Portman Ridge Finance Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 11, 2023

Key Takeaways

  • Strong Q1 Results: Core investment income rose to $19.3 M, up $1.6 M quarter-over-quarter and $4.2 M year-over-year, with net investment income of $8.5 M ($0.89/share) and the dividend increased to $0.69/share.
  • Rising Rates Advantage: With 89.2% of debt assets floating-rate, rising benchmarks and wider spreads drove incremental revenue, and full resets could add approximately $690K in quarterly income.
  • Attractive Valuation & NAV Upside: The portfolio trades at a blended 91.1% of par, implying $4.52/share of NAV upside at par recovery (or $2.99/share under a 10% default/70% recovery scenario), with nonaccruals at just 0.3% of fair value.
  • Disciplined Capital Management: Repurchased 35,613 shares in Q1, maintained gross and net leverage at 1.6x and 1.4x respectively, and held $36 M available on the revolving credit facility.
  • Optimistic Outlook: Management expects continued attractive returns through natural portfolio churn, robust dividend coverage even if rates decline, and reinvestment opportunities at elevated spreads amid market volatility.
AI Generated. May Contain Errors.
Earnings Conference Call
Portman Ridge Finance Q1 2023
00:00 / 00:00

There are 7 speakers on the call.

Operator

Welcome to Portman Ridge Finance Corporation's First Quarter 2023 Earnings Conference Call. An earnings press release was distributed yesterday, May 10, after market close. A copy of the release, along with an earnings presentation, is available on the company's website at www.portmanridge.com in the Investor Relations section and should be reviewed in conjunction with the company's Form 10 Q filed yesterday with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward looking statements, which are not guarantees of future performance All results can involve a number of risks and uncertainties.

Operator

Actual results may differ materially from those in the forward looking statements as a result of a number of factors, including those described in the company's filings with the SEC. Portman Ridge Finance Corporation assumes no obligation to update any such forward looking statements unless required by law. Speaking on today's call will be Ted Goldcorp, Chief Executive Officer, President and Director of Portman Ridge Finance Corporation Jason Roos, Chief Financial Officer and Patrick Schaeffer, Chief Investment Officer. With that, I would now like to turn the call over to Ted Goldthorpe, Chief Executive Officer of Portman Ridge.

Speaker 1

Good morning. Thanks everyone for joining our Q1 2023 earnings call. I'm joined today, as previously mentioned, by our Chief Financial Officer, Jason Roos and our Chief Investment Officer, Patrick Schaeffer. I'll provide brief highlights on the company's performance and activities for the quarter. Patrick will provide commentary on our investment portfolio and our markets.

Speaker 1

And Jason will discuss our operating results and financial condition in greater detail. Yesterday, Portman Ridge announced its Q1 2023 Results and continuing off the back of strong earnings momentum seen in fiscal year 2022, We're pleased to report yet another strong quarter of financial performance in the Q1 of 2023. Our total investment income, core investment income and net investment income for the Q1 of 2023 All increased in comparison with the Q4 of 2022 as we can continue to see the impact that rising rates have in generating Incremental revenues from our debt portfolio investments. Our core investment income for the Q1 of 2023 was $19,300,000 An increase of $1,600,000 as compared to $17,700,000 for the Q4 of 2022 and an increase of $4,200,000 as compared to $15,100,000 for the Q1 of 2022. Our strong performance this past quarter has allowed us to raise our dividend for the 3rd consecutive quarter to $0.69 per share.

Speaker 1

This increase to our shareholder distribution also represents the 5th overall increase in over the past 7 quarters. Regarding our primary market as a whole, the bank failures of Silicon Valley Bank, Signature Bank and First Republic during March April have further Perpetuated the volatility and uncertainty in the syndicated markets that we have noted in our early March Earnings call, which historically is favorable to private credit businesses such as Portman Ridge. We remain bullish on new investment opportunities and the ability to rotate our portfolio at reduced risk and incremental returns. For new opportunities, spreads remain approximately 150 basis points wide As compared to the beginning of 2022 and upfront fees are up an incremental 100 basis points to 200 basis points. Additionally, we continue to see strong equity contributions from sponsors and reduced leverage levels on new opportunities.

