Barings BDC, Inc.

At this time, I would like to welcome everyone to the Bering CDC, Inc. conference call for the quarter-ended March 31, 2020. All participants are in listen-only mode. A question-and-answer session will follow the company's formal remarks. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Today's call is being recorded, and a replay will be available approximately two hours after the conclusion of the call on the company's website, at www.barringsbdc.com under the Inspector Relations section. Please note this call may contain certain forward-looking statements that include statements regarding the company's goals, beliefs, strategies, future operating results, and cash flows. Although the company believes these statements are reasonable, actual results could differ materially from those projected in forward-looking statements. These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks, including those disclosed under the sections titled Risk Factors, and forward-looking statements in the company's annual report on Form 10-K for the fiscal year ended December 31st, 2019, and quarterly report on Form 10-Q for the quarter ended March 31st, 2020, each as filed with the Securities Exchange Commission. Barings BDC undertakes no obligation to update or revise any forward-looking statements unless required by law. At this time, I will turn the call over to Eric Lloyd, Chief Executive Officer for Barings BDC.

Thank you, Operator, and good morning, everyone. I first want to start by just saying I hope everybody is doing physically and mentally well in whatever situation you're currently in and that you and your loved ones are making the best of these unique times. We appreciate everyone joining us for today's call. Please note throughout this call, we'll be referring to our first quarter 2020 earnings presentation that's been posted on our investor relations section of our website. Today on the call, I'm joined by Barings BDC's president and co-head of private finance, Ian Fowler. Tom McDonnell, managing director in the portfolio management for our liquid credit and global high yield and BDC's chief financial officer, Jonathan Bach. Ian and John will review our first quarter results and provide a portfolio and market update in a few minutes. I'll begin today with some high level comments about the first quarter and the market volatility that we saw. Please turn to slide five of the presentation. In the first quarter, the liquid credit markets and BDC stock prices experienced their worst quarter since the 2008 financial crisis, falling roughly 14% and 46%, respectively. The global fear and uncertainty created by the COVID-19 really drove selling across the board. In the past, we've discussed the high correlation between liquid credit spreads and BDC stock prices and this correlation proved true again in the first quarter, regardless of the underlying collateral held by BDCs. Just as the equity markets revalued risk in the BDC space in the first quarter, We believe that increased risk and corresponding price moves should be reflected in our net asset value. On slide six, you see our first quarter highlights. As we would expect, the market volatility caused by COVID-19 had a direct impact on our net asset value, as NAV per share declined 20.8% in the quarter to $9.23. John will go through a NAV bridge later, but suffice to say that unrealized depreciation in our portfolio was the driver of this decrease. Each quarter, we value our investments by taking into account market and portfolio company information in our internal valuation process that is consistent across the entire Bearings platform and consistent quarter to quarter. Our total investment portfolio is carried at 87.4% of cost at March 31st versus 98.3% of cost at December 31st. Overall, we've been pleased with how the sponsors and management teams of our middle market portfolio companies have handled these challenging market conditions. All but four of our middle market debt investments are valued above 90% of cost as of March 31st, with the remaining four valued above 85% of cost. We continue to have no non-accrual investments, and all portfolio companies made their scheduled interest and principal payments in the first quarter. Additionally, we've seen improved conditions in the liquid markets since quarter end, resulting in appreciation in our broadly syndicated loan portfolio. Ultimately, however, how quickly the country gets back to work will be a critical driver of portfolio performance in the second quarter. While portfolio performance was certainly the story of the first quarter, I do want to point out a couple of other key items. First, our net investment income per share of 15 cents was consistent with the fourth quarter of last year, and 1% below our first quarter dividend of 16 cents per share. While we did see the expected increase in our investment income for the quarter as a result of our middle market deployments last December, the impact of further LIBOR declines and an overall slowdown in middle market lending in March resulted in a relatively flat investment income and net investment income for the quarter. Second, in terms of our portfolio rotation, we had gross middle market originations of $93 million during the first quarter, which were funded in part by $46 million of net Raleigh syndicated loan sales. Importantly, when we saw the slowdown in direct lending market in March, the breadth of the bearings platform allowed us to be opportunistic with strategic purchases of 22 million of broadly syndicated loans and 12 million structured product investments at attractive prices that should generate increased returns in future quarters. It is during these times of market volatility that Barings' wide investment funnel across global markets and multiple asset classes can allow the Barings BDC to remain active in these markets and search for the most attractive risk adjusted returns. On slide seven, we summarize some additional financial highlights for the first quarter in each quarter of 2019. Despite the NAV decline during the quarter, our net debt equity ratio was 1.2 times still well below the regulatory threshold of 2.0 times and providing a cushion to withstand additional pressure on asset values, meet our contractual commitments for unfunded capital and support existing and new investments with incremental capital. Ultimately, the decisions we have made since becoming the investment advisor to the BDC in August of 2018, including our fee structure, our focus on high quality, true first lien senior secured investments, as well as bearings unique ownership by MassMutual have positioned us to manage through these challenging markets and opportunistically take advantage of market dislocations that should drive long term shareholder value. Turning to slide eight, I'll provide a quick update on our share repurchase program. You'll recall that we announced a new share repurchase program for 2020 on our last earnings call, whereby the board has authorized the company to purchase up to 5% of its outstanding shares during the year, a share straight below NAV per share, subject to liquidity and regulatory constraints. This program kicked off in early March. And through yesterday, we have repurchased roughly 2% of our total shares outstanding, or approximately $7 million. The volatility in our stock price created a strong buying opportunity. as our average purchase price per share was $7.21 over the entire period. And the first quarter NAV accretion of 3 cents per share generated by these repurchases should provide a long term benefit to shareholders as loan prices reflate. As a reminder, Barings LLC continues to be Barings BDC's largest shareholder, owning 28.4% of the shares outstanding. Another example of our commitment to long term shareholder alignment. Let me finish by thanking the bearings team for their incredible tremendous efforts during this difficult time of uncertainty. We are focused on the health and well being of our employees and of our communities, creating a work from home environment and flexibility to allow employees to do their job effectively, while taking care of their families and loved ones and themselves. I continue to be impressed by the focus of our investors, portfolio companies and other stakeholders and their titles efforts, I believe will prove to be a driver of long term success. I'm now going to call over to Ian to provide an update on our investment portfolio and what we're seeing in the middle market today.

