David Miyazaki: Yeah.
Ted Goldthorpe: … to answer your very last question, we continue, we think it’s going to continue to be linear because a lot of these are coming up on two years or 18 months from maturity date.
David Miyazaki: Okay. Yeah. That’s very helpful. I think that you probably have one of the best, if not the best perspective on taking over portfolios and working them out. And you’ve had a lot of success in recycling this capital and seemingly not come across big surprises to the downside in what you’re doing. So it’s helpful to have some granularity on how that’s actually unfolded and what’s left. So I appreciate that.
Ted Goldthorpe: It’s good feedback. That’s good feedback. We got similar feedback from somebody yesterday and I think it’s good feedback.
David Miyazaki: Okay. Thank you very much.
Ted Goldthorpe: Thanks, Dave.
Operator: Next question comes from the line of Deepak Sarpangal with Repertoire Partners. Your line is open.
Deepak Sarpangal: Thank you. Hey, Ted, Patrick and team.
Ted Goldthorpe: Hi. How are you?
Deepak Sarpangal: Good to see another solid quarter. Yeah. It seemed like more further progress on both the portfolio management side, in terms of improvements in leverage and portfolio quality, and also definitely on the capital allocation side. I know you’ve been buying shares for a few years now, but kind of seems to be increasing in size of that as well, given the accretion that it’s creating. A few questions on each of those. One, on the buybacks and capital allocation, I know that you’ve been pretty consistent in repurchasing shares and you’ve talked about seeing your stock as undervalued, but you’ve also talked about the environment increasingly becoming a pretty attractive place to invest. How do you think about balancing those two alternatives and where to deploy your capital, especially because it looked like, maybe in the previous year, you leaned into some of the weakness in the credit market and appropriately so had a lot more deployments than repayments on a net basis and then I think also similarly now, as there was a little bit of an improvement, you’ve seen now more repayments or pay downs?
But maybe one, if you could talk, because I know, it looks like some of the newer investments are yielding quite a high number upfront and other good terms. So that was kind of like the first question, just on the capital allocation side. And then on the portfolio management side, it seemed like we don’t have the full details, obviously, in terms of gross versus net by industry, but it seemed like there was either an exit or reduction in some of the areas that are probably those that you viewed as less attractive, whether it’s automotive, consumer energy, I know you already have pretty low exposures there, but can you maybe talk about if there’s anything that we can’t see in that data, in terms of industry breakdown. And then finally, it looked like there were some interesting new investments, just curious to learn more about.
In particular, I think the newer ones were Morae, CineMedia — Media or CineMedia Holdings and Tactical Air Systems, and then I think there were some follow on investments, Metal Works and LB Holdco. I’d love to hear more about those? Thank you.
Ted Goldthorpe: Yeah. Well, why don’t I start and Patrick can chime in as well. I mean, the new investments that we’re doing were, like, are incredibly attractive. And you can see it, we’ve picked up on a like a portfolio basis, 75 basis points of incremental spread over even just two quarters and then obviously Silver’s higher. The post regional banking crisis, there’s just no one lending last year and so we were able to do really low levered, widespread in deals. So we’re really excited about that vintage. I would tell you that it’s got more competitive. So like, spreads have definitely come down year to-date starting about February, particularly on generic sponsor finance, just supply to ban, there’s just not that many good LBOs out there.
So our new investments were very excited about. On the exit side, yeah, you brought it up. I mean, we had a stressed auto supplier that we picked up in a one of our acquisitions that we were taken out of this quarter. And I would tell you, we’re very excited to be taken out in many different ways. And so that was good and away from that, I think a lot of the exit activity was relatively normal course. But yeah, the auto supplier in particular was something we were very excited to not have in our portfolio anymore. And then on capital allocation, I would say, like this last year was the first year that I’ve run a BDC ever, where it made for the first time ever, the math made more sense for us to deploy capital than to buy back stock. But I think our philosophy is we should always be buy back stock, particularly when we’re trading below NAV, because we believe that NAV is NAV, and we think — we heard Patrick’s comments, we think there’s like, 10% plus NAV upside in just things maturing apart.
So, we just think it’s good discipline to always be buy back stock, regardless of what the math says. But the math for the first time, and basically, in a long, long time, would support actually new deployment, as well as buy back stock. So, as you said, we’ve increased our buyback program, but we’re also finding really good things to invest our money in.
