At this time, I would like to welcome everyone to the Barings BDC Inc. Conference Call for the quarter ended September 30, 2020. All participants are in a listen-only mode. A question-and-answer session will follow the company's formal remarks. [Operator Instructions] Today's call is being recorded and a replay will be available approximately two hours after the conclusion of the call on the company's website at www.baringbdc.com under the Investor Relations section. Please note that this call may contain forward-looking statements that include statements regarding the company's goals, beliefs, strategies, future operating results and cash flows. Although the company believes these statements are reasonable, actual results could differ materially from those projected in forward-looking statements. These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks, including those discussed -- disclosed under the section titled Risk Factors and Forward-looking Statements in the company's annual report on Form-10K for the fiscal year ended December 31, 2019 and quarterly report on Form-10Q for the quarter ended September 30, 2020; each is filed with the Securities and Exchange Commission. Barings BDC undertakes no obligation to update or revise any forward-looking statements unless required by law. At this time, I will turn the call over to Mr. Eric Lloyd, Chief Executive Officer of Barings BDC. Ladies and gentlemen, please standby, we need to bring Mr. Lloyd back online. Mr. Lloyd, please go ahead.

Thank you. And I guess this goes with 2020. We start conference calls with challenging situations like this. So apologize for that, I got dropped. Thank you, Donna. Good morning, everyone. We appreciate you joining us for today's call. And I hope you and your families are doing well and staying healthy and positive during these times. Please note that throughout today's call, we'll be referring to our third quarter 2020 earnings presentation that's posted on our Investor Relations section of our website. On the call today I'm joined by Barings BDCs President and Barings Co-Head of Global Private Finance, Ian Fowler; Tom McDonnell, Managing Director and Co-Portfolio Manager; Brian High, Barings Head of U.S. Special Situations and Co-Portfolio Manager; and the BDC Chief Financial Officer, Jonathan Bock. Ian and Jon will review details of our portfolio and third-quarter results in a moment, but I'll start off with a few high-level comments about the quarter. Turn with me to Slide 5 of the presentation. We've shown this slide in the last several quarters to provide a sense of the volatility of broadly syndicated loan prices and the correlation to BDC equity prices. In the third quarter, broadly syndicated loan prices continued to increase with spreads down over 100 basis points. BDC equity prices, however, remained relatively flat quarter-over-quarter, largely driven by factors such as select dividend reductions and increased non-accruals for some companies. Jumping to our third quarter financial highlights on Slide 6, Barings BDCs net asset value per share improved by $0.74 in the quarter, a 7.2% increase, to $10.97. Unrealized appreciation on our investment portfolio was a primary driver of this increase as market and credit-driven improvements continued to help reverse some of the unrealized depreciation we experienced in the first quarter. As of September 30, our total…

Thanks, Eric and good morning, everyone. Focusing first on the broader market, please turn to Slide 10 of the presentation. As you would expect, middle-market activity is down in the U.S. this year compared to 2019 with a focus on add on acquisitions. This is where Eric's comments have a wide frame of reference are or particular importance. If there's a limited universe of quality transactions in the market, firms with the ability and experience to execute across investment types will be in the best position to take advantage of the quality opportunities. Jump to Slide 11. The Credit Suisse Single B leveraged loan index continued to tighten in the third quarter, and is now back inside middle-market levels. As we saw an increase in activity, direct lending spreads were generally within a 25 basis point range across the different sub-sectors relative to the second quarter. Switching gears to the Barings BDC portfolio on Slide 12, we show a summary of our investment activity for the third quarter. So we are on the same page, let me define cross-platform investments. We are categorizing investments here that take advantage of the breadth of the Barings investment platform, including items such as opportunistic liquid loan and bond investments, special situation investments, and structured products that would include CLOs and asset-backed securities. Relative to a slow second quarter, the third quarter was much more active in terms of both middle-market and cross-platform investments. Net new middle-market investments totaled $53 million, with gross fundings of $96 million partially offset by sales and repayments of $43 million. New investments included seven new platform investments, totaling $80 million and $16 million of follow-on investments and delayed draw term loan fundings. We also had $50 million of additional cross-platform investments, and continued the rotation out of our…

