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Fifth Street Finance's CEO Discusses F1Q12 Results - Earnings Call Transcript

Stocks in this article: FSC

So we are closely monitoring the actions of our lending partners, trends in the market, and in years past, and showing we have the capacity and deal flow to predict strategically among the changing capital flow cycles. We have ongoing flexibility to capitalize on what should be a building year for new deals, thanks to an equity raise of just over $100 million earlier this year, executed at a net price above book value.

Rather than ask for permission from our shareholders in sell below book value, as many of our peers have done, we issued stock above book value despite the volatile market climate. It is our sustained belief that selling stock below book value is rarely justified.

Our initial outlook for 2012 is not substantially changed, as we consolidate our Sumitomo facility, we are actively steering the portfolio towards a range of 70% to 80% first lien loans. At the end of year, we are targeting leverage of 0.6 times on average, excluding our 10-year effects on non-recourse SBA debentures.

For the quarter, we delivered $0.29 per share of NII, which is consistent with our quarterly dividend rate. We anticipate that repayments will continues as the portfolio matures; this should favorably impact on our earnings, thanks to the recognition of exit fees, prepayment penalties and on occasion, equity realizations, not to mention uptick in up-front fees.

It is our expectation, the origination volume through the year will continue in the range of $100 million to $300 million per quarter with deals flow increasing as the year progresses. Given that the previously mentioned tax changes for the calendar quarter with seven new Fifth Street origination record.

Compared to last quarter, the pace of activity thus far for the quarter ending June 30 has improved. Net investment income of $0.29 per share for us in the second fiscal quarter represents a strong quarter that outperforms the consensus.

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