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spk01: ROE in line with many of would be more susceptible to a broader economic slowdown.
spk02: Our borrowers remain fundamentally healthy with stable EBITDA trends and a weighted average interest coverage ratio of 1.98 times and weighted average leverage of 4.98 times. We remain conservatively levered on a net basis at 1.03 times, down from 1.1 times in the previous quarter, and we have ample liquidity on hand to take advantage of new investment opportunities. We remained active repurchasers of our common stock during the quarter, buying back about 424,000 shares at an average price of about $11 per share.
spk01: For a total repurchase, we believe our stock remains deeply undervalued.
spk02: Many traded BDCs are trading at or near the high end of their historical ranges on a price to NAV basis, potentially limiting upside for investors, while FIAT continues to generate an attractive, well-covered dividend yield and offers a compelling total return opportunity. We expect to remain active in repurchasing shares in the coming quarters. Additionally, the Scion team has been active buyers of our stock. We believe it is active on the BDC team, and no member of the Scion management team has ever sold Scion stock. Looking at the space more broadly, many investors and analysts have focused on the outlook for returns for BDCs, given the increase in competition for deals and the resulting
spk01: erosion of more lender-friendly conditions.
spk02: We have our middle market focus has generally insulated Scion from the spread compression and looser covenants that have characterized larger, more commoditized deal opportunities. Just recently, Scion funded a first lien to a true middle market borrower with annual EBITDA of approximately $55 million
spk01: spread 45% based on the market price and reinvested dividends. First, the pure average returning approximately 30% over the same period. On many metrics that matter, I continue to perform well, which we believe justifies closer to our net asset value.
spk02: With that, I'll now turn it over to Greg to discuss our portfolio and investment activity. Greg?
spk04: Thank you, Michael, and good morning, everyone. Our Q1 net investment income benefits from a diverse combination of the higher floating interest rates on our loan assets, origination and transaction fees from our investment activity, and a plethora of structured yield enhancing provisions embedded within our portfolio.
spk01: We remain highly selective with new investments as market conditions change rapidly at the beginning of 2024 with the market risk-on switch being abruptly flipped as substantial capital inflows into the large cap market vehicles has resulted in a dynamic of capital transactions particularly in the larger cap markets. This has resulted in
spk04: higher leverage attachment levels and looser credit terms throughout the larger cap loan markets. We have seen this dynamic creep into the upper middle market where spreads have tightened and leverage level expectations have increased for companies with 60 plus million of EBITDA. We continue to stick to our knitting and focus on what we consider to be the traditional middle market, companies with 20 to 50 million of annual EBITDA. We continue to see a nice pipeline of opportunities in this range. While competitive spread levels for new issue have trended 50 to 75 basis points below the comparable period last year, we still believe favorable versus the 150-plus basis point compressions are prevalent in the larger cap market. which are
spk01: the company for future growth and investment.
spk04: We realize significant investment income and an attractive return from the backstop fee and exchange of our discounted loan purchases into debt and equity of the recapitalized Avis and Young. These transactions are representative of our special situations focus where we identify opportunities to drive incremental yields to our investors through first lien investments at the top of the capital structure where we have more active involvement in driving the outcomes of the situations. We additionally continue to utilize secured yield enhancement provisions such as PIC features, call protection, make-hold provisions, and MOECs to incrementally enhance yields at the top of the capital structure rather than reaching deeper into riskier capital structures for mezzanine and equity co-investments to achieve incremental investment yield. As a reminder, as a reminder, as a reminder, approximately 60% of our annual PIC income is derived from highly structured situations, such as our litigation finance investments, where we can attain higher yields by matching flexible pick timing features with strict cash flow sweeps upon collections or through coupon structures where pick is incremental to our cash interest.
spk01: Over 80% of our pick investments are portfolio companies either one or two and 99% risk-rated
spk04: or better. Turning now to our Q1 investment and portfolio activity. During Q1, we completed an attractive mix of first lien investments.
spk01: We completed private direct first lien financings for new portfolio companies alongside several of our long-term club partners and partners
spk04: with whom we have completed many successful investments together. These transactions include Key Impact, American Family Care, and Rydell, where we acted as either a complete arranger or impactful partner. We also had add-on opportunities with approximately 50% in direct private investments for new portfolio companies. We also funded a total of $4 million of previously unfunded commitments. We had sales and repayments totaling $207 million for the quarter, which primarily consisted of the full repayment of our debt investments in AMPAC, Services Compression, Pentec, and RR Donnelly.
spk01: The full repayment
spk04: with nearly half occurring at or within the last several weeks of the end of the quarter. As a result, net funded investment activity decreased by approximately 96 million for the quarter. We expect the active repayment trend to continue in 2024 as strong cash inflows into direct and syndicated loan funds will likely fuel refinancing and repayment activity. We are pleased with our portfolio's continued performance. as non-accruals declined slightly from 0.89% of fair value at the end of Q4 to 0.86% of fair value at the end of Q1. We removed one name, our second lien investment in Trimark Ambrosia from non-accrual this quarter as the company completed a voluntary restructuring process in Q1 as we indicated on our previous earnings call. Scion was a member of the backstop group and received a package of backstop fees to take back debt on accrual this quarter. Overviews, which are investments where we expect full repayment but are either spending more engagement time and or have seen increased risk since the initial asset purchase increased from approximately 6.5% to 10.4% of the portfolio. This increase was driven largely by portfolio companies where we are more actively working on merger, refinancing, or recapitalization transactions that are requiring a higher
spk01: I will now turn the call over to Keith.
