BCP Investment Corp. (BCIC) Earnings Call Transcript & Summary

Good afternoon, and welcome to today's call to discuss the proposed transaction recently announced between Portman Ridge Finance Corporation, a business development company externally managed by Sierra Crest Investment Management, an affiliate of BC Partners; and Garrison Capital Inc., a business development company externally managed by Garrison Capital Advisers, an affiliate of Garrison Investment Group. I'm joined this afternoon by Ted Goldthorpe, CEO and Chairman of Portman Ridge Finance Corporation; and Joe Tansey, CEO and Chairman of Garrison Capital Inc.; along with certain members of the Portman Ridge and Garrison Capital management teams. Before we begin, I would like to note that this call is being recorded, and a replay information is included in our June 24, 2020, press release. Throughout today's call, we will reference an investor presentation that has been posted to the Investor Relations section of both the Portman Ridge and Garrison Capital websites. If you have not done so already, I encourage you to download the presentation for review during the call. Please note that this call is the property of Portman Ridge, BC Partners, Garrison Capital and Garrison Investment Group, and any unauthorized rebroadcast of this call in any form is strictly prohibited. Today's conference call includes forward-looking statements and projections, and we ask that you refer to Portman Ridge's and Garrison Capital's most recent filings with the SEC for important risk factors that could cause actual results to differ materially from those projections. Portman Ridge and Garrison Capital do not undertake to update their forward-looking statements, unless required by law. I will now turn the call over to the CEO and Chairman of Portman Ridge, Ted Goldthorpe.

