PennantPark Investment Corporation

Good afternoon and welcome to the Pennant Park Investment Corporation's second fiscal quarter 2021 earnings conference call. Today's conference is being recorded. At this time, our participants have been placed in a listen-only mode. The call will be open for a question and answer session following the speaker's remarks. If you'd like to ask a question at that time, simply press star 1 on your telephone keypad. If you'd like to withdraw your question, press star 2 on your telephone keypad. It is now my pleasure to turn the call over to Mr. Art Penn, Chairman and Chief Executive Officer of Penn and Park Investment Corporation. Mr. Penn, you may begin your conference.

Good morning, everyone. I'd like to welcome you to Penn and Park Investment Corporation's second fiscal quarter 2021 earnings conference call. I'm joined today by Aviv Efrat, our Chief Financial Officer. Aviv, please start off by disclosing some general conference call information and include a discussion about forward-looking statements.

Thank you, Art. I'd like to remind everyone that today's call is being recorded. Please note that this call is a property of Penn and Park Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by using the telephone numbers and PIN provided in our earnings press release as well as on our website. I'd also like to call your attention to the customer safe harbor disclosure in our press release regarding forward-looking information. Today's conference call may also include forward-looking statements and projections, and we ask that you refer to our most recent filings with SEC for important factors that could cause actual results to differ materially from these projections. We do not undertake to update our forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at pennantpark.com or call us at 212-905-1000. At this time, I'd like to turn the call back to our Chairman and Chief Executive Officer, Art Penn.

