Erik Zwick: Thanks for taking my questions.
Operator: Thank you. One moment for our next question. Our next question comes from Mickey Schleien with Ladenburg Thalmann. Your line is now open.
Mickey Schleien: Yes, good morning everyone. I wanted to follow up on your comments on Netreo. It sounded like you attributed most of the decline in the valuation to comparable valuation. But I saw in the Q that you also mentioned higher leverage. Was that due to declining EBITDA or a bank coming in ahead of you, or could you just expand on that, please?
Michael Grisius: There’s higher leverage because we’ve been supporting the growth of the business with our own debt. So there’s nothing that’s coming in front of us, but there is a higher debt load. Most of the change, just to reiterate, in value was due to a change in multiple as we looked at macro factors and just where valuation is, combined with lesser performance of the underlying business. And then, the thing I’d point out to, Mickey, is that the vast majority of that write-down was reversal of appreciation that we have — unrealized appreciation that we had before that.
Mickey Schleien: I understand. Thanks for that, Mike. Your last fiscal quarter also includes December, which is historically the busiest month of the year for BDCs. Could you give us any sense of how active you were in December in terms of fulfilling your pipeline?
Michael Grisius: I mean, we tend not to get into that detail post quarter-end. But I think we’ve continued to support our portfolio companies kind of consistent with what we’ve done in the past. Haven’t seen a whole lot of change in sort of what you saw through the last reported quarter.
Mickey Schleien: Okay. My last question is in regards to the notes coming due in March. I understand that they’re extendable at your discretion for a year. Those are at 8.75%. I’m just trying to understand whether you’re more predisposed to trying to refinance those or just extend them for a year and see how rates go?
Henri Steenkamp: Yeah. I don’t think we’ve made a decision on that yet. We’ve still got two-and-a-half months to go, Mickey. So, I think we’re still sort of considering our options, but it’s obviously nice to have the flexibility with an instrument like that, especially a short-term instrument like that.
Mickey Schleien: I understand.
Christian Oberbeck: If I could just add also to that, I mean, I think inside of that optionality to do that, I think that’s something that we try and preserve. I think Henri did a very good job in negotiating that to allow us that option. It could have been straight up to your facility, but we gave ourselves the option to be able to repay it. So, I think it’s reflective of how we think about our capital structure relative to potential changes in interest rates. The other thing I would say, and this is sort of a broader concept that’s running through the broader marketplace and the BDC marketplace is what is the course of interest rates next year? What do people expect? What’s going to happen? And I think the core answer is that nobody really knows.
I think if you were to put up the charts of all the forecasts of short-term interest rate cuts that have been forecast over the last several years, I think they’ve been universally wrong. So, we just don’t know enough right now about the market, right, for debt instruments to make that call. And just look what’s happened in the last two-and-a-half months. What people would have said or didn’t say two-and-a-half months ago and what they’ve been saying the last couple of weeks is pretty radically different. And there’s a lot of more information we’re going to get before we have to make the call on that, as Henri said. So, we’re going to wait till the — right up to it and obviously, evaluate all our financing alternatives relative to that extension.
Mickey Schleien: Yeah. I completely agree with you. I know that we don’t know where interest rates are going to go and I understand your rationale. And I suppose it’s similar with the undistributed taxable income you seem to be carrying, right, Henri, that’s something you’ll evaluate sort of, I guess, in the middle of this year? Is that correct?
Henri Steenkamp: Yeah, absolutely. I mean, we actually — we talk about it the whole time. And again, it’s being able to have optionality and flexibility, especially at a time like this, where one sort of at a moment in the market where a lot could be changing. It might not, it might, but it’s just nice to have that flexibility right now.
Mickey Schleien: I understand. That’s it from me this morning. I appreciate your time. Thank you.
Christian Oberbeck: Thank you, Mickey.
Michael Grisius: Thanks, Mickey.
Operator: Thank you. One moment for our next question. Our next question comes from Robert Dodd with Raymond James. Your line is now open.
Robert Dodd: Hi, guys. First question, if I can, on leverage. Obviously, you’ve brought the regulatory leverage down a bit versus where it was a couple of quarters, I mean, with raising equity and the manager supporting that financially. So, are you — is this scenario where you’re kind of we should expect you to remain comfortable in the [1.60s] (ph)? Or is it contingent or market? If the market gets more active, you’re willing to go higher again on the regulatory leverage side? Or can you give us any thought? I know you don’t give us an explicit target, but some framework thoughts around where we should expect leverage to play out.
