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

Doug Mewhirter - SunTrust Ryan Lynch - KBW Robert Dodd - Raymond James Jonathan Bock - Wells Fargo Derek Hewitt - Bank of America Michael O'Brien - Dearhill.

Good afternoon. Welcome to the Golub Capital BDC Inc's December 31st, 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 any number of risks and uncertainties.

Actual results may differ materially from those in the forward-looking statements 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 the company intends to refer to on the earnings conference call, please visit the Investor Resources tab on the homepage of our website, www.golubcapitalbdc.com and click the Events Presentation link to find the December 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 would now like to turn the conference over to David Golub, Chief Executive Officer of Golub Capital BDC. Please go ahead..

Thanks operator and good afternoon everybody and thanks for joining us today. I am joined by Ross Teune, our Chief Financial Officer; and Greg Robbins, Managing Director. Last Friday we issued our earnings press release for the quarter ended December 31 and we posted a supplemental earnings presentation on our Web site.

We will be referring to the presentation throughout this call today. I am going to start by providing an overview of the December 31, quarterly financial results.

Ross is then going to take you through the results in more detail and I'll come back and provide some more remarks on what we're seeing as we turn the corner into 2016 and I'll also open the floor for questions. Before we dive into this quarter's results I thought it would be instructive to revisit our conversation last quarter.

If you recall last quarter we talked about how GBDC had a very strong quarter in an environment where most asset classes experienced significant volatility and weak performance.

We talked about how our results were particularly gratify in the context of a market where BDC's had experienced net releases unrealized credit losses and declines in that per share.

Well, Groundhog Day, the headlines for this quarter will sound strikingly familiar to that conversation and I am pleased to report that despite continued in many cases increased market turbulence and softness across most asset classes GBDC continue to buck that trend with another strong quarter of steady results.

So with that, let me dive into some of the details for the quarter ended December 31, 2015, net increase in net assets resulting from operations or net income was 20.6 million or $0.40 a share that compares to 19.5 million or $3.08 a share for the quarter ended September 30, 2015.

GAAP net investment income or as I call it income before credit losses was 15 million for the quarter ended December 31 are $0.29 per share, excluding a $1.4 million GAAP accrual for the capital gains incentive fees. NII was 16.4 million or $0.32 a share.

This compares to 16.3 million or $0.32 a share when excluding an $800,000 accrual for the capital gains incentive fee for the quarter ended September 30th, so largely flat.

Consistent with prior quarters, we provided net investment income per share excluding the GAAP Capital gains incentive fee accrual because the capital gain incentive fee payable as calculated under the investment advisory agreements zero.

So we think this adjusted NIIs is a more meaningful measure of income then NII inclusive of the capital gains incentive fee accrual. As you've heard me say many times before we think the most important measure of the BDC's performance for shareholders remains change in net asset value per share over time.

I'm very pleased to report that GBDCs net asset value per share for the quarter ended December 31, 2015, increased to $15.89 and that compares to $15.80 per the prior quarter. This represents the 14th consecutive quarterly increase in our NAV per share. The $0.09 accretion was attributable to quarterly earnings in excess of our dividends.

Net realized and unrealized gains on investments and secured borrowings were 5.6 million or roughly $0.11 per share for the quarter. Most of this was the result of net realized gains from the sale of three equity co-investments. This was our 12th consecutive quarter with what we call negative credit losses.

Let's talk a little bit about originations new middle market investment commitments totaled 149.9 million for the quarter that including from investments of 15.5 Million in senior loan funds. Total investment commitments were 165 million.

As in previous quarters our investment activity was heavily weighted toward portfolio companies that are that are existing, obligors and private equity sponsors with whom we've done multiple transactions.

Just to give you some statistics on that, across calendar year 2015 over 80% of our deals were completed with repeat sponsors and over 45% of our middle-market loans were to repeat borrowers. Consistent with prior quarters, we continue to focus on one stops which we continue to think offer the best risk award in middle market lending.

Right now originations for the quarter were 21% traditional senior secured, 69% one stops, 9% in senior loan fund and 1% in equity securities.

Overall total investments and portfolio companies at fair value decreased by 1.3 million during the quarter after pay offs to the sales to SLF and total investments in portfolio companies at fair value held by SLF increased by just under 12% or $37 million.