Thanks, Ian. On Slide 19, you can see the bridge of the company's net asset value per share since last quarter, showing an increase of $0.74 per share. While our net investment income outpaced our dividend by $0.01 per share, the primary driver of the increase was net unrealized appreciation on our investment portfolio and foreign currency transactions of $1.17 per share. This appreciation included $0.59 per share reclass adjustment to more than offset the $0.43 per share net realized loss on investments in foreign currency. These net realized losses were driven primarily by sales of investments in our initial BSL portfolio, with roughly 80% of those losses coming from the complete exit of position win [ph], Fieldwood Energy and Men's Wearhouse. You can see a further breakdown of our net unrealized depreciation on both $1 and per-share basis on Slide 20. The $1.17 per share of net unrealized appreciation, which equates to approximately $56 million included an appreciation of approximately $17 million on our middle-market investment portfolio, of which $14 million was attributable to lower spreads in the broader market for middle-market debt investments, and a million of which was attributable to underlying credit or fundamental performance. Both, our crust -- both our cross-platform investments, and our initial BSL portfolio saw appreciation of $7 million. And we have $28 million of reclassification adjustments I mentioned that more than offset the $21 million of net realized losses we incurred in the quarter. I'd like to point out that Slide 20 provides a further breakdown of the value for our cross-platform investments in a special situation, opportunistic liquid, structured products, and our joint venture investments as we continue to look for ways to increase the clarity and transparency around our investment portfolio. Slides 21 and 22 show our income statement and…

Thank you, ladies and gentlemen, the floor is open for questions. [Operator Instructions] In the interest of time, we do ask that participants limit themselves to one question and one follow up before rejoining the queue for additional questions. [Operator Instructions] Our first question is coming from Fin O'Shea of Wells Fargo. Please, go ahead. Mr. O'Shea. Thank you.

Hi, everyone. Sorry about that. Thanks. Appreciate everybody the opportunistic strategy breakout and now it looks like you'll have more of an unsecured debt profile. So I guess, first question for Eric, does this mean we'll see a shift in strategy, or perhaps a more fluid strategy on the origination side? Obviously, the BDC started out mostly oriented to middle-market, but it looks like you started to get opportunistic in the volatility this year, which is obviously great. And now we're seeing more clear language. So, any just high level on what this means for how we look at the BDC going forward.

Thanks, Ben. So those of you who joined us almost two years ago -- now, a little over two years ago when we were able to execute on the triangle transaction, we were new to the BDC space. And I said at that time on our initial call that the first job order was, frankly, to establish credibility with our shareholder base, with the analyst community, and within the industry, and do what we say we're going to do. And the focus then, and continues to be the core part of the portfolio to be directly originated first lien senior secured loans. To Jon's point, we think the fee structure allows us to do that at levels that are very sound from a credit perspective, as evidenced by the lack of -- we have no non-accruals on our -- in our portfolio right now, in the BDC, while also kind of preserving the return that we're targeting for investors. That being said, as we've kind of evolved over the course of the past quarters, we've tried to share, at times kind of the insights into Barings platform. You saw some European deals if you go back a year ago, and then we've started to introduce some of our other capabilities into the BDC from an investor return perspective. That's not intended to be in any way, shape, or form a shift in strategy, but I do think when we think of the 30% bucket that we have, now, it is our obligation as a manager to make sure that we're looking for the best risk adjusted returns across our wide spectrum of investment capabilities we have at Barings, and bring those to bear for our investors, of which, obviously, at Barings we're by far the largest investor in the BDC. So, no shifting strategy, we're still going to say we know we call it boring is beautiful. The core of the portfolio is going to be directly originated, firstly in senior secured. But you will continue to see some portion of that 30% bucket, do what I believe we're being paid to do, which is find the best risk-adjusted return -- returns, we can particularly in parts market volatility, and we're agnostic to wherever that comes within Barings. This is a Barings BDC, not just our private finance platform.

