Golub Capital CEO Discusses F4Q2010 Results – Earnings Call Transcript

Dec.13.10 | About: Golub Capital (GBDC)

Golub Capital BDC, Inc. (NASDAQ:GBDC)

F4Q2010 Earnings Call Transcript

December 13, 2010 1:00 pm ET

Executives

David Golub – CEO

Ross Teune – CFO

Analysts

Christopher Harris – Wells Fargo Securities

Troy Ward – Stifel Nicolaus

Bill Oldman [ph] – Harbridge Rye Fund [ph]

Jim Young – West Family

Operator

Good afternoon. Welcome to the Golub Capital BDC September 30, 2010 quarterly and fiscal year-end earnings conference call.

Before we begin, I’d like to take a moment to remind our listeners that remarks made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than the statements of historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward looking statements as a result of a number of factors, including those described from time-to-time in the Golub Capital BDC filings with the Securities and Exchange Commission.

For a slide presentation that we intend to refer to on the earnings conference call, please visit the Events and Presentations link on our homepage of our website, www.golubcapitalbdc.com and click on the investor presentation link to find the September 30, 2010 investor presentation. Golub Capital BDC’s earnings release is also available on the company’s website in the Investor Relations section.

I’ll now turn the call over to David Golub, Chief Executive Officer of Golub Capital BDC. Please go ahead, sir.

David Golub

Thanks, Sharon. Good afternoon, everybody; and thanks for joining us today. I hope you’ve been able to review the earnings release and our investor presentation that we’ve posted on our website. I’m joined today by Ross Teune and Sean Coleman. As we described in press release this morning, Ross Teune has been elected our new Chief Financial Officer. Ross has been with us at Golub Capital for a number of years now. He was previously Senior Vice President of Finance and has been involved in a whole variety of investor reporting at Golub Capital and has been very involved with the company since its IPO, working closely with Sean.

Prior to joining Golub Capital, Ross held senior finance roles at Antares Capital, at Heller, and at KPMG. Sean, who is also here with me, Sean is going to continue as a Managing Director of our Investment Advisor, focusing on origination and underwriting of new investments.

I just want to start off by saying I am very excited to bring Ross’ talent to the company and I want to thank Sean for his extraordinary efforts in connection with the IPO and our early success.

So the format for today’s call is as follows; I am going to start with brief overview of our September 30th quarter and I am going to talk about the current market environment. Then Ross is going to summarize the financial results for the quarter. Then I am going to come back with an update on our SBIC license and make some brief concluding remarks and then we’re we are going to open up the line for Q&A.

So with that, let me get started. I am pleased to report that we had a solid quarter. The company generated EPS of $0.35 for the quarter ended September 30, 2010. That’s up from $0.29 earned for the June 30th quarter.

Few points to highlight about the quarter, new business was very strong. This is consistent with some comments that I made on our last earnings call. New investment commitments for the quarter were 83.7 million, up very significantly from the June 30th quarter. Second highlight, credit quality remains very strong with only a few exceptions, we’ve seen portfolio companies continue to improve from a credit perspective, despite a muddling U.S. economic recovery.

We continue to achieve strong momentum in new originations. We’ve made these comments in our press release. Given our closings to date in the December 31 quarter as well as our pipeline of deals under letter of intent, we’re confident that new deal originations for the 12/31 quarter is going to be higher than the September 30th quarter.

Key drivers of this, I discussed on our last call I made, they remain the key drivers now in terms of what’s causing the acceleration in new deal activity. First off, the economic recovery while muddling, is helping most companies achieve more predictable and in most cases higher levels of EBITDA. Second factor is that private equity firms are eager to do new deals, some of them have sat on the sidelines for the last couple of years, others have expiring capital commitments that they want to spend before they expire. Third factor is there is a large backlog of sellers, many of whom missed the window a little over two years ago, and over the course of the last two years really only four sellers have hit the market. So we’ve got a significant backlog of sellers who are interested in selling companies now.

And the fourth factor is there is a large pipeline of middle market leverage loans that mature over the next couple of years, many are going to seek to refinance in the next 6 to 12 months. Moody’s just recently presented a piece of work, talking about the pull-forward effect of facilities that are coming due where you’ve got for example a revolver that’s due in 2012 and a term loan that’s associated with it that’s due in 2013 or 2014, and their point was that more often than not companies involved are going to seek to refinance their overall balance sheet in 2012 rather than waiting until the maturity dates of the carry past-due term loans. We are seeing that same kind of phenomenon in the middle market now, we anticipate we’ll see more of it next year.

