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

Doug Mewhirter - SunTrust Robinson Humphrey Robert Dodd - Raymond James Jonathon Bock - Wells Fargo Securities Ryan Lynch - KBW Jim Young - West Family Investments.

Good afternoon, and welcome to Golub Capital BDC Incorporated March 31, 2015 Quarterly Earnings Conference Call. Before we begin, I would 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 Incorporated filings with the Securities and Exchange Commission.

For a Slide Presentation that we intend to refer to you on the earnings conference call, please visit the Investor Resources tab on the homepage of our website, www.golubcapitalbdc.com and click on the Events/Presentation's link to find the March 31, 2015 Investor Presentation.

Golub Capital BDC's earnings release is also available on the Company's website in the Investor Resources section. As a reminder, this call is being recorded for replay purposes. I will now turn the call over to Mr. David Golub, Chief Executive Officer of Golub Capital BDC. Please go ahead..

Thanks very much. Good morning everybody and thanks for joining us today. I'm joined at Golub Capital’s offices by our Chief Financial Officer, Ross Teune, and Managing Director, Gregory Robbins.

Yesterday evening we issued our quarterly earnings press release for the quarter ended March 31, and we posted a supplemental earnings presentation on our website. We'll refer to the presentation throughout the call today. I'm going to start by providing an overview of the March 31, 2015 quarterly results.

Ross is then going to take you through the quarter in more detail and I'll come back and provide an update on our outlook after that as well as some comments on recent news that GE will be selling GE Capital including its middle market sponsor lending business. With that let me begin, I'm pleased to report we had a quarter we are really proud of.

For the quarter ended March 31, net increase in net assets or net income was $17.9 million, $0.38 a share and that compares to $15.2 million or $0.32 a share for the quarter ended December 31, 2014.

GAAP net investment income for the quarter was $13.8 million or $0.29 a share excluding a $1 million GAAP accrual for capital gains incentive fees, net investment income was $14.8 million or $0.31 per share. This compares to $0.31 a share for the quarter ended, December 31, 2014.

I think everybody understands the capital gains incentive fee accrual issue but let me just go over it again quickly.

Under GAAP we are required to include the aggregate unrealized capital appreciation on investments in calculating a capital gains incentive fee accrual on that quarterly basis and we are required to do that as if the unrealized capital appreciation was actually realized.

But what's interesting is that under the investment advisory agreement we can't count that unrealized capital appreciation in determining whether the fee is payable. So in practice what this means is the fee is not payable but we have to accrue it under GAAP.

We believe that the expense - this expense is unlikely to be payable in the foreseeable future and consequently we think it makes sense to provide investors with both measures with and without the capital gains incentive fee accrual as a means of assessing our performance. Let me give you a little bit more detail on the net gains for the quarter.

It was our ninth consecutive quarter with what I call negative credit losses. We had $4.1 million of net realized and unrealized gain, that's $0.09 a share and that was the result of $4.5 million in realized gains and $400,000 of net unrealized depreciation.

The realized gains mainly related to the sale of two equity investments and the net unrealized depreciation included the reversal of net unrealized depreciation on those two equities offset by some net unrealized appreciation on several middle market debt and equity securities.

In regards to new investment activity, new investment commitments for the quarter, we are $179 million.

It was a solid origination quarter despite what was industry wide a weak quarter and it was despite our continued selectivity consistent with prior quarters, we continue to focus on one stops and traditional senior secured investments and we continued to avoid second lien and subordinated debt investments.

We continue to generally view junior debt as unattractive right now from a risk reward standpoint. If you look at the mix of our originations it was 31% senior secured, 58% one-stops, 9% in our senior loan fund and 2% in equity securities.

During the quarter about 80% of our new investment commitments were with repeat sponsors and about 45% were with repeat borrowers. You’ve heard me talk many times before about how those two measures, those two metrics we look at consistently as a signal for how good a job we are doing in keeping our sponsor clients and our obligor clients happy.

We can keep those repeat business metrics up, we think that's a very good sign. Final point, we achieved our objective during the quarter of accelerating the ramp up of our senior loan fund. During the quarter, total investments at SLF increased by $67.5 million to $189 million in total investments.

