Joe Alala - Chairman and Chief Executive Officer Jack McGlinn - Chief Operating Officer, Treasurer and Secretary Steve Arnall - Chief Financial Officer.

Mickey Schleien - Ladenburg Chris Kotowski - Oppenheimer John Hecht - Jefferies Christopher Nolan - MLV and Company Greg Mason - KBW Vernon Plack - BB&T Capital Markets.

Good morning. At this time, I would like to welcome everyone to the Capitala Finance Corp.’s Conference Call for the Quarter Ended June 30, 2015. All participants are in a listen-only mode. A question-and-answer session will follow the company's formal remarks.

Today's call is being recorded and a replay will be available approximately three hours after the conclusion of the call on the company's website at www.capitalagroup.com under the Investor Relations section.

The hosts for today's call are Capitala Finance Corp.'s Chairman and Chief Executive Officer, Joe Alala; Chief Operating Officer, Treasurer and Secretary, Jack McGlinn; and Chief Financial Officer, Steve Arnall. Capitala Finance Corp. issued a press release on August 10, 2015 with details of the company's quarterly financial and operating results.

A copy of the press release is available on the company's website. Please note that this call contains forward-looking statements that provide information other than historical information, including statements regarding to the company's goals, beliefs, strategies, future operating results, and cash flows.

Although the company believes these statements are reasonable and actual results could differ materially from those projected in the forward-looking statements.

These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks, including those disclosed under the section titled Risk Factors and Forward-Looking Statements in the company's quarterly report on Form 10-Q. Capitala undertakes no obligation to update or revise any forward-looking statements.

At this time, I would like to turn the meeting over to Mr. Joe Alala. Please go ahead sir..

Thank you, operator. Good morning everyone. Thank you for joining us. The highlights of last quarter, we issued 3.5 million shares, above now NAV offering in April, netted $64 million in proceeds. Those proceeds from the offering have been invested during the quarter.

This quarter, we’ve invested $103 million in gross investments during the quarter through our direct origination platform. Approximately 28% of these loans were senior secured loans. The average yield on these Q2 investments was 11.6%.

The yield on the aggregate portfolio right now is approximately 12% with a reasonable 4.2 ex-leverage at the portfolio level, this compared to 12.6% the prior period. The average EBITDA of portfolio companies is up to $34.1 million. Also in Q2, we realized a capital gain of $15.8 million or $0.99 per share.

This effectively completed our rotation strategy of rotating out of equity securities as IPO were at 36% and now we are under 15% of equity securities as part of the portfolio at fair value.

The net investment income was $5.3 million or $0.33 per share and that was impacted this quarter due to the equity offering and as Steve will get into more detail about that we are very optimistic about our NII momentum for the rest of the year. We paid $0.62 of distributions during the quarter.

That consisted of $0.47 in regulator distributions and $0.15 of special distribution. Based on the June 30 NAV of $17.95, we are paying approximately a yield of 13.8%. We also repurchased shares during the quarter with our stock repurchase program. We repurchased approximately 225,000 shares $3.9 million for 1.4% of shares outstanding at quarter end.

The subsequent activity to the quarter, Q3 to date we deployed approximately $49 million in debt investments yielding approximately 12.7%. Year-to-date through today, we have deployed approximately $219 million with debt yielding approximately 12.4%.

We think this demonstrates that we are not experiencing the lack of the margin compression that many others in the industry are facing. We have not increased our debt level materially at the portfolio level to generate that yield and moreover approximately 30% of our loan securities are senior debt securities.

We currently have a very robust pipeline of directly originated deals of over several hundred million dollars in the pipeline. At this point, I’d like to turn the meeting over to Steve for some additional comments on our operating and financial performance.

Steve?.

Thanks, Joe. Good morning everyone. As previously mentioned, on August 10, we filed a press release with our second quarter 2015 earnings. In addition, we also posted a second quarter 2015 investor update to our website providing additional details about the company, the investment portfolio and other financial related trends.

I’d like to take a few minutes to highlight a few items with the earnings release which can be found on the Investor Relations section of our website. During the second quarter of 2015, total investment income was $15.1 million, an increase of $2.6 million over the same period in 2014.

