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Monroe Capital Corp (NASDAQ:MRCC)
Q2 2020 Earnings Call
Aug 6, 2020, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Monroe Capital Corporation's Second Quarter 2020 Earnings Conference call. Before we begin, I would like to take a moment to remind our listeners that remarks made during this call today may contain certain forward-looking statements, including statements regarding our goals, strategies, beliefs future potential, operating results or cash flows, particularly in light of the COVID-19 pandemic.

Although, we believe these statements are reasonable based on management's estimates, assumptions and projections as of today, August 6, 2020. These statements are not guarantees of future performance. Further time sensitive information may no longer be accurate at any time of any replay or listening. Actual results may differ materially as a result of risks uncertainty or other factors, including but not limited to the risk factors described from time to time in the company's filings with SEC. Monroe Capital takes no obligation to update or revise these forward-looking statements.

I would now like to turn the call over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation. Please go ahead.

Theodore Koenig -- President & Chief Executive Officer

Good morning and thank you to everyone who has joined us on our call today. Welcome to our second quarter 2020 earnings conference call. I'm joined by Aaron Peck, our CFO and Chief Investment Officer. Last evening, we issued our second quarter 2020 earnings press release and filed our 10-Q with the SEC. First and foremost, we hope you and your families remain healthy and safe.

We are pleased that despite the continued economic and public health challenges associated with the ongoing COVID-19 pandemic, we were able to generate record net investment income and increased NAV performance during the second quarter of 2020. The continued uncertainty associated with the COVID-19 pandemic has created concerns related to the economy, as well as specific unanticipated challenges for many companies due to business interruptions and a slowdown in business activity. This uncertainty has caused volatility across the financial markets over the past several months. The government stimulus has buoyed the financial markets during the second quarter with the S&P 500 erasing nearly all of the 20% decline experienced in the first quarter. Price increases were also seen in traded credit investments as the S&P/LSTA Leveraged Loan Index, which finished the first quarter down approximately 14% in market value, rebounded and was up approximately 8% during the second quarter.

The uncertainty that caused many of our portfolio companies across our platform to be focused on their own liquidity as evidenced by the wave of revolver draws requested that we saw during March waned considerably after April. We are back to a near normal on portfolio company revolver draws. The Monroe funds, including MRCC have met all borrower revolver draw requests and we believe that we have the appropriate liquidity to meet any future requests across all of our funds.

As we discussed on last quarter's call, we have been shifting our portfolios over the past several quarters in all of the Monroe funds away from higher risk cyclical industries. As a result, MRCC has limited to no direct portfolio exposure in industries most affected by the pandemic such as airlines, automotive, travel leisure, oil and gas, minerals, and mining and energy. However, the best thing about our portfolio is that we are typically a control lender. We are the agent on approximately 81% of our loan investments. We have good loan documentation with tight baskets regarding indebtedness and restricted payments with no collateral leakage potential.

We have at least two and often several more financial covenants on most all of our deals, including maintenance and incurrence tests and debt leverage. This allows us to be proactively engaged with our borrowers, and their financial sponsors in terms of liquidity. It also allows us to opportunistically amend and reprice our loans to constantly rerisk our portfolio. In past calls, we have discussed the importance of tighter loan documentation in the lower-middle market that we play. In the larger broad middle market, almost 80% of all loans are covenant light. In our market, we are dialoguing with our company's weekly and sometimes on a daily basis. This allows us to manage risk and do many things to enhance our risk and return positions. Our risk is also mitigated by the fact that we maintain conservative starting leverage and loan to values when we underwrite our loans often in the neighborhood of 50% loan to value.

Our arbitration proceeding in the Rockdale Blackhawk matter is now complete. The award was issued in final form and we received payment during the second quarter, which covered more than 100% of our par amounts, accrued interest, and fees on this loan. We are expecting an additional payment of the remaining escrowed amount once certain legal issues are resolved. Assuming we recover the remaining escrowed amount at the current estimated value, we will have received $23.6 million in proceeds and investment that had a cost basis of $19.5 million. This recovery does not include the substantial interest payments and equity distributions that we received over the life of this investment including in June in conjunction with the settlement, which aggregated approximately $23.1 million for MRCC. This is a prime example of how Monroe is dedicated and expert portfolio management efforts can yield outstanding results even in a difficult and delicate situation.

