CCAP - NASDAQ

Good afternoon, ladies and gentlemen, and welcome to the Q1 2023 Crescent Capital BDC, Inc. Earnings Conference Call. [Operator Instructions] Also note that this call is being recorded on Thursday May 11, 2023. And I would like to turn the conference over to Dan McMahon. Please go ahead.

Good morning, and welcome to Crescent Capital BDC Inc.'s first quarter ended March 31, 2023 earnings conference call. Please note that Crescent Capital BDC may be referred to as CCAP, Crescent BDC or the company throughout the call. Before we begin, I'll start with some important reminders. Comments made over the course of this conference call and webcast may contain forward-looking statements and are not subject to risks and uncertainties. The company's actual results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in its SEC filings. The company assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not a guarantee of future results. During this conference call, we may discuss certain non-GAAP measures as defined by SEC Regulation G, such as adjusted net investment income or NII per share. The company believes that adjusted NII per share provides useful information to investors regarding financial performance because it's one method the company uses to measure its financial condition and results of operations. A reconciliation of adjusted net investment income per share to net investment income per share, the most directly comparable GAAP financial measure can be found in the accompanying slide presentation for this call. In addition, a reconciliation of this measure may also be found in our earnings release. Yesterday, after the market closed, the company issued its earnings press release for the first quarter ended March 31, 2023, and posted a presentation to the Investor Relations Section of its website at www.crescentbdc.com. The presentation should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC. As a reminder, this call is being recorded for replay purposes. Speaking on today's call will be CCAP's President and Chief Executive Officer; Jason Breaux; Chief Financial Officer, Gerhard Lombard; and Managing Director, Henry Chung. With that, I'd now like to turn it over to Jason.