Thanks, Eric. And good morning, everyone. I want to echo Eric's comments. I hope all of you and your families are well and safe. On slide 10, we show a summary of our investment activity for the first quarter. Frankly, from a middle market investment standpoint, the first quarter consisted primarily of January and February. as new investment activity largely came to a standstill in March. New middle market investments totaled $93 million, with sales and repayments of $41 million during the quarter. New investments included 10 new platforms, including four European platforms, and 10 follow-on investments. Regarding the follow-on investments, $9 million was for the funding of previously committed delayed draw term loans, and $6 million was for new commitments to existing portfolio companies. And in all instances, the investments were made to fund acquisitions. Other than funding $1.6 million of delayed broad term loans in April to fund add-on acquisitions, Barings BDC has not made any additional investments in portfolio companies to support liquidity needs driven by the current economic environment. It is important to note that Barings B2C does not have any revolver commitments, so there has not been a drain on our liquidity as a result of portfolio company revolver draws. John will discuss our liquidity in more detail, but we remain focused on our ability to meet all of our contractual delayed draw term loan commitments to portfolio companies. Given that our DDTLs are generally earmarked for acquisitions and require compliance with incurrence covenants, we would not expect material usage of these DDTLs in the current economic environment. As Eric mentioned, while middle market activity was slow in March, we did opportunistically take advantage of market conditions. Of the $28 million of broadly syndicated loan purchases in the quarter, $22 million was made in March, and we also made $12 million of structured product purchases, which includes CLOs and private asset-backed securities. Given the prices of these assets, we believe the long-term returns generated by these high-quality liquid investments will generate some of the best risk-adjusted returns available in the current market. On prior calls, I've emphasized the value of choice and Barings large investment funnel across high quality obligors and desperate asset classes has proven to be advantageous in this volatile market. On slide 11, you can see that at March 31, we were invested in roughly 645 million of private middle market loans and equity, which included 74 million of unfunded commitments, and 385 million of liquid, broadly syndicated loans. I'll walk through how the portfolio changed during the first quarter in a minute. But first, I'd like to make some high-level observations about our portfolio. The portfolio statistics on slide 10 regarding leverage, interest coverage, and EBITDA are all generally consistent with the statistics we reported last quarter. Given the timing of financial reporting, These metrics are primarily supported by portfolio company financial information as of December 31st, 2019. Even after they are updated to reflect first quarter portfolio company results, the COVID-19 impact in our economy will not be fully reflected. That is why it is important to focus on items like seniority and diversification in this market. Our total portfolio was 96.9% senior secured. First lien assets spread across 29 different industries. The $571 million funded middle market portfolio was spread across 62 portfolio companies and 18 industries in sponsored back transactions. While the $385 million BSL portfolio was spread across 94 portfolio companies, and 20 industries. Our top 10 investments are shown on site 12 and reflect another aspect of the overall diversity of our portfolio. As the top 10 positions represent only 21% of the overall portfolio and no investment exceeds 2.4% of the total portfolio. Thus, no single investment should have a significant impact on the company overall. There are many unknowns heading into the second quarter and beyond, which is why a high-quality, diverse portfolio is more important than ever. Slide 13 shows a bridge of our total investment portfolio from the end of 2019 to March 31st. We've touched on the key origination and repayment components, but this slide also shows the impact of unrealized depreciation on the portfolio as a whole. which totaled 121 million for the quarter. This unrealized depreciation is further broken out on slide 14. You can see that approximately 83 million or 68% of the unrealized depreciation was attributable to our liquid investments, while 35 million or 29% was attributable to our middle market portfolio. Within the middle market portfolio, 26 million was driven by higher spreads in the broader market for middle market debt investments based on our observations of a combination of high yield and middle market indices. We've classified $8 million of the middle market portfolio unrealized depreciation as being attributable to underlying credit or fundamental performance. At this point, the vast majority of this is not driven by reported portfolio company results, but rather our ongoing proactive analysis of the impact of the current situation on our portfolio companies, including the effects on revenues and liquidity through our discussions with management teams and sponsors. Certain investments have been impacted more than others, and our evaluations have been adjusted to reflect this. As Eric indicated, all of our portfolio companies made their scheduled interest and principal payments in the first quarter, and we continue to remain in close contact with each company as the COVID-19 situation develops. Switching gears to the broader market, please turn to slide 16 of the presentation. While average unit tranche spreads saw a slight uptick in the first quarter, they remain near historic lows, while spreads for the other non-bank structures generally decreased during the first quarter. It is important to keep in mind, however, that the majority of this data was driven by market conditions in January and February. So, the spread increases as a result of COVID-19 are muted thus far. As you can see from the Credit Suisse Single B Leverage Loan Index, we would expect spread increases across the board in the second quarter based on current market conditions. Slide 17 gives a graphical depiction of relative value across the BBB, BBB, and single B asset classes. Recall bearing size and scale is a $327 billion asset manager provides RBDC with a unique investment frame of reference in both liquid and illiquid credit. The data here outlines spreads at three-year highs across the spectrum, but it also shows the relative value opportunities that can exist for investors at different levels of credit risk. For an example, an investor looking to take single B risk can earn an investment spread of 981 basis points invested in liquid corporate loans relative to approximately 750 basis points in direct lending Unitronch. In contrast to the extent an investor wanted a similar yield provided by that Unitronch transaction, but improved their risk position, they could consider structured market investments in BBB CLOs at widespread. In short, the value of choice across markets provides a meaningful benefit to the BBC investors. In our core direct lending markets, we will continue to be highly selective, focusing on select sponsors and markets across the U.S. and Europe. We will also continue to be opportunistic across the credit spectrum, but always maintaining diversity without an overemphasis on one product, obligor, or geography. With that, I'll turn the call over to John to provide more color on our financial results.

