XAI Octagon Floating Rate & Alternative Income Trust (XFLT) Q2 FY2025 Earnings Call Transcript & Summary

Good morning. Welcome to the XFLT Second Quarter Update Webinar. Thank you so much for joining us today. We're excited to get to the primary content, but I do have a few housekeeping items we need to cover first. Let me begin this morning with some brief introductions. I'm Kevin Davis with XA Investments. I head up sales and distribution for the firm. I'm happy to be joined today by Lauren Law from Octagon Credit, who's a Senior Portfolio Manager. She joined the firm in 2004 and oversees Octagon's structured credit investment strategies. Today, she'll be covering the macro environment for the leveraged loan in CLO markets. She'll address credit spreads in the space and the impact -- the potential impact of interest rate changes on the portfolio. We're also joined today by my colleague, Kim Flynn, who is the President of XA Investments. Kim will be walking us through the financial highlights from the quarter, fund performance as well as how XFLT compares with other CLO focused products. Before we get into the presentation, we do have a few important disclosures that we want to address. We will be talking about performance throughout the presentation. Certainly, past performance does not guarantee future results and current performance may be higher or lower than the performance that it quoted. We will also be discussing market outlook and the materials do contain forward-looking statements. Investors should not place undue reliance on forward-looking statements. We encourage you to review all of the general disclosures of the presentation. [Operator Instructions] We'll also open up for questions at the end of the prepared remarks. And if you don't get your questions answered, please feel free to contact me directly, and we will get those answers for you. Lastly, please check out our website, xainvestments.com, to find information on our fund, our firm and general educational materials about the asset class. So let's get started. Most of you likely on the call are already familiar with Octagon Credit and the great work they've been doing for a long time in this space. For those newer to the firm, they are an industry leader in both CLO issuance and CLO fund management. The firm was founded over 30 years ago, and they have over $32 billion in assets under management as of the end of June. XFLT was launched in 2017 and it was Octagon's first strategy to be publicly available in a registered fund format. I wanted to also provide some brief background on XA Investments. I recognize there's a lot on this slide. I just want to point to a few highlights. We are a Chicago-based boutique alternative asset manager with $924 million in managed assets as of 6/30. We were founded by XMS Capital in 2016. We have a suite of proprietary registered funds focused on alternative income. And for each of these funds, XA acts as the adviser, and we will work with best-in-class sub-advisers such as Octagon Credit. We have 2 listed closed-end funds as well as an interval fund, which is also sub-advised by Octagon and it's focused primarily on CLO debt. Lastly, in addition to our proprietary suite of funds, we have a robust consulting and research practice focused on the closed-end fund market, interval and -- interval and tender fund markets as well. We help outside firms build products. We bring them to market and publish research to support their efforts. We also make our research available on a subscription basis for interested parties that are looking to learn more about the space. Okay. Let's get into the presentation. We have some prepared questions and topics for the speakers, which we will address throughout the presentation. And again, just as a quick reminder, if you have questions for the speakers, please type them into the Q&A box at the bottom of the screen. So with that, let me turn the call over to Kim Flynn to begin with financial highlights. Kim, the floor is yours.

