Stephanie Sullivan - General Counsel and Chief Legal Officer Sam Tillinghast - Co-CEO and Co-Chief Investment Officer Christopher Flynn - Co-CEO and Co-Chief Investment Officer Terrence Olson - COO and CFO.

Leslie Vandegrift - Raymond James Doug Mewhirter - SunTrust Robinson Humphrey Greg Mason - KBW Peter Councill - BB&T Capital Markets Jonathan Bock - Wells Fargo Securities.

Good morning and welcome to THL Credit's Earnings Conference Call for its third fiscal quarter 2015 results. It is my pleasure to turn the call over to Ms. Stephanie Sullivan, Chief Legal Officer and General Counsel of THL Credit. Ms. Sullivan, you may begin..

Thank you, operator. Good morning and thank you for joining us. With me today are Sam Tillinghast and Chris Flynn, our Co-Chief Executive Officers, and Terry Olson, our Chief Operating Officer and Chief Financial Officer.

Before we begin, please note that statements made on this call may constitute forward-looking statements within the meaning of the Securities Act of 1933 as amended.

Such statements reflect various assumptions by THL Credit concerning anticipated results are not guarantees of future performance and are subject to known and unknown uncertainties and other factors that could cause actual results to differ materially from such statements.

The uncertainties and other factors are, in some ways, beyond management's control, including the factors described from time-to-time in our filings with the SEC.

Although we believe that the assumptions on which any forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate and as a result the forward-looking statements based on those assumptions also could be incorrect. You should not place undue reliance on these forward-looking statements.

THL Credit undertakes no duty to update any forward-looking statements made herein. All forward-looking statements speak only as of the date of this call. Our earnings announcement and 10-Q were released yesterday afternoon, copies of which can be found on our website along with the Q3 Investor Presentation that we will refer to during this call.

A Webcast replay of this call will be available until November13, 2015, starting approximately two hours after we conclude this morning. To access the replay, please visit our Web-site at www.thlcredit.com. With that, I'll turn the call over to Sam..

Thank you, Stephanie. Good morning everyone. Thank you for joining this morning’s call covering the results of THL Credit’s third quarter ended September 30. As an agenda for this call, I'll be providing some financial highlights for the quarter.

Chris will be discussing the portfolio and related activity including the senior secured Logan joint venture and Terry will take you through our financial performance in more detail then I'll wrap up with some closing remarks.

Our net investment income was $0.35 per share again this quarter, compared to an ordinary dividend of $0.34 paid at the end of September. For the sixth straight quarter, we’ve generated earnings in excess of our regular dividend and since our inception over five years ago our cumulative earnings have covered the total of all of our dividends.

Additionally at quarter end we had retained approximately 6.2 million or approximately $0.19 per share of undistributed taxable income on our balance sheet. We’re also pleased to announce that on November 3, our Board of Directors approved a quarterly dividend of $0.34 per share for the fourth fiscal quarter 215, which is payable on December 31.

A trialing one year, two year and three year net investment income as of September 30, represented a 10.8%, 10.4% and 10.3% annualized return on our average net asset value over the same periods respectively.

Our ability to consistently cover our dividend and consistently generate a strong return of equity to our shareholders is a reflection of our disciplined approach to poring capital and the strong credit quality of our portfolio since our IPO.

We remain entirely focused on optimizing our fully invested portfolio overtime and we continue to seek ways to drive shareholder returns. To remind folks of these initiatives, first we have repurchased and expect to continue to repurchase our stock below book value. Second, we have grown and expect to continue to grow our Logan joint venture.

Third, overtime we’ve spent to redeploy proceeds of equity realizations in the yielding assets. And fourth, as we look at our advisors [ph] expansion of its direct lending platform including the management of additional private funds, we expect benefits of this scale to decrease the expenses of BDC overtime.

As we have stated many times we did not have plans to issue stock below NAV. In fact during third quarter we continued to repurchase shares of our common stocks and we repurchased 263,000 for $3.2 million, reflecting a 7.6% weighted average discount to the June 30 NAV.