Sure, that's very helpful. Thank you. And another one on platform verticals, on middle-market, Europe, that appears to have been very robust this quarter. A lot of that was sold to the -- down to the JV. Just trying to get a feel as to, that -- was that for the BDCs appetite or was that to create space for MVC? I know they have Europe as well, but just on a higher level, on allocation, how does the BDC and JV fit in line? Are they both equals in claiming allocation to Europe deals? Or does the BDC get its fill and then the JV gets its fill of that? Any color on how we can think of where Europe fits in for, I guess, essentially, the BDC shareholders.

Sure, Fin. So we'll start with kind of a high level view of where we believe that the joint ventures can make a quite a deal of sense. So, to manage the 30% bucket, it's always important to realize that the JV it's about diversification of return across a wide investment frame, not over levering middle-market or over levering BSL investments in order to generate a risk-return to try to solve the problem. And so what happens is, when the BDC participates, the BDC participates in Europe and U.S. loans on the exact same frame as all our clients. But remember, the BDC cannot hold vast majority of European loans because of a result of the 30% limitations. So what you'll see is there's a level of diversification what we call loan transfers or sell downs to the joint venture, so that the BDC can still have exposure to the space. But at the end of the day, not end up over-allocating the 30% bucket into let's say just a few a few names across Europe, it's nice to have a very diversified portfolio. So, on a go-forward basis, then you'll see -- you referenced the transfers, those would have been European loans that were done in a previous -- say two quarters ago, right? And then they were effectively transferred down and you can expect to see transfers in the future, kind of keep into the view that the BDC wallet wants to have some level of European exposure, it does always make sure to watch that diversity level appropriately. So from a participation perspective, it all starts with the BTD, is what gets onboarded inside the BDC and then gets transferred down to the JV, as both the partners agree to -- if it's an attractive opportunity to transfer down. And so really, it's about diversification. It's about maintaining. What we saw, at least in this quarter was, as Ian had outlined, attractive DM, but also making sure that diversification bright -- widely occurs both in the joint venture and in the BDC portfolio itself in that 30% bucket.

Thanks. And can you remind us of the JV's target leverage profile?

I think when we announced the transaction nearly a quarter and a half -- or sorry, nearly a year and a half ago, there was an expectation of roughly 2x, right? Across the equity position, note that, this is a JV that BDC participates in with roughly $50 million capital investment and our JV partner at roughly $500 million in equity.

Okay, that's helpful. Thank you, everybody.

Thank you. Our next question is coming from Robert Dodd of Raymond James. Please go ahead.

Hi, guys, good morning. Congratulations on the quarter and also on the disclosures. Some of those things incredibly helpful to us and I think investors, particularly like the restructured pic, right? I mean, it's zero for you but that element is something that's extremely difficult to tease out of schedule investments but provides a very compelling picture for your portfolio, and contrast it to some others out in the market. But that -- just on the spreads successfully that you saw, you're seeing, I mean, on Page -- Chart 14, if I look at the middle-market, like the average spread to the middle-market business now is 536. At the end of 2019, it was 528. So it's only moved up very modestly while leverage obviously has ticked up the leverage in that portfolio was 47 at the end of 2019, it's 52 now, in the context of what's going on Chart 15 where your deployments were at 730, meaningfully higher spreads. Can you walk us through kind of the change there in terms of spread to leverage and how that relates to kind of the much wider spreads you saw in the deployments for Q3 as there's a 200 basis points wide of the average for the quarter? Just trying to get a feel of risk, leverage pricing, et cetera and how that's playing out.