And we also saw in connection with the increase in total investments, we saw an improved return on equity, we achieved an annualized low-teens return on investment in SLF during the quarter.

Turning to Slide 3 of the Investor Presentation, you can see in the table the $0.38 per share we earned from a net income perspective and the $0.31 per share we earned from a net investment income perspective before accrual for the cap gains incentive fee. Our net asset value per share increased by $0.06 to $15.61.

I would point out this is the 11th consecutive quarter our NAV per share increased another metric that we look at very carefully and you heard me talk about before. As shown on the bottom of the slide the portfolio remains well diversified with investments in 146 different portfolio companies and an average size of $9.4 million per investment.

I will now turn it over to Ross who will provide some additional portfolio highlights and discuss the financial results in more detail..

Thanks, David. Starting on Slide 4 as David mentioned we had total originations of $179 million offsetting that was total exits and sales of investments of $147 million. Included in the $147 million is $76.7 million of sales of traditional senior secured loans to senior loan fund.

Subject to approval by our partner in senior loan fund we plan to continue to sell senior secured loans to this fund in future periods to enhance our returns on these lower yielding, lower risk investments. Overall net funds growth for the quarter was $22.3 million, a $1.6 million increase over the prior quarter.

As David mentioned, the mix was 31% senior secured investments, 58% were in one-stops, 9% in senior loan fund and 2% in equity co-investments. Turning to Slide 5, these four charts provide a breakdown of the portfolio by investment type industry classification, investment size, as well as fixed versus floating rate.

Looking first at the chart at the top left hand side, we saw a slight increases in the percentage of one-stops, as well as in our investment in senior loan fund. These increases were offset by a decrease in traditional senior secured loans.

These modest changes between the investment categories is consistent with us originating a higher percentage of one-stops this quarter, as well as the impact of selling traditional senior secured loans from GBDC to senior loan fund. In regards to industry classification the portfolio remains well diversified by industry.

There have been no significant changes in these classifications over the past few quarters. We continue to focus on investing in highly resilient companies with sustainable revenues in EBITDA, relatively low cyclicality and low sensitivity to commodity prices.

Looking at the charts on the right hand side, investment portfolio remains diversified by investment size and our debt investment portfolio remains predominantly invested in floating rate loans.

Turn to Slide 6, the weighted average rate, our new middle market investments was 6.5%, this was consistent with the weighted average rate on investment that paid off during the quarter. The weighted average rate of 6.5% on new investments was down from 6.8% from the previous quarter primarily reflecting some mix - some modest mix differences.

Our sense is that overall market pricing has been fairly stable.

The weighted average interest rate of new investments is based on the contractual interest rate at the time of funding for variable rate loans to contractual rate would be calculated using LIBOR plus the impact of the LIBOR floor and for fixed rate investments it is just the contractual rate on the investment.

Shifting to the graph on the right hand side, this graph summarizes the investment portfolio spreads for the quarter focusing first on the grey line.

This line represents the income yield or the actual amount earned on the investments including interest and fee income but excludes the amortization of discounts in upfront origination fees, due to higher prepayment fee income, as well as stable pricing and new investments. The income yield increased from 7.8% to 7.9% for the quarter ended March 31.

The investment income yield or the dark blue line, this includes the amortization of fees and discounts, this increased by comparable amount quarter-over-quarter and was 8.4% for the quarter ended March 31. As shown on the green line, the weighted average cost of debt remained stable at 3.3%.

Flipping to the next slide, overall credit quality continues to remain strong with non-earning assets as a percentage of total investments on a cost basis at 0.8% and 0.2% as a percentage of total investments on a fair value basis.

During the quarter, we took one additional investment non-accrual which had a fair value of approximately $1 million at March 31. Turning to Slide 8, the percentage of investment risk rated to five or four. Our two highest categories remain stable quarter-over-quarter and continues to represent over 90% of the portfolio on a fair value basis.

The percentage of investments risk rated are one, two, or three decreased slightly and continues to remain very low. As a reminder, independent valuation firms valued approximately 25% of our investments for the quarter ended March 31.

To review in a more detailed balance sheet and income statement on the following two slides, we ended the quarter with total investments of $1.4 to $2 billion. Total cash and restricted cash at $57.5 million and total assets of just over $1.5 billion. Our total debt was $754.5 million.