Thanks, Aviv. I'm going to spend a few minutes discussing how we fared in the quarter end of March 31, how the portfolio is positioned for the upcoming quarters, our capital structure and liquidity, the financials, then open it up for Q&A. We are pleased with our performance this past quarter. We achieved a 5.8% increase in adjusted NAV. adjusted NAV went up 51 cents per share from $8.69 to $9.20 per share. We are particularly pleased that our NAV today is up over 5% from what it was pre-COVID December 31st, 2019. We have several portfolio companies in which our equity co-investments have materially appreciated in value as they are benefiting from the recovery. This is solidifying and bolstering our NAV and we will highlight these companies in a few minutes. As part of our business model, alongside the debt investments we make, we selectively choose to co-invest in the equity side by side with the financial sponsor. Our returns on these equity co-investments have been excellent over time. Overall for our platform, from inception through March 31st, our $226 million of equity co-investments have generated an IRR of 28% and a multiple uninvested capital of 2.9 times. In a world where investors may want to understand differentiation among middle market lenders, our long-term returns on our equity co-investment program are a clear differentiator. With regard to income generation, we have the opportunity to rotate out of our equity investments over time and into yield instruments. In addition, we have the ability to grow the PNNT balance sheet and that of our PSLF JV with Pantheon, which should also generate additional income for the company. We are also pleased that in April, We diversified our financing sources with the issuance of $150 million of 4.5% five-year senior notes to institutional investors. Although we never predicted a global pandemic, as you know, we have been preparing for an eventual recession for some time. Prior to the COVID-19 crisis, we proactively positioned the portfolio as defensively as possible. The overall portfolio is constructed to withstand market and economic volatility. As of March 31st, average debt EBITDA on the portfolio was 4.6 times and the average interest coverage ratio, the amount by which cash income exceeds cash interest expense, was 3.1 times. We have no non-accruals on our book out of 93 different names in PNNT and PSLF. We have largely avoided some of the sectors that have been hurt the most by the pandemic, such as retail, restaurants, health clubs, apparel and airlines, although PNNT does have exposure to oil and gas, which we'll discuss later. The portfolio is highly diversified with 83 companies in 29 different industries. Since inception, PNNT has invested $6 billion and an average yield of 12%. This compares to a loss ratio of about 19 basis points annually. This strong track record includes our energy investments, our primarily subordinated debt investments made prior to the financial crisis, and now the pandemic. Our performance through the global financial crisis and recession was excellent. During that recession, the weighted average EBITDA of the underlying portfolio companies declined by 7.2% at the bottom of the recession. This compares to the average EBITDA decline of the Bloomberg North American High Yield Index of 42%. We are proud of this downside case track record in the prior recession. Based on tracking EBITDA of our underlying companies through COVID so far, we believe that our EBITDA decline will be substantially less than it was during the global financial crisis. Many of our portfolio companies are in industries such as government services, defense, healthcare, technology, software, business services, and select consumer companies that are less impacted by COVID and where we have meaningful domain expertise. We believe that we are experiencing a strong recovery with some companies and industries being beneficiaries of the environment. We are pleased that we have significant equity investments in five of these companies, which can substantially move the needle of our NAV. I would like to highlight those five companies. They are Cano, Wheel Pros, Walker Edison PT Network, and JF Petroleum. Cano Health is a national leader in primary health care who's leading the way in transforming health care to provide high quality care at a reasonable cost to a large population. Our equity position has a cost and fair market value on March 31st of $2.5 million and $73 million respectively. We believe that there's a massive market opportunity for Kano to grow in the years ahead with the Medicare Advantage program. The merger with Jaws Acquisition is scheduled to close in June. At that time, we will receive another $6.7 million in cash and own 6,629,953 shares of Kano Health and a limited partnership controlled by a financial sponsor where the sponsor will earn 20% of the exit proceeds. The shares will be locked up for six months. From a valuation perspective, due to the lockup, the independent valuation firm valued the position with a 6% illiquidity discount to the traded value on March 31. Wheel Pros is the largest national distributor of aftermarket custom wheels. Our equity position has a cost of $500,000 and a fair market value of $26.4 million as of March 31. At the end of March, the company announced a strategic transaction with a new sponsor investment vehicle which will result in the full exit of our investment in Wheel Pros. The transaction is expected to close in the next couple of weeks. This will result in our equity investment in Wheel Pros generating an IRR of 104% and a multiple uninvested capital of seven times. Walker Edison is a leading e-commerce platform focused on selling furniture exclusively online through top e-commerce companies. Our equity position has a cost of 1.9 million and a fair market value of $16.7 million as of March 31st. Shortly after quarter end, the company executed a refinancing and dividend recap, which resulted in shareholders receiving two times their cost while maintaining the same ownership in the company. This resulted in PNNT receiving a $3.8 million cash payment on its equity position. PT Network is the leading physical and occupational therapy provider in the Mid-Atlantic states. Our equity investment in PT came through a restructuring which came about after the company made several operational mistakes. We have always had a positive view of the industry and the outlook due to industry tailwinds and demographics which result in comparable companies trading at EBITDA multiples of 12 to 15 times. Under our ownership, we brought in an excellent management team who corrected those operational mistakes and has shepherded the company well through COVID. Our equity position has a cost of $23 million and a fair market value of 48 million as of March 31st. MidOcean JF Holdings, or JF Petroleum, is a leader in the distribution, installation and servicing of vehicle fueling and related equipment to retail fueling stations, retail fueling locations in the United States. As a result of a restructuring several years ago, PNNT owns approximately 30%, excuse me, 36% of the company's equity. After the restructuring, A new management team was recruited who stabilized the business and returned it to growth. Additionally, several accretive acquisitions have been completed and a stable long-term senior financing package was put into place in 2019. The company performed well through COVID and is continuing to grow organically and through acquisitions. As of March 31st, PNNT owned Equity Securities with a cost and fair market value of $40 and $43 million, respectively. These companies are gaining financial momentum in this environment, and our NEV should be solidified and bolstered from these substantial equity investments as their momentum continues. Additionally, we are pleased with the liquidity events at Wheel Pros and Walker Edison, which are a solid start to our equity rotation program. PNNT has among its lowest percentage of energy investments since 2013. Energy investments represent only 6.7% of the overall portfolio. Ram completed its last two wells in January. The results were strong and among the best in the Austin chalk. Ram is now on stable operational and financial footing and has benefited from higher prices and production. The company is free cash flow positive after debt service and plans to use any cash flow to repay debt. As of March 31st, equity represented approximately 36% of the portfolio. Over 60% of this 36% has come from appreciation over the last 12 months, driven by many of the companies previously mentioned. Our long-term goal continues to target that percentage down to about 10% of the portfolio. As we monetize the equity portfolio, we're looking forward to investing the cash into yielding debt investments to increase net investment income. The outlook for new loans is attractive. We are focused on the core middle market which we generally define as companies with between 10 million and 50 million of EBITDA. We like the core middle market because it is below the threshold and does not compete with the broadly syndicated loan or high yield markets. As such, we do not compete with markets where leverage is higher, equity cushion lower, covenants are light, wide, or non-existent, information rights are fewer, EBITDA adjustments are higher and less diligent, and the timeframe for making an investment decision is compressed. On the other hand, where we focus in the core middle market, because we are not competing with the broadly syndicated loan or high yield markets, generally our capital is more important to the borrower. As such, leverage is lower, equity cushion higher. We have quarterly maintenance covenants which are real. We receive monthly financial statements to be on top of these companies. If there are EBITDA adjustments, they are more diligent than achievable, and we typically have six to eight weeks to make thoughtful and careful investment decisions. According to S&P, loans to companies with less than $50 million of EBITDA have a lower default rate and higher recovery rate than those loans to companies with higher EBITDA. We also believe that middle market lending is a vintage business. This upcoming vintage of loans is likely to be the most attractive we've seen Thank you, Art.