Total interest, fee, and PIK income was $5.6 million higher in the second quarter of 2015 compared to 2014, but was partially offset by $3.1 million less dividend income. Total expenses for the second quarter of 2015 were $9.8 million compared to $6.9 million in 2014.

The increase is attributable to an increase in interest and financing fees of $2.3 million related to the notes offering in June of 2014 and an increase of $0.4 million in management fees, net of the waiver.

Net investment income totaled $5.3 million or $0.33 per share for the second quarter of 2015 compared to $5.6 million or $0.43 per share for the same period last year. Second quarter net investment income per share was significantly impacted by the issuance of 3.5 million new shares in April.

The execution of our strategy to rotate out of equity and into debt coupled with the investment of the equity offering proceeds during the second quarter position the company well for future growth in net investment income per share for the second half of 2015.

Management’s highest priority is to cover regular distributions with net investment income. Net realized gains totaled $15.8 million or $0.99 per share for the second quarter of 2015 compared to $0.5 million for the same period last year. During the quarter, we realized gains related to Boot Barn Holdings Inc.

approximately $7.7 million, Corporate Visions Inc. $7.1 million and KVP Investments LLC $0.9 million. The change in unrealized depreciation was a decline of $16.2 million or $1.02 per share for the second quarter of 2015 compared to an increase of $0.1 million for the same period last year.

However, it should be noted that $15.7 million of this decline related to the realizations of net gains for the period by a reduction of previous unrealized appreciation. Therefore, the remainder of the portfolio was flat as compared to the prior quarter.

Net increase in net assets resulting from operations during the second quarter of 2015 totaled $4.9 million or $0.31 per share as compared to an increase of $6.2 million or $0.48 per share the previous year. Total net assets of $291.9 million at June 30, 2015 equate to $17.95 per share compared to $18.56 per share at December 31, 2014.

During the second quarter of 2015, as Joe mentioned, the company repurchased 224,602 shares of the common stock under the board approved repurchase program, approximately 1.4% of the shares outstanding at quarter end. The weighted average annualized yield on the share repurchase during the quarter was approximately 14.3%.

From a liquidity standpoint, we have cash and cash equivalents of $39.5 million at June 30 compared to $55.1 million at the end of the year. SBA debentures outstanding at June 30, 2015 totaled $192.9 million with an annual weighted average interest rate of 3.51%.

In addition, the company has a $113.4 million of notes outstanding bearing a fixed interest rate of 7.125%. Lastly, the company has $80 million available under its senior secured revolving credit facility at the end of the quarter.

At June 30, the company’s balance sheet and future net investment income will not be materially impacted by changes in short term interest rates. At this point, I’d like to turn the call over to Jack for a few comments on our investment portfolio and trends we’re seeing in the overall investing market..

Thanks, Steve. Again, we are pleased with the strong quarter of investments with over $100 million placed in the quarter. This investment activity was highlighted by the following large investments.

A $12 million investment in [indiscernible] (9:30) that included $2 million of senior secured term debt and LIBOR plus 6%, $7 million of sub debt and LIBOR plus 14% on a quarter as cash rate and a $3 million equity investment. Note that the LIBOR rate had a 2% for net investment which we were a co-sponsor on.

A few $15.7 million of our sub debt into corporate visions and 11% rate, 9% cash and 2% PIK, as well as $1.6 million equity co-investment that was a sponsor led deal.

A $10 million senior secured debt investment into American Clinical Solutions at LIBOR plus 9.5% cash rate that was a low leverage dividend recap, a 28.3 million sub-debt investment in the Cedar Electronics at a 12% cash rate. It was also a sponsor led deal.

And as previously announced, we also made a $5.2 million investment into the Capitala Senior Liquid Loan Fund I, which is our joint venture with Kemper. The yield on new debt investments was 11.6%, bringing the total weighted average yield to 12% for our debt portfolio.

As Joe mentioned, we had subsequent Q3 deployments of $48.8 million with a new debt investment yielding 12.7%. In regards to repayments, for the second quarter we received $57.4 million of repayments. Two items of note here, we received almost $20 million of payments from non-income producing equity investments.