This includes $461 million and floating rate debt issued through our securitization vehicles $208.8 million of fixed rate debentures and $84.7 million of debt outstanding in our revolving credit facilities.

Total net asset value on a per share basis increased to 15.61, as net income exceeded our quarterly dividend our GAAP to debt equity ratio was 1.02x at March 31 or the regulatory debt to equity ratio was 0.74x. Flipping to statement of operations, total investment income for the quarter was $28.5 million.

This was up approximately $1 million from the prior quarter. The increase in investment income was primarily attributable to higher fee and dividend income as shown. On the expense side total expenses are $14.7 million increased by $1.7 million during the quarter primarily due to the $1 million GAAP incentive fee accrual that David discussed.

The results saw an increase in interest expense caused by higher average debt outstanding and an increase in operating expenses. As David highlighted earlier, we had realized and unrealized gains on investments of $4.1 million during the quarter and net income totaled $17.9 million.

Turning to following slide, the table on the top will provide the summary of our EPS and ROE from both a net investment income and a net income perspective for the past five quarters excluding the GAAP accrual for the capital gains incentive fee.

Net investment income on a per share basis has remained fairly stable at $0.31 or $0.32 a share for the past five quarters, return of approximately 8%.

Due to strong credit performance and strong equity gains, we have generated positive net realized and unrealized gains each over the past five quarters increasing our return on equity and net asset value per share as shown at the table of the bottom of the slide.

Turn to Slide 12, this slide provides some financial highlights for our investment and senior loan fund or what we call SLF. As expected growth accelerated SLF this quarter as we continue to transfer senior secured loans from GBDC's balance sheet to SLF.

Net growth in investments at fair value for the quarter ended March 31 was $67.5 million, a 55.5% increase from 12.31 as SLF purchased $76.7 million of loans from GBDC at fair value.

Due to the increased size, diversification, utilization of third-party leverage, as well as no net mark-to-mark losses this quarter our annualized return improved from 5.7% for the quarter ended December 31 to 11% for the quarter ended March 31. Turning to next slide as of March 31, we had approximately $112 million of capital for new investments.

This consisted of restricted cash and unrestricted cash, undrawn SBIC debentures and availability on our revolving credit facilities. As of March 31, subject to leverage and borrowing base restrictions we have $38.4 million of availability under our revolving credit lines with Wells Fargo and Private Bank.

In regards to our SBIC subsidiaries we had $16.2 million of additional debentures available subject to customary regulatory through out requirements. As previously reported, in early May we closed on a small public offering of 3.5 million shares of our common stock at a public offering price of $17.42 per share.

We raised approximately $59.1 million in net proceeds after underwriter discounts and commissions. In early May the underwriters exercised their option to purchase additional shares and we raised additional proceeds of approximately $8.5 million.

As we've said before, we only raised additional capital when we feel it is good for existing shareholders as well as new shareholders and when we have a value enhancing and approximate use of the capital. We have then and we will continue to be very careful to avoid earnings dilution from too large or too frequent equity offerings.

Proceeds from the offering will be used to invest in new portfolio companies, as well as to continue to capitalize our growing investment in SLF. On Slide 14, we summarize returns of our debt facilities and lastly on Slide 15, our Board declared a distribution of $0.32 a share payable on June 29 to shareholders of record as of June 18.

I'll now turn it back to David, who’ll provide an update on current market conditions as well as some remarks on the recent news regarding GE capital.

David?.

Thanks Ross. One of the themes I have talked a lot about over the last few years is increasing bank regulation and how increasing bank regulation was likely to be good for Golub Capital. In the last four months these themes really been brought to the floor.

2014 last year we heard a lot of talk by the FDIC, the OCC and the Federal Reserve about increasing these stringent regulation of a bank led leverage lending.

But mostly it was talk and late last year the three regulatory agencies came out with renewed leverage lending guidance that suddenly seem like they were very serious and that it was time for the banks to listen. In Q1 they did listen. Bank led leverage lending fell significantly and we see it continuing to fall in Q2.