Thank you, Dan. Hello everyone and thank you for joining our earnings call. We appreciate your continued interest in CCAP. I'll begin the call by providing a brief overview of our first quarter results before discussing the current market environment in more detail. I'll then provide an update on our dividend policy, before turning it over to Henry to review our recent investing activity. Gerhard will then review our financial performance for the first quarter. Let's begin. Please turn to Slide 6, where you'll see a summary of our results. On March 9, we closed on our acquisition of First Eagle BDC, so first quarter results reflect approximately three weeks' worth of combined company P&L. Earnings per share metrics are based on weighted average shares outstanding for the period. For the first quarter, adjusted net investment income increased 10% to $0.54 per share from $0.49 per share for the prior quarter. This increase was driven primarily by rising base rates and higher spreads. Our net asset value per share ended the quarter at $19.38, down 2.3% as compared to year-end. This decline was attributable to two things: one, transaction costs related to our acquisition of First Eagle BDC; and two, unrealized losses we took to reflect wider credit spreads in the market, which were modestly offset by net realized gains. We tend to focus more on realized gains and losses, which we believe is a more important metric in grading our performance than unrealized gains and losses, which has meaningfully less impact on our longer-term results. Please turn to Slides 13 and 14 of the presentation, which highlights certain characteristics of our portfolio. We ended the quarter with nearly $1.6 billion of investments at fair value across a highly diversified portfolio of 187 companies, with an average investment size of less than 1% of the total portfolio. Our investment portfolio continues to consist primarily of senior secured first lien and unitranche first lien loans, collectively representing 89% of the portfolio at fair value at quarter end, which compares to 90% as of year-end. And we remain well diversified across 20 industries and continue to lend almost exclusively to private equity-backed companies, with 98% of our debt portfolio in sponsor-backed companies as of quarter end. In terms of industry composition, you can see on the right-hand side of Slide 14 that the majority of our investments continue to be in services-based businesses with a particular focus on healthcare, software, commercial and professional services. This is by design, as Crescent's private credit team has always focused on underwriting free cash flow generative businesses in what we deem to be more recession-resilient industries. With respect to software, our investment focus is providing conventional cash flow-based leverage financing to more mature sponsor-backed companies. We are not participants in loans to free cash flow or annual recurring revenue-based loans. This approach has led to the consistent payment of principal and interest from our borrowers, with portfolio companies representing over 99% of our total debt investments at fair value, making full payment in the first quarter, a figure that's remained stable for some time. As highlighted in our previously released supplemental materials, the acquisition of First Eagle BDC has not resulted in material changes to the credit quality, investment type or industry focus of our portfolio. A few more credit trends to review: performance ratings and nonaccrual levels. Our weighted average portfolio grade of 2.2 compares to 2.1 last quarter, and the percentage of risk rated one and two investments, the highest ratings our portfolio companies can receive accounted for 85% of the portfolio at fair value, down modestly from 87% last quarter. As of quarter end, we had investments in eight portfolio companies on nonaccrual status representing 2.7% and 2.0% of our total debt investments at cost and fair value, respectively. Moving to the current market backdrop. The volatility we experienced in the financial markets in the latter half of 2022, continued during the first quarter of 2023, especially with the challenges in the regional banking space. We believe that the banks remain constrained on new activity due to capital and liquidity concerns, which improves the opportunity set for direct lenders. For example, while M&A activity remained muted for the first quarter, for those deals that did get done, we continued to see a growing preference for surety of execution from sponsors and management teams alike. This is highlighted by the fact that in the first quarter, over 90% of new LBO financings by count were completed by private capital providers, a market traditionally weighted towards the broadly syndicated channel. Additionally, the opportunities we have seen in recent quarters have demonstrated economic and structural terms that are favorable to prior years. On the topic of regional banks, less than 3% of our portfolio at fair value has top line exposure to regional bank customers. While we believe Crescent has and will continue to benefit from its position as a tenured solutions provider to middle market companies, given the breadth of our origination capabilities and the experience of our team, in the immediate to near term CCAP is primarily focused on the rotation of our existing portfolio and maintaining leverage in the lower half of our target range and therefore, we'll be highly selective on new deployment opportunities. The new investment opportunities the platform is seeing are quite compelling in terms of attractive pricing, enhanced call protection and lower overall leverage levels for high-quality companies. Spreads on new originations are approximately 100 basis points higher compared to a year ago. Switching gears. Before I turn it over to Henry, I want to touch on our dividend policy. As CCAP has continued to scale since its inception in 2015, net investment income and the quarterly base dividend have grown alongside. Following a dozen dividend increases, which began in the second half of 2015, we've paid the current $0.41 per share base dividend every quarter, since the beginning of 2019, which represents an 8.5% annualized dividend yield based on our March 31 NAV. We have consistently prioritized earning our dividend and note that we have earned our dividend in every quarter since inception. Following the Fed's rate hikes beginning last year, our NII per share has begun to more comfortably outpace the base dividend, as was evident over the past few quarters. Because of this dynamic, beginning in the second quarter, we intend to implement a variable supplemental dividend program. The supplemental dividend will be variable each quarter, calculated as 50% of NII in excess of our regular dividend rounded to the nearest penny and subject to a measurement test. The measurement test will cap the supplemental dividend such that any decline in NAV over the prior two quarters, plus the supplemental dividend, will be no more than $0.15 per share. For purposes of the initial second quarter calculation, the change in NAV component will only look back one quarter to March 31, which is the first reporting period following the First Eagle BDC acquisition. For all future periods, the prior two-quarter methodology will be applied. The supplemental dividends will be approved by our Board, announced with quarterly results and paid in the following quarter. We believe this formulaic framework strikes the right balance of increasing total distributions to our stockholders, while preserving the stability of our NAV over time. For the second quarter of 2023, our Board declared a $0.41 per share, quarterly cash dividend, which will be paid on July 17 2023, to stockholders of record as of June 30 2023. Assuming we over-earned $0.41 per share in the second quarter, and are not constrained by the measurement test, we'll announce the amount of our first supplemental dividend in conjunction with next quarter's results. I'd now, like to turn it over to Henry, to discuss our Q1 investment activity. Henry?

