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Edited Transcript of TCRD earnings conference call or presentation 10-May-19 2:30pm GMT

Q1 2019 THL Credit Inc Earnings Call

Boston Jun 17, 2019 (Thomson StreetEvents) -- Edited Transcript of THL Credit Inc earnings conference call or presentation Friday, May 10, 2019 at 2:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher J. Flynn

THL Credit, Inc. - CEO & Director

* Sabrina Rusnak-Carlson

THL Credit Advisors LLC - General Counsel & Chief Compliance Officer

* Terrence William Olson

THL Credit, Inc. - Assistant Secretary, Treasurer, CFO & COO

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Conference Call Participants

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* Christopher Robert Testa

National Securities Corporation, Research Division - Equity Research Analyst

* Kyle M. Joseph

Jefferies LLC, Research Division - Equity Analyst

* Leslie Shea Vandegrift

Raymond James & Associates, Inc., Research Division - Senior Research Associate

* Leon Cooperman

- Private Investor

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Presentation

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Operator [1]

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Good morning and welcome to the THL Credit's earnings conference call for its first fiscal quarter ended March 31, 2019.

It is my pleasure to turn the call over to Ms. Sabrina Rusnak-Carlson, General Counsel and Chief Compliance Officer of THL Credit. Ms. Rusnak-Carlson, you may begin.

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Sabrina Rusnak-Carlson, THL Credit Advisors LLC - General Counsel & Chief Compliance Officer [2]

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Thank you, operator. Good morning and thank you for joining us. With me today are Chris Flynn, our Chief Executive Officer; Jim Fellows, our Advisors Chief Investment Officer; and Terry Olson, our Chief Operating and Chief Financial Officer.

Before we begin, please note that the statements made on this call may constitute forward-looking statements within the meaning of the Securities Act of 1933 as amended. Such statements reflect various assumptions by THL Credit concerning anticipated results that are not guarantees of future performance and are subject to known and unknown uncertainties and other factors that could cause actual results to differ materially from such statements. The uncertainties and other factors are, in some ways, beyond management's control and include the factors included in the section entitled Risk Factors in our most recent quarterly report on Form 10-Q, as updated by our periodic and other filings with the Securities and Exchange Commission.

Although we believe that the assumptions on which any forward-looking statements are based on, are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be incorrect. You should not place undue reliance on these forward-looking statements. THL Credit undertakes no duty to update any forward-looking statements made herein. All forward-looking statements speak only as of the date of this call.

Our earnings announcement and 10-Q were released yesterday afternoon, copies of which can be found on our website, along with the Q1 earnings presentation that we may refer to during this call. A webcast replay of this call will be available until May 19, 2019, starting approximately 2 hours after we conclude this morning. To access the replay, please visit our website at www.thlcreditbdc.com.

With that, I'll turn over the call to Chris.

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [3]

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Thanks, Sabrina, and good morning, everyone. Let me say at the outset that we believe we have made significant progress transitioning the BDC to a highly diversified first lien floating rate vehicle. We expect the majority of this transition to be completed by the end of the year. As a result of our execution, we believe that our portfolio is substantially less risked today than it did a year ago. We have ensured, to the best of our ability, alignment with our shareholders, while we have executed our plan via fee waivers and reduced fees and share repurchases at the BDC and share purchases by our adviser.

As we continue to build out a more diversified pool of senior secured floating rate assets and assuming we get approval in June and have successfully amended our credit facility, we expect to take advantage of modestly higher leverage in 2020 to drive increasing ROE for our shareholders.

Now let me summarize our financial results for the quarter and provide an update on our progress since our March call. First, our investment income of $0.21 per share, or $0.22 excluding onetime items, for the quarter was in line with our Q1 dividend of $0.21.

Secondly, NAV for the quarter declined by 2% to $8.96 per share due to an additional markdown taken on our position in LAI. We marked our original investment in LAI down in Q4 and indicated that the company was in the sale process on our March call. And in Q1, we stepped in to support the business with an additional $10 million investment to address liquidity needs ahead of the sale, which we expect to close next week. The markdown this quarter on our original investment reflects our expected sale proceeds. We expect to exit the new dollars contributed in Q1 at par.

Overall, apart from this markdown in LAI, we are pleased with the performance of the remainder of the portfolio, which was either flat or up for the quarter. I will go into more detail on the portfolio in a minute.