Robert, it's Ian, I'll start and Eric or Jon can jump in. So a couple things going on here; first of all, as you look at the portfolio and you look at Europe versus U.S., typically in Europe, the deals are bilateral deals, so there's one tranche of debt. And typically, that debt is a little higher than the US market. But at the same time, the OID and the spreads can be higher as well. So on a relative value basis, it can be a very attractive investment. And then in terms of the U.S. market, the way I would look at it is in this market, any company that certainly in the third quarter, and now that's getting finance and attracting new capital is a high-quality company. It's COVID light or COVID green. It's performed well and it's under writable through a recovery that we yet don't know what that geometry is going to look like. And so if you look at the -- and you're right. If you look at the spread, the spread is pretty much flat in the U.S., a little different than Europe. The leverage has actually come down about a quarter of a turn-ish, but what has changed in the North American market is the OID and that really reflects the fact that in this market, the scarce deal flow, sponsors are trying to take deals off the table, whether they're proprietary in nature, or it's a- it's a limited auction. And it's highly competitive. And so sponsors are looking for financing partners that can provide capital and reliability and responsiveness to help them take those deals off the table. And so they're paying more for those deals through the OID. So if you're an agent, if you're leading these transactions, you're benefiting from that higher OID and you can see on that portfolio chart that our OID is around 3%, which was definitely higher than pre-COVID. You add on to that in North America, slightly lower leverage better documentation and really high-quality deals, ad so you get to a point where you can look at a very attractive investment opportunity. And you can look at it in terms of on a relative value to the liquid market. We talked about that illiquidity premium or you can break it down to return by turn the leverage and look at it from that perspective as well.

Sorry, I appreciate that. If I can, kind of tying onto that. The slide, I guess 27, originations since -- in Q4, since. I mean, the DMVs and spreads are not the same thing. But that 8.2%, that seems to be holding in pretty well, right? I mean, given where spreads were in Q3, can you give us any color on -- for that Q4 origination, those Q4 origination so far? I mean, is any of that -- the really high spread opportunistic stuff that you did in Q3 that we see on Slide 15? Or is that more of the middle-market type deals where you're still finding opportunities to capture quite attractive spreads and DM margins, even in Q4, even with competition coming back?

I'll start with the middle-market and then I'll let Eric and Jon jump in. We continue to see the deals that we are working on continue to be attractive from that perspective. Now, obviously, there's a lot of capital out there. And so our expectation is that with this competition you're going to see some of those returns compress overtime. I think the other thing that you want to be focused on is, and I mentioned this earlier, once you get through a dislocation, it's really the high quality businesses that can attract new capital. And clearly, there are companies coming out of the woodwork here that maybe aren't so high quality in nature, they're going to be looking for financing. So you want to make sure you pick the right ones. And so what we're not going to do is start taking undue risk and looking for that return and take on too much risk for that return. So we're going stay disciplined. And I think we're in a really good spot, because as we went through the whole COVID situation, while other platforms were dealing with capital issues and liquidity issues, we didn't have any of those issues. So the market saw us as a stable and reliable source of capital. And quite frankly, we're getting a lot of plat -- a lot of portfolio companies and new platform opportunities coming to us because of what some of these sponsors saw during the market. And then a couple cases, we've actually replaced existing agents. So I see a continuing, we're extremely busy right now in terms of the pipeline. But nothing lasts forever, so we expect things to get back to fairly competitive environment. And Eric and Jon, I don't know if you want to add anything to that.

I think, Ian, you answered it very well on there. Just specifically, Robert, that does refer to not exclusively, but very much our core directly originated in middle-market business. So think of those deals that were funded in October, those were probably August type of initial due diligence and transactions now as time goes. And so as Ian said, nothing lasts forever. So it's a -- it's more competitive today than it was in August, but we're still finding some really attractive opportunities.