Turning now to the second quarter results. We are pleased to report that in this challenging environment. We generated adjusted net investment income of $0.62 per share, a significant increase from the adjusted net investment income of $0.33 per share in the first quarter. The increase in our net investment income was primarily the result of receipts of proceeds related to the Rockdale proceedings. Approximately $7.4 million or $0.36 per share of previously unaccrued interest and fees were recognized as a result of proceeds from the legal proceedings during this quarter.

Without Rockdale, our adjusted net investment income would still have covered our recent quarterly dividend of $0.25 per share. Aaron will go into more detail regarding the components of our net investment income later in the call.

We also reported a net increase in assets resulting from operations of $14.2 million or $0.69 per share during the quarter, which was driven primarily by the increase in the fair value of our investment portfolio during the quarter. As a result, our NAV, on a per share basis, grew from $10.04 per share at March 31 to $10.37 per share at the end of the second quarter. Net increases in the fair value of investments contributed approximately $0.36 per share to our book value growth during the quarter or 3.6% on a per share basis. Additionally, the net impact of the settlement of Rockdale contributed approximately $0.07 per share to the book value growth during the quarter.

In order to bolster our liquidity and reduce leverage, we issued 825,460 shares of stock under the ATM program during the quarter, which reduced our per share book value by $0.10 per share. Without this issuance, we would have experienced a $0.44 per share increase in our book value per share. We estimate that approximately $0.36 per share of the increase in book value was attributable to changes in portfolio valuation, including $0.46 per share as a result of the tightening of credit spreads during the period unrelated to individual credit performance.

During the quarter, LCD first lien three-year discounted loan spreads tightened by 365 basis points, retracing around 60% of the first quarter spread widening. Of that $0.46 per share NAV increase attributable to spread tightening, approximately $0.26 per share or 57% was attributable to assets held directly by us, while $0.20 per share or 43% was as a result of markups on assets held in the MRCC senior loan joint venture. The loans in the joint venture tend to be middle market -- larger middle market companies. And those loans experience higher price volatility in times of market correction. This increase of $0.46 per share associated with spread tightening was partially offset by approximately $0.11 per share of unrealized net mark-to-market valuation losses attributable to specific credits in certain portfolio companies, a significant portion of which is as a direct result of the impact of the COVID-19 pandemic on these borrowers. A recovery of these unrealized losses is dependent on both continued spread tightening as well as improved company performance for these specific COVID-19 affected loans.

During the quarter, we reduced MRCC's regulatory debt-to-equity leverage from 1.47 times debt-to-equity to 1.6 times, returning to approximately the same level of regulatory leverage as of the beginning of the year. The decline in leverage was primarily driven by strong repayment activity during the quarter, including the realization on Rockdale. We continue to focus on managing our investment portfolio at the appropriate risk adjusted leverage level going forward and continue to target regulatory leverage in the range of 1.2 to 1.3 times debt-to-equity.

Our senior management team is continuing to spend time and effort analyzing underperforming credits and collection strategies. We are very focused on realizing the highest possible recoveries on the assets that we have marked down. And we are engaged in several processes to execute on that strategy. One such process was undertaken with respect to Rockdale Blackhawk in 2019. And we have seen the positive results of that process now contributing approximately $0.07 of our per share book value increase during the period. There are other similar processes ongoing.

The Monroe Capital organization has approximately 125 employees with many devoted to underwriting, risk management, and workout strategies. During periods like this, it allows us to bring the very best resources to bear on the portfolio that are necessary. As many of you know, we have a long track record of success in managing through difficult economic environments, notably the great financial crisis in 2008 and 2009, including select workout situations with borrowers. If need be, we are not afraid to take over and hone our business. While that is not our preferred option, we know how to do it and have done it successfully in the past. If necessary, we will roll up our sleeves and do what we need to do in order to achieve the best possible recovery. The important thing is that we have the ability, experience and internal resources to do that if necessary.

As we look ahead, there continues to be a high bar for investing new capital during uncertain times. We are seeing many attractive investment opportunities to invest capital today, and we have over $100 million of liquidity on our ING led revolving credit facility in terms of availability subject to borrowing base capacity. Aaron will discuss more about that later.

Our focus for the balance of the year will be to maintain current leverage levels and to selectively make new investments in portfolio companies with compelling risk return dynamics, just as we have done at Monroe in the years following the last economic downturn in 2010 and 2011. We are now well positioned to do this.