Thanks, Jason. Please turn to Slide 15, where we highlight our recent activity. Gross deployment in the first quarter was $29 million as you can see on the left-hand side of the page, which consisted of three add-on and several follow-on revolver and delayed draw fundings. The $29 million in gross deployment compares to approximately $54 million, in aggregate sales and repayments during the quarter. Inclusive of the $335 million First Eagle BDC investment portfolio that we acquired, which is not highlighted on this side of the slide, total investments at fair value increased by 24% quarter-over-quarter. Moving to the right-hand side of the page, you'll see our first lien investments including unitranche investments continue to account for the lion's share or 89% of our total portfolio at fair value. Given that majority of the acquired First Eagle portfolio was in traditional senior secured first lien loans as opposed to unitranche loans that component of the combined portfolio increased from 24% to 28% quarter-over-quarter. Turning to slide 16. You can see that the weighted average yield of our income-producing securities at cost increased quarter-over-quarter from 10.8% to 11.4% on the heels of the Federal Reserve's continued interest rate hikes and is up 390 basis points year-over-year. This was driven primarily by an increase in base rates. As of March 31st, 99% of our debt investments at fair value were floating rate with a weighted average floor of 80 basis points, which compares to our 66% floating rate liability structure based on debt drawn with 0% floors. This situates us well to benefit from increases in base rates above our average floors as is the case this quarter with continued growth in our net interest margin. Overall, our investment portfolio continues to perform well with strong double-digit year-over-year weighted average revenue and EBITDA growth. While a higher rate environment is certainly beneficial from an earnings perspective, we are also cognizant of the fact that it is generally correlated with a slower US economy, which together can create more stress in the portfolio. We have been particularly focused on the impact to our portfolio from rising wages and interest rates. We have seen a sustained outpacing of revenue growth relative to EBITDA growth driven primarily by margin pressures resulting from labor inflation in select top sectors. While our portfolio companies has demonstrated an ability to pass-through certain price increases due to their respective market positions and customer value propositions this dynamic continues to be one that our management teams and private equity partners are actively managing. We have yet see broad-based revenue pressure at the portfolio or even sector level and declines that we have witnessed have tended to be company specific particularly companies that were outsized beneficiaries from COVID-19 stay-at-home mandates where we are now observing a reversion to the mean. With respect to rising rates, using market interest rate levels at quarter end and adjusting for last week's Fed rate hike, weighted average interest coverage for the total portfolio is 1.8 times. We continue to closely monitor how our portfolio companies are managing fixed charges in this environment and believe that our companies in the aggregate are capitalized as sufficient available liquidity. As of quarter end, approximately 70% of aggregate revolving capacity was available across the portfolio, which we view as a very manageable figure. We have not seen a material increase in revolver utilization rates across the portfolio in recent quarters and recent draws have been driven largely by the routine operational needs of the respective businesses. The strength of our portfolio continues to benefit from the substantial amount of equity invested in our companies. The weighted average loan-to-value in the portfolio at time of underwriting was approximately 41%, which provides us a margin of safety from both an enterprise value perspective as well as capital risk from sophisticated partners beneath our tranche that is available to support our investments. Crescent's track record of successfully managing through multiple economic and market cycles provides us with significant and relevant experience to navigate what could potentially be a challenging environment in 2023 and beyond. With that I'll now turn it over to Gerhard.

Thanks, Henry, and good afternoon, everyone. Our adjusted net investment income per share of $0.54 for the first quarter of 2023 compares to $0.49 per share for the prior quarter and $0.41 per share for the first quarter of 2022. Total investment income of $39.3 million for the first quarter compares to $34.5 million for the prior quarter, representing an increase of approximately 14%. Driven by rising base rates and the impact of three weeks of earnings from First Eagle, recurring yield-related investment income comprised of interest income, PIK income, amortization and unused fees was up 10% quarter-over-quarter from $32.5 million to $35.8 million, ultimately accounting for over 90% of this quarter's total investment income. PIK income continues to represent a modest portion of our revenue at approximately 2% of total investment income. Our GAAP earnings per share or net increase in net assets resulting from operations for the first quarter of 2023 was $0.24 per share, which compares to $0.08 per share for the prior quarter. At March 31st, our stockholders' equity was $718 million resulting in net asset value per share of $19.38 as compared to $613 million or $19.83 per share last quarter as we issued approximately 6.2 million shares during the first quarter as part of the consideration for the net assets acquired from First Eagle BDC. The unrealized component of this quarter's NAV decline is not in our view a reflection of deteriorating credit quality in our portfolio, but rather the widening credit spread environment, which affected marks. This dynamic is evidenced by our internal portfolio ratings at the end of the first quarter, largely consistent with prior quarters with 85% of the portfolio rated one or two our highest rating categories. This is also in line with our expected risk ratings resulting from the First Eagle BDC acquisition. We believe this is an important distinction to highlight for shareholders in a volatile market environment. Now, let's shift to our capitalization and liquidity I'm on Slide 19. As of March 31, our debt-to-equity ratio was 1.23x up from 1.08x at year-end, which is in line with our expectations given the leveraging impact of the First Eagle acquisition. The weighted average stated interest rate on our total borrowings was 6.52% as of quarter end. As you can see on the right-hand side of the slide, we have a low level of debt maturities over the next few years with one $50 million maturity related to our 5.95% unsecured notes coming due in July. As you may have seen disclosed in the 10-Q we filed yesterday evening we completed a private offering of $50 million aggregate principal amount of 7.54% senior unsecured notes due July 28, 2026. These notes will become effective upon the repayment of the existing 2023 notes at their maturity at the end of July. Adjusted for this activity there are no near-term maturities until 2026. It's also worth highlighting that in January we upsized our SMBC Corporate Revolving Facility by $35 million to $385 million. And in March, we upsized our SPV asset facility by $150 million to $500 million and extended the maturity from June 2026 to March 2028. Additionally, we assumed First Eagle's 5% unsecured notes due 2026 which provides for enhanced funding flexibility and improves our unsecured debt mix to approximately 33% of total drawn debt as of quarter end. Our liquidity position remains strong with $297 million of undrawn capacity subject to leverage borrowing base and other restrictions and $34.5 million in cash and cash equivalents as of quarter end. We believe the increase in our dry powder positions us well to continue to support our existing portfolio company commitments as well as selectively invest in new opportunities in the current investing environment where we will remain highly selective. Finally, for the second quarter of 2023, our Board declared a $0.41 per share quarterly cash dividend which will be paid on July 17, 2023 to stockholders of record as of June 30, 2023. And with that, I'd like to turn it back to Jason for closing remarks.

