David Golub - CEO Ross Teune - CFO Gregory Robbins - Managing Director.

Jon Bock - Wells Fargo Doug Mewhirter - SunTrust Leslie Vandergrift - Raymond James.

Good morning. Welcome to the Golub Capital BDC Inc.’s September 30, 2014 Quarterly Earnings Conference Call. Before we begin, I’d like to take a moment to remind our listeners that remarks made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Statements other than statements of historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties.

Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time-to-time in Golub Capital BDC Inc.’s filings with the Securities and Exchange Commission.

For a slide presentation that we intend to refer to on the earnings conference call, please visit the Events and Presentations link on the homepage of our website, www.golubcapitalbdc.com and click on the Investor Presentation’s link to find the September 30, 2014 investor presentation.

Golub Capital BDC’s earnings release is also available on the company’s website in the Investor Relations section. During the presentation all participants will be in a listen-only mode, afterwards we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this call is being recorded for replay purposes.

I will now turn the call over to David Golub, Chief Executive Officer of Golub Capital BDC. Please go ahead..

Thank you Leanne and good morning everybody. Thanks for joining us today. I am joined by Golub Capital officers by Ross Teune, our Chief Financial Officer; and by Gregory Robbins, one of our Managing Directors.

Earlier today we issued our quarterly earnings press release for the quarter ended September 30 and as we have noted we posted a supplemental earnings presentation on our website we’ll be referring to that presentation throughout the call today. I would like to start by providing an overview of the September 30 quarterly financial results.

Ross is then going to take you through the results from a financial perspective in more detail and then I am going to come back and provide an update on our outlook for conditions in the middle market lending environment over the next couple of quarters. So with that let’s get started.

As highlighted on Page 2 of the Investor Presentation, I’m pleased to report we had another strong quarter. For the three months ended September 30, we generated net investment income of $14.9 million or $0.32 a share and that compares to $15.1 million or $0.32 a share for the quarter ended June 30.

We had particularly strong net gains during the quarter principally realized gains from the sale of several equity co-investments and so net increase in net assets from operations or net income for the quarter ended September 30 was $20.2 million or $0.43 a share and that compares to $16.3 million or $0.35 a share for the quarter ended June 30, 2014.

Let me give you a little bit more detail on those net gains, the $0.11 per share of net realized and unrealized gains on investments for the quarter were the result of $10.3 million in realized gains on the sale of five equity investments reduced by about 5 million of net unrealized depreciation.

The net unrealized depreciation was primarily reversal of previous write-ups on those investments that we sold during the quarter. Overall credit quality remains very strong, we have a non-accrual rate that continues to ramp to zero and as we’ll discuss nearly 95% of our investments have an internal risk rating of 4, 5, our two highest ratings.

In regards to new investment activity, we had a very strong quarter with new origination commitments totaling $332.6 million.

This was quite unusual, because the quarter ended September 30 is usually a slow quarter and the fourth calendar quarter, the quarter ended December 31 is typically more active than Q3 as I’ll talk about later today, we anticipate that that’s going to reverse this year.

It’s also interesting to note that, our high originations quarter in Q3 came despite our being more selective. We monitor and collect data on the number of opportunities that we look at over the course of the year and so far this year, we’ve completed an unusually low percentage of the opportunities that we’ve generated.

Our originations are focused on areas where we have a competitive advantage that you’ve heard me talk about before, I’ll talk about three of those now. Over 80% of the new originations this quarter were one-stops and we think we have a particular advantage as a leading market provider of one-stops.

Over 85% of the new originations were with sponsors we’ve worked with before and you’ve heard me talk about how repeat business - repeat business with the same quality sponsors is a key element of our strategy and over 65% of new originations this last quarter involved companies we’ve previously been a lender to what we call incumbencies.

So again here repeat business with repeat obligors’ is key element of our strategy and we think a key risk reducer. Despite strong originations, overall funds growth for the quarter was modest, we had an unusually high level of runoff this quarter $286.6 million of repayments and that resulted in overall funds growth of $22.7 million.

Turning to Slide 3 of the Investor Presentation, you can see in the table that $0.32 per share we earned from net investment income and the $0.43 per share we earned from a net income perspective. You can see that NAV went up this quarter to $15.55 as compared to $15.44 last quarter.