I'd like to highlight some additional progress since our earnings call in March. First, we continue to improve the overall diversification of the portfolio by adding smaller positions and proactively exiting more concentrated positions. The average size of 4 new investments made year-to-date in 2019 is $4 million, which is less than 1% of the portfolio and well below our target max hold of 2.5%.

And since the start of 2018, the average size of our 13 new investments made is $6 million or 1.2%. Our co-investment capabilities across our private funds, including our middle-market CLOs, have allowed us to take smaller hold sizes within the BDC and achieve our diversification goals, while still executing on our strategy of being a leading investor and originator in middle market private credit.

We continue to benefit from a robust high-quality deal flow from our broader direct lending platform. The platform has invested over $500 million across 34 investments since Q1 2018. The growth of our private capital vehicles has allowed us to be the lead in -- on the majority of these deals, while maintaining the diversity requirements inside of our BDC.

We've continued to make progress exiting our more concentrated investments. Hart InterCivic, our third largest position at 5% of the portfolio, was repaid at par at the quarter end. Over the last 12 months, we have proactively exited or reduced the size of 4 other concentrated positions: A10, Alex Brands, MeriCal and Hart. There are currently 10 remaining positions with a hold size in excess of 2.5%.

While we are proactively monitoring all the remaining concentrated positions, we continue to be especially focused from a risk and diversification perspective on 3 positions which I highlighted on last quarter's call. They are Charming Charlie, Holland and OEM.

First, let me address Charming Charlie. With the completion of the refinancing of its ABL facility in March, the company positioned itself better from a liquidity perspective heading into the spring selling season. The company continues to evaluate several options to improve its liquidity ahead of the 2019 holiday season and we are very pleased with the execution of the new management team. With that said, the company continues to face headwinds in the retail space and remains on nonaccrual.

Holland, a first lien investment and 1 of our 3 remaining energy credits, was stable in Q1. As we have mentioned, the company has done well during the protracted downturn and has seen some improvement on a few strategic fronts, and liquidity has remained stable.

Moving on to OEM, where performance has been stable, but we continue to watch closely given the size of the position in our portfolio. As the majority owner of OEM, we've taken a number of steps to stabilize the business. We've provided additional capital and have been proactively working with management team and its advisers on several product developments, operational and sales initiatives. The company continues to execute on its plan and has performed in line with our expectations so far this year. It is our goal to position the company for sale by early 2020.

The other 6 concentrated names were either flat or marked up in Q1. We continue to make progress on our remaining noncore control equity investments. In particular, Copperweld has marked up notably in Q1, and we increased our quarterly dividend on our equity holdings by $366,000, reflecting the strong performance and improved liquidity profile. Similarly, our quarterly dividend on C&K was increased by $172,000. We continue to remain optimistic about the sale prospect of both of these companies in 2019. We expect these dividend levels will continue to remain at these levels as long as we hold them.

As we execute on our plan, we will continue to ensure alignment with our shareholders. We are focused on compensating our shareholders for the time it has taken us to execute our plan and rotate in -- out of this illiquid portfolio. Our lower base management fee of 1% went into effect April 1. We expect this to add an additional $0.02 per share per quarter going forward.

As we look at the rest of 2019 and 2020, we are taking steps to appropriately position the BDC. Our advisor, in addition to lowering our base management fee, also lowered our incentive fee from 20% to 17.5%, yet we left our hurdle rate unchanged at 8%. These moves are intended to bring better alignment with what we expect to be a more diversified senior secured floating rate portfolio in the future. As a reminder, our advisor has also agreed to waive incentive fees to the extent earned through 2019.

Lastly, we have implemented a $15 million 10b5-1 stock repurchase plan shortly after our last earnings call. To date, we have repurchased $3.4 million of stock or 23% of the plan at an average discount to NAV of 27%. While modestly accretive through the end of this quarter, $0.01 per share covering the few weeks of the plan was active in Q1, we expect these repurchases to continue to increase book value per share as we move the program forward. Once we have achieved our diversification objectives, we believe it will be accretive to our shareholders to operate with additional leverage in the 1.05 turns to 1.15 turns range.

Our Board of Directors has approved putting the reduced asset coverage requirement to a shareholder vote at our Annual Meeting in June. If approved by our shareholders and subject to further progress and diversing our portfolio and successfully amending our credit facility, we intend to introduce modest additional leverage commencing sometime in 2020.

We believe these actions we have taken in 2018 and thus far in 2019 are the right ones. We expect that they will result in a more stable, predictable return for our BDC and for our shareholders and will position the company for continued progress in 2020 and beyond.