Thanks, Gerhard. In closing, while we continue to monitor the potential for economic challenges that may lie ahead, we believe that we are well positioned to navigate these conditions. We've built a defensively positioned portfolio and benefit from the Crescent platform and highly seasoned team who've collectively managed through numerous challenging times and cycles. As always, we appreciate you all joining us today and we look forward to speaking with you next quarter. And with that, operator we can open the line for questions.

Thank you. Next question will be from Ryan Lynch at KBW. Please go ahead.

Hey, good afternoon. First question I had was I think you mentioned in your prepared comments that the NAV decline or the portfolio depreciation this quarter was mostly driven by mark-to-market which I think has largely been the case historically with the acceptance from credit. But as I take a step back and I look at your overall -- the cost of your debt portfolio versus the fair value of your portfolio, it's been written down about $43 million or so. There's kind of cumulative difference between those 2 numbers. I'm just curious have you guys looked at that same number? And is there any sort of sense that you can provide or color that you can provide of that markdown that's roughly $43 million what percentage of that has been due to historical credit marks taken over the last year or so? And what percent of that roughly has been more mark-to-market which would assume that if things go well that could be recoverable over time?

Ryan, thanks for the questions. This is Gerhard. I can comment and then Henry and Jason may have some additional thoughts on that. But the -- to answer the last part of your question more than half -- I would say somewhere between -- close to 60% is mark-to-market-related or spread environment-related. And then we had a couple of our nonaccrual names that contributed to that unrealized loss over the last couple of quarters. I would call out [indiscernible]. There's two names that have been on nonaccrual in the portfolio. And then lastly the Logan JV which is an acquired asset that we onboarded as part of the First Eagle transaction that is a broadly syndicated portfolio or kind of a bank loan portfolio with a number of syndicated positions and so that is sensitive to -- more sensitive to changes in liquid marks. And so we did see about $0.13 of unrealized loss from that portfolio that we don't think is credit-related but more so spread-related just in the last couple of weeks of March since the close of the transaction.

And that's – hey, Ryan, it's Jason. That's a levered portfolio right so the movement is going to be more exacerbated there. And then just to tack on to what Gerhard was saying if you think about just the quarter Ryan, which you didn't go there but maybe you were planning to of the roughly $0.30 change in unrealized about 20% of that is related to a couple of the nonaccrual names that Gerhard mentioned and [indiscernible] which are really the values on those can move more dependent on what's going on with those specific situations. And then I would characterize the remaining balance that 80% as being more mark-to-market driven.

Okay. That's helpful. And that's a good time, for ballpark sort of -- so that's definitely helpful. As you study your overall portfolio and I understand each individual investment has idiosyncratic things that affect it but from a higher level when we're just looking at the industry concentrations of your portfolio this is obviously a choppy economic environment. There are certain tailwinds and headwinds for different industries. What would you say are maybe a particular industry that you guys hold in your portfolio that's experiencing some nice tailwinds in this environment or performing better than expectations and then also maybe an industry that maybe has additional headwinds or sort of underperforming or you have more concerns about in this environment?

