Good morning, and welcome to TPG Specialty Lending, Inc.'s March 31, 2020 Quarterly Earnings Conference Call. Before we begin today's call, I would like to remind our listeners that remarks made during the call may contain forward-looking statements. Statements other than the statements of historical facts made during this call constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as result of a number of factors, including those described from time to time in TPG Specialty Lending, Inc.'s filings with the Securities and Exchange Commission. The company assumes no obligation to update any such forward-looking statements. Yesterday after the market closed, the company issued its earnings press release for the first quarter ended March 31, 2020, and posted a presentation to the Investor Resources section of its website, www.tpgspecialtylending.com. The presentation should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC. TPG Specialty Lending, Inc.'s earnings release is also available on the company's website under the Investor Resources section. Unless otherwise noted, all performance figures mentioned in today's prepared remarks are as of and for the first quarter ended March 31, 2020. [Operator Instructions] I will now turn the call over to Josh Easterly, Chief Executive Officer of TPG Specialty Lending, Inc.

Thank you. Good morning, everyone, and thank you for joining us. With me today is my partner and our President, Bo Stanley; and our CFO, Ian Simmonds. First and foremost, all of us at TSLX and our broader Sixth Street organization hope that you and your loved level ones are safe and healthy. We particularly want to express our gratitude to all the health care professionals, first responders and essential business workers for serving our communities during this challenging time. In this environment, one of our top priorities has been the health and well-being of our people, which in turn allows us to be to best protect and serve our shareholders' capital. Post-implementation of our business continuity plan in early March, we and our broader Sixth Street platform have been operating at full capacity with nearly all of our global team members working in moment. Our organization has quickly adapted to this new environment, maintaining a high level of collaboration and communication, both internally and externally that is essential to the success of our business. Over the past few months, we have proactively issued public letters to our stakeholders with real-time updates on our business, balance sheet and preliminary financial results. We hope you found them to be helpful and consistent with our culture and transparency and maintain an ongoing dialogue with our stakeholders. While no one could have predicted the timing and nature of events leading to this sudden economic downturn, we believe we are entering the next phase from a position of strength, given the actions we have taken over the past few years. As Bo and Ian will each discuss later in more detail, our forward planning and risk management framework resulted in what we believe to be a defensive portfolio and robust liquidity, funding and capital…

Thanks, Josh. Given the rapid market downturn in March and low visibility surrounding the duration of the economic shutdown, middle market M&A activity has since come to a halt. In the liquid loan markets, there was significant volatility during March as retail loan funds looked to liquidate assets in order to meet daily redemption requests. This supply surplus drove significant price declines across both higher quality and low-quality credits and resulted in the steepest monthly price decline in leveraged loan markets since the 2008, 2009 financial crisis. Against this backdrop, our Q1 originations activity was light as expected, with $134 million of commitments and $80 million of fundings across three new and four existing portfolio companies. Of the three new investments, which comprise 88% of the fundings this quarter, two were completed in January prior to the market turbulence. The other new investment was Vertafore, a small opportunistic secondary market purchase that we made in late March at a price of $78 that is now trading around $91. Similar to the market volatility we experienced in late 2015 to early 2016, we believe there will be outsized risk return opportunities with respect to the secondary markets and companies and sectors where we have a differentiated view. You may recall that following the 2015, 2016 period, we had approximately $260 million of liquid debt and holdings in our portfolio as we purchased certain loans in the secondary markets at a weighted average price in the high 80s and rotated out of them as they pull back to par. Different from the 2015, 2016 period, we think the opportunity set for both opportunistic liquid investments and our direct origination strategy in this downturn will be longer term in nature given the amount of capital and economic destruction this pandemic will ultimately inflect.…