With that, I will turn the call over to Terry to talk more on our portfolio and our Q1 financial results in more detail.

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Terrence William Olson, THL Credit, Inc. - Assistant Secretary, Treasurer, CFO & COO [4]

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Thanks, Chris, and good morning, everyone. First a few portfolio highlights. As of March 31, the portfolio of $498 million was 67% invested in first lien senior secured debt, 16% in the Logan JV. As a reminder, the Logan JV is 95% invested in first lien assets. The remaining 17% of the portfolio was held in a -- in second lien subordinated debt and other income producing and equity holdings. Copperweld and C&K together represent over half of the 17% or $33 million. Please refer to Slides 13 and 14 in our earnings presentation, which highlights these trends over the last 2 years.

The Logan JV continued to perform well, and credit quality remained strong. The $349 million portfolio of 133 issuers continues to generate an attractive yield for our shareholders. We expect to continue to grow Logan as we cycle out of noncore concentrated positions. At 16% of the portfolio today, we see the upper end in the future at 20%, plus or minus, at this time.

As we mentioned in our March call, our long-term expectation is that this is a 11.5% to 12% yield for us. We're nearer the lower end this quarter as repayment activity in the broader markets have continued to be fairly muted, as it has been over the last few quarters, which has slowed some of the accretion of OID and prepayment penalties. Some of it is also related to timing of deployment within the quarter compared to timing of equity contributions.

Total nonaccruals as a percentage of the portfolio at fair value and cost increased to 5.9% and 12.4%, respectively, as LAI was moved to nonaccrual in Q1. As Chris mentioned, we expect the sale of LAI to close next week, bringing nonaccruals back in line with last quarter. Charming Charlie and Loadmaster were the other 2 loans on nonaccrual status at March 31.

The weighted average yield of the debt and income producing portfolio, including Logan, was 9.9%, down from 10.7% last quarter, reflecting the LAI nonaccrual. 97% of the debt portfolio is in floating rate loans as of quarter end.

Moving on to the financials for the first quarter. As Chris mentioned, the net investment income of $0.21 per share included a onetime expense of $0.01 related to a downsizing of our credit facility. Excluding this onetime item, our core earnings were at $0.22, exceeding our dividend.

Looking at some of the components of our $14.2 million of investment income this quarter, interest income decreased from $12 million in Q4 to $9.8 million in Q1, this largely due to the new nonaccrual and the fact that we had no prepayment income this quarter and minimal income generated from the amortization of upfront fees due to less prepayment activity. This quarter's level of prepayment activity is not typical.

Additionally, in setting our $0.21 per share dividend last quarter, we took into consideration this quarter's expected investment income level and the risk of a decreased earnings power in the portfolio due to yield compression and credit performance. And as Chris mentioned, the lower base management fee beginning in Q2 will contribute an additional $0.02.

Dividend income increased from $3.4 million in Q4 to $3.7 million in Q1 as a result of the increased dividends from C&K and Copperweld Chris mentioned. This is offset by a slightly lower Logan dividend, largely driven by timing of deployment and less repayment activity. The increase in other income for the quarter -- quarter-over-quarter was largely related to additional amendment fees.

On the expense side, total expenses for the quarter were $7.5 million compared to $8.4 million in Q4. The decrease was primarily due to lower interest and fees on borrowings as there were higher accelerated deferred financing costs in Q4 related to the redemption of our 2021 notes. Unrealized depreciation during the quarter, which drove the NAV decline, was largely related to LAI and was offset by a markup -- by markups of Copperweld and several other positions in the portfolio.

The net realized loss of $2 million in Q1 was primarily related to our realization of our investment in Alex Brands in Q1. This was offset by an equal change in unrealized depreciations so no book value impact in Q1. We also recognized an incremental loss on our remaining Aerosoles exposure.

From a leverage and liquidity perspective, leverage levels increased to 0.8x at March 31, but fell to 0.73x with the repayment of Hart in early April.

In an effort to reduce our cost of capital and lower expenses, we reduced the size of our $275 million revolver in March to $190 million to better align with the size of the portfolio. We anticipate this will save approximately $425,000 per year on unused fees.

With that, I will turn the call over to the operator to start the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from the line of Leslie Vandegrift with Raymond James.

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Leslie Shea Vandegrift, Raymond James & Associates, Inc., Research Division - Senior Research Associate [2]

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My first question, on LAI and the deterioration there, I know you discussed the sale next week. Now the extra $10 million that you put in the quarter, what -- I guess, the -- why was that needed this quarter to push it over the line? And also on the mark, how close do you feel that last quarter's mark is to what you've -- you're going to get on that sale price?

