Good morning, and welcome to Sixth Street Specialty Lending Incorporated September 30, 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 statements of historical facts made during this call may 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 a result of a number of factors including those described from time to time in Sixth Street Specialty Lending, Inc. 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 third quarter ended September 30, 2020, and posted a presentation to the Investor Resources section of its website, www.sixthstreetspecialtylending.com. The presentation should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC. Sixth Street Specialty Lendings, Inc. earnings release is also available on the company's website under the Investor Resources section. Unless noted otherwise, all performance figures mentioned in today's prepared remarks are as of and for the third quarter ended September 30, 2020. As a reminder, this call is being recorded for replay purposes. I will now turn the call over to Joshua Easterly, Chief Executive Officer of Sixth Street Specialty Lending, Inc.

Thank you. Good morning, everyone, and thank you for joining us. We recognize that the ongoing pandemic continues to present a very real and unique challenges for everyone and their families. So we're grateful to those who are able to join us today. And thank all our stakeholders, wherever they are, for their continued interest and partnership. Once again, I'm here today with my partner and our President, Bo Stanley; and our CFO, Ian Simmonds, both of whom we will hear from later on this call. After the market closed yesterday, we reported strong third quarter results with net investment income per share of $0.61, over-earning our Q3 base dividend per share of $0.20. Net income per share for the quarter was $1.21. These results correspond to an annualized return on equity on net investment income of 15.1% and net income of 30.1%. On a year-to-date basis, we've generated an annualized return on equity on net investment income of 13.5% and net income of 14.7% based on the beginning year pro forma net asset value per share of $16.77, which is adjusted for the impact of our Q4 2019 supplemental dividend of $0.06 per share. Of note, these annualized year-to-date return on -- ROEs both exceed our average annualized performance since our IPO through the end of 2019, which we think is notable given the difficult operating conditions experienced during the first 3 quarters of 2020. That said, based on market conditions today, we believe there are tail risks that all BDC portfolios are subject to, including credit risk and earning headwinds from LIBOR, which in our portfolio is offset by our LIBOR floors and the floating rate nature of our liabilities. Our strong net investment income this quarter was a function of both robust interest and fee income as…

Thanks, Josh. During the third quarter, conditions continued to stabilize in the leverage loan market as unprecedented levels of fiscal and monetary stimulus supported ongoing investor demand for risk assets. Secondary loan prices continue to recover in Q3 and primary issuance activity slowly reemerged in connection with opportunistic financing and M&A. On an absolute basis, however, our leveraged loan activity in Q3 remained muted compared to historical levels, resulting in a 10-year low for year-to-date new issuance volumes. These trends carried across the middle markets where overall activity remained modest. However, we noticed a notable increase in sponsor activity later in the quarter and into Q4. In contrast to the muted issuance activity in the loan markets, we had record Q3 originations activity with our highest level of commitment since inception at $436 million and our second highest level of fundings at $332 million. This activity was across 12 new and 4 existing portfolio companies. As alluded to in our last earnings call, despite the lack of middle market sponsor M&A since March, we had a very strong pipeline headed into Q3 given our diverse sourcing channels and deep sector relationships as part of our thematic investment approach. At a high level, this quarter's new investments were predominantly non sponsored transactions were underwriting and sector capabilities along with significant dry powder across the Sixth Street platform allowed us to be value-add partners for companies and their management teams. Examples of this include the $500 million term loan facility that we underwrote with our affiliated funds for the publicly traded biopharmaceutical company, Biohaven. Similar to our prior investments in Nektar and Ironwood, our Biohaven facility is secured by all assets of the company, including royalty streams from an FDA-approved drug and therefore faces no underlying regulatory approval risk. In addition, certain…

