OFS Capital Corporation

Good morning and welcome to the OFS Capital Corporation Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, 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, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Steve Altibrando, 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. This quarter, we are pleased to report a fourth consecutive increase in our net investment income, which rose to 40 cents per share, up by 5% from the second quarter. We believe this increase was a result in part of our balance sheet positioning with the majority of our debt being fixed rate and the vast majority of our loan portfolio being floating rate. Our net asset value declined slightly by 1.5% to $12.74 per share, primarily due to unrealized depreciation on a few assets. This was partially offset by broader net unrealized appreciation across the remainder of the investment portfolio, particularly in our structured finance investments. The overall performance of our portfolio companies remained solid in this uncertain macroeconomic environment. In our view, the vast majority of our portfolio companies remained well positioned to manage the increased cost of borrowing. Yields on the portfolio continued to increase compared to the last quarter, in line with observed increases in benchmark rates. As part of our longstanding investment discipline, we have historically avoided 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. 99% of our loan portfolio at fair value is senior secured. We believe that being at the top of the capital structure will continue to benefit us in this uncertain economic environment. In terms of new originations, we continue to see subdued M&A activity compared to historical levels due to interest rate and macroeconomic uncertainty. Like many market participants, we are optimistic that we will see increased activity in the first half of next year. In the meantime, we remain deliberate in putting capital to work. Our financing continues to benefit our company At the end of the third quarter, approximately 89% of our outstanding debt matures in 2026 or later, and 59% of our outstanding debt is unsecured. Our non-recourse $150 million senior loan facility with BNP Paribas matures in June 2027. Our corporate line of credit is flexible with no mark-to-market provisions. As we have discussed before, we locked in $180 million of fixed-rate unsecured debt two years ago, and that has a weighted average coupon of 4.8%, which is notably lower than current market pricing. We also anticipate that we will continue to benefit from the experience of our advisor, which manages approximately $4.2 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 Cerney, our Chief Financial Officer, to give you more details and color for the quarter.