Crescent Capital BDC (CCAP) Q3 2026 Earnings Call Transcript

DATE

Tuesday, Nov. 10, 2026

CALL PARTICIPANTS

• Chief Executive Officer – Jason Breaux
• Chief Financial Officer – Gerhard Lombard
• President – Henry Chung

TAKEAWAYS

• Net Investment Income — $0.37 per share, representing an increase from $0.36 per share in the prior quarter and covering the $0.34 per share regular dividend.
• Net Asset Value — $17.72 per share, reflecting a decrease from $17.82 per share in the second quarter primarily due to spread widening and realized losses.
• Total Investment Income — $36.9 million, compared to $36.3 million in the prior quarter, driven by higher recurring interest income from benchmark rate increases.
• Share Repurchase Authorization — $50 million, established by the Board to allow for open-market purchases at prices below net asset value.
• Sun Life Share Purchase Program — $25 million, committed by the parent entity to acquire common stock at thresholds below net asset value to strengthen alignment with shareholders.
• Joint Venture Equity Investment — $30 million, representing the company’s expected equity contribution to a new unconsolidated vehicle alongside a $30 million partner contribution.
• Joint Venture Target Returns — Low to mid-teens ROE, intended to be accretive to the gross portfolio yield through the use of an asset-based leverage facility.
• Total Investments — $1,555.2 million at fair value, spanning 190 portfolio companies with an average investment size of 0.5%.
• Senior First Lien Exposure — 91% of the portfolio, maintaining a focus on high-priority capital structure positions for capital preservation.
• Portfolio Risk Ratings — 84% of investments rated one or two, indicating performance at or above expectations despite a slight increase in the watch list.
• Weighted Average Interest Coverage — 2.3x, representing an improvement in portfolio company performance from the prior quarter.
• Watch List Concentration — 16% of the portfolio at fair value, an increase from 15% due to three-rated investments rising to 13%.
• Nonaccrual Debt Investments — 4.7% at cost, representing a decrease from 4.8% following the sale of a legacy First Eagle investment.
• Gross Investment Deployment — $23.5 million, focused primarily on follow-on revolver and delayed draw fundings within existing portfolio companies.
• Total Exits and Repayments — $38.7 million, resulting in net realizations of $15.2 million for the quarter.
• Net Debt-to-Equity Ratio — 1.36x, down from 1.37x in the prior quarter but remaining above the long-term target range.
• Total Liquidity — $246.7 million, comprised of $36.2 million in cash and cash equivalents and $210.5 million in undrawn credit facility capacity.
• Add-on Financing Activity — 50% of deal count and 25% of dollars committed over the last 12 months, providing activity during a period of subdued buyout volume.
• GreenOak Platform Assets — $326 billion in assets under management, reflecting the unification of Crescent with other Sun Life investment affiliates.
• Floating Rate Debt Investments — 98.2%, maintaining high sensitivity to fluctuations in benchmark interest rates.
• Unitranche First Lien Exposure — 65.3% of the portfolio, representing the largest single asset class at a fair value of $1,015.8 million.

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RISKS

• Chung stated, “Our watch list increased modestly from 15% to 16% of the portfolio at fair value, driven by 3-rated investments increasing from 12% to 13%,” citing company-specific challenges in certain holdings.
• Breaux stated, “Sponsor-backed M&A remained subdued during the third quarter. Direct lending volumes supporting leveraged buyouts was down roughly 21% from the prior quarter and 60% from the third quarter of last year,” reflecting limited new platform financing opportunities.
• Chung warned that rotation of assets, particularly those on the watch list, will likely be longer-term exercises due to muted portfolio turnover velocity and management’s focus on maximizing recovery outcomes.

SUMMARY

Management reported that Crescent Capital BDC, Inc. (CCAP +12.34%) achieved stable net asset value while introducing multiple capital allocation initiatives focused on deleveraging and addressing its stock price discount. The company announced a $50 million share repurchase program and a separate $25 million purchase commitment from parent company Sun Life. To facilitate these actions and return to target leverage ranges, the company is forming a new $150 million joint venture to be seeded with performing first lien assets. Management indicated that despite subdued buyout volume in the broader market, the company maintained improved interest coverage across its diversified portfolio of 190 companies.

