Daniel Pietrzak: No, I think the short answer is yes. I think it has closed meaningfully or will kind of, close enough to get the transaction levels up. I do think you had a bunch of what’s called different factors in play. I think we even going back to last summer, we saw a little bit more activity, a little bit more books coming around or sort of chatter about deals. And the events in Israel and the Middle East sort of happened in October. That sort of, we’ll call, put most things on hold. And then the market was forecasting these six rate cuts coming into the year. I think people wanted to hold assets with the view that in a lower rate environment, they would sort of get better prices. But I think there’s a decent consensus out there that rates are going to be higher for longer.
So that’s kind of off the table. And I think there’s also a decent consensus that, while there might be certain bumps in the road or sort of challenges, this, as I said, the conversation around hard landings off the table, it’s all, pretty muted in terms of sort of, I think challenges in people’s mind, albeit, I think we’re a little bit more cautious on that. So I think all that is coming together. And then Robert, you said it. I mean, people are looking for capital back on the LP side. And on the other side, there’s a lot of dry powder.
Operator: Our next question is from Eric Zwick of Hovde Group. Eric, go ahead with your question.
Eric Zwick: Wanted to start first with a question regarding the pipeline. And curious, if you could provide any commentary in terms of how that looks today in terms of the mix of new investments versus add-on opportunities, as well as if there are, any particular industry segments that you’re finding that are either kind of more active or more attractive from your perspective?
Daniel Pietrzak: I’d say it’s almost in line with what you’d probably expect, right? We’ve been probably overweight, the add-on and the incumbency. So I think you’re always going to see a large chunk of that considering the size of the platform, but some of that will be regular way kind of new deals. So I think it’s pretty balanced. I think the pipeline is decent right now. I think the level of deals that I see being screened or making their way to investment committee is definitely up more, quarter-on-quarter or up more than maybe what we saw last year. I still think it’ll take a little while to play out though, right, because some of the conversations here are just people gearing up for this. That means it’s a multiple month process and a multiple month kind of close, but constructive.
Brian Gerson: Yes. I mean, the one thing I’d add, Eric, is that just because a company is being sold doesn’t necessarily mean it’s going to go out of our portfolio. We are always in active dialogue with sponsors looking to sell companies about providing financing to the new buyer. And because we have the incumbency position, that gives us a bit of an advantage over some of our competitors. So clearly that’s a focus for us.
Eric Zwick: That’s helpful. Thank you. And the second question for me, it was just interesting to notice on Slide 10, median interest coverage for your companies has been pretty stable for about a year and actually ticked up a little bit in 1Q, which makes sense given that base rates have been pretty stable and given the fact that you said you’ve kind of seen high single-digit EBITDA growth over the past year. So I guess if we assume that rates stay here or even potentially come down and you continue to see some EBITDA growth, is it a fair assumption that we’ve kind of seen the bottom of kind of a trough for this particular metric for this cycle?
Daniel Pietrzak: Yes. That would be our view in terms of the trough. Now, that view is a little bit driven off the fact of, well, we don’t believe that rates are necessarily coming down anytime soon. I don’t think they’re going up either, right? So it’s probably more leaning to over the next several years kind of these rate reductions. You did see that kind of uptick a bit. I think to be fair, it probably wasn’t all for the entire sort of point one. I think some of it may have just been kind of the rounding there, but it definitely improved kind of quarter-on-quarter.
Eric Zwick: Thanks for that confirmation there. Thanks for taking my question today.
Operator: Our next question comes from Maxwell Fritscher of Truist Securities. Maxwell, go ahead with your question.
Maxwell Fritscher: I’m calling in from Mark Hughes. Just a broader question about the economy, but is there any sector in particular that you were seeing cracks in or staying away from or are there any credit issues, and this is industry-wide, not just in your portfolio. Are these credit issues more idiosyncratic? Thanks.
Daniel Pietrzak: Yes. And I think we’ve talked about this on some of the prior calls. I mean, I think we have tried to build the portfolio staying away from the secular decliners, right? So that’s been sort of positive out of the gate, but that has, those, I think in many ways would continue to be challenged. I think we have seen businesses in the healthcare space probably be a little bit more challenged. I think some of that has had to do with, and this is an industry point, not just anything with us. Some of it has to do with the revenue side and how people get reimbursed. We’ve seen some of the discretionary spend, names kind of struggle. Some of these roll-ups are sort of struggling. So healthcare, which historically has been viewed as a defensive asset class, has probably been a little bit more mixed. And I think that probably continues for sort of some time. But Brian, anything else you want to add?
Brian Gerson: I mean, look, I think you said it pretty well. I mean, we’ve been focusing on, industries that we think are more defensive. We like software, we like consumer-driven healthcare, we like professional services, business services. Those have all been pretty resilient. Energy, retail, consumer products, we’ve just tended to stay away from. Look, I think we’re continuing to see pretty solid earnings growth across the book, as evidenced by that 7% number that Dan focused, but that’s clearly an average. So, I would tell you that, there’s nothing right now where we could say semantically, beyond what Dan said, there are certain industries that are just in having real trouble. It’s been somewhat, specific situation specific with, some of our non-accruals and problem credits. And I think we just need to continue to be cautious about the overall economy and whether we have a soft landing or not.
