So in business models like that, which we seek out having a lot of those characteristics, we’re okay with a bit higher leverage profile and most of the increase in leverage is reflective of some of that activity.
Mickey Schleien: And that includes your focus on software deals, right? Where leverage tends to be higher than average or am I mistaken?
Michael Grisius: It would include that for the ones that are underwritten on an EBITDA basis for the same reasons.
Mickey Schleien: Yes.
Michael Grisius: But it would also include some of the other business models that we invest in as well.
Mickey Schleien: Okay. I understand. Those are all my questions this morning. Thank you for your time.
Christian Oberbeck: Thanks, Mickey.
Henri Steenkamp: Thank you, Mickey.
Operator: Thank you. [Operator Instructions] And our next question comes from the line of Bryce Rowe from B. Riley. Your line is open.
Bryce Rowe: Thank you. Good morning. Wanted to start, Chris, with just the dividend and obviously the huge amount of coverage you have of the dividend here this quarter? How should we think about the dividend construct, you know, going forward, I think we’ve probably all of us have thought about this or asked us on previous calls. But clearly, there could be some room to move the dividend higher? Are you expecting possibly to consider a base supplemental construct? Just curious how you and the Board are thinking about it at this point?
Christian Oberbeck: Well, as you can imagine, this is something we think about and discuss quite a bit. I think a lot of the predicting — the future business is very difficult especially these days. And if we look at we kind of look at all these forward interest rate curves that are coming out. And I think if you look at the forward interest rate curve six months ago, they were predicting interest rate cuts this summer, this July. And then you look at it more recently there’s higher for longer and interest rates coming in 2024. So there’s a tremendous amount of volatility. I think we’ve had probably the most predicted recession by really accomplished, intelligent and really successful investors have been predicting an imminent recession for, you know, six months now or something and that has not yet occurred.
And now this debate is a soft landing, hard landing still going on. So there’s so much uncertainty out there and that’s not really our business to try and figure that one out. That’s pretty complicated to figure out. And so what we’re trying to do is we’re trying to establish a sustainable dividend level if, kind of, you know, somewhat of the worst case occurs coming out there, you know, in the future, you know, if the economy comes off and then the interest rates comes down, we want to be in a position where we can sustain this dividend, kind of, through that, that case. Then obviously, if things continue much better, we’re building up a lot of incremental dividends obligation, right, that we would ultimately look to take payout, you know, to our shareholders.
I think as we mentioned in our last call, the way the BDC requirements for payouts occur, generally, it’s sort of like November’s, right, for us. So you have November of ‘23, you have a certain tax obligation, November ‘24, you have a certain tax obligation. And so we don’t have a requirement by November of 2023 to do anything different than what we, kind of, been doing. November 2024 is different, then that’s when a lot of our supplemental, you know, earnings, you know, incremental earnings would be due. And so we have quite a bit of time and as I’ve just said, you know, if look at over the last six months how outlooks have changed. I think over the last next six months, probably outlooks may change just as much, may not change a lot, we don’t know.