Turning to Slide 3 you can see in the table the $0.40 per share we earned from a net income perspective in the $0.32 per share we earned in NII before accrual for the capital gains incentive fee and you can see our NAV per share of 15.89.

As shown on the bottom of the slide the portfolio remains very well diversified with investments in a 169 different portfolio companies and an average size of 8.4 million per investment. I'm going to turn the floor over to Ross who's going to give you some additional portfolio highlights and discuss the financial results in more detail.

As I said at the outset I'm going to come back after Ross's comments and give you a perspective on what we're seeing as we've turned the corner into 2016..

Great, thanks David. Starting on Slide 4, as David mentioned we had total originations of a 165.4 million, total exits and sales of investments of a 171.4 million, including the 171.4 million is 79.2 million of sales of Senior Secured Loans to senior loan fund.

Turning to Slide 5 these four charts provide a breakdown of the portfolio by investment types, industry size and fixed versus floating rate.

Looking first at the chart on the top left hand side, overall portfolio mixed by investment type remained very consistent quarter over quarter with one stop loans continuing to represent our largest investment category at about 74% of the portfolio.

With regards to industry diversification the portfolio remains well diversified by industry, there have been no significant changes to these classification percentages over the past year.

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

We continue to invest in companies we believe have sustainable revenues and EBITDA and in sectors that are typically resilient to changes in macroeconomic conditions. We also continue to avoid industries in which there is a high degree of cyclicality or commodity price risk. This strategy has served us very well in the current environment.

Turning to Slide 6 the weighted average risk and new middle market investments was 6.7%, this was slightly below the weighted average rate on investments that were sold or paid off during the quarter of 7.3%. This was due to a few large payoffs on season portfolio companies that had higher interest rates relative to current market pricing.

The weighted average rate of 6.7% on new investments was relatively consistent with the previous quarter as our new originations mix and market pricing on new investments both remained steady.

Although spreads had widened significantly in the more liquid credit markets as we have said before there is a lagging effect in the middle market and we're beginning to see this trickle down to the middle market.

As a reminder the weighted average rate on new investments is based on the contractual interest rates at the time of funding, for variable rate loans the contractual rate would be calculated using current LIBOR, the spread over LIBOR and the impact of any LIBOR floor.

Shifting to the graph on the right hand side, this graph summarizes investment portfolio spreads for the quarter, we’re focusing first on the gray line, this line represents the income yield or the actual amount earned on the investments including interest and fee income, but excluding the amortization of discounted and upfront origination fees, primarily due to a decrease in prepayment fees of 1.1 million the income yield decreased by 40 basis points from 8% to 7.6% for the quarter ended December 31.

The investment income yield or the dark blue line which includes amortization of fees and discounts decreased by 60 basis points to 8.2% due to the decrease in prepayment fees as well as lower OID amortization as a result of lower run offs.

The weighted average cost of debt increased modestly to 3.3% for the quarter ended December 31st as a result of an increase in the average LIBOR rate.

Flipping to the next slide, overall credit quality continues to remain very strong, nonaccrual investments as a percentage of total investments at amortized costs declined from 1.1% of the portfolio last quarter to 0.9% of the portfolio at December 31st as we disposed of one nonaccrual investment at a value slightly above where it was marked at September 30th.

Nonaccrual investments as a percentage of total investments at fair value increased from 0.4% last quarter to 0.5% at December 31, in this case for a good news reasons as we increased the value on one nonaccrual investment.

There were no new nonaccrual investments added during the quarter and the overall percentage of nonaccrual investments both on a cost and a fair value basis continues to remain very low.

Turning to Slide 8 the percentage of investments risk grade of 5 or 4, our two highest categories remain stable quarter-over-quarter and continues to represent over 90% of the portfolio. The percentage of investments risk graded of 1 through 3 increased slightly but continues to remain low.

As a reminder independent valuation firm, value approximately 25% of our investments each quarter. Now reviewing the more detailed balance sheet and income statement on the following two slides. We ended the quarter with total investment of 1.53 billion as fair value. Total cash and restricted cash of 101.1 million and total assets of 1.64 billion.

Total debt was 809.1 million which includes 461 million in floating rate debt issued through our securitization vehicles, 225 million of fixed rate debentures and a 123.1 million of debt outstanding on our revolving credit facility.