spk05: Okay, thank you, Greg, and good morning, everyone. As Michael mentioned, we reported another quarter of strong financial results driven by a combination of income generated from a quarterly investment activity and yield-enhancing provisions realized within the portfolio. During the quarter, net investment income was 32.6 million, or 60 cents per share, compared to 21.8 million, or 40 cents per share, reported in the fourth quarter, an increase of 10.8 million, or 20 cents per share. Total investment income was 73.6 million during Q1, as compared to 60 million
spk01: reported in Q4.
spk05: This is an increase of $13.6 million, or about $23.2 million, reported in the fourth quarter. The increase was driven by higher interest rates. At March 31st, we had total assets of approximately $2 billion, and total equity net assets of $863 million, with total debt outstanding of $1.
spk01: At the end of this quarter, our net debt-to-equity ratio was 1.03 times, which is slightly lower than 1.1 times at the end of Q4. Our portfolio fair value ended the quarter at $1.7 billion, down $100 million from the fourth quarter, reflecting a combination of price declines, mostly in our equity investments, and large repayments received at the end of the quarter.
spk05: The weighted average yield on our debt and other income-producing investments at amortized cost was 12.9% at March 31st, which decreased 48 basis points from 13.4% at the end of Q4. At March 31st, our NAB was $16.05 per share as compared to $16.23 per share at the end of December. The decrease of $0.18 per share, or 1.1%, was primarily due to price declines in our portfolio by over-earning our distributions and the accretive nature of a share repurchase program during the quarter. We ended the first quarter with a strong and flexible balance sheet with over $600 million in uncovered assets, lower leverage relative to our peers, a strong debt servicing capacity, and solid liquidity. We had about $179 million in cash and short-term investments and an additional $175 million available under our credit facilities to further finance our investment pipeline and continue to support our existing portfolio companies. Our current debt mix is about 60% in senior secured and 40% in unsecured, with over 85% in floating rate. During the quarter, the weighted average cost of a debt capital was about 8.4%, which is slightly down from the first quarter. In terms of our debt capital, we are actively working with our commercial lenders to amend and extend our credit facilities for an additional two to three years with more constructive provisions and better economics. We believe these new terms will give us the flexibility needed to further diversify our debt mix between secured and unsecured and to continue to expand our group of lending partners. Now turning to distributions, during the first quarter, we paid a quarterly-based distribution to our shareholders of $0.34 per share, which is the same as the first quarter. As a result, the trailing 12-month distribution yield through the first quarter, based on the average NAV, was 10%.
spk01: And the trailing 12-month distribution yield based on the quarter-end market price was
spk05: As announced this morning, we declared our second quarter base distribution of $0.36 per share, which is an increase of $0.02 per share, or about 6% from the first quarter. The second quarter base distribution will be paid on June 17th to shareholder record on June 3rd. This is now the fourth time we have increased our quarterly base distribution since we listed back in October 2021, raising the base distribution 10 cents per share with 38%, from 26 cents per share to 36 cents per share. In addition, as previously announced, we will be disclosing the amount of the mid-year supplemental distribution sometime during June. The mid-year supplemental distribution will be paid on July 12th to shareholders of record on June 28th. Thank you. We will now be conducting the question and answer session.
spk01: If you would like to ask a question, please press star 1 on your telephone keypad.
spk03: A confirmation tone will indicate 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 hands before pressing the star keys.
spk01: One moment, please, while we poll for your questions. Our first questions come from the line. of Eric Swick with Habdi Group. Please proceed with your questions.
spk00: Thanks. Good morning, everyone. You noted in the prepared remarks that there were a number of transactions in the quarter that drove some revenue from realization fees and exit fees and things of that nature. I'm curious if you could quantify that revenue that occurred in 1Q that would not be expected to occur in 2Q, fully understanding that there could be additional transactions going forward as well.
spk01: I think this is Michael. How are you doing?
spk02: We only really upgrade something to one when we have knowledge of a loan that's going to be exited for the reporting period. So you should expect most of our names will be two when we do a deal and only upgrade it to a one if we have knowledge of something that's going to happen to that name.
spk00: Got it. That makes sense. So given kind of the transactions that were reported here in one queue, you had pretty good sense of that in four queues. They're upgraded. Perfect. That's all for me today. Thank you.
spk02: Yep. Thank you.
spk03: Thank you. This concludes our Q&A session. I would now like to turn the floor back over to Michael Reisner for closing remarks.
spk02: Thank you. You know, in closing, I just want to reiterate that Scion continues to perform well and that we believe the current discount to NAV remains unwarranted. On a total return basis, based on the market price, Scion ranked in the top 10 of 42 publicly traded BDCs over the past 12-time period.
spk01: We are focused on building a durable and sustainable franchise here at Scion that seeks to deliver strong results in all market environments.
spk02: We look forward to speaking to you again next quarter. Thank you.
spk03: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
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