Thank you, Ian. On slide 19, you can see the bridge of the company's net asset value per share from December 31, 2019. to March 31, 2020. Now, as Eric mentioned, our NAV was down by $2.43 this quarter to $9.23 per share, declined approximately 20.8%. Now, this decrease was due to net unrealized depreciation of $2.44, which was offset by one cent for the net impact of all the other drivers combined, including three-cent accretion from share repurchase, including the three cents of share accretion from our share repurchase program. You saw that a breakdown of this unrealized depreciation on NAV per share basis was also shown when Ian discussed slide 14. Now, at a high level, over 90% of the NAV decline was driven by broad market moves caused by spread increases for middle market loans and price declines for liquid investments. Also reflected on that chart was the fact that foreign currency fluctuations did not have a material impact on our financial results in the quarter, which you'd expect given our hedging strategy. Slides 20 and 21 show our income statements and balance sheets for the last five quarters. From an income statement perspective, we've already touched on some of the key highlights, but I'd like to point out a few high-level trends. On the top line, our consistent portfolio rotation has resulted in an increase in in our total portfolio average spread of 84 basis points since March 31, 2019, with the average spread increasing from 373 basis points to 457 basis points. The average yield at par in our total portfolio, however, has decreased from 6.2% to 5.7% over the same time horizon as a result of lower LIBOR, resulting in a relatively flat total level of investment income. Now, this market dynamic could have made it tempting to pursue higher yields in order to grow the bottom line, but it's during the turbulent markets we are experiencing today that we're happy we remain focused on a primarily first-lane strategy. You can see on slide 21 our balance sheet trends. Excluding our short-term investments, total investments at fair value were down approximately $106 million compared to the fourth quarter due to the unrealized appreciation that we've discussed. Excluding this impact, the portfolio would have increased $15 million based on the portfolio rotation. And similar to last quarter, our cash balance and short-term investments balance at March 31st were largely transitory due to the timing of repayment of our BSL credit facility and debt securitizations with the proceeds from our BSL sales. During the fourth quarter, We lowered the commitment on the BSL facility from $150 to $80 million and further lowered it to $30 million subsequent to quarter end to right-size the facility relative to our remaining BSL portfolio following a $20 million repayment. Also, during the first quarter, $27 million of the CLO Class A1 notes were repaid, bringing the total CLO debt principal balance down to $291 million at March 31st. An additional $65 million of the CLO Class A1 notes were repaid in April, bringing the total current CLO debt principal balance down to $226 million. Details on each of our borrowings are shown on slide 22. Our debt-to-equity ratio at March 31, 2020, was 1.42 times or, most importantly, 1.2 times after adjusting for cash and short-term investments in unsettled transactions. Pro forma for the BSL credit facility and the CLO debt repayments in April totaling $84 million. Our debt to equity was 1.23 or roughly in line with our net debt as of March 31st. I'd also like to note that our only debt maturity in the next two years is the BSL credit facility that matures in August of 2021, which is now down to a size of roughly $30 million. Now jump to slide 23. From a liquidity perspective, our primary sources of liquidity continue to be the proceeds from planned rotation out of our liquid BSL as appropriate, and depending on those market conditions, as well as the borrowing capacity under our $800 million senior secured corporate credit facility. Today's available borrowing capacity under this facility, which is all subject to leverage, borrowing base, and other financial covenants, would allow us to borrow amounts up to the approved regulatory limit of two times. We certainly do not plan to increase leverage to that level, but I want to use that to illustrate that we have the available liquidity to support existing portfolio codes and remain active market participants today. The chart on slide 23 shows the impact on our net leverage of funding our unused capital commitments. While Barron did not have any revolver exposures on our balance sheet, we have $73.5 million of delayed draft term loan commitments to our portfolio company, as Ian mentioned, as well as our remaining $40 million commitments to our joint venture investment. These DDTL commitments are generally in place to support portfolio company acquisitions and also generally have incurrence tests limiting their total leverage. Thus, we'd expect usage in those DDTLs to be limited and to those companies generating very strong results and further limited by the depressed level of acquisition activity that you're looking at in today's market. Now, while we'd expect limited usage, this table shows that we do have the available capacity to meet the entirety of these commitments if called upon, while maintaining cushion against our regulatory leverage limit. In addition, our $385 million liquid broadly syndicated loan portfolio also provides additional liquidity if it was needed. While we could sell those investments to reduce leverage while not impacting current NAV, we can also sell those investments in order to redeploy the capital in other investments with improved risk-adjusted returns. Any sale, of course, would likely convert an unrealized loss to a realized loss, but long-term NAV could be improved with the incremental returns on those new investments. One final point regarding our liquidity and capitalization strategy. relates to our ability to issue shares of common stock pursuant to board approval at a price below NAV, which was approved at our annual meeting of stockholders yesterday. We appreciate the support that we received from our shareholders on this proposal, particularly during a period of such extreme market volatility and uncertainty. It was evidence to us stockholders have placed their trust in Barings and the board, and we take that responsibility to act in our shareholders' best interest very seriously. Slide 24 updates our paid and announced dividends since Barron took over as the investment advisor to the BDC. We announced yesterday that our second quarter 2020 dividend of 16 cents a share will be paid on June 17, 2020, and this dividend level is consistent with the first quarter and represents two important points. First, The reality of the current market environment is that middle market originations will be lower than historical levels. The breadth of the Barings platform will allow us to take advantage of opportunities as the market continues to evolve, but we would not expect overall portfolio yields to increase materially in the second quarter. Second, maintaining a consistent dividend level represents our current expectation that our portfolio will continue to perform in the second quarter given how well it was positioned entering into the crisis, and how it's managing through the crisis to date. Now, slide 26 summarizes our new investment activity during the second quarter and investment pipeline. Since April 1st, we closed and funded one new middle market investment of $10 million of equity and first lien debt with an origination margin, or BM3, of roughly 9.6%. We've also funded $1.6 million for previously committed DDTLs, primarily to one well-performing European portfolio company in order to fund some tuck-in acquisitions. The current Barron's global private finance investment pipeline is approximately $110 million on that probability-weighted basis and is predominantly firstly in senior security investments. Now, as a reminder, this pipeline is estimated based on expected closing rates for all deals that rest in the pipeline. And lastly, I'd like to provide an update on our joint venture with the state of South Carolina Retirement System. This vehicle allows us to leverage the broader Barron's platform and increases the investment diversity within the BDC. And at March 31st, the cost basis of BBDC's investment remained at $10 million. As we continue to ramp the JV using its subscription leverage facility, more than $4 million of investment declined, while the fair value of the investment declined to $6.4 million. Now, this quarter's decrease in value is largely driven by the same technical price-driven valuation marks that impact Barron's BDC, as the JV portfolio consists of roughly 70% broadly syndicated loans, 21% middle market debt investments, and 9% public and private ABS securities. We continue to evaluate the opportunities in areas such as European credit, structured credit, and continue to make investments in these areas that all have attractive risk-adjusted return profiles in this environment. And with that, operator, we would love to open the line for questions.

Thank you. Ladies and gentlemen, we will now be conducting the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tongue will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from Robert Dodd with Raymond James. Please proceed with your question.