As previously mentioned, total net asset value on per share basis increased to 15.89, our GAAP debt-to-equity ratio was 1.1 times at December 31st while our regulatory debt-to-equity ratio was 0.72 times of both these are consistent with the ranges and targets that we've communicated in the past.

Let me do a statement of operations total investment income for the quarter ended December 31, was $30.5 million, this was down 3.1 million from the prior quarter primarily due to lower OID amortization and lower prepayment fees.

On the expense side, total expense is 15.2 million decreased by 2.9 million during the quarter primarily due to a decrease in incentive fee expense as a result of lower investment income. As David highlighted earlier, we had net realized and unrealized gains on investments of $5.6 million during the quarter and net income totaled $20.6 million.

Turning to the following slide, the tables on the top provide a summary of our EPS and ROE, both from a net investment income and net income perspective for the past five quarters, excluding the GAAP accrual for the GAAP capital gains incentive fee, NII on a per share basis has remained stable at $0.31 or $0.32 a share for the past five quarters representing an annualized return of about 8%.

Due to continued solid credit performance and strong equity gains, we have generated positive net realized and unrealized gains which has resulted in an ROE of approximately of 9.4% on average over the past five quarters and 10.1% for the quarter ended December 31.

As shown in the table at the bottom of the page, we have steadily increased our net asset value per share for 14 consecutive quarters. Turning to Slide 12, this slide provides some financial highlights for our investment in senior loan funds.

Net growth in investments at fair value for the quarter ended December 31 was 36.8 million, an 11.6% increase from September 31th as SLF purchased 79.2 million of investment commitments from GBDCs at fair value. The annualized total return for the quarter ended December 30st was negative of 0.4% which was disappointing.

The primary driver of SLF underperformance was mark-to-market unrealized losses on some broadly syndicated and middle market loans. We continue to believe that over the longer term, we would generate a low teen return on our investment in SLF.

Turning to the next slide, as of December 30st, we had approximately $126.2 million of capital for new investments. This consisted of restricted and unrestricted cash and availability on our revolving credit facilities. Due to the recent legislation that passed Congress that increased the family of fund limit to $350 million.

We have submitted a $75 million debenture commitment application for GCS BIL 5, which is one of our SPIC licenses which will provide additional capital if approved by the SBA.

Slide 14 summarizes the terms of our debt facilities and lastly on Slide 15, our board declared a distribution of $0.32 a share payable on March 30th to shareholders of record as of March 7. I'll now turn it back to David, with some closing comments..

Thanks Ross. So to summarize despite a challenging and volatile environment for most asset classes the fourth quarter of calendar 2015 was another very strong quarter for GBDC. We think the market turbulence and the investor unease that we've seen over the last several months that these are likely here to stay.

Thankfully we at Golub Capital have been planning for this kind of environment and we think that we're well positioned to take advantage of it in 2016 and beyond. I want to spend a minute and talk about three key points, three key reasons why I think we're well positioned.

The first is, you’ve heard today from Ross and from me about our strong credit results. Well strong credit results put us in a position to play offence at a time when many others are going to be playing defense. So credit quality on our underlying borrowers remains very solid.

Several years we made some strategic decisions, we decided to de-emphasize or completely avoid some riskier asset classes such as senior debt and CLO equity, some decreased emphasis on industries with some cyclical or commodity exposure and really high bar on businesses that have sensitivity to a strengthening U.S. dollar.

And we decided to focus almost exclusively on first lien senior secured loans to solid resilient companies backed by high quality partnership oriented PE firms.

That strategy has served us very well and it puts us today in a position where we have very few workout credits that require us to play defense with and a portfolio that lends itself to our playing offence.

So first point is strong credit results allow us to play offense, second key point, when we're in a market such as we are right now filled with volatility and uncertainty, our ability to provide certain execution in size becomes very valuable to our private equity clients and that’s particularly true today in dealing with larger middle market deals.

In the third and fourth quarters of calendar 2015 the markets saw fairly large number of upper middle market and larger deals that struggled in syndication. There are reports out today that there're between $10 billion and $15 billion of hung broadly syndicated loans.

