Monroe Capital's (MRCC) CEO Theodore Koenig on Q1 2017 Results - Earnings Call Transcript

May 10, 2017 5:09 PM ETMonroe Capital (MRCC)
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Monroe Capital (NASDAQ:MRCC) Q1 2017 Earnings Conference Call May 10, 2017 12:00 PM ET

Executives

Theodore Koenig - CEO

Aaron Peck - CIO and CFO

Analysts

Leslie Vandegrift - Raymond James

Christopher Nolan - FBR Capital Markets

Mickey Schleien - Ladenburg Thalmann

Brian Hogan - William Blair and Company

Christopher Testa - National Securities Corporation

Operator

Welcome to Monroe Capital Corporation's First Quarter 2017 Earnings Conference Call.

Before we begin, I would like to take a moment and remind our listeners that remarks made during this call today may contain certain forward-looking statements, including statements regarding our goals, strategies, beliefs, future potential, operating results or cash flows. Although, we believe these statements are reasonably based on management's estimates, assumptions and projections as of today, May 10th, 2017, these statements are not guarantees of future performance.

Further time-sensitive information may no longer be accurate as of the time of any replay or listening. Actual results may differ materially as a result of risks, uncertainty or other factors, including but not limited to the factors described from time-to-time in the company's filings with the SEC. Monroe Capital takes no obligation to update or revise these forward-looking statements.

I would now like to turn the conference over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation.

Theodore Koenig

Hello, and thank you to everyone who has joined us on our call today. I'm with Aaron Peck, our CFO and Chief Investment Officer. Last evening we issued our first quarter 2017 earnings press release and filed our 10-Q with the SEC. I will first provide an overview of the quarter before turning the call over to Aaron to go through the results in more detail. He will then turn the call back to me to provide some closing remarks and then we will take some questions.

We are very pleased to have announced another strong quarter of financial results. For the quarter, we generated adjusted net investment income of $0.35 per share and net investment income of $0.36 per share, covering our first quarter dividend of $0.35 per share. This represents the 12th consecutive quarter we have covered our dividend.

Our book value per share decreased slightly to $14.34 per share as of March 31st, primarily due to the increase in unrealized mark-to-market decreases in the value of a couple specific assets in our portfolio, neither of which we view as a permanent reduction.

At quarter-end, our highly diversified portfolio had a fair value of $418.1 million and was invested in 65 companies across 23 different industry classifications. Our largest position represented 6.4% of the portfolio and our 10 largest positions were 35% of the portfolio.

Our portfolio was heavily concentrated in senior secured loans in particular first lien secured loans. 94% of our portfolio consists of secured loans and approximately 84% is first lien secured. Over the past several quarters, we have continued to migrate our portfolio towards first lien loans to take advantage of the better risk-adjusted returns in the senior secured part of the market. As we have discussed in the past, MRCC is very well positioned for future interest rate increases.

Most all of our loan portfolio is invested in floating rate debt with rate floors. Given the current LIBOR level, we have surpassed the level of the LIBOR floors on about all of our loans and therefore, we believe MRCC is well situated to meaningfully benefit from any increase in short-term interest rates going forward. In addition, we have $60 million outstanding in fixed rate debt from our SBA debentures, which will allow us significant interest rate arbitrage on any increase in LIBOR in the future.

As we have discussed in prior calls, middle market companies and private equity firms continue to look at alternative lenders such as Monroe Capital for lending solutions instead of traditional regulated banks. As a result, we continue to see numerous origination opportunities across a variety of sectors. Our external manager Monroe Capital maintains eight origination offices throughout the US, including one in Canada and reviewed over 2,000 unique investment opportunities last year.

The lending market remains highly competitive, where new entrants as well as other BDC managers are being aggressive in an effort to put new assets on the books or to replace run-off. We continue to remain highly disciplined in our approach to new business origination.

While we pass on over 90% of the investment opportunities we identify, we still have a considerable number of high quality and attractive opportunities in our pipeline. In fact, 34% of our new fundings in the last quarter came directly from our existing portfolio company add-ons. That is a luxury that comes from the Monroe Capital platform with about 4.1 billion in current assets under management.

