Good morning and welcome to the THL Credit's Earnings Conference Call for its Third Fiscal Quarter 2016 Results. It is my pleasure to turn the call over to Ms. Sabrina Rusnak-Carlson, General Counsel of THL Credit. Ms. Rusnak-Carlson, you may begin.

Thank you, Operator. Good morning and thank you for joining us. With me today are Sam Tillinghast and Chris Flynn, our co-Chief Executive Officers, and Terry Olson, our Chief Operating Officer and Chief Financial Officer. Before we begin, please note that the statements made on this call may constitute forward-looking statements within the meaning of the Securities Act of 1933 as amended. Such statements reflect various assumptions by THL Credit concerning anticipated results that are not guarantees of future performance and are subject to known and unknown uncertainties and other factors that could cause actual results to differ materially from such statements. The uncertainties and other factors are in some ways beyond management's control, including the factors described from time to time in our filings with the Securities and Exchange Commission. Although we believe the assumptions on which any forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate, and as a result the forward-looking statements based on those assumptions also could be incorrect. You should not place undue reliance on those forward-looking statements. THL Credit undertakes no duty to update any forward-looking statements made herein. All forward-looking statements speak only as of the date of this call. Our earnings announcements and 10-Q were released yesterday afternoon, copies of which can be found on our website, along with our Q3 investor presentation that we may refer to during this call. A webcast replay of this call will be available until November 17, 2016, starting approximately two hours after we conclude this morning. To access the replay please visit our website at www.thlcreditbdc.com. With that, I'll turn the call over to Sam.

Thank you, Sabrina. Good morning, everyone. I’d like to begin the call by discussing our investment strategy and the dividend adjustment announced in yesterday's earnings release. Part of 2014, our strategy at THL Credit was supposed on providing higher yielding junior capital to both sponsored and unsponsored companies. As we have mentioned on the last two calls, we have found over time that a number of these unsponsored companies do not perform at our expectations, making new unsponsored and unsecured investments has not been part of our strategy for the past two years and we have gradually shifted our portfolio into more first lien assets and sponsored companies during that time. In the third quarter, second lien loans declined from 20% to 14% of the portfolio. Most of that shift was into first lien loans, which grew from 50% to 55% of the portfolio. Our first lien loans and our investment in Logan, which is primarily first lien loans, together comprise 64% of the portfolio at September 30. We will continue to work through the underperforming investments related to our prior strategy, which in some instances include proactively restructuring our investment to preserve value. Now turning to our dividend reduction. Our dividend policy has always been to make distributions to shareholders in line with what we earn. We have done this consistently over time and have also paid special dividends in quarters where we have had extraordinary one-time gains. Our investment strategy and the market environment have changed since we set a dividend level of $0.34 per share 14 quarters ago. Yields for first lien loans in the lower middle market have contracted this year as more capital has been attracted to the direct lending sector. While it is still possible to find higher yields, we believe those loans often come with a greater risk of principal loss. Together with our Board of Directors, we have considered these factors and their potential impact on future earnings. On November 8, our Board of Directors approved a quarterly dividend of $0.27 per share for the fourth fiscal quarter of 2016, which is payable on December 30. We believe this new dividend level is supported by the long-term earnings potential of our portfolio as we continue to reposition it. Maintaining the dividend at the prior level would require us to invest in higher risk assets, however asset selection and portfolio composition should not be driven by an effort to maintain the dividend. In other words, our focus must be on building a resilient portfolio and paying out whatever dividend that portfolio produces. We believe such a portfolio will produce a more sustainable dividend level while providing an attractive return on equity over the longer-term. And with that, I will turn the call over to Chris.

Thanks, Sam, and good morning, everyone. First I’d like to provide more detail on the efforts made thus far to strategically reposition our portfolio. Since Q1 of 2014, we have increased the percentage of the first lien loans including unitranche from 45% to 55% based on fair value. On a year-to-date basis for 2016, 86% of our investment activity was the first lien securities including unitranche and substantially all the capital we deployed in Q3 was in first lien safer as well. Our last subordinated debt investment in the new credit was made over two years ago and since then we've reduced our exposure to sub-debt to 7% of the portfolio as of September 30, down from 20% percent in the mid-2014. Former strategy has resulted in seven remaining unsponsored investments, which make up 19% of the portfolio at fair value. Four of these credits are performing well being rated one or two. This includes our control equity position in C&K. These four credits represent approximately 10% percent of our portfolio. We are hopeful that we will be able to exit these investments in the coming quarters. The other unsponsored credits Copperweld, Tri-Starr, and OEM, represented about 9% of our portfolio on fair value have all been successfully restructured. As we stated in our earlier earnings call, we are taking a more proactive approach on managing these investments. These actions may include, but are not limited to replacing the management team, closing unprofitable business lines, removing excess costs, actions we can take now as we are owners to these businesses. Our focus here is return of capital, which we believe is feasible in all investment with Tri-Starr, which is our only five rated credit and represents less than 1% of the portfolio. While we will not comment on any one…