Thank you, Bo. I'll begin with an overview of our balance sheet. Total investments at fair value increased by $118 million quarter-over-quarter to $2.1 billion, primarily driven by this quarter's net funding activity and the net unrealized gains on our investments. Total principal amount of debt outstanding was $932 million, and net assets were $1.14 billion or $16.87 per share. Our debt-to-equity ratio at quarter end was stable at 0.81x due to the combination of the delevering impact from this quarter's increase in net asset value, offset by net portfolio fundings. Our average debt-to-equity ratio increased from 0.87x to 0.93x quarter-over-quarter due to the timing of our Q3 repayments, which were mostly weighted towards quarter end. On capital and liquidity, we continue to be strongly positioned, ready to capitalize on potential market dislocations. As Josh discussed, our capital and liquidity position has aided our ability to capture value for our stakeholders during these volatile times. Our financial leverage of 0.81x remains well below the regulatory limit of 2x, and we had ample liquidity at quarter end with $1.02 billion of undrawn revolver commitments. For context, our current liquidity represents nearly 50% of our total assets. And we had 12.4x coverage on our $83 million of unfunded commitments available to be drawn by our borrowers based on contractual requirements in the underlying loan agreements. This compares to a peer median using June 30 data of approximately 21% liquidity as a percent of total assets and only 4.4x coverage on unfunded commitments. At quarter end, our funding mix was comprised of 69% unsecured and 31% secured debt, and our nearest maturity was approximately 2 years away at only $143 million principal amount. We continue to be match funded with a weighted average remaining life of our investments funded with debt of 2…

Thank you, Ian. It goes without saying that nobody could have predicted the operating environment we faced for the first 3 quarters of 2020, but we're proud of what our business and our people have been able to accomplish. In the midst of a pandemic, with the majority of our team continuing to work remotely, we've generated record originations activity and are on track to deliver one of the strongest full year ROEs for our shareholders. In our view, none of this would have been possible without understanding of the unique constraints and challenges of the BDC model and the measures we've implemented on both sides of our balance sheet to help our business drive in periods of uncertainty. That said, we continue to evolve our thinking based on our assessment of underlying risks, trends and developments in the world around us. This includes an ongoing assessment of our liquidity and funding profile as well as an evolution of investment themes into new sectors or strategies we believe our human capital can be applied to generate value for both of our shareholders and our clients. As a business, it's hard not to be reflective given that we founded Sixth Street during the financial crisis 11 years ago. And today, we're faced with an ongoing pandemic. In our view, these 2 regressive events have shed light on the fact that we still haven't confronted the history and legacy of institutional racism, and we've continued to live with the consequences of our failure to deal with massive wealth inequality. We firmly believe that the adversity in our people, in our society today can create tremendous opportunities for improvement, not just lead to dark places. Looking ahead, our hope is that we all, in whatever ways we can, focus on healing conversations, equity and in our roles as market actors insist that we preserve the power of capitalism, which we firmly believe creates the best outcomes for society, albeit in a better modified way. We will leave you with one of our favorite thoughts from the Reverend Dr. Martin Luther King, Jr. "The arc of the moral universe is long, but it bends towards justice." With that, I'd like to thank you for your continued interest and your time today. Operator, please open up the line for questions.

[Operator Instructions] our first question is from Rick Shane with JPMorgan.

I wanted to start by just looking at the pending maturities within the portfolio. When we look at 2020, you have one sort of normal way transaction that's maturing, which is Quantros, it's carried a little bit below fair value -- or excuse me, a little bit below cost. I'm curious what the path there is. And then as we look into 2021, you've got 3 significant maturities, MedeAnalytics, IRGSE and then 99 Cent Stores (sic) [ 99 Cents Only Stores ]. Those are all carried slightly above cost. I suspect 99 Cents is doing very well. If you could just give us a little insight on the other 3 investments, that would be helpful.

Sure. Rick, good morning. So Quantros is actually in the sales process. It's sold -- Bo, correct me if I'm wrong. It's sold about -- we had a significant pay down. It sold some assets, software and analytics business, sold some assets maybe 1.5 years ago, 2 years ago. They're in the process of selling the rest of the business. But I expect that to be cleared up. IRG is a controlled portfolio company. 99 Cents is doing well. And there's going to be significant refi risk. And what was the other one there?

The other one was MedeAnalytics and that has paid off. That business was sold and has since paid off.

Great. Okay. And then that's very helpful because obviously, everybody is sort of asking about maturity default. So that clears that.

Rick, just let me -- I want to clarify because I think you're talking -- your focus on like this tail concept of tail risk in existing portfolios. And I want to clarify one of the things we talked about in our earnings call because the information, the names that we shared earlier included new names in each of the respective periods that the market were less than $98, which had a -- which could have had an impact from OID. So if we booked a new name, it's going to be at OID. The market is going to be less OID. It was included in tail names, even though that probably -- it's not really a tail name. If you exclude the new names that are obviously not tail risk names at quarter end, 8% of our portfolio had a fair market value of less than $98 compared to 4% at Q4 of 2019. The average price of those tail names in Q4 was $95 compared to $85 in this quarter.