Thank you, and thank you all for joining us this afternoon. As we announced on June 24, Portman Ridge entered into a definitive merger agreement with Garrison Capital that will result in the entity being merged with and into Portman Ridge. As many of you know, this will be the second merger transaction entered into by Portman Ridge since BC Partners Advisors took over management, the first being with Oak Hill Investment Corporation (sic) [ Oak Hill Advisors Investment Corporation ] that closed on December 18, 2019. BC Partners is a leading global alternative asset manager with more than $20 billion of assets under management and over 30 years of operating history in the U.S. and Europe. BC Partners Credit was launched in February of 2017 and has pursued a strategy focused on identifying attractive credit opportunities in any market environment and across sectors, leveraging the deal sourcing and infrastructure made available by BC Partners. We believe that this merger will deliver significant benefits to the shareholders of both companies and further validates our ability to consolidate the fragmented BDC space, as we outlined in connection with our initial externalization of Portman Ridge. I want to start off by outlining the details of the proposed transaction and delve into the strategic rationale and benefits for both Portman Ridge and Garrison capital shareholders. I'll then ask Joe Tansey, Chairman and Chief Executive Officer of Garrison Capital, to share some factors that resulted in Garrison electing to partner with us and briefly outline next steps for the completion of this transaction. Turning now to the presentation, starting on Page 3. The transaction will be done on a NAV-for-NAV basis, and has been approved by both Garrison Capital's and Portman Ridge's Board of Directors and received the unanimous recommendation from the Special Committee to the Garrison Board of Directors. As part of this transaction, Portman Ridge will deliver GARS' shareholders a combination of newly issued Portman Ridge shares valued at 100% of Portman Ridge's net asset value per share and $19.1 million of cash. Additionally, GARS' shareholders will receive $5 million in cash from Sierra Crest, the manager to Portman Ridge, which is equivalent to approximately $0.31 a share. This $5 million payment mirrors a similar payment made by BC Partners as part of their merger with -- of Oak Hill in December of 2019 and the externalization of KCAP's management contract in April of 2019. This will result in GARS' shareholders receiving total aggregate value of approximately 105% of its net asset value from Portman Ridge and Sierra Crest from a combination of cash and stock considerations based on March 31, 2020, net asset values of both GARS and Portman Ridge. Based on Portman Ridge's stock price as of June 23, 2020, of $1.25 per share, the merger transaction, including Sierra Crest additional cash payment, combined to value of Garrison shares at an aggregate of approximately $3.97 per share, which represents 62% of Garrison's March 31, 2020, net asset value and a 43% premium to Garrison's closing price of $2.78 on June 23, 2020. Turning to Page 4. I will let Joe talk to Garrison's strategic alternatives process, but I'll note here that BC Partners will continue to contribute all incentive fees actually paid for the first 2 years following the initial KCAP externalization transaction to purchase newly issued Portman Ridge common stock at net asset value up to $10 million. Additionally, Portman Ridge recently implemented a buyback program for up to $10 million and is actively in the market, subject to blackout periods and other restrictions. I would now like to provide an overview of the strategic rationale for the proposed transaction. First and foremost, this transaction will be immediately net investment income accretive, and shareholders will continue to benefit from the fully integrated BC Partners platform, which allows us to access to industry diligence and expertise from over 30 years of private market investing. Although we do not believe this to be a likely event, either company could withstand a meaningful realized net asset value loss between now and closing. And we still believe the transaction would be accretive on an earnings per share basis, given the significant reduction in duplicative overhead costs. Additionally, we believe the increased scale from the pro forma market capitalization of Portman has the potential to result in the stock trading at a higher price-to-book multiple. Secondly, we believe our differentiated middle market lending strategy will lead to better and long-term performance, a more stable net asset value and a better trading multiple. Because of Portman Ridge's flexible mandate and the management team's strong background, we are able to capitalize on attractively priced nonsponsor opportunities, an area of the market that a large majority of direct lending managers have historically not been active in. Over time, we intend to rotate the Garrison assets to portfolio of directly originated, high-quality senior secured debt investments, consistent with the approach taken on Portman Ridge portfolio and with a focus on diversification. Third, this represents another milestone in the consolidation of the fragmented BDC space. BC Partners has proven its ability to execute strategically with our second merger transaction in the BDC space within 5 quarters of taking over the management of Portman Ridge. Going forward, we believe the current macro environment will result in compelling opportunities to further grow our platform in light of the added benefits of scale. Fourth, the merger of Portman Ridge and Garrison Capital will allow the combined company to speak for larger deals, spread fixed public company costs across a larger AUM base as well as increase its capacity for higher-yielding nonqualifying assets. The deal also results in immediate shift in the portfolio's composition by substantially increasing the first lien senior debt exposure investments as well as significantly decreasing the portfolio's exposure to CLO equity and second lien investments. On a pro forma basis, first lien assets will represent over 70% of the portfolio, and the percentage of CLO equity will be reduced to around 3% of the total portfolio. We remain focused on growing the diversified portfolio of high-quality, privately originated senior secured debt investments that we are managing, and the additional -- of Garrison assets increases the scale of the portfolio and the ability for us to speak for larger deals. Finally, I would like to touch on one highlight that is not on this page, and that is the liability management. Portman Ridge's current liability structure is extremely flexible as we have an unsecured bonds outstanding that are callable and a revolving credit facility with JPMorgan that can be flexed up and down. Once Garrison's CLO structure is callable in November of this year, Portman Ridge will have the ability to rightsize its liabilities through any combination of these facilities, with the goal of more closely matching our liabilities to the size of the company and its investment strategy going forward. We foresee a smooth transition of the current assets between managers, and we'll continue to apply BC Partners' stringent credit standards while redeploying the capital and assets originated by our platform. We believe the shift in the composition of our investment portfolio, along with the opportunity to optimize our liabilities and capital structure, will ultimately result in a more stable NAV performance over time. Investors in the combined company should also benefit from the increase in the float of our stock. The ultimate goal is to deliver strong and more sustainable risk-adjusted returns to shareholders, and we believe this is the best path to achieve it. With that, I would like to now turn over the call to Joe Tansey to discuss the transaction from Garrison's perspective and discuss next steps.

