Welcome to the Q3 2017 Solar Capital Limited Earnings Conference Call. [Operator Instructions]. I would now like to introduce your host for today's conference, Mr. Michael Gross, Chairman and Chief Executive Officer. Sir, you may begin..

Thank you, very much and good morning. Welcome to Solar Capital Limited's earnings call for the quarter ended September 30, 2017. I'm joined here today our Chief Operating Officer, Bruce Spohler and Rich Peteka, our Chief Financial Officer.

Rich, before we begin, would you please start off by covering the webcast and forward-looking statements?.

Of course. Thanks, Michael. I'd like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of Solar Capital Limited and that any unauthorized broadcasts, in any form, are strictly prohibited. This conference call is being webcast on our website at www.solarcapltd.com.

Audio replays of this call will be made available later today as disclosed in our earnings press release. I'd also like to call your attention to the customary disclosures in our press release regarding forward-looking information.

Statements made in today's conference call and webcast may constitute forward-looking statements, which relate to future events or our future performance or financial condition. These statements are not guarantees of our future performance, financial condition or results and involve a number of risks and uncertainties.

Additionally, past performance is not indicative of future results. Actual results may differ materially as a result of a number of factors, including those described from time-to-time in our filings with the SEC. Solar Capital Limited undertakes no duty to update any forward-looking statements, unless required to do so by law.

To obtain copies of our latest SEC filings, please visit our website or call us at 212-993-1670. At this time, I'd like to turn the call back to our Chairman and Chief Executive Officer, Michael Gross..

Thank you, Rich. It's no secret that conditions in the cash flow leverage loan market have become heated. Over the past few years there's been an exodus of discipline in certain pockets of private credit investing.

Many private and public credit funds including some BDC's have been taking on more risk by reaching for yield in order to maintain unrealistic dividend or return policies. Other firms have been enforced to buy the market because of the share amount of capital they must put to work each quarter across their platforms.

Still other credit managers have reached to the current market by shifting their focus to a syndication model in which they did aggressively and mandate and syndicate the entire issuer friendly loan trenches which they view is too risky to own themselves to passive market participants.

While we still believe that the long term investment thesis for private middle market remains intact with no indication that banks will ever regain the market share they once enjoyed in this industry.

We cannot predict how long the current environment defined by loose structure and low pricing will persist and so we take into account both potential outcomes for this market. When making investment decisions we always assume we're in the late stage of the credit cycle and correspondingly maintain a lower risk portfolio.

Conversely our operate [ph] decisions are guided by the belief that we cannot rely on rising interest rates or market correction to drive increase in profitability.

Consistent with this approach in the third quarter we continue to execute on our strategy of buying and building speciality finance vehicles and less competitive and low correlated lending niches within the middle market by acquiring Nations Equipment Finance at approximately $327 million equipment finance platform.

Additionally our Board of Directors approved a 25 basis point reduction in our management fee. The new level will go into fact on January 1st, 2018.

This amendment which is a permanent amendment to our management agreement continued our history of shareholder friendly actions which has included voluntary fee waivers to ensure that our net investment income has covered our dividend as well our restraint in raising equity capital and increasing leverage which would have necessitated lowering our underwriting standards to invest in a [indiscernible] market just to earn higher fees.

Over the past year we've been focused on reducing our cost structure. We amended our credit facility to lower borrowing cost by 25 basis points and we refinanced our $75 million of 5 and 7, 8s [ph] senior secured notes with unsecured notes with a weighted average fixed rate return of 4.53%.

Additionally late last week we issued note to redeem $25 million of our six and three quarters, unsecured notes which we're effectively refinancing through new issuance of $21 million of unsecured notes with a fixed coupon of 4.5% and maturity of December 2023.

We believe our efforts to reduce our cost structure will help us grow our net interest margins even in the event of a continued low interest rate environment. Furthermore our speciality finance verticals including the addition of NEF position us well for either continued heated market conditions or a credit correction.

The investments in these niches which at September 30 accounted for approximately 60% of our comprehensive investment portfolio are always senior secured. Now three months into our ownership of NEF we are pleased with its seamless integration and contribution to our earnings.

As a reminder NEF is an equipment finance company that provides senior secured equipment financings to companies in the U.S. Solar Capital invested approximately $210 million to effect this acquisition which closed at the end of July.

The company was founded in 2010 by Former GE Capital equipment finance professionals to fill a void in the marketplace created by the dislocation of traditional lenders.