Investment spreads have widened considerably and terms of leverage have improved as well and we have the liquidity to selectively take advantage. MRCC enjoys a strong strategic advantage in being affiliated with a best-in-class middle market private credit asset management firm with over $9 billion in assets under management and over 125 employees as of July 1, 2020. We will continue to focus on generating adjusted net investment income and NAV performance, just as we have shown this past quarter.

I am now going to turn the call over to Aaron who is going to walk through with you our financial results.

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Thank you, Ted. During the quarter, we funded a total of $10.3 million in investments, which solely consisted of new fundings to existing borrowers, including $9 million in revolver draws and $1.3 million and add-ons and delayed-draw fundings. As we discussed earlier in the call, many of our borrowers drew on the revolvers in order to increase liquidity on their balance sheets, due to the uncertainty related to COVID-19. This portfolio growth was offset by sales and repayments on portfolio assets, which aggregated $42.3 million during the quarter, including proceeds from the Rockdale settlement and partial sales and paydowns. At June 30, we had total borrowings of $370 million including $146 million outstanding on our revolving credit facility, $109 million of our 2023 notes and SBA debentures payable of $115 million. Our outstandings under our revolver decreased by approximately $45 million during the quarter as we were focused on the reduction in our leverage during the period. Any future portfolio growth revolver draws or advances to existing borrowers will predominantly be funded by the $109 million of availability remaining under our ING-led revolving credit facility, subject to borrowing base capacity and the uninvested cash held in our SBIC subsidiary.

Turning to our results. For the quarter ended June 30, adjusted net investment income, a non-GAAP measure, was $12.8 million or $0.62 per share, a substantial increase from the prior quarter's adjusted net investment income of $6.8 million or $0.33 per share. The increase was primarily as a result of the recognition of previously unaccrued interest in fees received on Rockdale Blackhawk of $0.36 per share, which was previously recorded as part of our mark-to-market gain on our investment in Rockdale.

In June, the company received $33.1 million in proceeds from the Rockdale matter, of which $19.5 million was recorded as a reduction in the cost basis of the company's investment in Rockdale, $3.9 million was recorded as the collection of previously accrued interest, $7.4 million or $0.36 per share was recorded as investment income for previously unaccrued interest and fees and $2.3 million or $0.11 per share was recorded as realized gains.

Additionally, as an offset, the company recorded net change in unrealized losses of $8.2 million or $0.40 per share, primarily as a result of the reversal associated with the collection of proceeds from the Rockdale estate. Total net income associated with the company's investment in Rockdale was $1.5 million or $0.07 per share during the quarter ended June 30, 2020. As of June 30, 2020 the company has a remaining investment in Rockdale associated with residual proceeds expected from these state of $1.8 million or about $0.08 per share. This increase in investment income from Rockdale was partially offset by declines in interest income as a result of overall declines in LIBOR, placing three smaller additional assets on non-accrual status and a reduction in dividend income earned on the SLF during the quarter.

Incentive fees were fully limited during the quarter as a result of the total return limitation in our shareholder friendly advisory agreement. LIBOR rates were volatile during the period and three-month LIBOR, as an example, fell from approximately 1.45% at March 31 to 30 basis points as of June 30. While we maintain LIBOR floors in nearly all of our deals with the majority of floors at a level of at least 1%, the reduction in LIBOR did negatively impact our net investment income during the period.

As of June 30, our net asset value was $220.6 million, which was up approximately 7.4% from the $205.4 million in net asset value as of March 31. Our NAV per share increased from $10.04 per share at March 31 to $10.37 per share as of June 30. As Ted already discussed in his earlier remarks, the increase in our per share NAV was primarily as a result of unrealized mark-to-market valuation adjustments in the portfolio related to general tightening of credit spreads during the quarter and the resolution of the Rockdale Blackhawk matter offset partially by some specific mark-to-market adjustments on certain names in the portfolio that were impacted by COVID-19 and the issuance of shares below NAV during the quarter.