For the quarter ended March 31st, net investment income totaled 13 cents per share. Looking at some of the expense categories, base fees totaled $4.3 million, taxes, general and administrative expenses totaled $1.3 million, and interest expense totaled $5 million. Net unrealized gain on our investments was $33 million, or 50 cents per share. Net unrealized depreciation on our credit facilities was 6 cents per share. Net realized gains on investments was 1 cent per share. Our net investment income exceeded our dividend by 1 cent per share. Consequently, NAV per share went from $8.78 to $9.24 per share. Adjusted NAV excluding the mark-to-market of our liabilities was $9.20 per share up 5.8% from $8.69 per share. As a reminder, our entire portfolio, credit facility, and senior notes are mark-to-market by our board of directors each quarter using the exit price provided by independent valuation firms, security and exchanges, or independent broker-dealer quotes when active markets are available under ASC 820 and 825. In cases where broker dealer quotes are inactive, we use independent valuation firms to value the investments. Our spillover as of September 30th was 33 cents per share. Our gap debt to equity ratio net of cash was 0.9 times. Regulatory debt to equity ratio net of cash which excludes SBIC debt was 0.7 times. With regards to NAV, our GAAP NAV was $9.24 as of March 31st, up approximately 5% from the prior quarter, which reflects both the markup of assets offset by the markup of certain liabilities. Assuming liabilities were not marked to market, adjusted NAV is $9.20 up approximately 5.8% from the prior quarter. We have ample liquidity to fund revolver draws and we're in compliance with all of our facilities as of March 31st. We have readily available borrowing capacity and cash liquidity to support our commitments. We have a strong capital structure with a diversified funding source and no near-term maturities. We have 435 million revolving credit facility maturing in 2024 with a syndicate of banks, 119 million of SBA debenture maturing in 2026, 86 million of unsecured notes maturing in 2024, and the newly issued 150 million of unsecured notes maturing in 2026. Our overall debt portfolio has a weighted average yield of 9.3%. On March 31st, our portfolio consisted of 83 companies across 29 different industries. The portfolio was invested 38% in first lien senior secured debt, 16% in second lien secured debt, 10% in subordinated debt, including 6% in PSLS, and 36% in preferred and common equity, including 3% in PSLS. 92% of the portfolio has a floating rate all of which has a LIBOR floor. The average LIBOR floor is 1%. We have concluded in consultation with our board to extend the incentive fee waiver through June 30th, 2021. Now, let me turn the call back to Art.

