MidCap Financial Investment Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 2, 2023

Key Takeaways

  • MidCap reported net investment income of $0.44 per share in Q2, exceeding its $0.38 dividend due to higher base rates on floating-rate assets.
  • Net asset value per share rose to $15.20, up $0.02 from Q1, reflecting earnings above dividends and approximately $0.01 per share accretion from share buybacks.
  • Prepayment income fell to $0.6 million (from $2.6 million) and fee income declined to $1.0 million (from $2.2 million) as muted transaction activity weighed on non-interest income.
  • Credit quality remained stable with only 0.3% of the portfolio on non-accrual status and 96% of corporate loans maintaining at least one financial covenant.
  • The board declared a $0.38 dividend (10% annualized yield) and is evaluating whether to increase dividends or retain excess earnings going forward.
AI Generated. May Contain Errors.
Earnings Conference Call
MidCap Financial Investment Q2 2023
00:00 / 00:00

There are 11 speakers on the call.

Operator

Good afternoon, and welcome to the earnings conference call for the period ended June 30, 2023 for MidCap Financial Investment Corporation. I'll now turn the call over to Elizabeth Besson, Investor Relations Manager for MidCap Financial Investment Corporation. Please go ahead, ma'am.

Speaker 1

All participants are ready to

Speaker 2

take questions. Thank you, operator, and thank you everyone for joining us today.

Speaker 1

Speaking on today's call are Tanner Powell, Chief Executive Officer Ted McDolte, President and Greg Hunt, Chief Financial Officer Howard Wood, your Executive Chairman as well as additional members of the management team are on the call and available for the Q and A portion of today's call. I'd like to all participants are ready to begin. Please note that they are the property of MidCap Financial Investment Corporation and that any all authorized broadcast in any form is strictly prohibited. Information about the audio replay

Speaker 3

of this call is available

Speaker 1

in our press release. I'd like to also call your attention to the customary Safe Harbor disclosure in our all participants are conducting a question and answer session. Today's conference call and webcast may include forward looking statements. You should refer to our most recent filings with the SEC for risks that apply to our business and that may adversely affect any forward looking statements we make. We do not undertake to update our forward looking statements or projections from what's required by law.

Speaker 1

To all of our SEC filings, please visit our website at www.midcapfinancialic.com. I'd also like to remind everyone that we I'll also post a supplemental financial information package on our website which contains information about the portfolio as well as the company's financial performance. Throughout today's call, we will refer to MidCap Financial all of our shareholders are in the same store. We will use MidCap Financial to refer to the lender headquartered in Bethesda, Maryland. At this time, I'd like to turn the call over to our Chief Executive Officer, Tanner Powell.

Speaker 4

Thank you, Elizabeth. Good afternoon, everyone, and thank you for joining us today. I'll begin today's call by highlighting our results for the June quarter and will then provide our thoughts on the current environment. Following my remarks, Ted will cover our investment activity and portfolio and we'll also provide an update on credit quality. Lastly, Greg will review our financial results in detail.

Speaker 4

We'll then open the call to questions.

Speaker 5

All participants are very pleased

Speaker 4

with our performance for the June quarter given our strong net investment income, a slight increase in net asset value per share and stable credit quality. All participants are in

Speaker 2

the range

Speaker 4

of $0.04 per share for the June quarter was $0.44 well above the current $0.38 dividend as we continue to see the benefit of higher base rates on our floating rate assets. All participants are in the range of $1,000,000 We are particularly pleased with these results when considering the relatively muted transaction environment, which resulted in below normal prepayment income. At the end of June, NAV per share was $15.20 an increase of $0.02 from the end of March, which reflects earnings in excess of a dividend, stable credit quality and includes approximately $0.01 per share accretion from stock buybacks. We are pleased to report that we continue to observe relatively stable credit quality in our portfolio. We are seeing that most of our portfolio companies are able to handle higher interest costs.