In part is a consequence of that, we had a very good origination quarter despite what was industry wide a low volume quarter. In fact I’d say that trend is continuing into Q2.

A few weeks ago a second event happened, a bank that is particularly active in our space announced that it was putting its sponsor finance business up for sale, which bank am I talking about? You probably know it's a small Jet Engine manufacturer called GE. Many folks forget that GE is a bank.

GE got its start in GE Capital by using it’s very low cost of capital to make loans that banks generally didn’t want to make, good loans, smart loans, but loans that didn’t fit most banks lending templates. The unit grew rapidly under Welch and under Immelt until the financial crisis and then the unimaginable happened.

AAA rated GE found it terribly difficult to roll its commercial paper. So in order to avoid a liquidity crisis, GE took a government bailout and became subject to bank regulation. More recently GE also became subject to regulation as a SIFI, a Systemically Important Financial Institution.

We think the decision by GE to dismantle its GE Capital unit largely relates to regulatory pressure. In an era of increased regulatory scrutiny, it became very tough to run a bank that focused on making loans that banks don't generally make.

We've been asked a lot since the announcement who we think is going to buy GE sponsor business and the truth is we don't know. There are two possible categories, the unit could be bought by a bank but we think that's unlikely because of the regulatory issues.

The second possibility is the unit could be bought by a non-bank and here's the rub on the non-bank. A non-bank buyer is going to have a big challenge figuring out how to finance GE sponsor business. There are two elements to this financing issue.

First the actual acquisition itself is going to require a lot of new debt capital, getting the debt needed to affect the acquisition is almost certainly likely to require attracting new lenders to our space. And the second is that the cost of this capital is going to be a lot higher than GE’s cost of capital.

We estimate that difference is going to be over 200 basis points. So GE's long been our largest competitor and we anticipate that its exit from middle market lending is going to create a significant opportunity for Golub Capital.

We think we’re well positioned to take advantage of this opportunity and to illustrate this I want to just talk for a second about putting ourselves in the shoes of our sponsor clients.

What do sponsor clients today want, they want reliability, they want scale, they want to work with people that they know, they want to make sure that those people are going to stick around. What they really like is stress less or at least low stress executions. And that means working with firms they worked with before.

So we work at Golub Capital, we work hard everyday to have these attributes. It's not so easy candidly to have those attributes when you’re going through a sales process. So we’re already seeing an impact on our business from the GE sales process and we think the result is going to be that we’re going to gain some market share.

I’d also add we’re in the process of adding a number of people across the firm to capitalize on this opportunity. So what I anticipate going forward is a continuation of market conditions where industry wide volumes are low and despite that we’re anticipating that the Golub Capital's originations are going to remain strong.

That concludes our prepared remarks for today. As always thanks for your time and your continued support. And operator if you could please open the line for questions..

[Operator Instructions] Our first question comes from the line of Doug Mewhirter with SunTrust Robinson Humphrey. Please proceed..

Hi, good morning. First of all, thank you for that overview about GE Capital, I think that was sort of on front of everybody's mind given the fact that you compete everyday in the market and that's obviously good news for you at least in the short to medium term. Shifting gears a little bit, more of a financial question.

So, your senior loan fund, looks like you had a nice uptick in ROE because you're starting to leverage that fund a bit.

Where do you think that ROE could settle out at current yield, current funding costs and at your anticipated full leverage limit?.

Great question. So the question is, what do we think is appropriate target ROE for SLF as we continue to grow it. And I think the answer is, low double digits.

Unlike some other BDC's in respect of their SLF's, we're focused in our SLF on relatively low spread traditional senior assets and we're comfortable with a higher degree of leverage against those relatively low risk, relatively low spread assets, but one of the ramifications is that the ROE on the enterprise is impacted by the relatively low spreads on the underlying assets.

So, we're not aiming for 20% ROE on this, we're aiming for a low double digit ROE on it..

Great. And if could just maybe go back to touch on GE Capital, maybe go - maybe a little more specific in my question, GE Capital did a lot of things in the middle market, the SSLP, the big units, they did a lot of unitranche which directly competes with your one-stop.