On a year-to-date basis we have repurchased a total of 568,000 shares for $7 million, reflecting a 6.8% blended discount to the March 31 and June 30 NAVs. We intend to continue with accretive share repurchases under this program as market conditions and other factors such as our leverage and liquidity levels want.

As a reminder the board approved a $25 million program earlier this year. Before I talk briefly on our investment highlights, I want to remind folks of our direct lending investment strategy. We continue to be focused in investing in directly originated senior secured loans in the lower middle market.

We believe that this strategy provides higher risk adjusted returns and stronger downside protection than the upper middle market due to less leverage and tighter covenants. We believe these factors will be of at most importance in the next credit cycle downturn.

This we believe, this is an area of the market where relationships matter and our five office foot print has led to strong partnerships with a wide range of sponsors. The result of this long standing origination approach has been our direct involvement in the structuring of transactions.

In effect, as we have said before we’re working to create capital structures and loans instead of just buying them from an investment bank to offer the trading desk [ph]. As of September 30, we were invested in 55 portfolio companies valued at $748 million, down from 766 million at the end of Q2.

While we experienced a slight portfolio contraction of $89 during Q3, mostly due to one large repayment at quarter end we’ve seen an increase in investment activity in Q4 that is expected to replace this contraction.

Going forward we expect to fund new investment opportunities with proceeds from ongoing repayments currently averaging approximately $50 million per quarter over the last six quarters, equity realizations and to the extent necessary the sale of some of our more broadly syndicated loans which we deal as a source of liquidity.

We’re proud of our overall portfolio of credit quality and we remain focused on preservation of shareholder capital. Our NAV as of September 30 was $13.03 per share, which represents a 2% decline from June 30. The decrease in NAV is largely due to valuation changes in the capital markets rather than specific credit issues.

Terry will discuss this in more detail later on. Now I’ll turn the call over to Chris to talk about the portfolio..

Thanks, Sam and good morning everyone. During the third quarter we remained focused on optimizing our fully invested portfolio, given current leverage levels we have been increasingly selective we’re making no investments.

In total we invested $38 million in Q3 including 10 million in a new second lien investment and $28 million in follow-on investments including the Logan JV. We also had $49 million of repayments and sales through this quarter of which the proceeds were used to fund our new investments and buy back additional shares of TCRD stock.

Since IPO, we’ve deployed over $1.3 billion in investments and have realized proceeds of $691 million from repayments and sales, generated an aggregate growth IRR of 17.5% on fully exited investments, about 95% of these investments producing over a 10% IRR.

While this past performance is not a promise of future performance, we’re proud of our track record and the returns that we generated for our shareholders, which we believe is a reflection of our disciplined and rigorous underwriting standards.

We intend to continue to execute on this strategy of investing in directly originated senior secured loans including, first lien, second lien and unitranche as capital becomes available.

In addition to pursue our new investment opportunities with attractive risk adjusted returns, we intend to continue to invest in our existing portfolio where we already have previous knowledge of our borrowers. We continue to take a long-term view of our investments and we’re committed to supporting the growth of our portfolio company’s overtime.

We will continue to invest in our Logan JV, which is invested primarily in senior secured loans that provide an accretive earning strength to our shareholders. The $1.2 million of dividend income and realized gains during this quarter represented a dividend yield to us 11.9% based on average invested equity.

As of September 30, we had invested $44 million in the Logan JV and to date we are now at 49 million. At the fund level from September 20, the Logan JV consisted of loans of 280 companies totaling $152 million which was comprised primarily of more broadly syndicated loans.

Investments in directly originated first lien loans continues to grow as a percentage of the total portfolio, representing approximately 19% at quarter end versus 14% at the end of second quarter. We expect this percentage to continue to grow overtime as the JV scale diversifies.

The JV also recently up sighted its credit facility from 100 million to 125 million and expects to increase this further as we and Perspecta, our JV partner deploy additional equity into the vehicle.

The credit facilities revolving loan period ends December 17, 2016, with a final maturity date of December 17, 2019, and is priced at LIBOR 250 with no floor. As of September 30, the Logan portfolio debt to equity ratio was 1.7 times.

As a reminder the availability of this credit facility is determined by a borrowing base that is driven by credit performance and it’s not mark-to-market. Turning back to TCRDs portfolio at September 30, it was comprised primarily of senior secured loans with 72% of the portfolio invested in first and second lien loans.