Thank you, Kevin. So we're coming to you, this is August 26 sort of toward the end of this summer. We are reporting to you on the webinar today for the second quarter for period ended 6/30, we like to align our webinars. The timing of this, we appreciate, is delayed beyond quarter end because we like to align the timing with our filings with the SEC. And so we sync it up with when we're filing our semiannual and annual report. If you guys have any questions on those filings or the financials, please do let us know. We used to cover those in greater depth on the webinar, but we found that listeners really want to hear from Octagon and hear about kind of the current market and Octagon's thoughts on where we're headed. So we've shifted our webinars as a result. So we spend less time if you will, talking about the prior period. But my job is to cover what went on in the second quarter, just to give you a sense. There was definitely a lot of pressure for CLO debt and CLO equity listed closed-end funds. All of XFLT's competitors felt this NAV pressure in the second quarter. It was sort of carryover from the Q1 tariff-related pressure. And as a result, we did make a change to distributions with the June 2 declaration. We did reduce our monthly distribution by 9.09% from $0.077 to $0.070. So that reflects that 9% decrease that I mentioned, and that was for the payable July 1. And we always have been direct with shareholders respect to the composition of the funds distributions. There have been returns of capital in the funds distributions, and we needed to realign. So we talked about the rationale for the distribution decrease to try to true that up. And we think it was important to be timely in that communication. We, at XA Investments, have a daily NAV on XFLT. And so we -- that transparency is important. And you'll see in XFLT that the price and the NAV of our fund tend to move ahead of the competitors, which have lagged either monthly or quarterly NAV distributions. And so in that sense, XFLT sometimes leads with some of these communications on where the portfolio is headed and where distributions are headed. The other news of -- subsequent to quarter end was that XFLT did receive an overall Morningstar 5-star rating. We also, for XFLT, received a 5-star rating for the 3-year and the 5-year period. Now XFLT is categorized by Morningstar in the broader loan category for listed closed-end funds, so it includes the CLO competitors and senior loan-focused funds and XFLT does compare favorably to its peers for that 3-year, 5-year and since inception period. So we did just learn about that from Morningstar in the last couple of weeks, and we're working to make that information on -- available on our website and our fact sheets, and we're working through that process now. The other thing that I'd like to talk about in terms of financial highlights is we get a lot of questions about where are the mark-to-market prices for CLO debt and equity today. And the current yields for CLO equity are still north of 20% coming in at about 23%. And the mark price, so you'll see here is $51.98. So we have seen pressure on CLO equity. We have seen those prices come down on CLO equity. And so that's where things stood as of the end of June. CLO debt current yields are about 10.51%, and those are being marked close to par at $99.58. The loan market is yielding about 7.86% and those are being marked about $97.5. And then as XFLT has usually a very, very small limited allocation to bonds coming in, those current yields are at 5.85% and bonds are being marked at about $88.24. Now these are marks reflective of quarter end at 6/30. Lauren's going to talk about the market and where we were at 6/30 and where we've come. So I'll let her address that. But that's it in terms of updating investors on financial highlights, Kevin. So I'll turn it back to you.

Thank you, Kim. So let's bring in Lauren Law with Octagon. And on the heels of some of Kim's recent comments, Lauren, let's begin with loan performance. So how did the loans performed in the second quarter, given some of the volatility that we saw in the markets during April, in particular.

Sure. Loans actually performed quite well in the second quarter, especially considering the volatility experienced by markets during April. As the implementation of tariffs was pushed out and levels were negotiated lower than original headlines, the loan market began to rebound. So the U.S. broadly syndicated leveraged loan market returned about 2.6% during the quarter and is up just under 3% through the first half. I think particularly noteworthy is that risk assets outperformed, particularly late in the second quarter with CCC loans outperforming their higher-rated counterparts. A few themes that drove risk assets higher, one was some large corporate M&A, especially in certain sectors where we saw some discounted loan assets actually being acquired and taken out of the market. And additionally, the high-yield market has been open and many lower rated borrowers from the loan market have taken the opportunity to term out some near-term loan maturities in the high-yield market and that's a relief for the loan market that does not have as much capacity to refinance CCC rated assets. So all in, especially considering how the quarter started, 2Q was a good quarter for the leveraged loan market.

That's good. So following that, can you speak about broader economic conditions that are impacting borrowers such as consumer sentiment, jobs and hiring data? What is Octagon's outlook?

Yes. I would say, overall, the U.S. economy remains supportive of levered credit and while growth expectations have slowed, they do remain steady. And the labor market also looks steady on the surface. We've got low unemployment, modest jobless claims, but rising continuing claims do hint at some cooling. There are pockets of stress in the lower-end consumer, and we have seen some pullback there. But overall, the environment remains supportive of levered credit. And while tariffs may weigh on growth and impact inflation and candidly, we've yet to see the full impact of that. Most of the U.S. broadly syndicated levered loan market is relatively insulated from the direct impact of tariffs. Our borrowers continue to see mid- to mid-high single-digit EBITDA growth and the prospects of lower rates should actually be supportive of credit conditions. So I think we are set up constructively for levered credit in the U.S.

So let's pivot to spreads. Can you speak about spreads in the loan and CLO markets and how they impact XFLT's portfolio earnings potential?