Thanks, Aviv. To conclude, we want to reiterate our mission. Our goal is to generate attractive risk-adjusted returns through income coupled with long-term preservation capital. Everything we do is aligned to that goal. We try to find less risky middle market companies that have high free cash flow conversion. We capture that free cash flow primarily in debt instruments, and we pay out those contractual cash flows in the form of dividends to our shareholders. In closing, I'd like to thank our extremely talented team of professionals for their commitment and dedication. Thank you all for your time today and for your continued investment and confidence in us. That concludes our remarks. At this time, I would like to open up the call to questions.

Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow us to not reach our equipment. Again, press star 1 to ask a question. And we'll take our first question from Casey Alexander with CompassPoint.

Hi, good afternoon. Good afternoon. I first wanted to just make sure that I heard that correctly. Of the 36% that's equity, only 3% of that is represented by the JV and the other 33% is straight equity. Is that the right number?

Let me just take a look here. Aviv, you may have it right in front of you.

Yeah, that is the right number. About 3.4% is PSLF. That is correct.

Okay, so is there, I mean, PSLF at 3% of the entire portfolio, is there room to grow that? You know, many BDCs have JVs that are, you know, twice that size in terms of their relative position in the portfolio, and is there any room to increase the dividends that come from the JV?

Yes, that's a good question, and and Aviv just referred to the equity. We also have subordinated debt in PSLF, too. So I'm going to say our sub-debt piece is roughly twice as big as our equity piece. So call it Aviv, 9% in total.

Yes, 6% or so.

So 9% in total. But, yes, I mean, our goal is, A, to fully extend the existing JV, and we have a little bit of room to go there. And then subject to Pantheon's approval, of course, and partnership, We'd be totally open to expanding that JV, optimizing it. If you look at what's going on over at PFLT, our sister company with Kemper, we've grown that JV. We're growing it more. We've optimized the financing by doing a CLO transaction to get a higher ROE. We're not there quite yet. Pantheon's newer to the business, but and that would be an aspirational goal, at least from Penn and Park's standpoint, is to grow it and optimize it.

Okay. And then secondly, if you could just give us a flavor for how the outlook looks for originations over the next quarter to how your pipeline looks, how you would compare that pipeline to what your expected repayments are and, you know, potential ability to grow the interest earning side of the portfolio.

We're busy. Now, busy is good, and also busy also sometimes means repayments. So, you know, it's an active market again. The market has thawed out, and it's kind of very, very active now. We are getting some repayments, and we're also putting new money out. We've never had a real challenge ramping our portfolio subject to our quality control constraints. We obviously only want to do deals that we're very comfortable. So if you look at our history over 14 years, We've never had a problem originating assets that fit our box. These deals, because they are more bespoke, they take time. They take a couple months to work, and you're negotiating covenants and things like that. It's not like you're flipping a switch. But that said, we are active. We do hope and expect to grow both the JV, PSLF, as well as P&NT on balance sheet. And importantly, and we're starting to see the The Green Shoots with Wheel Pros and Walker Edison. Taking those equity proceeds and converting them to yield is obviously a key part of the strategy, and we're looking forward to doing that.

All right, great. All right, thank you. I appreciate you taking my questions.

Thanks, Casey. Our second question will come from Robert Dodd with Raymond James.

Hi, guys. Some semi-housekeeping words. So on Walker Edison, I mean, you mentioned the $3.8 million cash payment. Should we expect, say, half of that to be recognized as dividend and maybe the other half to be return of capital and take your cost basis down to zero, or would the whole thing be dividend income?

It'll be, based on what we could tell, it'll be the first, obviously the first part of it's return of capital. and the second part of it looks like it's going to be counted as a capital gain. So it will not be income, it will be a capital gain.

Got it. Then just on the debt side, I mean obviously the liabilities tax looks in good shape. Is it currently anticipated that you'd call the $86 million when that becomes callable in October or are you going to let that stay? Okay.

The 86 million from...

The baby bonds.

The baby bonds. Look, that's a good question. I think we'll have to see what our cost of capital is then and do the math and the fees. Obviously, we just did a deal that was much less expensive. So haven't made any pre-decisions, but that is certainly an opportunity.