• Management stated that the new joint venture is expected to be completed during the fourth quarter of 2026 and will be capitalized with an asset-based lending facility.
• CEO Breaux indicated that the transition to the GreenOak brand will take place over the next 12 months, though the company’s investment committees and personnel will remain unchanged.
• Chung attributed the watch list increase to company-specific challenges as opposed to broader credit degradation across the portfolio.
• The company intends to execute share repurchases through a broker under a Rule 10b5-1 trading plan to capture the discount between market price and net asset value.
• President Chung observed that sponsors are increasingly requesting duration extensions for investments to execute equity theses as an alternative to selling at current valuations.
• Management indicated that the $1.5 billion in capital committed across the broader Crescent platform during the quarter supports the ability to remain selective on credit quality and pricing.

INDUSTRY GLOSSARY

• Business Development Company (BDC): A closed-end investment company that invests in small and mid-sized businesses and must distribute at least 90% of its taxable income to shareholders.
• Net Asset Value (NAV): The total value of an entity’s assets minus its total liabilities, representing the book value of the company.
• First Lien: Debt that has the highest priority claim on a borrower’s assets and must be paid before other creditors in the event of liquidation.
• Unitranche: A single loan structure that combines elements of senior and subordinated debt into a single instrument.
• Nonaccrual: A status for loans where the borrower is no longer making regular interest or principal payments, leading the lender to stop recognizing interest income.
• Original Issue Discount (OID): The discount from par value at which a debt instrument is issued, representing a form of interest.
• Net Investment Income (NII): The income earned by an investment company from interest and dividends after deducting operating expenses.
• Return on Equity (ROE): A measure of financial performance calculated by dividing net income by shareholders’ equity.

Full Conference Call Transcript

Operator: Good morning, and welcome to Crescent Capital BDC, Inc.’s Third Quarter ended September 30, 2026, Earnings Conference Call. Please note that Crescent Capital BDC, Inc. may be referred to as CCAP, Crescent BDC or the company throughout the call. I’ll start with some important reminders. Comments made over the course of this conference call and webcast may contain forward-looking statements and are subject to risks and uncertainties. The company’s actual results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in its SEC filings. The company assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not a guarantee of future results.

I’ll now turn the call over to Dan McMahon.

Daniel McMahon: Thank you. Yesterday after the market closed, the company issued its earnings press release for the third quarter ended September 30, 2026, and posted a presentation to the Investor Relations section of its website at www.crescentbdc.com. The presentation should be reviewed in conjunction with the company’s Form 10-Q filed yesterday with the SEC. As a reminder, this call is being recorded for replay purposes. Speaking on today’s call will be CCAP’s Chief Executive Officer, Jason Breaux; Chief Financial Officer, Gerhard Lombard; and President, Henry Chung. With that, I’d now like to turn it over to Jason.

Jason Breaux: Thank you, Dan, and good morning, everyone. I’ll begin by reviewing our third quarter results, touch on the current market environment and then outline our key priorities and some of the actions we’re announcing today. For the third quarter, we reported net investment income of $0.37 per share, an increase from $0.36 per share in the prior quarter. Our earnings exceeded our $0.34 base dividend, and we also paid the second of our 3 previously announced special dividends of $0.03 per share during the quarter. Our net asset value remained largely stable at $17.72 per share as of September 30 compared with $17.82 at the end of the prior quarter. No new investments were placed on nonaccrual during the quarter.

Turning to the market. Sponsor-backed M&A remained subdued during the third quarter. Direct lending volumes supporting leveraged buyouts was down roughly 21% from the prior quarter and 60% from the third quarter of last year. While limited new buyout activity has moderated new platform financing opportunities and delayed some realizations, demand continues through add-on acquisitions, refinancings and other needs within existing sponsored portfolios. Add-on financings remain an important source of activity for Crescent. Our private credit platform includes more than 250 lower middle market portfolio companies, providing a foundation for originations beyond new LBO transactions. Over the last 12 months, add-on financings accounted for approximately 50% of Crescent’s total deal count and 25% of total dollars committed.

