CION Investment Corporation

Greetings and welcome to the Scion Investment Corporation second quarter 2024 conference call. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Charlie Arestia, Head of Investor Relations. Thank you. Please go ahead.

Good morning, and welcome to Scion Investment Corporation's second quarter 2024 earnings conference call. An earnings press release was distributed earlier this morning before market open. A copy of the release, along with a supplemental earnings presentation, is available on the company's website at www.scionbdc.com in the investor resources section and should be reviewed in conjunction with the company's Form 10-Q filed with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements, which are not guarantees of future performance or results, and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the company's filings with the SEC. Joining me on today's call will be Mark Gatto, Scion Investment Corporation's Co-Chief Executive Officer, Greg Bresner, President and Chief Investment Officer, and Keith Franz, Chief Financial Officer. With that, I'd like to now turn the call over to Mark Gatto. Please go ahead, Mark.

Thank you, Charlie. Good morning, everyone, and thanks for joining our call today. I am pleased to report that Scion continues to perform well with strong results across the board in net investment income, NAV growth, capital deployment, and portfolio credit performance. I believe these results are particularly impressive given what many lenders have described as a challenging market environment. I will discuss in more detail later, but I believe this quarter reflected Scion's continued focus on deal selection and measured growth rather than buying the market like many of our peers. Scion reported 43 cents per share in quarterly net investment income, more than covering our recently increased quarterly base dividend. As you recall, last quarter we recognized significant accretion from several structured yield enhancing provisions and beneficial resolutions in our special situations investment portfolio. These tend to be transactional in nature and may not always recur every quarter. We believe that Scion's differentiated strategy of combining a conservatively positioned loan portfolio paired with opportunistic first lien investing in more complex special situations is a superior model for driving attractive risk-adjusted returns. Our net asset value grew modestly quarter over quarter to $16.08, driven by over-earning our quarterly base dividend and ongoing accretive share repurchases, all set partially by unrealized and realized appreciation in the portfolio. This represents approximately 5% MADD appreciation compared to the same quarter last year. We remain laser focused on the credit performance of our portfolio and closely monitor the underlying fundamentals of our borrowers. During the quarter, following the review process that includes both internal and external examinations of various borrower key metrics and fair value marks, we downgraded three loans, offset by upgrading four loans on our risk rating scale. We also added one new loan to non-accrual status during the quarter, bringing the total non-accruals to 1.36% of the portfolio at fair value. In the aggregate, loans rated four or five comprise less than 1.5% of our total portfolio. We are pleased with the credit performance of our portfolio, but remain conservatively positioned with a net leverage ratio of 1.13 times. We remained active repurchasers of our common stock in Q2, buying back approximately 235,000 shares. at an average price of $11.37. Subsequent to the quarter end, we intend to renew our share repurchase authorization, which we believe preserves a strong alignment with Scion shareholders. I mentioned earlier that we are operating in a challenging marketing environment where there is an enormous amount of capital chasing a relatively small pool of new deal opportunities compared to prior years. The logical consequence of this dynamic is that new deals often have tighter credit spreads and looser protection for lenders. Amidst this backdrop, we remain highly selective in evaluating new deal opportunities, both in our traditional middle market direct lending portfolio and in the lightly syndicated loan market. We believe this positioning is prudent given the macroeconomic environment But at the same time, we remain nimble to adapt as needed as conditions evolve in the second half of the year. As Keith will discuss later, our recent amendment of our largest secured credit facility also reduces our cost of capital and provides increased operational flexibility as we navigate the current landscape. We believe Sign is uniquely positioned for this environment given our middle market direct lending focus paired with our opportunistic strategy that can capture alpha in volatile and complex situations. With that, I will now turn the call over to Greg to discuss our portfolio and investment activity during the quarter.