U.S. Markets open in 7 hrs 18 mins

Edited Transcript of SCM earnings conference call or presentation 9-Aug-19 3:00pm GMT

Q2 2019 Stellus Capital Investment Corp Earnings Call

Houston Sep 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Stellus Capital Investment Corp earnings conference call or presentation Friday, August 9, 2019 at 3:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Robert T. Ladd

Stellus Capital Investment Corporation - Chairman, President & CEO

* W. Todd Huskinson

Stellus Capital Investment Corporation - Treasurer, Secretary, Chief Compliance Officer & CFO

================================================================================

Conference Call Participants

================================================================================

* Christoph M. Kotowski

Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst

* Christopher Whitbread Patrick Nolan

Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research

* Robert James Dodd

Raymond James & Associates, Inc., Research Division - Research Analyst

* Ryan Patrick Lynch

Keefe, Bruyette, & Woods, Inc., Research Division - MD

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning, ladies and gentlemen, and thank you for standing by. At this time, I would like to welcome everyone to Stellus Capital Investment Corporation's conference call to report second quarter 2019 results. (Operator Instructions) The conference is being recorded today, Friday, August 9, 2019.

It is now my pleasure to turn the call over to Mr. Robert Ladd, Chief Executive Officer of Stellus Capital Investment Corporation. Mr. Ladd, you may begin your conference.

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [2]

--------------------------------------------------------------------------------

Okay. Thank you, Codey. Good morning, everyone, and thank you for joining the call. Welcome to our conference call covering the quarter ended June 30, 2019. Joining me this morning is Todd Huskinson, our Chief Financial Officer, who will cover important information about forward-looking statements as well as an overview of our financial information.

--------------------------------------------------------------------------------

W. Todd Huskinson, Stellus Capital Investment Corporation - Treasurer, Secretary, Chief Compliance Officer & CFO [3]

--------------------------------------------------------------------------------

Thank you, Rob. I'd like to remind everyone that today's call is being recorded. Please note that this call is the property of Stellus Capital Investment Corporation, and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by using the telephone number and pin provided in our press release announcing this call.

I'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Today's conference call may include forward-looking statements and projections, and we ask that you refer to our most recent filing with the SEC for important factors that could cause actual results to differ materially from these projections. We will not update our forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.stelluscapital.com under the Public Investors link or call us at (713) 292-5400.

At this time, I'd like to turn the call back over to our Chief Executive Officer, Rob Ladd.

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [4]

--------------------------------------------------------------------------------

Thank you, Todd. We'll begin by discussing our operating results followed by a review of the portfolio, which will include asset quality, and then we'll talk about the outlook. Todd will cover our operating results first.

--------------------------------------------------------------------------------

W. Todd Huskinson, Stellus Capital Investment Corporation - Treasurer, Secretary, Chief Compliance Officer & CFO [5]

--------------------------------------------------------------------------------

Thank you, Rob. We're pleased to report another quarter of solid earnings in which we generated realized income of $0.43 per share, including gains of $2.7 million or $0.14 per share, which exceeded our $0.34 per share dividend by $0.09.

GAAP and core net investment income were both $0.29 per share, which were short of our distributions for the quarter by $0.05. It's important to note that this was our first full quarter of dividends after our secondary offering of 2.9 million shares that was completed in March.

Total realized income year-to-date includes $12.9 million of realized gains. It's $1.29 per share, which exceeds our distributions of $0.68 per share for the same period. Net asset value increased $2.3 million over the quarter, primarily due to the issuance of underwriters’ overallotment in April for our secondary offering in March. Net asset value per share decreased slightly from $14.32 to $14.29.

With that, I'll turn it back over to Rob.

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [6]

--------------------------------------------------------------------------------

Okay. Thank you, Todd. I'd like to cover the following areas, portfolio and asset quality and outlook. With respect to the portfolio and asset quality, we ended the quarter with an investment portfolio at fair value of $531.1 million across 57 portfolio companies. During the second quarter, we invested $50 million at par value in 4 new and 3 existing portfolio companies and received $37 million of repayments and realizations. Our portfolio continues to be weighted towards secured lending at floating rates. At June 30, 95% of our loans were secured, of which 70% were first lien and 91% were priced at floating rates. This move to more senior lending is resulting in lower coupons, however, we expect that it will also result in stronger asset quality over time.

