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spk06: Good day and welcome to the New Mountain Finance Corporation first quarter 2023 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would like now to turn the conference over to John Klein, President and CEO of New Mountain Finance. Please go ahead.
spk07: Thank you and good morning everyone. Welcome to New Mountain Finance Corporation's first quarter 2024 earnings call. On the line with me here today are Steve Klinke, Chairman of NMFC and CEO of New Mountain Capital, Laura Holson, COO of NMFC, and Chris Corbett, CFO and Treasurer of NMFC. Laura is a little under the weather today, so she will not be making prepared remarks, but will be available for Q&A. Now Steve is going to make some introductory remarks, but before he does, I'd like to ask Chris to make some important statements regarding today's call.
spk03: Thanks John, good morning everyone. Before we get into the presentation, I would like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of New Mountain Finance Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available on our May 1st earnings press release. I would also like to call your attention to the customary Safe Harbor disclosure in our press release and on pages two and three of our slide presentation regarding forward-looking statements. Today's conference call and webcast may include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from those statements and projections. We do not undertake to update our forward-looking statements or projections unless required to by law. To obtain copies of our latest SEC filings and to access the slide presentation that we'll be referencing throughout this call, please visit our website at .newmountainfinance.com. At this time, I'd like to turn the call over to Steve Kalinsky, NMFC's chairman, who will give us some highlights beginning on page five of the slide presentation. Steve?
spk01: Thanks, Chris. It's great to be able to address you all today, both as NMFC's chairman and as a major fellow shareholder. Adjusted net investment income for the quarter was 36 cents per share. In line with our implied guidance and more than covering our 32 cents per share regular dividend that was paid in cash on March 29th. Our net asset value per share decreased slightly to $12.77, a 10 cent decline compared to last quarter. NMFC experienced strong core credit performance offset by a decrease in value of one of our equity positions, which John will discuss later in the presentation. Given our earnings of 36 cents per share this quarter, we will make our fifth consecutive variable supplemental dividend payment. The variable supplemental dividend for this quarter will be two cents per share, which is equal to half of the amount of our Q1 quarterly earnings in excess of our regular dividend of 32 cents. NMFC will pay these distributions on June 28th to holders of record as of June 14th. The remainder of the excess earnings will remain on our balance sheet and may be paid out in the future. Our dividend at 34 cents represents an annualized current distribution yield of 11%. Looking forward to Q2, in addition to our 32 cent regular dividend, we expect to again generate a variable supplemental dividend of two cents per share, or 34 cents in total payable in the third quarter of 2024. We also continue to keep our dividend protection program in place and are committed to reduce our incentive fee if and as needed to fully support the 32 cent per share quarterly regular dividend. We do not anticipate utilizing this pledge given our strong credit performance and current earnings power. We believe the strength of New Mountain and of NMFC is driven by the consistency of our strategy and the quality of our team. New Mountain overall now numbers over 245 members, and the firm has developed specialties in attractive defensive growth, that is acyclic growth sectors, such as life science supplies, healthcare information technology, software infrastructure services, and digital engineering. When pursuing our credit investing efforts, we utilize our extensive group of industry experts to provide unique knowledge and expertise that allows us to make very informed, high conviction underwriting decisions. Over the last year, we have continued to expand the quality of our overall team. New Mountain's private equity funds have never had a bankruptcy or missed an interest payment, and the firm now manages over $50 billion of assets. Similarly, NMFC has experienced only five basis points of average annualized net realized losses in its 13 years as a public company, while paying out nearly $18 per share of cumulative, ordinary supplemental and special dividends. We believe our loans today are well positioned overall in defensive growth industries that we think are right in all times and particularly attractive in less certain economic times. Finally, we as management continue as major shareholders of NMFC. I and NMFC's other senior management employees currently own approximately 12% of NMFC's total shares personally. With that, let me turn the call to John.