Thank you, Bo. I'll begin with an overview of our balance sheet. Given net repayment activity and the impact of valuation marks on our portfolio this quarter, total investments at fair value decreased from $2.25 billion to $2.05 billion. Total principal amount of debt outstanding was $987 million, and net assets were $1.04 billion or $15.57 per share, which is prior to the $0.50 per share of aggregate special dividends that will be paid during Q2. Our average debt-to-equity ratio was 0.99 x, and our ending debt-to-equity ratio was 0.96 times, down from one times in the prior quarter. At quarter end, we had meaningful cushions over all financial covenant thresholds under our revolving credit facility. Before turning specifically to our results, I would like to reiterate the strength of our liquidity, funding profile and capital position. To review a concept shared in our recent letter, we think about liquidity as the sum of our cash and freely accessible committed credits that together are available to fund our operations and make investments. Note that unlike typical corporate issuers, BDCs have limited ability to create liquidity from cash flow from operations given RIC distribution requirements. At quarter end, we had $1 billion of undrawn capacity on our revolving credit facility against only $66 million of unfunded portfolio company commitments available to be drawn based on contractual requirements in the underlying loan agreement. As of today, given the net repayment activity we've experienced quarter-to-date, our liquidity stands at $1.08 billion with an estimated $61 million of unfunded portfolio company commitments available to be drawn. And our leverage is approximately 0.86 times. We also think about our liquidity in the context of our ability to service our liabilities in future periods across a variety of operating environments. This has informed our objective to…

Thank you, Ian. Before moving to Q&A, there are a few housekeeping items I'd like to wrap up on. On May 1, our broader platform, Sixth Street Partners, completed our previously announced agreement with TPG to operate as independent unaffiliated businesses. As you know, Sixth Street has already been operating autonomously so it's been business as usual for us. Sixth Street today has over $34 billion in assets under management with more than 275 team members in nine locations around the world. With our platform's diversified investment platforms and flexible long-term capital base, we believe we are well positioned to serve our LPs and stakeholders' capital in the same prudent and creative manner that's been the hallmark of our partner group for over the last 20 years. Again, Sixth Street will continue to operate the same partners, the same investment strategy and same decision-making process. Likewise, TSLX will continue to be led by the same dedicated management personnel. And our stakeholders will continue to benefit from the same sourcing, underwriting and operational capabilities on the Sixth Street platform that they have since our inception. As part of the evolution of our platform, we will be changing our name from TPG Specialty Lending to Sixth Street Specialty Lending, Inc. Our ticker symbol on the New York Stock Exchange will continue to be TSLX. The legal process for our name change is expected to be completed in June, upon which we will make an official announcement. Moving on to our upcoming annual and special meeting of TSLX shareholders that will be held on May 28. Consistent with the past three years, we will be seeking shareholder approval to issue shares below net asset value effective for the upcoming 12 months. To be clear, we have no plans to issue equity under the…

[Operator Instructions] Our first question comes from Rick Shane of JPMorgan.

Hey guys, thanks for taking my questions and I hope everybody as well. It's all sort of tied together. When we think about the way that this is going to play out, we think it's going to play out in three stages. There was initially the liquidity stage that we're we seem to be emerging from. The second is the transition phase where we are right now. And I think the real key is going to be how sponsors behave as buffers between the short-term slowdown and the longer-term impact? And then finally, we'll move into sort of the cards on the table, what plays out within portfolios and within companies. I'm curious, in your conversations with sponsors right now, what types of behaviors you're seeing. And if you could specifically talk about, you have a couple of significant maturities this year, MedeAnalytics and Nektar Therapeutics. I know you can't necessarily speak specifically to those credits, but conversations around near-term maturities and the risk of maturity defaults.

Sure. Rick, hopefully, you and your family are safe. And I apologize in advance I can't control the lawnmowing schedule in the suburbs. So if you hear the noise in the background, I apologize. So on Nektar, in our prepared remarks, I don't know if you caught it, it's actually paid off at previous to quarter end. I mean, after quarter end, so paid off in early April. On Mede, that company is performing very well. We had proactively extended the maturity for Mede after quarter end as that company is performing well. And obviously, the sponsors view, it's not the best time to sell the business. And so as it relates to those two near-term maturities, one is fully paid in cash and one we extended given the performance of the business. And Bo, anything to add on those 2?