Competition for attractive credit remains even as portions of the nontraded BDC market continue to face redemption pressure. In this environment, our long-standing sponsor relationships and familiarity with existing borrowers allow us to remain selective on credit quality, structure and pricing. Despite subdued new activity, the Crescent private credit platform remained active, committing approximately $1.5 billion of capital during the third quarter. As we emphasized last quarter, CCAP remains an important part of Crescent’s private credit platform. The permanent fee reductions implemented earlier this year demonstrate Crescent’s economic commitment to those objectives. And today, we’re building on that commitment with several actions designed to drive NAV accretion by capturing the current discount in our stock.

First, our Board has authorized a $50 million share repurchase program for the purpose of repurchasing shares of our common stock in the open market at certain thresholds below our net asset value per share in accordance with applicable law. We believe our current share price materially undervalues CCAP, making repurchases at substantial discounts to NAV a compelling use of available capital. In addition to the CCAP repurchase program, Crescent’s parent entity, Sun Life, will purchase up to an additional $25 million of shares in the open market at certain thresholds below our net asset value per share in accordance with applicable law.

This commitment underscores Sun Life’s confidence in CCAP’s long-term value and further strengthens the alignment of Sun Life, Crescent and the leadership team with CCAP’s shareholders. The timing, manner, price and amount of any share repurchases under the CCAP repurchase program and the Sun Life purchase program will be determined by the company and Sun Life, respectively, in their respective discretion, based upon the evaluation of economic and market conditions, stock price, applicable legal and regulatory requirements and other factors. In order to accelerate share repurchase activity, we expect to announce the formation of an unconsolidated joint venture. The joint venture is expected to be seeded with approximately $150 million of performing first lien assets from CCAP.

CCAP expects to commit $30 million of equity to the joint venture, along with a $30 million expected equity contribution from the joint venture equity partner. In addition to the equity contributions, the joint venture is expected to be capitalized with an ABL facility. We are targeting a low to mid-teens ROE at the joint venture, which we expect to be accretive to our gross yield. The joint venture is expected to be completed during the fourth quarter of 2026. CCAP expects to use the proceeds from the JV to reduce leverage to our target range and fund share repurchases. Together, we believe these actions support our deleveraging objectives and create opportunities for per share accretion.

Finally, I’d like to highlight a recent announcement regarding Crescent’s broader platform. On October 26, Sun Life announced GreenOak, a unified global brand, bringing together Crescent, BGO, InfraRed Capital Partners, SLC Fixed Income and Advisors Asset Management. The platform represents approximately $326 billion in assets under management across credit, real estate and infrastructure, supported by a global distribution network. The brand transition will take place over the next 12 months. On the fixed income side, GreenOak brings together Crescent’s alternative credit expertise and SLC Fixed Income’s investment-grade public and private credit capabilities, providing a broader range of investment solutions and opportunities for collaboration. For CCAP, our investment processes, investment committees and investment personnel remain unchanged.

We will continue to manage the portfolio with the same disciplined underwriting approach and focus on income generation and capital preservation, supported by the resources and reach of the broader GreenOak platform. With that, I’ll turn the call over to Gerhard to review our third quarter financial results in more detail. Gerhard?

Gerhard Lombard: Thanks, Jason, and hello, everyone. Net investment income was $0.37 per share for the third quarter, up from $0.36 in the second quarter and covered our $0.34 per share regular dividend. Compared to the second quarter, total investment income increased by approximately $0.6 million to $36.9 million. Interest income increased by approximately $0.9 million to $35.6 million. This was offset by lower dividend income, which declined to approximately $0.9 million from $1.2 million, primarily reflecting lower distributions from the legacy Logan JV as the vehicle continues to run off and deleverage, as discussed in prior quarters.

Total expenses and excise taxes remained stable at $23.2 million with modestly higher financing costs, offset by lower income and excise taxes and professional fees. Turning to the balance sheet. Our investment portfolio totaled approximately $1.6 billion at fair value as of September 30. Total net assets were $653 million or $17.72 per share. On Slide 9, we provide a graphical analysis of the quarter-over-quarter change in NAV. We recorded $0.06 per share of net realized losses, largely offset by reversals of previously recognized unrealized losses on those investments. Net unrealized depreciation, including these reversals, totaled $0.04 per share. Valuation movements reflected slight spread widening, while company-specific credit movements were broadly neutral.

