OFS Capital Corporation

Good day and welcome to the OFS Capital Corporation first quarter 2024 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 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. Earlier this morning, we announced our first quarter results. Our net investment income in the first quarter was 42 cents per share, representing a 20% increase over the prior quarter. This increase is primarily due to certain non-recurring items. We continue to cover our distribution of 34 cents per share. As we discussed recently on our prior call, we believe the overall health of the portfolio remains solid. We placed one borrower on non-accrual status this quarter, representing approximately 2% of the portfolio at fair value. We believe that we continue to benefit from 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 in the first quarter declined to $11.08 per share from $12.09 at year-end, primarily due to unrealized depreciation concentrated in a couple of positions, most notably our equity investment in Fan Steel Holdings, which Jeff will describe in more detail. Noting this decline, we remain comfortable with our portfolio and believe it is well positioned for the current macroeconomic environment. As part of our long-standing investment discipline, we remain committed to avoiding highly cyclical industries. We believe that our portfolio remains well diversified and defensively positioned, with our largest sector exposures being manufacturing, healthcare, wholesale trade, and business services at fair value at quarter end. Another key part of our investment discipline is investing higher in the capital structure with approximately 100% of our loan portfolio at fair value in first and secondly in senior secured loans. We believe that this positioning will continue to benefit us in this uncertain macroeconomic environment. In terms of new originations, M&A activity remains subdued. though we anticipate that an increase in activity later in the year may occur as we get more clarity on interest rates. In the meantime, we remain active in supporting our existing portfolio companies. In our view, our financing continues to benefit our company. At the end of the first quarter, 100% of our outstanding debt matures in 2026 or later, and 70% 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 in 2021, and that has a weighted average coupon of 4.8%, which is notably lower than current market pricing. As mentioned on our last call, we completely paid down our remaining $31.9 million in SBIC debt in March, which was due to mature in early 2025. As we navigate this market environment, we have confidence in the experience of our advisor, which manages approximately $4 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.