Some large banks are literally closed for business right now due to these hung deals and inventory overhang. So in that context our ability to offer buy and hold solutions in size to close deals reliably to have a brand that reflects our capacity to consistently be reliable. These give us a very compelling value proposition.

You know as we've grown we've been able to do more and more for our sponsor clients and their portfolio companies, what we're finding last quarter and we think this is going to be a continuing story into 2016 is that we're now winning deals that in the past might have gone to bigger competitors.

In the sense now we are the bigger competitor and we're seeing some very attractive opportunities because of it. So second point certainty of execution large buy and hold capabilities, these are really compelling value propositions we can offer to our private equity clients now.

Third point, we're seeing signs that the economics of new transactions are improving. One of the experiences that we've had many times in periods of market stress is that we begin to see wider spreads on new loans.

The pattern is that this generally starts in the broadly syndicated market or in the high yield market and comes to the middle market after a lag.

And that's what we're seeing this time, it's still in the early days vis a vis the middle market and it's tough to predict what the magnitude of this shift will be, but if history is a guide here and I think it will be because we've seen this dynamic many times through different credit cycles, we can reasonably expect that we're going to see some wider spreads develop over the course of 2016 in middle market land.

That concludes our prepared remarks for today, as always I want to thank all of you on behalf of all of us here at Golub Capital for your time and your continued support and operator if you could please open the line for questions..

Thank you. [Operator Instructions] Our first question is from Doug Mewhirter from SunTrust. Please go ahead..

My first question is around the SLF and it’s more of an accounting question than anything else, but also how it relates to rest of your balance sheet.

Could you remind me how you treat the accounting of your SLF earnings? Does that sort of net figure that slight loss goes straight through to investment income or does the components of it go, one into investment income and the other into the realized and unrealized losses on your the Golub balance sheet?.

The latter, so it's both. SLF is an unconsolidated joint venture, so it shows up in investments in fair value on the balance sheet, there is associated -- change in unrealized value associated with the valuation of that investment. Separately SLF pays a quarterly dividend to its owners and that dividend shows up above the line in NII..

Thanks for that and that's what I had thought, I just wanted to confirm that and if you would take the mark-to-market out of the equation, is that dividend rate at maybe the cost base of your equity investment in SLF, is that approaching your -- this low teens target?.

Doug, this is Greg, yes it is..

Okay thanks for that and maybe someday relaying the SLF to the balance sheet, obviously you said you had some mark-to-market and some broadly syndicated loans, I noticed that you’re -- the Golub balance sheet has held a very well in that regard and it's just kind of interesting comparing contrast between the SLF fluctuations and your Golub balance sheet fluctuations and how it didn’t seem to move as much and I just didn't know, if it was just because there was a different mix of loans in there or what?.

Yes, there is different mix of loans and candidly in the early days of SLF in an effort to speed the ramp up of it, we've made a decision which in retrospect was not so great to purchase some broadly syndicated loans into the portfolio and we had looked at with 20-20 hindsight, I'd say we made two mistakes there, one was timing and the other was selection.

We've bought into some broadly syndicated loans in the market. The broadly syndicated loan market generally has weakened since then. And several of the specific loans that we’ve bought have not done well from a market price standpoint.

So you're right that, it is a little different from the balance sheet and I think Ross used the appropriate word in describing our sense for the SLF results for this last quarter, they were disappointing..

Okay, thank you. That's excellent color there, and my last question deals with your SBIC fund.

That's great news about the legislation and how you get a little bit more capacity, would you always be equal sort of lever that SBIC to the point where your total leverage has SBIC and non-SBIC goes up on absolute basis that your total debt-to-equity ratio goes up or would you maintain your current total debt to equity ratio in roughly this range now that you have some extra capacity in SBIC?.

So we've long said that our target levels of leverage in GBDC based on our asset mix which is in pretty consistent roughly 1.0 on a GAAP basis and about 0.75 on a regulatory basis and what the increased debentures again assuming that we receive SBIC approval to add some debentures, what the increased debentures will enable us to do is to take on some additional GAAP leverage to go above 1.0 without imperiling our regulatory leverage.

So we think that'll be very attractive incremental leverage for us. We have not reset with precision yet where we think the right new targets are. We're going to wait and see when we get the approvals from SBA, but I think it's fair to assume that we're going to look at, at increasing the GAAP leverage target of 1.0..