The remainder of the portfolio was invested in 9% in subordinated debt investments, 4% in other income producing securities, 6% in the Logan JV and 9% in equity, all based on fair value.

We expect that the first and second lien composition of portfolio and our investment in Logan will continue to grow as a percentage of the total portfolio as our subordinated loans repay overtime and equity positions are realized in the future.

Surgery Partners, an investment that was in our portfolio since our IPO went public October 1 and is expected to provide additional liquidity in the coming quarters. C&K Market, our largest equity position also continues to perform well, although a timeframe for liquidity is difficult to predict.

As of September 30, 76% of our debt portfolio was invested in floating rate loans which we believe leaves our portfolio well positioned to adjust to the raising interest rate environment. The weighted average yield on the portfolio was 11.7% as of September 30 and it remains steady in the 11% to 12% range for the last nine quarters.

We continue to be pleased with the overall credit quality of our portfolio, 74% of the companies are portfolio on a fair value basis were rated 1 or 2, which means they’re meeting our exceeding expectations versus 77% in Q2.

We continue to have one 4 rated credit and one 5 rated credit which collectively represent only 2.5% of the portfolios fair value. As of September 30, we had one investment on non-accrual representing 0.6% of our portfolio on a cost basis. With that I’ll turn the call over to Terry to talk more about our quarterly investment activity..

Thanks, Chris and good morning everyone. I’ll provide a more detailed recap on our investment activity and the financial performance during the quarter.

The 38 million of investment activity we had this quarter included a new directly originated $10 second lien investment in American Covers, a holding company for a manufacturer and marketer of air freshening products, 9 million of equity contributions into the Logan JV and 19 million of debt and equity follow-on investments in 19 existing portfolio companies to support growth and acquisitions.

The weighted average yield on these income producing investments excluding Logan was 10.2%. The most notable realizations in the quarter included the repayment in full of our first lien secured term loan in Harrison Gibson which provided accretive fees.

Further we exceeded our CLO equity investments in Adirondack Park and Sheridan Square receiving proceeds in line with our cost bases in each investment. Our three remaining CLO equity positions represent 2.1% of the portfolio as of September 30, each position continues to generate an attractive yield for the portfolio.

First quarter end we repayed on our senior secured first lien investment in Embarcadero Technologies which generated approximately $130,000 of income from accelerated amortization and a prepayment penalty. As of September 30, our leverage level is 0.75 times equity, which is towards the higher end of our targeted range of 0.6 to 0.8 times.

Effective August, in August in connection with the amendment of our $410 million senior credit facility led by ING, we extended the maturity of our term loan and revolving loan by three years and reduced the pricing on our term loan from L325 to L275 and we are also pleased to have added three new lenders to the syndicate.

Investment income for the quarter was 11.6 million or $0.35 per share, our investment income of 23.1 million was comprised of $19.1million from interest income and debt securities which included 1.1million of PIK interest, 1.7 million from interest income on other income producing securities, 1.2 million of dividend income from the Logan JV and other equity investments and other income of approximately 1.1 million included, 0.5 million of fee income from our managed funds and separate account and 0.6 million of fee income from our investments.

During the quarter we incurred 11.5 million of expenses including 3.9 million in fees and expenses related to our credit facility, $3 million of base management fees, 2.9 million of incentive fees and $2.1 million of administrative, professional and other G&A expenses, as well as the current net tax benefit of $400,000.

Expenses related to our credit facility included a $325,000 of amortization related to differed financing costs that were accelerated in connection with two lenders exiting the credit facility as part of our recent amendment.

Expenses for the quarter also included non-recurring tax benefit of approximately 450,000 principally related to final 2014 return adjustments received in the third quarter.

As I mentioned, we expect the percentage of administrative and other G&A cost that our BDC incurs will decrease over time as we continue to build our direct lending platform, including the management of additional private funds. Lastly, we had a net change in unrealized appreciation of our investments this quarter of negative 8.6 million.

