Christian Oberbeck: Okay. And then whether we’re in the market or not, I mean, we can’t say. Just as we’ve answered these other questions about the — what are we going to deploy over the next period of time and our targets versus leverage, it’s a consistent answer relative to this, which is it’s going to be a set of opportunities. I mean these stock sales were done in blocks. These were not like open market sales. These were block sales to specific investors with long-term investment outlook. So, in terms of float and all the types of things, again, we’re not driving what those investors are thinking and how they’re doing it. But those investors aren’t buying in blocks at this scale to then kind of trade out much in the volume situation of our stock, okay?
So, we believe they’re long-term investors. So, on the one hand, you’re saying, oh, yes, it’s adding to the supply, but it’s adding the supply of people that are long-term holders. They’re not — I mean, it’s not such a great idea to buy a big block and then trying to get out of it right away. I mean, as you know…
Casey Alexander: All right. Let me ask you one more question.
Christian Oberbeck: Sure.
Casey Alexander: All right. The shares that you have already sold in the fourth quarter, okay, will you be making up the difference to an NAV of $28.44 or $27.42, the manager?
Christian Oberbeck: The higher number. Right, Henri?
Casey Alexander: Okay. All right. Thank you. That’s all my questions. Thanks for taking my questions.
Christian Oberbeck: Okay. Thank you.
Operator: Thank you. One moment for our next question. Our next question comes from Bryce Rowe with B. Riley. Your line is now open.
Bryce Rowe: Thanks. Good morning. Don’t necessarily want to extend the call here, but did want to ask a couple of questions. I want to follow up on that last discussion with Casey. Chris, certainly understand the quality of the leverage profile and do acknowledge that balance sheet leverage is — on an absolute basis, is elevated relative to the space. And appreciate that you all are subsidizing the equity issuance here to allow the BDC to take it at 100% of NAV. To what extent are you — is the manager willing to subsidize, especially with the stock now down in the, let’s call it, 80%, 85% of NAV range now?
Christian Oberbeck: Well, again, that’s a prospective question, and I hope you appreciate that we have to be very careful on what we say we’re going to do prospectively. I think much like our investment discussions, selling stock is also similar. I mean, in other words, it’s not our decision to sell stock. We need a buyer on the other side that’s ready to acquire. And as we said before, the stock sales have been in blocks. We haven’t been selling stock just — we haven’t been like having a sell in the open market every day, okay? Well, that’s not what we’ve been doing to achieve these sales. And we are very cognizant of trading volumes and things like that. These are specific sales by appointment as opposed to us sort of saying, okay, we’re going to sell all the stock to anybody all day and just having an open sell order, no.
So, these arguably have been sort of off-market, right, and once the stock has been traded in blocks and it hasn’t really affected the market, it’s a separate kind of trip. So, we obviously are very sensitive to where our stock trades, how our stockholders effectively are affected by these events. We’ve been very thoughtful and careful about that. And we think that, that is very, very positive for the company. But we’re really excited. And we’re also — we’re sort of slightly puzzled by getting so much pushback on selling equity when analysts like yourselves are asking us about our leverage ratio. We would think we would get maybe more — applaud us for raising equity that is improving that metric on that side, recognizing that the next question everyone has is like, “Well, are you going to deploy it and increase your leverage again?” And our answer has always been, “We will or we won’t depending on the opportunity set.” And I think what’s missing from in our mind, from a lot of this discussion we have, it’s sort of like risk-adjusted returns, right?
In other words, you can have an absolute return of X. But the question is, how risky is X? And so, on a risk-adjusted basis, X risk might be X plus 50% risk or it might be X. And so, on our leverage structure, it’s sort of similar, like what is our risk-adjusted leverage. And if you compare our leverage at fixed rates and with the term structure, the absence of covenants, all those types of things, you say, okay, let’s compare that to another BDC that has a tremendous amount of bank leverage with asset-based formulas. And let’s say, their leverage is substantially less than our leverage. But if they get a bunch of markdowns, they’re going to have a default in that credit facility. And we had the exact same portfolio and the exact same markdowns, we wouldn’t have a default.
So, on a risk-adjusted leverage basis, we think our leverage is — should be discounted. In other words, you should take the absolute number of our leverage and say that’s what their leverage is. You should put a discount on that because of the structure relative to the BDC industry, because the BDC industry has a tremendous amount of essentially bank leverage. And you look at when people got into trouble, most of that trouble has come from bank leverage when assets have to be marked down and things come out of formula. So, anyway, so we feel our leverage is on a risk-adjusted basis, should be substantially discounted from the absolute number.