Overall, portfolio valuations were generally stable with NAV per share changing from $17.82 to $17.72. Let’s shift to our capitalization and liquidity. I’m on Slide 18. Our debt-to-equity ratio remained 1.42x or 1.36x net of balance sheet cash compared with 1.37x net in the prior quarter. Gross debt outstanding declined to approximately $924 million from $935 million. And cash, cash equivalents and restricted cash totaled approximately $36 million at quarter end. While leverage ended the quarter above our long-term target range, we continue to maintain sufficient liquidity with approximately $247 million of cash and available borrowing capacity as of quarter end.

We expect that pending portfolio realizations and the previously discussed joint venture will bring net leverage to within our target range by year-end. Our Board declared a fourth quarter dividend of $0.34 per share. We will also pay the third and final previously announced special dividend of $0.03 per share on December 15. Our supplemental dividend framework remains in effect, although no supplemental dividend is payable for the quarter under that framework. And with that, I’ll turn it over to Henry to discuss the portfolio.

Henry Chung: Thanks, Gerhard. We ended the quarter with approximately $1.6 billion of investments at fair value across 190 portfolio companies. The portfolio remained highly diversified with an average investment size of approximately 0.5% and 91% invested in senior first lien loans. The broader portfolio continues to perform generally in line with our underwriting expectations, with the majority of portfolio companies demonstrating resilient operating performance and year-over-year EBITDA growth. Approximately 84% of investments remained rated 1 or 2, indicating performance at or above expectations. Our weighted average portfolio risk rating remained at 2.1 and weighted average interest coverage improved to 2.3x. Turning to Slide 16.

Our watch list increased modestly from 15% to 16% of the portfolio at fair value, driven by 3-rated investments increasing from 12% to 13%. Investments rated 4 and 5 declined from approximately 3% to 2.4%. We had no new nonaccruals during the quarter. Nonaccruals declined from 4.8% to 4.7% of debt investments at cost, reflecting the sale of a small legacy First Eagle investment previously on nonaccrual. Measured against the total investment portfolio at cost, nonaccruals were 4.4%. Moving to investment activity, with leverage currently above our target range, our new investment activity was limited during the third quarter in order to prioritize deleveraging.

Gross deployment totaled $24 million, the majority of which consisted of follow-on investments in existing portfolio companies. Aggregate exits, sales and repayments totaled approximately $39 million, resulting in net realizations of approximately $15 million for the quarter. With that, I’ll turn it back to Jason for closing remarks.

Jason Breaux: Thank you, Henry. Before we open the call for questions, I’d like to leave you with a few closing thoughts. Our primary focus remains the rotation of our watch list. The work remains ongoing and active portfolio management remains a critical component of driving strong recovery outcomes over the long term. Crescent’s alignment with our shareholders has been a critical component of how we manage CCAP. Today’s $50 million share repurchase authorization and separate $25 million investment by Sun Life build on the permanent fee reductions implemented earlier this year. These initiatives demonstrate the continued commitment of Crescent and Sun Life to CCAP. Finally, we look forward to the opportunities for greater collaboration across the GreenOak platform.

A unified market approach, combined with the continuity of Crescent’s investment teams and disciplined investment processes, positions us to build on more than 3 decades of private credit experience for the benefit of CCAP’s shareholders. On behalf of the entire Crescent team, I’d like to thank our shareholders for their continued support and confidence. Operator, we’d now be happy to take your questions.

Operator: [Operator Instructions] Your first question comes from the line of Christopher Nolan with Ladenburg Thalmann.

Christopher Nolan: For the JV announcement, are you guys looking to this to be the first of multiple JVs down the line?

Henry Chung: Chris, this is Henry speaking. As far as the JV goes, we’ve done a JV in the past. We had one in place in 2019, which we fully realized and wound down in the ’22 time frame. This particular JV is in line with our stated objectives here of deleveraging as well as funding share repurchases. And as we sit here today, we are not contemplating any further JVs in the near term.

