Kyle Joseph: Hey, good morning. Thanks for taking my questions. Just on the decline in interest income. I know you guys talked about both spreads and then timing. But just in terms of modeling, would you attribute the majority to either of those? Or was it really more of a timing thing than the spreads? And then how do we factor that in that your – I think your reported portfolio yield was stable quarter-on-quarter if I’m not mistaken.
Matt Stewart: Hi. It’s Matt, Stewart. So I know in our prepared remarks we talked about the second lien portfolio impacting our spreads by about 10 basis points. But overall, we had spread compression within our book of in and around 15 bps on our weighted average yield. That was offset by a lot of the progress we’ve made on the non-accruals and work we did throughout the quarter. And then as Armen noted, we did have back-weighted deployments about $330 million of our deployments during the quarter were kind of mid-February to March. Now we’ll always have some level of what I’ll call friction between deployments and repayments. But that on average probably amounted to about $0.015 this quarter of impact that we probably normally wouldn’t see in a normal quarter.
Kyle Joseph: Got it. Very helpful. And then just a follow-up for me. On the unrealized depreciation in the quarter it sounds like the majority of that was tied to NPAs. And just give us a sense for ex the NPAs, how portfolio performance and valuations have been trending.
Chris McKown: Hey, Kyle, it’s Chris. I would just say that ex the NPAs the portfolio was relatively flat quarter-on-quarter. You’re right to point out that that really was the driver.
Matt Stewart: Yes. I mean predominantly the write-downs during the quarter were in Thrasio, Impel and OTG all of our non-performing assets from 12/31.
Kyle Joseph: Got it. Very helpful. Thanks for taking my question.
Operator: The next question comes from Paul Johnson with KBW. Please go ahead.
Paul Johnson: Hey, good morning. Thanks for taking my question. Congrats on the fee cut announcement. On the fee cut, I mean, with this announcement and some of the developments obviously, with the restructuring, some of that’s still ongoing. Some of it was completed during the quarter. But the timing of such an announcement, are you pretty confident that you’ve got a handle on any of the remaining credit issues in the book and pretty confident in the plan forward from here?
Armen Panossian: Yeah. This is Armen. We do feel confident that we have both a good plan for maximizing recoveries for our challenges in the portfolio. We do have a process that we engage in regularly with just evaluating the quality of the portfolio as well, just to try to anticipate any sort of issues or even repayments that we may get faster than expected. We feel good about the marks in the portfolio. We feel good about the quality of the portfolio and are positioned well in the market to continue to deploy. So, I think we’ve taken a pretty conservative view on the very small handful of challenges that we do have in the portfolio and have marked them in a way that we think is reflective of that conservatism. But we will continue to work hard to maximize recoveries and hopefully even outperform those marks.
It certainly is our goal to do better than where we have it marked and really leverage Oaktree’s capabilities to execute on an outcome that is favorable for shareholders.
Paul Johnson: Thanks, Armen. And then switching over to just activity in the quarter, a fairly high level of repayment activity. I was wondering, if you can kind of give some sort of color as to what kind of the balance has been in terms of repayments and exits that you’ve had. Have these been more liquid assets or higher-yielding season stuff? What was just kind of — stuff that was taken out in the market?
Armen Panossian: Yeah. Just in terms of payoffs it’s kind of a mix. There are — there were some chunky repayments on the private side, including a position in Melissa & Doug, which is probably the largest single payoff. And then we had a repayment in a company called Ardana. We had some small repayments in — or not small, but a reasonably sized second-lien repayment in Blackhawk Network. So it’s been — the repayments have been pretty strong. On the exits in terms of public side, we are pretty active in trading and have benefited from the markets especially the senior loan markets rallying this year, this calendar year. And so we did take some chips off the table with respect to both loans and bonds that we have in the portfolio.
And that was about $56 million of par in the public side about $201 million of par on the private side in terms of total exits. And the proceeds that we realized across the portfolio, it was driven — it was actually a better-than-par recovery in those exits, really driven by some higher-than-par exit prices on the private side as we saw some repayments.
Paul Johnson: Got it. Appreciate the details. That’s all the questions from me. Thanks.
Operator: The next question comes from Melissa Wedel with JPMorgan. Please go ahead.
Melissa Wedel: Good morning. Thanks for taking my questions today. Most have actually been asked and answered already. But just to follow along the thread of repayment activity, when we think about higher cycles, I think there were some elevated prepayment fee income just because of the pace of rate cuts that we had seen in the prior cycle. Given that this one is likely to be more extended, you’ve been talking about the potential for sort of a higher-for-longer rate environment for a long time. Should we be thinking about prepayment income in a more normalized way than what we’ve seen in previous rate decline cycles?
Armen Panossian: Thanks Melissa, it’s Armen. It’s a good question. I don’t think that we have a strong enough handle on making such predictions on prepayments. But I think your instinct is right that if base rates remain elevated for an extended period of time, where you will see repayments are when a company just outperforms and/or a sponsor wanting to sell a business just because it needs to return capital. The historic trend of enterprise valuation multiples rising interest rates being low either declining or ultra-low and not driving prepayments, that’s no longer the case. So, when you do see a prepayment it’s really because of something idiosyncratic for the upside most likely. Like in the case of Melissa & Doug that was a business — that was a loan that we did about a year ago or a little bit over a year ago.