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [3]

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Leslie, it's Chris. Appreciate the question. The business needed incremental capital and we wanted to stabilize it to make -- to ensure a smooth sale process. That was, if you will, the sources and uses of the $10 million. And we feel very good about the mark as it relates to our expectations as it relates to the proceeds next week.

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Leslie Shea Vandegrift, Raymond James & Associates, Inc., Research Division - Senior Research Associate [4]

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Okay. And then on OEM, you talked about looking to sell it in 2020. Is that something in that -- or by 2020. Is that something that you are actively involved in sale process already or just an outlook that, that might occur?

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [5]

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No. Again, appreciate the question. We're very active. We're the majority owner of the business. Each one of these credits that's gone through stress has a life cycle, if you will. We need to restructure the balance sheet, stabilize the business and then hopefully either provide guidance or capital to start to show growth in EBITDA. We're at the later stage of that cycle in OEM. And based on where we sit today, we feel a 2020 exit is reasonable. Obviously, that's all subject to market conditions and continued performance. But as we sit here today, we feel like we've taken care of 3 of the 4 main items to position the business to be transitioned to a new owner.

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Leslie Shea Vandegrift, Raymond James & Associates, Inc., Research Division - Senior Research Associate [6]

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Okay. And then the last question on the portfolio, Loadmaster. You talked about Charming Charlie as well. Both of them improving and mark in the quarter. But what were the improvements in Loadmaster that led to that?

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [7]

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Yes. Loadmaster is the -- it's in the energy space. It's got a few different initiatives and projects that we've been supportive of. We're reflecting in our marked confidence that these are going to start to pay dividends. I don't want to go into too much specifics as it's a privately held business. But again, it's not the largest position in our portfolio. It's a fairly small one on Loadmaster, but we've continued to back the team that we put in place and feel good about how it's proceeding.

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Operator [8]

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And our next question comes from the line of Christopher Testa with National Securities.

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Christopher Robert Testa, National Securities Corporation, Research Division - Equity Research Analyst [9]

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Aside from the 3 nonaccruals, obviously, LAI is going away. So you have those, you have Copperweld and OEM. Is there anything else that's considered a legacy investment as well?

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [10]

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Chris, it's Chris. I appreciate the question. A little bit difficult to answer that. Listen, anything that's above a 2.5% position, I consider to be a legacy investment that we're trying to reduce and diversify. And the good news is the vast majority of those credits were either stable or marked up for the quarter, so that's a positive. With that said, to the extent we can reduce or exit, we're pushing forward on that. The 3 main that we highlighted, OEM, Holland and Charming Charlie, are key areas of focus for a variety of reasons. The team that we've put in place at Charming Charlie has been excellent. They have done everything that they can to position this business for growth and a turnaround. So for that, we applaud them. With that said, as we said in our prepared remarks, it still remains on nonaccrual. And they face extremely difficult headwinds in the retail sector, which is not immune to just Charming Charlie. It's the entire industry.

The OEM and the others, we're working extremely hard to move forward and exit. The good news and what we are trying to send a signal to the market is as we've executed our plan, we are still originating leading key credits. We've originated over $500 million of investment since 2018. Yet, we are doing it with a much smaller balance sheet in the BDC, but we're doing it in such a way where the balance sheet is massively diversified. The fact that we were able to execute and win these transactions and hold target positions less than $10 million inside of the BDC, that's the right answer and that's the trend that we're excited about. And it's one of the reasons why coming into this last quarter that we finally felt comfortable putting in that 10b5-1 program to take advantage formulaically of, in our opinion, the disconnect between our stock price and our book value.

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Christopher Robert Testa, National Securities Corporation, Research Division - Equity Research Analyst [11]

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Okay. No, I appreciate that answer, Chris. And I know you guys had previously discussed not using the reduced asset coverage really until the portfolio is cleaned up, which you said is probably a 2020 event. Just, I guess, looking at this in the context of -- let's say, you're still struggling with some of the legacy credit issues and things don't go as planned, would you consider still using the reduced asset coverage because it's going to afford you to basically drive higher Sharpe ratio investments and free up the 30% basket more to grow Logan? Or is that just where you draw the line and you say there is no way we're going to use the increased leverage until that's all cleaned up?