Okay, great, that's very helpful. It's all my questions for now..

Thank you, our next question is from Ryan Lynch with KBW, please proceed..

First question you know as you guys mentioned in your prepared comments you know leverage loan market traded down in the quarter, but much like the September quarter you guys actually had a portfolio appreciation, so can you just discuss the factors of what was driving the portfolio appreciation on a quarter where the liquid markets were going down..

Sure, so if you look at our net realized and unrealized gains during the quarter and I'm going to speak to calendar Q4 those gains were primarily in equities, so we had $5 million of realized gains. I've got $5 million more than all of it relates to equity interest that were sold during the quarter and in Barcelona and DSI Renal.

So most of the gains that we saw in the portfolio were not actually on the loan side but were on the equity side. The second piece Ryan to the puzzle is that, our credit performance continues to be really strong and when you look at underlying loaned marked to market there are obviously two factors that are at play.

One is what's our market spread for a particular you know obligor's level of credit risk and then the second is what's that obligor's level of credit risk. So we benefited a lot over the course of recent quarters from continued growth in EBITDA of our underlying borrowers.

And you can see that if you look at the credit results in our one to five rankings because you know what you normally see in a portfolio that's beginning to kind of have more credit difficulties, as you see more dispersion in credit rankings, and if you look at ours, not just for this quarter but over time, we’ve sustained a very high proportion of the portfolio in fours and fives in our two best categories.

And I think as you start to see a number of other BDCs report particularly BDCs that have a higher proportion of their portfolio in junior debt and in businesses that are in less resilient sectors you're going to see in those credit results you're going to see a significant degree of migration to lower rated categories..

Okay, great, thanks for that color. Now I know you guys don't really -- energy is not really a concern in your guys portfolio because you guys really don’t have any exposure to the energy sector, but do you guys see any -- do you guys believe that there are going to be any issues with energy defaults kind of broader based in the economy.

Those defaults spilling over to other sectors in the economy and maybe just generally creating a broad base U.S.

slowdown?.

Look I think the chances of a broad based U.S. slowdown has increased significantly over the course of the last few months.

And I think partly that's a result of the derivative effects of the dramatic drop in the price of oil which you know as your point Ryan, I think that's valid, I think there is also significant factor in the form of the slowdown in China and China's role as a purchaser of commodities and manufactured goods from around the world is really important to bear in mind, but I think what all of this points to is that as we sit in 2016, seven years into a recovery, this is a time and I've been saying this for a couple years now, this is a time when it makes sense to be cautious about taking credit risk.

And I could give you some probability assessment of a U.S. recession in the next 12 months, but one thing I can be certain of this is that we'll be wrong. We're really good at predicting recessions that don't happen and at the end of the day I think we're particularly good prognosticators of recession.

What we're really good at is making loans to companies that pay us back and that pay us back even if the economy weakens and our MO, and this is not something new to this quarterly, you’ve heard me say this many times before if you've been a participant in this call and our quarterly call, our MO is that we think this is an environment, this is a time when it makes sense to be very focused on lending to resilient companies that are well supported by really strong financial sponsors.

And it’s been working for us and we think it's going to continue workforce..

Great idea, I really appreciate that color on that David, and then just one last one, it's on specific portfolio company competitor group, we just noticed that that company had a decent sized right down in the quarter still on accrual status, but is there any additional color you guys can provide around competitor group and what was going on or maybe what caused the right down in the quarter?.

Well, competitor group is, one of the ones we've been watching very carefully. We are in the credit with Ares and are working very collaboratively with Ares on a program to improve the situation, and I think without getting into gory details on it, I'm cautiously optimistic that we're on the right path..

And next question is from Robert Dodd with Raymond James. Please proceed..

Looking kind of following up on Doug's question by the SLF, on the dividend obviously 776.000 in the quarter versus total income was a loss and obviously GAAP income sort of speaking up business lost about 2 million, what weighting do you give the kind of conceptual question, rather than specific numbers.

What weighting do you give to the mark-to-market versus the credit because, if we look at last year obviously total income was 4.3 million versus 110,000 lost, but GAAP was kind of 650 and the dividend was 1.4 million, so this quarter dividend is basically half of the total last year but the GAAP was a lost but mostly the mark-to-market versus credit, so I am just trying to get a feel of kind of the dividend.