Okay, great. Thank you. Then last, if I could... The long-term goal to get equity, obviously, non-FLF equity down to 10%, what's a realistic timeframe to achieve that goal? Is that three years out? Is it going to take longer than that? It's certainly not going to happen in 12 months, I would think. Three, five...

I mean, yes, you're right. It's a great question. It's an imponderable question, right? It's the kind of guessing. Certainly not a year and hopefully not three years. You know, you're right. I mean, I don't know if that's a tight enough band for you. Some of these we control. Some of these we don't control. We control RAM to some extent, but we don't control where the oil and gas M&A market is. When the oil and gas M&A market starts to heat up, We will, you know, hopefully more action RAM. We do control PT pivot and that, you know, is more in our control and that market's strong. So that may be, you know, sooner rather than later. Does that mean 12 months or 18 months? It's kind of something in that zone. We don't control Kano. We don't control Walker Edison, et cetera. So, you know, Kano's going through the D-SPAC process hopefully in the next month or six weeks. We still don't control it after it does the D-SPAC, but Thank you for that. Thank you.

Our next question will come from Ryan Lynch with KBW.

Hey, good afternoon, guys, and thanks for taking my questions. First off, congrats on a really nice quarter. I just had one today. Can you talk about – has there been any – so obviously you guys historically making these equity co-investments has been a very successful – are all part of your success story to generate some nice naps through this COVID downturn. It's been a part of your long-term investment thesis of making some of these investments to offset some of the losses in your credit book and hopefully generate some gains longer term. I'm just wondering now with such a large equity exposure and your desire to reduce that position in your portfolio somewhat, Does that change the way you guys are looking when you guys are looking at new investments? Is that making you more hesitant to make equity co-invents? Is that adding more equity to your books? Or is that keeping that investment philosophy unchanged since it's worked so well for you in the past?

It's a good question. Most of these equity co-investments are $1 to $3 million bytes. Every once in a while we'll do one that's a $4 million byte. So individually they're not that big and usually they're maybe five percent or maybe ten percent of the amount of debt that we're lending so as individual bites they're relatively small they can have a nice asymmetric upside when they work like some of the names we've talked about so I think we're going to continue to do that as long as we continue to make progress on exits like like WheelPro and like Walker Edison You know, to us it's kind of just like a reloading. You know, we're reloading the next Walker Edison, we're reloading the next Wheel Pro, we're reloading the next Kano. So, you know, because, you know, kind of Wheel Pro was a 7-1, Kano's been whatever, it's been a 20-1 or whatever it is. So I think it's important that we reload, actually, as we're getting, you know, as we're exiting these bigger positions that have grown.

Okay, that makes sense. That's all for me today. I appreciate the time.

Thank you. We'll take our next question from Mickey Schlein with Leidenberg.

Yes, good morning, Art and Aviv. Art, I want to follow up on Ryan's question about portfolio strategy. Given how strong the economy is and how much support the federal government is providing to the economy, Are you more interested in investing in second lien and subordinated debt in this environment, you know, considering that, you know, the administration will be for a while and I imagine we can expect more support if needed. And if so, are the terms that you can get in those markets acceptable to you on a risk-adjusted basis?

Yeah. So, yeah, great question, Mickey, and we think about it a lot. So PNNT utilizes and is across the capital structure strategy. So what's our across the capital structure strategy? It's exactly what it means. It means first lien, some select, second lien in MES, and equity common best. So we have been doing a little second lien in MES. We will continue to do some of it. The bar is high. You're right, the economy and the tailwinds of the economy are a helpful fact. And where we can see quick deleveraging and de-risking, whether it be first lien or second lien MES, that certainly helps us get comfortable with the debt security and also making that equity co-investment.

So Wheel Pros was a second lien deal.

That was a second lien deal we did a handful of years ago. We did a healthy co-invest and that's worked out well. Walker Edison, on the other hand, was kind of a first lien were a stretch senior, Canada was a first lean. So it's been a mixture. But the point is, yes, we're open for business on the second lean MES side. I'm not saying it's a massive part of what we're doing because it's something where we've learned the hard way. You need to be really, really careful. But the risk-adjusted returns, when you find the right ones like Wheel Pro, where you can see a quick deleveraging and de-risking, can be very, very profitable. So it will continue to be part of the mix.