No, nothing to add. I mean, MedeAnalytics, we actually started that process pre-COVID. The business is performing well. It's HCIT business that has actually seen some benefits in this market. And we're at a really nice leverage position. So we extended the maturity there.

On generally, look, for us, it's all about being a having transparent and constructive dialogues with both management teams and sponsors. We're having those dialogues on a regular basis, most of the time on a weekly basis. We have asked most of our portfolio we've asked all of our portfolio companies to provide 13-week cash flow and try to be a partner with them and giving them tools to think about how to operate in this environment, which is measuring KPIs and measuring DSOs and DPOs and think about what can happen to cash and liquidity. And so those have been very constructive dialogues. At some point, the rubber will hit the road if the capital if there needs to have capital put in the business, and we expect to have constructive dialogues. And the more people can be transparent today about where companies are operating and the challenges they face, I think the easier those conversations will be in the future. And to date, it's been very, very constructive. Bo, anything to add, or Mike?

No. I think the point on transparency, we really encourage that. We have good relationships with our borrowers and with our sponsors. And that transparency allows us to be solution providers as issues arise in any environment including this one. So that those conversations are frequent and we feel like all of our relationships are being very transparent with us.

A couple of other things to note. Look at we had, at the end of obviously, the numbers are a little delayed, but at the end of Q4, our risk we were kind of derisking the portfolio or our borrowers were delevering significantly. So KPIs were generally up. Leverage or last dollar attachment point went from 4.2 times the previous quarter to 4.1. The average between 2017 and 2019 was 4.5. And so you've seen interest coverage was up. And so overall, the portfolio in Q1, quite frankly, the portfolio was performing pretty well across much of the portfolio pre-COVID. And so you I think there are fortunately, there's going to be more degrees of freedom, given the nature of the portfolio and the performance up to COVID. Obviously, the violence of COVID and the relatively if it will impact, to different degrees, all businesses and all business models will be felt, but we feel like the position the portfolio is positioned pretty well given its typically asset-light services businesses with high free cash flow and robust business models.

Great. Thank you very much guys.

Our next question comes from Kenneth Lee with RBC Capital Markets.

Hi, thanks for taking my questions and good morning. Just wondering if you could just further expand upon your outlook for potentially seeing more amendments versus debt defaults. Wondering specifically whether there were any specific factors driving this for you?

Yes. Look, I think the great thing about our portfolio that we've constructed for our shareholders is that we're typically a control lender. We have very tight baskets regarding indebtedness and restricted payments, which don't provide the opportunity for issuers to do liability management trades without working with us. And we have two financial covenants. And so we're going to be in a position to have conversations with companies and to be solution providers and protect risk. And so I think you can expect a decent amount of dialogue, quite frankly, as small as they have to come to us to incur a PPP loan because they don't have the debt incurrence basket to meeting some relief on financial covenants. But given we actually think it's a positive thing, it keeps effectively the portfolio to a shorter weighted average life, it allows us to manage risk and give us optionality to do many things to enhance our risk position. So I think pre quarter end, I think there was only two to three amendments related to COVID. But I think generally, there were like eight in the quarter and that's a typical cadence given how our docs are constructed. And so I would expect that we're constantly in dialogue given our the structure of our loan agreements in place. And I think that will ultimately benefit our stakeholders and will also allow us to be constructive solution providers with sponsors and management teams. Bo or Fish, anything to add there?

No. I think that was pretty well said. All these we've been talking about the importance of tight loan documentation over the past few years. And all of these are guardrails to get us back to the table to reevaluate risk, and to often times be solution providers as well to our portfolio companies. And we're seeing beginning of that, but activity levels have been relatively muted given the backdrop.

Great. Very helpful. And just one follow-up, if I may. It looks like leverage ratios are closer to the lower end of the target range. And granted, I realize that the leverage ratios could move around depending on the investment valuation changes, but wondering over the near term, would you be targeting closer to that lower end of that target range?