We continue to maintain good diversification with the largest industry sector at approximately 70% of the total portfolio. Our average investment per company is $9.3 million and our largest investment is $22.6 million, both of those figures are at fair value. 52 of the 57 portfolio companies are backed by a private equity firm. 81% of our total investment portfolio is rated at a category of 2 or better, which means on plan or ahead of plan. We did have 1 loan go on nonaccrual during the quarter, which now results in 4 loans on nonaccrual which comprise 4.8% of the fair value of our total portfolio. This is up from about 1.7% in the prior quarter. We do not believe this is an ongoing trend at this time, and, in fact, one older nonaccrual may come off during the third quarter.

Now turning to outlook. As we discussed on last quarter's call and as reflected in our current yield, we are expecting lower overall yield in the loan portfolio. This is driven by lower LIBOR, which you've seen and a continued rotation to first lien unitranche type loans. This quarter end, we funded $33.9 million of debt at par in 2 new portfolio companies. We've identified likely fundings of approximately $40 million to $50 million over the balance of the quarter and expect potential repayments of approximately $30 million during the same period.

As we mentioned in our last few calls, part of our strategy has been to invest in the equity of our portfolio companies in a modest way in order to generate realized gains. As our business has matured over the last 6.5 years, we've begun to see somewhat regular realized gains from our portfolio. In fact, in 2017, we generated $4.6 million of such gains. In 2018, we had $5.3 million of such gains. And as Todd reported earlier, thus far in 2019, we've generated $12.9 million of gains, and we're also aware that we may have an additional $7 million of potential gains by the balance of this calendar year. As a result of these realized gains, we believe it is likely now that the dividends paid from August forward will be categorized as long-term capital gains for tax purposes.

And with that, I'll open it up for questions. Thank you. And Codey, please open up the Q&A session.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) We'll take our first question from Robert Dodd with Raymond James.

--------------------------------------------------------------------------------

Robert James Dodd, Raymond James & Associates, Inc., Research Division - Research Analyst [2]

--------------------------------------------------------------------------------

A couple of questions on the nonaccrual side. And I appreciate you called out what you don't think is a trend. But one, Protect America, obviously, you've put it on nonaccrual I think on June 28, so towards the end of the quarter. So can I assume first that -- so it contributed a full quarter of income and was then placed on nonaccrual? And then, I guess, the question is this, one of your second liens, was the nonaccrual event a result of blocking? I mean you've still got to buy, say, a senior lend, that you've still got it marked at 85, which looks pretty healthy. So what's -- can you give us any more color about precisely how that came at par where -- came to play out whether it was a material deterioration of the business, in which case the mark looks a little odd, versus the structure that led to the nonaccrual?

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [3]

--------------------------------------------------------------------------------

Yes, Robert. For sure. So let me -- Todd and I'll cover that together. So with respect to the company, of course, this is a privately held company. So we're careful about what we discuss. But I would say that, there was some activity that would have caused us to think that it was certainly a better rated loan and that activity changed. We don't think the fundamentals of the company have deteriorated. With respect to interest for the quarter, there was a partial payment, but the majority of the interest was not accrued in the quarter.

--------------------------------------------------------------------------------

Robert James Dodd, Raymond James & Associates, Inc., Research Division - Research Analyst [4]

--------------------------------------------------------------------------------

Okay. Got it. And then...

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [5]

--------------------------------------------------------------------------------

And that's frankly -- that's what led to the placing on nonaccrual.

--------------------------------------------------------------------------------

Robert James Dodd, Raymond James & Associates, Inc., Research Division - Research Analyst [6]

--------------------------------------------------------------------------------

Got it. Just trying to [scoop on that] (inaudible). Your other comment about one of your older nonaccruals may come back in the third quarter. I'm going to presume that probably means Refac Optical since it's marked pretty basically at cost now and it's been improving over the last couple of quarters. Is there any particular trend that's leading to that? I mean obviously, it's been worked through over a period of time and we've seen that go through. But is there any particular trigger that still needs to happen for that to go on or back onto accrual?

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [7]

--------------------------------------------------------------------------------

So I'd say as a general matter, it would either be the improvement through the payment of interest or it would be the payoff of the loan.

--------------------------------------------------------------------------------

Robert James Dodd, Raymond James & Associates, Inc., Research Division - Research Analyst [8]

--------------------------------------------------------------------------------

Okay. Got it. And then...

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [9]

--------------------------------------------------------------------------------

One of those circumstances.

--------------------------------------------------------------------------------

Robert James Dodd, Raymond James & Associates, Inc., Research Division - Research Analyst [10]

--------------------------------------------------------------------------------

Yes, yes. Fair enough. When we look at the portfolio as a whole, can you give us any -- obviously with, it's been kind of a theme this quarter, concerns. And I think there's been -- not your portfolio specifically, there's been a mixed -- (inaudible) better, so mixed message from the BDC, some seeing EBITDA slowing on average in portfolio companies, some seeing growth stable. And can you give us any color on what you're seeing broadly maybe on the accruing side of the portfolio?

