Robert Dodd: Got it, got it. Understood. I mean that goes on to the follow-on. I mean, you mentioned it in your prepared remarks as well, like deal flow is you’re improving, you’re expecting there’s going to be more activity later in the year. And you also position for portfolio growth over the rest of the year. What’s your comfort level that the portfolio is going to be up from here by year-end given you talk about maybe prepayment activity accelerates as well. I mean, can you give us some more thoughts on how you think the increase in prepayments, combined with increase in deal flow, how that’s going to work out to ballpark what your portfolio could look like at year-end up flat. Any color there?
David Gladstone: You know, pre-payment is probably the toughest thing to predict. I mean, at this point, there’s, probably two or three decent-sized investments that we see likely to prepay. And if those prepayments come in, it’s somewhere between $10 million to $25 million, maybe $30 million, the pace of growth originations we are visually going to be pressed to outpace that. I think in the past, we’ve generally targeted to grow somewhere in the range of $20 million to $25 million a quarter. So, if we’re seeing similar amounts of prepayments, it’s going to take two or three deal closings a quarter to get that number back up. That’s not unheard of in the market where we’re playing. When you’re dealing with Unitranches, in the range that we’re talking about, $20 million to $25 million deals are normal and two or three deals a quarter, is also fairly normal.
So, I think if you look back at our origination history when the deal market was running, doing 200 to 215 million in gross originations per year is certainly doable. So, I think putting on 25 net — 25 net conservative — is a conservative number for us to continue to grow the assets. Is that going to happen every quarter? I’m sure it’s not. But I will also say, we’re feeling pretty good where we are and given our current capital base. We tend to slot in above the SBICs, which cap out around $20 million for the most part. And we tend to slot in below the large-scale billion-dollar funds which really don’t want to put out anything less than $40 million. So, if it’s a zip code of $20 million to $40 million, we are in pretty good shape to be competitive on that profile.
And there’s obviously a few other guys that are out there, but that’s the size deal that we are, I think, pretty well-positioned to continue to originate. And the mix may change a little bit. I expect with rates coming down, we may look at a little bit more second lien paper, which will negate some of the compression in spreads likely to happen as rates come down. But for the most part, I think $25 million plus or minus in net asset growth a quarter is still a track racer that we’ve averaged and a track record, I would expect for the balance of 2024.
Robert Dodd: I appreciate that color. Thank you very much.
David Gladstone: Thank you. Next question.
Operator: Thank you. Our next question comes from the line of Mickey Schleien with Ladenburg Thalmann. Please proceed with your question.
Mickey Schleien: Good morning everyone. Bob, following the common share issuance in the September quarter, the balance sheet leverage has been running a little bit below your target level. Is that purposeful because of your view on the economy or something else? Or do you expect your leverage to climb towards your target level as you invest your liquidity?
David Gladstone: Good morning, Mickey. I think there’s, two factors there. One, we were flattered to have institutional buyers come into the stock in the volumes that they did. We’ve always had a long-term strategic objective to increase the institutional holding and the float in our shares, and when they showed up, we felt it appropriate to take that advantage. And you will note that our institutional share counts probably doubled as a result of that issuance. So, strategically, it was good for the investor base and the flow in the stock market for us, we took advantage of it. I think the second is, we wanted to be in a position where we were strong relative to our capital base. Bank market conditions were a little unsettled in the summer.
So we felt going long, and the equity gave us a little bit more strength in that viewpoint. Lastly, I would say, yes, we are going to increase our leverage as the spreads probably start to contract with interest rates coming down. We’re obviously, skewed very much towards the fixed cost of capital right now. Having a strong equity base will allow us to put on assets and optimize our capital structure, and allow us to continue to maintain the level of dividend coverage that we’re going to look for to try to continue to maintain the dividend level at or above where it is today. So, we’ll grow into that leverage level with higher assets over the course of the next 12 to 18 months.
Mickey Schleien: That’s very helpful. Thank you, Bob. That’s it for me this morning.
Bob Marcotte: Thank you.
David Gladstone: Next question?
Bob Marcotte: No.
Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I’ll turn the floor back to Mr. Gladstone for final comments.
David Gladstone: Okay. Thank you very much. I appreciate you all calling in. Wish we had a few more questions. We like it when you ask questions, but we’ll wait for next quarter to get some more questions. That’s the end of this conference call.
Operator: Thank you. This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.