spk07: Thank you, Steve. I would like to begin by offering some more details on our direct lending investment strategy and track record. Starting on page eight, we highlight our exposure to a diversified list of defensive non-cyclical sectors. These sectors map to industries where New Mountain has made successful private equity investments and where our firm's knowledge is the strongest. We seek to make investments in companies with durable growth drivers, predictable revenue streams, margin stability and great free cashflow conversion. As you can see from the industry pie chart on page eight, we have virtually no exposure to cyclical, volatile and secularly challenged industries, which could be riskier areas to invest in given today's higher rate environment. Our strategy has been consistent over our 13 years as a public company and it allows us to operate with confidence in any economic environment. Page nine provides a high level snapshot of our business where we show a long-term track record of delivering consistent enhanced yield to our shareholders by minimizing credit losses and distributing virtually all of our excess income to shareholders. Since our IPO in 2011, MFC has returned over 1.2 billion to shareholders through our dividend program, generating an annualized return of approximately 10%. This represents a very strong cashflow oriented return well in excess of the high yield index. Our current portfolio invests in companies within a high quality industries that are performing well and where our last dollar of risk is approximately 40% of the purchase price paid for the business. We lend primarily to businesses owned by financial sponsors who are sophisticated and supportive owners with significant capital that is junior to the loans that we make. Turning to page 10, the internal risk rating of our portfolio improved quarter over quarter with .5% of our portfolio rated green compared to .5% last quarter. This represents the highest level of green rated assets since we began using the heat map rating system during COVID. Our most challenged names within the orange and red categories represent less than .5% of MFC's fair value, making them a negligible part of our portfolio. We have de-risked our book value by marking our red names to just 8% of face value and our orange names to 67% of face value. Overall, when we consider the very high proportion of green names compared to our non-green names, our portfolio is as healthy as it has been in recent history. The updated heat map is shown in its entirety on page 11. Given our portfolio's orientation towards defensive sectors like software, business services and healthcare, we believe our assets are well positioned to continue to perform no matter how the economic landscape develops. We did not have any negative risk rating migrations during the quarter. We also received full repayment of our $37.5 million second lien position in Franklin Energy, a yellow rated name marked at 91 cents as of 1231. As Franklin Energy and other material pay downs in recent quarters demonstrate, we continue to believe that many of our non-green names have the ability to migrate back to green and achieve exits at par. Turning to page 12, we provide a graphical analysis of NAV changes during the quarter resulting in a book value of 1277. Overall, the quarter benefited from very good core credit performance in a supportive market environment. However, we did reduce the carrying value of our equity stake in Inventum. As a reminder, Inventum is a leading provider of K through 12 online learning programs. We have been a minority owner since the restructuring in 2015 and have since recovered our cost basis while maintaining a residual equity position in the company. During COVID, Inventum and certain other players in the education technology market benefited from an accelerated shift to virtual learning. As the market normalizes post-COVID, we have seen a slowdown in performance and therefore reversed some of the unrealized gain we had previously recognized. We believe the market is stabilized, Inventum remains well positioned, and the value proposition of the company's products remains strong. Page 13 addresses MST's non-accrual performance. On the left side of the page, we show the current state of the portfolio where we have approximately 3.1 billion of investments at fair value with 49 million or .6% of the portfolio currently on non-accrual. As we mentioned on our Q4 earnings call, Charismatic Brands, a red name with a current fair market value of just 0.4 million filed for bankruptcy and was placed on non-accrual. The other names on non-accrual are from much older vintages, have been written down materially, and have a good chance of exiting the portfolio in the medium term. On the right side of the page, we show our cumulative credit performance since IPO where MST has made 9.5 billion of investments while realizing losses of only 37 million. This represents an annualized net realized loss rate of approximately five basis points since IPO. This is consistent with our value proposition of preserving principal value and distributing nearly all of our net investment income through predictable quarterly dividends. On page 14, we present MST's overall economic performance since IPO showing that we have delivered consistent and compelling returns. Cumulatively, MST has earned nearly 1.3 billion in net investment income while generating only 37 million of cumulative net realized losses and only 58 million of net unrealized depreciation, resulting in 1.2 billion of value created for shareholders. Moving to general market commentary, we continue to believe the outlook for the remainder of 2024 in the sponsor-backed