Speaker 4

We constructed our portfolio to withstand challenging periods. As a reminder, our corporate lending and other portfolio, which makes up 92% of our portfolio, primarily consists of 1st lien, top of the capital structure loans, is well our asset by borrower and industry is largely sponsor backed and has what we consider to be robust documentation and financial covenants. At the end of June, 96 percent of our corporate lending debt portfolio on a cost basis or 97% on a fair value basis had 1 or more financial Let me sorry, next, let me give a brief update on Merx. As discussed previously, we are focused on reducing our all of our investment in Merx. While we don't expect pay downs to occur evenly, we believe aircraft sales and servicing income should allow for the pay down of 3rd all party trade level debt and MFIC's equity and debt investment in Merx.

Speaker 4

Although Merx did not sell any aircraft in its portfolio during the June quarter, Merx repaid $3,500,000 to MFIC, which applied to the revolver which was applied to the revolver. At the end of June, our investment in Merx totaled $193,000,000 representing approximately 8% of our total portfolio at fair value.

Speaker 2

All participants

Speaker 4

are ready to take questions. Turning now to the market environment, the heightened volatility that we saw in the Q1 stemming from the regional banking crisis subsided all of our segments are expected to be in the range of $1,000,000 as the quarter progressed despite ongoing concerns about inflation, higher interest rates and fears about recession. Against this backdrop, new issue volumes were all of our business are slow driven primarily by slower M and A activity, partially offset by add on activity as sponsors pursue bolt on acquisitions. We still see financial sponsors, particularly those focused on the middle market seeking financing solutions in the private credit market. We continue to observe more lender friendly pricing and terms on new commitments compared to prior vintages, although we are seeing the pace of increases plateau.

Speaker 4

Moving to the dividend, our Board of Directors declared a dividend of $0.38 per share to shareholders of record as of September 12, all of our shareholders are in the range of 2023 payable on September 28, 2023. A $0.38 dividend represents an annualized dividend yield of 10% at NAV all participants are in the range of $1,000,000,000. At current base rates, we are well positioned to generate net investment income in excess of this dividend level. We believe our portfolio will continue to earn above the current dividend in a normalized rate environment. Our Board and management team continue to evaluate potential dividend increases versus retaining earnings.

Speaker 4

With that, I will turn the call over to Seth.

Speaker 5

Thank you, Tanner, and good afternoon, everyone. Beginning with investment activity, all participants are ready.

Speaker 2

As a reminder, MFIC is

Speaker 5

focused on investing in loans sourced by MidCap Financial, an affiliate of Apollo Global, all participants are in the range of

Speaker 6

$1,000,000 which provides MFIC with a

Speaker 5

large pipeline of investment opportunities. MidCap Financial is a leading middle market lender with 1 of the largest direct lending teams in the U. S. All of our shareholders are working with close to 200 investment professionals. MidCap Financial was active during the June quarter, closing approximately $4,400,000,000 in new all commitments.

Speaker 5

Specific to MFIC, new corporate lending investment commitments during the quarter totaled 79,000,000 all first lien across 15 different borrowers for an average new commitment of $5,200,000 as we continue to emphasize diversification by borrower. 17% of new commitments were made to existing portfolio companies. We continue to observe favorable pricing at lower our earnings levels for newly originated loans. The weighted average spread on new commitments was 681 basis points with an average OID of approximately 266 basis points. This translates into a very attractive weighted average yield of approximately 12.5% based on current base rates.

Speaker 5

All participants are in the

Speaker 2

range of $1,000,000,000. The weighted average net

Speaker 5

leverage of new commitments was 3.7 times. In terms of funded investment activity, all of our earnings were up slightly below the prior year.

Speaker 7

Gross fundings excluding revolvers for

Speaker 5

the corporate lending portfolio totaled $73,000,000 Higher interest rates and a lack of new deal our operating activities led to a slowdown in repayment activity. Sales and repayments totaled $58,000,000 Net revolver fundings totaled 11,000,000 we also received a $3,500,000 pay down from Merck's, as Tanner mentioned. In aggregate, net fundings for the quarter all of our

Speaker 2

shareholders totaled $22,000,000

Speaker 5

Turning to our investment portfolio. At the end of June, our investment portfolio had a fair value of 2,410,000,000 and was invested in 150 companies across 25 different industries. Corporate lending and other represented 92% of the total portfolio and Merx accounted for 8 our conservative weighted average attachment and net leverage on our corporate loans of 0.1x and 5.45x respectively. Both of these metrics were flat compared to the prior quarter, which we consider to be another indication of our portfolio's stable credit quality. All participants are in the range of $1,000,000 or approximately 0.7% of the total corporate and other lending portfolio.