Hi, guys. On the – and I appreciate all the color you gave in the presentation and remarks, et cetera. On the NAV mark related to credit, like the 17 cents, pretty small, compared to the overall mark because of the market, you mentioned, obviously, that's based primarily on 1231 financials, but then discussions with – with portfolio companies to get more up-to-date information and expectations. Can you give us any color on kind of how, you know, obviously there's marks in principle, you know, the values at 331. Can you give us any color about what you've heard either since then and that maybe differs from either better or worse, frankly, versus expectations that you built into those marks at the time. Obviously, they were forward-looking then, but, you know, hey, we're a month later as well. So any color on that front would be really helpful.

Sure. I can take this one, and Eric and John, if you want to jump in, you know, Go ahead. So just to provide a little bit of color here, I think, you know, we have the benefit of being a global platform with businesses in Asia. And so through our parent, Mass Mutual and Barings, this whole event that was occurring, the healthcare crisis, we were seeing it happen real time in our communities. markets that we're in globally, and even our direct lending business. We have people on the ground in Hong Kong. So we anticipated that there was going to be potentially an impact to our market. Obviously, we would not have been able to anticipate the shelter in place and all those other factors, but we did assume that there could be demand supply shocks to our portfolio companies and potential operational disruptions. And so, like we said in our opening remarks, we did not use the 1231 financials, nor expected first quarter performance because that didn't really reflect the true impact of COVID, which really would have been felt in March, particularly the last half of March. And as you pointed out, Robert, we had many discussions with management teams beginning in January, progressing through early March, as we tried to identify which companies had high, medium, and low exposure to COVID, and then also had to assume that there was going to be a subsequent economic recession that would follow. And every investment that we make, even before all this, we obviously spent a lot of time on a downside scenario, assuming a cycle. So what we tried to do in our discussions was really bridge that that downside cycle with the input that we were getting from the management teams through their analysis and their assumptions of this event. And as you point out, it's imprecise. It's not perfect. I think directionally it's more realistic. It's certainly not appropriate to be using Q1. You really want to Q2 projection, because Q2 will really truly reflect the full impact of COVID. And beyond Q2, it's really hard to get a line of sight in terms of what the environment's going to look like. So we're having calls every few weeks. We're adjusting our marks based on those calls. And, you know, I would say that in the number of cases, management teams, when, you know, in mid to late March when this thing totally happened and people were, you know, really concerned about the event and it was really unknown how this was going to play out. I think some of the analysis that came back was very draconian and actually based on conversations, some of those businesses are doing much better than they expected. And others are on plan and maybe some others are a little worse. So it's kind of all over the board. The one benefit we had going into this is that when you look at the industries that were the most vulnerable industries with this healthcare crisis, you know, they are industries that we avoid or underweight on an ongoing basis. So through luck and discipline, we were able to avoid a lot of that. I'll let Eric or John chime in.

Well said. Robert, does that answer your question? That does. Thank you. And that leads me to kind of the next one. To that point, Ian, on, you know, there are some obvious industries conceptually where, you know, if you're, you know, gyms, you know, hotels, hospitality, things like that, where there's obviously going to be a big issue. Are there any other industries that you've seen so far where maybe it's surprising on how either negative the impact has been or how well where they've weathered it so far? I mean, it's very early, but meaningfully better than expectations.

Yeah, great question. And Again, this is all based on our conversations with our management teams. Obviously, it's not anything that we've actually seen in numbers. We do get monthly numbers for most of our accounts. I would say, you know, for logistics, we have three logistics companies in our portfolio. They all seem to be doing very well. So we haven't seen any impact. You know, one of them is involved in the shipment of food, and the other one is chemicals and life sciences. So, you know, we think essential items. I guess that's probably what has been really surprising is depending on these companies and where they fall out from essential service or not. And those companies that are more discretionary, less essential, are the ones that it's just really gotten bad. And so, fortunately, we don't like retail and restaurants in the middle market because of the risk when you're financing small businesses like that where there's a lot of discretion. And you're seeing in this environment – even larger retail and restaurants where you would think critical mask and diversification would be protection. Quite frankly, those businesses have just been crushed. I've never truly been a big believer in recession-resistant businesses because I think every business is somewhat impacted to the economy overall. I think a lot of people look at healthcare as being somewhat recession resistant. So a surprise to me would be companies that are in the healthcare space that provide valuable services like dental management practices that are being impacted in this environment. So it's all over the board. We have one business that is... in the business of dealing with, you know, crime scenes and, you know, just kind of cleaning up situations where, unfortunately, people have died or been killed, that business is obviously, you know, doing quite well in this environment. So it's really all over the board and it's fluid. And just based on the shelter in place, it's really hard to predict the impact.

The only thing I've got to say real quick is, you know, it's kind of like what we learned in 2008-9, right? There's the first-order effects, which are the obvious ones. And, you know, so you look at your portfolio, as Ian said, we immediately went to every portfolio company and put them in three buckets based on the COVID impact, high, medium, and low. Sounds simplistic, but, you know, sometimes simplicity works. But the first-order impacts are the easy ones. It's really the ones that are second and third-order impact, right? You know, you've got to look through that company and say, okay, of their ultimate end customer, you know, 25% of it is tied towards what's just called catering or something like that, right, where you know that business is going to go away. And so I think what the team's done well is really looked through the company beyond just kind of the surface level, really understanding that company from our underwriting, engagement with the management team and sponsors, and really have a discussion on those kind of second and third order effects. And I think those will be the places where, you know, they'll either be positive or negative surprises, because I think that certain other ones are just pretty obvious to everybody.

Thank you. Our next question comes from Finian O'Shea with Wells Fargo. Please proceed with your question.

Hi, guys. Good morning. First question for John on issuing below NAV. Can you give us some more color on where you would issue below book, including do you see this as a tool for defense where your own capital structure may be stressed or offense where the market opportunity would merit new equity?

Thanks, Ben, for that. And just to bring those that are out there, I know we talked about In the proxy, we'd received approval to issue approximately 25% of shares below NAB, you know, outlining some of the factors in the proxy and the benefits. Maybe a few high-level thoughts because, you know, what we want to outline is, remember, dilutive issuance can, in certain circumstances, be seen as a benefit and That being said, history in the space might outline that its use could be a little bit checkered. And so our point in having the abilities do it, one, it's seen as a significant responsibility, and for us it always starts with alignment. So, Finn, you've seen the fact that we own over 28% of the shares, the largest shareholder, and so one would not be looking to dilute or harm that position in the future. and really there's some afforded benefits to the extent that you think about dynamics and debt capital and credit ratings, et cetera, having that ability, but also carrying a high degree of responsibility for having that ability. So I wouldn't rule out anything to try to say it's a set level here or there. It's always done to the extent it's ever needed in line with the shareholder's best interest, of which we are the largest one. But given the past of certain dilution for investors, which is harmful, and even rights offerings are dilutive. It's just the different part of the class that gets diluted. You end up kind of realizing that it's a tool to have, but one that you wouldn't put on the front burner as one to use as much as it's just a part of a dynamic plan. And really, you look at the current liquidity position where we sit, which we feel very comfortable about to both equip new investments and support our portfolio code. So less a hard and fast line and more of a broader picture to look at. For us, it's all about alignment. We've proven that. We want to continue to stick with it given our shareholder ownership. We appreciate the benefit that we'd receive having that option, but see that is an enormous responsibility to our shareholders, and we choose not to in any way, shape, or form take advantage of that unharmed investor trust. Finn, does that answer your question? Yes, sure, thanks.