I’ll now hand it over to Ross to discuss the financial performance for the quarter in more detail. Ross?

Ross Teune

Thanks, David. Hope you all have the copy of the investor presentation that was posted in our website this morning as I’ll be kind of walking through those slides. As David mentioned, we enjoyed a good quarter. I will begin on kind of page two of the presentation, the financial and portfolio highlights slide. As David mentioned, we earned $0.35 a share in the quarter, up from $0.29 last quarter. This was driven by solid investment income and unrealized gains on the investment portfolio.

As you can see kind of in the financial highlights box, our net asset value per share at the end of the quarter was $14.71 and we paid a dividend of $0.31 per share during the quarter. On December 8 of this month, our Board declared a dividend of $0.31 per share payable on December 30th to shareholders as a record on December 20th. At September 30th, we had investments in 94 portfolio companies with a fair value of approximately $344.9 million. The weighted average price of the loans in the portfolio increased to 97 at September 30th as compared to 96 as of June 30th.

We originated investments in 18 companies, totaling $83.7 million in commitments during the quarter. And as David said, we expect our level of new investment activity to increase this quarter, given our strong pipeline.

As you can see in the bottom of the portfolio highlights box, looking at some of the spread analysis there, for the quarter ended September 30th, the weighted average annualized investment income yield based on the fair value of the investments in our portfolio was 9.8% versus 10.3% at June 30th.

This decline was due to a quarter-over-quarter decrease in income from amortization of fees and discounts as a result of a decline in payoffs during the quarter. And if you look at the box just above that, you can see our payoffs during the quarter were 13.5 million as compared to 34.6 million during the previous quarter. Excluding that income from amortization of fees and discounts, the weighted average investments spread at September 30th was 8.1% as compared to 7.8% during the previous quarter.

With respect to our asset mix, kind of excluding cash and cash equivalents, our portfolio was comprised of 92% senior secured and unitranche loans, 3% second lien, 4% subordinated loans, and 1% in equity securities at September 30th. This mix is fairly consistent with the prior quarter, although we did see a small increase in junior debt, which we expect to accelerate in the next few quarters.

Turing over to slide three, this is our quarterly income statement, just a couple of highlights here. Total investment income for the quarter was 7.4 million, an increase of approximately 200,000 from the previous quarter due to higher average assets. On the expense side, interest expense was up significantly from the prior quarter, primarily due to higher cost of funds and the debt we issued via our securitization. This increase in cost of funds was expected. As we communicated to you last quarter, the economics of the securitization we did were better than the bank facility described in our IPO prospectus. Excluding interest expense, other expenses actually declined quarter-over-quarter.

Turning to page four, we have the balance sheet for the last three quarters. As we mentioned, we had total investments of 344.9 at the end of September 30th, up over 67 million or 24% from the prior quarter. Total cash and restricted cash available for investments was approximately $93 million at the end of September.

Turning to page five, on the graph on the left, we provided a breakdown of our new investment commitments for the past three quarters by product type. New investments for the quarter ended were primarily senior secured, although we are starting to see an increase in the mix of unitranche loans, subordinated debt, and equity securities. The chart on the right provides the breakdown of the end-of-period funds by product type, also for the last three quarters.

Turning over to slide six, we kind of graphically share all our investment yields for the past several quarters. As you can – as I mentioned before, the total yield declined during the quarter due to lower income from amortization of fees and discounts, our interest income yield increased due to strong originations of higher yielding assets during the quarter. The yields on our borrowings increased as the pricing on our new debt facility increased to LIBOR plus 240 basis points as compared to LIBOR plus 130 basis points under the old facility.

Turning over to slide seven, you can see our funds roll forward, a breakdown of our portfolio between fixed and floating rate, as well as a schedule of non-earning investments. On the funds roll-forward, we began the quarter with about 278 million in investments, generated about $30 million in payoffs and funded approximately 77 million on new deals. The fundings exclude fundings that did not take place and unfunded commitments. And we ended the quarter with, again 344.9 million of investments. As shown in the middle of the slide, the investment portfolio remains predominantly invested in floating rate loans; and towards the bottom, as you will note, we have one non-accrual investment, which represents less than 1% of the investment portfolio at fair value.