Got it. Okay. That's helpful. You're right. I was thinking a little bit about tail risk. The other investment I'd like to just talk about is Biohaven, which I think is a sort of a different investment for you. If we look, that's a company that is consistently losing money, seems to be burning cash. I realize your portion that facility is relatively small. But just like to talk a little bit about what's driving what appears to be a different type of investment in that particular company?

It's actually not -- it's the same exact investments that we had in Ironwood and Nektar. So those were large biotech companies who had an in-place IP and drugs that had sales, and then they were investing in R&D to expand the portfolio. And so if you look at the exist -- if you had looked -- if you kind of parse out the business and said, their existing drug portfolio that has revenues that has in-place IP and you look at that and you looked at the DCF of the value of that in-place IP, it significantly covers our loan. And so it's exactly the same theme as Ironwood and Nektar, who both paid off and were good investments for us. So the -- there's kind of a couple of different types of bio businesses, one biotech business, one set of biotech businesses that have no in-place revenues, no cash flows, all kind of on the come, those don't have a credit story. Then there are biotech companies who have a drugs or portfolio of drugs, but they're massively reinvesting in new drugs. And when you parse out, there is an underlying credit story either based on royalties or the value of IP from in-place drugs that are providing revenue. And so Biohaven actually has the market-leading migraine drug or 1 of the market-leading migraine drugs.

Got it. I think, in the current environment, exposure to migraine relief is probably a good place to be. Thanks for the context.

I mean I think Ironwood was like IBS and constipation medication or so -- or I think the Ironwood. So that could have been applicable, too.

Our next question comes from Devin Ryan with JMP Securities.

Maybe start here with a bigger picture question since it's on top of everyone's mind. I'd love to maybe just get a little perspective around how you guys are thinking about a scenario to the extent we do have a Biden White House, but a Red Senate, so we probably don't see tax legislation change, probably less stimulus. And related to that, you mentioned the pickup in deal flow over the past couple of months. I think that's consistent with the broader M&A markets. But if credit and equity markets remain reasonable in either, call it, political outcome that could happen here, do you see anything that could change kind of the strong momentum in new deal flow?

No. Look, I think you're right, which is -- I'm not -- by the way, I'm not -- I think both sides want to get some type of stimulus done, which I think is net positive for markets, including credit markets. I do think significant undoing of the Trump tax reform is probably off the table or specific stimulus into Blue States it's probably off the table. We saw that, obviously, in some of the New York [Technical Difficulty] stocks yesterday that were significantly down. The -- but on the corporate credit side, keeping corporate tax rates as is, is probably positive for credit and positive for valuations. And so I think putting personal politics aside, the markets like, I think, like the outcome of or at least yesterday and today on premarket, like the outcome of stability in knowing what the rules are, stability on knowing what corporate tax rates are and my guess is that there will be some type of stimulus both sides of table.

Okay. Terrific. And maybe just a follow-up here. So PIK income is obviously somewhere we've been focused in your PIK income as a percentage of total investment income is very low at 3.2%. And so I'm just curious, if that's just a function of some of the portfolio positioning that you've spoken about, just the health of the portfolio? Or is there something else going on there as we think about moving forward?

Yes. So I think, first of all, PIK income, I think on a notional basis, Ian, correct me if I'm wrong, was only up like $100,000 quarter-over-quarter.

That's right, Josh.

And that was a function of, I think, 2 new names in that PIK component, Biohaven and Forescout and a full quarter of PIK income on service channel Sprinklr with relatively small positions. And those were not -- none of that was related to restructuring. So those were related to investment choices we made. The activity level on amendments were significantly down quarter-over-quarter. And so -- and I don't think there was any amendments the last quarter that had put -- that had -- where we added PIK income. And so I think that's a function of where we position the portfolio pre-COVID, where in the capital structure and, quite frankly, on a sector basis, I think as we mentioned in our earnings script, really, we report our industry exposure by end markets served. But really, when you look at our portfolio, I think 75% of our portfolio is tech-enabled business service-as-a-software, which have very significant revenues and decently variable cost structure. And so people have been able to kind of live through the volatility given the nature of the structure of the businesses that we chose to finance.

Our next question is from Robert Dodd with Raymond James.

