Good morning, ladies and gentlemen, and welcome to the KCAP Financial conference call. An earnings press release was distributed yesterday. If you did not receive a copy, the release is available on the company's website at www.kcapfinancial.com in the Investor Relations section. As a reminder, this conference call is being recorded today, Thursday, August 2, 2018. This call is also being hosted on the live webcast, which can be accessed at our company's website at www.kcapfinancial.com in the Investor Relations section under Events. Today's conference call includes forward-looking statements and projections, and we ask that you refer to KCAP Financial's most recent filings with the SEC for important factors that could cause actual results to differ materially from these projections. KCAP Financial does not undertake to update its forward-looking statements unless required by law. I would now introduce your host for today's conference, Mr. Dayl Pearson, President and Chief Executive Officer of KCAP Financial. Mr. Pearson, you may begin.

Thank you. Good morning and thank you all of you for joining KCAP Financial for review of our second quarter 2018 results. Today, I will review key highlights and activities from the quarter. I will then turn over the call to our Chief Financial Officer, Ted Gilpin, who will provide a more thorough review of our operating and financial results for the quarter, and then open the line for the questions. Overall, we've continued to execute on our strategy to lower our overall borrowing costs, optimize our balance sheet and position ourselves for growth. Second quarter performance was relatively flat compared to the prior quarter, which is due mainly to competition in the market around high quality transactions as well as higher than expected professional fees. The competitive environment has led to spread compression and we have elected not to deploy capital on transactions where we judge the market was not offering yield commensurate with risk. As a result, while we have actually been a little slower to put capital to work than we anticipated, we have been vigilant with the result that the credit quality of our portfolio continues very strong. Whereas, the wider industry has seen a sharp increase in nonaccruals, we have a good portfolio of assets, strong liquidity and lot of flexibility in our path forward. Let me briefly touch on our sources of liquidity. As you will recall, we have a credit line of $50 million of which approximately $29 million remains undrawn. We also have cash on hand of approximately $15 million so our current dry powder is approximately $44 million. Our ability to sell some of our lower yielding loans provides us with an additional source of liquidity, although we have rotated out of most of the legacy placeholder assets. Turning to our…

Thank you, Dayl. Good morning, everyone. As of June 30, 2018 net asset value stood at $4.72 compared with $4.85 as of December 31, 2017. As Dayl just mentioned, our net investment income was $2.5 million or $0.07 per basic share for the second quarter 2018. Net investment income for the six months ended June 30, 2018 was $5 million or $0.13 per basic share. While estimated taxable distributable income for the six months of 2018 was $0.14 per basic share. Interest income on our debt securities for the quarter ended June 30, 2018 was $4.3 million or $0.11 per share compared with $3.8 million or $0.10 per share for the first quarter of 2018. Interest income on our debt securities was $4.8 million or $0.13 per share in the second quarter of 2017. Our debt securities portfolio contribution to total investment income for the quarter was 62%, which compares to approximately 55% for the first quarter of '18 and 62% for the second quarter of 2017. Investment income from CLO funds securities decreased to $1.5 million or $0.04 per share in the second quarter of 2018 from the $1.9 million or $0.05 per basic share reported in the first quarter of '18 and $2.8 million or $0.08 per share in the second quarter of 2107. We experienced $3.8 million or $0.10 per share of unrealized losses on the portfolio during the second quarter with AMA and CLO equity positions accounted for $2.3 million or $0.06 per share of that total. We received distributions from our Asset Manager Affiliates of $800,000 or $0.02 per share in the second quarter of 2018, $500,000 of which - or $0.01 per share, which is estimated to be return on capital. The Asset Manager Affiliates distributed $650,000 or $0.02 per share in the second…

[Operator Instructions]. The first question call comes from Paul Johnson of KBW.

My first question has to do with the outstanding debt, the bonds that you have outstanding. I see that the larger of the two, I guess, is callable on September of next year. I'm wondering if you guys have any thoughts around - as you approach that date, it's obviously after that March date that the 2:1 leverage goes effective for you. Do have any thoughts around what you would do with those. And if you could potentially, I guess, call those whether or not have the priority?

Yes, I think it's going to be a function of where we are in terms of being fully invested in. And I think, obviously, those are attractive from a rate perspective right now. But, obviously, taking advantage of the increased leverage is even more attractive. So it's something that we've discussed at the board level and I think we don't need to make a decision on it today. But assuming we can get to a point where we're closer to where the current leverage cap is, we probably would call those bonds and refinance them with our credit facility. Our lenders are constantly asking us when we're going to upsize and borrow more? So we have a fairly friendly lender group that wants to see us borrow more from them. So I would anticipate we're on this call in April or rather August of next year we'll probably have a clear path on that.

Okay, thanks. It's very helpful. And my second question has to do, is there anything in particular that drove the write-down this quarter in the asset manager, I think it was written around - down around $2 million or so. I'm just wondering if there is anything...

Yes. I think that's reflective of the fact that we had made a loan to the asset manager for them to enter into a couple of risk retention financings for Catamaran 2013-1 and 14-2. So we had a financing on the entire strip - the 5% strip, including the equity owned by the asset manager. And we unwound all the debt. We paid off all the debt, which reduced our loan by about $6 million. We still have a small loan outstanding, which was - which is - the interest on which is more than covered by the distributions from CLO equity. Those CLO equity pieces, as with our other CLO equity pieces, were impacted in the quarter by some sort of technical things, particularly the fact that there was a historic spread between one month and three month LIBOR. I think something close to 60% of our borrowers chose one month LIBOR and of course we have to borrow at three months LIBOR in the CLOs. So that 30 basis point differential had an impact in the short term on the cash flows which impacts the valuation, so it will - so impacted those equities. We anticipate that - is that spread narrows. We anticipate that sort of reversing itself over the course of the next quarter or two.

[Operator Instructions]. There are no more questions in the queue. I would like to turn the call back to Mr. Dayl Pearson for any further remarks.

Thank you, and thank you everyone who was on the call today. And we will be speaking to you in the third quarter in early November. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.