Art Penn: Yes. So we’re constantly watching the – we’re constantly watching the 30% bucket. You may see that at quarter end, we’ve been purchasing T bills on the balance sheet of PNNT, which is a qualifying assets, which can help expand the 30% bucket?
Mickey Schleien: Okay. I appreciate that. And the leverage of the JV is running around 2x. Is that where you want to see it that’s counting the notes to the members as debt. Is that about where you want it to be?
Art Penn: Notes to the members, we – it’s all part of the junior capital. So we’re kind of looking at 2:1, $2 of external debt to $1 of junior capital, which would include the subordinated notes that we and Pantheon own along with the equity. So to us, that’s junior capital. We leverage that 2:1 or so.
Mickey Schleien: Okay. 2:1, okay. That’s it from me this afternoon. Thanks Art.
Art Penn: Thanks Mickey.
Operator: And the next question will come from Mark Hughes with Truist.
Mark Hughes: Yes. Thank you. I think you’ve addressed a lot of this. I was going to just ask about the sustainability of returns in the JV. You talked about high teens here recently. Is that something that’s sustainable with that structure, just assuming kind of the reasonable returns in the underlying investments?
Art Penn: Yes. We believe it is. Obviously, if rates come down, if and when rates come down, yields will – these are floating rate assets, of course, yields will come down. We do finance the JV with floating rate liabilities either credit facilities or floating rate securitization CLO financing. So it’s matched, albeit when rates are higher, you get a higher ROE. And then, of course, it’s about credit performance. And can we continue to have very strong credit performance. I think we can the portfolio as a senior portfolio that we do here is well constructed conservatively underwritten I think we’ve been sharing with you that the senior loans we’re doing today are 4.3x debt-to-EBITDA was last quarter, interest coverage of 2.1x and loan to value of about 40%.
So that’s kind of what’s populating that joint venture and then we leverage that with the floating rate credit facilities and the floating rate securitization. So we’re optimistic, although if rates come down, it may be hard to retain that. And of course, we got to keep underwriting credit well and try to minimize the nonaccruals.
Mark Hughes: Appreciate it. Thank you.
Art Penn: Thank you.
Operator: And we’ll take a question from Casey Alexander with Compass Point.
Casey Alexander: Hi. Good afternoon. Thanks for taking my questions, Art. I’m just curious in the schedule of investments, block is listed as a sub debt position. So I’m just kind of curious why you guys who is ahead of you? And why would it be you guys who is making the decision to put management in?
Art Penn: Yes. So great question. So this is a specialty finance company. Regions Bank is the senior lender. We are mezzanine lender, subordinated debt. As part of the restructuring, we’re converting some of the mezzanine debt to equity, and we’re doing some additional mezzanine debt, which is junior to reach his bank. So this was a non-sponsored deal. So it was a founder that was running the company. And when the company needed extra liquidity we’re the ones who provide the liquidity and between the liquidity you provided, and the conversion of debt to equity, we’re in a majority equity position.
Casey Alexander: Okay. Great. That’s excellent color. Thank you. Just as a matter of course, is there any Flock or Walker Edison that is also in the JV?
Art Penn: I think – no, actually, no. There’s no Walker Edison in the JV or Flock.
Casey Alexander: Okay. Great. And lastly, I think you mentioned it, but I think I whiffed it. What was the company that came off nonaccrual in the quarter?
Art Penn: Yes. The company historically was called Mailsouth. Its name changed to Mspark. It’s been marked at zero for the last few quarters. It got sold, and we realized that zero, unfortunately. But it’s now off the SOIBs, the company got sold.
Casey Alexander: All right, great. Well, sorry to hear that result. But, all right. Thanks for taking my questions. I appreciate it.
Art Penn: Thank you.
Operator: And moving on to Kyle Joseph with Jefferies.
Kyle Joseph: Good morning. Thanks for taking my questions. I apologies if I missed this, but just wanted to get a sense for competition and spreads. It looks like your yields for the quarter were fairly stable. Just give us a sense of what base rates versus spreads there and it looks like the yields on new investments were a little lower. But just kind of been hearing kind of mixed messages about banks either exiting or entering the space and just kind of what you’re seeing in terms of competition.