Got it, got it, I appreciate that. And one more, if I can, obviously, your leverage pro forma for cash, or short term investments in these deployments obviously, is in a pretty good spot. The MVC deal, if it's approved by shareholders, would you lever you even more? And even in the context of that leverage, obviously, earnings are very good and drove an increase in dividend. So, given the TLC [ph], you have managed to -- or the attractive spreads you've got with the --this leverage profile, have there been any thought to either maybe even targeting, staying at a lower leverage given that if you can produce the earnings at a lower leverage, that's no risk all in? I mean, any thoughts on that?

Yes, so we started at the beginning of this, I think one of our first calls I referenced now managing the liability side of our balance sheet was going to be something we focused on and hopefully, would be a differentiator for us. And I think what you've seen with our cost of capital or unsecured debt issuances that you've seen here, staggering out those maturities have all been positive. When we looked at the pipeline, we saw coming in, really, that August, September timeframe, and have the strength of the pipeline that we saw for October type of closings. And as Jon referenced, the probability weighted pipeline that exists now going forward, combined with the return or the strength of the liquid market, we really viewed it as a time to, frankly, shell a lot of our liquid collateral at that time, that it added some volatility to our underlying NAV, and move that -- and so shell that, that created the cash which makes the net leverage, to your point, at attractive level. We saw the pipeline coming through. We said all along, we -- buying optionality on whether it be unsecured credit, to go back to our original revolver, we ended up taking more rev -- more revolver capacity than we initially went out for to buy that optionality. And so to the extent that we can generate the appropriate return for shareholders, at a lower leverage is something we'll absolutely evaluate. It's really for us, it's about maintaining that optionality and that flexibility to make sure that when the market opportunity is there, that we have the leverage capacity to take advantage of it, for a benefit of shareholders.

Got it. I appreciate that. Thank you, and congrats on the quarters.

Thank you. Our next question is coming from Ryan Lynch of KBW. Please go ahead.

Hey, good morning. Thanks for taking my questions. I know this is just one-quarter of data that we're looking at, that I really appreciate the breakdown of the investments in the middle-market versus cross-platform. But this quarter, two-thirds of your originations were kind of in the middle-market and a third were in that cross-platform. That feels pretty high, but do you think you're going to sustain that type of breakdown? Or is it just given this uncertain economic times, this is creating increased activity in that cross-platform and any sort of long term break down? Of course, it depends on the market environment, but do you have any sort of long term breakdown of what percentage of that cross-platform strategy you would like to make as a percentage of portfolio just given that -- how much higher-yielding strategy?

Thanks, Ryan. It's Eric. It really is just what the market opportunity provided us. It wasn't a huge volume quarter, if you look at the middle-market relative to the cross-platform, but we saw some good opportunities in our across-platform investments, and we thought to capitalize on them. If you look at the October number that we referenced there, you see that be a much, much higher percentage of directly originated, first-lien senior secured and a look at Q4, I would think of it as kind of a core stuff that we told you we were going to do over time. So we don't have a target, we don't look at it and say we want 25% of it to be that. We look at it and say, you got to manage the 30% bucket, right? We don't want to get right up against it too much from a percentage basis. So if you think of that, the core part of the portfolio, and I'd say it's kind of always going to be kind of 75%-plus of what we do. But I do think that when we see those opportunities and one of the benefits, I think, Barings brings to the shareholders is between our really deep liquid team and U.S. and Europe, our structured credit team, our private and public ABS teams, we just -- our deal flow is really robust across various asset classes. And as importantly, it gives us a relative value framework that I think if you go back to fourth quarter, I think it was two year -- a year and a half ago, or so, we had a really slow origination quarter and that was where we had a lot of volatility in the liquid markets. And we didn't see a real illiquidity premium, so we kind of put our foot on the brake on the middle-market in that case, because we didn't really see that as value. And so where we do see value, we're going to step in there to benefit shareholders, but I wouldn't view it as a change in strategy and nor is it a target we have, but I would think of it as using that 30% bucket, some portion of it for this type of investment, which I think can help differentiate ourselves versus other managers.