Turning over to slide eight, with respect to portfolio company ratings, our credit quality remains strong, with nearly 99% of the portfolio rated at 3, 4, or 5. We have only two category two loans, one of which is non-accrual. Consistent with last quarter, independent valuation firms have valued approximately 25% of our portfolio during the quarter. As shown on the graph on the right, the portfolio remains highly diverse.

And turning over to slide nine, as previously noted, our Board declared a dividend of $0.31 payable on December 30th to shareholders on record as of December 20th.

And I’ll give the floor back to David, who will provide a brief update on our SBIC license, as well as provide some closing remarks.

David Golub

Thanks, Ross. So we’re very proud we received our SBIC license from the SBA, we announced that on August 26th. If you look at slide nine, you’ll – I am sorry, slide 10, you’ll see some of the advantages of having that SBIC license, it provides us with the ability to access long-term funding at attractive pricing and it further diversifies our funding sources.

Just to give you an update on SBIC activity, on October 8th, we received a $22 million debt commitment from the SBA. That commitment can be drawn subject to customary SBA procedures, and through December 10th we had drawn 10 million out of that $22 million commitment.

Now let me just shift to a quick summary, and then we’ll open the floor to questions. In summary, I – we think we had a solid quarter. We – the good news is that our credit performance and our deal flow remain strong. We think that on the deal flow front, the continuing recovery in middle market M&A and continuing heavy rate financing activity bode well for calendar 2011.

But I want to talk for a minute about the bad news side as well. We continue to be very cautious in our macroeconomic view. High household debt, you know, it’s down about 6% from its highs, it still has a long way to go. Stubbornly high unemployment, you’ve all seen the headlines on this, seems that new job generation continues to be very, very slow. And what we anticipate, next year is going to be immense pressure on state and local governments to cut government spending.

In our mind, these point to a long protracted muddling recovery and that view – the macroeconomic view colors all of our underwriting, but I want to leave you on a sour note, you know, our mantra these days is looking for credits reflects nothing and we think there are a lot that fall in that category. What I mean by that is, you know, even if we are right about the economic recovery being long and slow, as we look forward to what we are seeing in this December 31st quarter and what we anticipate seeing in calendar 2011, we think we are well positioned to capitalize on some robust market conditions that will enable us to continue to actively grow our earnings. Key to that obviously is the deal pipeline, which as I said is robust; and our credit performance, which has been strong and that we anticipate will continue to be strong.

At this point, I would like to open up the line for questions. Sharon?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Chris Harris of Wells Fargo Securities. Please proceed with your question.

Christopher Harris – Wells Fargo Securities

Thank you. Good afternoon.

David Golub

Hi, Chris.

Christopher Harris – Wells Fargo Securities

Hi, David. I guess starting off I was wondering if you can maybe give us a ballpark figure on how much yield pickup you guys are getting right now from your new origination activity relative to kind of the repayments that you’ve been getting in the portfolio.

David Golub

That’s a great question. You know it’s – there are two elements to the yield pickup. The first element is, within an asset class and the second element is mix. So, let’s talk about each of those in turn. So, most of the repayment activity that we have been seeing and that we anticipate seeing in the early part of calendar 2011, is going to be in our legacy portfolio, which is a senior portfolio, and most of that repayment activity will be in loans with yields that range from LIBOR plus, well we have a few quite low yielding, probably syndicated loans that are probably as low as LIBOR plus 2 to LIBOR plus 5.

So, we’re going to see meaningful yield pickup from those repayments, Chris, because the new loans that we’re booking on the senior side are generally in the LIBOR plus 5 to LIBOR plus 7 range, pretty consistently with LIBOR floors of 1.5% to 1.75% and also pretty consistently with upfront fees in the neighborhood of 2%.

The second factor that is going to influence yields pickup is going to be our continuing efforts to shift mix toward unitranche or what we call GOLD loans and mezzanine; and Ross mentioned in his comments something which I want to reiterate, which is that we saw some shift, a modest shift this last quarter toward GOLD loans and subordinated debt. We anticipate an acceleration of that shift in the coming quarters.

Christopher Harris – Wells Fargo Securities

Okay, great. Yes, that helps a lot. And then I guess on the repayment side, I know you guys had a little bit of a decline and I know that can be lumpy from quarter-to-quarter, but based on your commentary, it sounds like you’re still pretty optimistic on repayment activity being very strong, I mean is that a fair characterization, and if so, how much of the portfolio do think you might repay over the course of the next year or so?