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [12]

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Yes. The last thing this portfolio needed was increased leverage historically, so we're not going to move forward with that until we believe the equity base is stable, and a stable equity base requires us to exit a handful of these investments to increase that diversification. So again, we're asking the shareholders. I think we're one of the few BDCs that are going to the shareholders and asking. We believe it will pass. We think it should pass. But we are not going to implement that until we believe our equity base is stable enough to ensure an appropriate level of leverage to drive ROE. The good news, as we set back and set our dividend at that $0.21, which, again, cutting the dividend is a disappointment, but we set the dividend at a level with the new management fee where we feel like, as we sit here today, we can still cover it at that 105% to 110%. The fact is if we continue to execute, we move our ROE, that's got upside associated with it. Which we feel good about it, but we're not going to press the portfolio until it's ready.

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Christopher Robert Testa, National Securities Corporation, Research Division - Equity Research Analyst [13]

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Got it. Okay. That's fair. And I know THL, the platform, completed its first middle market CLO. Just a couple of questions on that. Are you expecting the platform to do more in middle market CLOs relative to probably syndicated? And do you feel that the middle market CLOs are further augmenting your sourcing for some larger borrowers and more diversification within TCRD?

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [14]

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Yes, exactly. I appreciate the question, and thanks for bringing that up. Our goal all along, when we looked at the BDC, the issue historically was that it was a small single asset that was somewhat forced into concentrated positions. And as a credit investor, that's a bad idea. We've worked extremely hard to diversify the number of pockets and the increased private capital alongside that BDC, so we can now build a more diversified, appropriate portfolio. We're very, very good in broadly syndicated CLOs. We're very, very good at direct lending. Putting that together to do middle market CLOs is an incremental leg to the stool, if you will, of the advisor. And we anticipate that being a very large part of our platform going forward. So between the BDC, our private funds and our middle market CLOs, we feel confident that we can execute our strategy of originating unique assets between $10 million to $40 million in EBITDA and maintaining that diversification that's required and prudent portfolio construction going forward.

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Christopher Robert Testa, National Securities Corporation, Research Division - Equity Research Analyst [15]

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Got it. And one more, if I may, and I'll hop back in the queue. Just -- you guys have executed on a good deal of the repurchase authorization and kudos on that. Just -- would you expect to reauthorize another repurchase program if you indeed exhaust this one and the stock remains at a pretty significant NAV discount?

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [16]

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Yes. Listen, we hope that the gap between our book value and the stock price narrows as we continue to execute, but if we're sitting in the future, if we spent the $15 million and we're still at these levels, this is a very attractive use of capital for our shareholders, and we would anticipate continuing to move forward. I hope that's not the case, but if it is, we'll reevaluate after this $15 million is spent. And to the extent we need to spend more, I'm sure we will.

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Operator [17]

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And our next question comes from the line of Kyle Joseph with Jefferies.

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Kyle M. Joseph, Jefferies LLC, Research Division - Equity Analyst [18]

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Most have been answered, but just wanted -- Terry, just wanted to get a sense for -- looks like you had a nice tick-up in the dividend income in the quarter. It sounds like that was related to Copperweld. Is that a decent run rate going forward, knowing you guys continue to plan on growing Logan and whatnot?

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Terrence William Olson, THL Credit, Inc. - Assistant Secretary, Treasurer, CFO & COO [19]

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Yes. We're pleased with Copperweld performance, and I would expect the level that we -- we're at now will continue so long as we continue to hold the investment for both, certainly, for Copperweld, and I would say the same for C&K.

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Operator [20]

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And our next question comes from the line of Leon Cooperman with THL Credit.

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Leon Cooperman, - Private Investor [21]

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I'm not with THL Credit, but I'm an investor. Anyway, I'm just curious. If I took the $0.01 here and the $0.02 here that you guys mentioned, it sounds to me like 12 months out from now, if things go according to what you expect, you should be earning at a rate of almost $1 a share. Is that -- did I read it right? Or is that -- did I hear it right? Or is that not correct?

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [22]

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Leon, listen, we don't provide guidance that far out. But as we said on our last call, we set the $0.21 dividend at a level where we feel very confident as we try to rebuild credibility with the Street that we can achieve this. Obviously, the fee reduction we put in place, that's $0.02 a quarter right there, that's banked. That feels good. We've waived our incentive fee as -- through the rest of the year, which is obviously a benefit to the shareholder as we continue to finish cleaning the portfolio, if you will. But our expectations are in 2020, we're going to close the chapter of this old book on the BDC and we're going to open up a new one, which is going to have hopefully higher ROE and a more diversified portfolio to drive shareholder value.

