Joshua Easterly: Yes. I think it’s a great question. Hard to model. What I would say is I think there’s us in the industry. First, historically, we’ve had more of the type of income I think — so I think we can agree on that. So — but the question is, is it — how does that impact us? I think when you look at our portfolio, unlike the rest of the industry, we were actually able to deploy post rate hiking cycle. And so we have more business in ’22 and ’23. And so that was a higher spread environment. So I think you’re going to — either one of the two things will happen is, one is we’ll hold those assets for longer, which would overearn at churn, we can all agree spreads coming in a little bit, which will create income. So we have 43% of the of the portfolio was invested in the second half of 2022.
So I think we were — given how we manage the business and how focused we’ve been on being good allocators of capital, the market has rewarded us with the ability to give us more capital, which allow us to view this vicious cycle. It allow us to invest in ’22-’23 vintage in a higher spread environment, which my guess will at some point churn. I think you have to split out between the industry and us, and we just have more ’22, ’23 vintage, and we all agree [indiscernible].
Operator: Our next question will be coming from Erik Zwick of Hovde Gr Group.
Erik Zwick: First question is maybe a two part question. Bo noted that competition you guys have talked about it in subsequent answer, so the competition has increased since last year. And I’m curious if that is manifesting primarily just in compressed spreads and on the pricing side? Or if you’re seeing anything on the structure side as well. So that’s the first question. And I guess the second would be one your slides, you note that the for your portfolio, the weighted average number of covenants per credit agreement is 1.8%. I’m curious if that has changed over time or if that’s been pretty consistent as well.
Joshua Easterly: It doesn’t — it most definitely will lead on the margin into the document. Documents are so better than relative well documents. But it doesn’t just stop at the door of spreads. So but we still feel comfortable with the overall package. And then I would say there is a little bit of a tale of 2 cities. We look at seeing the opportunity set up market. And on upmarket, there is those documents, there might be a few or less financial covenants. And so — but that is a — we’re making a choice between the trade-off between credit quality side of the company and protections. And we think the relative value is still very good there. Just to size it up. Not everybody — there’s a handful of people who you write $500 million check.
there’s a lot of people that can write $40 million to $50 million check. And so in this moment in time, it always won’t be that case. We’ve moved up market. You can see that in our underlying EBITDA — average EBITDA portfolio company that’s that fine metric. I think it’s gone from $35 million a couple of years ago to 90%, Ian what’s the average now?
Ian Simmonds: It’s over 90%.
Joshua Easterly: Over 90%. So anything to add there, Bo?
Robert Stanley: The only thing I would add is we continue to only invest in situations where we have control or influence on the documentation. And with competition, you’re going to see with your documentation, but we still have — we still control that and tend to only play in situations where we believe the document still have the protections that we need as investors. So we have seen losing of terms certainly from 18 to 24 months ago when docs get really tight, but they’re still adequate to protect our capital.
Erik Zwick: I appreciate the detailed commentary there. And I guess just the only remaining question for me. And you just noted the ability to write large checks and if I look at Slide 6 and average investment size in your portfolio. If I look at it, excluding the structured credit investments, it’s actually down a little bit year-over-year. However, if the then includes the structured credit, it’s up year-over-year. So just curious about the kind of the divergence there and what’s transpired on the structured credit side over the past year or so?
Joshua Easterly: Yes. The divergence as we’ve increased diversity in our portfolio for sure, over time. And our capital base is relatively fixed in SLX. And so in participating in larger deals across the platform, but our capital base is relatively fixed in Natural [indiscernible] we’ve been focused on increasing diversity. So I hope — I think I got that question.
Operator: Our next question will be coming from Melissa Wedel of JPMorgan.
Melissa Wedel: Most of my questions have already been answered, but I wanted to follow up on your comment, Josh, about the opportunity set right now. You’re seeing it really with the larger companies and bigger capital structures. Based on Ian’s comments, it seems a very detailed analysis of what the return threshold is for new investments and where you were able to source — what you’re able to source in the first quarter. Certainly, it looks like you’re able to clear that threshold by a couple of hundred basis points, at least in the first quarter. But as competition increases, I guess the question is, do you see the opportunity set evolving more in the more complex deals? And you talked about a couple of those that you got done in the first quarter. Is that where the economics are? Is that where we should think about you being involved primarily in the next few quarters?
Joshua Easterly: Let me tell you the power. I think this is at the heart of our platform. I think this is and now part of how we think about this, investing in how we [indiscernible]. So I mean I may go down around a hole and then you can pull me up for a second. So [indiscernible] I think people know $77 billion or $75-plus [indiscernible] Management. 600-plus employees. We have people sitting across industries and verticals and focus on the companies all types in all parts of their life cycle. And that includes by sector, by size and then by we’re there on the life cycle from growth restructuring. And the power of our platform is that we can go between on a relative value. So between all those factors, from size of the company, to where they are on their life cycle to what sectors we think are interesting.