Okay, understood. Just recently, over the last several months, you guys have done a really good job getting the IG rating and diversifying the liability structure with some unsecured notes, and including more in the fourth quarter. Obviously, there is a lot of benefits and I think that that's -- that that should be well received by the market, you guys' diversification liability structure. Those unsecured notes are a little bit higher cost from your line of credit. So I'm just wondering, as you stated today with pro forma for issuance, you guys have done in the fourth quarter, you feel good about the composition of your liability structure or would you still like to layer on additional unsecured notes in the future if the pricing is right?

Right. Ryan, this is Bock. I'll argue that there is -- there's certainly an opportunity to layer in more unsecured debt, just generally speaking, because there is a general expectation for that of investor grade BDCs to have senior secure -- or secured debt, right? Think of your revolvers, no more than 30% of your total assets. And so you can kind of look at our ratio and understand that where we are versus where many IG-rated BDCS are targeted or kind of ranked. Honestly, the true north when it comes to how you think about unsecured debt issuance comes out in Slide 28, because clearly, everyone saw the benefits of unsecured debt issuance, right? It helps quite a few respected peers navigate the timeframe. And it also avoided the material dilutive rights offerings, et cetera that it occurred in more secured-oriented type debt structures. That being said, you don't want to let your liability structure become the tail that wags the dog. And so if you have a high focus on attractively priced debt and you make sure that when you put it together with your alignment, your fee structure, etcetera, and you're able to continue to prosecute across a wide array of assets with that required spread mass that we reference, then yes, it's attractive because it provides flexibility and protection during times of volatility. But at the same time, it doesn't force material yield seek to the detriment of investors because you can see that happen just as fast because it's a two-edged sword. So for us, we're comfortable. You can kind of see the math outlined on 28. And that's more of a long term view for us. And so you could expect the additional unsecured debt to be layered in, while keeping a very important point on price and realizing that there can be downsides when you increase your unsecured debt too much to the point where it forces you into the wrong asset base at the wrong time. But right now, we can expect more and still allow us to achieve our objective returns with a very stable and boring liability structure.

Okay, understood. That's all I had today. Congrats on those really nice quarter, guys.

Thanks, Ryan. Appreciate it.

Thank you. Our next question is coming from Casey Alexander of Compass Point. Please go ahead.

I know we only have a couple minutes, but I just have two questions. It -- was it at the point where -- when you looked at the spread available on the broadly syndicated loan portfolio which you said the yield at fair value was 480 versus your cost of capital as it simply didn't make sense to hold any of them anymore?

Less of a cost of capital decision, Casey, and much more of a -- of an opportunistic redeployment opportunity, because clearly, you can look at those two as exclusive events and not necessarily connected because even a smart manager that might be raising carry [ph], right, could still hold liquidity at a certain cost, to the extent that they felt they weren't exiting those proper fair value and redeploying them at widespread.

Yes, okay. And secondly, Ian, if you could give us some color in terms of, when you talk about the cross-platform investments, and I understand what Eric says, you're still in Barings lane, you're not in the normal lane of the normal BDC. So I think investors would benefit from understanding what type of companies are these? What type of opportunities are these that are creating this excess return, so that they can get a better feel with some more specificity about how you're investing and what you're investing philosophy as?

Well, we have Brian High who's on the phone to answer that. He's one of our co-portfolio managers. He runs our U.S. special situations business. So maybe, Brian, if you're available to add a little color to that, and then, Ian, you can [indiscernible].