I appreciate that and thanks for that, Art. You mentioned RAM a little bit in your comments and I don't want to beat a dead horse, but the price of oil has remained in that sort of $60 plus level, which I think in the past you've mentioned is where you expected M&A and the oil patch to start to develop. Are you seeing any green shoots at all vis-a-vis that segment and outlook for RAM to eventually be acquired by a strategic buyer?

Yeah, so a couple responses, Mickey. First, at $60, the company's generating good cash flow and paying off debt. That's always helpful. You create equity value when you pay off debt, and that's certainly what's going on here, so that's nice. With regard to M&A, look, have we seen green shoots or green shoot? I think we're in the more green shoot as opposed to green shoots area, but inevitably and hopefully as The market continues to be stable. We'll see more shoots and therefore more M&A activity will come and at some point there'll be a robust market hopefully for RAM. In the meantime, hunker down, generating cash flow, paying off debt. The acreage that RAM has has now been proven out very nicely. It's all a matter of public information. It's on the RAM website. So anybody who's looking for acreage and productive acreage, in that Austin Chalk area can see the numbers, and they're very attractive, some of the best wells in that area. So, you know, we're doing everything we can. We can't control that environment. The mean street loan we got really extends that option out nicely. Again, we want to sell and find the right buyer at the right price at the right time, but we do have a long-tail option at this point. We, in the last 12 months, have done a really good job extending that option. That said, I do also want to say that, and I highlighted this, we're at the lowest percentage of oil and gas in our portfolio in the last eight years. And we hope RAM does well, and we hope we can get great value from RAM over time. But in the meantime, you know, we have some, you know, companies and industries that are kind of more of our forte, where we have domain expertise in healthcare and consumer, et cetera, where, you know, we see Real secular growth and real nice tailwinds. So, you know, whether Ram a year from now is out of our portfolio, still 6.7% of our portfolio, or a smaller percentage of our portfolio because the portfolio has grown and some of these other companies are growing, you know, time will tell. But we feel like we've got, you know, we've got it managed as best we can at this point.

Art, there's a follow-up. Given the uncertainty as to timing of a potential exit on RAM, is there any room in their financials given the cash flow profile for them to eventually pay you a dividend?

It's a good question, and we have thought about that, you might imagine. As part of the loan with the Fed Main Street program, which is a great loan, we are prohibited from paying dividends at this point. So, you know, look, let's see what happens. Let's see, you know, the company's results. Certainly, when we pay down debt, we, by definition, increase equity value. And let's keep that option alive. And, you know, at this point, we think keeping the option alive as long as possible is probably the best thing to do of any option we have here.

I understand. Just a couple of housekeeping questions, maybe for Aviv. I apologize, but we're just swamped with earnings. Could you give me the main drivers of the unrealized gains this quarter and also the undistributed taxable income per share figure?

Aviv, you want to go through the main drivers?

Go ahead, Aviv.

I know it's certainly the same names that Art has mentioned before. PT is like positive 9 cents, unrealized gain quarter-over-quarter. Ram Energy, we just discussed, about positive 7. Jones & Frank, about positive 12 cents, quarter-over-quarter. A bunch of Wills Pro, positive 3. So, you know, these are the larger movers, quarter-over-quarter.

And UTI per share?

I think we said it was $0.22. Is it $0.22 or $0.30? I think it was $0.30.

$0.30. Okay. Sorry for that. I appreciate you taking my questions, Art. That's it for me this morning.

Great. Thanks, Mickey.

We'll take our next question from Kyle Joseph with Jefferies.

Hey, good morning here, afternoon there. Thanks for taking my questions. Most have been asked and answered, but just wanted to follow up for kind of your sense of where you're thinking about portfolio yields, you know, as we think about the market recovering, rotation of equity assets, and then, you know, the potential for higher repayments. Give us a sense for how you see yields trending throughout the remainder of the year.

