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| Statement |
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| As a final thought before we open the line, we would like to reiterate our message that we believe CION is well positioned to provide solid returns to its shareholders despite current market conditions |
| The private direct lending sector remains robust, which is consistent with what we are experiencing with our platform as our private direct transaction sourcing remains strong |
| As Michael mentioned, we reported another quarter of solid investment performance, driven by an increase in LIBOR and SOFR rates, fees generated from our quarterly investment activity, prepayment premiums and other yield enhancing features within our portfolio |
| As we reported this morning, we had a very strong third quarter, which saw a continued resilient credit profile, an over 3% increase to our net asset value quarter-over-quarter and strong net income of $0.87 per share, an increase of 70.6% quarter-over-quarter and 45% year-over-year |
| Our net investment income of $0.55 per share continues to outperform our dividend |
| Our net investment income of $0.55 per share is up 22% year-over-year and 27.9%, sequentially, driven on balance by higher interest income from our floating rate loan assets, origination and other transaction fees, prepayment and other yield enhancing features within the portfolio, and the reversal of non-accruals from restructured transactions |
| This, coupled with a robust deal pipeline, a conservative balance sheet and the fact that our investing team’s singular focus is on our BDC and not conflicted or distracted by competing strategies or products, makes us feel very good about our third quarter results and our position going forward |
| Our portfolio benefits from EBITDA growth and financial support from equity sponsors |
| We believe that through our predominant focus on first-lien investments to companies with institutionally-backed sponsors, we provide a higher quality of earnings with a superior risk return profile than other BDCs that often have much higher portions of the portfolio in equity investments |
| It also brings additional strength and flexibility to our balance sheet and aligns well with our mostly floating rate investments |
| We ended the quarter with a strong and flexible balance sheet, with over $500 million in unencumbered assets, lower net leverage relative to our peers, a strong debt servicing capacity and solid liquidity |
| We have consistently demonstrated that our robust, unique and diversified deal sourcing funnel is capable of originating high quality senior secured investments to true middle-market companies |
| We have successfully and very strategically accessed the financing markets in a methodical, incremental manner to grow our portfolio and continue to increase our portion of unsecured versus secured |
| Our Q3 net investment income benefited from a diverse combination of the direct pass-through of higher floating interest rates from our loan assets, origination and amendment fees, prepayment premiums and other yield enhancing provisions embedded with our primarily first lien portfolio |
| We believe we have demonstrated that we can drive shareholder returns by being highly diversified and predominantly senior secured floating rate first-lien loans, while remaining conservatively levered |
| While we don’t believe that the bad thing BDCs are taking market share from the investment banks, we are very proud that we continue to stick to our knitting of lending to truly middle market companies |
| The completion of these financings naturally matches the predominantly floating rate nature of our assets and allows us to continue to increase our percentage of unsecured debt relative to secured to methodically increase our leverage towards our net leverage target of 1.25 times, provides us ample dry powder to take advantage on the favorable vintage of investments and allows us the flexibility to increase the pace of our 10b5-1 share buyback program in coming quarters |
| We are seeing single-digit EBITDA growth in names that we have held over a quarter |
| 99% of our book is risk rated three or higher, again, a favorable benchmark when looking at our peers |
| We believe investors are well served, sticking with BDCs that have established true middle-market ecosystems and have not engaged in deviations from their long-term focus and track record histories |
| Our portfolio delivered resilient credit performance, as a percentage of our portfolio on non-accrual fell to 1.03% of fair value, down from 1.69% the previous quarter |
| We wanted to be cognizant of not only rates in the environment, but also the mix between secured and unsecured and we were happy that we are able to get this $100 million in unsecured and also floating |
| Our net asset value increased $0.49 a share to $15.80, owed in part to the share repurchase program, as well as out earning our dividend and an increase in marks from our illiquid book |
| From an organic earnings point of view, our EBITDA is up |
| Perhaps an even better indication of our credit performance, the percentage of names that we have risk-rated four or five has remained consistent at around 1% of the portfolio, which compares favorably to many other BDCs |
| In our 12 years of investing over $7.8 billion in predominantly middle-market loan assets, we are proud to have achieved a 3-basis-point annualized loss rate |
| In addition, we have benefited from technically-driven disruptions in the syndicated loan market, where we continue to acquire lightly syndicated first-lien loan tranches at substantial discounts to par due to issues such as ratings changes, maturity extensions, exchanges or restructurings, which are not suitable for the existing syndicate holders |
| Going deeper and cheaper is the name of that game to win market share |
| During the quarter, we completed an attractive mix of direct and lightly syndicated first-lien investments, such as our lead arranger exit financing for David’s Bridal, co-lead arranger financings for the sponsor acquisitions of Fluid Control and Single Hill architecture and the discounted purchases of the lightly syndicated first lien tranches of Avison Young, Juice Plus+ and YAK MAT and the incremental direct term loan upsizes to finance tuck-in acquisitions for Gold Metal Holdings and Work Genius |
| On the financing side, we successfully issued $33 million of additional floating rate Series A unsecured notes in Israel this quarter |
| Statement |
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| I noticed that the current median EBITDA at $33.7 million is down about 10% from the year ago figure |
| We are just cautious in how we obtain the additional leverage |
| consumer, particularly in light of recent global developments |
| These dynamics have resulted in several of our planned investment closing slipping from Q3 to Q4 |
| M&A activity remains relatively subdued, and we have seen a number of circumstances where valuation gaps and lengthy negotiations are not ultimately being converted into closed transactions |
| I think there are two issues |
| We remain highly selective with new investments, as we are still cautious with respect to the U.S |
| Those companies who have limited access to more borrower-friendly syndicated loan alternatives due to deal sizes and perceived tranche liquidity |
| Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the company’s filings with the SEC |
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