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [11]

--------------------------------------------------------------------------------

Yes. So a good question, Robert. So one of the things we would look at as a question of recession. Is there kind of a national recession coming or has it started to occur. So we're not seeing that in the portfolio companies. We would say that, which is true, been true for a number of years now that if we have a problem, it's company-specific. So we're not seeing a trend downward in the EBITDAs of the portfolio companies. So -- and, in fact, year-over-year coming in the first quarter, which we'd be measuring the calendar year, it's actually up. And I think our best estimate for the -- so far this year is flattish to up. So not any big -- not seeing any concerns in the portfolio as a general matter.

--------------------------------------------------------------------------------

Robert James Dodd, Raymond James & Associates, Inc., Research Division - Research Analyst [12]

--------------------------------------------------------------------------------

Got it. Got it. Appreciate it. And then as the subsequent advantage as you said, you've deployed $33 million. I think you've had not any repayments yet. Any color -- have you had any call saying you're going to get repaid or anything like that, any indication about repayments in the third quarter?

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [13]

--------------------------------------------------------------------------------

Sure. Sure. So the number that I've expressed is approximately $30 million, which we think is likely.

--------------------------------------------------------------------------------

Robert James Dodd, Raymond James & Associates, Inc., Research Division - Research Analyst [14]

--------------------------------------------------------------------------------

Okay. Yes, I guess, I…

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [15]

--------------------------------------------------------------------------------

Yes. We would -- that would be your best estimate. Always could be more, but those we'd think are more likely than not. And in terms of the fundings, I think the same. But it's always the case, repayments end up being more certain than the new fundings. But we think, again, those are our best estimates, $40 million to $50 million on new fundings and $30-ish million on repayments.

--------------------------------------------------------------------------------

Operator [16]

--------------------------------------------------------------------------------

And we'll now take our next question from Christopher Nolan with Ladenburg Thalmann.

--------------------------------------------------------------------------------

Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [17]

--------------------------------------------------------------------------------

Rob, Protect America, I estimate that's roughly $0.02 a share per quarter. Is that right?

--------------------------------------------------------------------------------

W. Todd Huskinson, Stellus Capital Investment Corporation - Treasurer, Secretary, Chief Compliance Officer & CFO [18]

--------------------------------------------------------------------------------

Yes, Chris, let me just calculate it here.

--------------------------------------------------------------------------------

Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [19]

--------------------------------------------------------------------------------

Okay. And then -- on a follow-up on to Robert's question on Refac. Is it correct that the fair value of that credit actually went up quarter-over-quarter? I thought I saw that between looking at -- comparing the Qs, and I saw that -- please go ahead.

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [20]

--------------------------------------------------------------------------------

Yes. No, no, that's correct. And that would hopefully be a reflection of what we think the outcome is.

--------------------------------------------------------------------------------

Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [21]

--------------------------------------------------------------------------------

Okay. So on the face of it, I mean, that could be a harbinger to a positive resolution for Refac?

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [22]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [23]

--------------------------------------------------------------------------------

Okay. Great. Going forward, given everything that you're seeing, we're seeing -- at least I'm seeing portfolio deterioration in multiple BDC. So it's not isolated to SCM. How are you guys planning in terms of incremental investments, given that you have a low leverage ratio? Going forward, I mean, is it all going to be first lien? Or what's the thoughts around that?

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [24]

--------------------------------------------------------------------------------

Yes. So first of all, with respect to our portfolio, we don't think there's been a material determination. In fact, as an example, there is a -- we know the risk grade 3, that's likely to come off in the third quarter to a risk grade 2. So we -- the kind of this Protect America is like a delta shift, but I think it's one company. Hopefully, that's helpful. We'll report if we have otherwise -- we feel otherwise in the third quarter but that's our view for now. In terms of what's informing our investing going forward, so Chris, there is a lot of concerns about the global economy slowing, which can impact U.S. companies and, of course, we're more likely than insulated from that. We approach our investing and always have is, do the companies we invest in survive a recession? And so what are the characteristics of those companies that could survive a recession? So that's the lens we always had.

