OFS Capital Corporation

Good day, and welcome to the OFS Capital Corporation Third Quarter 2025 Earnings Conference Call. All participants will be in a 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 now like to turn the conference over to Steve Altibrando. 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 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. Substatements 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, Bawal Rashid.

Thank you, Steve. Yesterday, we announced our third quarter earnings. Net investment income was 22 cents per share compared to 25 cents per share in the prior quarter. This decline was primarily due to higher interest costs, which were expected as part of our ongoing initiative to refinance our existing bonds and extend the maturities of our debt. The net asset value at September 30th was $10.17 per share compared to $10.91 per share in the prior quarter. The decrease was largely driven by a markdown on our equity investments, most notably our position in Fan Steel Holdings. and unrealized depreciation on our CLO equity investments attributable to underlying loan spread tightening. Overall, we believe our credit portfolio is stable. During the quarter, we had one loan placed on non-accrual status and one loan was taken off of non-accrual and moved to performing status. While we remain steadfast on preserving capital, we are strategically focused on efforts to improve our net investment income over the long term. This includes ongoing efforts to monetize our minority equity position in Fansteel, our largest position in the portfolio, with a fair value of approximately $78.5 million at quarter end. The fundamental performance of the company continue to improve and the long-term outlook remains strong in our view. The reduced valuation mark reflects the challenging market conditions to monetize this asset despite the improved performance. While we remain confident in the portfolio company's long-term potential, a near-term exit could improve our net investment income and reduce concentration risk. However, we recognize this may come at the cost of realizing the investment's full fundamental value. As a reminder, our initial $200,000 investment in fan steel in 2014 has generated approximately $4.2 million in distributions to date and approximately 20 times return on our cost. Looking forward, the broader economic outlook remains uncertain. On the monetary front, so far this year, the Fed has lowered interest rates by 50 basis points, and there is potential for further reductions in the near term. Given that the vast majority of our loan portfolio is floating rate, continued rate cuts could reduce our net investment income. Despite this backdrop, we remain comfortable with the overall health of our portfolio. We have deliberately constructed our loan portfolio to be resilient by avoiding highly cyclical industries and maintaining our strong diversification. Our loan portfolio is entirely composed of first and second lien senior secured loans, reflecting our commitment to positioning higher in the capital structure. As for new originations, middle market M&A activity this year has remained below expectations. However, we remain actively engaged with our existing portfolio companies and are prepared to deploy additional capital if needed. As we mentioned on our last call, early in the third quarter, we began the process of refinancing our $125 million unsecured notes that were due to mature in February 2026. In July, we completed a $69 million unsecured public bond offering. These new public notes mature in July 2028. In August, we continued the refinancing process by completing a private placement of a $25 million unsecured note. This new private note matures in August 2029. Following the completion of these offerings, we repaid $94 million of the February 2026 notes in August, resulting in a leverage-neutral refinancing. We believe these actions have further strengthened our capital position and enhanced our operational flexibility. In addition, the public bonds have a non-call period of only one year, while the private unsecured note is prepayable at any time, providing us additional flexibility in an evolving rate environment. We expect to repay the remaining $31 million on the February 2026 notes ahead of the majority. Additionally, During the quarter, we elected to reduce the size of our floating rate facility with BNP Paribas from $150 million to $80 million. We took this action as we embark on de-levering the balance sheet. We believe our liquidity position remains sufficient, supported by our $25 million Bank of California floating rate corporate line of credit, which was undrawn at the end of the quarter. as we continue to navigate this uncertain environment we remain confident in the experience and capabilities of our advisor with approximately 4.1 billion dollars in assets under management across the known and structured credit markets deep expertise across industries and a track record spanning more than 25 years and multiple credit cycles, we believe we are well positioned to manage through this ongoing uncertainty. With that, I'll turn the call over to Kyle Spina, our Chief Financial Officer, to give you more details and color for the quarter.