I want to emphasize this -- it is our view that consistent increases in net asset value per share are critical measure of our success, this is the 9th consecutive quarterly increase in our net asset value per share.

As shown on the bottom of this slide, we had a slight increase in average size of our investments, but the portfolio remains very well diversified 145 different positions and an average size of $9.1 million per investment.

And I’ll turn it over to Ross, who’ll provide some additional portfolio highlights and discuss the financial results in more detail..

Thanks David. I’ll begin on Slide 4. As David mentioned, we had total originations of $332.6 million, total runoff of $286.6 million and net funds growth overall of $22.7 million.

As shown in the table at the bottom of this slide, 81% of our new originations were on one-stop investments, 11% were in traditional senior secured loans, 6% in second lien loans and 2% equity co-investments.

New junior debt investments continue to remain a very small percentage of new investments and this product category continues to shrink as a percentage of the total portfolio reflecting our negative view of market conditions for junior debt as well as our cautious macro-economic outlook.

Turning to slide 5, these four charts provide a breakdown of the portfolio by investment type, industry classification, investment size as well as a breakdown between fixed and floating rate investments.

Looking first at the charts at the left hand side due to strong origination of one stop this quarter the percentage of one stop investment increased to 70% of the portfolio. Traditional senior secured investments represent about 20% while the remaining 10% is split between junior debt equity co-investments and our investment in senior loan fund.

Looking at our industry diversification the portfolio remains well diversified by industry and there have been no significant changes within these categories over the past year.

You can see the largest three concentrations are in areas where we have a particular domain expertise, healthcare, retail and restaurants and software and the portfolio has low exposure to commodity dependent and highly cyclical companies.

Looking at the charts on the right hand side the investment portfolio remains well diversified by investment size. The top 10 represent less than 25% of the portfolio with the top 25 investments representing less than 50% of the portfolio and looking at the table on the bottom again the portfolio is predominantly in floating rate loans.

Turning to slide 6, for new investments, the weighted average rate and new middle market investment was 6.7% this quarter down from 7.1% the previous quarter reflecting market spread compression on new investment that we’ve been discussing over the past year.

The weighted average rate and new investments was also below the weighted average rate and investment that paid off during the quarter. However you can notice that the gap here is narrowing as compared to previous quarters reflecting this significant turnover in the portfolio over the past 12 months.

On a positive note due to the recent volatility in the high yield and broadly syndicated credit markets we started to see a bit of a reversal in the spread tightening and leverage creep that we have been seeing over the past year. And we are cautiously optimistic that this trend will continue into 2015.

Shifting to the graph on the right hand side this graph summarizes the investment portfolio spreads through the quarter focusing first on the gray line. This line represents the interim yield or the actual amount earned on the investments including interest in fee income but excludes amortization of discount in upfront origination fees.

The income yield declined slightly from 8.3% from the quarter ended June 30 to 8.2% this quarter. So fairly flat quarter over quarter including the amortization of fees and discounts the investment income yield as a dark blue line.

You can see that jumped this quarter to 9.3% from 8.9% last quarter again this was due to increased fee amortization as David mentioned we had an unusually high level of run off this quarter and that caused an acceleration of unamortized fees on those deals as they paid off.

In terms of dollars for the quarter ended September 30, total fee amortization was $3.6 million this was up $1.8 million compared to the quarter ended June 30. Last, looking at the green line, the weighted average cost to debt decrease slightly from 3.2% was 3.2% this quarter compare to the 3.3% last quarter.

Looking to the next slide, the overall credit quality continues to remain very strong with not earning assets as a percentage of total investment on a cost basis at 0.2% and rounds to 0% on a fair value basis.

Slipping to slide 8, looking at our risk ratings the percentage of investment risk rated of 5, 4 or 2 highest categories was about 95% of the portfolio the number of investment with a risk rating of three remains stable quarter-over-quarter at around 5%.

And the percentage of investment with a risk rating of a 1,2 remains fairly small at 0.3% of the portfolio on a fair value basis. As a reminder, independent valuation firms was valid approximately 25% of our investments for the quarter. Turning to slides 9 and then kind of looking at the more detailed balance sheet and income statements.