Yes. So and I'll let Ian speak about it. So right now, debt-to-equity is 0.86. That's kind of on the pressed asset values. And so we actually have a whole bunch of capital and a whole bunch of flexibility to expand into what we think is going to be a much more lender friendly environment, less competitive from the leveraged loan market, less competitive from the high-yield market for kind of issuers that are in our target range, less competitive from the private credit markets, given people are inwardly focused or liquidity or capital constrained. And so we have from both a capital perspective and a liquidity perspective, we are in a, I think as well positioned as we could be to kind of create find good risk-adjusted returns going forward. The other thing I would say is the actual existing book in these times. And these moments tend not given credit spreads have widened, tends to stay in place and the existing book, given the combination of our floors and our hedges and our liability actually have a decent amount of net interest margin expansion on a go-forward basis as being discussed. And so the existing book is pretty well positioned from a net interest margin perspective. We have a ton of capital and some liquidity to make smart capital allocation decisions to drive economic return for our shareholders on a go-forward basis. And so we're pretty happy with as we're pretty happy with how it's played out. Given just a little color around that to color it up, we have $1 billion of unfunded commitments $1 billion of liquidity. We have about $68 million of contractual unfunded commitments. So I think we're like 16 times coverage. We only have a the nearest term maturity is $172.5 million in August of 2022. And so we basically have $1 billion plus liquidity and for against very small amount of unfunded commitments and $172 million in maturity, that's going to be over two years away. So I mean, from a capital and liquidity perspective, we're, I feel, pretty good in really good shape. And from an opportunity standpoint, Ian, is there anything to add there?

I think you captured it, Josh. It's all about just giving ourselves putting ourselves in a position where we have options, and it feels like we've got to that stage.

Great, very helpful. Thanks again and everyone stays safe.

Our next question comes Finian O'Shea with Wells Fargo.

Hi, everybody. Good morning, everyone. Just to follow on the last question. Actually, it was more related to leverage, but I wanted to ask on equity issuance. I think you should be officially above book again if the market opens here today. Does that change your position? And if not, what conditions are holding you back from raising more equity, given you're one of the few companies that can accretively do so. Is it more your liquidity position or the lack of good deal flow?

So look, that's a great question. We've always been I think we've always thought of ourselves as very prudent allocators of capital. We've never raised there's always this agency principal issue kind of that exists in all businesses, but people tend to think about in the asset management business where there's the virgin interest between the manager and the people actually providing the capital. And for us, we've always put our capital before our interest, and we'll continue to operate that way. And so when you look at where we sit today, we have we're overcapitalized. We're at 0.86 times debt-to-equity on what's relatively, we think, are depressed asset prices. And so if you actually normalize that for spreads tightening or at some point, that those unrealized losses rolling through as we get to maturities on underlying investments. We actually have more capital than that and so we're less levered. And we have a ton of liquidity. So there is no need or desire to raise capital because we have a lot of capital, and we quite frankly, we don't need to raise capital because we have a lot of liquidity. So I think we are we'll take the position we always have is, which is we'll only raise capital when it's accretive from a book value basis, an ROE basis. And hard to imagine it's accretive from an ROE basis, given that we have a whole bunch of excess capital to deploy in what we think to be a pretty good investment opportunity set. As that as we have line of sight into that investment opportunity set and how quickly it comes and how good we think it is, our view might change on raising equity capital, but quite frankly, raising equity capital given the liquidity position and given the capital position is not even close to top of our list. Ian, is that do you have anything to add, or Bo?

Yes. I think the thing was just making sure we stay true with the discipline that we've articulated in the past about being accretive to NAV and on an ROE basis, and that's important to us.

So any equity capital we've raised today, look, we had massively grown the book would be dilutive, given that we would be deleveraging the business and so I it's as I can see as the opportunity that evolves and where there's clear line of sight to be liquidity and capital providers to the middle market and middle market sponsors that we might be we might raise equity capital, but we have a ton of liquidity and capital. So I don't see that as a near-term process.