David Golub

Well, two thoughts on this. First off, we still own within the legacy portfolio, a bit in excess of $40 million of broadly syndicated loans that are liquid and that we can sell and that we anticipate selling as we find opportunities to redeploy those assets in higher yielding new loans. So one source of improvement in yield that we’re likely to see in calendar 2011 has to do with the sale and redeployment of those liquid loans. With respect to the remaining portion of the portfolio, our experience over many years is that outside of unusual recessionary periods that typical durations for our loans are about three years, and what that means is that we would anticipate absent the environment being real unusual, we would anticipate that roughly a third of our book at the beginning of the year would repay over the course of the year.

Christopher Harris – Wells Fargo Securities

Okay, I guess and then last question here on the SBA; I know you guys have $22 million of debt commitments that you kind of talked about here. Can you remind us really what the process is with the SBA itself, I mean, are you guys able to kind of increase that commitment as you need to or what are the steps that really need to take place in order to get additional commitments from the SBA?

David Golub

Well, I wish that was a simple question to answer. The rules surrounding SBICs are extremely complicated. So, I am going to try to answer your question, but please understand that my answer is of necessity going to be an oversimplification. So, we have a game plan within BDC, putting ourselves in a position to get about $75 million of SBIC debentures in the relatively near term. In order to effect that plan, we have to go a through a number of hurdles. The hurdles relate to having an adequate level of regulatory capital within our SBIC subsidiary, getting appropriate approvals from the SBA including getting a satisfactory SBIC audit done, and obviously having a sufficient level of investments within the SBIC subsidiary. We think we’ll be able to do all of those things, but we’re very experienced in dealing with the world of SBICs, having operated SBICs since the mid 90s. But unfortunately the answer to your question isn’t something that I can state crisply. There are whole bunch of steps associated with it.

Christopher Harris – Wells Fargo Securities

The answer makes sense and helps out a lot. Thank you very much guys.

David Golub

Thanks, Chris.

Operator

[Operator Instructions] And our next question comes from the line of Troy Ward of Stifel Nicolaus. Please proceed with your question.

Troy Ward – Stifel Nicolaus

Great, thanks and good morning, gentlemen.

David Golub

Good morning.

Troy Ward – Stifel Nicolaus

David, can you talk real quickly, go back to – going back to slide two where you show the asset mix. It’s relatively unchanged over the last several quarters. Can you talk longer term, where you would like to see that asset mix? And how should we think of the overall portfolio yields kind of once you have reached that asset mix goal?

David Golub

Well, the two categories where we want to see fairly significant migration of the portfolio are the unitranche and subordinated debt columns. And we’ve got significant room on both of those. As I said, I think we’ll see progress over the course of the next couple of quarters in increasing the proportion of our assets in those two categories. We don’t have a new miracle target with respect to these, because we really want to be focused on making the best investments that we can find, regardless of the category, and so we don’t want to get formulaic about fitting out the portfolio. Having said that, if we’re right now running at 66% senior debt, I’d like to see that get under 50% relatively soon and I’d like to see that over time go down to something in the 33% vicinity, with the balance being significant increases in the unitranche category, some increase in second lien sub-debt and equity, but quite significant increases in the unitranche category.

Troy Ward – Stifel Nicolaus

Okay. That makes sense. I mean that is not formulaic, you won an X percentage. But I guess what we found a bit surprising was the yields, the senior that you’re doing call it L plus 5 or L plus 6, even with the fees and the add-ons, they’re still under a 10% yield overall. How should we think about where – I guess, the question is where – what do you view as the right level of yield in the BDC, obviously with a low leverage allowed in the model? How low can you run the overall portfolio yields?

David Golub

I’m not sure I understand your question. Can you try that again?

Troy Ward – Stifel Nicolaus

Where do you think is the right assets from a yield perspective? Are you comfortable, I guess, continuing to add new investments at the yield you did this quarter, with the senior assets?

David Golub

Well as I said, I think, we’re going to continue to see some new senior assets that we’re adding to the mix, but if you look at our portfolio now, I think, what you’re going to – if you look at our portfolio from here, I think what you’re going to see is that more of the new additions are going to be coming in the unitranche and subordinated debt category. So we’re not going to be – we’re certainly not going to be growing senior secured as a percentage of the portfolio. I would anticipate the opposite. I’d anticipate that we’re going to be shrinking senior secured as a proportion of the portfolio. And as I also said when I was answering Chris’ question, Troy, the category of asset repayment and of actual sales was going to be far and away the highest is going to be in our senior secured book, because that’s' where the legacy asset’s locked.