Yes. Spread compression has been a theme in the market really for the better part of the last 18 months. I feel like we've been talking about it in this forum and format and others as well. The volatility we saw in markets during March and April halted repricing activity and allowed spreads to stabilize. But unfortunately, that period of stabilization proved short-lived. And as the market recovered from the March, April drawdown, repricing activity reappeared. And just to kind of recap, over the last 18 months or so, the market has lost about 50 basis points of spread. Subsequent to quarter end, during the month of July, we actually saw repricings intensify and July was the most active month on record for repricing activity. So over 10% of the market repriced in July, and those borrowers saved about 50% -- 50 basis points of interest expense on average. And this impacts the trust in a couple of ways. First, XFLT obviously owns loans outright. Loans are 50% of the asset allocation. So we feel that spread compression directly on our portfolio of loans. And there's very little we can do to offset it without taking excess risk. Two, we don't see low equity in the trust as everyone is well aware. And CLO equity is an arbitrage product. Its returns are very simply the excess of loan spreads over liability costs. And as spreads contract on the loans the CLO owns, so do the cash flows earned by that CLO equity unless, of course, we can refinance the liabilities of our CLOs as well. And we can and we do, and we have been aggressively in the CLO market, refinancing CLO liabilities always occurs at a slower pace than loan spread compression. The trust has actively reset and refinanced many of its CLO equity positions. And again, refinancing CLO liabilities does mitigate the impact of spread compression, but it occurs at a lag. So we are working through that, and we'll continue to do so as we look forward.

Yes. So on the topic of fundamentals, Lauren, we saw a slight increase in loan downgrades in the second quarter. Can you speak to the health of borrowers? And how Octagon is viewing risk in the current market as it relates to XFLT.

Yes. You're correct. We have continued to see rating agency downgrades and downgrades to CCC in particular, which are impactful for CLOs have continued to plague the market in 2025. I think we've seen about $12 billion of new CCC downgrades this year. That being said, and I think it's interesting to point out, CLOs have actually reduced their holdings of CCC assets. And CLO managers have been able to do this in a couple of ways. That robust bid for risk that I mentioned earlier when talking about the market has led to higher trading prices of CCC assets. And that simply allowed managers to sell out of their CCC holdings with minimal losses. In addition, the refinancing of CCCs in adjacent markets, such as private credit and high yield has contributed to the reduction of CCC Holdings and CLOs and so while downgrades have continued, the quality of CLO collateral pools has improved. In addition, the percentage of the market that's trading at stressed levels have decreased. CLO holdings of those assets have decreased and CLO cushions to over-collateralization tests remain at robust levels, further pointing to the health of CLO structures. Just lastly and maybe even more simplistically, levered borrowers continue to exhibit strong growth and profitability, leverage levels and interest coverage levels have remained stable and are set to improve from here if we do, in fact, see a meaningful reduction in rates going forward.

So I want to stick with you, Lauren. And given the spread compression that you mentioned just before and some of the recent volatility that we've seen in the underlying loan market, could you discuss CLO performance and how Octagon is navigating the CLO market?

Sure. I'll break CLO performance out into the BB tranche and the equity. CLO BBs performed quite well in Q2. They returned in excess of 3.6% during the quarter, but CLO equity returns were under pressure, and we did see this in the fund's NAV. The pressure on CLO equity really during the first half of the year was driven by 2 key factors: spread compression in the underlying loan market, and then heightened concerns about credit risk during the tariff-driven volatility at the start of the second quarter. Again, we saw this in the Trust NAV as CLO equity valuations declined on these 2 factors. We remained active throughout Q2, taking advantage of opportunities created by the vol. Specifically, we added new CLO equity positions at higher yields and with longer reinvestment periods. We added BB exposure both in the primary and secondary market with higher return potential. And encouragingly, markets have been more constructive in Q3. And while spread compression in both loans and tranches has resumed, new CLO equity is again benefiting from a very active environment for refinancing and reset activity. And as a reminder, these types of transactions are the most effective tools we have to offset spread compression and enhance returns for the trust.

So one more for you, Lauren -- regarding interest rates. So as we know, the Fed has maintained rates so far in 2025 and with the Fed's meeting coming up here next month in September. Could you speak about the potential impact a change in rates might have on XFLT?

