So the basic answer is if there’s volatility, we won’t have a need to liquidity, we can choose our deployment. We would not expect to sell for less than value because of trading vagaries in almost all cases.
Arren Cyganovich: Okay. Got it. Well, congrats on the transactions.
Operator: Our next question will come from Robert Dodd with Raymond James.
Robert Dodd: First, on the asset side. So of the 183 on Slide 14 of the merger presentation, 183, that’s the directly originated stuff, that’s not originated by MFIC. Would we expect that to also be rotated out over a normal course of business as well? I mean, it’s not just the BSLs, right? If it was originated in a large market group rather than the MidCap Financial. Is that also going to be part of the cycle?
Howard Widra: No, those will be part of sort of the core portfolio. And again, because they’re directly originated as part of sort of the broad Apollo strategy and direct origination. And obviously, they’re private credit, so they’re not liquid anyway, but we would not expect those to be…
Robert Dodd: Are they going to be monitored by the MidCap team even though MidCap didn’t originate them? Or that they’re monitored by the large market group?
Howard Widra: Yes, monitored by the large market group. But just to be clear, so you get a sense of how it works. MidCap manages the assets that are jointly held by both the MidCap private company and MFIC. But there is oversight from MSIC for all of those assets. There’s separate work being done and certainly much more involvement when credits have sort of some changes, either upsides or credit issues, watch points, et cetera, led by Tanner and Ted’s team, that will be the same on these credits, except instead of MidCap doing the initial monitoring, Apollo will do the initial monitoring and then will flow through to our team. But we have the advantage, obviously, of knowing a lot of people and working next to all those people and having all the history with those ones.
Robert Dodd: Got it. On the liability side of — I think I’ll ask the question about target leverage. If I look on Slides 14 and 15, it tends to imply target leverage about 1.4x. Then I think you mentioned that’s the low end of the target range. In the past, you’ve set a target range of 1.4x to 1.6x, that you prefer right now to operate at the low end. Is the explicit target range going to change if both the mergers occur, or is the target range going to remain that 1.4x to 1.6x with a preference of where you operate depending on where the market cycle is.
Gregory Hunt: Yes. I think we’re going to keep the leverage targets the same.
Operator: [Operator Instructions]. And our next question comes from Ryan Lynch with KBW.
Ryan Lynch: I think we touched a lot on the asset side this morning. My question revolves around the liability side. I see there are a couple of credit facilities in both of the closed-end funds. I’m just wondering, will those — and they’re pretty low cost, like 90 basis points plus SOFR. Will those credit facilities be brought over as part of the merger? And how will this — and how do you expect the liability structure to kind of look post merger? Because if it’s all drawn — if it’s all kind of brought on via the shares issued and the drawing down of the credit facility, as you kind of mentioned in your slide deck, it reduces your unsecured debt to around 23%. Is that a level you guys are comfortable with longer term? Or will there also be something you think changes to the unsecured debt portion of your liability structure kind of at some point post merger?
Gregory Hunt: Yes. I think as of the merger, we will be repaying those credit facilities of AIF and AFT. I think if you look at those facilities today, they primarily support the prior strategy of the funds for BSL financings. And as the fund has gone into more direct origination, that cost of financing probably wasn’t sustainable. I think as you look at the combined entities, we do have plenty of capacity given the recent CLO issuance. And we’ll continue to evaluate where markets — as interest rates change over the next 12 to 18 months, we’ll look at the unsecured market. I think we’re very familiar with it given our non-traded BDC, which we’ve put a number of unsecured financings on, and we’ll watch that market. But we want to efficiently look at the CLO market, which we think is very attractive for this asset class. And so I think we’ll just continue to diversify our financing as we rotate the portfolio.
Ryan Lynch: Is there a minimum level of, like as a percentage of your liability structure, where you guys want to have unsecured liabilities at? Or is that not a consideration?
Gregory Hunt: I think from our point of view, we look at it as part of it, but I think we’re looking at ROE and return to shareholders. And I think that that’s our focus. And so I don’t think we have a set target as of right now.
Ryan Lynch: I appreciate the time today and congrats on the merger.
Operator: Our next question comes from Melissa Wedel with JPMorgan.
Melissa Wedel: Given the proposed dividend, special dividend as part of the mergers, is if fair to think that there wouldn’t likely be contemplation of any other special dividend to MFIC shareholders before closing?
Howard Widra: Right. I think that’s right. I think that’s it. We’re going to operate in the normal course — I think your question is, in the normal course, we may have paid a special dividend this year, but the expectation is that the special dividend that’s paid post the consummation of the mergers will be the next special dividend beyond what our normal dividend policy is.
Melissa Wedel: Okay. Appreciate that clarification. And then in terms of the anticipated dampening effect on portfolio leverage post merger. Again, understood nothing’s approved yet. A lot of things have to happen. But given the dampening effect on potential portfolio leverage, does that give you any thought to sort of taking leverage above the lower end of your target range in the near term? And does the sort of opportunity set support that thought given what’s out there to be deployed right now, but also what you’re expecting in terms of repayment?