We have then reinvested in the mostly interest baring securities. With that we feel we have accomplished our goal of rotating out of our pre-IPO equity concentration that was in the mid-30% range. Secondly, we entered our initial investment in corporate visions with a $21.2 million repayment that included a $7.1 million realized gain.

We were then able to re-enter the investment with a new buyer, a strong private equity sponsor. We were able to do this through the recommendation of the corporate visions management team. The capital portfolio at the end of the second quarter consists of 60 companies with a fair market value of $565.3 million on a cost basis of $546.6 million.

Senior debt investments represent 36.1% of the portfolio. Senior subordinated debt 46.5%, Senior Liquid Loan Fund 2.7%, and equity warrant value of 14.7%.

In regards to portfolio quality, we continue to maintain a sub two internal weighted average risk rating at 1.97, with much of the increase from the first quarter rating 1.88, due to the large amount of new investments, since we rank all new investments at initial rating of 2.

For example, we exited corporate vision that was a one rating and investment in new corporate visions deal that I previously mentioned that had now an initial rating of 2. During the quarter, we added one investment and a subordinated debt of FSTR to cash and non-accrual status.

Debt investment security has a cost basis of approximately $17.8 million and a fair value of $10.5 million. The impact of adding FSTR to non-accrual to Q2 debt investment incomes was $0.02 per share. We continued that one portfolio of debt investment on pick non-approval.

This sub-debt investment has a cost base of $8.1 million and a fair value of $5.7 million. As an update on our investments in the energy space, we continue to closely monitor our five investments that represent 10.7% of the total investment portfolio at fair value.

These fair values are marked approximately 86% of cost at quarter-end, slightly lower than 89.5% at year end. All the five investments continue to be current on our interest payments. In regards to market conditions, we continue to see strong proprietary deal flow and have several deals that are currently in the diligence space.

With that I’ll turn it back to Joe..

Thanks Jack. Management acknowledges that NII fell short of analyst forecast and one of those reasons is approximately 94% of the 102 million placed in Q2 was in the second half of the quarter. So, since the equity offering in early April, we have placed approximately 150 million in directly originated deals yielding 12%.

This monetisation of corporate vision, also last quarter, has effectively completed our rotation of - strategy of rotating out of the equities, securities, and NT yield. We had subsequent capital gains of about 25.2 million of this equity rotation.

These capital gains generated as part of this equity rotation along with the NII have allowed our regular distributions per share to remain unchanged during the year, while allowing us to declare a special distribution of $0.50 per share.

Again, 2015 to date through June, we have earned 2.44 per share of NII and realised gains, and have played out 1.14 per share during the quarter. Now that we have completed this equity rotation over the past few quarters, management is very optimistic about net investment income for the final two quarters of 2015.

And with that operator we're ready to take address questions..

Thank you. [Operator Instructions] Our first question comes from the line of Mickey Schleien of Ladenburg, your line is now open..

Good morning Joe.

Wanted to just make sure I understand what you're seeing in terms of your prepared comments, at fair value the equity and warrants are now 15% of the portfolio, but NII was short of the regulatory regular dividend by 30%, are you saying that even if you stay at 15% of fair value in equity you can make up that difference by reinvesting and rotating that capital plus the equity, the funds you earn from the equity offering into yield earning investments?.

Mickey, this is Steve, that’s basically correct, the back end investments during the quarter of 102 million be in the second half of the quarter coupled with the rotation from equity to debt, put us in a good position to have a full benefit in Q3 of those investments. Yes..

Okay.

So, Steve can we expect the equity positions to decline further as a percentage of fair value or is it just sort of the range that you are comfortable with?.

Yes, we have said on previous calls that we would like to be between 15% and 20% as a benchmark, if we ever rose much above 20%, I think the rational for that would be we would do that through appreciation meaning that the company's companies were doing well and we had investments appreciating, but I think a general rule of them would be where we are, we like very much and with that though we will continue to evaluate opportunities to invest additional equity because we've had great results over the track record speaks for itself..

Okay.

