Sabrina Rusnak-Carlson - General Counsel Sam Tillinghast - Co-CEO Christopher Flynn - Co-CEO Terry Olson - COO and CFO.

Kyle Joseph - Jefferies Ryan Lynch - KBW Doug Mewhirter - SunTrust Robert Dodd - Raymond James George Bahamondes - Deutsche Bank Finian O'Shea - Wells Fargo.

Good morning. And welcome to the THL Credit’s Earnings Conference Call for its Fourth Fiscal Quarter 2015 Results. As a reminder this call is being recorded. It is my pleasure to turn the call over to Ms. Sabrina Rusnak-Carlson, General Counsel of THL Credit. Ms. Rusnak-Carlson, 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 Securities and Exchange Commission.

Although, we believe that the assumptions on which any forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate, and as a result, 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 announcements and 10-K were released yesterday afternoon. Copies of which can be found on our website along with the Q4 investor presentation that we may refer to during this call.

A webcast replay of this call will be available until March 18, 2016, starting approximately 2 hours after we conclude this morning. To access the replay, please visit our website at www.thlcredit.com. With that, I’ll turn the call over to Sam. .

Thank you, Sabrina. Good morning everyone. As an agenda for this call, I will be providing some market color and highlights for our 2015 fiscal year and fourth quarter ended December 31, 2015.

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

For the end of 2015, there was a great year of volatility in the broader credit and equity markets fueled by concerns of slower economic growth, volatile energy and commodity markets and uncertainty about where we are in the credit cycle. These concerns resulted in spread widening in both broadly syndicated loans and high yield debt.

However in the lower middle market where we focus our lending efforts we do not see the same level of volatility and the movement in yield was only modestly wider at year end. So far during the first quarter of 2016, although the broader market volatility has caused middle market deal flow to slowdown.

It does appear to be a more favorable environment for lenders with some spread widening and more conservative approaches to leverage. Now turning to a few investing and financial highlights. During the fourth quarter we invested a total of $58 million in three new companies and in follow on investments.

Consistent with our focus of investing in directly originated senior secured loans, 56% of these investments were in first lien loans and 29% invested in secondary lien loans. The weighted average yield of these new investments was 10.5% and the yield on the Logan JV based on the fourth quarter dividend was 12.8%.

As of December 31, the weighted average yield on income producing securities in the portfolio was 11.3% including the Logan JV. Going forward, we will remain focused on adding high quality, senior debt investments where we generally work closely with smaller sponsors to creatively structure transactions.

We also expect to make additional investments in the Logon JV. These investments will continue to maximize the risk adjusted yields in our portfolio. Our NAV as of December 31, was $12.58 per share which represents a 3.5% decline from the September 30th NAV of $13.03 per share.

The decrease in NAV is largely due to unrealized losses some of which were driven by changes in market yields impacting certain investments in our portfolio. And other factors impacting the performance of three existing credits one of which was put on non-accrual status in Q4.

Chris will be discussing our plans for these investments as we continue to actively work for moving away from subordinated debt positions and particularly those of unsponsored companies. Our net investment income per share was $1.41 for the year and $0.36 for the fourth quarter.

This exceeded our dividends paid for the year of $1.36 and for the fourth quarter of $0.34 per share. For our shareholders, this represented another quarter of dividend coverage and strong returns on equity based upon net investment income of 10.9%, 10.8% and 10.4% for the trailing one year, two year, and three year periods respectively.

We’re also pleased to announce that on March 8th, our Board of Directors approved a quarterly dividend of $0.34 per share for the first fiscal quarter of 2016, which is payable on March 31st. We remain confident in value of our assets.

And we continue to see the dislocation between our stock price and our net asset value as an opportunity to accretively repurchase our shares. For the year, we repurchased a total of 594,000 shares between May and December for $7.3 million, reflecting a 7.4% discount to NAV.

Our purchases in the fourth quarter were modest given that our window remained close due to our bond issuance in mid-December and other funding needs. Given the original stock repurchase program expired earlier this month, I’m pleased to report that our Board authorized a new $25 million program on March 8th.

While our window to repurchase in March will be short the window throughout the remainder of the year will provide opportunities to evaluate repurchasing more stocks as market conditions and other factors such our leverage and liquidity levels want. And now I’ll turn the call over to Chris, to talk about our portfolio..