Yes, sure. Thanks, Eric. So if you -- if I just have you turn back to Slide 15, you can see that Jon broke it down nicely in a few different buckets, special situation investments being -- think of them as more of a rescue financing type of an investment of good companies that got caught up in COVID, running out of liquidity, and we're looking for attractive ways to provide them capital, with solutions that are maybe a little bit not down the middle of the fairway, whether it's a drop-down of assets to finance on a first name basis, or a super senior loan or something like that. Opportunistic liquid is exactly what it would sound like. It's just good intrinsic value based on dislocation in the market. Typically, for this vehicle, we're looking for more off-the-run transactions that maybe don't have a liquidity in the market, and we know them fairly well, given the research platform that we have here at Barings. And then, the structured products; this is another form of rescue financing. The theme that I would point to I guess, in the third quarter with WTCs [ph] is related to some of the airlines providing capital, with some of the metal as a collateral, but having the underlying risk of the airline as well. So we think we get a good risk-adjusted return, given the fact that we have those hard assets. And we can leverage our ABS team within Barings as well as our real assets team to really understand exactly what it is we're lending against, and then take a broader view on the overall credit of the airline as well.

Okay.

Casey, big part of your quote [ph], as well as this kind of theme that Ryan hit at, Fin hit at. From day one, we promised you transparency and communication. So one of the takeaways for me will be, if we get to the point we can have Investor Day, well, maybe it'll be virtual, we'll Zoom it or something, we'll do a real focus on these other areas, because I think we spend a lot of time on our traditional first lien senior secured middle-market business. But maybe we'll do some time during that investor meeting to really do some deep dive in a couple of these areas so that people can get -- really understand the teams, the depth of the team, the track record, and all that so that there's no concern around it.

Great, that's helpful. Thank you. That's all my questions.

Thanks, Casey.

Thank you. Our next question is coming from Kyle Joseph of Jefferies. Please go ahead.

Good morning, guys. Nice quarter. Thanks for taking my questions. And, yes, let me echo that I appreciate all the color and the deck. I know you guys have a lot going on, I think the deck does a good job really explaining it and making it easy to understand. So appreciate that. Most of my questions have been answered, just a few. Obviously, in terms of portfolio yields, obviously, there were some kind of nuances in the quarter in terms of the buildup of short term investments ahead of the debt paydown. But just want to get a kind of a refreshed outlook, given the portfolio rotation we saw in the quarter, some of the new investments you're seeing in terms of ABS and opportunistic -- give us a sense for your kind of near term yield outlook. And then layer in how that looks with the -- theoretically and MVC portfolio on top of it into next year.

Kyle, what I would do, is if you turn to the balance sheet, so clearly, you can, also looking at our subsequent events, right? The DMs on average of 8.2%. So -- and as Ian and Eric outlined, kind of a focus on the core direct lending at widespread, expect that to continue. You can expect the debt structure to change now that you know, of course, we announced the securitization pay down as well as the unsecured debt. And so when you get to that kind of blending, right? You can approach certainly a leverage target a bit higher than where we are now. But before the de-levering activity that would occur on the onboard of the MVC merger, right? So all in all, I think it was perhaps referenced previously that you can expect origination strength in the quarter from our -- from ourselves. You can also expect earnings lift as it relates to a higher earning portfolio that becomes on-boarded. And you could also likely expect leverage to remain fairly constant over this timeframe. Well, not -- a little bit higher than $0.74, clearly, because you can imagine it's been a heavy deployment quarter. But at the same time, with more -- we'd be left with more than enough carrier dry powder capacity to take advantage of opportunities in the future while still generating a -- an improved ROE as a result of the rotation. So all those kind of factors come together to just point as a refresh of improved ROE, we still improved ability to deploy capital, to the extent volatility returns and middle-market volumes stay robust, moving into 2021.

Very helpful. And then one follow up for me, I think it's been glossed over a little bit in the quarter, but obviously, we were -- we're still in a pandemic, there's a lot of companies struggling. I know you guys reference no non-accruals and no increase in pick [ph] income from restructuring and anything like that; but can you give us a sense for just broadly how portfolio company performance has trended between second quarter and third quarter? Did you see ongoing recoveries did some continue to struggle and just kind of talk about the trends you're seeing in -- on average in your portfolio?