I have a lot of the questions, but I'll ask one more and get back in the queue, maybe just one for Jack or I'm not sure can you walk us through the decline in the portfolios yield from 12.6% to 12%, I mean there is lot of moving parts here, was it pressure on spreads was it a change in the portfolios makes going more senior, was it a combination of those two, a little color there would be very helpful..

Yes, I think with the origination that we had in Q2, 100 million obviously is that debt was a large portion of the portfolio now. It was at a lower rate, some of that was because of the senior debt nature of it. These were, even the lower middle market investments were you know [indiscernible] $30 million EBITDA mark.

We had a lot of sponsored activity this quarter. So, they were somewhat higher leverage in the 4x and in some cases slightly over 4x of leverage, but then there was also a fair competitive yield to – on whether it was a senior debt or a sub-debt on the sponsored deals.

So, it was a little bit lower yield this quarter, especially compared to last quarter, but then again for Q3 the money we put out so far we brought that yield back up some. So, it was an active quarter.

We weren’t stretching or giving up yield to get deals done, we just had, we have some good deals in front of us and that was kind of a market rate at the time for the security we are investing in..

So, if Jack …..

We are still seeing new opportunities..

Jack, I think you said Q3 deployment so far were 49 million at 12.7, would it then be fair to expect the portfolios weighted average yield to climb in the third quarter, if, since we are, if we were to stop today..

Yes, year-to-date it will be up from where it is at the end of Q2..

Okay. I have some more questions….

And as Joe mentioned in his comments, year-to-date the investments have been made at an average yield of 12.4%..

Okay. I will get back in the queue. I have a few more questions. Thanks.

Thank you. Our next question comes from the line of Chris Kotowski of Oppenheimer, your line is now open..

Yes. I wonder when you quote the yield of 12 or 12.4 or 12.7, is that an all in yield or is it including OID accretion and prepayments and things like that or is it just the yield coupon plus PIK..

It is just the yield, no fees included, it’s coupon plus PIK if any PIK in that particular loan..

And it relates to the loan portfolio..

Correct..

Okay, all right. Good. And then you gave us the $48 million or $49 million of new investments subsequent to the end of the quarter.

Can you give us an idea how prepayments are running?.

Prepayments, I think there was about $4 million or so of repayments so far in the quarter. So that’s a pretty one that....

$4 million, okay. So that’s net growth.

And then give us an idea of your view of asset quality generally and obviously you had new nonaccrual, but that had been marked before, are you seeing any – outside of the energy patch, are you seeing any softness stretching on covenants and...?.

Yeah, from a quarter to quarter and year to year, we’ll always have some portfolio of companies that are not performing as expected. There is nothing unusual in this quarter than historically has been case.

Again, we are watching our energy investments and the oil and gas space with the further decrease in fuel prices, so we continue to be very active with those companies in monitoring them. We had an SSCR in the nonaccrual list and are actively in working with that portfolio company too. So, I would say, it’s normal activity..

Okay. And then, lastly, I guess, August is obviously always the slowest month of the year and then it takes a while to recover from Labor Day.

I mean should we expect that the activity that we’ve seen in the third quarter is more or less it in terms of new transactions?.

Chris, this is Joe. Our active pipeline has never been greater and we are finding that Q3 quarter-to-date and forecast is going to be a very accurate quarter.

We do still got to get them close as you know, but our direct origination platform is generating an enormous amount of quality deal flow and I think that is one of the main reasons we are not experiencing yield compression right now. So I think this quarter and our forecast is the following quarter will be very active quarters for us..

Okay. That’s it for me. Thank you..

Thank you..

Thank you. Our next question comes from John Hecht of Jefferies. Your line is now open..

Good morning, guys. Thanks very much.

Just real quick just from a modelling perspective, is there any, I guess, unusual or non-recurring administrative expenses in the quarter, I guess, related to the equity offering or should we think of the expense rate now as the kind of the recurring level?.

Yeah, I think if you look at the expense run rate, there is a little bit of timing of some professional fees in there, but by and large, the expenses are pretty in line with what management would expect within [indiscernible] moderate range..

Okay. And then turning a little bit to the pipeline, so it sounds like you guys – you had an active quarter, you still see a lot of activity.

I’m wondering can you tell your what are you sourcing it, your characterize, is this a direct lending, is this relationships with sponsors or any geographical kind of machine is out there?.