Speaker 5

All MFIC is focused on lending to the core middle market where MidCap Financial has strong longstanding relationships with sponsors and borrowers and all companies was approximately $55,000,000 We believe the core middle market offers attractive investment opportunities across cycles does not compete directly with either the broadly syndicated loan market or the high yield market. The weighted average yield at cost of our corporate lending portfolio our increase in base rates. These yield figures are an average of the beginning and the end of the quarter. At the end of June, the yield of the corporate lending portfolio at cost all points up one basis point compared to last quarter. Turning to credit quality.

Speaker 5

Our portfolio companies continue to have solid fundamental performance all participants are

Speaker 2

now in line with positive revenue and

Speaker 5

EBITDA growth. We're not seeing any signs of overall credit weakness, although we have observed a deceleration in top line growth and some margin pressure. We've not seen a meaningful increase in covenant breaches or a pickup in amendment activity. We believe our credit quality has benefited from MidCap our financials strong sourcing and underwriting capabilities. Based on data since mid-twenty 16, which is the Augsman date upon which we began utilizing our co investment order.

Speaker 5

MFIC's annualized net realized and unrealized loss rate on loans our financial results are being recorded by MidCap Financial is extremely low at approximately one basis point. The weighted average net leverage of the companies in our corporate lending portfolio was 5 Moving to interest coverage. The weighted average interest coverage ratio was 2.1, down from 2.3 times last quarter all of our companies are below 1x. If we utilize June 30 base rates, the interest coverage would be 1.6x We are closely monitoring these situations, which we believe are manageable as these companies either have strong current liquidity or the underlying businesses are performing well. We want to underscore that we have not increased take income to create interest coverage.

Speaker 5

Importantly, MFIC benefits from MidCap Financial's large dedicated portfolio management all of our employees are in a position of nearly 60 investment professionals, which helps identify and address issues early. It is also important to note that MidCap Financial leads and serves as administrative agent on the majority of our deals, which provides meaningful downside protection. As agent, we're in active dialogue with the borrowers and have enhanced information flow, all of our credit metrics

Speaker 2

are being made, which allows

Speaker 5

us to be proactive in resolving problems and credit problem credit as issues arise. We're also monitoring near term maturities to identify any potential risk of repayment so that we can address any issues early and proactively work with borrowers all participants will be

Speaker 2

ready to help them meet their liquidity needs. As part of our investment process,

Speaker 5

we are mindful of the specific fund making and acquisition as we believe sponsors are more likely to support businesses and funds with greater remaining duration. We continue to have very low levels of non no investments were placed on non accrual status during the quarter. At the end of June, investments on non accrual status all of our shareholders totaled $7,500,000 or 0.3 percent of the total portfolio at fair value. With that, I will now turn the call over to Greg to discuss our financial results in detail.

Speaker 2

All participants are ready to take questions.

Speaker 8

Thank you, Ted, and good afternoon, everyone. Beginning with our financial results, net investment income per share for the June quarter was $0.44 all participants are in the range of $1,000,000 as we continue to benefit from higher base rates on our floating rate assets and improved net interest margin. All prepayment income declined quarter over quarter due to lower prepayment activity. Prepayment income was approximately $600,000 all compared to $2,600,000 last quarter. Fee income also declined compared to the prior quarter.

Speaker 8

Fee income was approximately $1,000,000 in the June quarter compared to our earnings call is now open for questions. 2,200,000 last quarter. Arturic. GAAP net income per share

Speaker 5

for the quarter was $0.39.

