BlackRock Capital Investment Corporation
Q2 2013 Earnings Call Transcript

Published: 1 Aug 2013

[Operator:]

Good afternoon. My name is Ginger, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock Kelso Capital Corporation Investor Teleconference. Our hosts for today’s call will be Chairman and Chief Executive Officer, James R. Maher; Chief Operating Officer, Michael B. Lazar; Chief Financial Officer, Corinne Pankovcin; and Secretary of the Company and General Counsel of the Advisor, Laurence D. Paredes. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session (Operator Instructions). Thank you. Mr. Maher, you may now begin the conference.

[James Maher:]

Welcome to our Second Quarter Conference Call. Before we begin, Larry will review some general conference call information.

[Laurence Paredes:]

Thank you, Jim. Before we begin our remarks today, I would like to point out that certain comments made during the course of this conference call and within corresponding documents contain forward-looking statements subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of word such as anticipates, believes, expects, intends, will, should, may and similar expressions. We call to your attention the fact that BlackRock Kelso Capital Corporation's actual results may differ from these statements. As you know, BlackRock Kelso Capital Corporation has filed with the SEC reports which list some of the factors which may cause BlackRock Kelso Capital Corporation's results to differ materially from these statements. BlackRock Kelso Capital Corporation assumes no duty to and does not undertake to update any forward-looking statements. Additionally, certain information discussed and presented may have been derived from third-party sources and has not been independently verified. Accordingly, BlackRock Kelso Capital Corporation makes no representation or warranty with respect to such information. Please note, that we've posted to our website an investor presentation that compliments this call. Shortly, Jim and Mike will highlight some of the information contained in the presentation. At this time, we would like to invite participants to access the presentation by going to our website at, www.blackrockkelso.com, and clicking the August 2013 Investor Presentation link in the Presentation section of the Investor Relations page. With that, I would now like to turn the call back over to Jim.

[James Maher:]

Thank you, Larry. Good afternoon and thank you for joining our call today. We had a solid second quarter for new investments, putting $186 million to work. Sales, repayments and other exists totaled $199 million. Portfolio repayments were driven largely by refinancing transactions and while this contributed to a slight reduction in our overall portfolio for the quarter. Our exited transaction produced at a blended IRR in excess of 12%. For the second quarter, our adjusted net investment income was $0.26 per share and continues to cover our quarterly dividend. Capital deployment during the quarter was focused on investments in existing portfolio companies. We remain somewhat cautious about investments in new names. Our goal is to avoid substantial changes to the risk profile of the portfolio. This effort remained a challenge in the second quarter, as many of our successful investments were repaid or exited. During the very last part of the quarter, we were able to pursue additional transactions as credit market conditions ease. This resulted in our adding some $65 million in new investments after quarter end. During the second quarter, our weighted average yield remained relatively stable at 12.1% for income producing securities. In addition, we paid significant attention on restructuring our investments in several portfolio companies. In general, these restructurings have improved our relative position in the capital structure, attracted additional capital at a level junior to our investment. And have increased our control and participation in the potential upside in certain of our investments. Michael will get into more portfolio details later in the call. In the first half of 2013, market conditions have been flowed dramatically. In the first quarter, leverage finance markets reached record high post-credit crunch transaction volumes. However, despite the periods robust financing environment, sponsor backed M&A activity remain slow. In the second quarter, leveraged finance markets experienced quite a bit of volatility, starting the quarter with high pricing and low spread levels, and then slumping by quarter end. During the second quarter private equity sponsored middle market M&A transaction remained tepid at best. The excess supply continues to be directed to other trends types of transactions, without new middle market M&A transactions many lenders jump into senior-only refinancings that took out mezzanine debt or funded sponsor dividends. We continue to have plenty of debt capacity to grow our portfolio and don’t expect to raise additional equity capital in the near-term. At quarter end, we had more than $30 million available under our revolving credit facility. Mike will now discuss our results and portfolio activity in more detail.