Thanks, Ted. I'm happy to join you remotely on behalf of GARS and our Board of Directors to discuss this -- the strategic transaction with Portman Ridge. As most of you know, we spent a substantial amount of time in 2019 discussing the direction and future of GARS with our Board of Directors. We were fully aware that the company's size, performance and operating model was no longer sustainable. As a result, in Q3 2019, we announced our decision to retain Keefe, Bruyette & Woods as a financial adviser and explore a variety of potential strategic options that would maximize shareholder value. I'd like to start by spending a couple of minutes providing some color around the decision-making process that ultimately led to GARS' Board to unanimously vote to approve a partnership with Portman Ridge. To start, the commencement of our strategic review process received a significant amount of interest from a wide range of market participants. These market participants included both public and private firms of all different sizes, which resulted in a comprehensive variety of structures that included purchases of our management contract, asset portfolio purchases, mergers, just to name a few. The robust amount of interest and proposals provided the GARS Board with a good sense of the company's value. Based on our view of the company's value, we were able to select a number of counterparties, including Portman Ridge, who have submitted proposals that were within a reasonable range of that value. As outlined on Page 4 of the presentation, the GARS Board, throughout the process, was able to independently come to the conclusion that Portman Ridge's proposal brought significant tangible value in the form of an upfront cash component and Portman Ridge shares, underpinned with a quality NAV, which our due diligence validated. In addition, they brought flexibility, thoughtfulness and transparency to the process in the midst of a period of extreme and unforeseen market volatility. We also believe that their affiliation with a top-tier large global platform in BC Partners brought significant identifiable value to their proposal. Over the months of interactions throughout the due diligence process, BC Partners Credit management team proved invaluable due to their experience in the BDC space, experience and quality of credit underwriting and demonstrated ability to bring certainty of execution at a time of significant uncertainty. As a result of Portman's ability to meet all of these criteria, the GARS Board believes that this proposed merger results in a favorable outcome for the GARS shareholders. With all that said, I'll now provide an overview of the tangible value GARS' stockholders are expected to receive, which is highlighted on Page 6 of the presentation. In connection with this transaction, GARS' stockholders will receive a combination of: one, a $19.1 million in cash, approximately $1.19 per share from Portman Ridge; two, Portman shares valued at 100% of Portman Ridge's net asset value at the time of the closing of the transaction in the aggregate number equal to GARS' net asset value at the closing, minus the $19.1 million in cash from Portman Ridge; and three, an additional cash payment from Sierra Crest, the external adviser to Portman Ridge, of $5 million or approximately $0.31 per share. In aggregate, each GARS stockholder will receive $1.50 in cash per share and approximately $5.10 and $2.47 in the form of Portman Ridge shares based on Portman's March 31 NAV and stock price, respectively. The results in the total transaction values for GARS' stockholders of $6.76 per share or 105% of our 3/31 NAV and $3.97 or 62% of our 3/31 NAV, respectively. The stock exchange ratio for the stock component of the merger will be determined by the net asset values of GARS and Portman Ridge as of the closing, calculated as of 5:00 p.m. New York City Time on the day prior to the closing of the transaction. From a process and timing standpoint, we expect to finalize and file a joint preliminary proxy statement prospectus on Form N-14 in the next few weeks. Once the SEC comments are received, responded to and resolved, we will set record and meeting dates for the special meetings of each respective company's stockholders to approve the merger. If the shareholders approve the merger and other routine closing conditions are met, the transaction will close shortly thereafter. We anticipate closing to occur in the fourth quarter of this year. I will now turn the call back over to Ted for final comments, followed by Q&A.