So I'll share with you a couple of high level comment, and then turn it over to Ian to kind of give some specifics. I'd say -- the first thing I'd say is the partnership approach I've seen with our private equity clients during this situation has really been strong. And I think that partnership from both sides, really is defining in a lot of ways and I think will lead to enhance relationships, too. I'd say management teams in general, have adjusted business plans and business models much more quickly and much more creatively than I would have expected. And so I think just in general, I'd say the partnership that the private equity firms and us have worked in a constructive manner, combined with management teams who have been, I'd say, very impressive on their ability to adapt, are really part of the reason or a lot of reason why this portfolio has continued to perform as it is, in addition to our underwriting on the front end, but I'll turn it over to Ian to give anything specific and kind of second to third quarter.

Yes, well, first of all, I would just put a finer point on what Eric said. I mean, one of the reasons why we like the sponsor business is because of that very fact that sponsors -- if you pick the right sponsors and we underwrite the sponsors that we work with, we expect them to be ahead of the curve and to be proactive. And we definitely saw that during COVID and the dislocation caused from COVID. And of course, as you underwrite the issuer, so we underwrite the management teams. And so the combination of both the efforts by the management teams and the sponsors to right-size the business, but also in terms of communication and transparency, that was really important for us. You may recall that we discussed last quarter, we went through each company in the portfolio, working with the sponsors and the [indiscernible] co-management teams to forecast the next two quarters. And obviously, it was done at a time with a lot of uncertainty. And expecting the worse, we were pretty proactive, and I'd say conservative in terms of our internal risk ratings, and we downgraded a number of companies expecting some adverse impacts because of shelter-in-place and the COVID dislocation, but at a high level, recall that we limit and avoid many consumer-facing businesses generally, and especially those that are discretionary in nature, such as retail restaurants and gyms. So, the good news for us is our portfolio was comprised of mostly essential businesses with -- yes, there were some that were impacted initially by shelter-in-place, but came out of that. And we really avoided the industries that I think a lot of other people have had to deal with, in a tough environment where the business model's been impaired because of COVID. And they haven't been able to work their way through it. So third quarter, we just saw a lot of better financial performance than what we initially estimated when we had those initial conversations. And we've reversed many of those downgrades that took place in the second quarter.

Very helpful. Thanks again for answering my questions.

Thanks, Kyle. Thanks for your time.

Thank you. Our last question today is coming from Bryce Rowe of Robert W. Baird. Please go ahead.

Thanks. Good morning, I wanted to maybe talk about a topic we haven't talked about for the last couple of quarters because of the ongoing acquisition. But with that expected to close here by the end of the year, just curious what the appetite might be for more stock repurchases given your action in the past? I assume that they're still up for grabs, so to speak.

Yes, so we announced as part of the transaction, right? That we'll do $15 million of share buybacks post the transaction, the closing of the MVC. And we work with our board on that strategy on an annual basis, depending on factors. And so it's always something that will be in a discussion that we'll evaluate using, basically, equity as a form of return to shareholders, if it's attractive. At the same time, we want to make sure we balance the scale and liquidity of the underlying corpus of equity too, so that combination with our board is something we look at on an annual basis. But we've already committed to the $15 million post-transaction.

Great. Thanks, Eric. Appreciate it.

You got it, Bryce.

Thank you. At this time, I'd like to turn the floor back over to Mr. Lloyd for closing comments.

I just want to thank everybody for dialing in and your time. I know that the financial's community, y'all are very busy at this time. I appreciate the compliments on our transparency and the quality of the deck and Jonathan Bock and Elizabeth Murray and their team. It's really put a lot of effort into that. And so I'm glad it's recognized by people out in the investor community. If we can answer anything else, always let us know. We're always here. Everybody, stay healthy. Stay positive out there. And thanks for your time and support.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time, and have a wonderful day.