[Michael Lazar:]

Thank you, Jim. In advance of the conference call today, we posted our quarterly investor presentation to our website. The financial section of our presentation starts on page eight. First, with respect to the operating details, our portfolio generated investment income of $36.1 million for the second quarter, compared with $31.1 million for the quarter ended March 31st. $5 million difference between the two periods was spread across interest income, fees and dividend income. Of this, interest income was $2.1 million of the increase. Fee income was $2.3 million higher this quarter. Fee income tends to be relatively consistent for our business on an annual basis, although at time it can be somewhat lumpy from quarter-to-quarter. Adjusted net investment income of $19.1 million in the quarter, compares with $16.1 million in the first quarter and equated to $0.26 per share. A large portion of our new investment for the second quarter related to increases in our investments in several existing portfolio companies. When reviewing the earnings release that we issued earlier today, note that several of our investments in this quarter were in new facilities or refinancing of existing portfolio companies, which are illustrated on a growth basis for accounting purposes both as realizations and as new investments. Some of the more significant investments we made in existing portfolio companies during the quarter where as follows. We invested $30 -- an additional $35 million in a refinancing transaction for MediMedia USA. This new investment brings our total investment in the company to $70 million and as comprise of both first and second lien secured term loans at a blended current coupon of 11.6%. During the quarter, we invested additional $20 million in a refinancing transaction for prepaid legal services. This new investment brings our total investment in the company to $35 million and is also comprised of both first and second lien secured term loans. We also added to our investment and advanced during the quarter. In addition, we were active in the restructuring of our debt and equity investments in three of our portfolio companies and in each case made opportunistic additional investments. Details of the restructurings are as follows, first, as we discussed in our last investor call, we restructured our investment in Dial Global which was held at a fair market value of $38.6 million prior to the restructuring, investment cost was $46.6 million. In the restructuring, we exchanged our second lien loan for a new second lien term loans and approximately half of Dial’s new 15% preferred stock. In addition, we received equity once that will vest over time all with the combined total fair market value of $30.9 million. Additionally, we invested $31.5 million in a new 12% priority second lien term loan value at par as of June 30th, and received a $500,000 capital structuring fee, in conjunction with our services performed in structuring the transaction. In June, we restructured our investments in Bankruptcy Management Solutions. Prior to the restructuring, our investments in BMS had an aggregate value of approximately $33.4 million. Post-restructuring, we hold participations in the company’s term loans in addition to a controlling interests and its common equity including warrants. The combined fair market value of all of our BMS investments was $28.2 million as of June 30th. Also during June, we restructured our investment in AGY Holding. In this transaction we purchased $8 million of a new 12% senior secured second lien loan and exchanged approximately half of our existing investment in the company’s 11% senior notes and to a new preferred stock issued with 20% fixed coupon. The combine total fair market value of our original holdings is $23.7 million, compared with $25.7 million prior to the restructuring. Now we’re glad to have these transactions behind us and look forward to capturing more of the improving performance of each of these portfolio companies then would have been the case in the absence of these actions. Across the entire BKCC portfolio the net change in realized and unrealized gains and losses netted to $9.2 million of realized losses in excess of appreciation. Some of the more significant sales repayments and other exists of investments during the three months ended June 30th include the $57 million of par amount of MCCI Group second lien term loan, $29 million par amount of Berlin Packaging second lien term loan an unsecured debt, $38.5 million par amount of Progress Financial senior secured second lien loan, $10 million par amount of Source Corp and $10 million par amount of InterMedia Outdoors. In conjunction with the investments that we made this quarter, we recorded fees of approximately $500,000. We also recognized $4.5 million in fees and prepayment penalties in conjunction with exits. We had no investments or non-accruals at quarter end, including the three portfolio transactions where we have been actively engaged in restructuring activities, the weighted average rating of our portfolio companies at June 30th was $1.16, compared with $1.21 on March 31st. With that, I’d now like to turn the call over to Corinne to give some additional financial information for the second quarter.

[Corinne Pankovcin:]