Thank you, Joe. Before we move to questions, I would like to spend some time discussing the shareholder benefits of this transaction. On Slide 7, it is important to note that the pro forma company will be exceptionally well diversified. Even when counting the joint ventures at Portman Ridge as one security, despite the underlying portfolio being diversified, the pro forma company will have approximately 175 distinct borrowers, and the average position size will be just 0.6% of the total portfolio by fair market value. Additionally, I would note that first lien securities will be approximately 73% of the portfolio and CLO equity will only be 3%. On the origination front, one of the key tenets of our initial externalization transaction was that BC Partners platform had originated assets that were higher up in the capital structure and at a higher return by leveraging the breadth of our platform and the illiquidity premium associated with directly originated loans. As shown on Page 8, since taking over management of Portman Ridge, over 75% of the newly originated assets are first lien, and the total spread to LIBOR is 30 basis points higher than the initial portfolio. On Page 9, I would like to highlight the underwriting quality of the BC Partners platform. Due to the difference of sector that we target, the position in the capital structure and the quality of asset underwriting, the assets originated by BC Partners meaningfully outperformed other legacy assets within Portman Ridge during the market dislocation in Q1 of 2020. As we continue to rotate the legacy KCAP, OHAI and Garrison portfolios, we would expect the asset quality and mark-to-market volatility to decrease meaningfully. Finally, on Slide 10, I would like to highlight that we have a precedent for taking over portfolios of liquid quoted securities and rapidly reposition the assets. Shortly after the merger with OHAI in December of 2019, Portman Ridge monetized around 40% of the portfolio at fair value and rotated into assets at a higher total return higher net asset value upside, and that has performed significantly better during the current economic environment. I want to reiterate our excitement about the transaction and the benefits for both Garrison and Portman Ridge shareholders will derive from the merger. As previously highlighted, we believe the combined company will generate increased earnings per share, spread relatively fixed public company costs over a larger base and increased trading liquidity in the equity. We believe this transaction will solidify Portman Ridge as the acquirer of choice in the market and position us well for future M&A opportunities. With that, operator, would you please open the line for questions?

[Operator Instructions] Our first question comes from Chris York with JMP Securities.

Joe, first question for you, it's on the term of the value GARS' shareholders will receive. Why did you choose to accept the NAV exchange based on future NAVs rather than a fixed NAV as of today? And then were other comparable bids on similar terms?

I think the other term -- other bids were similar. There were other bids that were at a set price, fixed dollar amount, but there were also other bids that moved based on share price trading, which left us a little bit less comfortable. I think that -- and I wouldn't say that there was only -- that was not the main consideration. Really, I think the main consideration of this transaction was mostly that we felt very comfortable with the quality of the assets in the Portman Ridge book. And so when we looked through and felt that those assets were likely to perform quite well, we felt comfortable that they were similar to our assets and that we could say that what would happen would be a fair and reasonable outcome. But we weren't looking to gain it one way or the other. But I think it was not just that portion of the -- and I think the cash transaction -- cash flow of the transaction was also very high relative to some of the other people who submitted.

Okay. So you did do a significant level of reverse due diligence on the portfolio.

Yes.

Okay. Second question is I'm curious whether shareholders will be given the current NAVs at the time they will be voting on the deal.

Well, I mean, you're going to know what the exchange ratio is, Chris. And so there will be -- that you have to basically come up with NAVs in order to actually come up with the exchange ratio. So I don't know exactly what the disclosure will look like. But clearly, we're going to have to come up with those numbers in order to do the deal.

Okay. So will that be in the N-14? Or...

Whatever customarily gets disclosed will be in there. It will be exactly by the book.

Okay. And then this question would be for Ted, the last topic on stock component. So will the timing of Portman's previous commitments to stock buybacks be impacted in any manner?

No. So as we've said to many shareholders, we're committed to completing our $10 million buyback program. It's been challenging because of all this M&A that we've been in blackout periods. But it doesn't change anything from our perspective in terms of buying back stock. Yes, the benefit here as part of our repositioning plan is, Garrison's portfolio, over half the portfolio is in liquid assets. So the reposition of the portfolio is actually not as complicated as one might think. And we have liquidity, as you know, we have a lot of liquidity in our own portfolio as well.