Speaker 1

Turning the focus back to the company, we continue to believe in the valuation of Portman Ridge as we continued repurchasing shares under the renewed stock purchase program. In the Q1, we repurchased an incremental 35,613 shares, following on the trends seen throughout 2022, Where we repurchased a total of 167,017 shares at an approximate cost of $3,800,000 We expect this trend of repurchasing Portman shares to continue throughout 2023 as we're able to do so. On this call, Patrick will also walk through the portfolio upside cases for our net asset value. Our portfolio is largely in 1st lien debt And is now valued at a meaningful discount to par. If you experienced normalized defaults or even elevated defaults rates versus history, We believe there's embedded net asset value upside in the portfolio.

Speaker 1

This adds to our earnings momentum driven by wider spreads and new originations And rising short term interest rates to drive both potential NAV and earnings upside. With that, I will turn the call over to Patrick Schaeffer, our Chief Investment Officer, For a review of our investment activity.

Speaker 2

Thanks, Ted. Turning to Slide 5 of our investment presentation and the sensitivity of our earnings to interest rates. As of March 31, 2023, approximately 89.2% of our debt securities portfolio were either floating rate with a spread to an interest rate index such as LIBOR, SOFR or Prime with 52% of these still being linked to LIBOR. As you can see from the chart, the underlying benchmark rates on our assets during the quarter lagged the prevailing market rates and still remain significantly below the LIBOR and SOFR rates As of April 24, 2023, we expect this to normalize over time as the underlying 1, 3 6 month contracts reset. For lesser purposes, if all our assets were to reset either a 3 month LIBOR or SOFR rate respectively, we would expect to generate an incremental $690,000 of quarterly income.

Speaker 2

Our liability costs would also rise relative to their Q1 levels. We'd still expect a net positive benefit of approximately $0.06 per share, assuming all of our assets and liabilities are utilizing the same 3 month benchmark rates for an entire quarter. Skipping down to Slide 11. Both investment activity and originations for the Q1 were lower than the prior quarter, resulting in net repayments and sales of approximately $32,600,000 Net deployment consisted of new fundings of approximately 11,800,000 offset by approximately $44,400,000 of repayments in sales. These new investments are expected to yield a spread to Sofa of 25 basis points on par balance and the investments were purchased at a cost of approximately 97% of par, which will generate incremental income to the stated spread.

Speaker 2

As mentioned during our last earnings call, it was our expectation that Q1 would generate more repayments than deployments as we intentionally drew up a portion of our revolver In Q4 2022 to invest ahead of several repayments. In February, we repaid $6,900,000 of our 20 eighteen-two secondured notes And in May, we expect to make another pay down of approximately $23,000,000 During the Q4, we funded $5,600,000 into our Great Lakes joint venture, which has taken us close to being fully funded under that commitment. Similar to our experience with new assets on the balance sheet, incremental investments in our Great Lakes joint venture Have come at increasing spreads and widening OID, which should result in higher returns going forward. Our investment securities portfolio at the end of the Q1 remained highly diversified with investments spread across 28 different industries and 106 different entities, All while maintaining average par balance per entity of approximately $3,300,000 Turning to Slide 12, We had one incremental investment on non accrual as compared to December 31, 2022, which is a subordinated note in Lucky Bucks Holdings, which is valid at 24.75 percent of par. In aggregate, investments on nonaccrual status remained relatively low at 5 investments in the Q1 of 2023 as compared to 4 investments on nonaccrual status as of December 31, 2022.

Speaker 2

These 5 investments on nonaccrual status at the end of the Q1 of 2023 Represents 0.3% and 1.5 percent of the company's investment portfolio at fair value and amortized cost respectively. On Slide 13, as Ted mentioned in his opening remarks, if we focus on the top three rows of the table and exclude our investment in ProAir Holdings, which we have marked at 0, We have an aggregate debt securities fair value of $442,900,000 which represents a blended price of 91 point 1 1 percent of par value and is 85% comprised of 1st lien loans at par value. Assuming a par recovery, Our March 31, 2023 fair values reflect a potential for $43,200,000 of incremental NAV value or $4.52 per share. For lesser purposes, if you were to assume a 10% default rate and a 70% recovery rate on this debt portfolio, there would still be an incremental $2.99 per share of NAV value over time as the portfolio matures and is repaid. This default rate is above anything the market is expecting or has experienced historically.

Speaker 2

Turning finally to Slide 14, if you aggregate These three acquired portfolios over the last 3 years, we have purchased a combined $434,800,000 of investments That have realized over 72% of these investments at a combined realized and unrealized mark of 102% of fair value at the time of closing the respective mergers. We were able to achieve these results despite the global pandemic in 2020 and most 2021 and a weak market for almost all asset classes in 2022. In a similar vein as the previous slide, as of March 31, 2023, there remains an incremental $11,800,000 of value as compared to par in these were $8,000,000 when applying a similar 10% default rate and 70% recovery rate analysis. I'll now turn the call over to Jason to further discuss our financial results for the period.