Yeah, this is Joe, John. I think it’s all directly originated. It’s coming through our six full-service office right now.

And it’s a greater blend of both equity sponsor and non-equity sponsor growth capital opportunities and what we are finding is we are still able to get the yields we are seeing as Jack mentioned, our average EBITDA now in the portfolio is about $34 million. So these are larger lower middle market and some kind of traditional middle market deals.

And the neat dynamic we are also finding is a lot of these deals approximately 30% or more of senior debt structure deals and we are able to generate these 12% plus type yields on that type activity and the pipeline is very robust. And I think these direct originating office, they are just all – they are all hitting their stride again.

And that is why we have such a robust pipeline of activity..

Is it spread across the entire pipeline?.

It is and it’s speared geographically too. I mean about a year ago not quiet, we opened our West Coast office has performed very well and it’s also complementing our more Southern [ph] back office and we are seeing deal flow from across the U.S. and it’s very high quality..

Okay.

And on that topic, how do you guys feel – I guess how do you describe your [indiscernible], we know your cash and balance sheet, we know the availability [indiscernible], what’s your target leverage and how do we think about your capacity that you invest?.

Yes, this is Steve.

I think, the way I’d frame it up, at the end of the quarter, as you saw, we’ve got about $40 million in cash at the parent and the SBIC subs, quarter end leverage – regulatory leverage was 0.39x and we’ve got in excess of $100 million of debt capacity to remain, say, at or below 0.75x, which is probably as high as we would want to go from a regulatory leverage perspective.

And that debt would come in the form of drawing down on our senior secured credit facility.

At the end of the quarter, we got $80 million available to us, but we’ve made some recent additions to our borrowing base, so subject to continued good opportunities from our origination platform, we think there is an opportunity to upsize the credit facility and provide some liquidity from that perspective..

Okay. That’s very helpful.

Final question, do you guys have any thoughts or comments just on the SEC issue targeting under the commitment?.

No, for us, it’s relatively immaterial at this point. I think it’s something we’ve been engaged with our accountants and lawyers, but we’ve got that fully disclosed in our financial statements and pretty immaterial impact to us at June 30..

Thanks very much guys..

Thank you..

Thank you. Our next question comes from the line of Christopher Nolan of MLV and Company. Your line is now open..

Hi, guys.

On the share repurchases, I estimate repurchase price averaged at $17.32 per share, is that about right?.

That’s about right. Yes, sir..

And you issued shares at $18.32 and you are buying them back at $17.32.

Can you give us a little clarification in terms of what sort of – how are you looking at share repurchases? Is it simply just opportunistically below NAV or is there some other sort of return threshold that you are looking for?.

Yeah, well, the board approved $12 million over an annual basis, so that’s kind of the parameters what’s rough riding under, but we are actually looking at it from an opportunistic basis. Under NAV, it seems to make sense, if we can again retire these share that yield above what we can invest in the market.

It seems to make strategic sense and kind of the management and the board kind of feel the same way..

So based on that should we be thinking about accelerated share repurchases in the second half of the year given north of share prices?.

We’ve talked about that, but we have not implemented any changes in that regard..

Okay. Final question.

The outlook for realized gains, it looks like you guys have basically sold down on almost all of your position in blue bond, given that you don’t really have any more publically trade equity positions, should we look for a slowdown in the realized gains in the second half?.

I think it’s very fair to say, compared to the first half, the second half will be materially lower, yes. We still have a few shares of blue bond remaining, almost $100,000. It will be determined what we will do with those, but yeah, we’ve had pretty active first half of the year in gains, I think there would be slim chances of repeating that.

So yeah, from a modelling standpoint realized gains are going to be much lower..

Great.

And SLS [ph] leveraged yet and what’s the yield right now in the second quarter?.

The SLS [ph] is levered, but it got levered during the second quarter and so there really wasn’t any yield to the investors during Q2, we will announce our first dividend and distribution to the shareholders in September, so we will have some returns at that point..

Great..

For the second quarter..

Great, thank you..

My pleasure..

Thank you. Our next question comes from the line of Greg Mason of KBW. Your line is now open..