Sure. It is widely expected right now that the Fed will reduce rates at the September meeting. At least that's what the futures market is pointing to today. A reduction in base rates will impact the trust in a couple of ways. So one, broadly syndicated leverage loans and CLO BB tranches for that matter, and together those account for about 60% of the assets owned by the trust, they're floating rate assets. We earned SOFR, which is the base rate plus a spread on these holdings. And if short-term rates move lower, the interest income we earn on these positions will move lower as well. I think it's noteworthy to mention though that the trust credit facility is also floating rate. So the cost of the trust leverage will decrease as well, thus offsetting a portion of the decline in income. So we will not absorb it all outright. The second way in which the trust is impacted by lower interest rates is really more fundamental in nature. Fundamentally, lower rates are better for levered credits. A lot of the challenged capital structures that we see in the market today were levered in 2021, which was a year where companies were able to get a significant amount of leverage and that was a year when base rates were also much lower than where they are today. And so a lot of these companies have had a harder time meeting their higher-than-expected interest expense over the last several years. So lower rates would be helpful from a fundamental perspective, which is good for both the loans, the trust owns outright as well as our CLO equity positions. So good and bad.

Yes. Yes. So I want to bring Kim back in the conversation. Kim, if you would, could you discuss how XFLT is performing against some of the listed closed-end fund peers?

Sure. So we are uniquely positioned in the listed closed-end fund market. There's not another listed closed-end fund quite like XFLT in terms of the asset mix. And you see here, as of 6/30, the fund has about 46% invested in first lien senior loans and then about 38% in CLO equity, 12.3% in CLO debt. And so this asset mix has been fairly consistent since the fund's inception. And we believe that it enhances risk-adjusted returns over time. As opposed to having a portfolio that was just senior loans, there are a lot of peers in the listed closed-end fund category that simply invest in first lien, second lien loans. And there's also a smaller group of peer funds, which we've talked about in the past, which are CLO focused and those CLO focused listed funds tend to invest 80% plus in CLO equity. And CLO equity is higher yielding, but there's also more volatility associated with investments in CLO equity to the extent that it's a majority or 80% plus of the portfolio. So for us, it's always been less than a 40% or 45% allocation and if we think about the peer group for XFLT, the 3-year and the 5-year performance figures and what Octagon has been able to do over time as represented by the comparison of the 3-year and the 5-year relative to the benchmark, which is the Morningstar LSTA Leveraged Loan 100 Index, but also the 3-year and 5-year compared to the peer group, Octagon is outperforming the benchmark index, they're outperforming their peer group and Morningstar picks this up in the research that they do on the fund over the 3-year and the 5-year period. Now the 1-year period, the fund is not beating the LSTA benchmark. And it's in line. Its performance is in line with peers. And if you just look at that -- when I'm talking about performance, I'm talking about NAV performance, because that's what Octagon is responsible for NAV. Now we understand that shareholders also care about price performance. So let's talk about the NAV experience for investors in the fund year-to-date. So for the period from January 1 to June 30, the peer group and I'm talking now about the CLO focused funds to that smaller group. We've seen NAV declines across the peer group anywhere in the range of about 15% to 20% in NAV declines. Now the price of most of the peers that are CLO focused have followed the NAV. We did see a stabilization toward the end of May into June in terms of where NAVs slightly recovered. The peer group, Kevin, most of the funds that we compare ourselves are now trading at discounts. This is a group of funds, the CLO equity-focused listed closed-end funds on average, tend to trade at premiums in the secondary marketplace. But at this present point in time, these funds reflecting some of these pressures are trading at anywhere from 2% to 8% discounts as of last night. And the one thing I will note about the peer group, Kevin, is we have seen a couple of direct listings in the listed closed-end fund market in addition to 2 direct listings and those are CLO equity-focused funds that have come to market, there's a third listed closed-end fund that converted to a CLO equity. So I think the CLO debt and equity focused funds continue to be very popular for income-oriented investors. There's now more supply. There's 3 new listed closed-end funds that we've added to this peer group just in the last year. And there's also a growing number of CLO focused interval funds in the marketplace. We've talked on prior quarters just about the growth and popularity of the CLO debt tranche ETFs. So I think that while there are more products available not just in the listed closed-end fund space but also interval and ETF, the awareness is growing of the benefit of these types of investments. And so there is definitely an expansion in who XFLT is compared against.

Yes, certainly. So to follow that, Kim, so you talked a little bit about XFLT's unique positioning in the market. And we have seen an increase in popularity in CLO ETFs, so can you describe some of the structural advantages that the trust has as a closed-end fund compared to other CLO ETFs?