Got it. And then just kind of taking a step back as we think about the strategy. I mean, obviously, Ted, this is -- as you said in your prepared remarks, this is BC Partners' third acquisition in 2 years, which certainly does lead us to believe your experience in executing and negotiating these transactions. The question, I think, is as BDC investors haven't seen a roll-up strategy over the last 20 years for the investment vehicle, it does positively provide you some market differentiation, but alternatively, the strategy is complex. So do you worry that investors will always associate the portfolio as complex and then the stock with a complexity discount?

Yes, that's a good question. I mean, I think this is a great deal for our shareholders. And I would hope that Garrison shareholders feel the same way. The reality is it's very -- these vehicles are very hard to generate additional NII, particularly in a zero-interest environment. So you have substantial NII accretion, and we actually think we can actually, over time, tick it up even more. It's obviously not dilutive from a book value perspective because it's NAV-for-NAV. And one of the challenges with our equity has been the limited size of our float. So if you actually look -- I'm not saying -- if you look at a comp sheet, this takes -- like there seems to be a premium paid for BDCs above a certain size. And if you actually look at that break point, this should take us above that breakpoint. So we should, theoretically, given the fact that we're bigger, given we can spread our fixed costs over a much larger structure and generate NII accretion, and we're bigger, and we have a bigger float, we should trade better as well. So not only are our shareholders going to get better dividend coverage out of this transaction but, with a more liquid stock, it should trade better. And in terms of complexity, I think, obviously, this takes our CLO equity exposure down to 3%, which I think is a really valuable thing for us. And so this -- I don't think our portfolio is going to get more complicated here. A huge part of our portfolio is basically corporate first lien debt. So we don't have a lot of other exotic strategies that are in here. So actually, even though there's -- it's a very, very diverse portfolio, and there's lots of line items. But holistically speaking, it's a big portfolio of first lien senior secured loans, by and large.

Got it. Okay. And I understand the strategic rationale, just a question a little bit on execution and integration. So there's going to be 3 portfolios -- well, essentially, yes, 3 portfolios you're managing here. You're transitioning a fair amount of assets. So it seems like a lot to manage. So why should investors believe your team's internal controls and then management of those controls will be executed and be sufficient in the strategy?

I mean, #1 is we would expect members of Garrison's investment team to join our platform. So I do think there's continuity of personnel, which I think will help the integration. I think #2 is we've done it before. And so you see the slide -- the reason we put that slide together on the Oak Hill transaction is obviously very, very quickly post close, we executed on some of the things we talked to shareholders about. And I think the plan here were to do something similar. And this is really a partnership. I mean, we've been working very, very closely with Joe and his team, and we continue to do that. And so I think we're not going to wait to close to start doing some of the things that we think is best for our combined shareholders. So obviously, we're in very, very close dialogue with Joe, his team, his investment team, his CFO and his team to make sure that this transition happens very smoothly. So our platform has made 3 public company acquisitions that have been successfully integrated over the last 12 months, and so we feel like we have our playbook relatively together.

Got it. You answered my follow-up, which was if any Garrison employees will be joining you. Last question is, do you expect to seek an SBIC license with the SBA? Or are you expecting to kind of return that?

Yes, I think it's unlikely that we'll be seeking a new SBIC license.

Garrison has already retired it's -- is in anticipation of the transaction.

Got it. Congrats on the announcement.

Our next question comes from Christopher Nolan with Ladenburg Thalmann.

Many of my questions were already asked. Ted, why the buybacks? Why not announce a tender? Just do it.

Well, so the other thing we're contemplating is a 10b-5 program, where it's not subject to blackouts. The issue is, to do a 10b-5, I think you have to not be in a blackout period. And obviously, we have been in blackout because of this transaction. So I mean, listen, I think it's on the table. I don't think it's -- listen, it's been a challenge for us to buy back stock for a whole bunch of reasons, given some of the rules that we're subject to. So I actually don't think we're adverse to do a tender or just a blind buyback program, which is available to us.