Yeah. Ryan thanks. It's Jason and Henry might want to chime in here as well. I think in terms of tailwinds I think we're fortunate in the sense that we've tried to position the portfolio to be fairly resilient on the top line. And so I would say, generally, we continue to see good stable to growing top lines across the portfolio. It is and I think Henry made this comment on the call we are seeing revenue outpace EBITDA growth. And I would say that's probably more acute in healthcare than in maybe other segments where wage inflation is more pronounced. And I think it's sometimes more difficult to preserve margins in that sector. But I think across the board we have yet to see broad-based revenue pressure even at the sector level. And then on the margin side I would say healthcare is probably the area that we're spending the most time around margin compression. The other thing that, I would just say is that, I think we are moving into a different environment now where over the last few years sponsors I think have been investing for growth. And what I mean by that is really sizing the cost structures and spending in the cost structure of these companies for strong top line growth and we have seen some of that. However I think maybe things are changing a bit now where we are seeing in certain segments that sponsors are dialing back on that investment and perhaps trying to right-size or recalibrate cost structures in light of what might be a different sort of growth perspective on a go-forward basis.

Yeah. And I think I just want to put a little bit of a finer point on Jason's comment around what we're seeing on the healthcare side. That's obviously a broad industry categorization here. And when we think about some of the wage pressures being most acute is on the provider side. So think actual clinical services that are being provided to patients that are coming into the door. That's less than half of our total healthcare portfolio sector. So I do think that it's important to note that inside that bucket there also includes healthcare equipment businesses and service providers and pharmaceutical companies. So I think that's just one piece of detail that I think is worth appreciating here.

I mean on that comment and that's pretty consistent I feel like we talk other lenders that kind of the healthcare in particular like the healthcare service providers it's feeling that wage pressure versus the ability to pass-through those costs from a revenue standpoint. I mean how does that work out in a business that is in a healthcare providing business? How does that work out in that industry that's having big wage increases or cost pressures and then the associated revenue? How does that work out over the next year or two? What are some of the things that sort of borrower can perform, or is it just the hope that inflation cools down and revenue can kind of catch up with expenses?

Yes. It's Jason and then Henry can chime in. Thanks, Ryan. I think you certainly point out the kind of the macro initiative right which is what the Fed is working to do to tame inflation. And so we'll see how successful they are in that endeavor. But as it pertains to the portfolio and specific companies and how to operate I think the point that I was trying to make earlier around maybe recalibrating and rightsizing cost structures for a different growth perspective I think is important. You think about what is within the control of the company certainly spending and for instance on the clinic side what we've seen a lot across our portfolio and other sponsor initiatives is the opening of de novo type clinics for whatever business purpose their portfolio company serves. And those initiatives I think are certainly under the control of the ownership and can be slowed or halted in light of a different environment.

Yes. I think to add to that I wouldn't say any of our management teams or private equity partners here are hoping inflation goes down because I think it seems like wage pressures are likely sticky and especially for more kind of highly skilled clinicians here. But I will echo the point that a lot of these platforms that we're invested in are ones that were set up for growth. And part of that growth strategy was acquisition and the other part of that were de novos which are opening up new clinics. And that has quite a bit of fixed cost structure that comes alongside of it in order to be able to build up and roll out that platform. And we're seeing a reevaluation of that thesis across the board here just because there are some real questions around how much longer are we going to be operating in this environment where the wages are where they are and there's some turnover kind of within some select subsectors as well. I think the other piece as well we're also seeing in terms of how the go-to-market strategy is evolving here is just a lot more focus in terms of retaining patients making sure that they come in for follow-ups to the extent that that's critical for the respective service provider that's coming in and really looking to bolster the revenue side and kind of enhance that piece of the equation. And I think the final thing to note here is that from a lender perspective we certainly -- while we're not obviously the owners of the business have a lot of governors around how de novos and acquisitions roll out not just in terms of typically being the capital provider in those acquisitions but also vis-à-vis covenants around how and when those expansion opportunities are able to come into the picture here. So there's a lot of angles. I think that both the ownership teams, the management teams as well as the lenders are approaching this issue. And I think all of those are kind of in play in this environment that we're working through.