This was driven largely by its spread widening in the market, in particular as it relates to investments in CLO equity, our energy portfolio, the broadly syndicated loans in our Logan JV and our equity investment in Surgery Partners that priced its IPO below its initial targeted range.

We continue to have confidence in the overall credit quality of the portfolio based on the financial performance of our investments despite some volatility in market rates and packing price in Q3. And as of September 30, our NAV was 435 million or $13.03 per share compared to 13.29 per share on June 30.

The 26% share decrease in Q3 was largely driven by the changes. And net unrealized appreciation, noted earlier, slightly offset by retained earnings and accretive stock repurchases. With that, I’ll turn the call back over to Sam for some concluding remarks..

Thanks, Terry. We're proud of our consistent track record of generating earnings in excess of our regular dividend of providing on track to return on equity to shareholders.

We remain focused on the optimization of our fully invested portfolio and as the portfolio actually turns over, we intend to continue to pursue opportunities, continue our secured investments in the lower middle market where we see the most attractive risk adjusted returns and in the growing of the Logan joint venture.

Lastly we also intend to continue with accretive share repurchases as market conditions and other factors go.

Before I turn the call over to the operator to start the Q&A, I’d like to announce that Stephanie Sullivan, our Chief Legal and General Counsel - Our Chief Legal Officer and General Counsel will be leaving the firm at the end of the year to pursue other opportunities.

Stephanie has been with us since our IPO and we want to publicly thank her for her contributions to our success and wish her best in her endeavors. On behalf of Chris, Terry, and the rest of the firm, thank you, Stephanie, we wish you all the best. And with that, we’d like to open the line for questions, operator..

Thank you. [Operator Instructions] Our first question comes from the line of Kyle Joseph with Jefferies. Your line is now open. Please go ahead. Mr. Joseph, if your phone is on mute, please take it off mute and if your phone is on the speaker, please lift up the handset..

Yeah. I'm here. Good morning guys. Thanks for taking my questions. Just going into the quarter and looking at the yield trends, can you give us an idea? It looks like the portfolio yields declined slightly in the quarter. I’m wondering if you can tell us how much of that was attributable to sales of CLO equities.

And can you give us the trends X the sales of CLO equities?.

Hey, Kyle, this is Terry. I didn't calculate it specifically how much the decline was.

I believe it was only 10 basis points, big picture of the yield we put on the portfolio were about 11.3% year-to-date and you can see a little variability quarter-to-quarter and the two CLO equity positions that came off, we were accruing at about, I believe, it was 13.5% to 14% between the two of them representing, I think, about $19 million of securities.

Again as we redeploy that capital into Logan and other investments, we don't - well, it would appear that there is a lot lost, I mean, aggregate given the size of the pieces that were sold. It didn't have a significant impact overall..

Okay, thanks..

This is Sam. If you look at over the last four quarters, the portfolio was at 11.7%, three of the last four including this past quarter, we were at 11.8% the second quarter, so it really wouldn’t deal a whole lot into 10 basis points moving from one quarter to the next in terms of trends..

That makes sense. And then, Sam, I think you said that fourth quarter deal activity had picked up.

Just wondering if you're seeing some of the broader market volatility have an impact on middle market spreads and your outlook for yields going forward I guess?.

It's been of a little impact. At the lower end of the middle market, you really don't see that much of an effect from what's happening in the broader capital markets in terms of new transactions..

Alright, thanks. And I know you guys had some unrealized depreciation on the portfolio from broader spread movements.

But can you give us an idea of sort of the revenue and EBITDA growth you're seeing from your portfolio companies and I guess to bridge that just sort of your thoughts on the economy as well?.

Yeah, it’s Sam again, Kyle. Yeah, I think as a sort of a general statement, I think we're seeing slow growth. Most of the companies in our portfolio were up slightly in EBITDA growth. So it’s nothing fast. Generally we think the economy is - it’s healthy it’s just not growing very fast. But it's really how we’re thinking about it..

Alright, that's very helpful. Thanks a lot for answering my question..

Sure..

Thank you. Our next question comes from the line of Leslie Vandegrift with Raymond James. Your line is now open. Please go ahead..

I guess that was pretty close. It's Leslie Vandegrift.

Guys, how are you doing this morning?.

