Robyn Friedman - Vice President, Investor Relations Todd Owens - Chief Executive Officer Ivelin Dimitrov - President and Chief Investment Officer Steven Noreika - Chief Financial Officer.

Terry Ma - Barclays Capital Richard Shane - JPMorgan Troy Ward - Keefe, Bruyette & Woods, Inc. Douglas Mewhirter - SunTrust Robinson Humphrey Robert Dodd - Raymond James Financial Services Christopher Testa - National Securities Jonathan Bock - Well Fargo Securities Sam Schwartz - Credit Suisse Christopher Nolan - MLV & Co..

Good day, ladies and gentlemen, and welcome to the Fifth Street Finance Corporation Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce your host for today’s conference Vice President of Investor Relations, Robyn Friedman. Please go ahead, ma’am..

Todd will provide an overview of our results and outlook, Steve will summarize the financials. Then we will open the line for Q&A. I will now turn the call over to our CEO, Todd Owens..

Thank you, Robyn. Before we begin, I’d like to introduce our investors and analysts to Steve Noreika, our new Chief Financial Officer. Prior to his promotion, Steve was Chief Accounting Officer of Fifth Street Asset Management and one of the senior members of Fifth Street’s Finance team.

He has over 18 years of experience and has been with Fifth Street since September 2008. During his Fifth Street tenure he has held various positions including Chief Financial Officer of Fifth Street Senior Floating Rate Corp from November 2013 to July of 2014.

We believe that Steve’s deep financial accounting and operational experience combined with his knowledge of the Fifth Street platform make him a natural fit for the position. In the coming months, we look forward to introducing Steve to our analysts and investors. For the quarter ended June 30, 2015.

FSC generated $0.21 of net investment income per share. We are pleased that our net investment income per share has exceeded our quarterly dividend of $0.18 per share for the second straight quarter. During the June quarter, we continue to take steps to optimize performance at FSC.

We completed the sale of Healthcare Finance Group, finalize the waiver to reduce management fees on future equity races and operated within our targeted leverage ratio. In addition, as I will describe shortly we plan to begin buying back shares under our existing share repurchase program.

As I mentioned a few moments ago, we made a strategic decision to exit Healthcare Finance Group a healthcare asset-backed lender.

Over the course of our strategic review, we concluded that a focus on our core middle market lending businesses, particularly middle market sponsor-backed lending as well as the technology lending and aircraft leasing was a prudent approach for the company.

We expect solid opportunities in the middle market and believe that FSC’s capital can be used to generate higher risk adjusted returns in our core lending businesses. As we stated in February, we set our dividend at a level that we believe should consistently be covered by our sustainable net investment income.

In articulating this dividend approach we expected that we would generate excess income that would improve our operating flexibility and can be used in a variety of ways.

Given our current trading levels, we are pleased to announce that we plan to use our excess earnings from this quarter to buyback shares on the open market under our existing share repurchase authorization.

Going forward each quarter depending on market conditions, we intend to use our earnings in excess of our dividend to buyback shares in the open market. We believe that buying back shares at these prices should provide a strong risk adjusted return to our shareholders and increase our net asset value per share.

Due to repayments and exits that were in excess of origination levels during the June quarter, we ended the quarter operating at a 0.62 times leverage which is at the low end of our targeted range of 0.6 to 0.8 times debt-to-equity. As a result, we have fresh capital to selectively deploy the transactions with strong risk-adjusted returns.

In regard to own portfolio, we feel comfortable to credit quality and believe that FSC maintains a strong and diversified portfolio of investments. We feel good about our portfolio’s conservative positioning and we ended the June quarter invested in a diverse group of loans across a 132 portfolio companies.

We are pleased to report that the credit profile of our portfolio was stable this quarter with no new loans placed on non-accrual. The three investments that are on non-accrual comprise only 1.5% of our total portfolio at fair value as of June 2015.

Additionally, investments in the energy sector accounted for only 2% of the total investments at fair value spread across three portfolio companies as of June 30, 2015. The initiatives discussed today are part of the broader plan initiated earlier this year to deliver improved returns to FSC’s shareholders over the long-term.