Josh, during -- I think this is actually Bo, you mentioned notable increase in sponsor activity at the end of Q3 and Q4, I mean, that's consistent with what we've been hearing. But at the same time, I mean, obviously, Biohaven, Designer Brands, Centric, those are the more niche asset by really good credit security, very high IRRs, which we can obviously see with Centric Brands, this has already been realized. What will -- the sponsor type business tends to be a lower IRR, maybe longer-lived asset, but then the ABL stuff, higher IRR shorter lived asset. Looking forward, tough question, what do you -- what areas do you expect to see and I'm not just talking about Q4, talking about 2021, et cetera, do you expect to see the most capital deployed into? Is the market shifting right now from what was more ABL during the tougher periods to maybe more sponsored in '21? Or can you give us any thoughts on that?

Yes. So it's a great, great question. I'm not sure I'm going to have a greatest answer. How we've set up our business model is really to focus on multiple channels and in investments in industries that we like the -- in investments perhaps in industries that we like that we think have good credit characteristics, i.e., that the -- because you don't -- even in the sponsor business, even when they might be longer weighted average life, you don't really own a right tail. Like you don't -- you're not going to make 4 or 5x your money. And so you got to figure out, you got to spend your time and truncate the left tail. And so that's -- when we think about our business, we think about looking for and prospecting for a deal that has a return profile that doesn't have a left tail. And so that's both -- and then we've set up our business where we're kind of agnostic towards channels. And so we're agnostic towards sponsored channel and nonsponsored channel, stressed rescue financing healthy businesses as long as that distribution is consistent and acceptable and, on occasion, we might take some probability of loss but you got to have -- really have a higher expected MOM. And so I don't have a -- I would have thought if you would have said in March or April, where was all of our activity going to be? I would have said, all of our activity is going to be in rescue financings. And I think that, quite frankly, was offset by a ton of stimulus and the Fed either kind of threatening or actually participating in credit markets. And so hopefully, how we have our business set up is we don't have to -- we're…

No. I mean, listen, you're 100% right, Josh, the thematic approach in omni-channel approach allows us to be active when each of those channels have muted activity like we saw in Q2 and early Q3 in the sponsor M&A transactions. We saw that activity picked up, the natural arc of gestation periods of deals means that you start seeing that activity really come through in like Q3 in the pipeline in Q4, which we see, that was really pent up, and there's a lot of pent-up demand for M&A given where asset prices are right now. So it's a very active environment. I think you're hearing that across the industry. I would expect, and this would just be a guess that you would continue to see kind of normal levels of M&A going forward without some sort of dislocation, but we're also seeing a lot of opportunities across our other directed company, retail ABL, so the pipeline feels very balanced right now.

Yes. I'll just add. I mean, I think a lot of what we do are core software business services. We did see a pretty good snapback in the last few months as far as activity goes. And yes, I expect that to carry into next year. So that should continue along with what everybody else mentioned, retail ABL, asset-based restructurings and the like.

I appreciate that. And I really appreciate that. I basically asked a crystal ball question, but I appreciate the color. Just I kind of follow-up. On the M&A activity and the sponsor activity, I mean can you give us just a quick view on how pricing is? I mean, I presume spread widening largely are back-weighted it seems. But documentation, et cetera. Can you give us any quick comments there?

Yes. Like I'll quickly step in there. I think compared to pre-COVID, you're still seeing levels -- leverage levels down modestly, better documentation than you were seeing pre-COVID. From a pricing standpoint, there's probably still a premium to pre-COVID but that is -- it's definitely getting competitive, and that is starting to tighten up.

Our next question is from Finian O'Shea with Wells Fargo Securities.

Just one question on the -- for sort of Joshua, Ian on the LIBOR swaps, that's -- it was interesting color on the reversal coming up and the gains you've had and obviously, was a patient strategy to have had in place going into the recession before that LIBOR was going down but where things are now, as these unsecureds roll off soon, assuming you all replace those soon, would you still execute that same strategy or structure? Would you still swap to LIBOR given it's essentially 0? Any color on that, that would change going forward?