Hey, Leslie..

Hi, Leslie..

Just a quick question on again on the CLO equity, but not on the yield necessarily and then if you guys have a market 88% of cost right now. That's a bit more conservative than some of your peers. It’s not necessarily a bad thing. But just kind of the drivers behind that discount there and kind of expectations or what's driving that right now..

Yeah, Leslie, this is Terry. I think we certainly saw it as we sold a few of our - a couple of our positions in July. Beyond that, we started to see a gap down in pricing for CLO equity as it related to the risk - yield requirement that investors were demanding, which gaped out pretty wide in September.

In the last quarter, we had used that yield requirement as probably 14% to 15% range and if you look in the market today, that requirement is anywhere in the 20% to 25% range and if you run those - you run that return requirement through an Intex model using what we feel are appropriate assumptions given our performance, specifically of our - the CLOs we’re invested in, that's where you’re driving the value today, which is down notably from Q4.

So we're really just reflecting what's going on in the market..

Okay, perfect. And then just a quick question I noticed we had a change around just kind of how we're doing unfunded commitments in Logan JV. Obviously we talked about that in the past.

I agree that treatment, but just curious if you’ve had any discussions with the SEC since last quarter talking about just specifically in between the BDC and the Logan JV itself about how to treat that and going forward just restructuring maybe how those are done?.

Sure. As you may know, the staff recently provided some general guidance that basically provided this long issue of assets sufficient to cover unfunded commitments. There was nothing else that needed to be done in terms of recruiting them in the numerator denominator. They also didn't draw a distinction between the joint ventures either.

Our N2 is effective and we've cleared this matter with the staff. Our view is that the joint ventures don't represent unfunded commitments in the sense that traditional unfunded commitments do again, because the BDC is actually involved in decision-making on whether or not to call capital.

So I think, which is why you've seen us move the unfunded capital commitments of the JV out of that particular footnote into the JV footnote in the 10-Q. You might have noticed that, but the matters behind us it doesn't impact any ratios and we consider ourselves effective in moving forward..

Perfect. That's it from me. Thanks..

Thank you. Our next question comes from the line of Doug Mewhirter with SunTrust. Your line is now open. Please go ahead..

Hi, good morning. I just had a couple of questions. First on the - just at the end of your, Chris, your prepared remarks, when you talked about Logan and I don't know if you mentioned the, I guess, ramp rate or your appetite for increasing the assets and also the potential pipeline, I know that the syndication market had some disruption this quarter.

Some of it may have cleared up going to the fourth and first quarter I just didn't know if you had any updated view on the anticipated trajectory of what Logan JV ramp rate looks like in terms of assets and equity..

Yes, this is Chris, Doug. We had $44 million at the end of the quarter. We've increased that to $49 million as of today. We've been opportunistic in increasing our exposure in the more syndicated market as that market has traded off a bit.

But our growth for this will be tempered quite frankly as we look to deploy capital with a fully levered balance sheet. So the way I would think about it is you see this transition out of some of the equity securities or maybe some of the CLO equity in the future. Those will drive a lot of the growth behind Logan..

Okay, thanks and speaking of the CLO equity, it looks like the market has experienced a little bit of volatility there. Is that going to affect your plan for liquidating the CLO equity? I assume you want to get the best price possible. So you're going to sort of wait this out before pursuing any more meaningful sales..

Hey, Doug, this is Terry. It's a great question and we’re not in any hurry to sell this and we mentioned that from the outset we don't want to take any whack to book value permanently that we don't need to. These are strong performing investments for us.

The portfolios are very well diversified with modest energy exposure and no non-accruals or no defaults within the portfolios based on the latest trustee information available to us. So we feel good about the assets terrific yield.

So we're not going to push them out the door just for the sake of pushing them out of the door given their performance, so we’ll wait it out..

Hey, Doug, this is Chris.

One of the things to think about it at the committee level when we discuss these investments is it's not necessarily only the price that you're selling or what yield are you feeding to the buyer and when you're feeding a yield in the 11%, 12%, 13%, 14% range, we think that makes sense, but if you're feeding in the low 20s, what we're going to hold onto it until the market moves back into a more reasonable level..

