Matt Stewart: Hi, it’s Matt again. We should expect a pickup of that 75 bps across the liability structure going forward. We would have to declare a dividend with our JV partner, so it’s up to our JV Board. But all else being equal, that 75 bps savings should flow through the bottom line, which will either accrete through earnings through a potential distribution or it’ll accrete to NAV, so either way, that 75 bps is accreting through the BDC.
Ryan Lynch: Okay. And then, one last question, maybe just a higher level question for you, Armen. It sounds like, some of the market commentary you gave sounds a little bit cautious given where people finance some of their liability structures over the last couple of years and kind of the big movement in rates. I’m just curious, fundamentals for private credit, when you look at revenues and EBITDA growth has been pretty healthy over throughout 2023. I’m just curious, as if we roll into 2024, you’ve already seen sort of the decline in longer-term rates, certainly the forward LIBOR curve and the Fed funds probabilities continue to trend lower, especially with a report like today. Does your more cautious stance start to change if we start to see sort of rate cuts or if inflation comes down more materially, which implies the greater likelihood of rate cuts earlier or kind of in 2024?
Armen Panossian: It’s a good question. So I don’t think we’ll see material rate cuts in the front end of the curve, which is kind of what matters for floating rate assets and liabilities without a meaningful recession. I don’t think the Fed is just going to cut rates because it can or I don’t — I don’t — I just don’t think they’re positioned to do that unless and until there’s a meaningful economic issue. So I think that the rates are, while they might not be this high for a long period of time into 2025 or 2026, I do think that rates are going to be materially higher for the foreseeable future versus what they were in 2018 or 2019 or 2021. So with or without a recession, I think that there will be stress and a reason to be very cautious.
Without a recession, there will be highly levered businesses that fail because they can’t make their principal and interest as it comes due. With a recession, I think you see a broader issue in the economy. And just as a — just a little bit of a data point for you using the broadly syndicated loan market as a benchmark, about 50% of the broadly syndicated loan market is B3 rated by Moody’s. I would say that’s pretty similar to a good chunk of private credit in terms of credit quality that was issued in 2018 or 2019. Of that, roughly 50% of the market, 60% will have a one-to-one fixed charge coverage ratio or lower at the end of this year. And so I think that that’s 30% of a $1.5 trillion broadly syndicated loan market that’s a fair bit of sort of issues that need to be handled.
And I think that as those defaults pick up and they roll through, the banks are going to have a tough time stepping up to kind of support the market. So I think there’s going to be a longwinded answer to a fairly short question, which is I just think that there’s going to be stress and fits and starts. And I think that looking backward at performance of businesses over the last 12 months being surprisingly good relative to what we thought it would be, doesn’t necessarily mean that it will remain surprisingly good in the next 12 months because we have had a pretty stimulative environment. We’ve had a few trillion dollars of stimulus through the CHIPS Act, the Inflation Reduction Act, the Infrastructure Act, and those are all — those all help to sort of band aid our way through a pretty challenging economic picture.
And I think it has buoyed the economy more than anybody thought. But I think that that’s going to start rolling off. And then we’re going to get into an election year where what the Fed does with rates may be called into question because of that election overhang. So I think there’s a lot of uncertainty out there and reason to be cautious. I don’t think that rates will decline just because inflation is heading in the right direction. I don’t think rates will decline until you actually see a meaningful economic issue.
Ryan Lynch: Okay. Fair enough. That’s a good color on kind of your outlook and your thoughts and all that. That’s all for me today.
Operator: [Operator Instructions]. Our next question here will come from Melissa Wedel with J.P. Morgan. Please go ahead.
Melissa Wedel: Good morning. Thanks for taking my questions. First, wanted to touch on the yield on new investments, I think it was Slide 10 in the deck. Look like there’s been — I know there has been some noise in that line item quarter-over-quarter, but notice that the yield new commitments in the September quarter was 12%, down about 60 bps quarter-over-quarter. I was just hoping you could elaborate on sort of what’s driving that and if you expect sort of a lower yield on new commitments versus the rest of the portfolio to kind of persist over the next few quarters.
Armen Panossian: I don’t know, Matt, if you want to take that or if I should take that.
