Stuart Aronson: Yes. We have a number of credits where the ability to increase price has not kept up with rising raw material and labor prices and those companies are working with lower margins. So as a result of that, the companies are in most cases, slightly underperforming to our original budgets, which is why you’ve seen a move down a little bit in average rating. But 3 is not particularly concerning. It just means it’s underperforming where it was originally. And as I think I shared about half our portfolio is seeing increased EBITDA and lower leverage. And the other half of the portfolio is seeing decreases in EBITDA and higher leverage. And so that’s balancing out to, on average, slightly higher, like 0.1 or 0.2 turns higher leverage across the portfolio.
Bryce Rowe: Okay. Maybe a couple more for me. The Arcole transaction that you noted in the prepared remarks, assuming you monetized that or exited that around the fair value that we saw as of March 31?
Stuart Aronson: I believe we did. Joyson?
Joyson Thomas: Bryce, yes, we did exit it at the price that was marked at 3 31. And as Stuart had mentioned in the prepared remarks, overall, like to-date that equated to about 1.2x on our invested capital.
Bryce Rowe: Okay. Last one around rates. A lot of discussion around higher rates or lower rates, I would assume that there was quite a bit of consternation in taking the regular dividend up $0.015 with the prospects of maybe seeing lower rates at some point in the future. So if you could just talk about sensitivity to lower rates and how comfortable you are earning that $0.37 even in a lower rate environment?
Stuart Aronson: So we assume that the yield curve is correct. We assume that SOFR will come back down under 3% in a couple of years. We ran our sensitivities based on that. And based on the advice of our shareholders and analysts, we only raised the regular dividend by an amount that we felt was sustainable. And so if the yield curve is correct, the dividend should be sustainable, absent unforeseen circumstances at the $0.37 level. And that’s why we took everything above $0.37 and linked that to the variable mechanism that Joyson described in depth.
Operator: . We’ll take our next question from Melissa Wedel with JPMorgan.
Melissa Wedel: Sorry to drill in on the dividend, the supplemental, but I want to make sure that we are thinking about that and accounting for that properly in our model. As I heard you articulate on the call today, if I’m understanding you correctly, there is a threshold at which if NAV would be lowered by $0.15 a share between both net income and the supplemental dividend, there would be no supplemental dividend at all? Stuart Is that right?
Stuart Aronson: That’s right. To think about this is that inclusive of the supplemental dividend, the decrease in NAV over the current and the preceding quarter would be limited to $0.15 per share. So we would factor in not only with the supplemental dividend, but then to the extent that we do have maybe unrealized mark-to-market declines in NAV that would also limit it in any particular quarter.
Melissa Wedel: Okay. And just to make the distinction, we’re talking about, it’s either that 50% of excess earnings as declared or if it would trip that $0.15 decline threshold, there would be none at all. It wouldn’t be just reduced to limit.
Stuart Aronson: It would be reduced. As an example, if inclusive of the proposed $0.05 per share supplemental dividend that would have caused a NAV decline of $0.17 per share, then that proposed $0.05 supplemental dividend would have been reduced by $0.02 such that the supplemental dividend would have been $0.03 per share.
Melissa Wedel: Okay. Got it. Very helpful.
Stuart Aronson: That was for illustration purposes only. Yes.