Very helpful. And just one more if I can. You remind us on the mechanics of first out leverage. And specifically, if you talked a lot about having to potentially provide amendments. Would that require typically consent from your first out lenders? And would that perhaps trigger a diversion of the waterfall? Is that an issue that you grapple with going forward?

Zero. So typically not. In addition to the I think the average attachment point on our first lien last dollar positions is about half a turn in our detach is less than four turns. And so we're typically the big part of those capital structures control rec lenders. We have and typically, diversion is triggers on payment defaults. That's not even close to being an issue. Bo, anything to add there?

No, correct. Everything well said.

Okay, thank you guys so much.

Our next question comes from Chris York with JMP Securities.

Good morning, guys and thanks for taking my questions. So Josh or maybe, Bo, we understand a secondary form of repayment supporting your extension of the ABLs with a discount to net orderly liquidation value. Now that support seems reasonable in orderly markets, but clearly, this environment is anything but ordinary. So the question posed to you is, do you still feel comfortable about the collateral supporting your retail ABL strategy that may be approaching bankruptcy at a time when there could be an abundance of inventory available?

Yes. So it's a great question. So you have to have to you kind of have to have to put it in two different vectors. One is the value of your inventory and the second is the liquidity of the underlying company. And so what was on top of our worry list would have been a Sears, for example, which had no liquidity and that you were liquidating you would have been forced to liquidate into an environment where there were a whole bunch of closed stores or mandated closed stores. So that was our kind of the scenario you're talking about was Sears was our highest risk position that got paid off in the middle of the quarter when they sold a series of logistics assets that they were forced to repair a loan. The next one and then when you look at kind of everything else in our book, you have the essential businesses, Staples, 99 Cents, Save A Lot, those businesses are performing well. The secondary source of repayment is not effective actually, given the turnover in inventories probably have increased. And those businesses are performing well and have liquidity and have more free cash flow than they ever had. So put those aside. There's really two that are in kind of that vector you're talking about. One is maurices was just relatively small and the next is Neiman. And so on maurices, what I would say is ton of liquidity, had been performing very, very, very well. We feel very good about where we sit on maurices given that there is a reasonable time period for malls to open back up, which is called late summer or early fall. On Neiman, obviously, the overlevered balance sheet, very public. We actually feel and this will, I think,…

Perfect. That color is very helpful. And you got where I was going with maurices and Neiman. On the topic of retail, I noticed you did mark down your JCP loan meaningfully. This investment was not an ABL so what drove the write-down there? And why do you feel this one retail investment was supported by enterprise value when you underwrote it as opposed to hard assets?

Yes. So actually, JCPenney, so it wasn't an inventory loan, but it was a it is a collateralized loan. It has a whole bunch of fee simple and leaseholds. And so obviously, the value of the fee simple and leaseholds has changed. It's a level two loan. We may think it's cheap or we may think it's expensive, but we mark it to where it's trading. I think it's traded up post quarter a little bit. But to be clear, it is a it does have a collateral package. It happens not to be inventory. I think it actually has a second line inventory, but quite frankly, that's going to be absorbed by the existing ABL or the value will be absorbed by the existing ABL, but it was a fee simple and leaseholds primarily as collateral. And so obviously, that's a little different situation.

Okay. You feel pretty good about the mark there?

Yes. We it's a level two mark. I think it's up a little bit. Ian said up a little bit post quarter, I think, a little bit. But it's a level two mark. And so we choose to rebuy it every we could choose to rebuy it every day, which we have.

Got it. Yes. Okay. And then Bo talked a little bit about the expansion in the opportunity set in the secondary markets, very helpful there. But I'm curious if this environment has had any impact on your allocation of capital towards your investable themes? Or alternatively, has it created any new sector themes for which you plan to invest?