Thanks, Mike, and hello, everyone. I will now take a few moments to review some of the other details of our 2013 second quarter financial information. At June 30, 2013 our portfolio consisted of 41 portfolio companies and was invested 43% in senior secured loans, 21% in senior secured notes, 21% in equity investments, 11% in unsecured or subordinated debt securities and 4% in cash and cash equivalent. As compared to March 31st, our equity and cash equivalent components increased 9%, while our senior secured loans and unsecured or subordinated debt securities declined 9%. The composition of our portfolio invested in equity securities grew 5%, up from 16% last quarter, resulting from appreciation in our existing investments, as well as from additional equity securities received in conjunction with the restructurings during the quarter. Our average portfolio company investment at amortized costs excluding investments below $5 million was approximately $22.6 million at June 30th, down from $26.9 million a year end. The weighted average yield of the debt and income producing equity securities in our portfolio at its current cost basis was 12.1% at June 30, 2013. The weighted average yields on our senior secured loans and our other debt securities at their current cost basis was 11.5% and 13.2%, respectively at June 30, 2013. Yield exclude equity investments with no stated dividend rate, short-term investments and cash and cash equivalent. At June 30 we had $314.9 million in debt outstanding. Our leverage stood at 0.45 times at quarter end, a reduction from 0.5 times at year end, providing us with available debt capacity under our asset coverage requirements of $371.8 million at June 30, 2013. On June 7th, we entered into an additional $10 million of senior secured term loan credit commitment. The term loan has a maturity date of May 31, 2018, and the interest rate is LIBOR plus 375. At June 30, 2013, we had approximately $7.6 million in cash and cash equivalent, net of payables for investments purchased. Subject to leverage and borrowing base restrictions, $334 million was available for use under our amended and restated senior secured revolving credit facility which matures in March of 2017. With that, I would like to turn the call back to Jim.

[James Maher:]

Thank you, Corinne. One statistics that we are currently focused on is the percentage of our total portfolio comprised of equity investments. Equities currently make up 21% of the portfolio. While this is higher than desired concentration, it is largely the result of continued quarter-over-quarter improvement and increases in valuation. With that said, we begun to focus on potential exits for some of these investments and will monitor market conditions for realization opportunities going forward. Needless to say, any redeployment for equity to income producing securities will have a positive impact on NII. We remained patient in the current environment. We remained focused on growing our portfolio and consistently growing net investment income. Dividend coverage is our priority, we remain comfortable about the level of our dividend as we look forward into the remainder of the year. On behalf of Mike, Corinne, Larry and myself, I’d like to take this opportunity to once again thank our investment team for all of their efforts and to thank you for your time and attention today. Operator, would you now please open the call for questions.

[Operator:]

(Operator Instructions) We do have a question from Jonathan Bock from Wells Fargo Securities.

[Jonathan Bock:]

Good afternoon, guys, and thank you for taking my questions. Jim, Mike question on the overall marketplace, I know you mentioned that it is a bit frosty end or maybe difficult to deploy at a new investments at attractive risk adjusted returns and I’m just noticing so, can you kind of reconcile the fact that it's a frothy environment with the fact that there was a substantial amount of second lien and subordinated debt that -- that comprises your originations this quarter. So, Mike take that to me as you are moving in the higher risk securities.

[Michael Lazar:]

Sure, Jonathan. I think in the prepared remarks you heard us speak about the significant majority of the loans and investments that we originated during the second quarter being related to existing portfolio companies. In a few of the ones that I mentioned, we participated in loans, where performance in some of these companies have improved and we were able to make a new loan or a new investment and be part of a transaction that would have taken out or replaced our existing investment. Those are sort of closer to our current market terms as you can see in the materials that we have provided, but there we have -- we have been watching the credits, we are comfortable with our position and in each of those that the two that I am thinking of specifically, we participated both in first and second lien to sort of arrive at a blended exposure that we feel makes sense. Those are two largest sort of net investments and portfolio companies, Jim also mentioned that at the very end of the quarter when the markets got a little bit more choppy. We were able to be slightly opportunistic. The majority of the instances were that was true will be reflected in the third quarter's financial statement, although there are one or two small new investments that we made right at quarter end, that were opportunistic. So I think, besides that general comment about those investments, I think with respect to restructuring as we spend a lot of time making sure that, as we restructure new investment in an existing portfolio company, where there has been a situation that needs to be resolved. We leverage every angle that we have by being an incumbent [lender] in those deals. We negotiate very heavily in getting our best outcome. And many of those cases what we are trying to do is create opportunities to participate in the upside and the improvements, sometimes that means reinvesting in a junior debt security to preserve optionality, sometimes that means as we did in several cases taking an equity stake in those businesses, because we are close to them and we see the turnarounds in many cases.

[Jonathan Bock:]

Hey. I appreciate that Mike, and I guess, when we talk about refinancings more at market terms, where would you put leverage as a multiple of debt-to-EBITDA for maybe those two or just broadly the deals that you refid and participated in the refinancing this quarter?

[Michael Lazar:]

Sure. In both of those refinancing transactions and this is MediMedia really on prepaid. The overall debt at the company level remained consistent. In one transaction, there was a retirement of some preferred stock as part of the sources and uses that would be prepaid but since that was still a priority security is sort of a bit of a wash, mostly a refi. So it’s not really a big change in the attachment points, but rather a change in some of the terms on the margin and some of the pricing elements on the margin.