While we still have a lot of work ahead of us, we are pleased with our overall performance during the June quarter as our net investment income per share beat our dividend by $0.03. We did not have any new credit issues and we continue to operate within our targeted leverage range.

I would now like to turn the call over to our Chief Financial Officer, Steve Noreika to discuss our financials in more detail..

Thank you, Todd. FSC ended the third quarter of fiscal year 2015 with total assets of $2.6 billion a decrease of $117 million from the prior quarter. Portfolio investments totaled $2.3 billion at fair value which was spread across 132 companies at June 30, 2015.

During the quarter ended June 30, we closed $227 million of investments in seven new and five existing portfolio companies. At the end of the June quarter we had $182 million of cash on our balance sheet. Net asset value per share was relatively stable at $9.13 at the end of the June quarter, as compared to $9.18 at the end of the March quarter.

For the three months ended June 30, 2015 we generated total investment income of $70.2 million. The quality of our income continued to be high as net PIK which is PIK accruals recorded in excess of PIK payments received represented only 3.9% of total investment income. Net investment income was $32.5 million for the quarter.

We believe we are conservatively positioned, relative to our peers with 94% of the portfolio at fair value consisting of debt investments. 79% of the portfolio invested in senior secured loans, 76% of the debt portfolio consisting of floating rate securities and no CLO equity at quarter-end.

The credit profile of the investment portfolio continues to be solid as 98% of the portfolio at fair value was ranked in the highest one and two categories. FSC’s joint venture with an affiliate of Kemper Corporation continues to perform well generating a 17.6% weighted average annualized return on FSC’s investment during the quarter.

As of June 30, 2015 the joint venture had $349 million of assets, including investments in a range of one-stop and senior secured loans to 27 portfolio companies, subsequent to the June quarter the joint venture closed on $200 million of additional leverage source from Credit Suisse which should allow the joint venture to expand up to $600 million of assets.

The weighted average yield on our debt investments has increased quarter-over-quarter from 10.7% to 10.9%, including the joint venture return with the cash component of the yield making up 10.3%.

At June 30, 2015 the average size of a portfolio debt investment was $21 million, the average portfolio company EBITDA was $35.3 million and our top 10 portfolio company investments represented only 27% of total assets.

Last week, our Board of Directors declared monthly dividends of $0.06 per share for September, October and November consistent with the last two quarters. Going forward, we expect our Board of Directors to continue to declare monthly dividends on a quarterly basis. I will now turn it back over to Robyn..

Thank you for joining us on today’s call. Mallory, please open the lines for questions..

[Operator Instructions] Our first question comes from the line of Terry Ma with Barclays. Your line is now open. Please go ahead..

Hey guys, I just wanted to get a sense of your appetite for share buybacks. I think the buyback program expires November which is a couple of months out.

So can you just help us think about that?.

Sure. Hi Terry, thanks for joining us.

As we just announced what we – and consistent with what we said over the last couple of quarters, we have created some flexibility around excess earnings which we are going to use now to buyback stock under the existing authorization and these price levels once that authorization expires which is in November I would expect that the Board will reauthorize that program for the subsequent year..

Okay.

So in terms of aggressiveness we shouldn't expect you guys to use the majority of that by November, it's just mainly excess earnings, right?.

Correct, that’s correct. We are buying under the existing $100 million authorization programs, but the amount that we intend to buyback is the excess earnings from this quarter..

Is there any reason why you wouldn't be more aggressive about it?.

Look as I just said we have and as we’ve talked about on each of our last two earnings calls, our goal here is to improve profitability at FSC and we said that the right balance here is to use the excess capital, the excess earnings I should say from those decisions buyback stock..

Okay, got it.

And then on the senior loan fund can you maybe just give us a sense of what your asset growth expectations are for the rest of the year?.

Ivelin, do you want to handle that..