We ended the quarter with total investment of just under $1.35 billion total cash and restricted cash of $79.9 million and total assets of approximately $1.45 billion.

Total debt was $697.3 million, this includes $250 million in floating rate debt issued through our first securitization, $246 million of floating rate debt issued through our second securitization, $208.8 million of fixed rate debentures and the remaining piece is $27.4 million of debt outstanding in our revolving credit facility.

The total net asset value at the end of the quarter was $732.7 million this was up nearly $6 million from the previous quarter due to our earnings per share exceeding dividends paid. Our GAAP-to-equity ratio was 0.95 times at the end of September, while regulatory debt limit once we backup the SBIC debentures was 0.67 times.

Looking to the income statement on the next page, total investment income for the quarter was $30.7 million this was up $2.7 million or 9.3% from the prior quarter. This increase was driven by asset growth that occurred in the quarter ended June 30, as well as increased OID pre-amortization that I previously noted.

On the expense side, total expenses of 15.8 million increased by $2.8 million during the quarter, this was primarily due to an increase in incentive fee expense of $2.2 million as we are fully through the catch-up provision of the incentive fee calculation this quarter.

David mentioned, we had net realized and unrealized gain on investment for $5.3 million during the quarter, primarily due to realized gains on the sale of several equity co-investments and this was partially offset by the reversal of the unrealized depreciation on these investments. Net income for the quarter totaled $20.2 million.

Turning to the next slide. These charts summarize some of the information we have already talked about looking at our quarterly earnings per share this quarter. Again $0.32 a share from an NII perspective, $0.11 from unrealized and unrealized for $0.43 in total.

Our return on equity this quarter, 8.1% from an NII perspective, 11% return on equity including the equity gains that we had. And then looking at the graph on the bottom, this shows the growth in our net asset value since our IPO growing from $14.71 up to $15.55 per share this quarter.

Turn to Slide 12, this slide provides some financial highlights for our investment and senior loan fund or what we call SLF, is the vast majority of our origination this quarter were one-stop investments, SLF and total investments were flat quarter-over-quarter as we have discussed in the past SLF invest only in traditional senior secured loans.

However, we do anticipate faster growth over the next few quarters as we are in discussions with our partner to sale some traditional senior secured investments on GBDC’s balance sheet to SLF. Our return for the quarter of 5.8%, was negatively impacted by non-credit related marks and some broadly syndicated loans that are held in this portfolio.

Turn to Slide 13, we had approximately $165 million of capital available for new investments. This consists of restricted and unrestricted cash available SBIC debentures and availability on our revolving credit facilities.

As of September 30 subject to leverage and borrowing base restrictions, we have $71.2 million available under our revolving line of credits with Wells Fargo and private bank. And we have about $60 million of debentures available under SBIC licenses subject to customary regulatory requirements.

Turn to Slide 14, we have summarized the terms of our low cost long-term debt financing that we have in place. And then lastly on Slide 15, our Board declared a distribution of $0.32 a share payable on December 28 to shareholders of record of December ’14.

I will now turn it back to David who will provide an updates on current market conditions and some other closing remarks. .

Thanks Ross. I want to share this in the couple of minutes here before we get question to couple of insights on the current environment, four. The first one, I mentioned earlier looks like calendar Q4 is going to be slow from a new origination standpoint. The second macroeconomic picture that we are seeing right now looks okay, but we are nervous.

Third, I want to talk briefly about the recently released clarification and the leverage lending guidance impacting banks and how that’s likely to be a positive for GBDC and finally fourth, I want to talk a little bit about our expectations for fiscal 2015. So let me hit on each of those four briefly.

So I mentioned that to be outfit of this call that, the calendar Q4 is often our busiest new origination quarter, but we’re not expecting this to be the case in 2014.

Partly, this is due to the high level of activity that we saw in quarter ended September 30 and partly this is due to the recent market volatility, when we have a period of market volatility typically buyers and sellers end up in different places, where buyers want to see a price reduction and sellers aren’t prepared to offer one, so often there is a period of adjustment before buyers and sellers are seeing eye-to-eye again.

We think this phenomenon is playing out in the current calendar quarter. Second, let’s talk some more about that market fall.