Looking to our statement of operations. Total investment income increased during the quarter, primarily as a result of an increase in interest income due to the recognition of previously unaccrued interest and fees on the Rockdale matter, offset by a reduction in dividend income from the SLF during the period and a reduction in income on the remainder of the portfolio. During the quarter, we placed three additional positions on non-accrual status, including our investments in California Pizza Kitchen, Parterre Flooring, and the preferred equity position in value to our products. Notwithstanding those small additional nonaccruals, our overall fair value non-accrual position improved markedly in the quarter. Total non-accruals now approximate 4.7% of the portfolio at fair value, which compares to 7.4% as of March 31, largely as the result of Rockdale, which had been listed as a non-accrual asset in previous periods.

Moving over to the expense side. Total expenses for the quarter decreased primarily driven by the reduction in interest in other debt financing expenses in the quarter due to the lower debt balances. Base management fees also declined slightly primarily due to the lower level of assets at fair market value as a result of repayments in the portfolio during the quarter.

At the end of the quarter, our regulatory leverage was approximately 1.16 debt-to-equity, a substantial decrease from the regulatory leverage level of nearly 1.47 at the end of the prior quarter. The decrease in regulatory leverage is as a result of positive fair market value adjustments in our portfolio as well as the paydown on our revolving credit facility during the period. The current level of regulatory leverage is consistent with the targeted leverage range we have guided you to on prior calls. We are currently comfortably in compliance with the SEC asset coverage ratio limitation and actually below our previously discussed target regulatory leverage level of 1.2 to 1.3 times debt-to-equity.

As of June 30, the SLF had investments in 61 different borrowers aggregating $219 million at fair value with a weighted average interest rate of approximately 6%. The SLF had borrowings under its nonrecourse credit facility of $153.7 million and $16.3 million of available capacity under this credit facility subject to borrowing base availability. We do not expect to significantly grow the assets held in the SLF at this time and the SLF continues to be in compliance with all covenants in its credit facility. As discussed earlier, the loans held in the SLF saw significant unrealized mark-to-market increases during the period as a result of market spread tightening.

Regarding Rockdale Blackhawk as we've discussed on prior calls, there is a pending private arbitration of a breach of contract claim with a national insurance carrier with a material amount in dispute. That claim served as collateral for the MRCC loan to Rockdale Blackhawk. The underlying arbitration proceedings were completed in mid-August and final trial briefs were due and submitted to the arbitrator in late September of last year. An interim award was issued in January 2020. Just recently, the arbitrator issued a final award, which updated the interim award to include certain attorneys' fees interest and other amounts. The final award was very positive and resulted in a substantial recovery from MRCC and the other lenders to Rockdale, far in excess of the cost basis of our outstanding loan balances and unpaid interest and fees due to the lenders right to receive excess proceeds pursuant to the terms of a sharing agreement between the lenders and the estate. A small portion of such proceeds are being held in escrow pending a decision by a judge on the merits of two parties claims to receive such proceeds.

Another portfolio company BJ Services has been in the news, as it recently filed for bankruptcy protection in Texas. MRCC holds approximately $4.3 million of exposure to BJ Services in the form of a first lien senior secured loan. BJ Services is an oil service company that is a leading provider of hydraulic fracking, factoring and cementing services to upstream oil and gas companies. As a result of the decline in oil prices and as a result of the COVID-19 pandemic, demand for their services has been negatively impacted. Our loan is secured by a very substantial amount of equipment and other fixed assets, which we expect to be sold through the bankruptcy proceedings. We believe that our loan has significant asset coverage and we expect to remain current on all payments and we anticipate being repaid in full through the bankruptcy process. Equipment sales have already started.

I will now turn the call back to Ted for some closing remarks before we open the line for questions.

Theodore Koenig -- President & Chief Executive Officer

Thank you. Aaron. In closing, we continue to find ourselves in an unprecedented economic environment, which is likely to cause rising default rates and the potential for a recession. Despite these challenges, we remain optimistic about our investment portfolio and our prospects similar to what we saw in growth of the firm after the great recession of 2008 and 2009. The key is our conservative underwriting, a purposeful defensive portfolio and our access to a large and experienced portfolio management team with experience managing through multiple economic cycles.