direct lending market is positive. Deal flow is picking up in real time but still remains depressed versus historical levels. There are pockets of activity in our defensive growth verticals where we have the opportunity to make loans at attractive yields while staying very selective. Deal structures remain compelling with leverage levels below peak levels and significant sponsor equity contributions representing the vast majority of the capital structures. We remain bullish on the medium and long-term outlook for M&A activity given the magnitude of dry powder for private equity and the increasing pressure to return capital to LPs as well as more attracting financing markets for borrowers. Syndicated markets are open and we continue to see modest spread compression related to the increased competition. However, we expect the supply demand imbalance to normalize as soon as we see more regular deal flow environment return. While the syndicated markets are open, the direct lending market remains the financing market of choice for sponsors as the majority of our sponsors still recognize the benefits of direct lending solutions including more certain execution, more flexibility around creating bespoke capital structures and the ability to hand select lenders. In addition to new activity, we have seen an increased volume of opportunistic refinancing and add on opportunities within our large portfolio of over 100 unique borrowers. This provides an ongoing opportunity set to make incremental loans to existing, well-performing companies seeking to pursue a creative M&A. Page 16 presents an interest rate analysis that provides insight into the effect of base rates on NMSC's earnings. As a reminder, the NMSC loan portfolio is 88% floating rate and 12% fixed rate while our liabilities are 54% fixed rate and 46% floating rate as of quarter end. During Q1, we fully swapped our investment grade bond issuance from fixed to floating rate. As we access the investment grade market in the future, we would expect to hedge interest rate risk in this manner again. Moving on to page 17, in Q1 we saw continued portfolio velocity. We originated 192 million of assets partially offset by 145 million of repayments. Our originations consisted of investments in our core defensive growth power allies including niches of enterprise software and business services. I'd highlight that three of our repayments during the first quarter were second lien positions and turning to page 18, subsequent to quarter end, we received four additional second lien repayments. We believe this uptick in second lien repayments is a function of credit selection. We generally reserve our second lien capacity for our highest conviction opportunities. These companies have largely performed well and have been able to take advantage of the current market environment to their sell or refinance their capital structures. These refinancing is combined with our incumbency position often provide a mechanism for us to rotate from second lien to first lien as you can see in the case of OEC connection and TriTech. Turning to page 19, we show our asset mix where approximately 69% of our investments inclusive of first lien SLPs and net lease are senior in nature. As I mentioned, this continues to skew more senior over time. Second lien positions decreased from 18% in Q1 of last year to 14% this quarter and only 10% pro forma for the post quarter end second lien repayments. Approximately 8% of the portfolio is comprised of our equity positions, the largest of which are shown on the right side of the page. As mentioned in prior quarters, we hope to monetize certain of these equity positions in the medium term and rotate those dollars into cash yielding assets. Page 20 shows the average yield of NFC's portfolio has increased from .9% in Q4 to .1% for Q1, primarily due to the higher for longer shift in the base rate curve. Generally speaking, even though spreads are tighter as evidenced by lower yields on our originations compared to our repayments, yields remain attractive and support our net investment income target. Page 21 highlights the scale and credit trends of our underlying borrowers. As you can see, the weighted average EBITDA of our borrowers has increased over the last several quarters to $179 million. This is primarily attributable to our originations of some larger companies, as well as growth at individual portfolio companies that we lend to. While we first and foremost concentrate on how an opportunity maps against our defensive growth criteria and internal new mountain knowledge, we believe that larger borrowers tend to be marginally safer all out SQL. We also show the relevant leverage and interest coverage stats across the portfolio. Portfolio company leverage has decreased slightly over the last several quarters. Loan to values continue to be quite compelling and the current portfolio has an average loan to value of 43%. Interest coverage ratios have stabilized as expected and the weighted average interest coverage on a portfolio actually increased slightly to 1.7 times this quarter. We've seen sponsors continue to proactively support company liquidity and continued M&A activity. This is a great indication that our portfolio consists of companies that are performing well and are able to attract additional investments at healthy valuation. Finally, as illustrated on page 22, we have a diversified portfolio across 115 portfolio companies. The top 15 investments inclusive of our SLP funds and net lease account for approximately 42% of total fair value and represent our highest conviction names. I will now turn the call over to our Chief Financial Officer, Chris Corbett, to discuss our financial results.
