OFS Capital Corporation

Good morning, everyone, and welcome to the OFS Capital Corporation's second quarter 2023 earnings conference call. After today's prepared remarks, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, you may press star, then two. Please also note, today's call is being recorded. At this time, I would like to hand the call over to Steve Alto Brando, Vice President of Capital Markets. Please go ahead.

Good morning, everyone, and thank you for joining us. Also on the call today are Bilal Rashid, our chairman and chief executive officer, and Jeff Cerny, the company's chief financial officer and treasurer. Before we begin, please note that the statements made on this call and webcast may constitute forward-looking statements as defined under applicable securities laws. Such statements reflect various assumptions, expectations, and opinions by OFS capital management concerning anticipated results, are not guarantees of future performance, and are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from such statements. The uncertainties and other factors are in some way beyond management's control, including the risk factors described from time to time in our filings with the SEC. Although we believe these assumptions are reasonable, any of those assumptions could prove inaccurate, and as a result, the forward-looking statements based on those assumptions also could be incorrect. You should not place undue reliance on these forward-looking statements. OFS Capital undertakes no duty to update any forward-looking statements made herein, and all forward-looking statements speak only as of the date of this call. With that, I'll turn the call over to Chairman and Chief Executive Officer, Bilal Rashid.

Thank you, Steve. Good morning. We are pleased to report another increase in our quarterly net investment income, which rose to 38 cents per share, up by 1 cent per share from the previous quarter. We expect to continue to see the benefits of our balance sheet positioning in the current interest rate environment, with the vast majority of our loan portfolio being floating rate and the majority of our debt being fixed rate. As a result of this continued net investment income improvement, our board increased the distribution for the third quarter to $0.34 per share, which is a 3% increase over the prior quarter. This is our 10th quarterly distribution increase over the last 12 quarters. Our net asset value declined 3.6% to $12.94 per share, primarily due to net unrealized depreciation on our equity and structured finance investments. The overall credit quality of our portfolio remained materially stable, and we had no new non-accruals in the quarter. We continue to believe that the cost of borrowing remains manageable for our portfolio companies. Yields on the portfolio continue to increase compared to the last quarter, in line with observed increases in benchmark rates. As part of our longstanding investment discipline, we generally avoid investing in highly cyclical industries. We believe that our well diversified portfolio is defensively positioned with our largest sector exposures in manufacturing, healthcare, business services, and technology. So far this year, M&A activity continues to be subdued with the expectation that we will see some pickup in the second half of the year. In the meantime, we remain deliberate in putting capital to work. Our financing continues to provide us with operational flexibility. At the end of the second quarter, approximately 86% of our outstanding debt matures in 2026 or later, and more than half of our outstanding debt is unsecured. Our $150 million senior loan facility with BNP Paribas, which is non-recourse to the BDC, matures in June 2027. Our corporate line of credit is flexible with no mark-to-market provisions. As we have discussed before, two years ago, we locked in $180 million of fixed rate unsecured debt with a weighted average coupon of 4.8%, which is notably lower than current market pricing. The majority of our loan portfolio is senior secured, and we believe this will continue to benefit us in this uncertain economic environment. We also anticipate that we will continue to benefit from the experience of our advisor, which manages approximately $4.3 billion across the loan and structured credit markets, has expertise in multiple asset classes and industries, and has a more than 25-year track record through multiple credit cycles. At this point, I'll turn the call over to Jeff Cerny, our Chief Financial Officer, to give you more details and color for the quarter.