Got you. And just -- I mean, I guess, this is -- either Ted or Joe, Garrison uses some CLO financing and SBA financing aside from equity. And so most of its financing seems to be secured, at least, the debt financing. And looking at the fair value of its investments on an aggregate basis at 3/31, it looks like about 90% of its investments are currently secured, I mean, just encumbered. Is that a fair way to look at this? Because I'm trying to get an understanding where there's space to improve earnings momentum. It's a very difficult environment, lowering funding costs might be one of them, but I don't see it with how Garrison's funding is set up.

I think that it's not about as much about the funding itself as it is about taking 2 small public companies and having 1 larger public company to reduce all the duplicative public company costs, administrative costs throughout it. That really, I think, adds to the NII. And also, Garrison, as we knew we were in the sales process for the last several quarters, has been working more in liquid-type, lower-yielding assets that the Portman Ridge team will be able to rotate out of in time. We stopped originating new private credit when we decided to move forward with the strategic review.

Fair enough. And I guess, for Joe, can you give us an indication as to -- and I guess, for both of you guys, indication where you're seeing asset quality trends thus far since 3/31?

Yes, why don't I go first? We haven't seen -- I mean, kind of surprisingly, we haven't seen a discernible change in asset quality between March 31 and today. Now the big test is obviously going to be in the next 6 weeks as second quarter numbers come out. Because, obviously, people -- like when we went through the first quarter, obviously, the quarantine and shutdown of our economy didn't happen until towards the end of the quarter. So the real rubber will meet the road in the next 2 months. But as of now, we don't expect to see a wholesale change in nonaccruals or asset quality of our own portfolio. And having underwritten the Garrison portfolio in fine amounts of detail, we don't expect any material change from our perspective in the credit quality of the Garrison portfolio.

Okay. Great. Congratulations.

Thanks, Chris.

[Operator Instructions] Our next question comes from Paul Johnson with KBW.

This one's for Ted. In terms of the cash paid from Portman BDC to Garrison, where exactly -- where do you expect that, the $19 million or so, to be funded from? Is that going to come from repayments? Or are you going to be able to draw any amount of that down from your credit facility at all?

Yes. So we do have room to draw down on our credit facility, but I don't think the intention here is to lever up to do the deal. So we do have capacity under our liability structure. We have liquidity in our portfolio, which we could monetize. And we also have some visibility on some repayments. I would say repayment velocity has slowed. This won't surprise you. Repayment velocity should slow down materially over the last 3 months. So I don't think we're banking on a bunch of repayments to get this done. But also in the Garrison portfolio, there's also some repayments happening as well. So between the combined entities, we feel pretty good about -- we feel very, very comfortable about the $19.1 million.

Okay. And then on -- I just want to clarify this. I think Joe may have said something about retiring the SBIC licenses. First -- my first question is, can the SBIC licenses be transferred into the new combined BDC? Or does that debt need to be retired?

It has been retired. It has been turned back in. The transfer process is long and cumbersome. And when we started the strategic review, we've set a goal to retire them before any transaction would close. We were fortunate with some repayments that came through the entity to accelerate that process, and it was already been retired. Theoretically, we could have kept and tried to transfer it. It's very cumbersome process, and it would have slowed us all down.

Okay. Thanks for clarifying that. And then I guess I would ask, going forward or even leading up to the closing of the merger, is the plan to deleverage the BDC going up to or, post closing of the deal, down to a more reasonable range? I think you gave a 1.25 to 1.4x. Or is the plan to kind of allow repayments to do that over time?