Yes, hi, it’s Ivelin Dimitrov. Our pipeline is fairly full. It’s a unique asset size that fits the senior loan fund mandate that we have to originate with a [VICO] and also need to get approved by our partner there from Kemper. So we tried to find the right opportunities, we tried to maintain our discipline on credit and also on yields.

But I fee fairly optimistic that in the next couple of quarters we’ll make significant progress towards deploying the leverage which we just close the CS..

Okay, great. That's it for me. Thanks..

Thank you, Terry..

The next question comes from the line of Rick Shane with JPMorgan. Your line is now open..

Thanks guys for taking my question..

Of course, Rick thanks for joining us..

One of the things that you guys have really achieved over the last in the three quarters this year is taking down the leverage. And that was very important for a host of reasons and now you're sort of at the low end of your leverage target.

Given the current environment how aggressive do you think you will be? Do you think it makes sense to stay towards the low-end right now or do you think given risks to marks in the industry, what are you going to do here I guess is the question?.

That’s a good question. So it has been important for us as a management team to stay within our targeted range of 0.6 to 0.8 and we’ve done that now for several quarters in a row.

And our objective is to stay within that range and implicit in that is that we have the capacity to increase the leverage in coming quarters and probably had more towards the middle of that range than either the bottom or the top end.

Obviously, our business is impossible that perfectly predict and that’s why we operate at a reasonably wide band on the leverage. But we would like to see the portfolio a little bit more levered than it is today over time although we are happy to do within the stated target ranges..

Got it. It may have been a good question but it was inarticulately framed.

Are you seeing opportunities with many of your peers near their leverage limits as well in the secondary markets and is that something that you'll consider as a way to deploy capital?.

I’m not sure I follow the question. Are you asking or do we see opportunities to buy assets on a secondary basis from our competitors..

Exactly..

No, we are a fundamental underwriter we like to originate our own assets and invest in our own assets, source them, structure them, monitor them. We don't tend to play as aggressively as others in the secondary market.

I think if there are credit available out there that we like that may that we’ve invested it in the past or that might be in our portfolio, that come available certainly we would look for opportunities like that’s but we’re not going to look to increase our leverage levels by buying assets in the secondary market in a way different than what was done in the past..

Okay. Great thank you very much, Todd..

Thank you..

Thank you. The next question comes from the line of Troy Ward with KBW. Your line is now open..

Great, thank you and good morning guys..

Good morning Troy.

How are you?.

Doing well, thanks.

Todd, can we just go back to Terry's initial question on the buyback? Just a couple of points of clarification, when was the original buyback put in place?.

Last November was the prior authorization..

Okay. So it's going to go for a year at a time. Then based on, Todd, your comments I mean I was surprised when we read the press release and you talked about a $100 million buyback, we thought it was going to be much more meaningful. I just have to go back to the question of I'm assuming when you talk about your excess that's over NOI.

So you earned about $5 million, $4.8 million in excess dividend NOI over dividend.

Is that what you intend to be basically your buyback on this quarter?.

That’s what we intend for our buyback to be this quarter. That’s correct, Troy..

Okay and then….

Go ahead..

Just I mean I'm sure it's a broken record for you but why? If you look - I understand why some smaller BDCs would say a buyback, there's a lot of different things go into that decision based on your size and trying to be institutionally relevant and all this, but you're $1.4 billion of equity, why wouldn't you be buying back the stock at current valuation hand over fist? You exited Healthcare Finance Group and that got to $100 million and now you're going to focus on the three areas that you're already focused on so your business really wouldn't have changed if you just would've used the proceeds for that as a buyback.

So give us some more clarity around the decision to just buy back the minimal amount each quarter..

Yes, so again I’d like to play the tape back and just describe what we set out to do a couple of quarter ago, which is to level set the dividend to allow us to meet or exceed the dividend with our NII which we’ve now done for a couple of quarters and with that excess capital or excess earnings I should say would give us the capacity to do a number of different things give us a lot more operational flexibility and the decision that we’ve taken now is to use that operational flexibility this quarter and in subsequent quarters to use our excess NII to repurchase stock.

