Mark Hughes : Yeah. Thanks. Good morning, good afternoon. If you mentioned the leveraged finance market, it’s less constructive than the transaction you pointed out how the $1 billion-plus unitranche was becoming more prevalent. Was that a function of this broader transition to private credit? Or was that maybe influenced by some of the volatility later in the market that later in the quarter that you mentioned around higher for longer and political uncertainty.
Kipp DeVeer: Yeah. I mean, and let Kort jump in too, if you’d like. I’d say, to answer your question simply, both right? So I think over a long period of time, the private credit marketplace has been demonstrating to counterparties that it has a very attractive solution for borrowers and owners that can get achieved, particularly in scale these days away from the public markets. So more and more adoption, more and more recognition from our counterparties that the products that we’re providing, again, scale, flexible, customized, et cetera, to each solution are actually really attractive and support their investment thesis on the equity side. That, of course, accelerates during periods of higher market volatility. So over the last few quarters, it’s probably both, but I think the long-term arrow is very much to your question, pointing towards higher and higher percentage of getting done with private capital, and it seems to me the numbers support fewer deals, particularly smaller $1 billion, $2 billion and under getting done away from the syndicated markets.
Kort Schnabel : Yeah. I think our primary competitive advantage is certainty over the banks, which often they provide less certainty. And so in periods of volatility, we’re going to win with that advantage. But then when banks will step back into the market in less volatile times, people remember that volatility can come again and that certainty is valuable. And so that just creates permanent market share shifts, and it’s not linear. Overtime, but that, as Kipp said, that trend toward that permanent shift, we believe will continue.
Mark Hughes : Understood. And I’ll kind of approach the credit question maybe a little different way the — do you get the sense to anybody or the portfolio of companies are, say, foregoing CapEx or hiring if we’re going to be higher for longer in terms of interest rates. Are they keeping ahead of the game in terms of the good EBITDA growth you’ve described? Or I think you might have said it 2024, the outlook is for a little more pressure on credit, just the passage of time. If interest rates don’t decline, will that passage of time just put the natural pressure on credit?
Kipp DeVeer: Yeah. I mean to answer the first part of your question, which I think is the most interesting question. That’s sort of what we’re all watching and talking to our company is about right? Because the reality is we’re sitting in an environment where you’re actually seeing pretty good economic performance again across the portfolio, reasonable growth even if it’s slowing but all of a sudden, companies that are achieving plan or close to achieving plan have a lot less cash flow around than they had, right? So servicing debt something that they obviously need to put the utmost focus on is that changing the way they run their business, are they making fewer investments. It’s a great question. It’s like the question that we’re talking to all of our companies about to understand that. But I think that’s — the answer to that question, which I don’t have today, we’ll dictate sort of where the economy goes in ’24 and beyond.
Mark Hughes : Appreciate that. Thank you.
Kipp DeVeer: Thanks for the question.
Operator: [Operator Instructions]. Our next question comes from Ryan Lynch with KBW. Please proceed with your question.
Ryan Lynch : Hey, good afternoon. My first question was just on the broadly syndicated loan market. We’re pretty weak at the end of 2022 and as well as the beginning of 2023. But in the previous — in the third quarter, you start to see a lot more activity coming back to the broadly syndicated loan market, again, still relatively low relative to what private credit and direct lenders are doing. I’m just curious with the most recent volatility. Is the broadly syndicated loan market still an option for borrowers out there? Or did that take a pretty big step back from the sort of momentum it started to get in the third quarter?
Kipp DeVeer: Yeah. I mean — so trying to come back, it needs the CLO machine to function again, obviously, and that that’s the largest buyer in the space. And I think the banks today are structuring to ratings, frankly, cheap B2 ratings and larger deals, they feel confident they can syndicate. So to the extent it’s that profile, very much an option to the extent it doesn’t fit that profile kind of comes to us and others.
Ryan Lynch : Okay. So it just goes back to your comment of kind of the larger deals still having that option, long to high-quality deals.
Kipp DeVeer: Multibillion dollar term loans that get a B2 rating the markets up and other stuff, not so much.
Ryan Lynch : Okay. And then the other question is for you, Penni. I know you talked about the most recent bond offering and swapping that radar. And one of the questions I just had with that is versus the swap or not swap that out. I understand the commentary on that. But was there any consideration for instead of doing an additional unsecured bond, just drawing down on the credit facility you would have a better spread, you would reduce some commitment fees. You still have that optionality where if rates do go lower, you would actually have a lower overall yield on that debt as well as you guys have over 70% unsecured debt on your liability structure, so it’s not like you guys had a big need for further unsecuring your overall liability structure. So I just wanted to know how is the decision from swapping out unsecured debt versus just drawing on the credit facility made.
Penni Roll: No, I think it’s a great question. As you can see from our capital structure, we have raised a lot of secured debt through revolving credit facilities and have continued to do so even into this year. We like to look at all of the capital markets in which we go to market for the liability structure, and we care about the latter and the maturities and the access to capital from sources. And we are looking forward to debt maturities over the next one, two, three years. So we felt like it made sense to go cap back into the investment-grade market as one of those many sources of capital that we have. If you look at where we swapped it to while higher than most of our credit facilities, it is still our highest priced credit facility by a little bit.
So it’s in line with revolvers. And by swapping it does give us the opportunity to drive rates down if you believe the curve when that happens over the three and half year tenure or so. A lot of this is about continuing to build an appropriate capital structure and also think about the latter maturities. We did have a window in 2027 without much maturing on a relative basis. And even with this issuance, it’s still $1.1 billion in the term debt market in ’27. So it just helps us continue to build out that ladder. And access multiple sources of capital. We’ll continue to look to both markets, but I also think our team has done a great job of continuing to get more capital in on the secure revolving — or sorry, floating rate side. But it takes really all components to make the balance sheet work.