They also did a lot of senior loans - sort of senior bank loans in terms of the benefit to you - are you sort of exclusively seeing that on the unitranche one stop business that's coming - more of it's coming to you or is there a way to fit the more of those senior loans that GE Capital did into your portfolio, maybe putting them into your senior loan fund? I mean I realize it's a bit of a different business but I don't know if that's an opportunity?.

It's absolutely an opportunity. We compete directly and aggressively today against GE in both their traditional senior and in their SSLP unitranche joint venture with Ares.

I would say our most potent competitor in both senior debt and one-stops over the course of the last couple years has been GE on traditional senior and the GE Ares unitranche fund on one-stops.

So, we anticipate that the coming period of uncertainty and distraction is going to be good for us in both of those areas, and we're not sure what's going to happen after the sale itself..

Okay, great. Thanks. That's all my questions..

Our next question comes from the line of Robert Dodd with Raymond James. Please proceed..

Just continuing on kind of GE, one other things we see is the risk in a way if I can of having an SLF type structure with one partner versus - concentration of that partner than proceeds to go through some issues or decide to get out or exactly however that's going to play out.

So, looking at that on from the perspective of your SLF which obviously has one partner in it today, it's small.

What's your appetite for either adding more to diversify the risk, in case one of them has a change of heart, or add more SLF's or anything like that in terms of diversifying the capital base behind that double digit ROE?.

I think that's a great question, Robert. And I think you make a fine point in talking about how BDCs with SLFs have a degree of dependency on their SLF partner.

We certainly view ourselves as having a dependency on our SLF partner, couple of different component pieces to my answer, one is, unlike some BDC's and in particular let's talk about Ares and GE. We are not in a joint venture where we're counting on the origination expertise of our joint venture partner.

And I think that's an important distinction because it's easier to replace a joint venture partner when you're not counting on that joint venture partner's origination expertise.

Second element of it is, that we have a longstanding and very close relationship with our joint venture partner and have reasons based on our longstanding relationship and experience to have a lot of confidence in RGA as a good partner.

And the third piece of your question which is, would we be mindful, would we be amenable to potentially having other partners or other SLFs, I think that something we will need to think about going forward as our senior loan fund as RGA partner senior loan fund grows bigger.

And I think your focus on what I'll put in the broad category of counterparty risk, makes you sound like one of the members of our operational risk committee because we're always thinking about these kinds of dependencies and ways of mitigating these dependencies in our business..

Great, very helpful. Thank you..

Just to add one more point on that, I think it is important, this is Gregory Robbins by the way. Unlike our SLF, as it relates to Ares and GE's SSLP, the debt provider in our facility is Wells Fargo. So we have Wells Fargo as the debt provider and then the equity is provided by GBDC and RGA.

In the SSLP program, GE is the debt provider effectively, and then the equity is provided by both Ares and GE..

Yes, got it. Just on the pricing that you mentioned the GE Capital – or whoever ends up taking it, it's a non-bank lender, the cost of capital should shift up by 200 basis points.

Obviously that given the spread compression that has occurred over the last three years give or take, that would obviously if that 200, even a portion of that flowed back into widening spreads, that would be pretty significant on the spreads you could get on comparable credit risk assets.

Is that realistic to expect - obviously probably not the full 200, obviously GE's not the market but a decent slug of it - but is it realistic to expect even a small portion of that to come back, what do you expect just other competitive pressures, additional CLO activity even the risk retention rules are changing there obviously, there's a lot of other moving parts but, could you give us a little bit more color on that issue on what the relative scale is that?.

The question was, do we think that GE's exit or sale is likely to have an impact on spreads, and the answer is, not sure. There are two countervailing arguments here. The first argument is that GE was largely in the underwrite and syndicate business.

So every time they underwrote a new loan, their pricing on that loan was at a level sufficient to make them confident that they could sell it - at least a portion of it to third parties. So that would lead us to believe there is a market clearing price that is reasonably consistent with price levels.

The second view would be - we're going to take $16 billion out of the middle market lending universe, and $16 billion is last I checked a lot of money. And not just a lot of money in absolute terms, but a lot of money in terms of the size of this market.

So, the second argument would say the need to attract the replacement for that GE money is going to be a force that's going to create some tendency towards spread widening.