That seems to be a good approach a declinable approach and the one that we want to move forward on. There are – as we manage leverage levels up more towards the middle part of the range I know we’ll feel good about that. But coming back to the buyback, we think that this is the right balance to use that excess again.

And you are right on the math it's kind of approaching $5 million of share buyback to execute this quarter. We hope and expect that we will exceed our dividend in future quarters and if the stock price stays at this level we’ll continue to buyback stock with that excess..

Okay.

And then just – how much have you bought back on the $100 million to date? So how much is actually left on the program?.

No we have not bought back any stock under the existing $100 million authorization, we’ll begin buying back stock as soon as we come out of block out..

Great. Thank you..

Thanks, Troy..

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

Hi, good morning..

Hi, Doug..

On the portfolio activity it sounds like you will at least try if the opportunity is there to target a little bit of growth. What about the syndication market? It looks like you've had some syndication activity again. Do you anticipate that continuing on the current path? I know you've been trying to build that business for a while..

Ivelin, do you want to address that?.

Yes, this is Ivelin again. Yes, the syndication business I mean we use it opportunistically, sometimes we originate a larger assets and then we bring it down to our target hold size and we make the skin in the meantime. And that’s something we’ll continue to do. I mean those opportunities are available to use we’ll selectively pursue those deals.

In this market we find that everybody has capital so you need to have a differentiation to your platform and we find the message resonating with certain clients and we’ll continue to support those guys..

All right. And just as a follow-up to that question, is there any – obviously GE Capital has found a new home but there was a little bit of disruption, it looks like Golub might have taken advantage of a little bit of that vacuum.

Do you think there would be more syndication opportunities now that GE is sort of going its own way and the SSLP with Ares is winding down? Because I know Ares was directly talking about it. I just didn't know if you would see anything more like that coming your way..

I think that’s right. I mean we are seeing some of those opportunities that being said there is just a lot of people lining up to take advantage of it. So it’s difficult to predict how much will come our way.

We are competing directly with some of the people you mentioned on deals and we’re clubbing off with them on deals as well that’s how life works in the middle market. We’ll usually end up life in the same credit and the same name with the same sponsor and we end up clotting up to get a deal done. So yes, I expect to see more of those going forward.

I don’t know if the GE process really made that much of a difference. It seems like everybody was gearing up to take advantage of it and they were able to hold the book together with a most part. So it will be interesting to see how it develops in the coming quarters..

Okay, and just another financial question.

Steven, in your portfolio yield which is definitely showing a nice trend, was there any kind of excess sort of OID or call fees that maybe helped bump the yield up in the quarter? Was that mostly a nice organic trend that you've shown for the last sequentially over the last two quarters?.

I think it’s a little bit of both I think it’s a nice organic trend for us that said in the June quarter we did experience a high level of repayments and with those repayments we did generate some additional prepayment and exit fees. So I guess the answer is a little bit of both..

Okay, great.

And my last question, another numbers question, what was the contribution to the realized loss or realized gain loss line from the HFG sale in the quarter?.

It was about $4 million to the realized, but net to the P&L about $2 million..

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

The next question comes from the line of Robert Dodd with Raymond James. Your line is now open. Please go ahead..

Hi guys, I'm going to apologize in advance for my case of OCD. I see a dead horse, I have to beat it. So I'm going to go back to the buyback question if I can. Correct me if I'm wrong here. For the act BDC buying back stock does not constitute a compliance with the dividend requirement.

So buying back instead of paying out obviously is going to build your spillover, et cetera. But that just means obviously that the amount of a buyback is really conceptually completely separate from the amount you're earning as I think of it. The buyback is a capital allocation.

Earnings, NII, dividend, that's an income consideration and the 1940 Act kind of forces them to be separate.

So going back to that question if that's the case which I believe it is why the decision to tie the two together when intrinsically given your corporate structure as a BDC the two are unrelated?.

Thanks for the question. You’re correct and what you just said in terms of the 40 act and buyback and lieu of dividend which was I am paraphrasing of course is correct.