And a follow-up for... Hey, Finn, this is Eric. I just want to be crystal clear, make sure we are. We asked for that right, and we're grateful that people gave it to us for that liability management that could occur down the road and what flexibility it could give us. We have no intention, as John said, these times we didn't are asking for that approval just happened to coincide with this market volatility. We intended to ask for that six months ago, three months ago at this time. So I don't want anybody to read into the timing of that request and this market volatility that somehow those two things are connected. They weren't connected at all.

That's helpful. Thank you. And then for Ian or Eric, you touched on the opportunity in liquid or structured products. Can you give us any views on expanding your commitment to a joint venture where you can approach this in a more tailored fashion on asset selection, leverage, and so forth? And if you agree, would you have the appetite to set up another joint venture where you hold more of an economic interest?

I'll start with a joint venture question, and then I'll lateral it over to Eric, kind of talking about the broader platform and how we see opportunities. You know, for us, we're very thankful and appreciative of our joint venture with South Carolina. But remember, what happens here is often joint ventures can, in certain circumstances, become the tail that wags the dog to where, you know, too much of an economic interest in a JV that drives one earnings with high levels of leverage can end up walking people into a situation where that becomes the primary driver of return. For us, it's about diversification and having that ability, even at our commitment size, we feel very comfortable at that level that we both receive diversification into other asset classes that the BDC can't easily participate in given Bering's wide investment funnel, but also not creating the situation where tails do wag dogs and you lose that benefit of the diversification overall. And so that's one major point. And then to pass it to Eric on kind of relative value, really the fact that we've, you know, had such a wide funnel and sit across a number of global asset classes that report to Eric, you know, this is the opportunity to look across those to generate returns. And we're finding opportunities both for the BDC and the JV. And oftentimes they can co-invest together. But I'll lateral that one over to Eric.

Yeah, so, Ben, I would answer to be specific to your question. We have no intention right now of setting up another JV with anybody or having a larger stake in any of that. I feel like, you know, our real focus is on the asset quality and portfolio management of the existing portfolio and making sure we perform exceptionally well with those assets. I think what we tried to show in this quarter was that the begin to show their shareholder base that the bearings platform has the opportunity set that's broader and different than some other people. And, you know, we didn't want to go too deep into that structure products, um, you know, initially, um, but wanted to show that the type of opportunity that would exist. And so, and I think over time, you know, could you, it's a harder question is, could you see us doing more of it? Um, we're always going to go to where we think the best risk-adjusted returns are. We have a liquid, and Tom can speak to this, we have a liquid high-yield portfolio relative value committee that typically would meet every couple weeks and then meet more frequently, as you imagine these days, where we look at loans versus bonds, we look at Europe versus U.S., U.S. loans, Europe loans, European high-yield, U.S. high-yield, and all of the structured credit components in there. It actually includes our emerging markets business and the like in that discussion. And so as a firm, in our DNA, it's always about relative value. It's always about where is the best risk-adjusted return given the situation. So as John mentioned, you know, if you look to what could have happened or did happen in March, you saw some opportunities where, frankly, the liquid market provided materially better risk-adjusted returns than the middle market did. And so, you know, we're always going to go to where that best relative value is.

Thank you. Our next question. Ben, your line is live.

Ben, did I answer your question? Yes, thank you. Okay, good.

Thank you. Our next question comes from Kyle Joseph with Jefferies. Please proceed with your question.

Hey, good morning, guys, and thanks for everything you provided in the deck. Very helpful. I just wanted to get a sense for, given another drop in rates this quarter, give us a sense for where we are in terms of LIBOR floors on your portfolio and remind us what percentage of your portfolio, both the BSL and the middle market portfolio, do you have LIBOR floors?

I'll start and then I'll put it over to Ian for the middle market and Tom for the liquid side. I don't have an exact percentage for you on the middle market. I would tell you the majority, the vast majority of ours have a LIBOR floor. It's typically 1%. We saw some pressure, I'd say, three to six months ago where people were trying to take those out and maybe just put a floor of zero in there. So I would say it's the vast majority, but I don't have a specific number that I can give you. I don't know, Ian, if you know the exact percentage off, you know, top of your head.

I don't want to give an exact percentage, but, you know, I think if you looked at sort of 80 to 90%, that would be kind of directionally in the ballpark. And certainly I can tell you today any document that we open, For whatever reason, we're making sure that floors are in there as well as tightening other items in the documentation. I'll turn it over to Tom on the liquid side. Yeah, I'd say on the liquid side, it's kind of the exact opposite of that. Almost 90% of the deals have 0% floors. So there's a floor, but it's at zero. And so we don't have the benefit of that 1% floor for the majority of the market in the broadly syndicated side.

That's very helpful. Thanks. Obviously, the majority of the mark at 331 was, it sounds like, primarily driven by BSL movements. Can you give us a sense of how much of that has come back quarter to date?

Yeah, this is Tom. I'll take that one. We've had roughly kind of a 4% recovery on prices in broadly syndicated loans. Generally, you know, the CF index is a good measure of that. It's up about 4.2% in the month of April, and we're roughly in line with that.

Got it. Thanks. And then one last one for me. Obviously, this, you know, depends on ultimately the duration of this impact and whatnot, but just want to get your initial perspective on how this disruption impacts the competitive environment and any sort of outlook for potential consolidation?