I’m not sure I can explain to all of you what happened at September, October and what caused the massive market mood-swings with very significant changes in some cases intraday in major stock-market industries, major bond-market industries even treasuries.

Yes, there was data from Europe and Japan that will tweak and in some ways that data continues even since the September, October period to come out and look weaker. Yes, there’s a growing degree of concern about China, but what we’re seeing on the ground is that corporate profitability here in the U.S. continues to plug along.

I wouldn’t say that we’re seeing any signs of accelerating growth, but results are pretty good. Revenues are growing, profitability is growing, the numbers of areas of weakness outside of energy are few, so as we think about the macroeconomic picture right now, we’re nervous, we’re particularly nervous about infection from abroad.

We think it’s reasonably likely that Europe and Japan adopt policies designed to devalue their currencies and we think this could have an impact on the U.S. economy, but we continue to view as our base case expectation muddling growth, a continuation of what we’ve seen so far this year.

Third topic, I wanted to talk about was, leverage lending guidance. A very interesting piece of guidance came out earlier this month.

As you all probably know there are three different regulatory agencies that regulate banks, the fed, the OCC and the FDIC, and it is in my experience rare for all three agencies to come together and deliver messages in a coherent, consistent and in this case very loud way, but that is what just happened, they issued a report in conjunction with their annual review of what are called Shared National Credits and the short version is that the regulators are not very happy with their banks.

The regulators indicated that they believe that a previous guidance they’ve given on leverage [spending] [ph] is not being followed by many of the banks and they’ve indicated that they’re going to be enforcing the previously released guidance.

We’re seeing already some impact from this, we’re seeing some banks pullback from some leverage lending activity and that’s good for us, market volatility of this work we saw in September, October and regulatory uncertainty both of these things make our ability to deliver very reliable buy and hold solutions for our private equity from clients much more compelling.

So the leverage lending guidance, I think is going to be something we’re all collectively going to be hearing more about over the course of 2015 and I think it’s likely the play-out in a good way for Golub Capital.

Finally, as we turn the corner into 2015, we’ve started the new fiscal year and we’re shortly going to be turning it for the new calendar year, I’d say our overall view is one of cautious optimism. We think this quarter is going to be slow, but we think that that after this quarter, we’re likely to see a improving level of middle-market M&A activity.

There is enormous amount of private equity capital looking to be deployed. We anticipate that credit markets are likely to stay volatile and we think that, that’s good for our message of reliability and certainty. And we think that the tailwinds for us from increased regulation of bank led leverage lending is going to increasingly important.

As you think about what you expect from us in the context of new year, the guidance I gave you is we planned continuation of the strategy that you see from us over the last several years.

We planned to continue to be very selective to focus on senior loans and in particular senior loans to market leading very resilient companies that have strong private equity sponsorship and that have appropriate capital structures. And we think as a franchise that we are well positioned to execute on that strategy.

That concludes our prepared remarks for today. As always thanks for your time and your continued support. And Leanne let’s open the line for some questions. .

Thank you. [Operator Instructions]. Our first question comes from the line of Jon Bock with Wells Fargo. Please proceed with your question. .

Good morning, congratulations and thank you for taking my question. Maybe diving right into it, as we see the spread compression in the book which is apparent across the space.

I am curious at the investment in the SLF are just as it relates to its ramp, because that is a strong offset of potential spread compression and while one has the ability to ramp, I am wondering are there other constraints or maybe a willingness perhaps to be more patient as spreads widen? What do you think about use of the SLF to counteract the spread compression you’ve seen in the book today?.

Great question. So within the context of what I view as a quite good quarter for us, the disappointing element of the picture is the slow growth of SLF. And we have been looking at the slow growth of SLF in the context of potential ways to make it faster.

And as Ross mentioned, a solution that we have been spending a fair amount of time exploring is the possibility of selling assets from the BDC balance sheet into SLF, because while new originations of traditional middle market loans have been slow we have been faster on one stops which are not appropriate for our SLF strategy than we have been on traditional senior.

We have a fair amount of traditional senior on balance sheet. So I think what you should expect, what we are anticipating is that as we originate new loans on balance sheet we will free up capacity to do that by selling some loans, again subject to the approval of our SLF partner.

