OFS Capital Corporation

Good day and welcome to the OFS Capital Corporation Second Quarter 2025 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 your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to hand the call to Steve Altebrando. Please go ahead.

Morning everyone and thank you for joining us. Also on the call today are Bilal Rashid, our chairman and chief executive officer, and Kyle Spina, 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. Sub-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 incorrect. 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. Yesterday, we announced our second quarter earnings. Our results were in line with our preliminary earnings announcement on July 15, which we issued in advance of our bond offering. As for the second quarter results, our net investment income was fairly stable at 25 cents per share compared to 26 cents per share in the prior quarter. Our net asset value at June 30 was $10.91 per share compared to $11.97 per share in the prior quarter. This drop in NAV was primarily due to a decline in the value of our equity investments. This includes a decrease of $7.8 million on our equity investment in fan steel holdings. Overall, the health of our credit portfolio remains stable with no new non-accruals. We continue to work on improving our net investment income in the long term by rotating certain non-interest earning equity positions into interest earning assets, specifically by continuing to explore potential ways to monetize our minority equity investment in fan steel. This is our largest position in the portfolio with a fair value of approximately $83 million at quarter end. Fundamentally, we continue to believe in the long-term prospects of this portfolio company. At the same time, we also realize that achieving a near term exit of this position provide us with an opportunity to improve our net investment income and mitigate concentration risk. However, we understand that achieving this short-term exit may come at the cost of realizing the full fundamental value of the investment. As we have previously discussed on these calls, our investment in fan steel over the last 11 years has generated approximately $3.9 million in distributions or approximately 18 times our cost, which was only $200,000 in 2014. In terms of our view of the economic outlook, there continues to be significant uncertainty surrounding tariffs and US monetary policy, and the potential impact this may have on our portfolio companies is unclear. That being said, we remain satisfied with the current overall quality of our portfolio with no new non-accruals this quarter, as I just mentioned. We believe that we have constructed our loan portfolio to withstand the challenges of this continuing uncertain macroeconomic environment, specifically by avoiding highly cyclical industries and maintaining strong diversification. We remain focused on investing higher in the capital structure with 100% of our loan portfolio in first-lane and second-lane senior-secure loans. As we navigate these uncertain times, we are focused on maintaining a consistent dialogue with our portfolio companies and supporting them with additional capital if appropriate. As it relates to new originations, M&A activity has remained subdued for the year. We believe that the macroeconomic uncertainty will continue to impact the prospects of increased M&A activity in the second half, and therefore, we are continuing to be cautious in deploying new capital. As I mentioned at the top of my remarks, shortly after quarter end, we began the process of refinancing our $125 million unsecured notes that are maturing in February, 2026. Given the size of those notes, we thought it was prudent to take advantage of receptive market conditions to start paying them down and extend our overall debt maturities. In July, we completed a $69 million unsecured note offering in a leverage-neutral transaction. The new notes mature in July, 2028, carry a .5% coupon, and have a one-year no-call provision. Of the $125 million outstanding on February, 2026 notes, we intend to pay off a total of $94 million in August. These efforts reinforced our capital position, which we believe provides us operational flexibility. 74% of our outstanding debt is unsecured at the end of the quarter. Our non-recourse $150 million floating rate facility with BNP Paribas matures in June, 2027. Finally, our $25 million Bank of California floating rate corporate line of credit provides us additional liquidity and flexibility. As we look to navigate this market, we will continue to rely on the longstanding experience of our advisor. Which manages approximately $4.1 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 Kyle Spina, our chief financial officer, to give you more details and color for the quarter.