I'll jump in there and then turn it over to Bach. So, you know, two years ago or so, I was on a panel in Super Return over in Europe, and someone asked about volatility and what my view of that was. And I said, you know, I was actually looking forward to it. I'm not sure I was looking forward to this kind of – this level of volatility or in this sudden. I was looking forward to it because I do think your question is, it's an opportunity to separate the better quality managers from others, right? And I think, you know, there'll be, I think everybody's going to have challenges in their portfolio. And as I've said to our team for years and to any investor I've talked to, institutional, shareholder, you name it, it's like, you know, you really don't make your key, you know, make your money on, you know, having a, 8% origination yield versus a 7.75 origination yield or, you know, eight and a half versus an eight. I mean, you really make it by managing downside risk and being having the experience base to manage that downside risk and, and having a deliberate portfolio construction that helps you protect from that, because, you know, that helps protect from the unknown, as John mentioned, you know, we have a large amount of diversification, our portfolio, I think our single largest investment is plus or minus 2.5% of our portfolio. And so I think that volatility will be, I think, ultimately good for the industry because I think they'll create some separation. As far as consolidation, I mean, you know, we'll see where that goes. It's a difficult industry to consolidate given the way, you know, structures are in these businesses. But I do think that, you know, they may provide some opportunities, you know, out there. as shareholders looked at just how certain managers performed during this period of time. John, I don't know what you would add to that.

Yeah. Eric, I'd echo your comments, and Kyle, I know you're familiar with this, but really the economic challenges come in two parts. The first is a crisis of liquidity, and you've seen that on the part of the industry. There are liquidity issues, right? And then the second is a point on credit, and that usually takes time. several more quarters and months to bear out. The potential for acquisitions usually comes on the industry on that credit wave, right, which we've yet to see. Always, just like anyone will mention on a call, always open for the opportunity to the extent its shareholder are creative. But the goal here for us is to always realize that we've got great opportunities in our core market sets, and so any such acquisition would need to be very compelling from a shareholder perspective. And it might get there. But right now you have the credit wave coming first. And as you dive into NAVs and others, you know, I think we'll all understand in the future kind of where the chips fall for the entire industry. But, Kyle, does that help?

Thanks very much for answering my question.

Thank you. Our next question comes from Casey Alexander with Compass. Please proceed with your question.

Hi, good morning, everybody, and I hope everybody is feeling well during this. And thank you for the granularity of your presentation. I think investors should really appreciate particularly the breakdown of unrealized marks. I think it's extremely revealing. I've got a few quick questions here. One, you only touched on it lightly in your presentation earlier, But what have your conversations been with the sponsors of your portfolio companies? And how did that contour your bucketing from high, medium to low in terms of kind of risk rating where your portfolio companies are at?

Yeah, I'll take this one. So, you know, as I mentioned, we had multiple conversations with management teams and then The second stage was having conversations with sponsors because part of the analysis, and again, what we were trying to bucket initially was exposure to COVID from a high, medium, and low perspective and kind of think of that as kind of the first wave and maybe the most disruptive wave with the assumption that we're going to have some kind of recession. The Severity of that recession obviously depended on the duration of the health care crisis. And so as we identified companies with high and medium exposure to COVID, then the conversation was with the sponsor, okay, you have this company. It has exposure. What's your game plan? How are you going to support it both in terms of oversight, strategy, and also capital? And the reality is on the capital side, sponsors have finite amount of capital. And so part of our analysis was, you know, getting a perspective from them in terms of, you know, where does this investment reside, which we would know, you know, is it an older vintage or a newer fund? And if it's an older vintage, then therefore they have less capital available to support that company than So then you get into analysis of what other companies are still active in that portfolio and how much capital do they have. And then it's kind of game theory about which ones do you think they're going to support and which ones you don't think they're going to support. Obviously, with newer funds, they have more capital to support those companies. So that was the analysis that we went through. And it doesn't change the high, medium, low. impact of COVID, but it changes our playbook in terms of what our approach is going to be if this company gets into either a liquidity crisis or a big R restructuring. The other thing I'll point out, which I didn't mention, is that all the discussions that we had with our management teams and sponsors We basically took all that information to our high yield team. We have almost 50 high yield industry experts and basically had them validate what we were hearing in terms of the industries and the comments that we were getting around the company's ability in that industry to withstand any kind of liquidity issues or COVID issues and maintaining that value proposition. Does that help, Casey, with your question?

Yes, it does. And in a follow-on, in a situation where a sponsor is at the end of the rope in the fund and obviously, you know, they have rules about cross-investing, Does the sponsor yet still participate with you in sort of game planning for additional forms of capital to that company? I mean, it seems to me that just because they can't do it themselves doesn't mean that they're necessarily so willing to just kind of let it go. And do any of those options include government-sponsored lending programs?

So, I'll take it and then if anyone else wants to jump in, please go ahead. So, you know, the reality is, yes, I mean, hopefully, we've done a good job on the front end, we underwrite the sponsors that we work with. So, we're really focused on sponsors that have operational expertise, treat us like a partner, not just like a supplier. And so historically through other cycles, I've had sponsors that were unable to put money in but really worked those companies to help maximize recovery. At the end of the day, if additional capital comes in, if it's the right sponsor, they have a choice. They can be diluted or they can lose their equity completely. And, you know, the right sponsors are going to be supportive in terms of working together. a holistic plan, whether it's them putting in the capital or someone else putting in the capital, but all of us working together to, you know, preserve that company and maximize recovery. And the only thing I'll say on the government plan is that's obviously new and kind of a changing environment. That's really up to the company and the sponsors to determine if that's – program that they want to participate in or not.

Okay. Thank you for that, Ian. John, from a maintenance standpoint, the discussion of the debt pay down as a subsequent event post the end of the quarter, should we look at that as coming from short-term investments or is that more being taken from capacity on the credit line to repay those other forms of leverage?

Yeah, no capacity on the credit line. One, it comes from short-term investments in cash. And, you know, we've been active in sales to the extent that, you know, we've generated a few that we're still trading at attractive levels to where we bought or if there was some moves in and out. But by and large, no, using your revolver capacity to pay off SPV lenders is a bad idea.

Great. Thank you very much. I appreciate you taking all my questions. And, again, I hope everyone is feeling well. Thank you.

Thank you. Our next question comes from Ryan Lynch with KBW. Please proceed with your question.

Hey, good morning. I hope you guys are all doing well. The first question just has to do with your securitization COO. Obviously, you guys are in compliance as of Q1 with all your covenants in that CLO, but as we kind of get further down the road, and I'm assuming that we will have more defaults just across the board and more ratings downgrades for credit investments down the road, how comfortable are you all with maintaining your triple C bucket or your OC cushion for that securitization going down the road.

