Dwayne Hyzak: Sure. I do think, overall, for the last couple of months, you have seen a slowdown in the overall market. From my standpoint, there’s purely my personal opinion. I think that’s because the private equity firms have been, needing to reset their expectations, given the significantly higher cost of capital that exists in today’s marketplace. I think to some extent, that’s happening. So I do think that you’ll see that part of the marketplace from an activity standpoint starting to improve. And I think we’ve already seen that here more recently, but I’ll give credit to our private credit team over the last couple of years, including during COVID, largely because of what we just talked about, us having liquidity and having a capital structure that allowed us to continue to be active.
We did a great job, and we built some what we think are some really good high-quality relationships with private equity firms that we want to be doing business with. So we continue to see good deal flow. I do think we, just like everybody else, is being very prudent in how we approach the market. But from our standpoint, when a private equity firm is transacting in this marketplace, we think the quality of that transaction is likely better, because it survived what’s going on in the broader economy. And that private equity firm is excited about moving forward with that investment despite the fact that they’re going to pay a higher cost of capital, at least on the debt capital side. So we think it’s a good environment to be investing for those reasons.
And obviously, as we touched on earlier, you have the ability to continue to be active and be selective where it makes sense given our conservative capital structure and our liquidity position. But I’ll see if Nick wants to add any additional comments on that point.
Nick Meserve: I think, Dwayne got nailed the overall theme. I think the other one is repayments are down, specifically, across the industry. And so with lower repayments, our need to respin that money is lower. And so our total transactions might be down, but the dollar amount was spent in total on a net basis will be where we target for the year.
Mark Hughes: Yes. Thank you for that. And then just to kind of step back, the lower middle market, if we do run into a slower economy, is that going to perform from a credit perspective, refresh me on the kind of the dynamics there?
Dwayne Hyzak: Sure. So I’ll provide a couple of comments, and then if David wants to add on, he can. But I’d say the key points we look at. One is most of our lower middle market portfolio is fixed rate debt as opposed to floating. So they’re not being impacted by the rising rate environment. That’s one of the big positives we see in that part of our strategy. The management team is there, they obviously are dealing with inflation, supply chain, labor, et cetera, but they are not worried about their capital structure because they’ve got a very well-capitalized, strong investor in Main Street in the capital structure, and they are not seeing, at least for the majority of that portfolio are not seeing their interest expense changes as market rates have improved.