Yes, absolutely. I think that sometimes, research reporters or authors, they get this -- they make apples to oranges comparisons when you're comparing the ETFs with a listed closed-end fund. And so I think it creates some confusion and that's what we're hoping to clarify today, Kevin, I think, is that the benefit of a listed closed-end fund structure for CLO debt and equity, especially lower rated tranches of CLO debt is that CLO debt and CLO equity can become episodically illiquid. And you need to have the right product structure for these types of assets. You want to house them appropriately because in the ETF marketplace, there are inflows and outflows every day. And so there are situations where the CLO debt ETFs, they may be forced sellers, and you don't have those same pressures in a listed closed-end fund. There's also -- so right now, we only see CLO debt ETFs. Many of the larger CLO debt ETFs are highly rated debt ETFs. But when you're comparing like a BB debt ETF, I think you should be concerned. And we did see bid-ask spreads on those lower rated tranche CLO debt ETFs widen out. And so there's a concern about the liquidity or episodic illiquidity and whether or not that's the right structure. It's probably too soon to tell. We only have a short track record for the CLO debt ETFs. Now with listed closed-end funds, there's a number of funds that now have 10-year-plus track records and so you can look at like how have they performed in different market cycles like when the market faced pressure in 2018 or in 2020. And we like the listed closed-end fund structure for the way Octagon manages money, XFLT, unlike its listed closed-end fund peers, we're not charging performance fees. As I mentioned before, we do have a daily NAV, and we think that transparency is helpful. We also have independent third-party valuation. We're not marking the securities ourselves. And so this is what contrasts us from some of the other competitors. Now listed closed-end funds do use leverage and these assets because they're floating rate tend to lend themselves to the use of leverage and prudently managed, the leverage can add value. You don't tend to see leverage in CLO debt ETFs. But the reason I bring up leverage here, not just because there's leverage risk associated with that, I think it also can distort the expense ratio because obviously, if you've got leverage costs, those show up as costs to common shareholders. What's not quantified in that is what's the benefit of the leverage because you see it in the income or you see it in the return. But when you look at an expense table, you're like, oh, these funds -- these listed closed-end funds, they look expensive relative to an ETF that's not using leverage. This is just the way things are disclosed and so it's important to point out that there is not only a risk of leverage or cost of leverage, but there's also differences in terms of how you might compare an unlevered fund to a levered fund. And obviously, as rates have moved higher, the cost of leverage has moved higher. It's not that these funds -- their management fees typically aren't changing. Their operating expenses aren't changing. It's typically the leverage cost that have gone up over the last couple of years. So we'd just like to point that out. These will continue to be apples and oranges. And so when people make comparisons between product structures, it's just important to be sort of fair in how you compare the benefits and the risks of these.

Yes. Thank you. That's incredibly helpful. So Lauren, I'd like to get back to you, can you provide some color on the performance of the underlying sectors and industries of the loan portfolio? Are there any highlights or lowlights?

Sure. As I mentioned earlier, the broadly syndicated leveraged loan market has been performing well from a fundamental perspective. There are, however, pockets of stress, certain sectors that have been under more pressure. And I can provide a couple of examples. The chemical sector has been under pressure for several quarters at this point. And in -- the second quarter continued to be challenged by soft demand, choppy order patterns due to tariff uncertainty and an imbalance of supply and demand for certain chemical substrates. So we try to position around these facts within the trust opportunistically, but defensively. So our chemical exposure has a focus on specialty chemical companies with higher margins and capital structures with robust liquidity and the proper amounts of leverage. Just another good example of the sector under pressure would be the building products sector. Building products companies have been plagued by a slowdown in demand. This has been driven by weakness in new housing starts as well as reduced repair and remodel activity, which is really correlated to existing home turnover. In addition, tariff-related uncertainty and inflation has weighed on margins within the sector as certain input costs have moved higher. The trust building products exposure is weighted towards nondiscretionary end markets such as roofing and HVAC repair as well as the building products distribution subsegment. The distribution landscape is undergoing consolidation, which is benefiting many of the levered capital structures within this space. I highlight these 2 sectors as an example of some of the underperforming and credit challenge sectors in the market. However, I'd like to mention that these challenges can be an opportunity for thoughtful credit selection and do present opportunities at the right time. So we're trying to move our loan exposure to capitalize on some opportunities for improvement in the future.

So lastly, let's go to Kim before we address some of the questions that were previously submitted. [Operator Instructions] So again, XFLT's leverage ratio has come down in the second quarter. Can you discuss how management views leverage on XFLT and how that leverage strategy is deployed?