Thanks, Sam and good morning, everyone. As of December 31st, we are invested in 55 portfolio of companies valued at $754 million. During the quarter we experienced portfolio growth of around $11 million at far.

We continue to see better risk adjusted opportunities for our shareholders further up the capital structure and are continuing to reposition the balance sheet in the more floating rate secured paper ideally first lien and unitranche.

As of December 31.78% of the debt portfolio was invested in floating rate loans, which we believe leaves our portfolio well positioned to adjust in a rising interest rate environment. Also 94% of the $58 million deployed in Q4 were secured first and second lien loans in the Logan JV.

We also had $47 million of repayments in sales during the quarter, including our unitranche position in Embarcadero and our second lien holdings of more liquid loans in Export Global and BBB Industries. As of December 31st, our portfolio composed predominantly of secured loans with 72% of the portfolio in first and second lien.

The remainder of the portfolio was invested 8% in subordinated debt investments, 3% in other income producing securities, 6% in the Logan joint venture, 7% in equity, 2% in the tax receivable agreement and 2% in CLO equity all based on fair value.

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

As part of this repositioning we continue to work through some legacy issues surrounding certain subordinated debt investments and unsponsored borrowers. While we continue to work with and support these borrowers we have in select instances taken more aggressive actions to control and drive our own timeline.

Such proactive steps in the near-term maybe result in a modest increase in our equity holdings in our balance sheet. However we believe these actions are necessary to protect our investments to drive the portfolio transition that we feel is appropriate.

Despite the recent mark downs we continue to be pleased with the overall credit quality of our portfolio as of December 31st, 74% of the companies in our portfolio on a fair value basis were rated either one or two credit score, which means that they are meeting or exceeding expectations, which is the same percentage as at the end of the Q3.

At December 31st the aggregate investment score was 2.13 compared to 2.07 at the end of 2014.

The notable decline in unrealized losses this quarter amounted to $0.46 per share a book value were tied to book market spread widening in particular as it impacted the more broadly syndicated loan book held indirectly to the Logan joint venture and directly in our portfolio as well as credit performance of certain assets.

Our subordinated debt investments in Dimont an unsponsored company, which had been on pick non-accrual for all of 2015 was marked down further as an ongoing restructuring efforts continue. During Q4 we put our subordinated loans to Tri Star an unsponsored company a non-accrual status and mark down the value of our holdings.

The terms of this loan were admitted earlier in 2015 making it a predominantly a fixed security with a small cash pay component. We’re actively working with the company and its capital providers to evaluate a number of opportunities for growth and few other cost efficiency.

As of December 31st, this brings the number of our investments on non-accrual to two representing 3.3% of our portfolio on a cost basis. I want to comment briefly on our energy exposure and the portfolio given the continued headwinds.

We continue to hold the first lien investments in three sponsored backed companies as of December 31, 2015 they had an aggregate fair value of $42 million representing 6% of our portfolio.

Each company has taken proactive steps over the last year to position itself from a liquidity standpoint to withstand continued macro-pressures and we continue to receive our contractual interest payments on each investment.

As an update of one of our other portfolio investments and largest equity position C&K Markets paid a dividend to the equity holders during the quarter due to strong company performance. As a result we received dividend income of $685,000 in Q4. We anticipate receiving regularly quarterly dividends in the future until we exit this investment.

Before turning the call over to Terry to talk more about our financial results I wanted to give a brief update on the Logan joint venture. As of December 31, 2015 the portfolio consisted of loans to 85 companies totaling $170 million at par and was comprised of 83% more broadly syndicated loans and 17% more directly originated loans.

Despite some headwinds in the broadly syndicated market negatively impacting underlying loan values the portfolio of credit quality remains very strong with no payment defaults.

For the year we recognized $3.8 million in dividend income from the Logan joint venture, for the quarter we recognized $1.5 million represented a 12.8% dividend yield based on the average invested equity for the quarter.

As of December 31st, we had invested $49 million in Logan joint venture, which at the end of the year had $108 million outstanding on its revolver representing a debt to equity ratio of 1.9 to 1. With that I’ll turn the call over to Terry to talk more about our quarterly performance..