Selling some traditional senior loans from balance sheet to SLF, this is a double win for us Jon, because it improves the ROE of SLF because we are going to be ramping it further and have the ability to be somewhat more efficient in our use of leverage there, and it’s also capital sparing because sales of assets from balance sheet to SLF will free up the capital on balance sheet for new investments.

So it will put us in the position to be able to avoid having to think about any new equity issuance for a longer period of time as we grow SLF and free up capacity on balance sheet. So that’s a key part of our strategy for 2015.

I don’t want anybody to conclude that they should anticipate that we are going to see a massive change in one quarter, we are not. That’s not how we operate. But I do think there is an opportunity for us to grow SLF over the course of fiscal 2015..

Makes sense, and David, if you look loans that might be available to put into the program if you’re going to kind of segment out that bucket, obviously we could easily sort by yield and [Indiscernible] lower yielding highest quality credit can go in.

How would you gauge the bucket of capital that might be a consideration for the SLF vehicle, do you have an amount?.

Yes, there is about 200 million or so kind of senior secured loans that we’ve kind a looked at and identified as being potential candidates to send over to our partner to have them take a look at..

So again I wouldn’t - I don’t want to leave anyone with the impression that tomorrow we’re going be transferring $200 million, that’s not the plan, I want to be very clear that this plan requires the consented approval of our SLF partner, it’s not something that’s fully in our control.

But as you can see from the number that Ross sided we have a substantial amount of traditional senior loans on balance sheet that we can look at for this first. .

Got it, and maybe taking time just to go under the portfolio really quickly.

I just noticed the write down in Avatar but I see that position still looks really interesting, it’s worth the question maybe on that credit in particular if you have a moment and why would it still be on accrual status if the [mark well] [ph] had been I’d say sizable as a percentage of the overall previous mark last quarter..

We look at that question of whether to put something on non-accruals status very carefully. We put things on non-accrual status when we anticipate there is going to be a near term prospect of not getting paid interest currently and or when we believe that impairment - permanent impairment is likely.

We did not make the judgment that that was appropriate to do for Avatar this quarter, we are absolutely working with management team and sponsor on Avatar to assist them in a program to improve its financial performance.

And we are - happily there are very few companies that are in our watch list special assets category where we are engaged in these kinds of discussions but that’s certainly one of it..

Appreciate that. And then as we think about the potential for middle market activity to occur in 2015 and also I think as you mentioned that at a potentially higher spread given [vol] [ph] and once buyers and sellers come together.

What we’re trying to ascertain is, a lot of the same reasoning we’ve heard if there is private equity capital on the sidelines that there is obviously like a bank pull back in bank allocation in the space et cetera.

We continue as investors to hear these a lot and the question is like what attaches and what gives you the high degree of confidence that 2015 we’ll start to see a maybe a breakup of the log jam as it relates to M&A and new money deals for yourself and some of the others that are providing sponsor based and non-sponsored financing..

We actually saw pretty good M&A volumes in the early part of calendar 2014 until I would argue until quite recently we were seeing pretty good levels of M&A volumes. So I don’t mean by my comments to be predicting that we’re going to see at 2015 that sharply different from the first eight months of 2014.

I think 2015 is likely to look a lot like the first calendar eight months of 2014.

I think the anomalous periods are going are going to turn out to be September, October, November, December and if you think about M&A activity and the cyclicality around M&A activity what tends to drive in our experience what tends to drive periods of robust middle market M&A activity are factors like the following, a degree of stability in the economy and predictability and earnings streams, a desire by management teams to accelerate growth because organic growth is challenging, significant capital availability on the part of private equity firms relatively good access to debt financing, all of these factors are present right now and we have one more which is in the period from just before the crisis until I’d argue about 1.5 years to 2 years ago we had a relatively depressed level of M&A, and following a relatively depressed period of M&A you tend to see a bit of a bounce back.

So those would be at the top of my list John, if we think about the downside case of some macro-economic issues arising in the U.S.

economy and as I said we view that as most likely coming from some kind of infection from abroad, some kind of impact of European weakness or Asian weakness in that scenario that could have a significantly negative impact on M&A activity in the short-term..

And while we see spreads triple down a bit they have been also stabilized and with a potential to go back up as buyers maybe adjust to a different situation. Terms would also be of interest, just as we think about not just leverage although we would love to hear your comments on where leverage is today.