Our co-investment exemptive relief from the SEC enables us to co-invest alongside the numerous private institutional funds we manage in order to provide comprehensive financial solutions to our borrowers. Our disciplined underwriting and focus on credit quality has helped us deliver consistent income and dividends to our shareholders.

As we continue to ramp our SBIC subsidiary over the next several quarters, now that we have fully invested the equity portion, our ability to access the second tier of leverage associated with the recently approved increase in our SBA debentures should positively impact our per share net investment income, all other things being equal.

Currently, we continue to maintain $0.43 per share of undistributed net investment income, which in our view provides a significant cushion in our ability to maintain a consistent quarterly dividend payment to our shareholders without returning capital.

I am now going to turn the call over to Aaron, who is going to discuss the financial results in more detail.

Aaron Peck

Thank you, Ted. Our investment portfolio continued to grow in the quarter and as of March 31, the portfolio was at $418.1 million at fair value, an increase of approximately $5.2 million since the prior quarter-end.

During the quarter, we funded a total of $41.5 million, which was due to two new deals and several add-on and revolver fundings on existing deals. This growth was offset by complete pre-payments in sales of seven deals and partial repayments on other portfolio assets, which aggregated $33.8 million during the quarter.

At March 31st, we had total borrowings of $136 million under our revolving credit facility and SBA debentures payable of $60 million. The increase in outstandings under the revolver and the increase in SBA debentures are the result of portfolio growth and a build-up of cash in anticipation of additional deals that were funded shortly after quarter-end.

As of March 31st, our net asset value was $239.6 million, which decreased slightly from the $240.9 million in net asset value as of December 31st, primarily as a result of net unrealized mark-to-market declines in the portfolio.

This was driven primarily by two discrete events. The first involves a culmination of our credit bid procedures in the fourth quarter and the continued turnaround in Q1 in a portfolio company called The Picture People with a mark-to-market reduction of approximately $1.65 million. Monroe now has full control over that business and we are encouraged with the changes to management and the new business plan being implemented there.

The second is due to a $1.35 million reduction in the equity valuation for Rockdale Blackhawk, as Rockdale has reduced its projected EBITDA due to the reduction in reimbursement rates from certain payers. As a result, our NAV per share decreased slightly by $0.18 from $14.52 at December 31st to $14.34 per share as of March 31.

Turning to our results for the quarter ended March 31st, adjusted net investment income, a non-GAAP measure was $5.9 million or $0.35 per share, flat when compared to the prior quarter. At this level, we continue to cover our quarterly dividend of $0.35 per share. During the fourth quarter of last year and during the most recent quarter, we had no distributions from our investment in Rockdale Blackhawk, which has averaged $0.09 per share per quarter for the first three quarters of 2016.

As we've discussed on previous calls, the timing and amount of future distributions are out of our control and are difficult to predict. We also generally have a robust level of prepayment activity in the portfolio, which is additive to earnings and returns, but quarter-to-quarter, this activity can be volatile and unpredictable. While, fees and other income due to prepayment activity was somewhat greater this quarter when compared to the prior quarter, it was still lower than our recent historical average level.

Additionally, in this quarter we generated net income per share of $0.15 per share, a decrease from the prior quarter amount of $0.45 per share. The decrease is primarily attributed to an increase in net unrealized mark-to-market declines in the period, as I have already discussed. Looking to our statement of operations. Total investment income for the quarter was $12 million compared to $11.2 million in the prior quarter.

The increase in investment income is primarily as a result of the growth in the portfolio during the period and an increase in prepayments gains during the period. Total expenses of $6 million included 2 million of interest and other debt financing expenses, 1.8 million in base management fees, 1.3 million in incentive fees and 867,000 in general administrative and other expenses.

As for our liquidity, as of March 31st, we had approximately $64 million of capacity under our revolving credit facility. We also had access to $55 million of additional SBA debentures at quarter-end.

I'll now turn the call back to Ted for some closing remarks, before we open the line for questions.

Theodore Koenig

Thanks, Aaron. Given the current state of the market and the performance of many of our peers in our industry, I'm very pleased with the performance of MRCC. Since going public with our IPO in 2012, we have maintained a relatively stable book value, almost boring while generating a 39.6% cash-on-cash return for our shareholders, based on changes in NAV and dividends paid since our IPO, assuming no reinvestment of dividends.