Troy Ward – Stifel Nicolaus

Okay. Moving on, as you think about growing the overall balance sheet in 2011, as you start to sell off some of those lower yielding senior assets, when do you think it will become necessary to grow the balance sheet, either with the additional equity or layering an additional debt?

David Golub

Well, I think we’ve said before that we think that it would be good for shareholders if we can sell additional equity at an attractive price, for us to do so as a means of both growing the vehicle and as a means of increasing the public flows [ph]. We’ve also said that we’re going to be looking over time to further diversify our debt sources, so we’re reliant not just on our initial securitization and SBIC financing, but on other sources of financing as well. So as I look at our game plan for calendar 2011, you know, subject to the really critical caveat that we’re not going to do anything unless it’s good for shareholders, I’d anticipate that we’re going to look to grow both our equity and our debt components of our balance sheet.

Troy Ward – Stifel Nicolaus

Okay, great. Thanks.

Operator

Our next question comes from the line of Bill Oldman [ph] of Harbridge Rye Fund [ph]. Please proceed with your question.

Bill Oldman – Harbridge Rye Fund

Thank you very much for taking my call and congrats on good quarter. I have a question about the level of cash on the balance sheet. Number one, can you talk about how you think about cash and cash strategy and what, you know, the ideal percentages or range is as you go forward and grow your business. Secondly related to the last caller’s question, if you could talk about your equity capital strategy, just a little bit more and maybe just flush out what you mean by an attractive price in terms of raising new equity capital? Thanks a lot.

David Golub

Sure. So, let me answer what I heard as two questions, Bill and –

Bill Oldman – Harbridge Rye Fund

Yes.

David Golub

And correct me if I don’t get to both of them, please come back afterwards. So, the first question is on cash. I mean cash is; we don’t want to be a money market mutual fund. We don’t think that shareholders ought to be paying us to be a money market mutual fund. When we have high degrees of cash on our balance sheet, I would describe that as not being a good thing. So, obviously post an initial public offering there is a period of time when we’re looking to deploy that capital and that’s been the situation we found ourselves in.

We’ve been deploying that capital and – a question that didn’t come up when I was talking to Troy – in response to Troy’s and Chris’s questions is, you know, why haven’t we sold our low yielding loans that are liquid yet. And the answer is well, we have a cash balance, so why would we want to do that while we still have a cash balance. I think what you will see over the ensuing quarters is that we will work down our cash balance and establish an approach where we are conservative in the sense that we always make sure that we have dry powder available for new investments and to handle surprises and to continue to pay dividends. But not to do so at the expense of having some cash hoard on the balance sheet. Does that make sense?

Bill Oldman – Harbridge Rye Fund

Yes.

David Golub

Okay. And the second question you asked was with respect to what constitutes a good price, and I guess I can answer that in the reverse. BDCs under the ‘40 Act are in the absence of specific shareholder approval are restricted from selling shares at a price below net asset value. Many of our BDC brethren have gone out to their shareholders and sought approval for being able to sell stock at less than net asset value.

You’ll note if you are going through our filings that we have not done so, we do not intend to so. I don’t think in the current environment that selling shares below net asset value would make any sense. So, clearly that’s one book-end, the other book-end, what premium to book do we think constitutes a good place to issue new shares, we don’t have a specific quantitative target that we’re going to be looking for, Bill. But we would note that when we’re able to sell shares at a meaningful premium to book, it does have a really nice impact on existing shareholders through an accretion in our net asset value.

So, I guess that probably isn’t a completely satisfying answer relative to what you were hoping for, but I guess the point I’m really trying to drive at is one that you and other shareholders have heard me talk about before, which is our goal with Golub Capital BDC is over time, as we prove ourselves worthy to our investors is to grow the vehicle, that’s what makes – we think makes sense for our investors, and that’s what we think makes sense from a Golub Capital standpoint to have this vehicle become a larger proportion of our overall business, but the proviso is the critical part. It’s got to be good for shareholders; if it’s not good for shareholders, we’re not going to do it.

Bill Oldman – Harbridge Rye Fund

That’s very helpful. Thank you.