Yes. Look, look, our belief -- our fundamental belief is that we have the ability to underwrite, manage and pick credit risk and manufacture strong credit risk premium. We don't really have the ability to figure out the macro. And so LIBOR, as you say, LIBOR is closest to the pin to 0. That being said, there's arguably negative real rates right now. And there's negative nominal rates in Europe. So like don't -- I don't -- you should not think about LIBOR as a -- I would not think about LIBOR as a floor. Now I'm not calling for negative rates. But you shouldn't think as 0 is an absolute floor. Zero is a number just like negative 30 is a number. So I would say we will continue to have -- we'll look at it when we make that call, but we'll continue to have a bias where we think can -- we think we do some things well and have a skill set and we continue -- and we do some things not well or don't have the -- we might do well. We don't think we have the skill set to do well, which is the macro. And so that is a little akin to us, would you stop hedging your foreign currency exposure by borrowing in local currency? And so the answer is independent of where you think there's going to be a reversion to mean or independent what you think currency swap rates are, cross-currency swap rates are, we probably wouldn't do so just because we don't have that skill set. So I would expect -- we haven't talked about it for a while, but I would expect that our general North Star remains unchanged and I would -- our LIBOR, our swaps just to be clear, unlike our bank deal does not have floors. And so if LIBOR does go negative, our cost of funding is going to go down on our notes, whether it's existing swap. There's a floor of 0 on our bank revolver, but in our -- there's no 0 floor. Ian, do you have anything to add?

No. I think, Fin, you actually understand the concept anyway because on day 1, when we enter into a swap, the NPV is 0. So then I'll just revert back to the comments that Josh made about where our skill set lies beyond that in terms of forecasting on a macro basis.

Yes. No, I appreciate it. Actually, one more question popped up.

If then, the one -- I know you get this one thing just for other people who might be listening, that there's a significant correlation between when rates go down, that there's a kind of economic uncertainty, right? Because as a policy manager, as a policy matter, people are using -- use rates and monetary policy as a form of stimulus. And so the -- and right now, we basically have, on our asset side, we have basically a fixed rate of return given our LIBOR floors. And so in environments where there is a ton of uncertainty and policymakers are pushing rates down, we probably have credit losses. And so we like the benefit in that environment from the net interest margin experience, which we've massively -- which we've actually massively has helped us by 100 basis points or 110 basis points projected next quarter. And so what we do give up is we give up in massive risk on environments, and we give up some ROE expansion if we have a whole bunch of fixed rate debt. The other thing I would say, the last thing I'll say on the subject is, another theme is like, is that our dividend is -- could be argued, excluding the environment we live in today, which is expecting some credit losses, as safer today than it was a year ago, so because of the net interest margin expansion. And so I think that is one. We have more net interest margin than we've had historically, which is protect -- which actually provides safety for our dividend and safety for the -- for future credit losses.

Sure. And on spillover, I know you've paid out the $0.50, and I think, first quarter, your undistributed NII is already above where it was before that. Are we looking at another -- are we looking at another special, special, as you may call it, or extra?

Yes. So it's kind of -- I'll let Ian answer the second piece. It's had a little bit of a bummer, right? We did that -- we've tried to avoid doing large specials when we put in the recurring, supplemental dividend framework 2, 2.5 years ago. And then given that the level was set at only at $0.50, we ended up having friction costs and kind of growing the spillover income and growing, unfortunately, on a per share basis, the excise tax. And so we wanted to clean it out. I think we're basically back pre-clean out. Is that right, Ian?

Yes. At the beginning of this year, when we went to the Board with the proposal, we were at $1.61 per share of undistributed income. And at the end of Q3, we're at $1.55. So we're pretty much back there.

And so as a -- I think we'll look at, Ian, correct me if I'm wrong, the plan is to look at where we sit on a tax basis and look at the 90% rule and look at how much of excise tax is a drag on earnings? And we'll go through the same work we did at the end of the year, at the end of this year.

Congrats on the quarter.

Great. Thanks, Fin. Hope you and your family are safe.

Our last question is from Ryan Lynch with KBW.

A lot of BDCs have talked about really positioning their portfolio late cycle over the last several years, but not all BDCs' portfolios have really held up as well as yours has so far. And I know there's -- you mentioned there's still a lot of credit risk in your portfolio, and we're still in the midst of a downturn. But so far, you guys have grown book value meaningfully in 2020 in the midst of this downturn and have had actually one of your best ROE, net income ROE generation years that you guys have had in the midst of this downturn. So I'm just curious, are you guys surprised how well your portfolio has held up in the midst of this downturn and how much value you guys have been able to create?