Yeah, that's a great question, Colin. It kind of relates to the earlier question about MES and second lien, right? So prototypical first lien deals today are L525 to L650. Prototypical second lien and MES are L800 to L900. All of these, I'm assuming, are 1% floor. So it's really a mixed question. and how much second lien MES that we're going to see that we like, you know, where our stringent standards fit. I think last quarter our yields on our new loans were a little higher because we had a slightly higher mix of second lien or MES. This quarter we didn't have quite as much, you know. So that's kind of where we see the market today. It's still probably going to be mostly first lien. It's probably still going to be most of what we're doing in terms of new, but we will opportunistically. And when... The credits meet our threshold due some secondly to miss.

Got it. Very helpful. Thanks for answering my questions.

Thank you. We'll take our next question from Melissa Waddell with JP Morgan.

Good morning, guys. Thanks for taking my questions. Really appreciate all the detail on the equity positions, particularly around timing and the ones that you control versus the ones that you don't. Specifically, I just want to make sure I heard you guys right. On Kano, that's the only one I heard you guys talk about a lockup on. In terms of Wheel Pros and Walker Edison, those are things that are 2Q events that will be completed and done, no lockups. Is that right?

Yes. So Wheel Pro we will be out of entirely, you know, here in the next couple weeks. Walker Edison, we've got two times our cost back already, and we still own... and the same percentage of the company that we owned prior. So will Walker Edison have an event in the next year or two? We hope so. We think so. Again, we're not in control of that. But the company is doing amazingly well owned by a sponsor. So, you know, gravity should take hold and at some point the sponsor should find a full exit. Cano is, you know, is getting merged in with a SPAC. So that's the one where you can look at a publicly traded stock price every day. It's Jaws Acquisition, JWS is the ticker. And we are in a limited partnership controlled by a sponsor that will end up owning a bunch of Jaws stock after the D-SPAC. So that's one you can look at every day. And the independent valuation firm took a 6% illiquidity discount from the publicly traded price. And then also, because we're locked up with a sponsor, there's a 20% exit. The sponsor's getting 20% of the exit proceeds. So that kind of works its way down with the 6% discount, with the 20% exit payment to the sponsor to the value you see. At 331 in the value, you could ascertain today if you want to. It's a little bit less than what it was 331. And then once that de-SPAC happens, there's a six-month lockup. Now, you know, because the sponsor LPs, including us, will own a majority of the company, it's not like you wave a magic wand and you're totally liquid, you know, in six months and one day. It's something that, like any sponsor deal that goes public, it's something that needs to happen over time. The liquidity events, it's got to be done judiciously. Certainly the company itself, you know, will probably want to raise equity for growth. So it's kind of, you probably think about it over a couple year time period.

Art, that's really helpful. Thanks so much.

Thank you. And our final question today will be a follow-up from Casey Alexander with CompassPoint.

Yeah, hi. One of the things that we always try to track is industry concentration risk. And looking at the portfolio and looking at the 10Q, I see 23% in health care, education, and child care. Normally, that would be a number that would bother me, but I think that's such a broad category. It's probably capturing a lot of companies that really aren't very comparable to each other. Does it make any sense to cut that into a couple of different baskets and better define it for investors?

That's a great idea. We do quite a bit in healthcare, and healthcare itself has a number of different verticals. They're not all correlated. We've had the benefit of the Cano mark up. And yeah, we do some education deals as well that are not correlated to health care. So I think it's a good suggestion, and maybe we'll start doing that or figure out some way to disclose that in a more granular basis. Good idea.

Okay. All right, great. Thanks for taking my question.

Thank you.

And that will conclude today's question and answer session. I will now turn the call over to Mr. Art Penn for any additional closing remarks.

Just want to thank everybody for being on the call today. I know it's a busy time in the BDC space, so thank you for your attention and focus. We appreciate it, and we look forward to talking to you next in early August after our next quarter. Thank you so much.

That will conclude today's conference. Thank you for your participation. You may now disconnect.