Operator

Our next question comes from the line of Jim Young of West Family. Please proceed with your question.

Jim Young – West Family

Yes, hi. Can you discuss how the competitive landscape has changed from the third quarter coming into the fourth quarter with respect your position vis-à-vis other providers of capital? And then secondly, how do you see the competitive environment shaping up going into 2011?

David Golub

Sure. Let me talk about that across our different asset classes. So, I would say on an overall basis that the biggest change has been the increased demand for our kind of debt as opposed to there being a really big change in terms of who is providing it or in terms of what – what approaches they’re taking with respect to it. So what I mean by that is on the senior side, our historical – most strongest competitors have been GE Capital and Madison Capital, they continue to be our strongest competitors – on the subordinated debt and GOLD front – the landscape is much more fragmented. We occasionally will run into some of the other public PDCs, but really in that area, the reality we face is that we rarely see the same competitor across more than deal that we’re working on at one time.

I don’t really think there has been a significant change in the competitor situation or in competitor pricing over the course of this last quarter. What obviously has changed, and you can see it in the change in our originations is that we’ve seen very significant increases in M&A activity and refinancing activity.

So what’s going to happen next year? Well, some of that M&A activity and refinancing activity began as tax driven activity. So it began at a time when owners thought that dividend, tax rates, and capital gains tax rates were going to be higher in 2011 than 2010. That may still be the case, we will see whether Congress is able to get this new tax legislation through, but if I were a betting man right now, I would tell you that my guess is that we’re going to see an extension of current dividend tax and capital gains tax rates.

So as we go into next year, I think we’re likely to see a bit of a lull in the first quarter of next year in some of the M&A and refinancing activity, because of the impact of tax uncertainty in pulling forward deals that might naturally have occurred in 2011 into the fourth quarter of 2010. But despite that, I’d say that our expectation is still 2011 taken as a whole is going to be a real busy year. We think – and I talked about this earlier, Sharon, and I repeat myself that we think that fundamental drivers of M&A recovery and refinancing demand are still real strong.

Operator

Our next question is a follow-up question coming from the line of Troy Ward of Stifel Nicolaus. Please proceed with your question.

Troy Ward – Stifel Nicolaus

Hi, David, just one other thing. As we think about exit fees as the portfolio increases in velocity in 2011, can you just put a little a color on what kind of fees that you might see from that repayment activity? And I assume it’s going to be a lot less or virtually none on the $40 million of syndicated senior; is that correct?

.

David Golub

Well, on the liquid stuff that we’re likely to sell, obviously there isn’t an origination key on that, that we’re going to be taking into income. So you’re right, we’re carrying that at the value that we would anticipate selling it at.

With respect to other repayments that we receive, there will be either contractual call premiums in some cases or there will be acceleration of amortization of origination fees from when we put those loans on. So I guess that’s a long-winded and technical way of saying of that an increased velocity of repayments is a good thing from an EPS, and in particular, from a net investment income standpoint.

Troy Ward – Stifel Nicolaus

Do you know off hand what your unearned fee income balance is as of today?

David Golub

I don’t, but Ross and I have looked at that and if that’s something that can be derived from the information that we’ve disclosed publicly, we’ll get that to you.

Troy Ward – Stifel Nicolaus

Okay, great. And then one last thing and I will hop off. Just speak a little bit on those metrics on net fees and upfront and penalties and call premiums, things like that on the new stuff that you’re putting on the balance sheet today. What did the structures look like today?

David Golub

Good question. So, again, it varies a bit by asset class. So if we look at subordinated debt today, most of the sub-debt that we are putting on has pretty meaningful call protection features to it. A typical new deal might be two years of hard no call and then a couple of points of call premium in year three, descending down to redeemable at par after year five, that would be I say a typical structure, each deal obviously bearing its own unique attributes.

In GOLD loans, we typically see a modest degree of call premium for the first couple of years and on senior loans, we typically don’t have call premiums. In all three cases, we would have pretty significant origination fees, which obviously get accelerated in terms of amortization in the event of a repayment.

Troy Ward – Stifel Nicolaus

Great, thanks.

Operator

I am showing no further questions at this time.

David Golub

Okay. Sharon, I appreciate your help and everyone on the call. Thank you for calling in and giving us your time. And as always, Ross and I are available outside of this call to all shareholders who have questions. Thanks very much.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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