The acquisition offered a compelling opportunity for Solar to invest in an established business, we have experienced management team has underwritten approximately $1 billion of equipment finance transactions and has built a strong track record.

NEF sourcing channel enhances solar's flexibility to originate across multiple business lines in order to find the best risk reward investments. We expect our investments in NEF will generate a 10% to 11% cash yield consistent with our other specialty finance assets. NEF will distribute substantially all its earnings to Solar on a quarterly basis.

Based on its existing portfolio the investment is expected to generate quarterly net investment income for Solar of approximately $0.04 to $0.05 per share. Bruce will provide additional details on the NEF transaction. Solar Capital funded its investment with available liquidity including borrowings under our existing credit facility.

At September 30, we had $475 million of debt outstanding and leverage of 0.51 times net debt to equity. Also September 30, Solar had over $775 million of available capital under its existing credit facilities subject to borrowing base availability to finance portfolio growth.

As a result of the business plan we put in place five years ago, when the impact of global easy monetary policies first became apparent our credit quality remain strong.

At September 30, 100% of the portfolio is performing and our net asset value At September 30, 100% of the portfolio is performing and our net asset value is $21.80 up a penny from Q1.

Additionally we have increased the earnings power of our comprehensive investment portfolio, in the third quarter we generated $0.41 of net investment income per share and we expect both our Q4, 2017 and Q1 2018 net investment income per share to exceed that and be in the low 40s.

Given our increased runrate of net investment income in low 40s resulted from a combination of a larger comprehensive investment portfolio and reduced expenses, our Board of Director has approved an increase in our quarterly distribution to $0.41 per share for Q1 2018 concurrent with a start of reduced management fee The distribution increase is an initial step in aligning our distribution with a greater projected net investment income and we feel confident in our ability to continue to grow Solar earnings.

At this time, I will turn the call over to our Chief Financial Officer, Richard Peteka to take you through the financial highlights..

Thank you, Michael. Solar Capital Limited's net asset value at September 30, 2017 was $921.2 million or $21.80 per share compared to $920.9 million or $21.79 per share at June 30.

At September 30, 2017, Solar Capital's on balance sheet investment portfolio had a fair market value of $1.4 billion in 88 portfolio companies across 33 industries compared to a fair market value of $1.2 billion in 57 portfolio companies across 24 industries at June 30.

For the three months ended June 30, 2017 gross investment income totaled $36.1 million versus $33.9 million for the three months ended June 30, 2017. Expenses totaled $18.8 million for the three months ended September 30, compared to $17.8 million for the three months ended June 30.

Accordingly, the company's net investment income for the three months ended September 30, 2017, totaled $17.3 million or $0.41 per average share compared to $16.1 million or $0.38 per average share for the three months ended June 30, 2017.

Below the line, the company had net realized and unrealized losses for the third quarter of 2017 totaling $0.2 million versus net realized and unrealized gains of $2.7 million for the second quarter of 2017.

Ultimately, the company had a net increase in net assets from operations of $17.2 million or $0.41 per average share for the three months ended September 30. This compares to an increase of $18.8 million or $0.44 per average share for the three months ended June 30, 2017.

Finally, our Board of Directors declared a Q4 distribution of $0.40 per share payable on January 04, 2018, to stockholders of record as of December 21, 2017.

Additionally and as Michael mentioned the Board declared an increased first quarter 2018 distribution of $0.41 per average share payable on April 3rd, 2018 to stockholders of record as of March 22, 2018. With that, I'll turn the call to our Chief Operating Officer, Bruce Spohler..

Thank you, Rich. Before diving into the details of our portfolio I would like to take a minute and just give you an overview of our origination platform. As many of you know we've spent the past several years building and acquiring niche businesses in order to advance our strategic objective of becoming a diversified speciality finance company.

As a result of these efforts today we have four distinct business lines. First off our cash flow business which invests in senior secured loans, sponsored back companies in the upper mid-market, here as you know our average EBITDA is approximately $65 million at the borrower level.

Included in this vertical are also our SSLPs through which we invest in stretch senior cash flow loans in partnership with Boya [ph] and another institutional investor.

Secondarily we have our asset based business which encompasses loans the company is in transition as well as loans to other finance companies much of which is done through our crystal finance platform.

These collateralized loans are made against the realizable liquidation value of a borrower's assets and come with meaningful upfront as well as prepayment fees. Our third vertical is our life science lending business which lends to privately held or small market cap drug and medical device development companies.

