a comment that was earlier, where we talked about how we can take that conversation we have with that company and then work with our high yield research analysts. We have really large high yield research staff that's industry specific.
And as you know, for most middle market lenders, it's very difficult to have industry expertise and have a diversified portfolio. Typically, if you have industry expertise, your portfolio has a lot of those industries in there. And so we're able to take that information we're getting from that management team, what they're expecting in the second quarter, sit down with the research analysts and say, does this make sense to you given how you're seeing the industry play out and other management teams are talking to and to begin to triangulate on what we think the second quarter looks like. Because, Ron, to exactly your point, we're not trying to speculate on what the full year looks like because we don't know what that environment is going to be, but we're really focused on this quarter.
Speaker 8
That makes sense. That's good clarification and good color. And I think all that makes sense given these uncertain times. Just one last question. Over the next coming months and coming quarters, I think just broadly speaking, there's the expectation for a significant increase in the defaults, nonaccruals and workouts across the credit landscape.
How comfortable are you all today with across the Barings platform of being able to work through those credits? Because it's going to take a significant amount of human resources, professionals to spend a lot of time working through those credits to be able to get the best outcome. So how comfortable are you with the amount of people, the level of people and the skilled professionals to be able to work through those credits without putting too much strain on the overall platform?
Speaker 1
Yes. So I'll take that and then Ian can jump in also. So we highlight the Barings platform a lot, and this will be another example where I highlight the broad Barings platform. The first thing to look at is the depth and experience of our existing team that works on the middle market credits, right? So let's focus on the illiquid credits for a second.
There, I mean, we have an incredibly seasoned team. We have and I know the number of dozen plus individuals with twenty plus years experience in the industry. So they've seen multiple cycles. And I think this is a time where having people that have that experience and having worked through these type of situations, job situations is really, really critical. That being said, right, we don't just want to rely on our existing team in the middle market.
We have a very significant special situations group that basically historically has operated on the liquid side. But as partners with people like Tom, Tom focuses more on performing credit, but this group would look at more challenging situations. They have a lot of experience working through challenging situations on liquidity, potential bankruptcies, restructurings and the like. We actually work with that group, and that group is a part of our watch list process that helps evaluate credits and also as part of our resources we tap into when we talk about under certain situations, how would we look to play that situation out. Then the third part I'll hit on is, again, the broad platform.
A lot of times people don't see. We talk about the investment professionals. We have a deep legal staff at Barings, in house legal staff, both with expertise in middle market and private investments and expertise a team that has expertise in restructurings. And we bring those legal resources to bear also as we sit through discussion. So I feel very good about our team in isolation.
But frankly, it's the power of the entire organization that I believe will have us best be able to manage this. And one part I didn't even hit on is we actually have a private equity business. It's a small business for us relative to our fixed income business, but has experience with operating, operating companies. And so we do have the knowledge base on how would you put together a Board and how would you put the right operating partners in there and how would you incent the management team and the like. So all those different components are what we would tap into and we are we do tap into to have the best outcome for ourselves, our own capital and for our shareholders' capital.
Speaker 2
And I would just add two points. One, as Eric mentioned, lots of experience on the team, including workout experience and going through cycles. Almost 35% of the team has close to twenty years' experience. And then the other thing I would say is just on Eric's point in terms of the resources within the firm, hopefully, we don't have a lot of situations where we actually have to take the keys of a company. But if you just think about special sits and our high yield team with all their industry contacts, we just have such a huge network of people that we can bring into situations, whether it's a Board member or whether it's a management team or maybe it's a strategic buyer of a business.
So there's just a lot of resources there that we can lever.
Speaker 0
Our next question comes from David Miyazaki with Confluence Investment Management.
Speaker 3
Hi, good morning. I just wanted to echo, I think it was Casey's comment on the detail you provided on your unrealized depreciation. Think Slide 14 personally was very helpful. I think that as you guys are kind of at the beginning of earnings season, it's I think as an investor, I'm sort of bracing myself to see mark to markets all over the place. And so I was wondering if you could provide a little bit of detail on how you got to your valuations.
I mean, did you I presume you had a kind of a combination of quotes and grid pricing, some quotes get ignored. Did you find that your valuations were had wider ranges? And did you find yourself at the higher end or the lower end? Or was it any different than what you normally go through? I'll take the valuation question and then kick it over.
But David, the bottom line is same valuation process, change. And in fact, we kind of take that as a very important point, because for us, take broadly syndicated loans, for example, the mark is the mark is the mark, no kick outs, no major adjustments. That's simple. And then when you get into the middle market, this is where we want to do our best because we kind of operate in the belief that either one marks their book or the market does it for you. We find that through our prospective discussions with management teams, through our view of making sure a common and consistent policy across the entire firm, very big on consistency, we found that really the while the levels will move as spreads have widened, the process hasn't changed.