Based on the closing market price of our shares on May 8th, investors that purchased stock in our IPO in 2012 have received a 46.2% cash-on-cash return, assuming no reinvestment of dividends. On an annualized basis, this represents greater than a 10.4% annual return for stockholders since 2012. We believe that these returns compare very favorable to those achieved by our peers and puts MRCC in a very small and elite group of BDCs that have delivered this level of performance on a consistent basis for shareholders.

In closing, we continue to cover our dividend with adjusted NII. We have grown our per share NAV since the beginning of 2016 and paid out $1.75 in dividends since the beginning of 2016. We have one of the more shareholder friendly fee structures in the industry and every metric within our control we have delivered solid value for our shareholders and we intend to continue to do so. Based on our pipeline of both committed and anticipated deals, we expect to maintain our new investment momentum for the remainder of this quarter as well as into the third quarter. With our stock trading at a dividend yield around 9% fully supported by adjusted net investment income and a best-in-class external manager, we believe that Monroe Capital Corporation provides a very attractive investment opportunity for our shareholders and other investors.

Thank you all for your time today. And with that I'm going to ask the operator to open the call for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions]. Our first question comes from the line of Leslie Vandegrift of Raymond James.

Leslie Vandegrift

Hi, good morning. Thank you for taking my questions.

Theodore Koenig

Hi Leslie.

Leslie Vandegrift

So, you discussed it in the prepared remarks earlier, but just quick refresh on the outlook for Rockdale if you could. I know the timing of dividends can be spotty, but you talked about their EBITDA expectation is changing and that's leading to the mark down there, so kind of what do you see as a catalyst if they need one in the next few quarters where we're going?

Theodore Koenig

Sure. Thanks, Leslie. So let's just first make sure we're really clear on something that the change in mark that we're talking about was the mark on the equity piece, the debt piece is still marked really close to par, I can't remember the exact mark, but very solid on the debt piece.

And I also recall that the equity piece was not a fees that we invested in, but it's the piece that we got for making the debt investment and you will see an allocated cost to the equity piece, but that was more of an allocation of original cost, but we funded principal debt and received equity in exchange, so just as that as a backdrop to remind people and so, yes, it's true that the future forecast for EBITDA has been muted a little bit for Rockdale based on some changes in reimbursement rates.

Anyone who invests in healthcare knows that reimbursement rates always change and they usually go down. So that's always anticipated when you are involved in a credit like that and the third-party firm that does valuation, certainly was considering a possible future reduction in reimbursement rates when they looked at valuation. And so some of the issues around trying to value the Rockdale Blackhawk equity was that it's always been very difficult, because there was always a projected decline in future reimbursement, which made it difficult to know what EBITDA depends to in terms of making valuation.

And so the good news is that we feel at this point that if you will - the other shoe has dropped on reimbursement and so there's a lot more clarity on reimbursement going forward, which gives the EBITDA numbers that they're using a lot more certainty.

And I think the valuation firm and we obviously as the ones who sponsored a valuation at the end of the day feel comfortable that the valuation reflects sort of the current state of the environment for reimbursement and it's sort of at the right spot now.

Leslie Vandegrift

Okay. All right. And then on the one dividend, the one committed [ph] dividend and that was Education Corp, again, correct?

Theodore Koenig

Right. So that's a preferred - that's a dividend on the preferred, which has a contractual rate. So that all things being equal if the credit continues to perform which it has, should be consistent level every quarter unless something were to change in that credit, but that's not variable based on earnings like Rockdale's is.

Leslie Vandegrift

Okay. That's what I thought, I just wanted to make sure. And then on the add-on loans to the two non-accruing debt investments, so InterCore and The Picture People, now each one had a bit of an addition in this quarter, but the overall marks went down slightly only few percentage points there, but could you walk me through the reasoning behind this, if they weren't looking better after that?

Theodore Koenig

Sure. So, as it applies to TPP or The Picture People as we talked about on the call, we are now in control of this name and we are in a turnaround with the new management team and that company has always had a seasonal need in the first part of the year as a lot of their revenues and EBITDA come at the end of the year and so, it's very traditional for the lender to need to fund into that deal, so that's what's happened here.