Speaker 8

Net per share at the end of June was 15 all participants are in the range of $0.20 an increase of $0.02 since the end of June. The $0.02 increase reflects net investment income of $0.44 Which is $0.06 above the $0.38 dividend, dollars 0.05 per share net loss on the portfolio and approximately $0.01 accretion from all stock buybacks. Additional details on unrealized net gains and losses are shown on Page 16 in the earnings supplement. Total expenses for the quarter were $39,800,000 up $1,500,000 compared to the last quarter, primarily due to higher interest expense. All gross management fees totaled $4,300,000 essentially flat quarter over quarter.

Speaker 8

As a reminder, MFIC's base management fee was 1.75 on equity beginning January of 2023. Among listed BDCs, all of our employees are in the same position. We are the only BDC to charge management fees on equities on equity, all of

Speaker 4

our earnings call will be

Speaker 8

recorded, which we believe provides a greater alignment and focus on net asset value. Gross incentive fees totaled $6,100,000 for the quarter. As a reminder, our incentive fee on income is 17.5% and includes a total return hurdle with a rolling 12 quarter look back. We believe our fee structure is best in class amongst listed BDCs and provides a strong alignment of interest with our shareholders. All participants are ready for the quarter.

Speaker 8

We generated an annual ROE based on net investment income of 11.6 percent and And an annualized ROE based on net income of 10.2%. Moving on from a balance sheet perspective, our net leverage stood at 1.4 all times at the end of June. As highlighted last quarter, in April, we were pleased to extend the maturity of our senior secured revolving credit

Speaker 4

all of our business

Speaker 8

is now open to our facility by over 2 years to April 2028. We also are pleased that Kroll affirmed our investment grade ratings in June. During the quarter, we repurchased approximately $2,300,000 of stock, which had a $0.01 accretive impact all are on NAV per share. This concludes our prepared remarks. Operator, and please open up the call for questions.

Operator

Our first question comes from Arren Cyganovich with Citi. All

Speaker 6

Thanks. Maybe you could just talk

Speaker 8

a little bit about how your conversations with equity sponsors are right now. Are you seeing any kind of loosening up in terms of increasing activity. I know it's August now, so I imagine seasonal slowdown happening, but just in general relative since we have some better lender friendly type of terms today.

Speaker 4

Sure. Thanks for the question, Arun. So In terms of I'll try to handle it in 2 aspects. As it relates to I think which is primarily what your question is getting at In terms of overall activity, notwithstanding the kind of summer doldrums, which we know we encounter in August, We are seeing a modest tick up from earlier in the year off of a relatively low base. I think that there's a Bain report, Capital report that came out that said LBO volume was down 50% in the second quarter.

Speaker 4

We're seeing a modest uptick And a more and a greater willingness to engage from LBO sponsors. All of our stakeholders

Speaker 2

are in the same way. The second aspect of our conversation

Speaker 4

of sponsors relates to those companies where either they're trying to do something strategic and or things our moving sideways and we continue to see a very healthy level of support from the sponsors and in particular all of the ways that sponsors are electing to try and counter all of our expectations are in the all positions and that dialogue has been very, very healthy and shows continued equity support for the underlying borrowers.

Speaker 5

Thank you.

Operator

Our next question comes from Kyle Joseph with Jefferies.

Speaker 2

All Hey, good afternoon. Thanks for taking my questions. Just on the portfolio yield side, obviously, That's been expanding. How much of that is base rates and how much of it is spread movement? I know you mentioned it's kind of are you still kind of a more lender friendly environment out there?

Speaker 4

Yes. Thanks, Kyle. In terms of Let's just talk spread to help you disaggregate it there. In the quarter, we deployed at all of our earnings call is 6.81 and a OID of just over 2.5 points, which reflects what we've seen for a number of quarters, which is all of our credit lenders are very attractive environment for private credit lenders. Notwithstanding the downdraft in M and A, private credit is able to service a disproportionate share of M and A that's getting done.

Speaker 4

And more broadly against that backdrop, it continues to be lender friendly. To my response to Arren's question, we're seeing if I were to look at the deals that are being screened Today, there might be a slight tightening in terms of spread as M and A picks up and people are feeling better about prospects and or there is some level of stabilization, which is enabling your sponsors to make better decisions and or risk appetite has improved as we get further from some of the stress that we saw earlier this year, not to say that all has been mitigated, but generally speaking, banks and markets are feeling a little bit better relative I'll turn it over to what was a relatively low base for much of the first half of the year.