Because obviously you focus very much on GAAP because you don’t' want to look at NII even in the SLF because it's earnings before credit losses as you say, but I am just kind of -- conceptually how do you feel about the mark-to-market versus the earnings of that business versus the dividend, the earnings before credit losses so to speak about business?.

So we and our partner in SLF share a philosophy, which is that we want to have consistent distributions out of SLF overtime. Now that necessarily means we're not distributing GAAP income, we're distributing some proxy for GAAP that we believe equates to a long-term earnings power.

And at the end of the day, I don't think it really matters that much to be honest because we -- whatever is over or under distributed comes through in the change in unrealized line, and what you hear me talking about over and over again is that we think shareholders ought to be focused, need to be focused on EPS and on NVA per share, not on geography within the income statement..

Fair enough, second one, if I can. On the competitor environment obviously you have a one stop, looks like Antares got a little bit more visible in the fourth calendar quarter, kind of coming back a little bit from being somewhat quieter in the preceding period as their transition occurred.

I mean competitively is that true, I mean is that, are they becoming a more relevant factor again, how do you think that's going to affect your one stop business if it is the case?.

Well Antares is under GE and since the transaction where it became a unit of Canada Pension, they've always been a very good lender, they're a very strong competitor, we have a lot of respect for them and I wouldn't necessarily agree that they were disappearing from the landscape for a period of time, I do think that they were active in calendar Q4.

We certainly saw them and competed with them across a number of different situations, we also worked with them on two or three different loans in calendar Q4, I know, I don't think their behavior is, I don't think Antares' behavior was either you know strikingly more or less aggressive than I would have expected.

We expect them to continue to be a strong competitor going into 2016. On the one stop front I'm not sure, now that they -- now that Antares no longer has the GE Ares unitranche fund, both they and Ares are figuring out how they're going to compete in the unitranche business without that joint venture.

And on the Ares side we've seen the development of Ares joint venture with Varagon and a first couple of deals through that joint venture on the Antares side we've seen a couple of circumstances where they've been involved in unitranche deals, but it's early days.

So I don't think we have a clear answer yet how or the degree to which Antares is going to be competitive in the unitranche product but I -- our view is that it's likely that both Ares and Antares are going to be potent good competitors..

Okay, perfect, if I can, one more, one last one kind of following on to Ryan's question. On the oil side, now that the kind of, you know I mean price decks have stepped down substantially obviously to new levels.

What's your kind of philosophical approach to that, obviously you know it's commodity, it's there's a lot of volatility that's out of the control of the business, but I mean at what point would you be -- do you think it's appropriate to take a little bit more exposure to that space?.

Somewhere between never and never..

Okay, fair enough..

We're not smart enough to be good energy lenders, oil prices seem to move in ways that don't reflect any kind of economic logic and defy the smartest forecasters' predictions. I just don't think that's a game we want to get in..

Okay, appreciate it, thank you very much, thanks..

Our next question is Jonathan Bock with Wells Fargo, please proceed..

Good afternoon David, and thank you for taking my question. Speaking a moment about portfolio velocity. We see kind of outside of the SBIC, you're approaching what would be normal leverage levels which would limit your ability to drive new capital again ex-BIC, ex-SBIC into wider spread transactions.

And so you help us understand the earnings impact or more importantly the potential spread impact that can occur, right, in terms of making new loans, you know wider spreads and how apt the BDC is, understand that GC advisors is well equipped given substantial funds to draw from, but how the BDC is equipped to take advantage of the opportunity because at current capital levels it’s seems you’d only be limited to repayments which to the extent volatility increases, you find that there is not a lot of repayments that come in the door?.

First off, I think there's a presumption in your questions that's probably right. The presumption is that at current stock prices we're not going to be issuing shares.

And just to remind those who don't know this, who are on the call, we have not sought, we won't seek to get approval to issue shares below NAV and we're currently trading a little below NAV. So I think that's a valid presumption at least for now.

So second piece of it is, you're correct that we have limited, although some significant degree all of firepower on the balance sheet today. Ross went through the numbers with you, but over a $100 million of cash, some debt capacity that's unutilized. So we have some existing capacity before factoring in repayments.