Great. Good morning, guys.

Can you talk a little bit about the origination fees? Do you guys take those all into income when you originate the loans and how does that impact – obviously this is a big quarter from originations, it sounds like the second half of the year is, but how does that play into your ability to get NII to the cover the dividend, say, the BDC market just continues to stay depressed and you can’t raise more capital and originations eventually have to slow.

What goes into your hope of NII covering the dividend from the fee aspect?.

This is Steve. We do recognize the fees upfront but I think if you look at the fee income that we’ve generated over the last several quarters, I mean that’s just a part of our interest income base as we are able to provide liquidity through debt and equity offerings to fund this direct recession platform.

We are very optimistic that the fee income can continue to support our coverage of our distribution level. If we get to the point where business flow slows down, the economy is not doing well, we’ll address that.

But at this point, we are very optimistic that those trends will continue and that we can continue to have fee income part of our earnings stream..

Okay, great. And then on the dividend income, you’ve exited a lot of your equities and your high flying equities, so how should we think about that dividend income line going forward given the lower percentage in equity? Any guidance there would be really helpful from modeling standpoint..

The past few quarters, we basically had a few hundred thousand dollars of dividend income as opposed to the comparable quarter last year where we had over $3 million. I think if I was modeling out I’d use the current quarter more certain previous of few hundred thousand dollars would be a normal amount of dividend income.

If we had some events and some companies were in a position to provide us with something greater than that, that would be an exception..

Okay, great. And then one last question, Joe, I know you’re closely involved with the SBA and I believe the SBIC bill is now through the house I believe and just any commentary you have on the SBIC potential legislation out there..

The commentary I have and I do serve on the exec committee for SBA and the commentary I have is, their position is they are very optimistic but specific to Capitala, we would be prepared to submit if the lending increase were to happen from 2.25 to 3.50, we would be first in line to submit a subsequent SBIC application and the fact that we have received four SBIC licenses in the firm’s history, we would expect that our application would be expedited, and we would try to take full advantage of the low cost leverage that, that program offers us.

So we are prepared to move. We just need the legislation to happen and we will be – we made fly that application of to D.C. which we have done in the past to make sure we hand deliver it, but that’s really how we are viewing it and we’re just ready to go..

Alright. Great. Thanks guys. Appreciate it..

Thank you..

Thank you..

Thank you. Our next question comes from the line of Vernon Plack of BB&T Capital Markets. Your line is now open..

Thanks very much. And Jack, could you give us a little more color on what you’re thinking regarding SSCR, the outlook, possible resolutions just confer little more there..

That’s right. I can’t comment a whole lot on that because it’s such a – it’s an ongoing process and we’re very active with the company and the management team working on the resolution, working at common lower than that..

Okay.

And can you give me a sense if oil stays where it is today for say the next two years, what impact do you think that’s going to have to the oil and gas exposure that you have in the portfolio?.

We look at this and we like to talk about the five investments in that space and again one of them is the natural gas and it hasn’t really been all that impacted by the oil prices and one of them is kind of utility services, so that’s really not has any impact.

So, we really look at GCE, it is kind of one that has the most impact by that and again a little bit of detail there.

As you have seen, as you follow the market, the prices has continued to come down that’s mostly because US production has stayed pretty steady there is a reduction in the number of rigs, but production has been pretty stable and there has been good output from that. So, that production stability has helped CCE be – have a stable amount of business.

So, we really had to look at the production side of things and we really don’t have crystal ball there, we are just looking to see what the large production companies are going to be doing in the future. So, they are still stable at this lower pricing, obviously concerned about it, a lot of their competition has lashed out of the market.

So, they’ve actually been able to pick up new business in this market and that’s been able to help them out. So, that’s really our main concern. If the prices stay low, at the end of the day it is not good for them, but they do continue to maintain steady business and they have been keeping current payments to it..

Okay, so from your perspective, PCE is probably the most, that is the company that you are most concerned about, assuming….

Yes, they are most influenced by oil prices..

Okay. Alright thank you very much..

You’re welcome. Thank you..

Thank you. Our next question comes from the line of Mickey Schleien of Ladenburg, your line is now open..