Thanks, Chris, and good morning, everyone. I’ll provide a little more color on our investing activity and financial performance during the quarter. Chris mentioned the $58 million of investing activity we have in the quarter included new investments in the following companies, $17 million second lien term loan in Granicus Inc.

a provider of fully hosted cloud based technology solutions to government entities, $15.5 million, of the $15.5 million first lien secured term loan and a $750,000 common equity investment in Constructive Media an affiliated entity this is an educational game site operator.

We made a $10 million first lien senior secured term loan investment in American Achievement Corporation, a supplier of grade school, high school and college graduation and affinity products.

We also made $5 million of equity contributions to the Logan JV and $10 million in debt and equity follow on investments in existing portfolios companies to support growth and acquisitions in the weighted average yield on these income-producing investments excluding Logan was 10.6%.

We generated $23.6 million of investment income this quarter, which was comprised of $18.6 million of interest income on debt securities, which include a $936,000 of previously deferred income recognized that was related to our investment in Express Courier that we exit in 2014.

The $18.6 million of interest income also included a $1 million of pick income, representing 4.2% of our total investment income a level consistent with recent quarters.

Our $1.8 million of interest income from other income producing securities included interest on our investment doesn’t felt of tax receivable agreement, which generates the current yield based on cost of 17.6% and our three CLO equity positions, which continue to generate a 14.8% yield as a result of strong performing portfolios.

As we mentioned before we still intend to liquidate these equity holdings in the future, but will not do so at the current prices which would require recognizing a loss and seeking a return approaching 25%. Our $2.3 million of dividend income included $1.5 million from the Logan JV, $685,000 from C&K Markets and $100,000 from other investments.

Our $482,000 from fee income related to our managed funds and remains in line with previous quarters. And we also generated $456,000 from other fee income from several portfolio companies. For the year we generated $94.2 million of investment income compared to $91.9 million for the prior year, an increase of 2%.

On the expense side we incurred $11.5 million of expenses in the fourth quarter, which were comprised of $3.5 million of fees and expenses related to our borrowings, a decrease from Q3 as a result of some accelerated deferred financing cost being recognized in the previous quarter in connection with the amendment of our credit facility.

We also incurred $2.9 million in base management fees, $3 million of incentive fees and our administrative professional and other G&A expenses totaled $2.1 million. We also recognized an income tax benefit of approximately $100,000 during the quarter.

And for the full year ended December 31, 2015 we incurred $46.3 million of expenses compared with $43.7 million for the prior year. As previously mentioned we had a net change in unrealized appreciation of our investments of $15.6 million during the quarter negatively impacting our book value by $0.46 per share.

At the end -- as of 12/31 our leverage level was at 0.82 times equity, which was higher than our targeted range of 0.6 to 0.8 times. This was largely a function of signing of new investments, closing new investments and repayments coupled with the impact of unrealized losses impacting NAV during the quarter.

With the $36 million in proceed we perceived from the repayments our investments in 2020 and now will end in post quarter end. We are able to decrease our debt to equity to the 0.75 times range.

We expect to maintain a fully invested portfolio as we have for several quarters now and we’ll continue to use proceeds from repayments to fund our new investment opportunities. Looking back over the last six quarters repayments have averaged about $50 million per quarter.

As you may know in December we completed the issuance of an additional $35 million of unsecured notes of baby bonds that are due in 2022 you would note the interest at a fixed rate of 6.75% this capital further diversifies and extends our liabilities and provides us with additional flexibility to manage the growth of our Logan JV and continue stock repurchases.

The proceeds of this offering were used to pay us standard amounts under our revolver. With that I’ll turn the call back over to Sam for a few concluding remarks..

Thanks, Terry. Let me make a few summary closing points. We remained focused on investing in senior secured loans proactively working to exit certain legacy subordinated debt investments.

Where we can we will continue to work towards realizing current income from our equity investments in the form of dividends and other fees until such time when we exit these equity positions and recycle the proceeds back into debt investments.

Lastly as market conditions and liquidity allow we are focused on continuing to accretively repurchase our common stock. Now before I turn the call over to the operator to start the Q&A I’d like to introduce Sabrina Rusnak-Carlson as our New General Counsel.

Sabrina joined us in December from Proskauer Rose she was a partner in their finance, multi-tranche finance in the stress debt groups and we decided to have her on board and I know she looks forward to getting know all of you. And with that we 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 open. .