Speaker 2

Very helpful. Thanks. And then one follow-up for me. You mentioned some of the banking volatility negatively impacted deal flow. But stepping back from a longer term perspective with potentially higher all capital requirements at banks, do you see that as a longer term opportunity for MidCap but also the BDC sector as a whole?

Speaker 4

Yes, absolutely. I'm sorry. I should have drawn the distinction there. I think Kyle, when we see periods of volatility, which in this case earlier this year happened to be all related to banking stress, there was more broadly a greater reticence to transact

Speaker 2

all of

Speaker 4

our employees are in the same position. And it wasn't necessarily a function of whether banks were able to provide that financing or not, but you just saw reduced volumes, which were more connected to volatility And I'd left to do on whether or not the banks were providing it. As we and our peers have stressed and we are huge believers in, we continue to benefit very much all from a secular trend that has private credit taking share from the banking system as we roll forward and expect

Operator

all our next question comes from Sean Paul Adams, Raymond James.

Speaker 9

Hey, guys. I think you guys shared some light on the amount of companies you guys have that are below 1x interest coverage ratio. You guys have the exact numbers about the portion of the total portfolio that those companies represent and your maybe share some thoughts on your total outlook for your general portfolio as interest coverage might continue to decline later in the year?

Speaker 5

Yes, sure. And thanks for your question. I'll start with the outlook, which is if base rate to state the obvious, if base rates continue to increase, our borrowers as well as everyone else's borrowers are going to face increased We've run a number of different stress tests and scenarios around what those numbers could look like in different types of situations. As to the existing portfolio, the ones that we have that are all of our earnings are below one times now. In some cases, sponsors are putting in equity to cover that.

Speaker 5

In other cases, there's still sufficient liquidity, and we're in active dialogue with those.

Speaker 9

Got it. Thank you. I appreciate your answer.

Operator

Our next question comes from Melissa Weddle, JP

Speaker 2

Argan?

Speaker 3

Good afternoon. Thanks for taking my questions today. First, wanted to I'll start with some of the capital return activities and comments you made on the call. I know last quarter you talked about all participants are looking at potential special dividend at some point based on the comments you made today About the Board about continuing to evaluate sort of over earning, and whether to pay that out versus retain it. I guess the Question would be, is the Board still thinking about a potential payout in the form of a special or has that conversation evolved a bit to something else?

Speaker 6

This is Howard. I think Effectively, everything's on the table, meaning we have It is a cornerstone of our of the goal for us is to have stable NAV. We are helped by that by over earning the dividend. We also have both requirements obviously to Yes, I'll be in a certain amount of income as well as sort of a desire obviously to return to the shareholders the some excess return. And so the answer is if you did this over a longer period of time and we were out earning what is our core all of these investments will depend $0.06, $0.07 a share each quarter as we were in the last two quarters.

Speaker 6

There's sort of room for both. But it's a year it's effectively a decision. I would say as much as we the thing that sort of has been decided is a decision that we will sort of make at the end of the year. So that like we'll retain it for now and then make a decision in the year about the size of what we may or may not do. So I know that's Not that definitive, but we're just sort of trying to like balance all things.

Speaker 6

And obviously, If base rates continue to go up or even they went up in July, obviously, just now, and there And our fee income builds off a very low base. We could even now earn the dividend by even more. And so then there's even more room for both options.

Speaker 3

Okay, understood. I appreciate the delving into the framework that way, it's helpful. In terms of the share repurchase activity that you did, Notice that obviously it ticked up. I think the last repurchase activity was about a year ago. As we think about moving forward and the capital allocation choices that you have in front of the federally attractive investment environment, you've got net leverage kind of where it is, I think towards the Midpoint of your target range, if I'm looking at this right.

Speaker 3

And how should we think about you guys Evaluating those opportunities for appetite for additional share repurchase versus deploying capital into an attractive environment.