The third piece of it is, repayments. And today the portfolio is about 1.5 billion, our experience is that our loans typically have a weighted average life of about 2.5 years. So what does that mean in practical terms? That means that somewhere between 30% and 45% of loans will pay off in a typical year.

And yes you're right, John, that prepayment rate tends to slow down a bit in the environment of market turbulence, but in our experience it doesn't slowdown that much. You still will see a lot of repayments. I think it would be very unusual year for us where we would expect to see less than 25% of the portfolio turnover.

So factoring in the available capital that we've got and the low-end of range of repayments, I still think that's quite a lot of capital to deploy. And we will benefit from higher spreads to the degree that the market entertains higher spreads over the course of 2016.

I do just want to highlight one key point though which I mentioned in the earlier remarks, I think Ross mentioned it as well, the mill market lags, so can hope for wider spreads and spreads that widen a little bit so far in senior and one stop, but not a lot. So beyond what we have right now we're all speculating..

Okay, appreciate that, now another use of available liquidity and this is a common theme that gets put too many of BDC managers, today relates to share repurchase and interested in your view although it's kind of relatively new to see the shares below NAV, your view on the ability to create value with repayment capital coming in the door through share repurchases that allow you to reinvest in what is apparently, clearly a very well performing credit portfolio?.

Look I'd been very blunt on this point in the past, so we believe that BDCs own shares need to be looked at right alongside other potential new investments that BDC can make and evaluated against those new investment that BDC can make.

So we have a $50 million Board approved share repurchase program, and if we think that it makes sense to use it, we're going to use it. We also have, and this was highlighted in the press release, but I think it merits just mentioning here.

We also have as an advisor, we've purchased about $30 million worth of GBDC shares over the last two years for use in long-term incentive plans provided to our employees and we plan to continue to purchase shares from time-to-time in connection with those kinds of programs..

Okay, appreciate that and then if we could talk about the one stop, you've mentioned now just by the share stock size your ability to write large ticket hold is a clear competitive advantage in this market.

I'm curious, what now would you consider the sweet spot in which your hold sizes would be in terms of you know, how has this migrated over the last one year, two year, and when we think of competition clearly, it’s from the banks and it's from Antares, Apollo and GSO how you know -- how you would see the overall hold size to just continue rising in this environment as more and more funds come in both public and private? I'm curious on just the actual kind of the dollar amounts that you commit to and some of the average balances in the one stop product and how that's grown over time?.

So, happy to answer that, just to provide a little bit of context first, again for those on the phone who may not be so familiar with the Golub Capital platform. GBDC is one of the funds that we manage at Golub Capital. Across the platform we manage an excess of $15 billion in loan assets.

So we look these days at putting ourselves in a position to be able to support our private equity firm clients in larger size transactions by undertaking larger buy and holds, particularly in one stops. And we've done quite a lot of one stops that range in size from a $100 million to $300 million in buy and hold size.

We've done several that are larger than that where we've brought in partners and we’ve shown that it's possible to put together groups that can provide a sponsor with one stops in the $500 million to $600 million range, but we're not buying and holding $500 million to $600 million positions.

Our buy and hold appetite ends right now at about the $300 million mark. To your point John, one of the important phenomena that we've seen develop over the course of the last six months or so is a continued pullback by banks who used to be very active in this $100 million to $400 million facility size range.

And they're pulling back for a variety of different reasons, some of it's regulatory, some of its risk, you know there's a lot of hung paper right now, some of it’s a staffing model question.

But for whatever reason they're pulling back it's creating an opportunity for us to increase our market share in this size range, and what we're finding is that as the BSL market has become uncertain and volatile as syndication led solutions have become less reliable and as some of the banks have pulled back from being active in this market, it's created a very big opportunity for us.

Of all of the opportunities that I'm excited about in 2016 this is probably the one I'm most excited about because I think the value proposition we can offer to our sponsors is so compelling. .

I appreciate that and I think you've answered all my questions, thank you very much..

And we have a question from Derek Hewitt from Bank of America, please proceed..

My first question is really a follow up to Jonathan's question on the buy back, and it really revolves around, are you guys thinking about potential buy back at any particular point in time or are you evaluating any sort of repurchase decision, more on a relative basis versus say, the equivalent average life of a portfolio investment?.