[Jonathan Bock:]

So it’s possible the attachment points remained in maybe high fours to mid-fives and the terms, the covenant near-terms maybe declined or became a bit more aggressive?

[James Maher:]

Yeah. I would say that’s fair. I think the generalization of fours to fives, ones on the low end there and one of those twos on the higher end. But I think it’s fair to say that, it’s sort of a pricing in terms question, an upsizing or simplification of the capital structure in both instances. And one where -- in one case you had a basically the portfolio company taking the opportunity of what in the front half of the second quarter was a very active bullish market to extend some maturities as well.

[Jonathan Bock:]

I appreciate that. Maybe turning to the dividend in terms of a dividend policy, obviously it’s difficult to reinvest or solely focus on kind of the current portfolio refinancings in order to kind of run in place because at the end of the day you still suffer from spread compression. At what point, does it make sense for you to perhaps look at the dividend and say that given the current aggressive structures and aggressive pricing in middle market credit today, particularly in the higher end of the middle market, we’re just not comfortable with really deploying a whole lot of capital and neither are we comfortable with perhaps maintaining a dividend level that we can’t go into as a result of the market being, I’d say a bit frosty as you mentioned.

[James Maher:]

Yeah. Well, in terms of the dividend, we obviously look at it every quarter and we look at it both historically which our LTM coverage is a $1.05 versus $1.04 in actual dividend. We cover the dividend this quarter. We have significant debt capacity and underutilized leverage which would even at lower rates and higher -- lower leveraged transactions would be in a position to increase NII there. As I mentioned in my prepared remarks, we have significant equity and if you take any of that equity and redeploy it, even into first lien loans, it makes a significant difference in terms of NII. So we have a couple of levers to pull here and we intend to pull them. And we feel, as I said at the end of my prepared remarks, we feel comfortable with the dividend. So we’ve been having this conversation for I think the nine quarters that we’ve been at. And we’ve covered the dividend throughout that period of time. So I mean I think the proof maybe in the pudding.

[Jonathan Bock:]

I appreciate that. And Jim, when we look at the equity assets that you do have on the balance sheet, just looking at the ones with meaningful gains, how much do you actually control in order to affect the sale of those companies to actually realize the cash and redeploy it?

[James Maher:]

Yeah. I think I would say significant influence is really in most of the -- in most cases. There is no -- I can’t think of a significant investment where we could actually pull the trigger ourselves. We could sell to another -- certainly in a couple of instances, we could sell and might sell to another equity holder.

[Jonathan Bock:]

Got it. Okay. So influence but not exactly control, I guess, is kind of how we’re differentiating that just, if I read you correctly?

[James Maher:]

Right. And also many of these companies are companies that were involved in restructurings. They were companies that had probably been in our portfolio for a significant period of time. And as time has moved on here and the economies gotten better and their results have improved dramatically, many of these investments are ripe for sort of harvesting at this point.

[Michael Lazar:]

I would add to Jim’s remark just that each investment, each portfolio company and if we hold an equity investment is so unique, set of circumstances that it varies very, very broadly across the range.

[Jonathan Bock:]

Great. And then just one little mark question, I noticed in the book that there was a meaningful write down taken to advance lighting. Can you walk through what’s happening in that investment?

[Michael Lazar:]

Yeah. That one is pretty simple. They had a weak sort of quarter or two and the business is sort of a base materials business then the material they used in commercial and outdoor lighting principally, although they have some additional sort of chemicals that they sell that are related to those endeavors. They had a weak couple of quarters. EBITDA dropped and the mark I think was appropriately reflecting that they had a weak couple of quarters. We don't see any specific trend or significant change in the fundamentals of the business. It’s a very high market share, well-positioned company. There has not really been a replacement product or change in the way these things are sold that we are aware of. But we are monitoring the company much more closely now and continue to do that and take a conservative approach as we think about how we might move forward in that investment.

[Jonathan Bock:]

Great. Thank you so much for taking my questions.

[Operator:]

Your next question comes from Troy Ward from KBW.

[Troy Ward:]

Great. Thanks. Good afternoon guys. Hey, Corinne, you mentioned -- just couple of quick housekeeping things, you mentioned that the weighted average yield on the portfolio was 12.1 and then you broke it further into senior and other and I saw that in the Q. Do you have what the weighted average yield on the new investments on the quarter was, did you say that number?