That makes sense. Thanks. That's all my questions..

Thanks, Doug..

Thank you. [Operator Instructions] Our next question comes from the line of Greg Mason with KBW. Your line is now open. Please go ahead..

Hey, great, thanks guys. A lot of my questions have been asked, but one thing about the extension of the credit facilities and the term debt piece out to now 2021. Previously when you put that in place, you actually did some swaps on that to kind of fix out that floating rate. Those swaps look like they run off in 2017.

So just curious your thoughts on swapping that out again or leaving that floating rate going forward..

Great question, Greg, and the short answer is we're continuing to evaluate whether or not we want to extend that. We hadn't made any decisions on that as of today..

Okay.

Do you have to do anything before the expiration and may have of ‘17?.

No, we do not. We do not. It would just expire on its own..

Okay. Then one additional thing on the Logan facility, you said that the facility inside of it, the reinvestment period ends.

Was that December ‘15 or ‘16?.

Sixteen, obviously as we move forward in the coming months, we’ll look to naturally extend that as we traditionally do it..

Yeah, okay, that was going to be my next question. And finally just on the third-party funds, do you have exemption to co-invest with those potential funds that you raise..

Greg, this is Chris. We have an application on file with the staff and we're continuing to work with them through that..

Okay. That's great. Alright, thanks guys. I appreciate it..

Thanks, Greg..

Thank you. Our next question comes from the line of Peter Councill with BB&T Capital Markets. Your line is now open. Please go ahead..

Hey, good morning, guys. Two quick questions on Logan, you mentioned on the last call I think that you thought you could get to that 100 million in commitments without having to raise any additional capital to BDC level. I was wondering if you are still kind of targeting that..

Hey, Peter, it’s Terry. Chris talked about this a little bit. I think somebody asked kind of what the outside range is and I would characterize 100 million of kind of our perfect world, a lot of growth in JV, again it's not an asset that's eligible for our borrowing base.

So we look to continue to fund its growth with assets that don't contribute to the borrowing base as well, which is as the CLO equity rolls off and some of our equities realize that its normal contributions to the borrowing base. That will be the biggest driver.

We will also gauge putting dollars to work in Logan relative to other investment opportunities in front of us just as we think about stock repurchases and the best use of our capital in doing several things with our liquidity. So I’d say I don't want to venture to say how quickly we could get to 100 million.

I think a lot of it will be depending on how the portfolio actually migrates from its current position and new assets are put on will dictate the pace of that..

And then I guess, and you guys have been pretty consistent last couple of quarters at around $0.35 NOI and I was just kind of wondering if there's any color you can give as you do maybe under that perfect world scenario, where you guys ramp to 100.

Kind of how we should be thinking about NOI at the margin?.

I think as we continue to build Logan, the yields, now the current yield is in the 12.5%, 13% range as of September 30 given that we're now fully levered. I think again how much in capital we are able to put in that will drive - will be a big factor.

I think as we think about $750 million portfolio, I think we're comfortable that on a blended basis as we look at the yield of the existing portfolio and folding Logan on top of it that if you've got a 11.5% or 11.4% yield across those assets, I think that models comfortably to cover the $0.34 dividend without a lot of specials on the outside.

I guess so that's directionally how we think about it..

This is Sam, Peter. One other point I’ll add is, just as we realize some of the equity positions in our portfolio and are able to convert that into real loans that are producing yields that will improve the earnings per share as well. So for example Chris mentioned that Surgery Partners just did their IPO.

So as things like that start to occur, that will help to increase the dividend coverage..

Well, great, thanks. It's really helpful. That's all I got..

Thanks, Peter..

Thank you. Our next question comes from the line Jonathan Bock with Wells Fargo Securities. Your line is now open. Please go ahead..

Good afternoon and thank you for taking my questions. Starting first, I want to make sure I didn't miss that.

But, Terry, did you mention that you've filed and you've currently received exemptive relief from the SEC for co-investment?.

No..

Hey, Jon, this was Chris. We have filed the application we have not - it has not been approved yet. We are in constant dialog with them in moving through that application process..