And so, the expectation and hope will be that the company's performance will continue to improve through the year, they will have a strong end of the year, which will allow the company to be in a position to repay some of that funding need, so that one answers - it's a more syndicated club deal that went through a bankruptcy

And so they were fundings through a debt and that thing is now emerged as a very small funding amount like 100 grand which was money, good funding and that now is coming out of bankruptcy through an emergency [ph] and you'll actually see the entire answers piece that we hold have a very different look as we get to the end of the quarter as the company has gone through a full restructuring and so there will be more to talk about I think as that becomes clear at the end of next quarter, but over this coming quarter that is, but that's a deal that we don't control.

Leslie Vandegrift

Okay. All right. Now that make sense. And then on just last question, you mentioned on the call and I think I missed the number, but how much of the originations in the quarter were from add-ons rather than new companies?

Theodore Koenig

Right. So I believe the number is about just a little less than 11 million in terms of add-on. Hold-on. Let me go back to my -

Aaron Peck

I think it's 14.5 Leslie out of 41, which was 34%.

Theodore Koenig

Sorry. Yes, just a little bit less than add-ons, on terminals and delayed draws and about $3 million in revolving fundings, which may get into that 14 number and then talking about 26 million, two new deals were added in the quarter, Echelon and Midwest Wholesale.

Leslie Vandegrift

Okay, all right. Perfect. Thank you. I appreciate it.

Theodore Koenig

Thanks, Leslie.

Operator

Our next question comes from the line of Christopher Nolan of FBR Company.

Christopher Nolan

Thanks for taking my questions. Ted, when you mentioned in your closing remarks the expectations maintain investments yield for the rest of the quarter or something along those lines, can you clarify on that a little bit?

Theodore Koenig

Yeah, sure. How are you Chris?

Christopher Nolan

Good.

Theodore Koenig

What I think I said was that I expected to maintain our new business originations at a consistent performance, our investment yields I think if you look at quarter-to-quarter were flat and given where we sit today we're seeing more consistency in that as well. So I think that you can expect to see more of the same in Q2 and into Q3 from the pipeline of where we sit.

Aaron Peck

The one area I will make that Chris is, you recall we've said in the past that as we fund into the FDIC subsidiary, it gives us the flexibility to do - to put on some more lower risk loan that have slightly lower yields still maintain our ROE.

So as it stands today we've been consistent and flat, but it wouldn't necessarily shock me if we saw a little decline in yield as we continue to ramp SBIC sub deals, as we are using the extra leverage as a way to maintain our yield and not increase the risk.

Christopher Nolan

Got it. That's good stuff. Thank you. I guess the second question and just generally. I know you guys like to use your revolver facility, but given the prospect of possibly higher debt cost or higher interest rates, should we see a term loan facility or something along those lines or you're just going to continue to rely in the revolver?

Theodore Koenig

It's possible. Chris, it's possible. Aaron and I are very - we monitor the right side of our balance sheet very carefully and we've got a number of alternatives that we've been examining and I think that up until now we've made the right decisions and how we've used the right side of our balance sheet and we will continue to monitor that. And if we see the opportunity to do some term loans here at attractive prices for us, I think we may take advantage of it, but right now I would like the capital stack in the right side of our balance sheet.

Aaron Peck

I'll also remind you that we do have significant fixed rate debt in our SBIC debentures. So we are already basically taking advantage of the low rate environment for a portion of our liabilities and will continue as we take down the rest of the debentures through the year.

Christopher Nolan

Final question. In accordance with a fair amount of the banks that cover as well as BDCs, is everyone sort of taking these knocks in terms of either realize or unrealized write-downs, are you guys seeing anything broader in your economy in terms of weakness in C&I originations or asset quality or coverage ratios, something almost systemic you would say in term -

Theodore Koenig

I think that it depends on, Chris, on what part of the market that you're investing in. I can speak to the lower middle market where we play, which is that $30 million EBITDA size company and below. In that market, I think the companies have been more stable and earnings have been more stable, suppliers have been more stable and generally, if you look at our portfolio, which is about 230 companies, we see more consistency at that level.