Our team previously was founded and managed GE Capital's life science loan business over a 13 year period. These loans to companies in the late stage of drug and product development are senior secured and often come with success fees or warrants.

Finally our fourth vertical patient Nations Equipment Finance which we acquired in Q3 has given up an equipment finance capability which now enables us to act as a full solution provider to our middle market borrower clients.

In aggregate, at September 30, our investments across these four lines of business totaled 1.67 billion encompassing 225 different borrowers across 93 industries. The average investment was 7.4 million or 0.4%.

The increase in portfolio diversification and smaller average issuer size relative to the second quarter is primarily due to the acquisition of NEF's highly diversified portfolio. Negative fair value 98% of our comprehensive portfolio consists of senior secured loans.

The remainder approximately 1.8% consists of equity securities which are mainly associated with our debt investments. At 930 roughly 79% of our portfolio was floating rate, the uptick in our fixed rate loans resulted from the acquisition of NEF.

Including investments and repayments across our four business lines originations total 413 million, 327 of which was associated with the NEF acquisition and repayments were approximately 124 million.

During the quarter we more than replaced the cash flow loans which were repaid during the second and third quarters with investments in our specially financed businesses where we believe the current investment opportunity is more compelling than the currently [indiscernible] cash flow sponsored back lending market.

Now I'd like to end with an update on the credit quality and earnings power of our portfolio which includes our equity interest in any NEF Crystal and our SSLPs. Overall financial health of our portfolio company remain sound reflecting our discipline underwriting and focus on downside protection.

At September 30, the weighted average latest 12 month revenue and EBITDA trends continue to be positive across our portfolio companies. For the portfolio investments in our cash flow segment leverage to our security was 5.2 times consistent with the prior quarter, interest coverage was 2.7 times and average EBITDA was approximately 64 million.

The current U.S. economic environment with stable earnings and low defaults continues to remain favorable for disciplined credit investors. At September 30, the weighted average investment risk waiting of our total portfolio was two based on our 1 to 4 risk rating skill with one representing the least amount of risk.

Approximately 96% of our portfolio is rated 2 or better reflecting the portfolio's strong credit fundamentals and 100% of our portfolio was performing at September 30th. The weighted average yields on the fair value and current cost basis at quarter's end is 10.2% and 10.6% respectively slightly higher than the prior quarter.

Importantly, Solar was able to maintain its portfolio yield without compromising credit quality or taking on additional risk.

We're very pleased with the performance of our portfolio companies and believe it invalidates the proven investment approach and our strategic focus on specialty lending middle market niches that we've maintained over the last several years. I will now provide a brief update on NEF and then touch on our other verticals.

By way of background our investment team is very familiar with the leasing industry having diligent key market participants as well as independent lease finance companies in the context of evaluating both debt and/or control equity investments.

Solar had been closely following NEF for a number of years given our investment activity in the leasing industry.

In addition senior members of our investment team at Solar have longstanding relationships with NEF executives as a number of both Sober and Crystal investment professionals trained under NEF's Founder and CEO, Phil Carlson while they were all together at GE Capital. Today NEF employs a team of approximately 40 professionals.

As Michael mentioned since their inception NEF has directly originated approximately a $1 billion of equipment financings. Collateral securing their portfolio consists of long line essential use assets such as trucks and trailers, machine tools and equipment which can be readily liquidated.

Advance rates are typically less than the liquidation value of the equipment and the lease tenure is three to seven years with an average life of two plus years.

The typical borrower for NEF is a privately owned bid market business with a high percentage of fixed assets, with its 100% collateralized loan portfolio the addition of NEF complements our existing cash flow asset based and life science senior secured lending platforms.

Importantly we believe NEF's business is highly scalable and provides Solar access to middle market asset class which offers attractive risk adjusted returns which are comparable to our other speciality financed businesses.

At quarter's end our NEF equipment finance strategy had a total portfolio of approximately $323 million of funded assets to a 143 different borrowers with an average exposure of 2.3 million. During our two months of ownership in Q3 NEF had new investments of approximately 12 million and had portfolio amortization totaling approximately 18 million.

100% of NEF's investments are asset based loans and most of them are fixed rate. Interest rate risk is mitigated through both the loan short duration as well as our efforts to match fund NEF's fixed rate assets with fixed rate liabilities.

For our two months of ownership during the third quarter our equipment finance strategy generated a net yield of approximately 11%. Now I will provide a brief update on our other business platforms.