We have decided that the share buyback the excess is good way of setting about buyback we think it’s a good way of returning capital to the shareholders and it’s a good way of taking advantage of the fact that our stock price is at low levels relative to our NAVs.

The expectation and intent if this share price remains at discount levels that are comparable to this is that we’ll continue to use excess earnings to buyback stock. And although those concepts from a corporate finance perspective are not immediately related we think that that continue to use of those excess earnings..

Okay, got it and if I can one more.

On the 19 of your portfolio companies obviously are investments in private equity funds, kind of emphasizing that partnership relationship you have with the guys you work with, is the dynamic is that changing, is there an increasing expectation maybe not requirement that you put money into those funds? Or is that a potential source of capital if you could exit those as well, because obviously they are non-income-producing at this point?.

Yes, that’s a good question.

There is not really any change and how we think about those investments, we have made those investments in the past in support of our private equity sponsor partners, we would expect to make those investments in the future judiciously and we’re not really changing our strategy around that that, we have not seen increased pressure I’m not sure exactly the work you use, but we’ve not seen the increased pressure to grow the size of those commitments and we expect that to be reasonably stable part of our business..

Okay, thank you..

Thank you..

The next question comes from the line of Christopher Testa with National Securities. Your line is now open..

Hi, thanks for taking my questions, most of which have been answered, but just a quick question on leverage, Todd. So I know you guys have delevered significantly over the past couple of quarters.

Just what are your thoughts on the range going forward assuming that you continue to take on more kind of first lien assets? And also we've seen a lot of BDCs who have really taken the CLO positions out of their portfolios believing they are weighing on valuation.

Just wondering if there's any thoughts on becoming more first lien, maybe possibly just getting rid of those small CLO depositions? Just any color on that would be great. .

Sure, yes I’m happy to do it. Thanks for joining us. Again our stated range is 0.6 to 0.8 we have been at the high end of that range for most of the recent quarters until now we are now at the bottom end of that range.

As I said earlier and perhaps to be a little bit more explicit we would like to kind of be in the middle of that range and we would see actually quarter-to-quarter some ebb and flow around where we wind up.

I think in this environment we as a management team do not want to be as highly levered as may be we were last year or in prior quarters and are really aiming to manage that leverage ratio into the middle part of that range.

As it relates to the portfolio itself we have for many quarters now in migrating into more senior secured, more first lien type assets and we feel very, very good about that mix today.

You are not going to see us become dramatically more conservative than where we are today, but rather look to maintain a balance that’s pretty consistent with where are and frankly where we have been over the last quarter or too..

Okay, great that’s very helpful. That’s all for me. Thank you..

Thank you very much..

And the next question comes from the line of Jonathan Bock of Wells Fargo Securities. Your line is now open..

Good morning and thank you for taking my questions. I'll start with just a couple of questions on the investment portfolio first. Obviously, we see JTC and the write-down quarter over quarter was significant.

Ivelin, just curious looking at that and Antares Corporation, both of which have taken some markdowns and I know you've talked about JTC in the past, but we're seeing two second lien or subordinate securities all receiving some various degree of markdown.

Can you give us an update as to the performance of those particular credits?.

Yes, thanks for the question. I think that’s worth highlighting, because JTC and Antares the both names that we’re spending a lot of time with on a day-to-basis. So working through the situations there and JT has been portfolio since 2009. It was in a one-stop unit tranche equation and when we got refied out, so we took a small mezzanine position.

And the company went for a fairly dramatic operation they had a number of operational issues and for education business in the core profit sector even if you have a good value proposition in the healthcare side. As you start to recover when you made mistakes on that side of the business.

So we are in the process now of coming up with solutions, we are working with the sponsors who is still actively engaged here and there is a bank group ahead of us. So we are actively discussing with them a number of options but we felt in the interest of being transparent.

And I think that something you have known about us over the years, we mark the book appropriately we do it every quarter, we don’t play any games with that. Our Board is fully transparent with how we do it and we felt it’s a good – it’s the right time to mark JTC at the level where we think we can get immediate recovery now.