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Leon Cooperman, - Private Investor [23]

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If you had to guess, the $8.96, the trough of the book value decline, or do you think there's further vulnerability?

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [24]

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It's hard to project. What we try to do, Lee, is I highlight the 3 key credits in the portfolio. We mentioned Charming Charlie first for a reason. We've supported the team. I think we've got a fantastic management team. But as you know, you're an investor in the broader market. The retail sector is extremely tough and that's the credit that we look at and we evaluate on a daily basis. The good news is, last quarter, we were able to extend the runway. What a business like this needs is runway. We're able to get that runway extended. And -- but yes, Charming Charlie is very, very, very tough given the industry. But I think the team that we've got it in place has done excellent. OEM is just a big position. The business itself is okay. But it's a $38 million position for us, so we're monitoring that daily. The good news is we put capital in and that business has stabilized. We've got a new management team. And yes, we think it's turning in the right direction but it's still very, very large for us. That's why it's on our radar screen.

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Leon Cooperman, - Private Investor [25]

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Just so I understand, there's $11.6 million left in the buyback program, are you planning to implement that before the vote, independent of the vote? Or is that contingent upon the vote?

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [26]

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It's not contingent on the vote, Lee. We vote on leverage.

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Leon Cooperman, - Private Investor [27]

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Not contingent on the vote. Yes.

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [28]

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There's not -- there's no correlation between us buying stock back at a discount and whether or not the shareholders give us the incremental leverage.

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Leon Cooperman, - Private Investor [29]

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Okay. Okay. The last sort of philosophical question, philosophical. The market cap of the company is a little over $200 million. The expectation when this vehicle went public was totally different than it is now. Are you a viable economic entity? Does it make sense to be public with a $200 million market cap and a big discount to NAV, which prohibits you from raising capital? And I assume, the cost of management to the shareholders is probably about 3% or something like that. Does it make sense? Or should we really focus on shrinking the cap and ultimately returning the money to shareholders and let them invest elsewhere?

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [30]

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Lee, I appreciate the question. I know it's one that you and I have talked on these calls. I think the -- so first, I think the cost to the shareholder is a bit lower than that given the new fees construct that we put in place. So I will start there. Secondarily, as it relates to the size of the BDC, I'm not going to disagree with you. The size of the BDC is small and if it was the only part of our platform that existed, I think you're right. It doesn't make sense. The good news is, is that we have billions of dollars alongside the BDC that are able to enable us to execute our strategy.

At a $200 million market cap, we couldn't execute our strategy if it was a standalone entity. The good news is it's not. And we've raised a tremendous amount of capital privately away from the BDC and it gets to middle market fee earlier. So I think the fact that it's part of a larger platform, the economics still makes sense. We still believe that we're providing a very attractive return, or we can provide a very attractive return for our shareholders. And given the fact that stock continues to trade at a substantial discount, we think it's attractive entry point for folks to come in and hopefully participate in a stable dividend and hopefully some capital appreciation as the portfolio transitions out and moves closer to book.

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Leon Cooperman, - Private Investor [31]

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My own two cents, for what it's worth, as long as you have confidence in the outlook and your numbers that -- the $0.21 was really $0.22 and you had the different changes that you outlined, there is $1 out there and $1 out there, we're worth more than $6.74 a share. I think the best thing you do for shareholders is continue to buy back stock and ultimately wind up the whole company if that -- if the market does not want to pay attention. And I cannot think of a company management that has done more to support its shareholders than you guys, so I applaud you there. I'm not happy with the performance, but I have to say you guys have been standing up and have done everything you can to support the shareholders.

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [32]

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Thanks, Lee. We appreciate it. We don't disagree and setting that $0.21 -- again, it's -- we're trying to turn the page, reestablish credibility and start a new chapter.

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Operator [33]

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Ladies and gentlemen, this concludes today's Q&A session. I would now like to turn the call back over to Chris for any closing remarks.

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Christopher J. Flynn, THL Credit, Inc. - CEO & Director [34]

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I want to thank everyone for joining the call today. To recap, we've made significant progress transitioning the BDC to a highly diversified first lien floating rate vehicle and expect to complete this repositioning by the end of the year. We believe that our portfolio has substantial less risk today than it did a year ago. We have ensured to the best of our ability the alignment with our shareholders, while execute our plan with reduced fees and fee waivers and share repurchases at the BDC and by our advisor. Thank you, again, for everyone's time and questions. We look forward to providing another update next quarter.

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Operator [35]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.