Morning, guys thanks for taking my questions. First just going a little bit trying to get your view of the macroeconomic environment right now, you’ve talked about 75% of the investment portfolios performing inline or better than expectations.

Just wondering if you could walk through a little bit of the other 25% of the portfolio and see whether the things are company specific, industry specific? And then from there talk about the EBITDA and revenue growth trends in the 75% that are performing inline or above and then talk about the trends in those that are performing a little less or below your expectations?.

Yeah first this is Sam Kyle thanks for the question. I think to put things in perspective, the portfolio as a whole the majority of the portfolio credits are growing revenue and growing EBITDA.

So when we talk about our number one and two rated credits as Chris mentioned, those are the credits that are performing at expectations for higher than expectations. Anything that’s falling below our original underwriting case we mark as a three.

So it’s below expectations, doesn’t mean it’s a watchlist credit it just means what it sounds like, it just not hitting our expectations. We’re fine with that it might not be great from an equity standpoint, but it’s fine from a debt standpoint. It’s really the fours and five scores where those are the more watchlist type credits.

And I think at quarter end we have maybe two credits that were scored at four or five, 2 out of 55 credits..

Okay, that’s helpful. And then I know you touched on this, so there is a multi-part question, but essentially looking for your outlook for portfolio yield going forward. And I know you mentioned that spreads widened a bit in the market.

Just given the pipeline of repayments you have and your outlook for your investment pipeline and the new issue pricing you’re seeing there.

Could you give us sort of your outlook for yields going forward?.

Hey Kyle this is Chris. Expectations are as we look at new term sheets that we’re submitting now we’re probably anywhere from as low as 25 basis points to maybe 75 basis points higher than where we would have been two quarters ago or last quarter. So our expectation is you’ll see probably stability in the portfolio yields overtime.

You have to recall that it’s a large portfolio and we’re only getting $40 million to $50 million in prepayment. So it’s even over an extended period you’re not turning the portfolio that quickly to make it move one way or the other on the overall yield..

Okay.

And then just on deployment front, can you talk about which industries you’re seeing the best opportunities to deploy capital into and vice versa I guess?.

This is Chris again. It’s fun again, given our model of just originating directly originated assets. It’s a -- we don’t necessarily have the luxury to target a specific sector and say that’s still overweight or underweight. Right now I mean this is more of a general comment we like high recurring revenue, stable businesses to invest.

And we’re seeing that across healthcare, IT, it’s some in consumer. Obviously we’re at this point, we’re staying away from cyclical. We have the small energy portfolio and now which we’re pleased with but we’re not looking to add any exposure there in the foreseeable future..

Understood, that’s great color. Thanks for answering my questions and congratulations on a good quarter..

Thanks. .

Thank you. Our next question comes from the Ryan Lynch with KBW. Your line is now open. .

Good morning, thank you for taking my questions. First one, I calculated about one third of the portfolio depreciation this quarter was related to the two non-accruals on your book. So would you consider any of the other portfolio depreciation of the other two thirds.

Was any of that considered could we consider that related to credit or was that more just mark-to-market write downs in the quarter?.

Hi Ryan this is Sam. I think generally the way that we’re thinking about it is something like 60% or so as the portfolio was on more of a credit basis versus market yield. To be completely honestly with you it’s sometimes hard to really differentiate between what’s on market yield and what’s the change in credit.

But the way we’re thinking about it, it’s about a 60-40 split. .

Okay. And then just switching over to your energy investments, all three Allied, Hower [ph] and Loadmaster they all hold up really well on a quarter-over-quarter from a fair value mark perspective. I know you said that those companies have all worked very hard to improve their liquidity position over the past year.

But are those three energy investments how tight are -- how correlated are those investments their performance is going to be tied to the price of a barrels oil and in longer term can those businesses still operate successfully if we don’t see a substantial increase in the price of oil?.

Yeah so it’s a good question Ryan. So just to remind folks. We saw -- we have an office in Houston one of our five offices. We saw 171 deals in the energy space over three year period and we did three transactions, which is we chose very carefully what we wanted to do in energy.

And having lived in Houston myself for 24 years, it was never lost on us that energy is a very cyclical business. We chose to do only first lien deals, which has to do transactions with companies that had very experienced sponsors in the space and with a management teams that have been through cycles before.