Once you go above that and start looking at the larger size EBITDA companies kind of 50 million and above, many of those companies are generating sales overseas as opposed to the lower-middle market and the companies that are generating sales overseas are very impacted by a stronger dollar.

So if you look at our portfolio, especially the CLO portfolio that we manage, many of the larger sized EBITDA companies and the names are seeing some softness in revenue and some issues with gross margin in the larger EBITDA sized companies. So that being said, I think there is a difference between kind of company size.

And number two, which is I think just across the industry, I think the valuation firms, at least the high quality valuation firms are taking an increased focus on valuations and I think are attempting to be more thoughtful and that's why I think you're seeing some minor valuation adjustments across the board as an industry, notwithstanding some of us play different parts of the capital, the EBITDA size companies.

Christopher Nolan

Good. That's interesting observations Ted. Thank you very much for the feedback.

Theodore Koenig

Thanks, Chris.

Operator

Thank you. Our next question comes from the line of Mickey Schleien of Ladenburg. Your line is open.

Mickey Schleien

Good afternoon Ted and Aaron. I hope you're well. Ted, another high-level question perhaps along the lines to Chris. Certainly, the new administration has more of a pro-growth strategy. I am interested to know if that is increasing your level of interest in second lien opportunities. In other words, do you think the risk-reward ratio there is improving?

Theodore Koenig

That's a good question, Mickey. And I will tell you that I do not believe the answer is yes. And the reason why is because second lien is a great business when you're coming out of a downturn and you're going into growth mode economy. The challenge is today, there's a lots of capital chasing deals and the risk returns that we're seeing in second liens don't justify the extra leverage that are being put on the companies.

If you look at our portfolio, across the board we are catching it probably a little less than four times of EBITDA and when I talk about that I'm talking about across our entire platform.

Second liens today are anywhere around 5.5 times and given what could potentially happen in the marketplace, I don't think you're getting compensated fairly at 9% or 10% for a second lien loan today, given where we could be investing at the first lien. And if you look across the industry, many of our peers I think are seeing reductions in valuations and some risk and their portfolios where there's heavy second lien.

Mickey Schleien

That's very helpful, Ted. And talking about first liens, your weighted average yield on the portfolio actually was up slightly for the quarter and that's despite a higher weighting in first liens in a market with decreasing spread. Can you help me understand that trend given that you just said, you're not taking on more risks?

Theodore Koenig

Yeah, I would not read too much into one tenth of 1% increase in the yield. Some of that Mickey could relate to deals that we're getting paid out of deals where we earned prepayment penalties or deals where we generate other types of yield throughout the term that may be amortized or not. I think that where we are right now is a good place.

If you look at first lien across the board in our industry, I think we're at the very high end of generating first lien deal returns yet at also with the very high end of generating lower attachment points of our debt at under four turns of leverage.

So, part of the reason again is the platform. I talked about this in past calls. We generate - we've got about 2,000 investment opportunities that our origination team looks at each year. And of those 2,000 investment opportunities, we tend to execute on somewhere between 2% and 3% of those investment opportunities.

So we're able to I think really carefully select the very best risk return opportunities for us to invest in with the very best companies. So that's why I think you'll see a unique combination of strong yield, but very low leverage attachment points when you look at our portfolio.

Mickey Schleien

That's helpful, Ted. And just one sort of housekeeping question, maybe for Aaron. I realize Answers is not a particularly big position, but based on your comments or the prepared comments, is it reasonable to assume that that's going to go off non-accrual in the coming quarter?

Aaron Peck

I have to get back to you on that. I think it's - what will happen is - it will change completely in terms of the components. Some of the debt was equitized, some of the debt was reinstated and so my suspicion is once we go through all that analysis and get to a final conclusion sometime later in the quarter, we'll make a determination about what should be on accrual, what shouldn't, but it would be incorrect for you to look at the full balance of Answers and say all that comes back on accrual, because that will not be the case.

So unfortunately, for your modeling purposes, it's going to be a bit of a black-hole until we get into end of the quarter and we'll make some determinations in the next few weeks here about what can accrue and what can't. And I do think some of this will be accruing again. The first piece of reinstatement I just don't have an answer for you today unfortunately.

