Arthur Penn: Yes. We agree. It’s — as lenders were skeptics by nature, we presume and we underwrite assuming a recession which is how we underwrite. And if you rewind the tape to some of these calls a year or two ago, we were saying very clearly, we’re underwriting and assuming a recession that has not appeared. So again, our credits generally performing very well, because we underwrote assuming a recession. Now, we did not assume that base rates going way back. We did not assume base rates would be where they are today. So that’s that has been — there has been the surprise for us, it’s been by and large good because the yields we’re getting are excellent. If these base rates continue to persist, of course, in a portfolio of 100 or 150 names, there’s going to be some companies that over time just — it’s just too expensive for and where there’ll be amendments and things of that nature as this higher for longer trend continues.
If, when the Fed starts easing, that will give some of these companies a little bit of a break and a breather. But by definition, if these base rates persist for a while in any portfolio of this magnitude and the magnitude of our peers, there’s going to be companies peeling off and needing amendments and extensions and needing some relief, because you can’t have 100, 150 companies, all going up to the right, altogether no matter how good you are. And we think we’re pretty good. We think some of our peers are pretty good and by and large EBITDAs are growing 5% to 10% and we’re really thrilled with that. But by definition, there’s always a handful of companies that are going to need some help.
Robert Dodd: Got it. Thank you.
Operator: Next, we go to the line of Casey Alexander with Compass Point. Please go ahead.
Casey Alexander: Hi. Good afternoon. Thanks for taking my questions. And pretty simple stuff here. This one is just first maintenance. The weighted average yield dropped, if I’m correct about 40 bps quarter-over-quarter, which is actually a fair amount in this environment. Is that new weighted average impacted by the fact that you’re now carrying the government securities in the portfolio as opposed to categorizing them as cash and cash equivalents?
Art Penn: Well, I’ll take the first crack and kick it over to Rick. I mean for sure we’ve seen as we said spread compression. So the new deals there are coming in, call it 25 bps tighter from a spread compression standpoint, since we have been very active, the weighted average certainly has come down. Rick, I don’t know if you have any other commentary other than that.
Rick Allorto: I’ll just confirm that the government securities are not included in the calculation of the weighted average yield. So they are not impacting the outcome.
Casey Alexander: Okay. All right. Then secondly, I noticed in the SOI that you made a new loan of $50 million to Mid-Ocean. And if I’m not — and maybe I’m not correct, maybe — but I think, you’ve been sort of in and out and around that name for quite a while. Could you kind of walk us through your history with Mid-Ocean and what you found attractive to put a new $50 million in this quarter?
Art Penn: It’s a great question and you’re very astute at highlighting this. This is a company called JF Petroleum, which we’ve had for a while. It was originally a mezz [ph] deal, then it was a restructured deal, where we owned a chunk of equity and was restructured once again where we basically just became an equity holder. The company has seen a resurgence. There’s been some very smart add-on acquisitions that have been made. The company has come back very, very strongly and you could track the value of the equity there’s an equity piece that’s been marked up. It’s coming back strong. And the company we’ll see, I’ve learned not to overpromise Casey and you can appreciate that. The company is coming back strong. I just put it at that and we’ll see where we go.
Casey Alexander: All right. Thank you for taking my questions.
Operator: Next we go to the line of Paul Johnson with KBW. Please go ahead.
Paul Johnson: Good morning. Thanks for taking my question. I was just hoping to get a little bit more color maybe on just what drove the depreciation this quarter. Was it just broad across book? Or were there any loans in particular that were — that mainly drove that?
Arthur Penn: Yeah. So picking up to Casey’s last point, JF was up substantially. The three loans that have been marked down are Flock Financial, Walker Edison, which was a restructuring, which remains challenged and a company called Atlas Purchaser. So those were the big the three biggest declines in loans that got marked down during the quarter.
Paul Johnson: Got it. Yeah, thanks for that. I did notice Flock Financial, I did notice that was a bigger loan in your portfolio that was marked down this quarter. I was just curious if you could just kind of — maybe just tell us what that business is and what drove the weaker mark this quarter?
Arthur Penn: Yeah. It’s a specialty finance company. They are focused on busted credit card receivables, auto receivables. And they’ve had some recent stumbles. We are in there working with them to help solve the problem. It could be a really good sector. They’ve made some mistakes. And we’re in there working with the company in trying to help them grow, solve their problem and build back up.
Paul Johnson: Got it. I appreciate the color there. Two more. Just on the equity co-investment, it sounds like there could be some possible rotation there this year, which would be great. I was wondering if it’s at all possible to quantify that in any way maybe without names or if there’s even just any particular industry that maybe you would expect that it’s ripe for deals just any clues there would be helpful.