Thanks, Chris and good morning, everyone. I will provide a little more color on our investment activity and financial performance during the quarter. Our net investment income per share for the quarter was $0.32 relative to our dividend paid of $0.34 per share and NAV per share at the end of quarter was $11.84, which is down just slightly from $11.88 at June 30. As of September 30, we had 47 portfolio investments valued at $673 million and the weighted average yield on the portfolio was 11.4% including the Logan JV. The $33 million of investment activity we had this quarter included new investments as follows: $15.5 million first lien senior secured term loan in deferred and common equity in Merical LLC, a contract manufacturer of vitamins, minerals and supplements; also included a $5.5 million first lien senior secured term loan in It's Just Lunch International, a personalized matchmaking service. We also purchased $8.9 million of first lien senior secured term loans and revolvers of Tri-Starr at a significant discount as part of the restructuring that took place in Q3 and the remaining $2.90 million was invested in debt and equity follow-on investments in three existing portfolio companies. We generated $21.6 million of investment income this quarter which was comprised of $16.2 million of interest income and debt securities which included $0.5 million of PIK income and prepayments of $600,000 from the realizations of our second lien investments in Granicus, Oasis, and American Covers. We had $2.8 million of dividend income including $2 million from the Logan JV and approximately $800,000 from C&K Market. We also generated $1.7 million of interest income on other income producing securities which include our investments in the Duff & Phelps tax receivable agreement and our two remaining CLO equity positions. And finally, we have…

[Operator Instructions] And our first question comes from the line of Jonathan Bock with Wells Fargo Securities. Your line is now open.

Hi guys, this is Jamie Sirockman filling in for Jonathan. So my first question relates to the dividend reduction at $0.27 per quarter, $0.32 of NOI in the quarter which is exceeding that new level even if you back out from the prepayment fees. So just kind of wondering how you guys think about that your NOI and compare that dividend moving forward and how we should kind of expect that to play out?

This is Sam. I think the way we’re thinking about is we think of the long-term and as we look at new assets and new first lien assets that were looking, they are generally in the 8% to 9% coupon – probably couple of points upfront, couple of points in fees upfront. We amortize those fees over time, so you're looking at 9.5% to 10.5% yields. And so when we factor that in, we think the 27 is the right dividend, it’s sustainable and we’ve had our cushion of earnings above that.

Hey, this is Terry, I would also add. Obviously the portfolio is running a smaller portfolio, slightly delivered, it contribute to a decline in the earnings power of the portfolio as well. I think the combination of the two are really driving our decision.

Great, thanks. It helps. And then just a quick follow-up, if you guys could try a little bit of color around on CRS reprocessing small markdown in the quarter but small BDCs have taken a little bit harder mark. So just wonder if you guys provide a little color on what you're seeing on the scene may be slightly different.

Yes, sure. I call your – when you look at the marks of other BDCs, there is a couple. You probably that triangle as a blended mark in the security I think it was $0.58, we are carrying at $0.91. I think their mark reflects a blend of two securities they own, we own a security to further up the structure. So I just wanted to call that distinction out.

That helps. Thanks.

And as for performance of the company, we really don’t want to get into any specifics. We like to fix March reflect our view on what somebody would pay for the security so the extent things are market par, some level of underperformance reflects to the price. So just to be clear, our security is higher up in the current structure than every other BDC out there.

After that, that helps. Thank you guys, no more questions from me.

Thanks.

And our next question comes from the line of Lee Cooperman with Omega Advisors. Your line is now open.