Yes. I mean, most definitely so look, I think the liquid market was really interesting for a period of a couple of weeks. Quite frankly, we were getting we spent our time making sure that we had enough capital and liquidity to support our existing portfolio companies. And so we had our head down. We did one small secondary trade. My guess is that there's going to be divergence in the secondary market, which will probably create a lot of opportunities over time, but we're going to be patient there. The quite frankly, the themes as the big theme as being a capital and solution provider in complicated situations, I think that is plentiful in a post-COVID world. And that is where our skill set that is our skill set that I think we do best at and have historically done best at and have created a ton of value. And to put this in perspective, we are in kind of special sets, kind of rescue-oriented financings. We've originated $4.5 billion since inception. That's about 35% to 40% of the total originations. The gross IRRs on those investments in and in more benign investment was benign investment environment was about 24%. 35% of our originations post 35% of our origination since inception has been nonsponsor. The gross IRRs unrealized investments were 23%. And so in a world where we were not focused much of the world was focused either on sponsor finance or focused on growing market share, we were focused on really trying to drive and create value for our shareholders. And in a world where it's going to be very complicated both from underwriting from both from a balance sheet perspective for companies and from an operating environment and really the devil in the detail is understanding the forward earning power of the business, which probably have been massively diverged from the historical earnings power of the business and what their unit economics are is kind of our this is kind of what we do and what we do best and where our skill set lies. And so on the go-forward opportunity set, we're really excited given that the opportunity set matches up with our capabilities very, very well. And with the Sixth Street platform very well. That being said, obviously, given that the world we're in today was kind of set off by health care crisis. On a personal level and every other level, it's very upsetting to us, given the amount of destruction and amount of loss of lives and that people were and amount of uncertainty people are feeling both about their economic personal economic situation and their health. But I would say the go-forward opportunity set matches up pretty well with our skill set.

Got it. Again very helpful. Last question is, I noticed you said you temporarily suspended your buyback program intra-quarter. What's the thought process there because it appears you had a line of sight to an abundance of liquidity, especially with Ferrell and Nektar coming back to you. So presumably, that shouldn't cause you the need to hold maybe a couple million bucks for buybacks.

Yes. So, look, I mean, it was obviously very fluid in March. Credit spreads were like credit spreads, there was not a bottom of in credit spreads. So we mark our book to fair value. And the buyback program is backward-looking, not forward-looking. So it set off of the historical NAV. And as credit spreads are widening every day, every moment, you really don't know where there's a bottom. And you really we wanted to get our arms around making sure that get our arms around our debt-to-equity, get our arms around and quite frankly, make sure that we were being thoughtful users of capital, given that we didn't know what the new net asset value was going to be in the moment, given the violent move in credit spreads. So I think in the hindsight is always 2020. And given how the quarter ended, I probably wish we wouldn't have done that. But we were in a multivariable situation regarding the falling of credit spreads, talking to rate agencies every day, making sure that we protected our investment-grade ratings. And so we did what we thought was best in the moment and hindsight is always 2020, and it will be a lesson. Ian, anything to add there?

You captured all, Josh.

Great. That's it for me. And obviously, the market knows that you are a good allocator of capital.

Our next question comes from Ryan Lynch with KBW.

Hey, good morning. Thanks for taking my questions and hope you guys are all well. My first question has to just do with the opportunity set. I mean this is kind of unknowable question going forward, but I'd just love to hear your opinion. I mean, right now, the primary issuance market has come to a grinding halt. Secondary market has kind of snapped back pretty quickly. But as you guys sit here in a really good capital position for the remainder of the year, how do you guys view yourselves as far as allocating capital when it seems that the primary market may be held up for a pretty long time as there seems to be fears about second and third waves of potential spikes as the economy starts to reopen. Do you think you guys are going to be more tracking in the secondary market opportunities looking for dislocations there to deploy capital? Or just kind of how are you thinking about that kind of for the remainder of the year?