We have a defensively positioned portfolio with solid loan documentation and a lot of control over our own destiny in terms of risk management. As such, we continue to believe that Monroe Capital Corporation provides a very attractive investment opportunity to our shareholders. Our dividend is fully covered by net investment income and we have sufficient liquidity to selectively play offense in this market. We are committed to navigating successfully through this economic period and are confident that we have the skills and experience necessary to maximize returns for all of our lending partners, bondholders, JV partners, and shareholders. We believe that MRCC is affiliated with a best-in-class external manager, which has decades of experience, approximately 125 highly skilled employees and approximately $9.3 billion in assets under management, which provides us the infrastructure and stability in times like these. It also provides us an opportunity for MRCC to outperform. We would like to thank our shareholders for their loyalty and confidence. I would also like to thank the entire team at Monroe Capital organization for their hard work and dedication.

Thank you all for your time today. And that concludes our prepared remarks. I'm going to ask the operator to open the call now for questions.

Questions and Answers:

Operator

[Operator Instructions]. Our first question is from the line of Christopher Nolan with Ladenburg Thalmann. Please go ahead, sir.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Hey, guys. Ted, how much is the escrow outstanding for Rockdale?

Theodore Koenig -- President & Chief Executive Officer

I will tell you, I believe it's $1.8 million to us, for MRCC, the escrows merger, but that relates to other forms. But the MRCC portion is $1.8 million.

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

And that's at fair value. So that's our expectation of recovery.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Got you. And by the way, great job on Rockdale. I guess strategy-wise is the strategy still to further pay down revolver debt and lower the leverage ratios, and I know it's below your targeted range, but what's the leverage strategy going forward?

Theodore Koenig -- President & Chief Executive Officer

Good question, Chris. Let -- we're at where I think we want to be today. We're on leverage -- I know we've talked -- Aaron has talked in the past about guiding to a 1.2 to 1.3 times. We're about a 1.1 times leverage today. So we don't have any qualms about taking it up a little bit higher, but that's going to be dependent on market opportunities and what we see. We've got the capacity for growth. We just want to make sure we're being thoughtful in how we grow.

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

I'd also add, Chris, what -- the portfolio naturally has some repayments that come in even in this environment, and because the market opportunities out there are attractive, we will have significant opportunity to reinvest as well, as things come in even staying within the leverage limitation. So we're hopeful that we'll be able to move some of the start-up with the market as we see repayments.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Great. Final question, any other material recoveries in your non-accrual list, which compared to Rockdale or anything similar?

Theodore Koenig -- President & Chief Executive Officer

Nothing that comes to mind today, but I told you on the call and prior calls, we're very committed to recovering March loans. One of the ways that good asset management firms differentiate themselves is by recovering on loans that mark -- very often we don't have control over the mark process and we've got a pretty robust third-party evaluation process that we go through, as well as internally. But what we do, we have some control over, is the message and the effort and how we strategize in recovering proceeds. So, well, from time to time I'm concerned with marks. I'm not overly focused because I know what we're doing internally and I know the companies and I know that the strategies that we have in place to collect. Our dollars are sound and generally are fruitful.

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Great, that's it from me guys. Thank you.

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Thanks, Chris.

Operator

[Operator Instructions]. And our next question is from the line of Tim Hayes with B Riley. Please go ahead.

Tim Hayes -- B. Riley -- Analyst

Hey, good afternoon guys. Hope you're doing well. My first question here, I just want to pick on the investment opportunity here, and your appetite to invest that you have brought down leverage little bit. I know you're being prudent with investment now. [Technical Issues] activity picking up relative to this quarter given the opportunities you're seeing, maybe if you could talk about pipeline, give us color on what you're looking at now, is it more first lien focused [Technical Issues] and compare to what you were seeing eight months ago?

Theodore Koenig -- President & Chief Executive Officer

A good question Tim. You traded in and out a little bit, so I heard most of it. But your question relates about mostly the investment opportunity set and I will tell you that we've got a strong pipeline. We did a number of add-on transactions across the firm in the last quarter. The private equity platform transactions were down, but we're seeing more and more rescue type capital opportunities and add-on deals for portfolio companies that are seeking to take advantage of the market. That seems to be where most of the deals are coming from today. What's interesting is that we're seeing leverage come down a half a turn to a turn over the last eight months or so. As you said, we're seeing pricing from 100 basis points to 150 basis points at least. So, I expect that the vintage of assets that are going to come on in our portfolio will be very, it will be accretive to both investment returns as well as overall leverage levels going forward.