Thank you. I have four questions, so maybe I could just get him out. I think maybe you answered the first one already, but when you look at the probable recovery from your non-performing loans, do you think the book value realistically states the asset bay of the company, do you think it understates the 1184 number. Secondly, as you intend to run the company going forward, what is the realistic return on investors book value that we should expect I think the answer you had was with 9.510 is that net return to the investor I guess. Third If I told you a year from today fed funds would be 2% and attended every will be 4%. The e-com it was growing modestly, how would that raising rates impact our profitability. And fourth, was is the attitude and the intentions of the board toward stock repurchase whenever you say your stock is trading 20% or more below NAV, those four questions.

Lee, it’s Sam. I’m going to be taking the first one and let Chris and Terry take the others. So in terms of the recovery and the book value or NAV, in terms of the restructuring [indiscernible]. So just to remind policy for NAV is to mark assets to their fair market value. So when we did that, we are thinking about over to pay and knowledgeable investor pay us today for those investments. So that is different to maybe what’s your getting. That is different than what we think our ultimate recovery would be. So we have three transactions of – the aggregate has examples. Tri-Starr, Loadmaster, and Copperweld, all been restructured recently. I think we have marked those where we think we could sell those today. However, they all had improving performance and we are working very closely with the management teams of those three companies and we expect that ultimate recovery could be much higher than what we have today.

That’s right. The only thing I would add is, if you look at our scoring system as I highlighted in my prepared remarks, we only have one credit, Tri-Starr that’s rated to five which we don’t anticipate full recovery of principal. Everything else is rated 1, 2, 3, or 4 of which we expect full recovery of our principal on that as it relates to the value that we show in the $11.84 in our book value.

I’m a little confused maybe. So if it goes the way you expected to go, that’s already reflected in the book value or will it be–

So there is two things, Lee. On every investment with Tri-Starr we expect to get back par.

So what would that be your book value? If you are right in your expectation, the $11.84 would be what if you are right? It could be wrong, it could be right, who knows.

We have to go back into the math on each individual four rated credit that we anticipate a full recovery and I look at those individual marks and then do the calculation. I don’t have the numbers in front of me. We can do that on a separate call but the math isn’t complicated. I’m making this up [indiscernible] $0.85 then we expect full recovery we anticipate overtime picking up that 15 points.

I understand. I was wondering what that number is?

It’s admitted to the calculation. We haven’t calculated.

Okay, we can talk about that later. Second question is, the 9.5% to 10% return, is that net to the shareholder after expenses?

It is.

Okay. And third..

Yes, it’s primarily floating rate book lease to the extent and we’ve got 86%, 87% of the portfolio is LIBOR based loans. So to the extent there was a raise in interest rates. We think we position the portfolio to enjoy and for taking that rise. That minimal gap between LIBOR floors, where LIBOR is today does not have a material effect on our earnings potential. Sure, I can give the exact number but it’s not material.

We are close to the floor LIBOR but now it’s at 86 bips and our floors on average I think are 92% across the portfolio, Lee. If you’re looking at our 10-Q, we’ve got a table on the back on page 97 that addresses the change in rates and how it would impact net income obvious to drive up, right, once you get through floors. And you can see that table, let’s call it - your portfolio goes up a 100 basis points and you’re picking up almost $3 million of net income excluding the impact of any incentive fee. But we’ve laid out that in the table in the Q to give you some perspective on the magnitude of impact of the bottom line given 200 basis point and 300 basis point increase.

And then on the stock repurchase, Lee, I think from our perspective when the window was open it was not open last quarter given the pending dividend reduction. At these levels I think the management team is comfortable to say that and our board as supported us as active as we can and stock repurchases.

Thank you for your response. Appreciate it. Good luck.

And our next question comes from the line of Chris George with JMP Securities. Your line is now open.

Good morning guys and thanks for taking my questions. So the press release I think that you’ve received or exited about – when I calculate $20 million of investments to 3Q originations and to continued tough environment. For originations, should we expect the portfolio to decline again. And then maybe therefore more likely use of share repurchases.

Chris, I don’t think there is any reason to expect the portfolio to decline again. And we continue to see pretty good deal flow but I think activities is normal. We try and maintain leverage where it is today and we deploy money as it comes back.

Yes, one of the things I would add I think we’ve said this before, I know it’s tough for the equity analysts but we think it’s the right thing for the shareholder. We are consistently inconsistent in our deployment because as a management team we’ve made the decision, we’ll deploy when we see value and when we don’t. Now given our new strategic focus on these more first lien heavy weighted assets, there may be a quarter or two we see some contraction. But over the long run, our expectation is that we will be booking these quality assets in the range and the yields you addressed earlier.

