Erik Zwick: Good morning. Thank you. Just wanted to first start with a question on portfolio leverage. You indicated that you’re at the top of the range now and with pro forma for OSI II closing down to about 1.16. But given the fact that over the past 12 months, you were able to go from kind of call it the bottom of your range to the top of your range and it seems like investment opportunities are still plentiful today. How do you think about managing that leverage and continuing to grow out the portfolio here in the near-term?
Armen Panossian: Yes. Thanks, Eric. So a couple of things. One is, we have seen some of the best opportunities in direct lending over the last several months than what we — better than what we’ve seen over the last several years. And that’s why we felt the conviction to increase our leverage and take advantage of those opportunities. We did also buy publicly traded debt as that market went through some very deep choppiness in 2022. And I would say that public book is a source of cash to fund new private deals without increasing leverage. We don’t intend to increase leverage from the current levels. We’re always looking at potential market activities, where we can increase the size of our portfolio as well. So we’re — I think that €“ I think that we can grow, but we’re not going to want to grow through leverage at this point.
We’re just going to kind of work within the portfolio and do whatever we can on the capital market side, when appropriate. So that’s all I could say about that.
Chris McKown: Yes. I think one of the things that as you look at the December quarter, that balance sheet was pre-merger, but we were working on the merger, announced the merger. We had the vote for January. So we are anticipating and expecting kind of managing the portfolio, assuming the merger would be completed. So that’s why like the 1.16 number is really more operative than the 1.24 times
Erik Zwick: That’s helpful. And just a bit of a follow-up on the secondary market. Opportunities you mentioned, certainly a little bit slower in the last two quarters, but the pricing that you saw in the most recent quarter, according to Slide 6 was the most attractive you’ve seen. So just curious if that was a, a one-off opportunity, or would you expect to continue to see similar opportunities maybe in the next quarter or two at attractive pricing like that?
Armen Panossian: Yeah. I think the pricing is relatively consistent in terms of the opportunities we’re evaluating now. Again, sponsor-led private credit is SOFR plus 650, 675 for the typical deal non-software transaction, software’s at SOFR plus call it 750 or thereabouts. That’s pretty consistent today versus the last quarter or the quarter before. And on the non-sponsored side, its north of that, generally, what’s hard to predict at this point is the pace of the deal flow. It’s €“ on the non-sponsor side, especially, there are periods of time, where we do a lot in one quarter. It just happens to be the case. But because it’s pretty opportunistic and bespoke, we really have a tough time predicting the pace at which we originate on the non-sponsored side. But pricing-wise, it’s I would say, holding in there, at least for now year-to-date versus last year €“ versus the back half of last year.
Erik Zwick: Got it. And one last one, if I can squeeze it in. Just looking at the press release that there was 42 equity investments currently today, 30 of which you also hold a debt investment. So for those 12 where you don’t currently have a debt investment, are these opportunities whether the debt has repaid and you still have equity investments, or are there times or you take solely make an equity investment in companies?
Armen Panossian: Yeah. We generally don’t take equity investments solely. It would be in a small handful of instances, the legacy portfolio that we acquired from Fifth Street that had restructured and we own equity in those small handful, or it’s an equity position that is left over from a debt position that did repay. But we don’t buy just straight equity without €“ without a debt component attached to it as a matter of policy.
Erik Zwick: That’s what I figured. Thanks for confirming. That’s all for me today. Thank you.
Operator: A question comes now from Ryan Lynch from KBW. Ryan, please go ahead.
Ryan Lynch: Hey, good morning. First question I had was just when I look at your liability structure post merger with OSI 2. It looks like your guys’ total unsecured borrowings drops to about 36% from 43%. Are you guys comfortable operating at that range where you’d be post-merger, or are you guys €“ would we expect you guys to look at the capital markets to increase that number to a level closer where you guys have kind of operated historically?
Matt Pendo: Yeah. Ryan, it’s Matt. Good questions. So specifically answers, are we comfortable at this level? I’d say, the answer is we are comfortable. The liability structure in OSI 2 with the liability structure we created, we knew the assets. That was one of the advantages of the transaction. So that just kind of moves over and we’re able to actually re-price some of it more attractively. That being said, we’re always looking at the unsecured market. We’ve had very good success, the two unsecured deals. I think, we’re priced well, traded well. I think we have a very happy base of fixed income investors. So we’ll continue to look at that as that market performs, or kind of reopened. So we look at both, but we’re comfortable where we are, but we obviously like to have a very balanced liability structure and capital structure in general.
Ryan Lynch: Okay, understood. And Armen, you gave, I would say, fairly downbeat commentary on the outlook for credit quality, at least in the private credit markets broadly, given that fundamentally, it sounds like unlevered business performance is performing not great, given tightening EBITDA margins and then obviously there’s pressure on levered cash flow given higher rates. Do you expect now that inflation is showing some signs of easing, it’s still pretty high, would you expect there to be any reversal in 2023 of any of those trends from a margin pressure, or is inflation just still too high? And then kind of a separate question on that, because you mentioned pressure on EBIT or on levered cash flow. You all provided the estimated range of interest coverage of 2.5 times, which is slightly declined from the prior quarter, which provides some, I think, some value, but really in this marketplace, it’s really going to be the tail end risk of those borrowers that are going to be — is really the tail risk from higher rates on certain borrowers that are running closer to that lower leverage point.
So have you guys done any analysis that looked at your current portfolio where either rates are currently or where the forward LIBOR curve is, what percentage of your current portfolio would fall below that one times interest coverage?