Yes. I think it's going to be a combination of a lot of things. But again, there's obviously a lot of liquidity in the Garrison portfolio as with ours. So we do think we don't have to bank on repayments to get to those leverage levels. And obviously, we want to get to those leverage levels. We want to maximize value for shareholders, but also do want to get down -- but we do want to get down leverage levels over the next couple of quarters. So I think we can do it with a -- I think we can mostly do it with selling existing assets if we need to. And if we get a lot of repayments, then obviously, that's just a benefit for us.

Okay. And then lastly, I'd just ask you, at this point in the cycle, most BDCs are pretty inwardly focused on their current portfolio and managing liquidity and leverage on their balance sheets. At this point in the cycle, I mean, how are you comfortable with taking on someone else's assets essentially that you're probably going to be less familiar with? And also, I think, a sizable portfolio compared to the current Portman Ridge portfolio, what makes you comfortable with that?

We've obviously done a lot of work on the assets. And again, we're in a very uncertain environment. I mean, the thing I'd say is we feel very, very good about the net asset value. Obviously, we would not be doing this merger for our shareholders if we didn't believe it. So we feel very, very good of where it's marked today. I mean, the one thing is, there is a -- because this is such a NII-accretive transaction for us, there is a big buffer. So to the extent that we go through -- if either one of our portfolios experiences material credit losses between now and close, it requires a pretty substantial reduction in value for this not to be NII accretive. So again, feel great about their portfolio. Feel good about our portfolio. And if we do hit some air pocket in the market or the economy gets much worse, 2 things: one is it's a NAV-for-NAV deal, so it will be adjusted for through NAV; and number two is it would take an event that hasn't happened before effectively for this not to become NII accretive.

Our next question comes from Steven Martin with Slater.

Yes, I have a couple. Going back to your buyback, are -- will you be allowed to buy back shares during the pendency of this deal? And secondarily, you were talking about liquidity and use of funds, will you be able to buy back shares and still accomplish what you need to do in terms of closing the transaction for cash?

So 2 things. One is, now that this announcement is public, we obviously are cleansed. And so as long as we are not too close to quarter end, we obviously can buy back stocks. We're allowed to buy back stock between now and close, subject to blackout periods. And then #2 is, again, we feel like we have ample liquidity to close a transaction and don't think that's going to impact our ability to buy back stock.

Okay. With respect to the OHAI portfolio, and I know you made -- you very quickly made some changes. And where would you say you stand on monetizing and reinvesting the OHAI or transitioning the OHAI portfolio?

Yes. So the OHAI portfolio was, we thought, a very high-quality portfolio and very liquid. So the insinuation is not to say that it was not a good portfolio. As of right now, we've monetized a very large chunk of the legacy assets within Oak Hill. And if you remember, a lot of their assets were liquid second liens. So we've been kind of transitioning out of those into illiquid, proprietary directly originated first lens. So you've seen our -- you'll see, over time, our first lien percentage of our book continue to increase. And the Oak Hill portfolio has performed in line or better than kind of what we expected, all things considered.

Okay. And one last one, and I know I've talked with you guys about this before. As long as you're going to have to go for a shareholder vote, have you considered getting authorization to do a reverse split and get your share price up to a real price, for lack of a better term, and when that's marginable?

Yes. I mean, I think it's a great idea. I mean, I think it's something that we obviously need to talk to our Board about. But from my perspective, I think it makes a lot of sense for us to do a reverse stock split as part of this transaction. We feel like we're a very institutional company, and we feel like our stock should reflect that. And so I -- don't be surprised, as part of the closing, that we explore a reverse stock split. I mean, no decision has been made. We obviously have to go through our Board, but I think your suggestion is a good one.

And I'm currently showing no further questions at this time. I'd like to turn the call back over to Ted Goldthorpe for closing remarks.

Thank you. Well, thank you very much for your continued support, and thank you very much for dialing in today. We can't stress how excited we are about this transaction. And of course, Joe and his team, and myself and my partners, are available to speak to anybody about this transaction at any time. So thank you for dialing in, and we'll talk to you all soon.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.