And we imagined and when we -- our underwriting that there would probably would be a downturn, didn’t know when it would be, didn’t know how long it would be, but that was certainly part of the underwriting thesis. The companies we chose had a very high variable costs, in other words they were able to cut their cost as they saw revenues decline.

That’s exactly what’s occurred with these three companies they got in front of the problem. They’ve done a good job of managing their working capital. All three of them have access to liquidity, whether it’s through undrawn revolvers or it’s through sponsors. One of the three cases we’ve seen this a sponsor put additional liquidity into the company.

And when you go through a cycle like this, you want to be from a lenders perspective you want to be senior. We’re the only lender or only one of two lenders in each of these situations and you want to support the company that goes to the cycle.

And one thing about energy, it’s kind of the when everybody was saying it’s never going to go down and times are different now that’s usually when it goes down and it works the opposite way as well. It will turn back up when people aren’t expecting them to go backup.

So it’s all about a matter of just getting through the cycle and providing support to the company. .

Great, that’s actually great color on those companies. So you guys also recognized about $700,000 of dividend income from CK Market in the fourth quarter and you guys said that’s going to continue going forward.

Should we model it to remain around that $700,000 level or what should we kind of think about that going forward?.

Hey Ryan this is Terry. I think what we paid in Q4 is a decent number to model as long as we continue to hold the equity position so….

Okay. And then just one last one just on capital allocation. You guys have implemented that your share repurchase previously and if used outside wanted to say I applaud you guys and really appreciate you guys using that. As we sit here today you guys are fairly capital constrained and liquidity is pretty low.

So how should we think about share repurchase going forward, I know you guys implemented a new one.

But given where you guys stand from a liquidity standpoint, are you guys going to try to still use that going forward or what are your plans around that?.

Hey Ryan this is Terry it's a great question.

As we’ve talked about in the past we try to preserve a good amount of a flexibility on how we utilize the program right, you are right our leverage is high, don't have a lot of liquidity as we think about uses of capital and at any moment in time could be dictated by the term sheets we have out, the likelihood of closings, prospects of repayments and quite frankly where the stocks trading and volume.

So I think you’ll continue to see us look at our liquidity at those moments and time when we have opportunities to buy and we’ll certainly do so as we have in the past. If we think kind of all the things line up that we need to, to effectuate those repurchases.

But we fully expect to continue to do it as it make sense for the quarter and quite frankly for the shareholder..

Great, that’s all from me guys..

Thanks..

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

Hi, good morning.

I guess the two questions I had, first was around leverage you said that you end of quarter you’re at 0.82, but technically the year-to-date or first quarter to date you may be around 0.75 and that as generally to the upper end of that comfort range and but would that imply then that you would actually sort of slow down your gross originations if you didn’t receive any more repayments and that you would sort of let the portfolio kind of settle at that 0.75 or a little bit higher until you roll into the second quarter? Or say in other way did you pull some of the first quarter’s originations into the fourth quarter?.

Well I think the number of 0.75 is directional we’re bouncing up and down anywhere from 0.7 to 0.8 inter-quarter.

I think as we said before I think we’ll continue to say as we move further up the capital structure in terms of increasing the first and second lien components of the balance sheet we feel comfortable operating at the high end of the range now did we expect to end up at 0.82, no not particularly, but it’s some of it’s just moment in time.

So I’d expect those to continue to operate in that 0.75 to 0.8 range over the course of time and continue to put that capital back out.

The disruption we’ve had in the market the last couple of quarters obviously will provide some lowering of the leverage profile as well because you’re increasing your denominators as you move forward in connection with putting capital out as well..

Great, thanks.

And my second question on Tri Star was that I guess a company specific issue or was there any kind of macro issues tied with it related to is that saying anything about the industry in which it’s in does it have a lot of energy customers or is it same as there a big downturn in transportation or?.

This is Chris it was company specific not an industry driven issue..

Okay, great. Thanks that’s all my questions..

Thanks, Doug. .

Thank you. Our next question comes from the line of Robert Dodd with Raymond James. Your line is open..

Hi, guys.

Kind of following up on Doug’s first question on the activity, obviously so Q1 so far and it’s mostly done relatively low deployments a big repayment so my question more to that was there a conscious decision was Q1 a function more of managing the leverage, managing the liquidity or a decision to kind of wait out some of the market volatility and hope pricing becomes -- pricing and terms become even more attractive than you have so far?.