spk03: Thank you, John. For more details, please refer to our quarterly report on form 10Q that was filed yesterday with the SEC. As shown on slide 23, the portfolio had approximately 3.1 billion in investments at fair value on March 31st and total assets of 3.3 billion with total liabilities of 1.9 billion of which total statutory debt outstanding was 1.5 billion. Net asset value of 1.4 billion or $12.77 per share was down slightly compared to the prior quarter. At quarter end, our statutory debt to equity ratio was one spot 08 to one and one spot 03 to one net of available cash on the balance sheet. This represents the lower end of our target range and is meaningfully lower than Q1 of the prior year. On slide 24, we show our quarterly income statement results. For the current quarter, we earned total investment income of 90 spot 3 million, a 2% decrease from prior year. Total net expenses of approximately 53 million decreased 1% versus prior year. As a reminder, the investment advisor has committed to a management fee of .25% for the 2024 calendar year. As mentioned earlier, the investment advisor has also pledged to reduce its incentive fee if and is needed during this period to fully support the 32 cent per share regular quarterly dividend. Based on our forward view of the earnings power of the business, we do not expect to use this pledge. It is important to note that the investment advisor cannot recoup fees previously waived. Our adjusted net investment income for the quarter was 36 cents per weighted average share which has meaningfully exceeded our Q1 regular dividend of 32 cents per share. As slide 25 demonstrates, 98% of our total investment income is recurring this quarter given the minimal fees earned in Q1. You will see historically that over 90% of our quarterly income is recurring in nature and on average, over 80% of our income is regularly paid in cash. We believe this consistency shows the stability and predictability of our investment income. Importantly, over 99% of our quarterly non-cash income is generated from our green rated names. Turning to slide 26, the red line shows the coverage of our regular dividend. This quarter adjusted NII exceeded our Q1 regular dividend by 4 cents per share. For Q1 2024, our board of directors has again declared regular dividend of 32 cents per share as well as a supplemental dividend of 2 cents per share. On slide 27, we highlight our various financing sources and diversified leverage profile. Taken into account the SBA guaranteed to ventures, we have 2.6 billion of total borrowing capacity with 787 million available on a revolving line subject to borrowing based limitations. This represents our most significant availability since the inception of our business and highlights our strong liquidity position. As a reminder, covenants under both our Wells Fargo and Deutsche Bank credit facilities are generally tied to the operating performance of the underlying businesses that we lend to rather than the marks of our investments at any given time, which we think is particularly important during more volatile times. Finally, on slide 28, we show our leverage maturity schedule. During the quarter, we issued a $300 million five-year investment grade bond with very strong execution for NMFC's first issuance of this kind. In the future, we plan to be repeat issuers in the investment grade debt markets to further ladder our maturities in the most cost efficient manner. Notably, nearly 70% of our debt matures in or after 2027. With that, I'd like to turn the call back over to John.
spk07: Thank you, Chris. As we look forward over the remainder of 2024, we remain confident in the continued strong performance of NMFC's portfolio and believe we are on track to continue to deliver great risk-adjusted returns to our shareholders. We once again would like to thank all of our stakeholders for the ongoing partnership and support and look forward to maintaining our dialogue throughout the year. I will now turn things back to the operator to begin Q&A. Operator?
spk06: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, you may withdraw it by pressing star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Bryce Rowe of B. Riley. Please go ahead.
spk04: Appreciate it. Good morning.
spk07: Hey, Bryce, how are you?
spk04: I'm good, John. Maybe just wanted to start on some of the origination versus repayment dynamic in terms of pricing. And I think you noted it in your prepared remarks as well as kind of show it on slide 20. So it looks like some of the repayment activity is coming off at a higher yield and the originations are coming on at a lower yield. Can you talk about that dynamic and kind of what your expectations are, especially considering maybe increased competition and tighter spreads that we're starting to see here?
spk07: Sure, sure. Well, I think that's undoubtedly true when you look at the numbers. We did have particularly some second lien positions repay and those definitely had attractive spreads. Now we think that the primarily unitronch loans that were originating right now also have very good spreads, but they are a little lower. I think my own view is this is a moment in time and we alluded to this in our prepared remarks where there's not quite enough deal activity to satisfy the demand in the lending community. But no, I think it's our belief that that could normalize over the rest of the year and we expect to see spreads at least stabilize and potentially get a little better. I think when we look at the originations we've made, we really like the risk adjusted returns that those new loans afford us and think they're smart loans to make and feel very good about it. But it's something we have to watch as we consider just our ROE. But you can see that based on the results and the earnings power that the portfolio has, we're still in very good shape and feel good throughout the rest of the year.
spk04: Okay, that's helpful. Maybe one question on the income statement. Dividends from the SLPs look to be a little bit larger than you've seen here recently. Anything specifically going on and just trying to get a feel for how sustainable those dividend levels are?