And then you talk about the kind of overlay of third party, we find that very useful. And so we found that really there's been no major dissonance one way or the other, as we do our best to try to outline and skate to where the puck is based on our discussions. Key points of key themes of consistency and sticking to the exact same process, even when the markets change, that to us is very important, and we're finding that we're happy to reflect those in valuations because really to us, all mark to do is just shift economic return to future periods if one gets the credit risk call correct. And so provided having a strong liquidity position, there's never an issue discussing what the mark is because you build for that and you make sure that at the end of the day, fair value is as best as you can estimate it fair value. Dave, does that help?
Yes. No, that's very helpful. Unfortunately, don't know that we're going to see the same process throughout the industry. So it's definitely good to see somebody early in the reporting season come out with such a clear and transparent process. Appreciate that.
Speaker 1
Dave, can add one thing. Yes. Well, first of all, thank you for both of you for the positive comments on our transparency. I remember our initial meeting eighteen months ago, I said two things that I'm going to commit to you, really, I think it's three things. Alignment for the long term focus, communication and transparency, I think, were the three things that we highlighted.
So we're doing our best to make sure we're honoring that. One thing I want to also just highlight is, we have an independent valuation group within Bearings overall. So when you think of the valuation, the work products done within the investment team, Ian's team, There's an entirely independent valuation group that size off on all the valuations that's independent. It doesn't report up through me. It doesn't we wouldn't even connect until we get to the CEO of the company from that perspective.
And then the second one is, and this is obvious, but it's true. There's one price for each asset. So that asset that's marked in the BDC is marked that way on MassMutual's books. It's marked that way on our GPLP funds. It's marked whatever the asset price is, the asset price is.
If it's 93.2%, 93.2% for everybody. Now that's obvious in most people's minds, but I think it's important to make sure we state that, too.
Speaker 3
That's very helpful to know. And if I could, Eric, kind of shift along on what you've communicated in the past. I think that it's very helpful to have some clarity provided with regard to issuing below NAV against the backdrop of actually having purchased shares. I think it's more important as investors for us to see what you actually do as opposed to what you're saying. And I do appreciate the share repurchases.
If I could shift process or the question just a little bit to the regulatory front. I know that you guys are aware and involved in different aspects. One thing that has really affected the middle market industry a lot, I think, is whether or not sponsors could participate in Paycheck Protection. So I was wondering if you have any observations or thoughts about what's happening with regard to assistance in your portfolio companies. And then as well, I was a little surprised, but I guess pleased to see that the SEC moved in with some mark to market adjustments for the industry.
And for me, that does represent a slight difference versus the February when the BDCs got very little regulatory attention. And I know that the industry has been trying to work toward progress on AFFE and that really hasn't happened. But I do think that's part of the reason why the stocks got hit so hard in the first quarter. So if you could provide any insight on the regulatory front, that would be very helpful. I'll go SEC, and then Ian and Eric can discuss paycheck protection.
But in terms of the SEC leverage rules, just one parting comment, right? Having the ability to adjust your asset coverage ratios, remember the last crisis, David, that is certainly helpful if that were the only covenant, right? And so what you'll find is given the higher level of incremental debt that now is applied to the BDCs means that that's not the only covenant that one's working for. Granted, it's one less, but to the extent that one had overextended themselves on leverage and are having material amounts of payment adjustments, defaults, etcetera, you have a not a regulatory problem, you have a lender problem. And so certainly, relative to the last crisis, you found it was more regulatory than lender.
I'd imagine today, you're going to find it's going to be more lender than regulatory. And then paycheck protection, Ian and Eric.
Speaker 2
I can start, and then Eric, if you want to chime in. I mean, obviously, with PPP, the program is 75% for payroll, 25% occupancy. And that means keeping the lights on in the business. To the extent that it's all forgivable unless some of that 25% is not used for occupancy. And I think it's still early days, and it's a fluid situation.
I think if it's an industry that's been completely impacted by the COVID situation where revenue just went to zero, You're probably seeing that scenario where people are considering it, but it's really a portfolio company decision. One, do they qualify for the program? And it may benefit them, it may not. And it's really a decision for them. It's between them and the program.
And so I think just I think that's all we can say. We just don't really have any more information around that.
Speaker 0
Thank you. We have reached the end of our question and answer session. So I'd like to pass the floor back over to Mr. Lloyd for any additional concluding comments.
Speaker 1
No. Just want to thank everybody for dialing in, listening to us. If you have any follow-up questions, reach out to Elizabeth or Jonathan or me or Ian or anybody you want to make sure you get your questions. And appreciate the comments, the compliments that we got on, the transparency and the level of detail that we provided. That's our goal.
It's what we strive for to provide. As I say to people all the time, it's your money. It's your the shareholders' money. They just entrust us with it. So they deserve to know how it's being handled and all the transparency around it.
So appreciate those comments, and everybody stay well. And I look forward to having a call here in the last three months and updating you on the second quarter.
Speaker 0
Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time.