Yes. So we surely have there are opportunities. I think there are a lot of opportunities, both in our own capital structure, i.e., if the stock trades below book value. I think given the work we've done on our capital and liquidity, we think that will be a good investment. I also think that when you you're exactly right. The M&A market has come to a halt and will be very, very slow. The good news was our business wasn't that levered to sponsor M&A. Again, I think 45% of our originations from inception were more kind of special fits oriented and so and refinancing related. And so I think that opportunity set will massively grow and, quite frankly, lines up with our skill set very, very well. But the and then quite frankly, if you do see M&A, you're going to see M&A that's more strategic in nature. So it's going to be sponsored portfolio companies or nonsponsored portfolio companies and it's going to be strategic where I think given that there's not that much supply of capital both from the BDC market because I don't think generally [Indecipherable] is well positioned from a capital liquidity perspective or from the private fund market where people are inwardly focused either on their portfolio or solving liquidity issues themselves. There's no CLO creation. The high-yield market is open for big issuers and highly rated issuers but for kind of our core business, I think there's going to be a decent amount of opportunity. It's not going to be levered to M&A, but it's probably more connected to our existing skill set. Bo, do you have anything to add there?

No. Listen, I think we'll see an evolution of the opportunity set, as I've mentioned in our prepared remarks. With the high volatility, new issuance froze. We're starting to see the unthawing of that in the back end of the pipeline for opportunities where our set matches, as Josh mentioned, complex situations, special situations, good companies, bad balance sheets. Those type of opportunities are appearing, and we are well positioned to be liquidity providers in those environments.

Okay. That makes sense. As we kind of look into this oncoming downturn, I think one of the differentiators could be in the BDC space besides the liability structure that the BDCs have set up and you guys seem to be set up really well there and the quality of the asset book. Could be just the size, scale and the depth of the platform as BDCs work through challenged credits and try to get the best optimal outcomes for some of these credits. So can you just talk about your confidence in the size and the scale of your platform to work through both challenging credits in your own existing portfolio, find new opportunities, and then particularly in light of the finalization of the split with TPG?

Yes. So look, the like we have one of the biggest private credit platforms in the world. So $34 billion of AUM, that will, my guess, probably grow. We have a ton of dry powder across our platform, where we were going to be a active participant in providing solutions for companies and issuers that, quite frankly, the TSLX platform will benefit from. And so I think people saw that we were involved in the financing for Airbnb, given the structure of that loan and the ability of the company to pick it wasn't really appropriate for the BDC, but I think that's a good example of the how the platform at work, the scale of the platform our ability to see large opportunities. The amount of resources we have in our platform, we have 275 people. The partner group, I think we have like 18 partners now in the partner group. Much of us has been working together for somewhere between 12 and 20 years. And so as it relates to the scale, the skill set and our historical and our investment process, and our ability to protect and create value for both shareholders and LPs and the brand we have, I feel I could not feel better about how we're positioned and situated for the environment we're coming into.

Those are all my questions. I appreciate the time and hope you guys are all safe.

Next question comes from Robert Dodd with Raymond James.

Just one. Mine some of mine have already been answered. When you look at the capital allocation going forward, can you give us any color on the relative difference in hurdle rate, if you will, for new deployment versus reserving capital for existing portfolio companies? Obviously, if you put a follow-on investment into an existing portfolio company, even if the yield is lower, it's protecting the already invested capital, so the potential IRR can be materially higher versus new, where the yield might be higher but if asset life stretch the excess IRR, you've got from some of those where things have repaid quickly, may come in. So there's new risk versus existing opportunity cost IRR savings, etc. I mean, how is that going to be balanced over, say, the next three months versus the next year?