Speaker 3

Thanks, Patrick. As both Ted and Patrick previously mentioned, Despite operating under a challenging economic environment, our results for Q1 of 2023 reflect strong financial performance. Our total investment income increased by $1,700,000 to $20,300,000 in the Q1 of 2023 in comparison to $18,600,000 in the Q4 2022 as we continue to see the impact of rising rates in generating incremental revenue from our investments. The increase was largely due to higher paydown income, servicing fees, dividend income and interest income from rising rates as compared to the prior quarter. This reported total investment income also represents a $3,400,000 increase from the $16,900,000 of reported total investment income the Q1 of 2022.

Speaker 3

Excluding the impact of purchase price accounting, our core investment income for the Q1 was $19,300,000 An increase of $1,600,000 as compared to $17,700,000 for the Q4 of 2022 and an increase of $4,200,000 as compared $15,100,000 for the Q1 of 2022. Our net investment income for the Q1 of 2023 was 8,500,000 or $0.89 per share, an increase of $1,400,000 as compared to $7,100,000 or $0.74 per share for the Q4 of 2022 And an increase of $600,000 as compared to $7,900,000 or $0.82 per share for the Q1 of 2022. The quarter over quarter increase was largely due to the aforementioned impact of increased pay down income, servicing fees, dividend income and interest income from rising rates as compared to the prior quarter. As of March 31, 2023 December 31, 2022, the weighted average contractual interest rate on our interest earning debt securities was approximately 11 point Total expenses for the quarter ended March 31, 2023 were $11,800,000 compared to total expenses of $11,500,000 seen in the Q4 of 2022. This was predominantly driven by rising costs associated with the interest expense on our debt, offset by reduced expenses related to administrative services, Professional fees and other general and administrative costs, areas where we have focused on reducing overall expenses.

Speaker 3

Our net asset value for the Q1 of 2023 was $225,100,000 or $23.56 per share as compared to $232,100,000 or $24.23 per share in the Q4 of 2022. The decline due to our debt and equity securities was primarily driven by pay down activity and sales as well as mark to market movements within our portfolio. On the liability side of the balance sheet, as of March 31, 2022, we had a total of $358,300,000 par value of borrowings outstanding, Comprised of $79,000,000 in borrowings under our revolving credit facility, dollars 108,000,000 of 4.78 percent notes due 2026 and $171,300,000 in secured notes due 2029. This balance represents a quarter over quarter decrease $19,900,000 driven by a $13,000,000 repayment on our revolving credit facility and a $6,900,000 repayment on the secured notes due 2029. As of the end of the quarter, we had $36,000,000 of available borrowing capacity under the senior secured revolving credit facility and no remaining borrowing capacity under the 2,008-two revolving credit As the reinvestment period ended shortly after our draw on November 20, 2022.

Speaker 3

As of March 30 2023, our debt to equity ratio was 1.6 times on a gross basis and 1.4 times on a net basis. From a regulatory perspective, our asset Under the 20 eighteen-two revolver in advance of its expiration in the Q4 of 2022. Lastly, and as announced yesterday, a quarterly distribution of $0.69 per share was approved by the Board and declared payable on May 31, 2023 To stockholders of record at the close of business on May 22, 2023, this is a $0.01 per share distribution increase as compared to the prior quarter and a $0.06 per share distribution increase as compared to the Q2 of 2022. This also marks the 3rd consecutive quarter of a stockholder distribution increase and the 5th stockholder distribution increase over the last 7 quarters. With that, I will turn the call back over to Ted.

Speaker 2

Thank you, Jason. Ahead of questions, I'd like

Speaker 1

to reemphasize that we believe we are well positioned Overall, we believe we remain situated to continue to deliver attractive returns to our shareholders throughout 2023. Thank you once again to all our shareholders for ongoing support. This concludes our prepared remarks, and we will now turn it over to the operator for any questions.

Operator

And your first question comes from the line of Christopher Nolan of Ladenburg Thalmann. Your line is open.

Speaker 1

Hi, guys.

Speaker 2

Hi, Chris.

