I don’t know you may follow some of our bigger peers who focus on the upper middle market. Our sense is debt-to-EBITDA is higher than 4.5 times so, which is kind of where we underwrite 4 times. Our sense is interest coverage is tighter. And that’s just, frankly, because of the supply demand of capital in the upper middle market, there — they’ve got a lot of money to put to work. They’re “competing” with a broadly syndicated loan market and Wall Street. So, there’s a lot of dollars chasing those upper middle market opportunities. What’s resulted in its orphaned kind of the core middle market company. So, we have a playing field below 50% of EBITDA, where there’s a few of us who are active the competition is less our capital is very meaningful to those borrowers.
We can still get meaningful covenants. We get the monthly financial statements. So, the overall package of risk/reward is very attractive. And we think appropriate for the size of these companies.
Unidentified Analyst: Thanks Art. And lastly, the fund is doing well and the metrics are very good. Have you thought about talking to Moody’s or S&P or Fitch to get another rating?
Arthur Penn: Yes, I mean, just to be — so it’s interesting. S&P does rate our CLOs and does give us ratings estimates for all of the loans that go in our CLOs. So, basically, all of our senior loans get ratings estimates. And when we walk into the securitization side of S&P, they say, gee, the top 65% of the stack, we’re going to rate AAA, right? And we can issue AAA. We just issued AAA at 193 the other day in and so essentially, when you’re getting 2:1 leverage in that — in those CLOs through that portal of S&P, S&P thinks that you can leverage the assets 2 times and it’s a AAA. Then when you walk into the other door at S&P, which the name on the door says BDC, that door at S&P says, you can leverage more than 1.25 times and be BBB on an unsecured basis.
So, there’s a bit of an inconsistency going on at S&P. We try to highlight it to them. We’re happy to talk to them and perhaps you can talk to them. But if one portal of entry is giving us a 2:1 leverage through a securitization at AAA it would appear to us that, that’s a very efficient way to do it versus going into something called the BDC room where they’re much — they have a much different view of credits, which are, by the way, the same exact credits whether we’re doing unsecured at the BDC level or securitization either in the BDC or the JV. So, happy to talk to you about this at your convenience skill, but it’s very interesting.
Unidentified Analyst: Thanks Art.
Arthur Penn: Thank you.
Operator: Art, I’d like to turn the conference back to you for any additional or closing remarks.
Arthur Penn: Thank you. I just want to thank everybody for being on the call today. Next time we’ll be talking, it will be after our June quarterly earnings, which will be in early August. In the meantime, wishing everybody a great spring and summer. Have a good day.
Operator: This concludes today’s call. Thank you for your participation. You may now disconnect.