I'd say as a general matter, we're probably more cautious than we've been if you go back 6 months. So we're having a more cautious lens. That's -- so our rotation to more secured and now 70% first lien, which is the highest percentage we've had in the portfolio, would be indicative of that. The new fundings we're looking at in this quarter are -- I think all but one is the first lien. So I think that's another approach we take. We -- you may recall that last year, we didn't approve a couple of -- in a robust environment, a couple of deals we thought might be impacted by the trade situation. This was early before there was a consensus. So again, I think -- think of us as approaching the market cautiously. Having said that, when we find a good company, that's being well-capitalized by a high-quality owner and it's well structured, we're interested. So we remain active in the market. And that's, of course, why we have an interesting pipeline that I reported on earlier.

--------------------------------------------------------------------------------

Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [25]

--------------------------------------------------------------------------------

And I appreciate the...

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [26]

--------------------------------------------------------------------------------

Yes. Chris, one thing, going back to your question about the impact to Protect America, Todd is going to respond to that.

--------------------------------------------------------------------------------

W. Todd Huskinson, Stellus Capital Investment Corporation - Treasurer, Secretary, Chief Compliance Officer & CFO [27]

--------------------------------------------------------------------------------

Yes. So, Chris, you're right, it's a little over $0.02 a share. So $475,000 a quarter, which is about $0.025 a share.

--------------------------------------------------------------------------------

Christopher Whitbread Patrick Nolan, Ladenburg Thalmann & Co. Inc., Research Division - EVP of Equity Research [28]

--------------------------------------------------------------------------------

I guess, sort of my final thing would be, as we're going into the sort of choppy economic period, how well positioned do you think the PE sponsors of many of these companies are to inject more capital to backstop these companies, if things get choppy economically? From your perspective, are the private equity firms sort of fully deployed? Or they have (inaudible)? What's your sense there, please?

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [29]

--------------------------------------------------------------------------------

Yes. So, Chris, it might be helpful in terms of how we approach that. And then I think the answer as a general matter is going to be company-specific. So as we approach a new investment, where, one, assuming that it's a high-quality owner and in our case those are mostly private equity firms and there's capable investors. Second thing we look at is the status, what's their fund size? Where are they in the fund life? What's the dry powder in that fund? So that's a part of the calculus we use.

So it doesn't mean we wouldn't fund the last investment in a fund, but we are also mindful that very good sponsors that we work with also retain dry powder regardless of their investing pace to support portfolio companies. And so we would expect that to be the case and with all the firms we deal with, and so, again, I think in terms of where their fund life is and dry powder is just a function of where they are in that life cycle of the fund, but people that we work with have that mentality and we would expect, and we've seen historically, that's very much the case. So this is, of course, the benefit of providing capital to well capitalized and smart private equity investors. And so going through a period that we might go through, this is very helpful.

--------------------------------------------------------------------------------

Operator [30]

--------------------------------------------------------------------------------

We'll move on to our next question from Ryan Lynch with KBW.

--------------------------------------------------------------------------------

Ryan Patrick Lynch, Keefe, Bruyette, & Woods, Inc., Research Division - MD [31]

--------------------------------------------------------------------------------

Just have 2 of them. Just wanted a clarification. You said you expect about $40 million to $50 million of investments over the balance of the third quarter. You guys have already done $34 million quarter-to-date. So is that saying that you guys are actually expecting $70 million to $80 million for the full third quarter?

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [32]

--------------------------------------------------------------------------------

Yes, that's correct.

--------------------------------------------------------------------------------

Ryan Patrick Lynch, Keefe, Bruyette, & Woods, Inc., Research Division - MD [33]

--------------------------------------------------------------------------------

Okay. And then just one more sort of clarification. I think -- I believe you said there could be $7 million of potential realized gains that you guys could hope to achieve through the remainder of the year. One, did I get that number correct? And two, those $7 million of potential realized gains, are those already reflected in the fair values of those investments today, meaning if they do actually become realized, there actually will be no change in book value, those gains will just now be crystallized? Or is that potential upside to the fair value of any of those investments today?

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [34]

--------------------------------------------------------------------------------

Yes, Ryan. So first of all, you're correct, that's what we said about $7 million. And I'd say that not all of that is reflected in the current marks. And partly because one of the opportunities has come up since the books have closed effectively. So I think one, they're accretive to NAV. And two, of course, they would be realized, which means that we'll book them as such.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

We'll take our next question from Chris Kotowski with Oppenheimer & Co.

--------------------------------------------------------------------------------

Christoph M. Kotowski, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [36]

--------------------------------------------------------------------------------

Your income tax expense, $340,000, that's kind of unusually high. Is -- what's the explanation for that? And what should we factor in kind of going forward?