I think the truth is it's too early to tell, I don’t see a scenario in which the GE, sale GE exit is bad for pricing but I wouldn’t want anybody to count on spread widening right now..

Got it. Thank you..

[Operator Instructions] Our next question comes from the line of Jonathon Bock with Wells Fargo Securities. Please proceed..

Good morning and thank you for taking my questions. David first trying to understand delicate balance that occurs between investors providing BDC’s capital on equity raises and investors and folks deploying that capital because several folks have issued equity at a prices that in some cases our NAV dilutive and at best flat to earnings going forward.

And so understanding your recent equity raise we would all kind of benefit from the perspective of why that capital is needed in a relative tightening spread environment and how you think that over time investors would want to look at potential earnings accretion from it as I believe there is opportunities to work with SLF from a debt perspective and to drive ROE through that vehicle.

So your views on equity raises in your most recent one would be helpful in light of current investor experiences in several names..

So thanks Jonathan, we’ve talked before and Ross mentioned some of these principles in his remarks, we’ve talked before about Golub Capital’s perspective that in order for to make sense for GBDC to do an equity raise it has to be good for existing investors and has to be good for new investors and it has to be good for the company.

So when we think about that combination, what we concluded is that the net share price has to be above NAV, we got to have approximate use for the capital, we can’t just be putting it on the balance sheet without incremental investment income or we’re going to create a situation where there is earnings dilution.

And we've got to be able to look forward and say that we’ve got use for the capital that’s going to be accretive from an earnings standpoint relative to the cost of that capital and the acid test in my judgment for this is relatively straightforward. We want to look at our dividend yield and our growth in NAV over time.

And through the combination of the two, we want to provide a good return for our investors. And if we can accomplish that goal of having a consistent and if investment considerations are correct rising dividend yield and rising NAV over time then we’re doing a good job and if we don’t, then we’re not doing a good job.

So in this case, we looked at our debt equity ratios and our liquidity at the end of the quarter and we believe that we were running at the end of the quarter at approximately the levels that we’re targeting today about a 1:1 GAAP debt-to-equity ratio, about a 0.75 regulatory level.

And we saw an opportunity to raise additional capital as the premium to NAV and to be able to deploy that capital in a pipeline of new investments that we thought was attractive and that would give us the incremental firepower that we needed to continue to ramp up SLF and the combination of those things we believe were accretive for GBDC shareholders.

What we won’t do is to raise capital at low prices, we would rather just recycle the capital that we’ve got. What we won’t do is raise capital in large amounts because people who do that end up suffering from earnings dilution because they can't deploy the capital rapidly and get it earning assets.

And what we won’t do is raise capital, we don’t see a good set of investment opportunities to be able to deploy that capital into. And I think the folks who you’re referencing have violated one or several of those rules and disappointed investors as a consequence..

Much appreciated. One last one just as SLF is a key buzzword as SSLP et cetera. Just trying to understand the potential constraints from a credit facility size and kind of allowing you to further expand and go to program given you have capacity in the non-qualified asset bucket.

Now that it's - can you give us some levels at which the portfolio starts to achieve critical mass in that perhaps it’s diversification, perhaps it's just all-in size that can allow you to if it’s $300 million, $500 million maybe some of the breakpoints that allows you to effectively lower debt cost.

But then also get a bit more flexibility from your lender in the program in order to drive additional ROE?.

I think if we achieve a scale in SLF of $300 million to $500 million we put ourselves in a position where in addition to the kind of bank revolving credit facility that we have right now, we could in addition or instead put in place the securitization facility and into the two securitizations that we have on GBDC balance sheet today.

When we get to that size we're going to with RGA, evaluate those options and if it makes sense to do we’re going to do it. And if it doesn’t make sense to do we’re not going to do it. I don't want to give the impression that there is likely to be an opportunity for a very dramatic savings in interest rates, because I don't really think there is.

There maybe more of an opportunity to use a little bit of incremental leverage and it maybe advantageous to just diversify lending sources..

Okay. Thank you for taking my questions..

Our next question comes from the line of Ryan Lynch with KBW. Please proceed..

Good morning. It looks like pretty much all of the loan growth and the SLF in that quarter came from a loan sold down from GBDC into the SLF.