Speaker 4

Jason, the unrealized depreciation, was that from mark to market or was there

Speaker 3

Yes. The movement in the unrealized is largely mark to market. There's also some of that as it relates to the accretion as your cost basis creeps up, but largely mark to market. And then the realized the bulk of that, I guess, 2 thirds of that, more over 2 thirds of that was related to a flip between unrealized and realized, Predominantly driven by CLO.

Speaker 4

And then generally, the leverage ratio is quite high. What's your thoughts in terms of dialing that back given how your earnings are equal to

Speaker 2

Yes. Hey, Chris, it's Patrick Schafer. So, I think a couple of things, which is we tend to focus more at least internally on net leverage Because we're sitting on cash that at any given point we could choose to repay down various different facilities or invest. So we'd like to kind of keep Flexibility depending on market conditions and being able to react quickly. I would say that with that said that we saw a small pay down of the 2018 2 Facility in Q1 and we have a larger one, it's kind of expected to be about $23,000,000 in this quarter To pay down.

Speaker 2

So a decent amount of the cash that was sitting on the balance sheet as of March 31 was effectively earmarked for a pay down that because of The 2018 2 facility is structured like a CLO whereby you kind of have 1 pay down per quarter. So we sort of were sitting on the cash then make the pay down in sort of where we are now kind of mid May. So again, I think our general expectation is that as repayment come in, We will naturally sort of close the gap between gross and net leverage and that is sort of our plan going forward. So again it was kind of an intentional strategy at Q4 That we anticipate kind of continued pay downs over the course of this year.

Speaker 4

Final question. In your conversations with portfolio companies, How is the conversation going in terms of mitigating their financial risk to banks or whatever? I think You're saying get away from this bank, go to that bank or lower your leverage? How are the general conversations going on that front?

Speaker 1

I mean, I think every company is doing a full analysis of where they hold cash and what their cash is invested in. Also managing cash become much more important because when rates have gone from 0 to 5, obviously, cash management becomes more important. We thankfully had no material impact or exposure to any of the banks that have failed. And so I think generally speaking, people are getting much more conscious of where they have their money. And so we get frequent updates From our companies about how they're dealing with the situation and we feel very comfortable about cash management across the portfolio.

Speaker 1

I think we have a much longer conversation about this

Speaker 4

at some point.

Speaker 2

I think by and large the biggest takeaway that we've seen in our portfolio companies is They're no longer having sort of one bank, one solution for all their treasury work. They always have a kind of secondary bank account with a different bank Just in kind of an event of an emergency or kind of if you need to move money or keeping a little bit of let's say dry powder for a couple of payroll periods or something in a separate bank account. So I

Speaker 4

think it's just a little

Speaker 2

bit more prudent in terms of having multiple kind of treasury functions or treasury relationships as opposed to wholesale changes.

Speaker 4

Yes. That's it for me. Thanks guys.

Speaker 2

Thank you.

Operator

Your next question comes from the line of Ryan Lynch of KBW. Your line is open.

Speaker 5

Hey, good morning. Kind of The question regarding just kind of the movement in NAV. I know in some of the past quarters also you talked about kind of a lot of your bar downs are more Kind of market related versus credit related. This quarter, I think a lot of BDCs And I know you can't speak with other ones, but you're certainly going to be compared to other ones actually had some NAV increases Because credit was relatively stable and they sort of started to write some of those mark to market losses up a little bit in the quarter. You guys actually had some markdowns this quarter.

Speaker 5

So how should we think about that from a comparative standpoint, if a lot of these Previous markdowns you had in your books were truly mark to market sort of spread widening markdowns. When should we expect And why are we seeing any sort of recovery yet?

Speaker 2

Yes. So a couple of different answers to that, Ryan. I'd say Broadly speaking and again we similar to others I suppose, but we send out a majority again this is across our platform, A majority of our names in Portmage as well, but a majority of our names to 3rd party valuation firms. And generally speaking, The kind of collective market rates, market yields, kind of how you want to think about how they do sort of their discounts discount rates on the cash flows for debt securities, Generally speaking, it was flat over the course of the quarter. So again, if you kind of think about our initial conversation or Ted's initial remarks about Continuing to be able to put out new dollars at 150 basis points wide of what we were doing a year ago.

Speaker 2

You still have elevated returns in sort of the new issue market, which again in our view and in the view of our 3rd party valuation firms, It does put a bit of a ceiling in terms of sort of recovery to par if you have assets that are still priced at 475, L5, L525, etcetera. So again, I think the market is generally speaking kind of Holding up well, but when you look at a portfolio in aggregate, just new money being put out at a certain price, there's just only so much increase you could expect From your book from yield perspective. And then the last and the So that's kind of broadly speaking. So that's why our book as a whole, I'd say kind of generally speaking was sort of flat to maybe slightly up on an individual asset level perspective just from a market yield. And then specifically, we had a relatively meaningful markdown on one position Lucky Box Holdings, which again would be Credit specific and credit driven.