[Corinne Pankovcin:]

I don’t, I didn’t and I don’t have that exactly handy at the moment, but certainly would be happy to provide it later in evening.

[Troy Ward:]

We can go through the Q and kind of find them. Mike, back to the restructuring, obviously this is something that with those three that we were prepared for. Can you talk about how much did the restructuring actually changed the actual kind of payment debt burden on the underlying companies, either through actual lower debt or additional non-yielding equity into the capital structure or was it more just of a characteristics of the debt changing from cash paid to PIK?

[Michael Lazar:]

There’re elements of both of those characteristics in each of the different restructurings. We’ve lowered that cash burden on, for example, AGY by converting half of the senior note into a PIK instrument. We did that for two reasons. One is to preserve flexibility and liquidity in the business. Another reason frankly is that we’re in a position with the preferred stock that we structured with that very high PIK dividend to capture a significant portion of the upside and what is fundamentally is some cyclical business that all have some upside from here. So part of that would be increasing cash availability but really in that case, for example, what we’re really trying to do is capture some upside from where we sit. Bankruptcy Management, there are a lot of different securities and a whole lot of things going on and a big part of what we did there is we reduced the overall data on the business and really moved our equity, our new equity attachment point much closer -- much lower into the capital structure, in other words, are cut in for receiving significant shares of increases in value goes from being behind a whole lot of debt, including debt we participated in, into behind very little debt. So that sort of a debt cancellation and debt changeover and now on a slightly different set of circumstances. Dial Global, again we -- that was slightly more complicated restructuring there. The company has been underperforming for a period of time. We want to preserve liquidity in the business. So we moved a portion of our securities from cash to PIK. But in that case for example, we put in a new loan of $31.5 million, that’s 12% cash pay that we’re -- that attaches much higher up in the capital structure. So we’ve improved our positioning in the company and we did it in a way through series of negotiations, where we’re able to entice the equity sponsors by doing this, to put more cash equity into the business beneath us. So again, range of outcomes, range of reasons, each restructuring is very specific to its own circumstances. I think, as you pointed out in framing the question, we’ve been talking about these portfolio companies for some time, people -- most certainly people here have been watching them carefully and they have been active in trying to structure an outcome where we preserve the best return opportunity. I think to use Jim’s phrase, the proof in that pudding is that there wasn’t a really significant change in the overall value of this business from quarter-to-quarter. Thus we’ve improved our position, improved the safety of some of them and found a way to probably capture some additional upside from here.

[Troy Ward:]

Okay. And then related to those three companies, can you let us -- tell us how much income came from those three companies, let’s say in the March quarter. The way your disclosure works where you just talk about the portion of the payments in cash and the portion of it’s PIK. If I remember, right, Mike, obviously, on a cash, you’re going to take that of a par value but at PIK, you accrue that into income based on fair value. So I can’t really determine, how much income was being generated from those previously. And then second part of the question is how much income is going to be generated from them into the income statement going forward?

[Michael Lazar:]

That’s generally -- so your statement about how those two different types of securities, cash pay relative to PIK securities work through our income statement and cash flow statement is generally correct. There are some specifics about each one of the investments that we can walk through. I think that’s a pretty long topic for this phone call and if you don’t mind, I’d be happy to spend some time with you, going through the specifics in the future or following this call. I’m not sure this is time or place to do it. But I’m happy to do it as a follow-up.

[Troy Ward:]

Okay. That’s fine. Let’s getting into (inaudible) quite a bit. And then Jim, final one, you mentioned 21% of equity was a bit on the high side. So you may be looking to redeploy those into yielding, that’s great. Do you have a similar kind of thought process around PIK income? I mean, obviously it feels like to me that the amount of PIK income is definitely going to be on the rise here. Is there some level where you kind of feel like you -- you've got a threshold for PIK where kind of enough is enough?

[James Maher:]

Yeah. Well, we have -- just going back to comment for a second, generally sort of felt that 10% is sort of a number that is there when we would like to target our equity, our overall equity exposure. In terms of PIK income, we don’t have a number. It sort of depends on what the secure -- what the make up of that is. We have generally thought that 5% to 10% of the portfolio in that range is more than enough PIK.

[Troy Ward:]

And then, I think the current -- the six month number was in the Q at 7.2% but obviously with the two restructurings happening late in June, almost no income from PIK income was recorded. Do you anticipate that your PIK income will still be below 10%, following these restructurings?

