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Golub Capital's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Let’s first look at the total return swap, net realized and unrealized gains return swap were plus $2.1 million, and that’s comprising two pieces, a $1.5 of unrealized gains that was primarily result of rally in broadly syndicated loan prices of the loans that were referenced in the total return swap. And in addition to the $1.5 million, there was also an increase in net interest accrued on total return swap of $600,000 for the quarter. So total of $2.1 million consisting of two pieces.

Now let’s talk about the second component of net realized and unrealized which is huge investments in loans and equity securities. Here we have a bad guy and that is $1.8 million. Loss of $1.8 million that was comprised of $2.1 million of realized losses on the sale of a non-earning asset in that, $2.5 million on unrealized depreciation because we actually sold that position for more than carrying value. And we also had $2.2 million of unrealized depreciation, principally the result of a write-down on one new non-earning asset.

The final piece of net realized and unrealized relates to our futures hedge. If you recall last quarter, I mentioned that we in connection with drawing down debentures under the SBIC program, we currently have temporary borrowing under that program, it will get fixed in the SBA’s next ruling date is in March. So to eliminate interest rate risk on those temporary securities, we entered into a futures hedge. And the futures hedge with a quarter ended December 31 at a $500,000 mark-to-market loss on it. That was comprised of $400,000 of losses on the settlement of one futures contract and unrealized loss of a $100,000 on a new contract that we rolled into at year-end.

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