We are still working on the name and frankly my expectation is that recovery will be higher than that but it’s probably going to take some time to work through that progress. Given that as a lender we have a little bit of restriction is from the things you can do in regulated business.

Now answer is a little bit of different story the company came out with numbers that surprise the investor community even though – name we have platform were fairly somebody with response and the story there. So when you what do expect when you there is going to be some volatility there.

Those are marks provided by the agent on the deal, if you ask me I don’t know if we can buy those levels we are tried, we haven’t been able to, but this is why the loan is being marked in the community by the agent. We follow the name pretty closely. We have a meeting with the management team coming up actually in the next couple of weeks.

They are going to report the earnings I believe towards the end of August and I think they’ll show a little bit better performance and I think those levels will improve, because we really know, we don’t believe there is any issues with the underlying business is more of question of where the loans is trading..

I appreciate that. And maybe diving into a few more details on the $157 million and the ability to syndicate and sell down.

So Ivelin, can you tell us what were the biggest drivers on syndication in terms of specific names that drive that $157 million amount and whom or who did you sell those assets to?.

What is the $157 million you’re referring to?.

I believe so we have like $200 million, some odd of repayments, and then $157 million of maybe syndications, I call it selldowns, however you refer to it.

Just what was the biggest driver of that $157 million number, if you could think of some individual names?.

I think we’ve got a fair amount of repayments on the syndication side. We had some names that we have taken down on the balance sheet. I think some of those sales – is probably sales of the JV as well. So when we sell something to the JV with Kemper that shows up in the sales part of our reporting. So that I forget that’s for a good portion..

Yes, absolutely..

Totally understand. I think I see $27 million of new investments, $10 million of which came from LegalZoom and I guess the question is LegalZoom the name that was also owned by another BDC to the tone of $40 million? I see that you put an additional $20 million on or $18.5 million on your balance sheet.

The question is I'm wondering if you're including that $40 million that was taken by Solar Capital as a part of that unit tranche financing in your syndication effort, if that is the case or not?.

Yes, in LegalZoom situation, we’ve been working with the sponsor for a while. We crafted the financing, we actually underwrote the whole deal and then we brought in Solar and SocGen for our partners in the deal now. So they came in at different price than us, I believe, so that’s part of our syndication there..

Okay, okay, I appreciate that. And then Todd just as a more of a global 30,000 foot view a number of folks that we talked ask them about management and management for either two things. Its management for the shareholder or the external manager as it relates to the fees.

And certainly your choice to buyback stock is a step in the right direction, but that step is also a function of the magnitude of its impact and so I guess the question is we’re happy to see excess earnings become a part of the share buyback, but to the extent that the valuation is no longer going to bring you close to book value.

Is it your view that over time you can try to buyback a few million dollars worth of stock a quarter on the hope that eventually that gets above book or do you believe that over time more I'd say more drastic measures will need to be taken because what we’re seeing is even evidence today is happy to see the stock up just a certain degree of skepticism that I felt on this call with comments of beating dead horses et cetera.

That the market is not really going to bring you to the valuation you need allocating capital the way you're choosing to allocate us..

Jon, thanks for the question. I think the way that we’re – first of all we are not buying back stocks in an effort to get us back to NAV or above NAV. We’re buying back stock because we have excess earnings and besides we think it’s a good use of that excess earnings.

And so I think that our plan as I’ve articulated earlier to continue doing that with our excess earnings. I think that we as a management team are always discussing a variety of things around how to operate this business included on the share buyback front.

We will continue to discuss that, but as we sit here today this felt like the right way to get started on a share buyback program.

As I’ve said a couple of times earlier in this Q&A here if we continue to traded at discount like this to net asset value and continue as we hope to generate excess earnings above our dividend than it’s our expectation that we’ll use that excess to buyback stock..

I appreciate that. I think that over time the market will continue to opine and as you allocate capital the market will give you the premium or the discount that is warranted. So I appreciate you’re taking the time. Thank you..