So, exemptive relief can take quite a long time. One of the questions I have is, is it your plan to invest separate - I mean how do you envision growth if you've got some available capital in the BDC? I mean it's not substantial, but some repayments always occur.

How there will be no ability to kind of share across assets with the private funds that are being raised or is it your plan to co-invest without the formal exemptive after application approved?.

So, Jonathan, I follow your question obviously on the BDC side. As we said we continue to reinvest prepayments and we'll redeploy equity as we can, I think the prepayments on average has been $50 million.

Once we receive the exemptive relief, our expectation is first close with our private fund that has a similar strategy to the -traded vehicle and those two vehicles will invest alongside each other.

There are other strategies and other private vehicles that we can write off the manager that we can use and deploy capital that would not necessarily require exemptive relief that can leverage the five office footprint that we would put out in our ability to find and structure transaction.

So I wouldn't say that the growth of the overall platform is 100% contingent on exemptive relief. It’s obviously helpful for this initial first fun, but the long-term plans obviously we have other leverage to pull to continue to grow as needed..

Got it and then also just in terms of the CLO equity transition, you mentioned we see the sell-out, which is better than what, say, we or others would have expected.

Terry or Sam, what's the current view of CLO equity marks certainly this quarter? And whether you continue to see them deteriorate and whether or not you would feel compelled to liquidate positions at current evaluations? Understanding everybody has got the best most unique asset out there, right, I understand that and your seal is likely better than others.

But as a class, it's a volatility. So what's your view on willingness to depart in light of depressed evaluations that we're continually seeing today..

Jon, this is Terry. You may have not - I’ve responded this a little early on the call, but just to kind of reiterate, we don't have any plans to, if you will, blow these out of prices that don't make sense today.

We don't want to see it to return to an investor that's north of 20% on something like this and we don't have an immediate need to sell them. These are strong performing investments for us to generate a terrific yield with low energy exposure or moderate energy exposure within them and no defaults within the portfolios that we’re invested in.

So we feel good about the assets. So the short answer is we're in no hurry and we're not going to sell them at these distressed prices just for the sake of selling them. In terms of where the market is today relative to September 30, I would say it’s probably flat.

I still think that yield requirement for CLO equity investors north of 20% may continue there for a while. But again the brought the broader markets are difficult to predict..

Okay, great. And then last question just relates to second-lien, as well as subordinate securities as an investment today.

Just in light of what we're seeing in terms of volatility, there are hung deals et cetera, there can be an opportunity to invest in the mezzanine asset class that yields that you would likely want to have on the books that more than out on the cost capital.

The question is the risk that one takes and given that we see over - for some of the new investments that you made whether it's the 5.5 billion in Hostway et cetera.

How do you explain and walk through the lower risk nature of your subordinate debt positions in a market where folks are worried about volatility, continue to see volatility and at times feel that the subject asset class can be a bit hot, right, I understand there is technical marks, but sometimes the middle market in and of itself doesn't really - it lags on the way up and on the way down.

So comments on second-lien exposure would be helpful?.

Hey, Jon, It’s Sam. I think we talked about this last quarter. So our second-liens for the most part are directly originated. So we are involved in structuring them. They're not part of any kind of deals. I think you have mentioned the term home syndication or something like that.

In that construction, in the underwriting, in the negotiation, we are - our second-liens that have some value. In other words, the collateral there actually has some value and there are hard assets or enterprise value. It does put us above trade creditors and other unsecured creditors for example.

And it is a part of crafting a transaction, crafting a capital structure with these smaller, for the most part smaller private equity firms when these transactions get created, so it's a different security in our view a less risky security than a lot of more broadly syndicated second-liens that you mentioned. Got it. Guys thanks for your time.

Thanks for taking question and answers. I didn't know it was a luxury but some managers choose not to have it. So I really appreciate you taking the time to hear from us. Thank you..

Appreciate the questions Jon..

Thanks, guys..

Thank you. I'm showing no further questions in queue. I will now turn the call back to Sam Tillinghast for closing remarks..

Okay, thank you operator. Thanks everybody. We appreciate your questions and we look forward to talking to you again soon. Thank you..

Ladies and gentlemen, this does conclude today's program. You may all disconnect. Everybody, have a wonderful day..