But also some of the other items that are related to equity cures or a few of the other tangible covenants that you consider in middle market transactions.

And whether or not you’re seeing any movement there in the event that perhaps you might not be willing to charge a higher spread in this environment but maybe tighten up the covenant package a bit more than what you had previously.

Can you just give us structure?.

Sure, so from a structural standpoint the traditional middle market transactions, say transactions involving companies of $40 million of EBITDA and lower. There has not been a meaningful dilution of structural protections. So I don’t anticipate meaningful change there because there was a meaningful degradation.

The place that’s interesting to watch is the upper-middle market $40 million to $75 million of EBITDA, where in some cases some large market terms like covenant lights, build your baskets, allowances for cash to come out of the system in a variety of different ways.

We have seen those in -- transactions, and I think it will be interesting to watch in the coming couple of months whether there is an increased level of push back on those terms in the upper-middle market. I would anticipate there probably will be but I think it’s too early to tell.

And likewise I think there has been a spread widening in probably syndicated market in the high yield market and the BSL market that’s spread widening is probably between 25 and 50 basis points over the course of the period since early September.

And I think that the tendency in our market is that we lag but move in the same direction as probably syndicated market and the high yield market. And I think we’re seeing signs of that same spread widening, hardening in our middle market arena..

Your next question comes from the line of Doug Mewhirter with SunTrust..

Two questions, one on the SLF and one more general regulatory question. The question on SLF is it’s interesting that you’ve actually had a couple quarters of very healthy inflow on to your native balance sheet.

But I actually haven’t found a lot to put into the SLF relatively speaking, but that’s sort of an interesting dynamic considering they sort of play in the same environment but they’re just different parts of the capital structure. I was wondering if you can comment on that, that sort of bifurcation of the market.

Is it market conditions? Or is it specific sponsors or what can explain that?.

I think you’re right that if you look at the last several quarters, we’ve had what for us by historical standards has been an unusual proportion of our new origination in one-stops and what we call our gold loans.

And I think you’ve heard me say over the course of the last several quarters that that’s not by accident, that’s because we’ve seen the best risk reward in the marketplace in one-stops and so we focused our activity there.

I don’t necessarily think that’s a permanent phenomenon, so we’re going to continue to respond to where we see opportunities and to make investments that are consistent with our view on risk and reward.

I’m hopeful that we’re going to in coming quarters find a larger number of attractive traditional senior investments to make, as one of the strategies for accelerating the growth of senior loan fund. As we talked about in response to John’s question, we also have a second strategy for growing senior loan fund by shifting assets from balance sheet..

On the regulatory question, if you could maybe explore a little bit, the specifics of what specifically is making some of the banks pullback and how that would be advantageous, so maybe I can play Devil’s Advocate a little bit and obviously your view on the ground would trump my opinion, but the way I see that regulatory pressure is it it’s on the most I guess agree to sub-uses of terms and conditions in the market so for example don’t make a loan that’s above six-times leverage or something like that, so it would have an effect or trying to clear the banks out of that market and in my opinion that may create the biggest void is these sort of wildly leveraged transactions which you would have no interest in unless there was a truly exceptional case, and so wouldn’t it actually make a little bit more crowded and to the better the lower risk say for assets that maybe you would be attracted to since obviously again you’re not going to go after those loans that made the regulators the most nervous in the first place?.

Great question, so I guess let’s segment the market into three pieces. Let’s talk about traditional middle-market meaning companies under $40 million of EBITDA, let’s talk about the upper middle-market from 40 to about 75 and then let’s talk about the larger market the broadly syndicated market.

What the guidance has said is that, what the recent announcement said is that the regulators found one-third of leverage loans to be criticized one-third.

So this is not an isolated problem, this is not a small proportion of the universe and the regulators went on to say that they’ve found significant deficiencies and that’s code for we’re really-really-really unhappy and they went on to say that they’re going to increase their monitoring of banks in these areas which is code for you better stop now.

They went on to say that, if a particular loan is judged to be a past loan by a bank but then subsequently reviewed by the regulators and found to be a criticized loan a non-past loan that it’s not okay for the banks to simply refinance that loan, because it’s no longer viewed as a past loan it’s viewed as a non-past loan.