In terms of the -- this is Sam Robert. In terms of the leverage we had transactions that we wanted to close and the sponsors wanted to close before the end of the year and we had prepayments that we knew are coming in January. So it’s really just a timing it wasn’t a bigger strategic objective or anything that worked..

One thing to add Robert this is Chris if you think about the types of transactions that we’re doing these are long lead time assets. I mean we’re underwriting transaction short and maybe 30 days the long it could be 60 to 80 days.

So as you sit back it’s not easy for us to say let’s close this quarter or pull something affordable that’s not we’re not dictating that. So you do in the pattern that kind of thread the needle a little bit and [indiscernible] put good assets on the books like we wanted to.

So we printed a slightly higher leverage number at the end of the year at 0.82 with the full understanding that we’re going to back down to our target range as first part of January..

And Robert this is Terry. I think we’re comfortable I think you’ve seen us the portfolio in that $750 million to $760 million range the last several quarters.

So we’re going to see some volatility between net growth and net shrinkage quarter-to-quarter principally just as a result of timing as Chris talked about the inherent lead time in the middle market there so....

Got it. Second one you mentioned on the sub-debt in the non-sponsored deals that we might see equity pick up modestly as a piece of the portfolio is it your intent to kind of pick some control equity positions in those to be even more in the driver seat about potentially exiting the full investment et cetera.

Can you give us a bit more color on the strategy there and I mean obviously if you take control equity positions that’s a modest consumer of your liquidity and not generally an income producer, but can obviously enable you to resolve some of those positions that are perhaps not part of the core strategy going forward..

This is Sam again. C&K I think is a good example of what we did in that respect. We were sub-debt along with another lender. It was a situation where we needed to bring a new management team company went through bankruptcy. This is something that’s well known and we talked about before.

But I think a good example of where we converted sub debt to equity we now have along with the other lender control of the company and there are one or two other situations where we may need to do that. It’s part of the investment thesis you have when you are doing sub debt in an unsponsored company.

We’ve done it the past we are prepared to do it again if need be and really what your focused on is just want to make sure that the companies are making the right decision in terms of cutting cost, potentially bringing in more professional management, diversifying their revenue streams and bringing in experts when you need to help other companies or the management team as we speak [ph]..

Robert this is Chris. The only thing I would add to that is there is only so many things you can do as debt investor to drive change and as we sit back number we’ve been on the call for a while talking about how we want to re-position the portfolio.

We just want to use all the tools that we in the toolbox, A; to protect shareholder capital, but B; execute on the strategy that we told you guys we are going to do and that’s moving more out of sub debt and adding in more secured paper..

Got it. I understand. It sounds good.

Just one clarification on the C&K to kind of -- the 6.85%, is that the dividend run rate per year which is kind of a reasonable base case or per quarter?.

Per quarter..

Got it thank you..

You bet..

Thank you. Our next question comes from the line of George Bahamondes with Deutsche Bank. Your line is open..

Hi, good morning.

Can you walk us through the rational for liquidating your CLO holdings?.

Yeah, sure. This is Sam, George. The CLO holdings we originally went into them because part of the THL Credit is our Tradable Credit Group who is very experienced in managing CLOs team has been here for 25 years and we underwrote those CLO positions by knowing the managers very well of those CLOs and really re-underwriting the portfolios.

I think our highest level is maybe 5% to 7% maybe 6% of the portfolio. In all the positions we are performing well we ran into quite a bit of feedback from investors that they... I suppose they are associate CLOs with CDOs.

CLOs as you may know performed very well in the last downturn, CDOs performed terribly and a lot of investors felt like they didn’t understand CLOs or they felt like it was a black box. And so just listening to our shareholders we made the decision to exit our CLO positions. We are now down to like least 2% of the portfolio.

There has been a lot of volatility in those markets where our CLO positions continue to perform well. We are in no hurry and we certainly don’t want to take any losses on those positions. We don’t have to. So we are taking our time waiting for the right opportunity and then we like their positions..

And George this is Terry. If you had didn’t pick up it earlier, just note the yield on the securities from a portfolio perspective almost 15%, these performing portfolios very comfortable with these investments in terms of their performance and ability to generate at current yield to the shareholder.

So again selling up the levels the book debt today we’d see way too much of return to a lender in our view, to a buyer, sorry. Hopefully that’s response of two questions..