Speaker 6

Yes. I mean, the buying back of shares all of our capital expenditures are in the quarter. It's definitely a function of the things you said, obviously, how levered we are and how much capital we have, but more importantly is comparing it against alternative investments. And we bought back those shares much earlier in the quarter at markedly lower prices than we're at today. And so Which changes sort of the return on that buyback multiple hundreds of basis points.

Speaker 6

So it does change that metric. So we're always looking at it. And so obviously, if yields on assets or opportunities went down, that could change the appetite at this price because we still think it's a good value, but when there are these lending opportunities at this level based on where we've traded to now, that balance is all participants are in the range of $1,000,000 So I think the answer is we will buy back shares when it is clearly accretive to the shareholders versus all other options, right? Paying dividends, making a different loan, delevering. And we felt that was the case at the level we were able to buy shares very early in this quarter.

Speaker 3

Thank you. That's really helpful.

Operator

Our next question comes from Paul Johnson, KBW.

Speaker 10

Yes. Good evening, guys. Thanks for taking my question. So I guess just with everything that's occurred, I guess in the first half of this year And based on kind of what you're seeing from sponsors behavior and appetite for deals today, do you think all that we've reached or maybe we're approaching an inflection point in terms of just kind of risk appetite from sponsors. And if that is the case, I guess, what do you guys kind of expect for the remainder of the year and maybe more so like 2024, are you expecting a big year or just kind of a slower recovery to normalization?

Speaker 4

Yes, sure. Thanks, Paul. And let me make a quick comment before opining on your question. I think one of the parts of our story that we try to stress quite a bit is that we're $2,400,000,000 of a $30,000,000,000 business and that affords us A nice strategic advantage in that in any given quarter, there is plenty of volume and as we called out in our prepared remarks, MidCap, the broader MidCap, the Bethesda MidCap did 4,400,000,000 all originations in the given quarter and that gives us a dynamic where we're less sensitive to the ebbs and flows in deal volume. In terms of the inflection point, what we hear from sponsors in our And not to give you a half answer by any stretch of the imagination, but what we have seen, while there is some volatility, the our conversion from the has been reduced and there's some modicum of stabilization.

Speaker 4

While things were And

Speaker 2

that's not

Speaker 4

to say that no one is discounting the potential for higher rates and at least being able to say that I've got something that's unlikely to go up materially from here has enabled sponsors when they digest The implications to the next buyer's ability to pay, particularly if it's a sponsor to sponsor buyout that enables all of these models to be able to be run with a greater degree of confidence and precision. And so I think that's the impetus currently as well as also some distance from the stresses that we saw earlier in the year as well as some upside to that we saw earlier in the year as well as some upside to economic prints, but it would be very premature to all the inflection point as data on the front lines is changing, but certainly some modicum of reprieve there and that's what we've all sort of seen in the kind of post quarter end period with some modestly higher M and A volume and activity levels.

Speaker 2

All are

Speaker 10

Got it. Thanks for that. I understand. It's always difficult to predict. My other question is just a little more specific to Merck's.

Speaker 10

I'm just I'm trying to kind of understand, as I do understand these are obviously fixed fixed payment leases on the underlying aircraft. This is obviously a portfolio company that's in I'll run off with you guys. But in terms of aircraft leasing comparable lease rates, I guess, it's how I would term it. For any sort of borrower in the market, what are are the current, I guess, set of comparable rates that are available to lessees? And what I'm sort of getting at is, are any of these borrowers, when they to renew leases, or I don't know if it's possible to refinance leases.

Speaker 10

Are these being done at higher fixed payments? Is that driving a longer average life of the assets, pushing out that sort of termination data, I'm just curious how that works?

Speaker 4

Yes, absolutely. And what could be a very long answer, I'll try to be clear. And first and foremost is, with respect to the assets that we have in the books today, Yes, they are fixed leases, but we have fixed debt costs against those. And then So then as you play forward and we look at kind of the next buyer analysis or we look at transitioning those leases, ultimately all of our aircraft are being deployed. And in the same way, you see plane tickets going up to kind of recover the broader increase in interest rates and ultimately because of the long duration of on leases, there's a lag there, maybe even more significant than what you'd otherwise see in maybe the leverage loan market.