At quarter's end Crystal Financial had a diversified portfolio of approximately 370 million of funded secured loans to 24 borrowers with an average exposure of approximately 15 million. During the third quarter Crystal had new investments of approximately 60 million and had reductions product totaling approximately 63 million.

100% of Crystal's investments are senior secured loans and approximately 99% of uploading rate. For the third quarter Crystal paid Solar a cash dividend of 7.9 million equating to an 11.3% yield on cost which is consistent with the prior quarter.

Now turning to our senior secured unit tranche program, during the third quarter SSLP and SSLP2 collectively disease just over 13 million of senior secured loans to bring the total combined portfolio to 290 million.

This list has senior secured loans to 15 borrowers with an average exposure of just under 20 million and both vehicles were 100% performing. Combined repayments including amortization totaled approximately 4 million.

The SSLPs are currently earning approximately a 9.5% return on equity and we expect that to move into the low teens once the vehicles are fully ramped. Finally an update on life science, our portfolio totalled approximately 208 million of first lien senior secured loans across 23 borrowers with an average investment of $9 million.

During the third quarter the team originated one investment of about $4 million and had amortization repayments of about 12 million. The weighted average yield on our life science portfolio is 12.2% at cost which excludes any potential exit fees or warrants.

The blended IRR on our realized life science investments through third quarter was 17.7% including realized warrants. As Michael mentioned middle market lending environment remains frosty given the market technicals.

We are fortunate to have diversified origination sources and will continue to be disciplined and prudent in deploying our available capital.

Longer term we believe that the record amounts of private equity sitting on the sidelines, the retreat of the banks from middle market leverage lending and the approaching refinancing ways of existing leverage borrowers creates a very attractive supply demand dynamic for cash flow lending to middle market companies.

At this time I will turn the call back to Michael..

Thank you, Bruce. From the inception of Solar Capital 11 years ago our investment and management decisions have been focused on building long term shareholder value, protecting capital and maintaining alignment with our shareholders.

As credit markets deteriorated we consciously migrated Solar's portfolio to one that is comprised of over 98% senior secured loans.

We formed the SSLPs and strategic partnerships with institutional investors allowing us to invest in lower risk first lien's secured loans, well utilizing modestly higher leverage in the vehicle to generate attractive return on equity.

We established separate joint ventures with partners to enhance origination opportunities and create additional scale and importantly we diversified into speciality financed verticals such as asset based lending to Crystal, life science lending and now equipment finance with the recent purchase of NEF.

All of these steps are taken to maintain a defensive lower risk and high quality portfolio while building a broader origination platform. The acquisition of NEF is a significant event. Today we are a diversified speciality finance company providing solutions across the capital structure to middle market businesses.

Our origination engines provide us the opportunity to source loans in speciality niches focus on collateral loan to value lending that are less competitive than traditional cash flow lending.

In addition the speciality finance strategies are less correlated to the liquid credit markets and have a differentiated risk return profile that is complementary to our cash flow lending. They afford us greater flexibility to stick to our investment discipline.

At the beginning of this call I referenced a few ways credit manager have been reacting to the current relatively heated credit market conditions. We believe that firms which have focused on building out differentiated sourcing engines will outperform and there are handful of management team's taking this approach whom we greatly admire.

The addition of NEF gives us [indiscernible] engines of growth and enhances Solar's earnings power with approximately 60% of our growth investment income in the third quarter derived from investments and speciality finance businesses.

The increase in our quarterly distribution of $0.41 per share beginning 2018 is a direct result of the successful execution of our strategy to expand our speciality finance capabilities.

At 0.51 times net debt to equity we are under levered and have substantial dry powder to deploy via our differentiated investment verticals, therefore we believe Solar Capital has a clear path to achieving our run rate quarterly net investment income in the upper 40s.

As the earnings increased our Board of Directors will evaluate additional continued dividend distribution increases. At 11 o'clock this morning we will be hosting an earnings call for the second quarter of 2017 results of Solar Senior Capital or SUNS.

Our ability to provide traditional middle market senior secured financing through this vehicle continues to enhance our origination teams ability to meet our client's capital needs. We continuously benefit to the value proposition in Solar Capital deal flow. Thank you very much for your time. Operator would you please open the line for questions..

[Operator Instructions]. Your first question comes from the line of Chris York with JMP Securities. Your line is open..

So Michael you said in your prepared remarks that you're under levered so can you update us on your views of optimal level of balance sheet leverage at Solar Capital given that you have multiple specially finance businesses that each have their own form of off-balance sheet leverage..