Got it. That’s great, thank you..

You bet..

Thank you. And our next question comes from the line of Jonathan Bock with Wells Fargo. Your line is open. Unidentified Analyst Hi, guys. Hey, it’s Finian O'Shea in for Jonathan this morning.

How are you?.

Hey Fin..

Just a few questions, first on the mentioned potential restructurings we’ll see I was wondering if one of those would be the OEM group that was marked down about 17 points from three last quarter?.

Hey Fin it’s Sam. So OEM is a company that provides parts and supplies to semi-fabrication plants.

It’s a good example where C&K was an example of -- we took sub debt and converted to equity and OEM if you go back I think a year or two years ago we were originally sub debt in that company and we bought the senior debt and so it was a way of having more influence on the company.

We’re supportive of that company they did have a kind of a cyclical downturn that they experienced in the last quarter or two and we’re working with a company on a turnaround plan..

Okay, very well.

On the America Achievement deal we saw this another BEC and there is part of a clog it went on their books at 9.30 so was that something you bought of someone afterward or in the secondary and also this appears to be in playing a first out leveraged piece and is that the case on your end too?.

Finn this is Chris. We would have bought that either at close or shortly after close it wasn’t directly was the lead arranger it wasn’t bought from or purchase from a debt.

You asked a question about the financing arrangements of another firm I really I don’t know how they are financing ours is the first lien piece of paper as disclosed in our filing..

Okay.

And then on out of curiosity on Expert Global, you guys sold that at a nominal loss during 4Q is obviously pretty volatile and we saw it was downgraded I think by S&P shortly after, so just curiously you managed that was it just good timing?.

This is Chris. I mean we obviously manage the portfolio very daily if you will and as we sat back and looked at some of the trends of the business felt it was an opportune time to exit at a fair price and we’re around, we’re pleased that we did..

Very well, thanks.

And then just one more sort of a global question, with Logan that continues to ramp very well about $40 million this quarter and we see particularly in the remarks that today is a good time for the investing, but just given the T Credit the THL platform is more the built out for proprietary lower middle market credit could you just kind of remind us or walk us through the nature of identifying these more liquid opportunities?.

Yes Fin this is Chris. If you look at the direct lending side of the business you’re absolutely right we have the five office footprint that we’re utilizing to generate directly originated assets or creating assets.

The other side of the business is a more liquid strategy tradable credit that’s out that can buy syndicated paper we’re utilizing both sides of the house if you will, to generate a stronger return for our shareholder here.

If you think about the equity base that we have in the business and given that this a leverage book of business, we want to run that book extremely diversified.

So until we are able to build up the equity base towards substantial and you can hold slightly larger positions more directly originated positions you probably going to see it heavily weighted toward the syndicated paper as opposed to directly originated assets I think the split today 85.15 or 83.17 we wouldn’t anticipate that changing substantial until the equity base is larger so we can have larger hold positions..

And Fin this is Terry. I’d just add to that as you think about Logan growth I think we’ll proceed carefully there just in terms of how many dollars we put in and as you know it’s not a borrowing base asset.

So it’s like of CLO equity proceeds to the extent those are sold off and equity realizations have provide us a little more capacity to continue to fund the growth of Logan, but obviously pleased with the return now that’s approaching over 13% we think it’s a terrific risk adjusted return profile for the shareholder..

Absolutely. And on that matter between C&K and Logan this quarter’s dividend income about right sized 2.9 to….

Yeah I think Logan is $1.5 million for the quarter that given that we put capital in mid-quarter and a little bit in subsequent in Q1 we’ll be able to drive that a bit higher in quarters to come, but I think the 13% yield on equity is a decent number to use on the model.

And the equity on C&K as if you didn’t hear me earlier that was the 6.85 was the quarterly number and again to the extent we remain in the equity position, I would anticipate that would continue for the coming quarters..

Okay, awesome. And thank you so much guys and congratulations on the quarter..

Thanks, Finn..

Thank you. And I'm not showing any further questions from the queue at this time I would now like to turn the call back over to Sam Tillinghast for any closing remarks. Sam Tillinghast No closing remarks thank you everyone. We appreciate your questions and look forward to speaking with you soon..

Ladies and gentlemen thank you for participating in today’s conference. This does conclude the program and you may now disconnect. Everyone have a great day..