Chris, if you were to think about the leverage level, the ability to – we are a little smaller at the end of the quarter, largely as a function of timing. But you’re right, as we’ve talked about before, the uses of capital in terms of new investments, follow-on investments as well as the opportunity to repurchase stock is certainly the opportunity to do both given the leverage level we ended the quarter with as we look forward.

Okay. And then maybe on the repurchases, can you just remind us again when that approval expires.

Early March. It will but we look to extend that.

Okay. And then as they look at the portfolio a little bit, I was hoping maybe we could get some updated color on how you are approaching the investment in retail sector. Given the business model grapples with some disruption from technology and then some of your investments have exposure here to declines in enterprise value.

Yes, I appreciate the question, this is Chris. I think we're obviously very cautious in how we approach any investment in the retail sector given the dynamics between the traditional brick and mortar position and online or direct sales channels. If you look at our portfolio today with the one position that we have as experience some financial stress that’s reflected in, the market we have in the portfolio but again this is a large business. We think it’s got a unique product and from our perspective over time given well, yes, itself is mark down. We think long term liability of the business is still strong.

Is that specific investment you are speaking about Charming Charlie?

Yes, that's our largest retail investment.

Yes. And then alternatively, Mike Butcher, the pronouncement here with the ball was written, oh yeah. In the corner nicely and now Mark you’re at one point one eight cost. Do you expect this one to be refinanced?

Not at this time.

And then last one just a general question on the timing for the reduction in the dividend today because it seems that you've been shifting the portfolio for three years and then trends in earning showed signs of a decline in 2015 and then began to accelerate in Q1 of this year.

It was beginning of this year when we started to see a contraction in first lien loans in the lower middle market where we play. That’s really been a factor of lot of pride of credit fun being raised of the last couple of years as the market has gotten more competitors for of the upper well market. Some of those have drifted down into the lower market so we started to see that compression when you when we look at go back and look at our pipeline over time, their compressive as most honest subs beginning of 2016. So you combine that with handful of unsponsored deals that we've restructured and we think those unsponsored deals, the depression on earnings there is just temporary and that we will eventually sell those companies, reinvest that money back into earning assets. But it's sort of a timing of both of those late this year to put the depression. So the $0.27 again we think that's very sustainable with a cushion of wordings above that and we think this was the right time to do it.

That’s it from me. Thanks for taking my question.

And our next question comes from the line of Leslie Vandegrift with Raymond James. Your line is now open.

Good morning.

Good morning.

I know we talked about a little bit in the earlier remarks but the restructuring or this past quarter of Loadmaster and Tri-Starr, and then Copperweld and this quarter so far, can you give a little bit more color on the loans that resulted out of them as well as on the Tri-Starr side post the restructuring, there is still three PIK loans on their event or on non-accrual and just some color on that.

This is Sam. Maybe I’ll start with Loadmaster. Loadmaster is an energy credit. I don’t need to go and what’s having energy or we needed to take some of the first lien debt and convert that to preferred stock. So roughly half of the loan was converted to preferred stock. We saw a little bit of additional capital to help liquidity, sort of the sponsor in that case and our strategy with that company is just to continue to provide liquidity to make our guest through the down turn. And so that’s much more stable situation. On Copperweld, we did complete the restructuring. We converted $20 million of first lien to equity at different classes. This performance is also much better and it’s increasing, and it’s a much more stable situation where we work very closely with the management team there. We are working to refinancing the ABL facility to provide more liquidity to the company. I’ll let Chris talk about..

This is Chris on Tri-Starr. So as you can imagine in any business that has some form of financial stress, the complexity of the first lien loan gets ended up being trenched out. And if you recall from our last call, we made a decision as part of the restructuring to purchase at a substantial discount one of the senior lenders. So from a performance standpoint, the business is actually performing above expectations. It’s just on that non-accrual status there is a couple of small legacy tranches on that original first lien transaction that was led by commercial banks that just does not current pay, that’s what reflected above of the accrual and non-accrual status. We are not looking at that part as a return. From our perspective we made that investment basically as a way to get the restructuring done, as the way to prove their value not only in investment that we made but also the subject that we’ve converted to [indiscernible] shareholder. Does that answer your question?