spk07: Sure, the SLP funds have been great for us over the last 10 years. And I really think that over the course of the last two to three years, we've accumulated positions in really well performing loans that have very nice spreads. And I think we're reaping the benefits of that right now. I think the SLPs will continue to produce great income for NMFC. It's possible that there'll be a little bit of spread pressure on those funds. But as far as I can see over the next few quarters, I think the distribution yields from the SLPs will be very strong. Okay, okay.
spk04: Last one for me, and not just around the capital structure, you've got some SBA debentures that are starting to approach maturity, I guess in 25. Just curious how you're thinking about the SBIC licenses that you have, is there an opportunity to re-up and apply for a third, or have you guys kind of outrun those SBIC licenses and expect them just to level off here?
spk07: Sure, so I think the SBA program's been a really great program for us for a long period of time. SBA one has done very well, but as you mentioned, it is heading towards maturity. Right now our mindset is to try to replace that with a third license, but we don't have anything to report with regard to achieving that third license. And so that's sort of where things stand. So we're very aware of the March 25 first maturity, and of course we still have SBA two, which has longer maturity. So generally we feel really good about the SBA program, and we've been able to populate it with good conforming loans. I guess I'd also note that we have some other debt that's coming due over the next year or so that is actually at much higher rates, so there could potentially be an opportunity, depending on what the overall rate environment looks like, there could be an opportunity to refinance those at attractive rates.
spk04: Got it. All right, thanks John, appreciate it.
spk06: Thanks. Our next question comes from Finian O'Shea of Wells Fargo. Please go ahead.
spk02: Hey everyone, good morning. Could we go back to the commentary on the potential incentive fee waivers? Appreciate that of course, but gleaning out the remarks, it sounded like this is for a specific period or maybe insuring against a specific ROE headwind factor for a specific period. Can you outline that again? For how long and against, is it for spreads or whatnot, what you anticipate the headwind might be and for how long?
spk07: Sure, sure, so thanks for that question. We've had this program for a while. The whole intent of the program is to provide our investors with great confidence that if for any reason our earnings dip below the 32 cent based dividend, that we will support it through waiving incentive fee and applying those dollars back to the company such that we meet, we make sure that the NII is covering our dividend. I think that's really powerful and I think it gives a lot of our stakeholders a lot of comfort that even if NII does ever dip below 32 that they can feel good about their 32 cent dividend. That's a really powerful thing. It's been in place for a while. We haven't talked about it maybe quite as much because the NII has been so high, it's still meaningfully above, our NII is still meaningfully above the 32, but we just wanna have investors just continue to keep that in mind. It's set to expire at the end of this year, although my expectation would be that we'll talk to our board in very short order to extend that. It's a program that we feel very strongly about and again, I think a lot of our shareholders really like it.
spk02: Absolutely and that would include, what's going through my head sort of is if base rates relapse, New Mountain and many other BDCs of course would probably be facing dividend cuts, right? So would it, in that sort of new environment that may eventually come, would it still apply then?
spk07: Yeah, well the way we've done it in the past is we've always set the dividend protection program to be absolute over a certain period of time and so my mindset would be to talk to our board about extending it for one to two years and then if it's in place, we would live up to that dividend protection program pledge, so that's our mindset. I think we show, we do in our deck, we do show sensitivities around what happens at different base rates and of course, there are different things that if, in a lower base rate environment, there are some positive changes that can occur as well. For example, on the previous question I mentioned, the fact that we have some pretty high cost debt maturing in 25, so if base rates, for example, were to plummet into 25, we would lose yield on our assets but I think we'd also have a tremendous opportunity to refinance a meaningful amount of debt that's coming due at lower rates. So there are certain hedges that are in place and the analysis that we provide on page 16 is a dynamic analysis and changes based on the facts and circumstances of our assets and liabilities.
spk02: It's helpful, thank you and a follow up on the equity rotation potential, I think it's slide 19 and you all do a great job presenting all of these sort of dimensions of the new mountain story. Obviously a handful of big names here, they've all been here for a little while and of course, it's been a funky market we've all been through in the last handful of years but just seeing like a check on as a group where these businesses are in their rebound or whatnot, and saleability and then more specifically on just the second part on inmentum, it sounded like a sort of rethinking, we're not in COVID anymore. Is it just that or did something more fundamental operationally happen that caused that rethink? Is that one sort of like two steps back kind of situation? Thanks.