I'm sorry, I'm not really sure I understand your question, could you try that one more time for me?.

I guess when you're thinking about the buy back, are you looking at the buy back as a -- on a more relative basis, and so you're looking at it in terms of, I'm going to only buy back shares if I know over the next two and a half years or so which is average duration, I believe that you said of the portfolio, that it makes a good investment or are you just thinking about it, if the buyback were to happen in any particular point in time, if the shares were trading at a more significant discount to book value?.

I think we're going to look at it from the perspective of being a steward for shareholder capital, so we're going to look at it in a variety of different ways, all with the common focus of trying to figure out what's best for shareholders.

And that has both a short-term and a long-term element to it, so I think in some respects the answer to your question is both, but the common threat is, what’s the right thing to do for shareholders?.

Okay, thank you and then maybe this is for David, could you provide a little bit more color on what playing offense means? Does that mean having liquidity as you're getting paybacks to reinvest in more compelling primary investments or does that mean may be allocating some capital towards M&A since there is some cohorts that are struggling right now or maybe some combination of both?.

Actually, I’ll go back a step, so first and foremost it's the opposite of defense, so if defense means that the team is spending most of its time on trying to figure out how to get out of a bunch of problem credits and workouts, and how to avoid getting into consequent conflicts with private equity sponsors that undermine long-term relationships and interfere with the capacity to do new business.

If all those things are defense, what offense is, is using the opportunity created by this market tumult to advance further our relationships with sponsors who we want to work and they gain market share in dealing with the kinds of new deals that we want to win, so I wasn't thinking about it in terms of M&A, I wasn't thinking about it in terms of application of balance sheet capital to new lines of business, I was thinking about it in terms of taking advantage of our market position to be able to enhance that market position.

I am not saying we won't consider other options including the ones that you laid out, but we're going to be very careful not to allow ourselves to get distracted, it's easy to get distracted in M&A land, and we're going to be very careful not to get -- not to allow ourselves to get distracted going down a bunch of rabbit holes..

And we have a follow-up question from Doug Mewhirter from SunTrust. Please proceed/.

I just had one last question, about the -- you said Golub -- the Golub mothership becoming more of a -- competing more in so-called bank deals, where you can take down a $100 million to $400 million deal and sort of internally syndicate it, which is obviously a very comforting thing for a private equity sponsor.

What about external syndication capabilities at Golub? Where you would maybe take something that's twice your maximum hold size and syndicate it out and then you sent the fees down to your funds including gold Golub BDC, and with that, if you were to get into that more or if had the desire or capability to get into that more, would we -- could see maybe a higher amount of fee income going into the Golub BDC?.

So we are not believers in the idea that the BDC should be in the investment banking business.

If you've looked at recent quarterly reports on the performance of the leveraged finance unit of many other larger investment banks including Morgan Stanley or Credit Suisse, you'll see degree of volatility of those kind of operations just doesn’t lend itself, it is inconsistent with what we're attempting to build and in GBDC in terms of a very consistent ROE generator.

So first answer to your question is, don't think that's an appropriate business for GBDC. But the second piece of it is, are we as a platform trying to put ourselves in a position to be able to do syndications if that's what our sponsor clients want us to do, the answer is yes, to a limited degree.

But I don't think we're ever going to have the kind of syndication business that Antares or that Credit Suisse, or Jefferies have. Our model is much more credit focused than distribution focused and always will be..

Okay, thank you, that's very helpful, that's all my questions..

And we have a question from Michael O'Brien from Dearhill, please proceed..

Hello.

I was wondering if you could give a little perspective, for someone who hasn't followed you for a long time, on how you fared through previous cycles and recessions and whether you have any thoughts on the level of debt that's floating around in the world right now and how that might impact things?.

I'd be happy to, but why don't we take that conversation offline. Please feel free to shoot me, me or Ross an email and we'll be happy to follow up with you on a one-on-one basis..

Okay, sure, thank you..

And there are no further questions registered at this time..

I want to just reiterate my thank you to all of you for tuning in today and for your continued questions and support. Look forward to talking to you next quarter..

Ladies and gentlemen that does conclude the call for today, we thank you for your participation and I say you please disconnect your line..