--------------------------------------------------------------------------------

W. Todd Huskinson, Stellus Capital Investment Corporation - Treasurer, Secretary, Chief Compliance Officer & CFO [37]

--------------------------------------------------------------------------------

Yes. So Chris, this is Todd. So the primary thing that's driving that is excise tax. So we had $9 million of spillover -- a little over $9 million of spillover income at the end of 2018. And so we're now accruing excise tax on that during the year.

--------------------------------------------------------------------------------

Christoph M. Kotowski, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [38]

--------------------------------------------------------------------------------

So it will -- that will be a quarterly run rate as long as you have that level of spillover?

--------------------------------------------------------------------------------

W. Todd Huskinson, Stellus Capital Investment Corporation - Treasurer, Secretary, Chief Compliance Officer & CFO [39]

--------------------------------------------------------------------------------

Yes. Some of it was accrued from a prior period. So I would say -- if you think about $9 million, that's 4%. So for the year, that's about $400,000 of total excise tax for the year. So I'd say somewhat light going forward.

--------------------------------------------------------------------------------

Christoph M. Kotowski, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [40]

--------------------------------------------------------------------------------

And just an accounting question, why do you accrue it all in 1 quarter? And why in the second quarter, is that a seasonal or a tax year thing? Or should one going forward just expect it through the year or...?

--------------------------------------------------------------------------------

W. Todd Huskinson, Stellus Capital Investment Corporation - Treasurer, Secretary, Chief Compliance Officer & CFO [41]

--------------------------------------------------------------------------------

Yes. And that was just an accrual from a prior year spillover, so it's just larger than normal. But we'll be accruing the amount related to the current spillover on a quarterly basis going forward. So that's why it was larger in the quarter.

--------------------------------------------------------------------------------

Christoph M. Kotowski, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [42]

--------------------------------------------------------------------------------

Okay. So one should assume that goes down to $75,000 or between $75,000 and $100,000 something like that?

--------------------------------------------------------------------------------

W. Todd Huskinson, Stellus Capital Investment Corporation - Treasurer, Secretary, Chief Compliance Officer & CFO [43]

--------------------------------------------------------------------------------

Yes, that's right.

--------------------------------------------------------------------------------

Operator [44]

--------------------------------------------------------------------------------

We'll now take a follow-up from Robert Dodd with Raymond James.

--------------------------------------------------------------------------------

Robert James Dodd, Raymond James & Associates, Inc., Research Division - Research Analyst [45]

--------------------------------------------------------------------------------

Chris, just asked most of my questions. So -- but when we look -- hope certainly, as we look out into 2020, you had $9 million of spillover obviously at the end of '18, right now, looking at '19 with all the realized gains, you could be looking at ballpark $20 million in realized gains total this year, which obviously, flow into spillover, unless they're in blockers, et cetera. So what -- of the realized gains that have occurred so far this year or that you expect, how many are at the wick versus shielded from becoming an incrementally higher excise tax liability next year?

--------------------------------------------------------------------------------

W. Todd Huskinson, Stellus Capital Investment Corporation - Treasurer, Secretary, Chief Compliance Officer & CFO [46]

--------------------------------------------------------------------------------

Yes. Robert, so I would say the majority of that is going to be included in the spillover and then there will be a larger excise tax going forward. And one of the things that we're kind of, to Chris' question is, considering do we need to accrue some of that as we go along since it's related to 2019, but the tax is not paid until -- till 2020. So -- but you're right, that's -- that is -- the majority of that will be in spillover for this year.

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [47]

--------------------------------------------------------------------------------

I think it's right, Todd that $2.7 million is not...

--------------------------------------------------------------------------------

W. Todd Huskinson, Stellus Capital Investment Corporation - Treasurer, Secretary, Chief Compliance Officer & CFO [48]

--------------------------------------------------------------------------------

That's about right.

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [49]

--------------------------------------------------------------------------------

Yes. Rob, it's roughly $2.7 million so far is not in the spillover rate calculation.

--------------------------------------------------------------------------------

Operator [50]

--------------------------------------------------------------------------------

And that does conclude today's question-and-answer session. I'd like to turn the conference back over to management for any additional or closing remarks.

--------------------------------------------------------------------------------

Robert T. Ladd, Stellus Capital Investment Corporation - Chairman, President & CEO [51]

--------------------------------------------------------------------------------

Okay. Thank you, everyone, for joining and questions and your support of the company. And we look forward to updating you on the third quarter on our call in November. Bye-bye.

--------------------------------------------------------------------------------

Operator [52]

--------------------------------------------------------------------------------

Thank you. That does conclude today's conference. Thank you all for your participation. You may now disconnect.