[Michael Lazar:]

Well, I mean, I’ll jump in to that. I think, it’s -- part of that will be determined on what some of the valuation levels come out on some of these securities. So it’s a little bit premature to stick in number on there but I think just to amplify PIK generally, it’s a general rule of thumb we tend to avoid securities with a significant portion of PIK income, sort of, period full stop. We have a tolerance for a small amount of PIK as Jim just suggested but it’s never our focus and it’s never the type of securities that we’ll tend to be seeking. In some of these restructurings, we’re willing to take PIK securities. And in many cases, we fight to get PIK securities, not so much because we’re specifically focused on the short-term income but rather the contrary, we want to capture a rate of return ahead of somebody when that equity finally becomes sellable at a high return. We want to capture a disproportionate share of that by putting a PIK preferred coupon on what tends to be preferred stock. So there are two sort of different motivations for the different types of investments, one being an out of the box rate down the fair way PIK loan. We tend to avoid those. And one being a using every leverage angle that you have and restructuring to get ahead of the people and we like to do that. Of course, we rather not have any restructurings but it’s part of the business. And so when they come along, we try to be aggressive in capturing net value.

[James Maher:]

We haven’t taken our purchase to PIK instrument. It’s been a long, long time fully on in our existence. We used to try to match our PIK income to our dividend reinvestment. And that is very, very high. It’s now down, I think, roughly 6%. And so we -- as we think about PIK income, we actually think about dividend reinvestments. So that’s why I say 5% to 10%. That’s sort of where dividend rate investments run over the recent past.

[Troy Ward:]

That’s very helpful color. Thanks. Just parting comment, I would ask that you’d consider kind of improving your disclosure around the PIK. Just to give us a little more clarity on the moving parts, as you said, it’s never been a big number and it still isn’t. And we appreciate to always giving the number as an aggregate. But I think -- I think if you look across the peer group, I think the majority of the BDC peers do provide the breakout between cash and PIK. And if that’s something you’d consider, it would be appreciated. Thanks guys.

[James Maher:]

Okay.

[Corinne Pankovcin:]

But we do have the PIK on aggregate and we tick mark each of the individual securities that are currently in that. So we can explore and expand if we find it, that would be helpful.

[Troy Ward:]

Right. Thanks Corinne.

[Operator:]

(Operator Instructions) Your next question is from Douglas Harter from Credit Suisse.

[Douglas Harter:]

Thanks. I was hoping, you could talk about your outlook for repayments in the back half of the year?

[James Maher:]

We know of one potential sale, that may or may not got through. And at the moment, that’s about all we see in the forward calendar.

[Douglas Harter:]

Great. And just how far visibility do you typically have on something like that?

[James Maher:]

Three, six months.

[Douglas Harter:]

Great. And then, just want to get your -- obviously you guys have said you are slightly cautious on the market but prefer to reinvest in your own portfolio of companies. Just want to get a sense as to how you think the deployment of your strong liquidity position might pan out over coming six, 12 months?

[Michael Lazar:]

It’s Mike I would -- the way I would describe that is with two words that generally don’t go together. On the one hand, we’re quite cautious given market conditions but on the other hand we’ve been successful and being opportunistic over the last several weeks when the market has become slightly more choppy. So what we do is we sort of do a bunch of prep work, bunch of background analysis on several investment opportunities. There were times when we can more aggressively jump into those on the margin and times when we can’t. We have been some what successful as the market pull back slightly at the end of June and beginning of July and given some of the increased volatility in debt markets generally and sort of the behavior of the federal reserves and its commentary back and forth over time. We’re optimistic that we will see similar opportunities even if they maybe brief to put some additional money to work in some of these names that we are tracking.

[Douglas Harter:]

Got it. Thank you.

[James Maher:]

I guess, the only thing I would add to that as I think we -- as we look at the market place today, there is an opportunity to put money to work at lower rates and higher up in the capital structure. And I think as we go forward over the next six months, you’ll probably see us doing more of that. To utilize -- as I said earlier, we need to utilize more of our leverage capability.

[Operator:]

There are no further questions in queue at this time.

[James Maher:]

Well, thank you all for joining us this afternoon and as always if you have any questions we’re here and happy to answer for you. Thank you.

[Operator:]

Ladies and gentlemen, this does conclude today’s conference call. Thank you for participating at this time. You may now disconnect.