So these are not minor issues, these are major issues, these are ways in which the regulators are speaking with a megaphone and ways in which they’re getting the attention of very senior officials and the legal departments, the compliance departments and the senior executive departments of major banks, and it is already driving behavior.

So how is it going to drive behavior and this is where I think your question’s interesting. I don’t think it’s going to drive behavior in the banks toward doing more in that lower middle-market, what I call traditional middle market sub $40 million category, the banks have largely exited that category.

And I don’t see signs of new entry, and I think if we did see signs of new entry that new entry would likely be subject to regulatory criticism. We are seeing big impact is in the upper-middle market and in the broadly syndicated markets, where banks are in my judgment like to step back from their activities in leveraged loan origination.

I don’t think that we should assume they are going to beep the market entirely, I think what they are going to do is fix their spots and put themselves in a position to be able to tell the regulators, look we listen, we dramatically reduced our activity.

And they are going to try to reduce their activity in a way that maximizes their fees, so that they have the lowest possible impact on fee revenues that they could have. So that will mean they will focus on those transactions where they can be lead left, so they are the party that’s most of the fess.

That will mean that they are going to focus on larger transactions because, guess what, they make more fees on larger size transactions. So my expectation is that you are going to see a pullback of bank activity in the larger middle market segment that that’s going to be the most significant change.

And that the opportunity for us is going to be to step into those larger middle market transactions with solutions that are reliable, are good for sponsors are not going to require significant syndication risk and that are going to be from our perspective well priced and well structured. .

Thank you. [Operator Instructions]. Your next question comes from the line of Leslie Vandergrift with Raymond James. .

Hi, sorry. I just wanted to ask about your aftermarket program that you reinitiated this year. You tried that last year in 2013 and you didn’t do any sales through it.

And I was curious why you brought that back out in August for 75 million this year to try to do a comment that sale if you do not utilized at the last time, can you explain the reason behind trying that again?.

Sure. So we like to put ourselves in the position of having options. So we have our Board approved a stock repurchase program with regularity.

So that if by way of example, our stock price declined and was in the below book category we would have then easy ability to start repurchasing stock without having to call a Board meeting, without having to go through a lot permutations.

Likewise we have in place an ATM program that puts us in a position where if we need small amounts of equity we can issue small amounts of equity in a very cost efficient way that would -- because it’s an ATM program and not an issuance it would be possible to do in small size, and that might be advantageous from the standpoint of minimizing dilution.

As you point out we have had this program before, we have not issued before. We have this program now as I talked about we have actually quite a lot of dry powder now.

So I am not in a position to tell you we are not going to use it any point in the future but I would tell you that we think that there are circumstances under which utilizing an ATM program could make a lot of sense for us. .

Alright. And then the other thing I had a question about, earlier in the call you were discussing the one-stop advantage you had over your peers possibly or just within the industry itself on doing that right rather than SLF.

What will be your specific advantages on that?.

We are a market leader in one-stops. We and Harries are fallen away the largest rangers of one-stops in the market. Harries tends to be more focused on the larger middle market, we compete with them rigorously in that larger middle market.

We also from time to time collaborate with them and work with them on a lot of transactions in the sub $40 million EBITDA portion of the market I think we are far and away the market leader in a range in one stops and I think that market leadership enables us to be in the position to get a lot of looks a lot of first look a lot last looks.

We have a capacity by din of our scale to make a lot of these one stop loans by and hold single vendor loans which gives us an ability to offer degree of reliability that our competitors who need to bring in partners can’t do.

And we also have the advantage of having done a whole lot of these with large number of sponsor and by the end of that they what it’s like to work with us on one stop they know what is like the close one and they know what is like to have us as vendor to their portfolio company all of those things are hard to quantify. But are big, big advantages..

[Operator Instructions] And there are no further questions at this time. I would now like to turn the call back over to management for closing remarks..

Thanks Leanne Again I want to thank everyone for joining us this morning and for your support this quarter and overtime look forward to giving you a report on calendar Q4 in roughly two and half months and as always if you have any questions before them please feel free to reach out to Ross, to Gregory or to me. Thanks again..

Ladies and gentlemen that does conclude the conference. You may now disconnect..