Mickey Schleien

That's fine. I mean, it's not really large position, but I do try to model it at that level.

Aaron Peck

Sure.

Mickey Schleien

I appreciate your time this morning. Thanks.

Aaron Peck

Thanks, Mickey.

Operator

Thank you. Our next question comes from the line of Brian Hogan of William Blair.

Brian Hogan

Good day.

Theodore Koenig

Good day, Brian.

Brian Hogan

First question is focused on credit quality. You've done a I think a great job of managing credit quality ever since we've known you and so I just think the last several quarters that we've seen kind of a weighted average risk rating gradually creep-up and are still very good, but I just think what's driving the moving parts within there. I mean obviously Grade 3 moved up a decent chunk and Grade 2 moved down. Can you just kind of explain the moving parts here?

Theodore Koenig

Sure. I will be happy to. Good question. So there's a couple of things reflect here. One is as you know as you ramp a portfolio given the nature of debt and given the fact that we - I don't remember us ever moving something from two to one. The natural migration is that everything comes on as new as two and some things invariably will not perform as well and will move down in ratings. So I think it's - the natural seasoning of a new company, will see some decline in its average risk ratings, so that's part of it. And the other part is that we're actually pretty conservative about how we mark things in terms of risk rating. I always say it's kind of like a roach motel, it's easy to get in and hard to get out. So it's very easy for credit to move down to a three and move from a three to four, but it's very hard for us doing something up from a four, two to three, or a three to a two and so we tend to be very conservative about those movements. And I don't think it's anything more than that.

Brian Hogan

I appreciate that. And a question on I guess Ted, where are you seeing opportunities today, I mean what sectors, what is most appealing today, where is the highest returns there or is it just broad based?

Theodore Koenig

That's a hard question to answer, Brian, it's not, we're not necessarily looking for highest returns. I realize that many of our, or some of our peers in the industry may be doing that, but that's not our business model. We look for consistent good companies that cause us no headaches. That's our game plan here and as part of that we tend to want to have a diversified portfolio across lots of industries and intensive finance companies that have a reason to exist in their particular industry and have a good management.

I think if you look at it as opposed to the kind of the return side of the equation, it's good companies that have a reason to exist that have good management and over long period of time, the returns take care of themselves, I mean we've been doing this in the public side for - since 2012, with our private funds we've been doing this, since the year 2000.

So I will tell you over that period of time in and out of many credit cycles, it's really the quality of the company that matters. We've got a good mix between private equity sponsored companies and non-sponsored companies and we tend to have, as I said earlier, pretty deep origination and outsourcing coverage throughout the US.

But we also have industry vertical sector coverage and I will tell you that the industry vertical sectors that we operate in have been positive contributors to our overall return in yield and the industries that we cover on a sector basis are healthcare, are technology and software, specialty finance, retail ABL consumer and the last one is media. So within those specific industries, we've been able to take deep dives in trying to identify the very best companies in those spaces.

Brian Hogan

All right. I appreciate that. Just one little housekeeping things with that. Did you mention and I guess probably maybe I missed it the spillover earnings that you've carried over?

Theodore Koenig

We did. We have approximately 40 - what's the number?

Aaron Peck

$0.43, spill over earnings that we are carrying over.

Brian Hogan

All right. And then in addition to your $64 million of capacity on your facility and $55 million of SBA debentures available, what would you classify as being transitory assets that you can maybe swap out?

Theodore Koenig

Yeah, I mean basically the way I think about the transitory assets is, it's mostly anything that's our first lien loan sort of below 7% is typically transitory, so you won't see a lot. We had one we sold in the period for a small gain, as we saw some opportunities to fund into direct deals, but there's another time what I call transitory assets right now.

Brian Hogan

Okay. That's it for today. Thank you.

Theodore Koenig

Thanks, Brian.

Operator

[Operator Instructions] Our next question comes from the line of Christopher Testa of National Securities Corporation.

Christopher Testa

Hey, good afternoon, guys. Thanks for taking my questions. Just curious on your ABL platform whether you're seeing increased better opportunities there and whether we should anticipate any pick-up on that composition within the MRCC book?