A little bit on both of those. We should expect those to stay on the status that they are for a while then?

That’s right. We don’t have any anticipation but that just to be clear that was our expectation when we made the investment that was not a surprise. We bought it with those later tranches would not be current basically, that was factoring into the price that we pay.

Okay, all right. And then on Copperweld post quarter, that was obviously [indiscernible].

This is Terry. We would expect to that launch return to accrual status on the debt portion of it in Q4.

Perfect. All right. And then I know Chris has started this a little bit ago but talk about you retail sector investment? Now, obviously you’ve talked about Charming Charlie before and that has fiscal store locations that is it based out of? But your investments in such companies like Alex Toys or – they are all marked well and those are more online retail sellers, do you see that’s the true division is in physical for traffic and not so much a consumer issue on their ability to buy things right now?

Yeah, I think, listen, we are not brought retail investors who get unique assets in each area where we participate. If you look at Alex, Alex does have a broader distribution model; I don't believe they own any retail locations themselves. So the pull-through from that for consumer demand has been strong and the portfolio that Alex has is very unique and we think that team has done a fantastic job in building a very durable portfolio. On Charming with the retail locations, as you stated again, Charming at the common equity level is technically unsponsored, there's a private equity sponsor that's capital in between us and the original sponsor. And as we've said before, even though the loan itself is marked down, we think long term there's a way to preserve 100% of our value on that asset over time. It is going to take some work and some restructuring to get that done.

Okay. All right. Perfect. And then on – now I know you only have three of them right now, the unitranche lines, but you have done them before and we've been hearing from a lot the bigger unitranche lenders ones who do the upper middle market size unitranche line that demand is out there. Have you seen any demand with people coming to you? I know you've been focused in medical manufacturing health care for those recently, but with that being part of a senior secured strategy, have you seen an uptick there?

This is Chris. When we look to position ourselves in the portfolio and provide a financial solution to sponsor, there's multiple financial solutions on the table. Unitranche being one. First out, last out; first lien only; split collateral transaction, so it’s really driven by what the – what we think is the best way for us to structure and protect yourself as downside protection and meet the financial solution of the private equity sponsor that we are doing business with. So we’ve in that business, we will continue to be in that business and we see value, but I wouldn’t say there is any change from more demand or less demand today versus last quarter.

Okay, all right. And then can you – just on your weighted average leverage attachment points right now any color there?

No, they are reasonably consistent quarter to quarter. We wouldn’t view any slight uptick or slight uptick to be indicative of anything going on in the portfolio broadly.

Okay. Perfect. That’s all my questions. Thank you.

Thanks.

And our next question comes from the line of Kyle Joseph with Jefferies. Your line is now open.

Good morning, guys. Thanks for taking my questions. Most of them have been answered, but I got a few more. I just wanted to talk about yields in the quarter. It looks like you guys had some good expansion and I assume that's probably related to Logan, but a pretty sizable move given not too much portfolio turnover. Is that sort of where the repayments blower yielding versus yield on the new investments. Can you see just explain what's going on there?

There is actually a little extra yield in Q3 believe it or not from your accretion related to the Tri-Starr senior loans we’ve picked up. So I wouldn't view 11.6% as indicative of anything going forward. I think it’s more along that. If you look at a blended basis, it's been about 11% for the year on the new additions to the portfolio, Kyle. And Sam said, as we continue to move further up and structural replace some of the higher yielding assets of senior secured first loan, we would continue to see that 11% number drift down a bit over time.

Got it. And then the second quarter was quiet in terms of origination activity for the entire sector, but can you give us a little bit of your perspective on your outlook for deal flow going through the remainder of the year and into 2017?

Yeah, Kyle, this is Chris. I think from our perspective the fact that we've been doing this for almost nine years now, we've got a lot of infrastructure put in place and I think we are one of the few folks that actually have a five office footprint with full deal teams in each respective market out originating transaction. So from our perspective, we feel confident that we'll continue to be able to deploy assets that are high quality and solid risk adjusted returns for our shareholders given the amount of capital and energy we spend building out the team.

Great, thanks. And then just one last one from me. Just trying to understand from a broad base portfolio company performance and I don’t know if it’s helpful to go through by industry, but just give us revenue and EBITDA growth trends that you guys are seeing?