Christopher Nolan: Okay. And then the comments were that the JV is expected to generate low to mid-teen returns. I presume that’s return to the JV equity holders. So we should be looking for mid-teen potentially returns from this investment or from the scheduled investments?

Henry Chung: That’s correct. And as noted in prepared remarks, the JV will be capitalized both with equity capital from CCAP and the JV partner as well as asset-based leverage facility at the JV level. The combination of the leverage as well as the underlying assets here will deliver that mid-teens ROE that we referenced.

Christopher Nolan: And if I may, just one last one. Your average debt portfolio yields are 9.6%, which tends to be on the low end of the spectrum for BDCs. Is the JV part of a strategy to raise that average portfolio yield?

Jason Breaux: The strategy around the JV is really focused on our core near-term strategic initiatives around deleveraging the balance sheet at CCAP to within our target leverage range as well as creating excess capacity for share repurchases. So I would say that while it is accretive to the gross yield of the portfolio as a whole, the rationale for the JV and the formation of the JV is really focused on those 2 former strategic goals of ours.

Operator: Your next question comes from the line of Finian O’Shea with Wells Fargo.

Finian O’Shea: I’ll stick with the JV. Can you give some color on the sort of quantum and nature of assets that you’ll drop down in the beginning and the sort of mix of old and new origination that are planned to ramp it?

Henry Chung: Fin, this is Henry. I could take that. To start, the JV will be capitalized with approximately $150 million to establish the seed portfolio. It’s going to be a diversified seed portfolio, all first lien that takes into account the composition of both the JV and the remaining CCAP portfolio. The — in terms of the future capitalization of the JV, we expect the sizing to be around $150 million to $200 million in total size going forward here. So we don’t expect the size to meaningfully grow as far as the asset profile of the JV goes. It’s going to be consistent with the broader CCAP portfolio focusing on first lien investments.

Finian O’Shea: So should we expect the buyback to be rather swiftly executed?

Jason Breaux: Fin, it’s Jason. I think that’s — part of the objective here is to accelerate the ability to generate liquidity and deleveraging for CCAP so that we can both get leverage into our target range as well as start to capture some of the discount on the stock price through buybacks.

Henry Chung: Just to add to that, the buybacks are going to be executed through a broker under our Rule 10b5-1 plan. So the pace of the buyback is going to be subject to the plan’s trading parameters as well as the applicable regulatory requirements.

Finian O’Shea: Okay. That’s helpful. And one more. Jason, you gave some color on the GreenOak reorg rebranding and flagged that as a line of support to the BDC. Can you talk about what changes, what improves for the CCAP BDC under GreenOak?

Jason Breaux: Yes, Fin, thanks for the question. The GreenOak announcement is really bringing together a variety of capabilities that sit within Sun Life across credit, real estate, infrastructure and on the credit side, both investment grade as well as below investment grade. I think it’s going to be able — it’s going to enable us to really represent ourselves as more of a unified brand and go-to-market with more solutions for our clients and sponsors. But as far as CCAP goes specifically, I don’t anticipate any change to the investment strategy at CCAP. CCAP is a direct lending focused strategy, servicing the lower and core middle market for sponsor-backed companies and expect that to continue to be the case.

Operator: Your next question comes from the line of Paul Johnson with KBW.

Paul Johnson: Fin asked the question, but I’ll just ask you one more time, maybe a slightly different way. But is there any component, I guess, of the buyback that’s governed by the pace of repayments and sales to the JV as that capital becomes available?

Henry Chung: Yes. The pace of the buybacks for the JV, the primary governor there is going to be the parameters of the 10b5-1 plan. As noted, the rationale for the JV itself is to create excess capital and liquidity to be able to fund those purchases without — I should say, while maintaining leverage within our leverage target range. So if you think about the parameters and the governors around pacing, the primary governor, I would think of as the 10b5-1 plan trading parameters itself as well as the other related regulatory requirements.