That's really helpful color on how you're thinking about some of the nuances with each of the investments. I just had one final question. You mentioned the $50 million of private notes offerings done post quarter. Couple of questions to that. One is there any -- I know it's very -- I understand probably why you did it for the length that you did. But is there any sort of non-call provision or prepayment penalties on that issuance number one? And then number two the maturity is a shorter date maturity again it's higher cost so I understand why you're doing probably a shorter duration notes, but they're due in July 2026. How should we think about your -- all through of your debt issuances or your entire unsecured note offering staff coming due within a six-month period in 2026? I understand that that's quite a bit away, but how should we think about the entire 160 stack coming due over a six-month period?

Yes. Thanks for the question. A couple of questions there and hopefully I can cover them all. Look I think the way to think about the $50 million is that really from a terms perspective is almost identical to the $50 million that we're planning to repay at the end of July. And so it's really a two and a half year note. In other words we will have the same option to prepay without penalty six months prior to maturity. And we like that because it gives us kind of a window even in advance of that let's say six to nine months prior to that prepayment window opening to kind of assess the market and start thinking about our options. And frankly, I think the second part of your question I think maybe dovetails into that. I think we're aware of the upcoming maturities in 2026 and we plan to be proactive around looking at other capital options or refinancing options across the market. I'll add maybe that the First Eagle transaction is actually helpful in that regard because the additional scale that that brings to the capital structure will allow us to access new parts of the debt capital markets that have traditionally priced more favorably than some of the current debt in our cap structure. So I think the First Eagle transaction will be helpful to the stockholder base from that perspective.

Okay, understood. I appreciate the time today.

Thanks Ryan.

Thank you. [Operator Instructions] And your next question will be from Finian O'Shea at Wells Fargo Securities.

Hey everyone. Good afternoon. Can you provide the full quarter topline revenue and interest expense pro forma for First Eagle understanding that was just a few weeks?

Yes. Happy to do that. We don't have that available at this minute, but happy to--

Okay. And then I think you said this to an earlier question that this quarter's NOI would sort of be the starting point. Does that mean there's sort of no NOI accretion there for one? And then I think on some earlier calls, you mentioned significant cost savings from that merger. So, what are the sort of offsets or the headwinds that would keep NOI flat all else equal?

Fin, Gerhard again. I can take a crack at that. I think when we think about the -- especially the kind of the earlier remarks around portfolio accretion right, we look at the First Eagle P&L and the CCAP P&L and on an aggregated basis, obviously, revenue going forward is essentially the aggregate of the two portfolios. The cost savings on the P&L side really relates to our ability to remove some of the legacy First Eagle costs, while retaining obviously, the fixed and variable costs and the CCAP, P&L which we think are very attractive compared to the peer group. So, I think that's the accretion, we referenced in our prior remarks.

Okay. Thank you. And then just a follow-up on the dividend policy. I appreciate, the outline on that. However, it looks like if base rates fall back down, there won't be too much quarterly spillover at least, and it looks like that you have quite a bit outstanding as well. So can you give us that number of spillover you currently have? And then if base rates and yields normalize, will you kind of go back to where you were and keep what you have or will there be a bit of a rehash of the dividend policy?

Yes. The second part of your question it's hard to, really predict the new normal other than to look at the forward curve. But maybe, let me start with the spillover. As of year-end, our disclosed spillover was about $16 million. Obviously, that number has crept up due to NII year and excess of the distribution in Q1. So, we're close to just maybe just under $20 million of spillover at the end of Q1. Our base dividend at $0.41, a share is approximately $15 million, a quarter. So the rough math on that means where, we have a total spillover equal to just over 1 times our dividend. We believe that the supplemental program, we announced today, will really kind of manage that spillover or keep that spillover from increasing. We'll continue to evaluate the spillover. Our general policy there has been to think about that towards the end of the year in Q4. And so there is the potential for additional special dividends, to the extent that that spillover grows meaningfully. And then, I think the final part of your question again, I think for the foreseeable future year, we expect to over-earn and I think we just have to see where long-term rates stabilize.

Just a follow-up there. Is that $20 million you give, is that net of capital loss? Is that just the income number?

Well, it's a tax-driven calculation, so it includes realized, but would not include unrealized.

Okay. But you do have to pay out the income under a separate formula, right? So that's the sort of relevant one, right? So are you able to give the income spillover number?

It's an all-in of $20 million, yes.

Okay. Thank you.

Thank you. At this time, I would like to turn the call back over to Mr. McMahon, for closing remarks.

Thanks, everyone. Appreciate your interest in CCAP and the thoughtful questions. We look forward to speaking with you, next quarter, if not sooner.