Speaker 4

But notwithstanding, that does adjust. And you will see that become reflected in how The lease rates. One quick comment also, one of the aspects that gives us some cautious optimism in terms of reducing our exposure in Merx right now is that it is generally speaking a good yield environment for leasing companies. The increase in demand is well documented and at this juncture actually domestic revenue passenger miles are I'm actually above COVID levels. International is lagging slightly and overall we're at 96%.

Speaker 4

But importantly, With Asia having recently come back online, we would expect increases in demand there. And that's On the other side of the equation in terms of supply, we continue to see issues with Airbus and Boeing to deliver significant amounts of lift. And as a result, put aside the question you asked about lease rates and interest rates, all of these factors are

Speaker 2

not necessarily the same.

Speaker 4

Notwithstanding, we're seeing a healthy environment for lease rates and leasing on account of those supply demand

Speaker 2

all of our financial performance dynamics, which

Speaker 4

we hope will support our disposition efforts at Maersk to reduce that exposure.

Speaker 10

All Thanks for that. I appreciate that. So interesting dynamic and obviously this conversation could go on a lot longer, but appreciate the abbreviated answer and that's all for me.

Operator

Our final question comes from Kenneth Lee, RBC Capital Markets.

Speaker 7

Hey, good afternoon and thanks for taking my question. Wasn't sure whether this was discussed already, but wondering if you could just talk about any amendment activity you've been seeing in the portfolio, whether they're just routine or whether they're out of the ordinary? Thanks.

Speaker 5

Yes, sure. So the activity level on the amendment side of things has not ticked up materially. We do have most of our borrowers and most of our transactions all of you have a set of covenants in them. And so when borrowers come back and want if you grow, as we've mentioned before, they're looking to do accretive acquisitions, or if there are things where covenants are getting tight and sponsors want to be proactive. That brings us to the table to have those discussions.

Speaker 5

And our stance when we've been doing that all of our customers are looking to derisk and or get enhanced economics around it. And if a sponsor is looking for additional cushion on a leverage covenant, for example, we're going to put we may grant that cushion, but then we're going to have step downs. And then it also provides the opportunities fees and we can also look at the spreads as well. So the bigger picture is We have covenants, so we are in dialogue. The tone and the pace of amendments has not increased Materially as kind of at the same pace as it has been over the last several quarters.

Speaker 5

But when it does occur, we view that has an opportunity as well to either de risk or enhance the economics.

Speaker 7

Got you. Got you. Very all all the questions given that you see a lot of potential deal flow from the broader Mid all the Cap Origination Platform and perhaps a little bit less dependent upon deal flow there or would it be fair to say that the key constraints to originations over the near term I would be more on the underwriting, finding the appropriate deals, the appropriate returns, leverage constraints more so than broader industry trends. Thanks.

Speaker 5

Yes. I mean, as we've mentioned, MidCap closed on over $4,000,000,000 of I'll turn the call back to the operator for questions. And obviously, from a yield and structure standpoint. So in terms of constraints to new activity, it's certainly not the top of the funnel because we get that via MidCap. What we've continually expressed in terms of leverage is a range of 1.4 to 1.6 and a desire to stay at the lower end And so you've kind of seen us in between $1,400,000,000 and $1,400,000,000 over the last several quarters.

Speaker 5

And So as we think about deploying into new capital, we're balancing our desire to be in that leverage range I'll let you know what the attractive opportunities are out there.

Speaker 7

Got you. Very helpful there. Thanks again.

Operator

All participants are in the queue at this time. I would now like to turn the

Speaker 8

call back over to today's speakers.

Speaker 4

All participants are ready to take questions. Thank you, operator. Thank you, everyone, for listening to today's call. On behalf of the entire team, we thank you for your time today. Please feel free to reach out to us if you have any other questions, and please good evening.

Operator

This does conclude today's program. Thank you for your participation. You may disconnect at any

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