Paul Johnson: Okay. Got it. And in terms of new originations, you have some near-term dynamic with offloading some investments into the new JV. But I guess like how long would you expect to sort of gate originations in CCAP in order to, I guess, continue to create capacity for the buyback? I mean do you expect to be kind of continued for the duration of buyback as long as, I guess, it’s active? Or do you see any point, I guess, within next year where you kind of return to sort of a more normalized origination cadence?

Henry Chung: It’s going to depend on the pace of realizations within the portfolio itself. A few quarters ago, we stated that our goal here when we had net leverage above our target net leverage range was to get that back within our range by year-end. As we noted in prepared remarks, rotation activity has just been slow given that we’ve been in a bit of a quieter LBO environment, particularly in the second half of the year to date. And as a result, the rationale for pursuing the JV part of that was to accelerate that path to deleveraging by year-end.

And then the other component of that was to create that excess capacity relative to our leverage range to be able to buy back shares, just given where the stock is trading today. Based on where we are — there are — we are expecting further, I would say, organic portfolio realizations by year-end. And depending on the pace of further rotation within the portfolio, we would look to replace that with new originations just that are generated across the Crescent platform here. But I would think of the primary governor there as, first, the pace of just the organic rotation of the portfolio.

And secondly, where we are relative to our target leverage range, factoring in realizations as well as buyback activity.

Paul Johnson: Okay. Got it. And in terms of the consolidation of the asset manager, I guess, I’d ask what — how much or what percentage does private credit AUM? And maybe if I can go one step further sort of this core middle market overlapping AUM with CCAP’s portfolio, does that sort of represent within the broader AUM of the consolidated asset manager?

Jason Breaux: Paul, let me take a stab at that. And if I didn’t answer your question, give me another try. But — so if you think about GreenOak broadly as over $300 billion of AUM, credit is inclusive of below investment grade and investment grade would be over $200 billion of that $300 billion of AUM. And then when you drill down a bit further, if you think about Crescent AUM today, which is all below IG credit, that’s about $54 billion, $55 billion of AUM today, of which 3/4 of that is below investment grade private credit, so call it $40-plus billion or so is below IG private.

Operator: Your last question comes from the line of Mickey Schleien with Clear Street.

Mickey Schleien: Just wanted to touch on the pipeline with earnings season amongst the BDC sort of coming to a close. I’ve pretty consistently heard optimism about the M&A pipeline going into year-end and potentially into next year, given some reduction in macroeconomic uncertainty. I’m not sure I agree, but I’m very interested in understanding how you’re thinking about the scope of the pipeline relative to everything that’s going on, whether it’s uncertainty about what the Fed is going to do or the Iran war or changes in Washington, et cetera?

Henry Chung: This is Henry. I can start off there. I think what we’ve observed here, just really in the second half of the year, and part of that is attributed to several of those macro factors that you referenced are that the LBO environment, particularly within where we focus in the lower and core middle market, just has been quite a bit quieter relative to the first half of the year. And even if you were to look at the same time period on a year-over-year basis.

I will say that there’s certainly a lot of early looks and early reads out there, which may indicate that the pipeline going into the end of the year, beginning of next year will be quite a bit more robust in terms of deal activity. But where we sit here today in terms of just broader activity within our core market segments has quite candidly just been a bit quieter relative to what we’ve seen at the beginning of the year.

Mickey Schleien: And it sounds like your expectations for next year are for things to more or less remain as is. Is that correct?

Jason Breaux: Mickey, Jason Breaux here. Look, I think that right now, as Henry said that the pipeline is pretty light. What doesn’t change is the continued pressure from investors for liquidity and monetizations. And with each passing day, those pressures continue to build. So there is a fair amount of, what I would call, macro uncertainty out there that is restricting some activity at this point in time. But I think we still do believe that there will be a pickup in activity going into 2027, simply driven by really more of the concern around investors needing to see liquidity from their sponsors.

Henry Chung: I think to add to that as well — I was going to just add, what we’ve observed historically is that the pipeline can turn back on relatively quickly here as well. As I indicated, there’s quite a bit of early preemptive deal work going on, I would say, within the market segments that we focus on, both on the sell side, where there’s early looks or reads and valuations for companies that are looking to trade. So based on that, when we think about just the backlog that is resident within the core lower middle market, there certainly is the addressable market.