Speaker 2

So again, I would say that a decent chunk of our NAV markdown was from that one specific asset.

Speaker 5

Understood. And then following up on your question, I understand the difference. Obviously, net leverage Came down a bit this quarter and had ex cash. You guys are now within your leverage range. So I guess, As we sit here today, you guys from a net leverage standpoint, I think are now within your range.

Speaker 5

How should we think about Where you want to take leverage from this point? You guys are in the range, but at the higher end of the range. On one hand, you have the deal environment Really good as far as the quality of deals out there. Probably not a lot of deals to be done, but the quality of deals are really high. At the same time, we're coming into a choppier, probably economic period where I think we're all basically every agency expecting rising The fall from the BDC space, which is maybe speed to it may be better to have lower leverage.

Speaker 5

So what are you guys thinking from a leverage standpoint at this point going forward since you guys are at the upper end, are you guys comfortable with this or is it the intention to bring it down knowing that the deal environment is really good right now?

Speaker 2

Yes, it's a great question. So I

Speaker 1

think a couple of things. One is, I think we want to bring down our gross leverage. And again, there's a nuance to ours because we drew in that cheap facility last quarter. So it'll start deleveraging. And I do think that Overall, we will probably not increase leverage from where it is on a net basis.

Speaker 1

Of anything, we'd probably take it down. This is the first time in like a long time like in 10 years that we've seen it's actually more accretive for us to invest new money at these kind of rates It is for us to buy back stock. We are going to buy back stock because it's a guaranteed return versus a not guaranteed return when you put out money. But that threshold has now been crossed, which means it's an incredibly interesting environment for us. The good news here's the good news.

Speaker 1

The good news is We showed in our deck, repayment activity was incredibly muted last year and we've seen a pickup this year, not to historical levels, but at higher levels. So our book is beginning to churn and because we have some older vintage names from some of these acquisitions we've done, we actually have seen some of the older names getting taken out We can redeploy the money into newer, wider spreading, better names, right? So we expect to be able to take advantage of this environment a little bit Differently than others, like some others can take up leverage. I think our thing is we'll probably keep leverage flat or take it down, but can still take advantage of the environment because we are getting paid off at a higher rate than others just because we have some older vintage names from these acquisitions. So we've seen Again, we've seen elevated repayment activity all year this year versus last year.

Speaker 1

And again, we can replace that with newer, safer, Lower leverage, wider spreading names. So I think we kind of like I really don't think it's prudent for us to take up leverage. And so like I think we can take advantage of the environment just through natural churn.

Speaker 5

Okay. And then What do you guys like what are your thoughts around the dividend? Obviously, you guys raised it in the quarter. You guys have Pretty significant dividend coverage in the quarter. You guys provide a slide showing where the NII is probably going to go with current base now.

Speaker 5

Obviously, everybody knows the expectation is base rates aren't going to stay at these levels. And I think both managers are Chinese based dividends at a level that can be earned in multiple interest rate environment. So What are your thoughts on kind of your current core dividend and the extremely high coverage level, which isn't uncommon in the She stays at this point, but it's very high. And then do you guys have any thoughts about supplementals or special dividends? Do you guys have any Thoughts on our philosophy on how those could supplement our core dividend?

Speaker 1

Yes, It's a great question. So again, our philosophy, generally speaking, is we prefer to pay a higher core dividend that our investors can wake up every day and know they're getting versus Specials, that's generally our philosophy. That being said, you made a comment in your question, you're dead right, which is this is like The interest rate curve comes down pretty dramatically like people are kind of expecting 200 basis points of cuts over the relatively in the next couple of years. And so it doesn't matter what we believe or not believe. So we run all of that stuff through our earnings model.

Speaker 1

And we still think at today's dividend, we can pretty easily cover it even if the Fed cuts rates by 200 basis points. So we look at not only current rates, but where the market's telling you rates are going to go. And again, I don't see the Fed cutting rates anytime soon, but it doesn't matter what I think. We show we overlay our dividend coverage analysis with the forward curve. And that's kind of how we think about our core dividend.