Sure. So you'll see that our current leverage as of June 30 stands at about 37.79%. Since then, it's come down a smidge, so it's still in the low sort of 37%. We're typically targeting leverage for this fund close to about 40%. So -- but while it's a small reduction, I think it reflects some of the volatility that Lauren has spoken about in the market that we've experienced. We -- this target leverage ratio, we've been below 40% now for much of this year. And I think that we view leverage as an important part of income-producing strategy like XFLT, and we're very mindful of how we diversify the sources of leverage. XFLT is unique in the sense that not only do we have a credit facility, it's uncommon that our peers would have a credit facility given their CLO equity exposure. But because so much of the portfolio is invested in senior loans and CLO debt, we're able to get a very cost-effective in a floating rate credit facility. In addition, we use other forms of preferreds to diversify the sources of leverage, including retail preferreds and convertible preferreds. And we're always -- this is something that in collaboration with Octagon, XAI and Octagon are looking at dynamically and we're trying to get ahead of where the fund needs to be. XFLT grew significantly in the calendar year 2024. And so it allowed us to be strategic on the leverage side. And so we're going to be mindful of -- as Lauren mentioned, the cost of leverage is going to be coming down on the credit facility, which is really helpful. A lot of time, like our retail preferreds are fixed rate 6.50% retail preferreds. Now in a rising rate environment, that actually was very attractive relative to other fixed rate retail preferreds, which were in the high 7s or low 8s. So like I said, so with a floating rate fund, you've got a dynamically managed leverage. Right now, we're slightly below target, and that's by design, I think, and it's reflective of the comments that Lauren has shared with you today.

Thank you, Kim. So we did have a couple of questions that were sent in prior to the webinar. Kim, I think I'll address this first one to you. Question is just as XFLT issues new shares when the fund trades at a premium to NAV, would the fund consider repurchasing shares when the fund trades at a meaningful discount, which is greater than 5% as this would be accretive to NAV.

Yes. So took me a moment, sorry, I come off from you. Yes, we do get this question from time to time. And the topic of share repurchase is something that I think the biggest beneficial impact of doing a share repurchase actually comes at the point of announcement. And while share repurchases are accretive, they are temporary, and they're not a substitute for the natural demand. And the analysis -- I worked at Nuveen Investments for a very long time. And the analysis that was done was because the repurchases are viewed as temporary, they can be sort of limited in the benefit that they have for shareholders. And so what's actually more beneficial, I think what Nuveen found and the philosophy that we take here at XA Investments is to support the secondary market to talk proactively about XFLT and our other listed closed-end funds to do webinars like this, the quarterly webinars with portfolio managers are not typical in the listed closed-end fund market. Part of the -- we want to address shareholder questions, but we also want to attract a broader audience to the fund. So that's what we continue to do that work, unlike competitor closed-end fund sponsors. And I think that share repurchases are clearly an option, but of -- they have limited sort of use, and they do ultimately shrink a fund and can impact the expense ratio of the fund. And so we prefer to invest sort of the time and the effort in terms of generating natural demand. And that has to come from advisers and investors believe in Octagon's capabilities who believe in XFLT. And so that's what we're working to do, Kevin.

Thanks, Kim. So we did have one other question here. It says XFLT has been returning capital to investors. Can you speak to how XFLT manages distributions?

Sure. Absolutely. So this is what I had mentioned about the distribution cut announcement that we made on June 2. And we -- the goal is to distribute income. The fund may have return of capital from period to period. Part of the reason for that, and we've seen it in XFLT in the last year is that the distribution, while there is a preference for stable distributions, we don't want to be returning capital for long periods of time, and we do have to true up where the distributions are in line with the earnings of the fund. And so we do have a preference for stable distributions because shareholders want to see that, but they also want to see alignment between the income production and the distributions that we're paying out. Now it can be painful to make the distribution announcement that we did on June 2. We were ahead of our competitor peers but only by about 4 to 6 weeks. The rest of the market followed shortly thereafter because I think they, too, appreciate that you can't have a disconnect here and that you do need to have the distributions line up. And so that's with the change that was made, this followed a distribution cut that we made in December of last year. So we've tried to be proactive in terms of our distribution policy in terms of how we manage XFLT over time, Kevin.

Well, thank you, Kim. So -- and thank you both, that's the end of the questions that we have. So thank you both so much for your thoughts, for your insights today. I will remind everyone that the webinar will be available via replay on our website. And as I mentioned at the outset, there's a wealth of information available on our site in the Knowledge Bank section. Please reach out if you have any additional needs or questions, and we certainly appreciate your time today. Thank you.