Yes I think our target is still [indiscernible] times and the reason for that is these speciality vehicles tend to be leveraging with that as well, these are not high levered vehicles..

Got it. Okay and then I guess combining that and then combining your comments again in the prepared remarks but attractive ROE, so what is your target range here today for ROE at Solar capital given that leverage of 0.75 and then maybe now the reduce management fee..

So we kind of back to the math, we say which we are that we can achieve the high-40s NII - get to the 9-ish ROE..

Okay.

And then switching gears a little bit, are you content with your capital structure right now or are you considering new supplemental financing instruments that could provide you some more flexibility to fund future growth?.

So the answer is we're never content, we're always looking to lower our cost, I think the obvious place to lower our cost we still have $75 million outstanding of the [indiscernible] and we will look at ways to continue to nibble away at this with hopefully unsecured debt in the force..

Last one for me, can you help us think about the portfolio mix given that you've got four lines of businesses, cash flows at 38%, you've got life sciences here at 12.5, it is rather evenly distributed but maybe just comment on how you're thinking about that and then the allocation of capital in the form of new investments?.

Sure. I think that clearly we're looking to allocate the capital in the best risk adjusted return assets that we see in the current market environment.

Today I think that we continue to see good opportunity in life sciences in spite of having a somewhat slow third quarter, we see a nice pipeline there I think as you appreciate these are monthly loans once we get to a season state of your portfolio.

So we will see a constant trickle of repayments contractually there but we're always happy to be paid but I think we'll see life sciences continue to grow as you know on the cash flow side we are really focused on the stretch senior and I think that will be a little bit more episodic.

We do see a couple of nice opportunities out there but we are being highly, highly selective on cash flow underwriting and I think if you look at the NEF it should be steady growth, they also have a monthly [indiscernible] structure for repayments but I think you will continue to see steady growth there and then I think as you know Crystal is extremely opportunistic and a little bit tougher to forecast there but I think we expect to see a little bit of growth across all four segments that should amalgamate to a comfortable growth rate over the next year..

Your next question comes from the line of Mickey Schleien with Ladenburg. Your line is open..

I sort of have a follow up question to what Chris was asking about you know I'd like to ask your thoughts about allocating capital in your own balance sheet versus the senior loan funds because when I look at them after almost two years of operations as SSLP1 has leverage at 0.7 times which is clearly below the target and SSLP2 is only at 0.4 times.

So what factors are keeping you from getting those you know north of one maybe even closer to two to get the ROEs that you've been looking for quite a while..

Sure. I think Mickey it just goes to the overall state of the market you know that the cash flow market even if it's stretching your loans has been under pressure in terms of some of the structures that we've seen out there, I think it's more structure than price although pricing has compressed.

So we've been extremely selective there and have been blessed with having these alternative options I think you just saw in our press release at the asset level the yields on cash flow loans are the loans relative to what we can do in life science lending, equipment financing with NEF as well as asset based lending at Crystal.

Until things broaden out we're going to continue to invest first and foremost in those higher yielding structures and verticals and be mindful as I think you appreciate those are also because they're predominately asset based loans generally carry much more attractive risk profile, lower defaults and higher recoveries and so we will continue to allocate capital in that way..

And I think just to highlight that I think we have the luxury of not having to chase those because the businesses are all yielding double digit ROEs and with as Bruce said frankly less risk that we're seeing in the cash flow loans..

So Michael, what I'm trying to understand then is the SSO piece could pursue or are pursuing investments in larger companies which tend to be less risky.

So if you do the math with leverage up to you know 1.5 or whatever you can still generate a nice ROE without taking on excessive risk, are you saying that's just not feasible in this market at this point in time?.

No what we're saying is that the relative rest Mickey to our speciality finance verticals is higher and so we have the luxury of doing a [indiscernible] from a risk reward perspective across four different lending vertical and today given yes you can find attractive returns but we think the risk is elevated in the cash flow sector relative to the specially finance verticals.

I think there will be some optimization of the leverage in those SSLPs to drive a little bit better returns but I wouldn't expect us to allocate substantially more capital to those unless more of the conditions change..

Okay.

So the leverage at those vehicles it would be reasonable to expect them to stay in the neighborhood of where they are today?.

No I think we're going to try to increase the leverage slightly to boast the ROEs there but I wouldn't expect a lot of new equity capital to go in this current environment..