Thanks Jon..

The next question comes from the line of Douglas Harter with Credit Suisse. Your line is now open..

Hi, this is actually Sam Schwartz filling in for Douglas Harter, our questions have been asked and answered. Thank you..

Thank you..

Thank you..

Thank you. The next question comes from the line of Christopher Nolan with MLV & Co. Your line is now open..

Hi guys.

What's the spillover income, excuse me, the spillover income you currently have?.

The spillover – you mean so we are in $0.21, I’m sorry you are asking a different question. Steve, you want to….

For the quarter Chris if that’s about $4.5 million of spillover of excess..

And that's the accumulated?.

Well, just for the quarter, yes..

Okay.

Do you have any undistributed accumulated taxable income beyond that or is it only that?.

Yes..

Great. And then also the decrease in investment assets on the balance sheet seems to be $100 million off from the new investments versus the repayments.

Is that the sale of Healthcare Finance Group?.

That’s just the function of gross origination versus funded in a lot of cases we’ll originate new asset, but a portion of that facility is in unfunded commitment and therefore it doesn’t affect our balance sheet, but it is a gross origination for us..

Final question, what is the gating factor for you guys to grow assets in the SLF going forward? I mean do you have the financing in place and it does not appear you guys have put more equity into the SLF this quarter.

Just trying to get an understanding in terms of is it the size of deals, type of deals, what's sort of the gating factor?.

This is Ivelin again, hi Chris. It’s the right type of deal the facility has certain requirements as far as the type of deals we can originate with a VICO and frankly Kemper is our partner as you know has veto rights and they have approval rights on every asset.

So really we need to get our sales on board through the asset then we need to get Kemper on board as well and that just takes time..

Got you.

Is the incremental growth in SLF assets this quarter what we should expect going forward on a quarterly basis?.

Yes I think I mentioned earlier we believe in the next couple quarters we’ll make significant progress I am sorry towards deploying the leverage, we expect to be fully deployed hopefully by the end of the year, perhaps by March..

Great, thanks Ivelin..

Okay..

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

Hi guys, just a follow-up, can you give us a bit of color on how the buyback and the waiver will interact? Hypothetically if you buy back over the next couple of quarters 2 million shares then the stock does trade up to the point that you would issue equity and then reissued those 2 million shares.

Would the waiver apply to that or would it only apply to new shares issued over and above the current share count and you'd get the full base fee on any reissued previously repurchased shares?.

Thanks for the question. Yes, to answer your question the waiver would take affect above the amounts that we bought back so if we were to buyback stock as we buyback stock and then if we were in a position where we would be issuing equity which is the context in which the waiver would take effect for capital above the buyback amount..

Okay got it. Thank you..

Thank you..

Thank you. And we do have another follow-up question from the line of Jonathan Bock with Wells Fargo Securities. Your line is open..

Again, thank you for taking my question and I appreciate the answers.

So effectively there would be even if you bought back stock and eventually issued no fee impact to the external manager over time, which again the market can opine but whether this falls into management for an externally managed fee or for shareholders is something that I guess is TBD.

My question is if you are very focused on flows to the asset manager itself at FSAM, there is another opportunity to demonstrate shareholder alignment without having to buy back shares that also over time can lead to premiums.

And so Todd the question is have you thought about aligning your credit performance i.e., NAV and capital gains and losses with the NOI incentive fee in your fee structure? Because that gets alignment but it doesn't also lower fees to your external manager..

Yes, Jonathan and thanks for the question. We have talked as I said I think maybe when you are asking questions a few minutes ago we considered a number of things. We considered our fee structured we considered share buyback we’ve considered the absolute level of fees and we continue to discuss those things but we acknowledge question..

Thank you..

Thank you. End of Q&A.

Thank you. I am showing no further questions at this time. I would now like to turn the call back to management for any closing remarks..

We appreciate everybody’s interest and we appreciate the questions and stay tuned we are opportunistic for the coming quarters. Thanks very much..

Thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day..