Theodore Koenig

Thanks, Chris. We're looking at lots of opportunities there. And the question that we're always focused on is in ABL to the extent it's general ABL. That's a very competitive market from a return standpoint, because the banks, the traditional regulated banks are very active in that space, so it's very competitive and the challenge there is to find opportunities that we can generate the required risk adjusted returns that we need for the MRCC portfolio.

And then in the retail space, the retail and consumer goods ABL space, what you have to do is, pick up the papers to read about what's happening there and we're very, very focused on liquidity, not only collateral coverage, but liquidity in those companies and when you put the two together as underwriting standards, collateral coverage and liquidity, many of those companies don't meet the screens.

So we've been highly selective in that space in the last 12 months. And I would assume we're going to continue to see a similar pattern there or unless we can find companies that have good collateral coverage and good liquidity we're probably not going to see an increase in this type of asset in the MRCC book.

Christopher Testa

Got it. And just curious, do you think that the pick-up in competition in ABL is somewhat similar to the cash flow base lending or less or more, so just curious on how that stacks up.

Theodore Koenig

It's probably the same, if not more, because you've got the regulated banks coming into that space more heavily again, as well as some of the non-regulated players.

Christopher Testa

Right.

Theodore Koenig

So what's happened is that's caused the yield compression there probably at greater rates than in the cash flow lending business.

Christopher Testa

Okay. Got it. And just curious, I know you had said that, you're finding the best opportunities obviously in some 50 million EBITDA borrowers. Are there any other deals that you're seeing where you're using the exemptive relief and co-investment to take on larger bite sizes or larger borrowers and finding some good opportunities there as well?

Theodore Koenig

Yeah. Because of our platform, we've got an active capital markets group that see lots of opportunities in the larger EBITDA sized companies and we've executed on many of those as a platform and somewhere in the BDC and MRCC and from there, it's really a question of, as I said earlier, two things, pricing and a leverage attachment points.

If that market tends to be a little more competitive both at pricing and at higher leverage, we're not going to sacrifice our core underwriting criteria, but I'll tell you that there is spots that we identify and there's deals that we're able to do, because we're part of the club and lot of these kind of privately negotiated almost high yield of placements, private high yield placements where we're able to provide a financing solution together with a couple of other club participants to some of the larger EBITDA size companies.

Christopher Testa

Got it.

Aaron Peck

To frame this, I mean, I don't think is more than one or two assets on our balance sheet where [indiscernible].

Christopher Testa

Got it, that's great color. Thank you. And just looking at the investment mix, obviously unitranche has been something that you guys have done a lot of originations and just curious if you see this picking up again and if you've been holding back on this because you're not liking the pricing and structures or because the sponsors are not demanding that as much as maybe a bifurcated structure given there is not a lot of growth acquisitions going on?

Theodore Koenig

The unitranche is an important part of our business as a platform. We do quite a bit of it. Again the BDC underwriting criteria is very specific. We're focused on maintaining yield and we're trying to add responsible leverage levels. So some of the unitranche that we generate an agent is appropriate for MRCC and some of it is not appropriate for MRCC.

Christopher Testa

Okay. And last one for me. Just you guys mentioned that most of our originations were add-on investments, just curious if you have an estimate on what the uses of capital were for your existing portfolio companies?

Theodore Koenig

Yeah. I think I cover that in my remarks. I said about 34% of the originations in the last quarter related to add-on. So, the remainder were new fundings and the advantage that we have as a portfolio is with 230 names across our portfolio of over $4 billion, we generate a robust level of activity each quarter just in dealing with our portfolio companies. I expect that to continue throughout the remainder of the year as well.

Aaron Peck

Just to be crystal clear, Chris. The majority of the funding in the quarter were new deals, not add-ons. 26.3 million is a deal and 14 million of that on revolvers.

Christopher Testa

Okay. That's all for me. Thank you.

Theodore Koenig

Thanks, Chris.

Operator

Thank you. And I'm showing no further questions in the queue at this time. I'd like to turn the call back to Ted Koenig for closing remarks.

Theodore Koenig

We certainly appreciate everyone who joined the call today and we look forward to speaking to you in our next call as well as offline to the extent that you have any specific questions. Have an enjoyable day.

Operator

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

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