Speaker 1

So that means that it's higher for longer and the Fed interest rate curve is wrong, which historically it has been, then we'll pay out specials. So again, first principle is we want to pay a high core dividend and we don't and we favor that over specials. That being said, To the extent that it's higher for longer, we'll just pay specials to our shareholders and buy back stock.

Speaker 5

Okay. That's all for me. I appreciate the time today.

Speaker 1

Thanks, Ryan.

Operator

Your next question comes from the line of Stephen Martin of Slater. Your line is open.

Speaker 6

As a follow-up to this last question, where did your

Speaker 3

Let me get back to you on that, Steve. I think we were right around I'll have to get back to you on that. I think it's around $0.40 but don't quote me on that.

Speaker 1

The reason it's complicated is Because we've done all these mergers, we were able to generate a lot of tax benefits out of that. So even though we've been comfortably over earning our dividend, which would normally you could do math and just we have a lot of spillover income. That's been we've been able to shield a lot of that just through some of these mergers. So Jason's team has done a really good job Of mitigating tax impacts. So our spillover income today is still relatively muted, but we'll get you the exact number.

Operator

Okay.

Speaker 6

On deal flow, you've talked a little bit about it. What do you see going on this quarter? And are you seeing new deals? Are sellers Finally, lowering their price expectations, what's going on in that order?

Speaker 1

So there's some interesting observations just generally speaking just based on data. So prices in Europe have come down more than a turn For the average LBO, prices in the U. S. Have not come down, again based on trailing data. I would say, I think it's a little bit like going to take a little while for the adjustment period like our deal flow is down pretty dramatically just for like day to day deal flow.

Speaker 1

The quality of our deal flow has gone way up. And the reason for it is, if you're willing to borrow money at S plus 700, which is what we average it's our average issuance price, you need to have a pretty compelling reason to take the money. And so a lot of what we're seeing is instead of new LBOs, which is our core business, A lot of it is add on acquisitions and some of the nichey lending that we do. So I would say best time ever to be in our business. We're getting private equity returns for credit risk.

Speaker 1

So we're really excited about the environment, but deal flow is like way down. Deal flow is down, I don't know, 75%. So the average LBO in the 4th quarter, this is the thing that's interesting. Prices haven't come down in the U. S, but leverage has.

Speaker 1

So the average LBO total leverage has got from 6 times to 4.4 times. And what that is, is people are just backing into the fixed charge coverage ratios. So companies are asking us for a lot less leverage and despite the fact that purchase prices haven't really come down.

Speaker 3

I'd say

Speaker 2

the other thing I'd add to that. To what Ted said is, In addition to quality going up, the aggregate total deal flows down, quality is up and also our hit rate is theoretically up a lot as well. I just think over the last Several quarters, just the general fundraising environment for private credit has been a little bit challenged. So you're seeing more opportunities to be able to Either win deals or win shares of deals that perhaps would have gone to just one individual. So again, I'd say we The deal count is down, but I don't feel like we have a problem sourcing and finding enough attractive deals to actually refill the pipeline on repayments and things like that.

Speaker 6

Okay. And then it sounds like if leverage is down and prices aren't, that means there's more equity being put into these situations? Yes. Okay. What are you seeing on the amendment Modification in the amendment modification category?

Speaker 1

I mean, Patrick could speak to it as well. I would say we're seeing a lot of amendments, but a lot of them are sulfur LIBOR conversions, like we're seeing a I mean that's just natural as your book ages. I would say on like what I would call core amendments, I don't know, non sulfur transition, I would say it's they're up. They're up. I wouldn't say anything alarming.

Speaker 1

We've had this is the time of year where you get a lot of amendments around delayed financials. So amendment activity is up. I wouldn't say there's anything to be concerned about. I mean, one thing we didn't mention on the call is for the first time in 5 quarters, We're seeing margin expansion in many of our portfolio companies. So on a trailing basis at least, and again, we all know things are going to get worse going forward.

Speaker 1

But on a trailing basis, our company is doing better, because price increases are now running through the system And then labor shortages and things like supply chain are abating. So the stats on our portfolio companies are actually getting better on a trailing basis, which is kind of interesting.

Speaker 6

Good. Thanks a lot.

Speaker 2

Thank you,

Operator

Currently, there are no further questions at this time. So I'd like to hand back to our presenters.

Speaker 1

Great. Well, thank you for everyone for joining us today, and we look forward to speaking to you again in early August when we'll be announcing our Q2 results. And as per always, please feel free to reach out to any member of the management team for any questions. Thank you very much.

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