Sure. Ryan, this is Doc. That's a great question and one that, you know, how folks are financing is extremely important. So very comfortable with the OC cushion, very comfortable with the available CCC to the extent that downgrades persist. And I just want to outline kind of the timing. You know, that came, that CLO is really a function of just proper financing. It's not designed to to over-lever, you know, or to generate return, but mostly just protects a tight pay down. That's the form of a static CLO. And when it was done, it was done around that April timeframe that had a lot of the year-end malaise that occurred in loans in the latter part of 2018, right? So there was a lot of conservatism built into that structure. So very good from a liquidity perspective, and that securitization is built with a high level of cushion to make sure that even to the extent downgrades persist and are heavily elevated, that the cash flow NIM actually flows through to the investors. Does that answer your question?

Yep. Yep, that's helpful. And then kind of following up on an earlier question from Robert, you mentioned earlier that you guys don't have Q1 financials yet really for most of your portfolio companies, and so I think I would assume that. next quarter, you're probably not going to have Q2 financials yet for your portfolio companies, which, you know, that's going to be kind of the real tell of how these portfolio companies are performing. So in your discussions, though, that you are having, as you mentioned, are you guys getting formal forecasts for 2020 from your portfolio companies? Are these just more informal dialogue that are going on? And At this point, even if you guys are getting forecasts or just having these informal dialogue calls with portfolio companies, how reliant can you be on really anybody's ability today to forecast what the economic picture looks like going forward and how is that going to specifically impact specific portfolio companies? that you guys are operating, just given the unprecedented levels of uncertainty that we have going forward?

Yes, I'll take that question. So again, most of the companies that we have in our portfolio, we get monthly financials. And so we're able to bridge those monthly financials with the baseline projections that the management teams are giving us. So While it is a discussion, we're actually getting, receiving, and then walking through actual projections. I think what I would point out, and you highlighted this, is we don't – I mean, it's such a fluid situation. There's obviously the initial impact. There could be secondary impacts. We could have flare-ups. We could have another wave. I mean, you know, at this point, a full year 2020 plan is, you know, really going to be difficult to put together that has that is accurate. So, you know, our focus is really on the second quarter as the initial step, because that should be a quarter where if there is a COVID impact, it's fully reflected in the numbers. And as we continue to see trend lines, we can start expanding, you know, those projections from that second quarter into the third quarter. But it's going to have to be step by step. It actually means we're having conversations every other week with these management teams and going through their projections and looking at the monthlies and tying those monthly projections into the forecast they've given us to see if there's any deviation at all. And I think honestly, that's the only way you can manage through something like this. Because, you know, every cycle is different. This one is obviously a very different cycle. And, you know, we just we don't know how it's going to play out.

So let me add a little bit to that. Let me try and add something connected up here. And I can make sure we're clear. As Ian said, we do get monthly financials on a number of our portfolio companies. We said that we didn't have financials. Really, the March monthly financials, you don't have March 30th, you know, or 31st when you go through it. And so I think that we're referring to the actual, you know, the first month that had material COVID impact. You don't really get those financials until more around now in most of your portfolio companies. But we did have the monthly financials prior. So in our conversations with management teams, we really, as Ian said, focused on kind of What do you think April made June look like? Because that really gets to the heart of the liquidity of the company, right, which is really the most important thing in times like this, particularly for ones that are materially impacted. And I want to tie that back to a comment that was earlier where we talked about how we can take that conversation we have with that company and then work with our high-yield research analysts. We have, you know, a really large high-yield research staff that's industry-specific and And, as you know, for most middle market lenders, it's very difficult to have industry expertise and have a diversified portfolio. Typically, if you have industry expertise, your portfolio has a lot of those industries in there. And so we're able to take that information we're getting from that management team, what they're expecting in the second quarter, sit down with the research analysts and say, does this make sense to you given how you're seeing the industry play out and other management teams you're talking to, and to begin to triangulate on what we think this second quarter looks like. we're not trying to speculate on what the full year looks like because we don't know what that environment is going to be, but we're really focused on this quarter.

That makes sense. That's good clarification and good color. I think all that makes sense given these uncertain times. Just one last question. Over the next coming months and coming quarters, I think just broadly speaking, There's the expectation for a significant increase in the defaults, non-accruals, and workouts across the credit landscape. Now, how comfortable are you all today with across the variance platform of being able to work through those credits? Because it's going to take a significant amount of human resources, professionals, to spend a lot of time working through those credits to be able to get the best outcome. So how comfortable are you with the amount of people, the level of people, and the skilled professionals to be able to work through those credits without putting too much strain on the overall platform?

Yep. So I'll take that, and then Ian can jump in also. So, you know, we highlight the bearings platform a lot, and this will be another example where I highlight the broad bearings platform. the first thing to look at is the depth and experience of our existing team that works on the middle market credits, right? So let's focus on the illiquid credits for a second. You know, there, I mean, we have an incredibly seasoned team. You know, we have kind of, you know, the number of, you know, dozen plus individuals with, you know, 20 plus years experience in the industry. So they've seen multiple cycles. And I think this is a time where, you know, having people that have that experience and having them work through these types of situations, challenge situations, is really, really critical. That being said, we don't just want to rely on our existing team in the middle market. We have a very significant special situations group that basically historically has operated on the liquid side. But as partners with people like Tom, Tom focuses more on performing credit, but this group would look at more challenging situations. They have a lot of experience working through challenging situations on liquidity, potential bankruptcies, restructurings, and the like. We actually work with that group, and that group is a part of our watch list process that helps evaluate credits and also is part of our resources we tap into when we talk about under certain situations, how would we look to play that situation out? Then the third part I'll hit on is, again, the broad platform. A lot of times people don't see, we talked about the investment professionals. We have a deep legal staff at Barings, in-house legal staff, both with expertise in middle market and private investments and expertise, a team that has expertise in restructurings. And we bring those legal resources to bear also as we sit through discussions. So I feel very good about our team in isolation, but frankly, it's the power of the entire organization to that I believe will have us best be able to manage this. And one part I didn't even hit on is we actually have a private equity business. It's a small business for us relative to our fixed income business, but has experience with operating operating companies. And so, you know, we do have the knowledge base on how would you put together a board and how would you put the right operating partners in there and how would you incent the management team and the like. So all those different components are what we would tap into and we do tap into to have the best outcome for ourselves, our own capital, and for our shareholders' capital.