Yes. Thanks for taking the follow-up questions. I want to go and talk about the senior loan funds, can you - I am trying to under the rationale of having two of these particular leases, the second one is supervised by a Apollo and given that these are non-qualified investments it ultimately reduces the scale and I’m sure that’s important.

Can you walk us through the rationale for two of these rather than just one?.

Well, I think the rationale and one level is building out another origination platform for the BDC. Currently, we have a great direct origination platform through our six full services office, but now we are actually generating an origination platform through loan desks, which at times can be great product for BDC.

Also we think these senior loan funds can generate double digit yields and then we can declare those as dividends back to the BDC, but right now it’s under 5% of assets, so it is not a material investment for us. And lastly, we think these assets are so diverse from our direct origination assets.

It’s a very diversified investment strategy, it helps for the diversification. I think average EBITDA is multiples of the 35 and average EBITDA from our directly originated platform. So, those sort of three dynamics, really we think is value added for the BDC shareholder.

We do have one with Kemper as mentioned and we formed another one with Cion/Apollo and I will say that relationships that we have developed through these Senior Loan Fund programs have been very beneficial throughout the platform on both growing out relationships with the loan desk and actually generating more directly originated deal flow.

So, I think it’s a very complementary and diversification strategy for us and we have been – we’ve happy today with the results..

Yeah, I understand what you are saying Joe, but if I’m sitting over at Kemper, your – from their perspective, the amount of equity that you can contribute to the senior loan fund is limited because that’s an unqualified investment and now you are adding CION to the mix, so it’s even more limited.

I just don’t understand why you have two of these, why not just focus on one of them?.

Well, we have two of them because it diversifies our sort of relationship base. I mean the CION/ Apollo’s senior loan sign has brought a lot of additional complementary relationships to the platform and so has Kemper.

And we don’t – we consider them complementary and in fact what the strategy would be if you had two equally sized senior loan funds and we are trying to get a $6 million allocation, you put three million in each bucket [indiscernible] obviously you have to get a joint approval from both Kemper and Apollo.

We all believe it is complementary and it’s really adding value throughout both platforms because of the extra distribution you get from having two parties versus one..

Okay..

Remember these are liquid quoted investments. These are not – our traditional directly originated assets..

I understand.

Why did you decide to use a total return swap in the Kemper fund and will you use a similar vehicle in the CION fund?.

And that goes back to – these assets are liquid quoted senior loan participations. So the TRS offered the better structure for those type investments. If these were into middle market companies that were non-liquid daily quoted papers, TRS is not the optimal solution for that, but just they are liquid and they are quoted end of every day.

TRS offers a better capital structure for that type of investment activity. And you have to really expect that TRS to be in with the Apollo/CION joint venture..

Right, right.

And when you say, you expect double digit yields on these, you are referring to return on equity, correct?.

Yes, correct..

Okay.

And just a couple of liquidity questions, of the $40 million or so in cash on the balance sheet, how much of that is outside the SPAC?.

The majority of it actually is outside the SPAC. Some of the activity last quarter was SPAC eligible investments, so we’ve been very efficient with those funds..

Okay. I’m just – there is a lot of moving parts here.

So most of the cash is outside the SPAC, so you can use that to fund the senior loan funds or other sorts of investments, but can you remind us what kind of collateral does the credit facility expect to – how flexible is it?.

The credit facility is very flexible. From sub-debt, all the way up to first lien bank loan, so there is a wide variety of collateral accepted with varying degrees of advanced rates. So....

So you can fund a lower middle market investment with the credit facility?.

We could, yes. At certain earnings threshold and leverage statistics, but yes, that’s absolutely correct..

Okay. Fair enough. I appreciate that.

Steve, I think I probably want to follow up with you this afternoon, are you going to be around?.

I will be..

Okay. Thank you..

Pleasure..

Thank you. I’m showing no further questions at this time. I would like to turn the call back over to Joe Alala for any closing remarks..

Thank you, everybody. We appreciate the conference call. We will be around, Jack, Steve, and I, all day, if you want to call one-off basis to ask any questions. Well, we appreciate your time. Thank you..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Have a great day, everyone..