Bryce Rowe: Got it. Alright, last one for me, Ed. It looks like the new activity in the fourth quarter from, I guess, pricing perspective, it looked like most of those debt investments were straight up first lien, no last out structure to them. I might be wrong there, but that’s the way I read the schedule of investments. Anything to kind of read into that or is that more just kind of flow of what happened in the quarter relative to kind of what we’ve seen over the last couple of years in terms of structuring those debt investments?
Edward Ross: Sure. No, nothing strategic. It’s more — we start with, I think, as you know, just what’s the quality of the underlying business and then try to figure out what the opportunity is. In this case, it was more just a mix towards dollar type investments. The only thing I would say, we are very focused on quality and so we’re willing to sacrifice a little yield if we find the right quality investment, if you will. And so I’d say there’s a little bit of both of those that go into the decision making, but it starts with trying to find very high-quality businesses to invest in and then we figure out how we can do it. So, hopefully, that’s helpful.
Bryce Rowe: Thanks. Thanks for the time.
Edward Ross: Thank you. Appreciate it. Good talking to you, Bryce.
Bryce Rowe: You, too. Thanks.
Operator: The next question comes from Mickey Schleien with Ladenburg. Please go ahead.
Mickey Schleien: Yes, good morning, everyone. Ed, it sounds like some of the repayment activity in the fourth quarter was due to refinancings, which certainly is in line with what we’re seeing broadly. So I’d like to get your take on how much more prepayment risk you see in the portfolio?
Edward Ross: Sure. It’s a great question, Mickey. I think in terms of repayments, we haven’t seen a lot of repayments that are just trying to get a lower price. In fact, I look at the three companies that were repayments for us. Two of them were strategic in nature by us and then one of them was a very large acquisition and we just chose to exit that situation from a debt and equity perspective. So I — we haven’t seen a lot of just getting taken out, if you will, of our debt investments. Having said that, I think we’re in an environment where competition has increased over the last 12 months, yields have come down a little bit. And are — so I would expect that piece of the puzzle to show its face a little bit here in 2024, more so than the last couple of years. That’s how I — that’s how we currently think about it.
Mickey Schleien: I understand. Thanks for that. I just wanted to follow up on the fourth SBIC license. I’m not on — I’m not clear on exactly what’s going on because Fund III already has regulatory capital of $175 million. So what debt commitments has the SBA made to Fund III? And why does that necessitate a Fund IV?
Edward Ross: Sure. Shelby, do you want to take that one?
Shelby Sherard: Sure. So let me just start, let’s talk about Fund II and so I made the comment that we repaid $35 million of SBA debentures and that was really just to avoid a situation where we would end up with trapped cash. And so given some of the repayments that we had in 2023 and, quite frankly, a subsequent event in 2024, our second SBIC license had a fair amount of excess cash. And so the best way to utilize that cash was just to repay $35 million. That completes the wind down of Fund II. Any further repayments in that fund, we can fully redeploy cash on a go forward basis, whether it be making investments out of the BDC or using some equity capital to contribute to a new fourth SBIC license once it’s approved by the SBA.
So that really — with that repayment, that leaves us with one SBIC license, Fund III that has been fully deployed, meaning we fully borrowed and invested the $175 million cap per SBIC license for Fund III. So that necessitated the need to go ahead and get another SBIC license. So we submitted that application at the end of December. And as Ed mentioned, we’d kind of like to think that that hopefully that’ll definitely be in 2024. My hope would be first half, if not shortly thereafter, of 2024. So we can start deploying new capital into that fourth SBIC license because of the attractive rates on SBA debentures given other alternatives in this market environment. It’s really just [Multiple Speakers]
Mickey Schleien: Yes. No, I agree that the rates are attractive. So Fund III is limited to debt to equity of only one times rather than two times.
Shelby Sherard: No, it’s two times. So we have the two times fully deployed, the $175 million is the two times.
Mickey Schleien: Okay, thanks for that Shelby. And how has the increased allocation to first lien and unitranche over time impacted your target debt to equity number?