spk07: Sure, thanks for that question and let me know if I don't handle all of it but when we think about our equity positions, I think it is fair to say that they have been around for a little bit, the one thing and I don't use this as an excuse but it has been over the last three years, a challenging market for every asset owner to sell companies. So it has not been a great environment, I think you acknowledged that in your question and we are eager to monetize, there's no doubt about that. With regard to the performance of the top investments, I would say Unitech is very healthy, has delivered a lot and has pretty nice tailwinds and has showed consistent growth over the last three to four years and I think that company is performing very well and just as a reminder that the end markets are telecom fiber construction which is a really great market right now and Menton will talk more about. Benevist I'd say is a slow and steady recovery in the dental practice management industry and we have a lot of resources focused on getting that business to the earnings power that we really think it can get to and then Permian I think has some really nice tailwinds as we shift the business mix in that business. So in general we think the businesses are actually doing pretty darn well and in a better M&A environment we'll have a lot better opportunities to monetize but no matter how well your company is doing if the M&A environment is bad, it's tough to get a good price. On in Menton, and I think you could double check this, there are a lot of public data points but there was a big COVID bump, positive bump for a lot of education technology businesses and that is very, very clear. And in Menton just has had this, the market has affected Menton the same as a lot of other companies have been affected by that bump. So I really think it's just waiting as I mentioned for the markets to normalize but there's nothing in the products, the execution of the business that is causing us concern. We just are gonna have to fight harder to win business in a market that is not quite as, not quite as good as it was during COVID when every school system was rushing towards these ed tech solutions for remote learning, et cetera. So I think it's just, it'll just take a little time for the markets to normalize and for us to attack the market even harder. And so I think we'll know a lot more about Menton over the next 12 months and we have, we're actually very optimistic about how the performance will evolve over the next 12 to 18 months. Great, thank you, John. Dag, dag, everything? Yes. Thank
spk06: you. The next question comes from Eric Swick of Boning and Scattergood. Please go ahead.
spk05: Good morning everyone. Now with the HVDI group. I wanted to start maybe first in just your thoughts on the opportunity for portfolio growth. You notice the deal flow is picking up in real time and I guess the harder part of the equation is maybe to have more than a couple months out a strong view on repayment activity, but just thinking with spread compression, maybe putting a little bit of pressure on investment income dollars if you were to grow the portfolio to potentially offset that. Do you see that kind of pathway or how do you think about the opportunity to grow the portfolio over the next quarter or two?
spk07: Sure, thanks for that question. And I'm glad you asked it because net of cash, this quarter we were 1.03 times statutory debt. And so that is the lowest level we've been at in a little while. And so I guess I would say that we're very committed to our range which is statutory leverage between one and 1.25. But I think there is definitely an opportunity to move the leverage up a little bit to improve the ROE, use that as a lever to offset some of the spread compression which you can see and we acknowledge. But we don't wanna, we wanna be very disciplined about the way we do that. And we definitely don't wanna be, as we've said in the past, we don't wanna be at the absolute top end of our range every quarter, but could we be at the mid high end of the range in a comfortable manner? I think that is possible.
spk05: Thanks, that makes sense. And second one for me, it was interesting to note on slide 21 to see the interest coverage ratio for the portfolio go up and curious, what may be the major drivers of that, certainly on the graph above the average portfolio, we did EBITDA grows, so that helps and base rates have been stable now for a couple of quarters. So curious if there was anything else driving that increase and whether you think we've maybe seen the bottom of that ratio for this cycle.
spk07: Yeah, I'm glad you asked that question too. I really view it as good performance. It's reflective of good performance of our underlying portfolio companies. I think it's also reflective of the new deals that were originating having better coverage than maybe some of the old deals that we had. And that's a function of just less aggressive gearing in a higher interest rate environment that we're in right now. So I really see those as the two factors, good performance and a positive mix from a interest coverage perspective.
spk05: Thanks for taking my questions today.
spk06: Great, thanks so much. As a reminder, if you have a question, please press star then one. With no further questions, this will conclude our question and answer session. I would like to turn the conference back over to Mr. Klein for any closing remarks.
spk07: Great, well, we thank you for your interest in New Mountain Finance Corporation and we very much look forward to speaking to you on the next earnings call. Goodbye.
spk06: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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