Right. Well that's a good segue to my next question because there's a footnote in the SOI that indicates you are non-qualifying assets climbed above 30% of your total assets.

I realize there's some optics there because of the repo and the t-bill but what's your perception or what's your strategy in terms of managing that ratio and getting it back into compliance?.

We're in compliance so that's not the question. We're allowed to go up and over based on value changes and commitments that have been previously made with a dynamic portfolio. It's just once you're over 30% you can make an additional commitment investment into those vehicles. So those commitments are already static..

[Operator Instructions]. Your next question comes from the line of Jon Bock with Wells Fargo Securities. Your line is open..

Earlier in the year you announced a life sciences JV that was targeting investments in public companies.

So I think reading through the doc here Solar's commitment was made through the SSLP3 but I also see here that the SSLP was dissolved, so is the life sciences joint venture still a strategy for Solar or can you provide any kind of an update here?.

Sure. That was not dissolved, we just have not funded into that at this point.

So we are continuing our team is continuing to seek opportunities for the to your point public life science lending investment, it's been a little slower than we all would like but those tend to be a little bit later stage and we just haven't seen as many attractive opportunities there yet, but you should expect that maintain and get funded over the next couple of quarters..

And just to clarify, I see that the SSLP3 was dissolved, this is on March 10, 2017.

So is the joint venture commitment is that now on the balance sheet at SLRC?.

No the SSLP3 effectively was renamed JV..

So the next question, when you purchase NEF and I guess also on a go forward basis how do you determine like which equipment finance deals sit within the core solar portfolio verses within NEF's portfolio?.

At the end of day from an earnings perspective, it frankly doesn't matter because we're [indiscernible] but certain assets we put the NEF balance sheet that are tax efficient for the BDC and those are tax efficient and will more likely be on our balance sheet..

But you should see the and just to Michael's point it's really just aesthetic and structure doesn't change, the underlying economics which in 100% for the benefit of solar but you should see the number of investments and dollars invested shift somewhat from off balance sheet to on balance sheet over the next few quarters here but there will always be a mixture of both and goes to Michael's point the nature of the underlying loan and whether it's more efficient to put it in the C-Corp or not..

And then just one last question, are you in the market for more opportunities to grow the capabilities in some of these specialty niches through you know the acquisition of more of these companies.

I know the 30% bucket is an issue but as we've seen with NEF that you actually have underlying assets there so that doesn't qualify as a finance company underlying assets verses securities or loans.

So do you still see opportunity for growth or are you comfortable with the current mix going forward?.

I think the answer is we still see opportunities for growth, they could be the new platforms or add-ons to these platforms as you'll hear us talk about for Solar Senior in a few minutes on our next earnings call, we just made an acquisition there of a small asset based lender that was appropriate for that platform and so we continue to look for ways to expand what is broadly old world commercial finance businesses where we do have collateral lower risk and generally some pretty attractive returns..

[Operator Instructions]. Your next question comes from Rick Shane with JPMorgan. Your line is open..

It's Melissa for Rick.

Question about the potential for spread compression in the diversified verticals, I'm wondering if those are at risk for the thing kind of spread compression that we've seen in the more sort of sponsored back cash flow lending base?.

Sure.

I would say that there is very few lending verticals broadly out there in the credit markets that haven't seen spread compression so we have experienced some but much less so given the number one participant historically is a lender, the banks are not players in most of our speciality lending verticals and so there's been much less spread compression and so we feel we've seen what's happened it's not as if they have been immune but it is much more protective, higher barriers to entry into those verticals..

Okay.

And looking forward into Q4 if you don't want to provide specific guidance on pipeline and what volumes can look like in the fourth quarter I'm wondering if you are looking at a certain portion of the portfolio as being potentially at risk for repayment or refinancing?.

Yes, I would say no. We do have steady amortization from a contractual perspective in both NEF as well as our life science lending business less so in Crystal and our cash flow businesses.

But no we don't see any material repayments and we will see selective growth on all four verticals but I think you should expect sort of nominal steady growth but we feel very good about the earnings power of the existing portfolio that we have in place given that it's a 100% performing and seems to have generated a nice stable yield to your earlier question relative to compress..

[Operator Instructions]. And I'm showing no further questions at this time. I'd like to turn the call back over to Michael Gross, Chairman and Chief Executive Officer for closing remarks..

Thank you. We have nothing more to add at this point other than to thank all of you for your continued support and patience with us as we continue to grow our business together. Thank you..

Ladies and gentlemen thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day..