As Aaron mentioned, we're going to be selective, only because when times like this, it's very hard to confirm in some industries projected financial performance and add backs and things like that's we're being a little more conservative when it comes to focusing on projected results and in projected add backs. We're being very diligent on historical results impact with COVID and there is a number of industries that have actually done quite well during COVID and those tend to be companies that are involved in supply, logistics, technology, software, and that's where we're going to really focus more of our efforts. So I would expect that you will see performance from Monroe, not only in MRCC, but across all of our funds look similar to the vintage of 2011-2012 when we came out of the crisis -- financial crisis and there were some liquidity constraints in the market and we're able, as a liquidity provider to take those opportunities and use them to our advantage and be a good partner to clients, companies, private equity firms, but get paid fairly for doing that.

Tim Hayes -- B. Riley -- Analyst

Thanks for that. That's some good color and I just want to confirm you the color you provided about kind of leverage levels and spreads. Is that just on the lower-middle market portfolio you're talking right now?

Theodore Koenig -- President & Chief Executive Officer

Yeah, that's primarily lower-middle market. Upper middle market has moved as well, but we're still seeing high leverage rates. In upper middle market, we've seen pricing expand a little bit. The challenge is that the upper middle market is really competing for deals with the high yield market and the investment grade market today and the investment grade market and high-yield market have been very, very strong still because of the investors thirst for yield. When you've got 10-year treasuries hovering around 50 basis points, it creates a lot of pressure for those investment grade purchasers. So I like the overall risk return in the lower part of the middle market right now, because I think we're getting paid better for taking same kind of economic risks.

Tim Hayes -- B. Riley -- Analyst

Right, got it. Okay. And then I don't know if you have these stats in front of you here. But you -- would you be able to disclose the average LTV or leverage multiples on the lower-middle market debt portfolio?

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Yeah, we don't have updated stats that we provide for the portfolio. Specifically, but what we can tell you is kind of where things look, when we started on these loans, sort of where Monroe originates middle market loans in the BDC, MRCC would have a similar starting stats and so typically you will see our portfolio around 4 times to 4.5 times EBITDA on a leverage basis when we're starting a new transaction and it's typically just a hair below 50% loan to value on that basis -- on a weighted average basis across the Monroe portfolios. And I wouldn't expect MRCC portfolio to be markedly different for the lower-middle market direct loans that we do in the portfolio.

Tim Hayes -- B. Riley -- Analyst

Okay, got it. And then you mentioned the -- I think you have about $109 million of capacity on your revolver. Can you just -- would you be able to disclose your borrowing base and how much of the capacity that you have access to at this point?

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Yeah, it's difficult to disclose that. First of all, we don't disclose that. Second of all, it moves, right. So if you may have a certain amount on your borrowing base today that's available based on the current assets. But if you originate an asset, it expands your borrowing base. So it's a bit of a moving target all the time, but we have capacity today. We have significant room on the borrowing base today, we're not near the full borrowing base capacity today. But we're really more focused on the overall leverage in the portfolio and the borrowing base is not posing an issue today.

Tim Hayes -- B. Riley -- Analyst

Okay and then just on your comment on how that can move around a bit. I'm just curious if you've seen a -- whether it's a significant amount of assets, or maybe just a modest amount fall out of the borrowing base is leverage multiples either increase or credits have been added to non-accrual, or is that just not really been an issue for you guys?

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Yeah, I mean you're not really seeing a major change in eligibility as a result of COVID-19 right now and we're monitoring that very carefully. But now, we're managing through pretty well and the borrowing base is continuing to be pretty solid and we haven't seen a lot of things fall out.

Tim Hayes -- B. Riley -- Analyst

Got it. Okay, great. Thanks for taking my questions.

Theodore Koenig -- President & Chief Executive Officer

Thanks, Tim.

Operator

And I'm showing no further questions at this time, I'd like to turn the call back to our presenters for closing remarks.

Theodore Koenig -- President & Chief Executive Officer

Thank you very much. We appreciate all of you joining us today and we look forward to speaking to you again in the coming months. In the interim, to the extent you have any questions, as always, please feel free to reach out to Aaron directly with any of your individual questions. But prevent, stay safe and we will speak to you soon. Thank you.

Operator

[Operator Closing Remarks]

Duration: 38 minutes

Call participants:

Theodore Koenig -- President & Chief Executive Officer

Aaron Peck -- Chief Financial Officer and Chief Investment Officer

Christopher Nolan -- Ladenburg Thalmann -- Analyst

Tim Hayes -- B. Riley -- Analyst

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