So should we just expect a primary driver of growth in the SLF going forward to come from GBDC selling down loans in the SLF? And just can you give us some thoughts on selling down investments from GBDC's balance sheet in the SLF versus originating new loans in the market?.

Again I'll go back to strategy. So the strategy that we have here is that we want SLF to hold lower margin senior secured traditional senior secured assets. And I’m less concerned about whether we’re acquiring those assets directly or - whether SLF is acquiring those assets directly or whether SLF is acquiring those assets from GBDC.

What's more important to us and I think the same is true of RGA our partner, what’s more important is that we identify appropriate assets with the right combination of risk and reward for SLF.

I think from a GBDC shareholder perspective likewise it doesn’t really matter whether we’re looking at direct acquisition or acquisition from GBDC balance sheet..

Okay.

Maybe just a follow-up on that, I mean are there any assets right now on GBD’s balance sheet that are maybe a little bit lower yielding that you would look to continue to place in the SLF?.

Yes..

Can you quantify that at all that amount?.

It's a large number. I mean I think if you go through our scheduled investments they’re reasonably easy to identify. Many of the assets are lower spread assets then we have some assets that perhaps started out as one-stops, but that have delevered significantly.

And so from a leverage standpoint they're now akin to traditional senior secured assets from a risk standpoint.

So again one of our strategies is to continue to look to optimize both SLF and balance sheet, including as one of the tools that we're going to use to do so by looking again with our partner's approval to move some assets from balance sheet to SLF..

Okay, thanks David. That's all from me..

Our next question comes from the line of Jim Young from West Family Investments. Please proceed..

You had mentioned that the origination volumes in this current quarter is basically on pace with the March quarter.

Could you also give us sense as to how prepayments are shaping up at this time?.

Just to clarify, I said that originations this quarter looked good, I didn't say they are on pace with last quarter. I'll just repeat what I'd say, I've said that we're anticipating this quarter is going to be another strong origination quarter. In terms of repayments, that's not something that we comment on intra quarter, sorry, Jim..

Okay. And then secondly regarding your capital raise, following up on Jonathan Bock's question, you appear to time your equity raises after the dividend goes x as opposed to many BDC's that will raise capital and then a week or so later go x.

Could you share with us your thinking in that process and why don't you give the new shareholders a so called dividend? Thank you..

We look at this simply from a cost of capital standpoint and I think some BDC's raise equity prior to a dividend because they are trying to comply with the rule of issuing shares above NAV, and they are comparing their issuance NAV to their prior quarter end NAV, and it's a little bit of a trick to issue shares just before a dividend when your shares are artificially high because your share price reflects the fact that you are about to pay a dividend.

So, we're not really interested in that kind of trick, and we think if we're comparing our NAV to a prior quarter end NAV, that prior quarter end NAV in order to be comparable, needs to be comparable in terms of where we sit relative to the dividend.

So, we're not trying to do anything other than do well by the Company and existing shareholders and avoid a unnecessary incremental cost.

As we believe in the efficient markets, efficient markets would tell you, doesn't matter when you issue, and maybe that's true, I think it depends, I don't think there is a clear lesson here - the one thing that is clear to me is that if you're only trading above NAV because you're about to pay your dividend, you're not really trading above NAV..

Thank you very much..

We have a follow-up question from the line of Robert Dodd with Raymond James. Please proceed..

Actually a follow up to Ryan's question on transfers from the BDC to the SLF, in terms of accounting.

When you originate a loan on average 1.5 upfront, does that stay with Golub or get trans sold down as well as a part of the loan sale? Obviously if it stays at Golub, it's better to originate on balance sheet and then sell down just as originated in SLF?.

Transfers to - sales to senior loan fund are done at fair value, whatever fair value is at that time, and are done as I said at a price that's got to be acceptable not just us but to our joint venture partner..

Got it. Thanks..

So, I think - sorry that's not mostly rather than it depends..

Thanks. Got it..

Mr. Golub, there are no further questions at this time. Please continue with your presentation or closing remarks..

So, thanks everybody again for joining us this morning, really appreciate your time. As always, if you have any further questions after some reflection, please feel free to reach up to Ross or to me. Look forward to talking to you next quarter..

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your lines. Have a great day everyone..