And I would just add two points. One, as Eric mentioned, lots of experience on the team, including workout experience and going through cycles. Almost 35% of the team has, you know, close to 20 years' experience And then the other thing I would say is just on Eric's point in terms of the resources within the firm, hopefully we don't have a lot of situations where we actually have to take the keys of a company. But if you just think about Special Sits and our high-yield team with all their industry contacts, we just have such a huge network of people that we can bring into situations, whether it's a board member, or whether it's a management team, or maybe it's a strategic buyer of a business. So there's just a lot of resources there that we can lever.

Got it. That makes sense. Those are all my questions. I appreciate the time today.

Thank you. Our next question comes from David Miyazaki with Consolence Investment Management. Please proceed with your question.

Hi, good morning. I just wanted to echo, I think it was Casey's comment on the detail you provided on your unrealized appreciation. I think slide 14 personally was very helpful. I think that you guys were kind of at the beginning of earnings season. I think as an investor, I'm sort of bracing myself to see mark to markets all over the place. And so I was wondering if you could provide a little bit of detail on how you got to your valuations. I mean, did you – I presume you did kind of a combination of quotes and grid pricing. Some quotes get ignored. Did you find that your valuations were – had wider ranges, and did you find yourself at the higher end or the lower end, or was it any different than what you normally go through? I'll take the valuation question and then kick it over.

But, David, the bottom line is same valuation process, no change. And, in fact, we kind of state that as a very important point because, you know, for us, take highly syndicated loans, for example, the mark's the mark's the mark. No kickouts, no major adjustments. That's simple. And then when you get into the middle market, This is where we want to do our best because we kind of operate in the belief that either one marks their book or the market does it for you. So we find that through our prospective discussions with management teams, through our view of making sure a common and consistent policy across the entire firm, very big on consistency, we found that really while the levels will move as spreads have widened, the process hasn't changed. And then you talk about the kind of overlay of third party. We find that very, very useful. And so we found that really there's been no major dissonance one way or the other as we do our best to try to outline and state to where the puck is based on our discussions. So key points of key themes of consistency and sticking to the exact same process, even when the markets change, that to us is very important. And we're finding that We're happy to reflect those in valuations because really to us, all Mark to do is just shift economic return to future periods if one gets the credit risk call correct. And so provided having a strong liquidity position, there's never an issue discussing, you know, what the mark is because you build for that and you make sure that at the end of the day, fair value is as best as you can estimate it, fair value. Dave, does that help?

Yeah, no, it's very helpful. I'm... Unfortunately, I don't know that we're going to see the same process throughout the industry. So it's definitely good to see somebody early in the reporting season come out with such a clear and transparent process. I appreciate that.

One thing, yeah. Well, first of all, thank you for both of you for the positive comments on our transparency. I remember our initial meeting 18 months ago, I said, Two things that I'm going to commit to you, I think it's three things. Alignment of the long-term focus, communication, and transparency. I think we're the three things that we highlight. So we're doing our best to make sure we're honoring that. One thing I want to also just highlight is we have an independent valuation group within Barings overall. So when you think of the valuation, the work products done within the investment team, Ian's team, there's an entirely independent valuation group. that size off on all the valuations that's independent. It doesn't report up through me. It wouldn't even connect until we get to the CEO of the company from that perspective. And then the second one is, and this is obvious, but it's true. There's one price for each asset. So that asset that's marked in the BDC is marked that way on mass mutuals books. It's marked that way on our GPLP funds. It's marked whatever the asset price is, the asset price is. If it's 93.2, 93.2 for everybody. you know, that's obvious in most people's minds, but I think it's important to make sure we state that too.

That's very helpful to know, and if I could, Eric, kind of shift along of what you've communicated in the past, you know, I think that it's very helpful to have some clarity provided with regard to issuing below NAV against the backdrop of actually having purchased shares. You know, I think it's more important as investors for us to see what you actually do as opposed to what you're saying. And I do appreciate the share repurchases. If I could shift the question just a little bit to the regulatory front. I know that you guys are aware and involved in different aspects. One thing that has really affected the middle market industry a lot, I think, is whether or not sponsors could participate in paycheck protection. So I was wondering if you have any observations or thoughts about what's happening with regard to assistance in your portfolio companies. And then as well, I was a little surprised, but I guess pleased to see that the SEC moved in with some mark-to-market adjustments for the industry. And, you know, for me, that does represent a slight difference versus the 2008 crisis when the BDCs got very little regulatory attention. And, you know, I know that the industry has been trying to work toward progress on AFFE, and that really hasn't happened. But I do think that's part of the reason why the stocks got hit so hard in the first quarter. So if you could provide any insight on the regulatory front, that would be very helpful.

I'll go SEC, and then Ian and Eric can discuss paycheck protection. But in terms of the SEC leverage rules, just one parting comment, right? Having the ability to adjust your asset coverage ratios, remember the last crisis, David, that is certainly helpful if that were the only covenant, right? And so what you'll find is given the higher level of incremental debt that now is applied to the BDCs, means that that's not the only covenant that one's working for. Granted, it's one less, but to the extent that one has overextended themselves on leverage and are having material amounts of payment adjustments, defaults, et cetera, you have not a regulatory problem, you have a lender problem. And so certainly relative to the last crisis, you found it was more regulatory than lender problems. I'd imagine today you're going to find it's going to be more lender than regulatory. And then paycheck protection, Ian and Eric.

I can start, and then, Eric, if you want to chime in. I mean, obviously, with PPP, the program is 75% for payroll, 25% occupancy, and that means keeping the lights on in the business. to the extent that, you know, it's all forgivable unless some of that 25% is not used for occupancy. And, you know, I think it's still early days and it's a fluid situation. I think if it's an industry that's been completely impacted by the COVID situation where revenue just went to zero, You know, you're probably seeing that scenario where people are considering it, but it's really a portfolio company decision. You know, one, do they qualify for the program? And, you know, it may benefit them, it may not, and it's really a decision for them. It's between them and the program. And so I think just, you know, I think that's all we can say. We just don't really have any more information around that.

Thank you. We have reached the end of our question and answer session, so I'd like to pass the floor back over to Mr. Lloyd for any additional concluding comments.

No, just want to thank everybody for, you know, dialing in, listening to us. You know, if you have any follow-up questions, you know, reach out to Elizabeth, you know, or Jonathan or me or Ian or anybody you want to to make sure you get your questions. And appreciate the comments, the compliments that we got on the transparency and the level of detail that we provided. That's our goal. It's what we strive for to provide, as I say to people all the time, it's your money. It's the shareholders money. They just entrust us with it. So they deserve to know how it's being handled and all the transparency around it. So appreciate those comments and everybody stay well and look forward to having a call here in the three months and update you on the second quarter.

Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time.