Yes. I wouldn't -- look, hindsight is always 2020. So I think we feel very good about where we are today in the portfolio today. I'm a little bummed that in the midst of -- and again, hindsight is 2020 and I've had these conversations with people a little bummed that we turned off our stock. We didn't buy enough bonds back in those moments, a little bummed that we didn't buy back, we turned off our stock buyback program in middle of March to protect liquidity. I'm a little bummed that we created, quite frankly, a whole bunch of value in Q2 and Q3 by being a little bit active. There was probably more opportunity to be had there. But uncertainty was very high. And so I don't give us a path. Look, 2020 hindsight I'm a little bummed. So I feel very good about what we were able to accomplish and how we protected the balance sheet. And -- but that all started with, I think, protecting the balance sheet and it was only a decision of what assets we chose to finance. It was -- because there were some of our peers who had financed similar assets, but they were -- they got back and then doing unnatural things because they didn't reserve for unfunded commitments, they didn't think about drawdowns and net asset value during times of volatility and what that meant for offense. And so I think it's a combination of -- the ROEs this period are a combination of assets we picked to finance and position the left-hand side of the balance sheet, but it's also how we position the right-hand side of the balance sheet to be able to make the business at minimum, robust, but possibly anti fragile, where we were able to attack opportunities during times of volatility, which we've always talked about. And so am I a little surprised? Yes. But I think it's what we thought about and how we thought about the business. And quite frankly, I thought a lot of the disciplines we put into our framework ahead of the crisis allowed us to capitalize a little bit in hindsight at which we would have capitalized more. Ian, Bo or Fishy, anything?

No, I think that's right.

Agree.

Okay. Yes. We're well done. You mentioned in some of your earlier comments, prepared remarks, some of the secondary opportunities that you guys had and the value you created in the second and third quarter. Looking into the fourth quarter, are there still any opportunities in those markets at all? Or given the kind of run-up in prices, is that kind of market kind of gone away at this point?

It feels like it's gone away. I mean things are not obvious. So for example, the structured credit market is not as obvious to us. On an opportunistic basis, I think there's still value to be had there. But given that it's kind of not -- I won't say outside the lane, but it's an adjacency. It's -- there's -- it's not that seeming value that we're going to kind of go out of our lane. I would say, I think there's opportunities in regular way direct lending. That we think is interesting. But we are positioning, look, the path of COVID is highly uncertain. And we are -- I think we are continuing to position our balance sheet to not saying that there's going to be more volatility to come, but if there's more volatility to come, both from how much capital we have and how much liquidity to have to be positioned to lean into that volatility if it does come. And so I'm -- our balance sheet was I think pretty well in position, pre-COVID, it's actually in better position today given we have more capital. We have -- debt-to-equity is lower. We have basically the same amount of liquidity. Ian?

No, I think you captured all of it, Josh.

Okay. And then I just had one more. I think earlier, you were talking about -- Robert was asking about the kind of terms and structures on sponsored deals. I think you said they were maybe modestly better from leverage levels or documentation and maybe a little bit better on pricing, but maybe that's coming down. Just curious your thoughts on even if terms, documents, structures haven't materially improved since where they were maybe pre-COVID, would you still consider a new investment today versus a year or 2 ago, potentially a better risk-adjusted opportunity just because if you're making an investment into a new portfolio of companies, today, you're at such an information advantage versus where you were a year or 2 ago because you'd have this -- recency you have seen how this particular businesses is performing during a very severe downturn. So while the terms and structures may not have improved significantly, the risk-adjusted return is better because of the information advantage you potentially have?

Yes. So I think that's a very valid framework and a very valid argument. I think it all comes down to the underlying idiosyncratic credit. And then I don't think that you can underestimate the volatility in both our portfolios and how businesses performed was most definitely muted by the significant stimulus. And so you kind of got a window but -- into how things performed, which I think most definitely is an informational advantage and which is helpful in your underwriting. That being said, you had a whole bunch of stimulus through PPP loans or through just broad-based stimulus that you really -- that tide kind of went out and then kind of got stopped. If that makes sense? But I think your framework is a valid framework, which is, yes, like you get to see how cost structures behaved, how management behaved, how sticky were the revenues in the backdrop of COVID? And then I would say, plus at the backdrop of stimulus.

Yes. Yes. So I guess a couple of different factors there, with the government coming in and talking about stimulus.

And this concludes our Q&A session. I would like to turn the call back to Joshua Easterly for his final remarks.

Great. We have a little bit of a history of wishing people happy holidays and the Thanksgiving is coming up. And so what I would say to people is, I think one of the silver linings of COVID is, people, for better or worse, got to spend a lot of time with their family. For me, it's been, quite frankly, amazing. And so hopefully, people take the time given all the strife in the world and on Thanksgiving and really take the time and appreciate the things they have and figure out how to make the world a better place. Thank you.

Thank you, ladies and gentlemen. This concludes today's program. You may now disconnect. Have a wonderful day.