Yes. So first of all, look, we mark all of our investments to fair value. And so I think and I think I understand the question. But the as it relates to our existing investments, and given that we mark at the fair value, like the I'm not sure the hurdle rates differ that much given that where there was a sunk cost and so you I'm trying to think through your question on the fly, but like the sunk cost as it relates to the existing investment is, it is what it is. And so we mark at we're going to say here's the cost of here's our opportunity to invest in our stock, here's the investment opportunity to invest in the new loan, here's an opportunity to invest into existing loan. And like those things should all line up where and we should that's how we're going to allocate capital. But I don't I'm not sure there's a different cost of I'm not sure we're going to allocate capital at a lower cost to our existing portfolio company versus making new investments. You might do that, but you would look at the return of the fair value, effectively the incremental value you're creating when you mark the investment to mark it on your existing investment.

Okay, I appreciate that. Just when we can resolve up on that, that later as well. Thanks a lot.

Our next question comes from Mickey Schleien with Ladenburg.

Yes, good morning everyone. Josh, just one sort of high-level question. Obviously, your company has had a great experience and solid returns in the retail segment. Now we see airlines completely dislocated for reasons greatly out of their control. But you have blue-chip names with and in some cases, with very high-quality assets. And there will be a day when you and I and everybody else on this phone call are getting back on airplanes and traveling and visiting companies and visiting clients. So I'm curious whether you're thinking about that sector, something in which the BDC could invest. I realize you're not investing there now. But it would seem that there would be opportunities there, which could generate some really outsized IRRs if the deals are structured correctly.

Yes. Look, so the challenge with the airline industry, first of all, I think the some of that opportunity set has been displaced from in the short term through public policy. And so they've got a decent amount of support through the existing policy programs. And so I think the challenge generally with airlines is that we always thought asset value was a little bit illusionary. Given that the time you needed your asset value was where the it was typically correlates to an environment where there was a time where it was oversupplied and there was given that if it was oversupplied, there would be no bid for your underlying asset value. So I think the airline industry, given the amount of I think amount of kind of permanent demand destruction and given the operating leverage, I think it makes it very, very challenging to invest broadly. There might be opportunities in the future to do things. But you're looking at an industry where it's going to have there's real demand destruction. I think it took six years post 9/11 for demand to fully come back. I would expect this is actually longer. This relates to people who have internalized their personal health. You might see that you might see it come back a little bit quicker with the if you do see a antiviral or a vaccine, especially a vaccine. But I quite frankly, I'm not given that there's been a lot of public resources devoted to the airline industry, and given the amount of the demand destruction and the asset values are tied to effectively how much what the supply is, I think, is very challenging not as noninvestable, but that you might find several opportunities, but I'm very happy that we're not long either airline credits or not long underlying assets in the airlines today. I think when you take a big step back, I think there are the travel industry, especially the asset-heavy models which I think differentiates from kind of the Airbnb models, the and real estate, I think there is will be long tail demand destruction both for real estate and for the transportation industry, especially those people who own assets will be very much affected.

Josh, how do you feel about education? And I'm not talking about online products or for profit universities, but I'm hearing about just enormous liquidity constraints that across the university system. I imagine some of those are actually your clients. Are there opportunities developing there that we haven't thought about that might be interesting?

Yes. So first of all, most of when you say our clients, you mean in our LPs or portfolio company customers?

The endowments as partners.

Yes. Look, I think the I think I mean, we're always going to be or want to be a solution provider to whoever our client is, if it's endowments or pension plans, etc. There are as it relates to trying to find good assets for their balance sheet. And so I do think the education industry is going to be under a ton of pressure. But we're always a solution provider for our clients. Where we if we can find good assets that help them either meet their liabilities such as pension plans or grow their assets as it relates to endowments. But I don't see us being providing loans to either private universities or private endowments. I don't think that's an opportunity set for us.

I was hoping for a structured credit question.

Those are all my questions today. I hope everyone stays safe and healthy. Thanks for your time.

I'm not showing any further questions at this time.

Great. Thanks, Mickey. Very much appreciate everybody's well wishes. And please feel free to reach out to the team with any questions. Obviously, Memorial Day is going to be very different this year, but I hope people take the moment to spend time with their families and friends and enjoy the time they have with their loved ones and people be safe and wish only health and happiness. Thank you so much.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.