PennantPark Investment Corporation (NYSE:PNNT) Q2 2024 Earnings Call Transcript

Art Penn: Yes. It’s a good question, Kyle, and we did not cover that earlier. Spreads have contracted about 50 basis points over the last six to nine months in the core middle market, which is where we focus under $50 million and that’s just what the market has been. There’s M&A flow has been a little light. We’ve been busy, as you can tell, a lot of our business comes from both new platforms and existing companies, but spreads have tightened a bit to average 550 over the risk-free rate in our space, that along with what we think are attractive credit statistics like 4.3x debt-to-EBITDA, interest coverage of 2.1x, loan-to-value of 40%. So we still think those credit stats along with, call it, 550 over risk-free rate average is very attractive, very attractive risk reward.

Unclear what happens between now and year-end. We are optimistic. We believe there’s going to be a lot of activity between now and year-end, a lot of deal flow. And there may be a scenario where supply demand widens spreads again, no guarantees, but you can certainly see that if a lot of supply hits the market, which we think is a possibility, spreads may widen again. But either way, we’re – most important for us is we are credit-oriented. We’re focused on credit, and we’re okay taking a little lower yield if the credit is well underwritten.

Kyle Joseph: Great. Thanks for taking my question.

Art Penn: Thank you.

Operator: And that does conclude the question-and-answer session. I’ll now turn the conference back over to Mr. Art Penn.

Art Penn: Thanks, everybody, for participating. We really appreciate it. Next time we’ll be doing the call in early August for the June 30 quarter. In the meantime, wishing everybody a terrific spring and summer. Speak soon.

Operator: Thank you. That does conclude today’s conference. We do thank you for your participation. Have an excellent day.