Kyle, it’s Sam. I think generally it’s flat in terms of putting it at average, it has been consistent for most of the year where – there’s maybe half of companies reporting good growth, the other half not so much. But nothing dramatic I would say.

Yeah, I think if you look at to scoring that we – the one, two and three rated credits is probably a pretty good indication of how does it perform against our expectations. Again, the vast majority of the portfolio is performing in line with where we are comfortable from a debt case scenario, but that’s probably the easiest way to benchmark it.

One thing I would mention, Kyle, even is the industries, we are deemphasizing investing or lending to industrial companies. We stopped doing energy like 2.5 years ago now. More recently we’ve looked at our industrial companies that we – one might see overtime. I wouldn’t say there is a prohibition on it, but certainly there is a higher bar in terms of what we are willing to do there. So what we are focused on is business in financial services, consumer and healthcare companies, media and information services companies, that’s where we are really trying to stick with those industrial verticals.

Great. Thanks very much for answering my question.

And our next question comes from the line of Christopher Testa with National Securities Corporation. Your line is now open.

Hi, good morning, guys. Thanks for taking my questions. Just wondering if you could discuss the unitranche attachments versus the true first line originations?

I mean in general if you are looking at unitranche security, maybe you are doing slightly deeper in the capital stack given the higher yield profile that you have than you would on a traditional first lien. I think, as we look at it, as we build out a balance sheet, the amount of equity contribution would be the filler if you are doing a unitranche loan maybe the equity contribution in that example is anywhere from 30% to 45% and that we are doing first lien only maybe the equity contribution is 40% to 60%. I want to be careful here just to – that’s just generalization of how you think about – how you price out the overall risk of the portfolio, but that’s probably the easiest method to think through it.

Yeah, so, typically, unitranche might go above five turns of leverage assuming you are not syndicating out let’s say the first [indiscernible]?

Yeah, that depends. I mean, listen, when we build out the portfolio everything on the leverage attachment point is really sector industry focused. If you look at software IT business that made more than a five times transaction, but if it’s a consumer transaction, it could be substantially lower than that. I don’t want to make a generalization that all unitranches are over five turns because that’s not factually accurate from our perspective. But we – in theory that are deeper in the capital structure than a true first line, we don’t disagree with that. To your other point and I think this is important, it’s hard for us to quantify, when we build out the business, we are always focused on loss given default, that’s what a good credit manager does. So – and then we make the decision that we're comfortable having a first out participant in that unitranche, we're very, very focused on where their attachment point begins, you know, when does our recovery star. So we can't give you the specific details on a credit-by-credit basis, but I just want you to know from the management team perspective and the committee member perspective, we're very, very focused on making sure that we're minimizing the amount of debt that’s in front of us to the extend there is any at all.

Got it. That's great color. Thank you. And is there a potential to essentially move your leverage target up, maybe to 0.85 times as you shift more and more into first lien and the CLO equity continues to run off in the portfolio?

This is Terry, Chris. I would say running a business in BDC space north of 0.8 times is probably a slippery slope. I don't see foresee in any time in the near future operating over that level because there are moments in time where you could be near or slightly over it, I think, yes, and I think as the portfolio move us into increasingly first lien position, you could run closer to the high end of our range than we are now with more comfort. But 0.85 that strikes me as a little bit high given – particularly given a broader view of where we are in the credit cycle.

Right. Yeah, I would agree with that. So just what are your thoughts on, you know, obviously, you commented on a lot of pressure going into the lower middle market. Are there thoughts on potentially focusing more on the core middle market given you guys have the private funds and can you still invest across there and take down some larger deals that maybe some of your peers are unable to do in terms of providing certainty of closing?

Chris, I think, you know, our focus really has been on the direct lending side, originating from sponsors who are not running options when they look for lenders, we try to build relationship with sponsors where they bring us in early the transaction. And we are not the only lender they bring in, but they will bring in a handful of lenders and talk to them, it really as bidding on a deal, as thinking about how to build the capital structure for companies that they are acquiring. And so as long as we are talking to sponsors, who have that kind of approach toward their lenders, I think we are suddenly open to doing larger transactions as we increase our capital on the direct lending side. So it’s not so much one into – being one into lower middle market or smaller companies, it’s just we found that to be less competitive and more focused on things like certainty of close and working together toward planning the right capital solution for the capital.

