Main Street Capital Corporation (NYSE:MAIN) Q4 2022 Earnings Call Transcript

Dwayne Hyzak: Yes. Bryce, I would say there was one transaction in the quarter that benefited both Main Street directly. It also benefited MSC Income Funds. So that transaction will not be recurring. But even without that transaction, we would have seen some incentive fee income at MSC Income Fund. So it’s very, very difficult to predict what happens in the future, even one quarter out. I would say, as we sit here today, we would expect to have some incentive fee contribution from our asset management business, it may just be down a little bit from where it was in the fourth quarter, primarily are directly attributable to that one transaction that I referenced.

Bryce Rowe: Okay. Okay. And then maybe last one for me. You all highlight where nonaccruals are today. Obviously, not a meaningful piece of the portfolio, but — can you talk about kind of the puts and takes quarter-on-quarter? I guess you have 12 nonaccruals today versus 11 last quarter. And you did highlight some realized loss activity. Just curious if those nonaccruals generated some of that?

Dwayne Hyzak: Yes. I’ll let Jesse add on any additional detail that he has here. But I’d say that during the quarter, from memory, we had on net add. So not a lot of movement, as you said. I think the portfolio as a whole continues to perform well. We do have some names that have underperformed. And when they underperform, if it’s on the private loan or middle market side, the first thing we do is look for the private equity sponsor in terms of what they’re going to do in relation to supporting the company. And I’d say that we’ve seen in most situations, the private equity sponsors continue to be very, very supportive, which obviously is a good thing and a big part of our investment strategy in the private loan segment. But we have had a couple where the performance was such that the private equity firms either were not supportive, but we needed to do a restructure that either caused the nonaccrual or the realized loss activity.

But I’ll let Jesse give any additional specifics he can add on.

Jesse Morris: I think this is — we have one that came on, that was the movement. And I think you probably heard it in my commentary, but we expect to have another one come off in the first quarter of this year.

Bryce Rowe: Got it. Okay. I think I’ll leave it there. Appreciate it.

Dwayne Hyzak: Thanks a lot, Bryce

Bryce Rowe: Thank you.

Operator: Our next question comes from Kenneth Lee with RBC Capital Markets. Please proceed with your question.

Kenneth Lee: Hi, good morning. Thanks for taking my questions. Just one on the Asset Management business. You mentioned briefly, in the prepared remarks about actively working on growing the business. I realize that’s still a little early days, but I wonder if you could just talk a little bit more about what sort of activity you’re working on? And also maybe I could wonder if you could just comment upon what you’re seeing in terms of either fundraising or investor demand for the product there? Thanks.