I think what we’re just looking for here is the volumes to actually convert in the near term.

Operator: Your final question comes from the line of Robert Dodd with Raymond James.

Robert Dodd: A lot going on. I hate to go back to the JV. But if I can, on that, is that intended to be a permanent vehicle? I mean it sounds from the way you’re describing it that you’re selling assets down into it primarily to release liquidity for buybacks and deleveraging. And that could obviously be done if it was kind of a static pool vehicle with a static pool CLO kind of structure. And then it would attrite away over some period of time. So I mean is this meant to be a permanent JV vehicle? Or is this a tool that may have a finite life for you?

Henry Chung: Robert, this is Henry. It’s — I would think of it as a — this is not a static pool where we’re establishing a seed portfolio and having that runoff on this JV will be reinvesting. And our expectation in the near term, we’ll continue to manage it as a permanent part of the CCAP portfolio, albeit it will be — we’re expecting roughly 2% of the portfolio going forward. Longer term, we’ll continue to evaluate that relative to broader origination that we’re seeing across the space. But for the near term, I would not consider this a one-off static pool, and we are expecting to replenish assets into the JV as the initial seed portfolio rotates.

Robert Dodd: Got it. Got it. And on the credit, obviously, I mean, nonaccruals improved a little bit. There was a legacy asset gone there. It takes a while to turn these. Your 3s ticked up a little bit. So I mean, it sounds rather like credit is kind of stable, but not where you’d want it to be, but stable. I mean can you give us any update? And I realize, again, it doesn’t change very quickly quarter-to-quarter, but on like how the restructuring or turnaround progress is going within the troubled asset pool that you have?

Henry Chung: This is Henry. I could take that. I would say that with respect to the watch list, I would agree with your observations that we are seeing stability where we sit today relative to underwriting expectations and additions to the watch list that we have seen this quarter are really due to company-specific challenges that we’re seeing in certain portfolio companies as opposed to broader credit degradation as a whole across the portfolio.

With that being said, and I think this is something that we’ve continually been clear about here is, especially in an environment like we’re in today, where portfolio turnover velocity has just been muted, given the LBO environment that we’re in, I would expect that the rotation of assets, particularly those on the watch list, are just going to be longer-term exercises in terms of maximizing recovery. We’re not looking to fire sale any assets just to get them off the watch list.

And as a result, we’re prepared and looking to maximize long-term recoveries by taking a long-term approach to each of these assets, whether it’s truly just a one-off short-term watch list inclusion or a longer-term change of control. So hopefully, that gives you some color in terms of just what we’re observing to date, but our expectation here is that we’ll continue to look towards maximizing longer-term recoveries with respect to the watch list.

Operator: We have one more question from Christopher Nolan with Ladenburg Thalmann.

Christopher Nolan: Given the slow LBO market and so forth, is that forcing you guys to extend the maturity of maturing investments?

Henry Chung: Thanks for the question, Chris. We’ve seen that become more prevalent within investments where sponsors are electing to extend duration for investments as opposed to looking to sell them today at current valuations. And what we’re seeing here is that this is not necessarily indicative of companies that are in stress, but more so a determination from the sponsor’s perspective that there’s further value creation that can happen at the underlying portfolio companies, whether it be organically or inorganically. And as a result, they’re looking for — from support from the lenders to be able to continue to execute on their equity thesis.

Typically, how we approach these discussions is it’s an opportunity for us to reprice the respective loans when those asks come across. So what you’ll typically see in conjunction with an extension ask is fees or an increase in spread or both. So we take that as an opportunity to reunderwrite as well as reprice the loan to the extent that we would like to stay in the loan. And to the extent that we would not like to stay in the loan, then we elect to get taken out. So that’s our approach, but we’re absolutely in an environment where extension asks are certainly more commonplace than they have been several years ago.

Operator: There are no further questions at this time. I will now turn the call back to Jason Breaux for closing remarks.

Jason Breaux: Okay. Thank you, operator. And I just wanted to say thank you to our shareholders and analysts for their interest in CCAP and all the questions, and we look forward to speaking with everyone again soon.

Operator: This concludes today’s call. Thank you for attending. You may now disconnect.