The only thing I would add from a return profile perspective is we’ve seen some contraction in the lower end of the middle market. I would still argue that on a risk adjusted basis, we find the asset class to be extremely attractive. Not only us, but other alternative lenders are stepping in to fill that void created by the commercial banks that just aren’t providing that commercially historic enterprise value loans. We’ve taken what we believe to be historic bank loan risk and still getting paid a substantial premium over above that what banks would have paid two or three years ago. So a lot of the yields have contracted somewhat, we still think it’s very, very attractive risk adjusted return from profile from what you’ve been able to do historically.

Got it. And just regarding your comments on building out the invest off in Texas, just curious what your thoughts are on building that out in that particular state, I know Texas has been a beneficiary of lot of business fleeing the higher tax high regulation states, is this to take advantage of that and take advantage of the growing technology and finance companies moving down there?

Absolutely, what we’ve seen in the Dallas/Fort Worth market, we’ve seen a number of new middle market, lower middle market private equity firms start there in the last few years and as we focusing more and more on that town we realized that being there being locally and again spending time every week in person with these private equity firms not just with origination people but with our actual transactors, the guys who are making credit decisions to underwriting deals. We’ve seen an increase in deal flow this year significantly from those efforts. So to us it made a lot more sense to move from our legacy office in Houston to close that down and move those folks to Dallas which we’ve done.

Okay, great. That’s all for me. Thank you for taking my questions.

Thanks, Chris.

And our next question comes from the line of Casey Alexander with Compass Point Research & Trading. Your line is now open.

Hi, good morning.

Good morning.

Again, I probably not going to set this question upright, but I mean I’ve heard you say that you believe that the portfolio was stabilized in fact that there is probably some embedded NAV in your current marks and you are saying that you are originating new stuff at around 10% return to investors. Now given the fact that your stock has been rerated, but you’ve right size the dividend, what’s the status of the share repurchase program and why would you not be a lot more aggressive with the share repurchase program at these levels where you could be buying shares for your investors an 11% yield and supporting the stock?

So the trading window for us was closed last quarter because we were still discussing whether or not to cut the dividend, but now that decision has been announced. The window will be opening in two days and we will be able to repurchase.

Okay. And what’s the current status of the share repurchase program, how much do you have open on it?

We now have a $20 million to $25 million program, I believe we have about $22 million available between the four expires in March, but we had others as I mentioned earlier would extend it of course.

Okay. And you are down to 14% of second lien in the portfolio, are you getting to a level that you are comfortable or do you basically want it all out of there?

This is Sam, Casey. The way we are thinking about is we are trying drive first liens to a larger portion of the portfolio. So first liens in Logan that we’d love to get above the 70% number together, 70%, 75% together. The rest of the portfolio will be a mix of securities and to the extend we can move some of these business that we have equity investments in and convert those – as we exit those investments and convert those back to secured loans, we will do that. I wouldn’t say we have a target on second liens, we just – we want to maintain the flexibility there.

All right. The second lien and…

Having the portfolio of first liens plus Logan, that’s 70%, 75%, that what we are trying to do.

All right. Okay. And the second lien in the unsecured is older vintages, is there sort of a – I’m not looking at the schedule of investment and I figure you know this, is there a pace at which they just sort of naturally run-off?

We’ve had a number of them run-off particularly in the last quarter and we’ve replaced those with first lien assets.

Casey, I would say that we will continue to see the shrinkage of the sub-debt number, we would expect to see that continue to contract over time.

Got it. Okay, great. All right, thanks. Thanks for taking my questions. I appreciate it.

Thanks.

Thanks.

[Operator Instructions] And our next question comes from the line of Jin Young with West Family Investments. Your line is now open.

Hi. Could you just remind us as to how much stock insiders and the company own and could we expect to see senior management also buying stock when the window opens up again? Thank you.

We definitely plan to buy stock again when the window opens up again. The percentage – I’m not sure any of us know.

I think it’s the bottom – I think it’s the bottom percentage, one or two percent between senior management team and the board.

We can get you that figure, Jin, after the call. We don’t have it in front of us.

Okay, thank you.

And I’m showing no further questions at this time. I would now like to turn the call back over to Sam Tillinghast for closing remarks.

Thanks, everyone. We don’t have any closing remarks at this time. We appreciate your questions and looking forward to talking to you again soon.

Ladies and gentlemen thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone have a great day.