Earnings call transcript: PennantPark Q3 2025 results show mixed performance

PennantPark Investment Corporation reported its Q3 2025 earnings, revealing an EPS of $0.18, in line with expectations. However, revenue fell short at $29.55 million, slightly below the forecast of $29.81 million. The stock reacted with a 0.48% decline to $7.28, reflecting a cautious market sentiment. According to InvestingPro data, the company has maintained strong profitability with a 100% gross margin over the last twelve months, though 7 analysts have recently revised their earnings expectations downward for the upcoming period.

Key Takeaways

• EPS met expectations at $0.18, but revenue missed by 0.87%.
• Stock price decreased by 0.48%, indicating cautious investor sentiment.
• Net Asset Value (NAV) dropped by 1.6% from the previous quarter.
• Strong focus on equity rotation and debt investments.
• Diversification across 158 companies and 37 industries.

Company Performance

PennantPark’s performance in Q3 2025 was characterized by stable earnings per share but a slight revenue shortfall. The company’s strategy of equity rotation into interest-paying debt is ongoing, aiming to optimize returns. The portfolio remains diversified, reducing risk exposure.

Financial Highlights

• Revenue: $29.55 million, down from the forecasted $29.81 million.
• Earnings per share: $0.18, meeting expectations.
• Net Asset Value (NAV): $7.36 per share, a decrease of 1.6% from the previous quarter.
• Total distributions: $0.24 per share.

Earnings vs. Forecast

PennantPark’s EPS of $0.18 matched the forecast, while revenue fell short by 0.87%. This revenue miss, though minor, contrasts with the stable earnings, indicating possible challenges in revenue generation.

Market Reaction

Following the earnings release, PennantPark’s stock saw a 0.48% decline, closing at $7.28. This movement suggests a cautious market response, likely influenced by the revenue miss and decrease in NAV.

Outlook & Guidance

The company is focused on a 12-18 month timeline for its equity rotation strategy, aiming to reinvest proceeds into higher-yield debt. This approach is expected to enhance income generation and potentially increase leverage post-portfolio normalization.

Executive Commentary

CEO Art Penn emphasized the company’s commitment to providing additional capital to existing portfolio companies and maintaining a selective investment approach. He reiterated the objective of delivering risk-adjusted returns through stable income and capital preservation.

Risks and Challenges

• Revenue shortfall raises concerns about growth potential.
• NAV decline may indicate asset devaluation.
• Nonaccruals, at 2.8% of the portfolio, could impact credit quality.
• Market conditions and macroeconomic factors could affect future performance.
• Execution of the equity rotation strategy is critical for future success.

Q&A

Analysts inquired about the timeline for the equity rotation strategy and potential debt refinancing options. The company confirmed its ongoing equity co-investment approach and addressed potential merger possibilities within the Business Development Company (BDC) sector.

Full transcript - PennantPark Investment Corporation (PNNT) Q3 2025:

Art Penn, Chairman and Chief Executive Officer, PennantPark Investment Corporation: It is now my pleasure to turn the call over to Mr. Art Penn, Chairman and Chief Executive Officer of PennantPark Investment Corporation. Mr. Penn, you may begin your conference.

Good afternoon, everyone. Welcome to PennantPark Investment Corporation’s earnings conference call for the third fiscal quarter twenty twenty five. I’m joined today by Rick Valordo, our Chief Financial Officer. Rick, please start off by disclosing some general conference call information and include a discussion about forward looking statements. Thank you, Art.

I’d like to remind everyone that today’s call is being recorded. Please note that this call is the property of PennantPark Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited. An audio replay of the call will be available on our website. I’d also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward looking information. Today’s conference call may also include forward looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these projections.

We do not undertake to update our forward looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at pennantpark dot com or call us at (212) 905-1000. At this time, I’d like to turn the call back to our Chairman and Chief Executive Officer, Art Penn. Thanks, Rick. I’m going to spend a few minutes to comment on how we ferried on the quarter ended June 30, our dividend coverage and spillover income balance, the current market environment for private middle market credit and how the portfolio is positioned for upcoming quarters.

Rick will provide a detailed review of the financials, and then we’ll open up the call for Q and A. We are encouraged by a recent resurgence in deal activity, which we anticipate will result in increased loan originations and potential exit of some of our equity positions during the 2025. Additionally, we continue to provide additional capital to many of our existing portfolio companies as we execute their respective growth plans. Our platform continues to prove its strength as we support our existing portfolio companies and private equity borrowers with strategic capital solutions to help grow their businesses. With regard to how we fared in the quarter ended June 30, our core net investment income was $0.18 per share compared to total distributions of $0.24 per share.

We previously communicated our plan to rotate out of our equity positions and redeploy that capital into interest paying debt investments, which will drive an increase in our core net investment income. We remain focused on this strategy are comfortable maintaining our current dividend level in the near term as the company has a significant balance of spillover income, which we are required to distribute. P and M has $55,000,000 or $0.84 per share of undistributed spillover income, and we use the spillover income to cover any shortfall in core net investment income versus the dividend while we position ourselves for equity rotation. We are encouraged by increased M and A activity in the market and believe that this growing activity level will result in meaningful cash realizations in our equity portfolio. Looking ahead, we expect origination activity to be a mix of our existing portfolio companies and high quality new investment opportunities.

We believe that the strongest assets, those with demonstrated growth and tariff resilience, will still command premium valuations and attract sponsor interest. With regard to asset pricing, in the core middle market, the pricing of first lien term loans is still for plus $4.75 to $5.25 for high quality assets. As always, we will remain rigorous in our underwriting and highly selective in pursuing new investments. We continue to see attractive investments in the core middle market. During the quarter, for investments in new portfolio companies, the weighted average debt to EBITDA was 3.8 times, the weighted average interest coverage was 2.6 times, and the yield of maturity was 10.2%.

As the credit statistics just highlighted indicate, we continue to believe that the current vintage of core middle market directly originated loans is excellent. In the core middle market, leverage is lower and spreads are higher than in the upper middle market. We continue to get meaningful covenant protection while the upper middle market is primarily characterized as covenant light. As of June 30, the portfolio’s weighted average leverage ratio to our debt security was 4.7 times, and the portfolio’s weighted average interest coverage ratio was 2.5 times. These attractive credit statistics are definite to our fuel activity, conservative orientation, and our focus on the core middle market.

We continue to believe that our focus on the core middle market provides the company with attractive opportunities where we provide important strategic capital to our borrowers. We have a long term track record of generating value by successfully financing growing middle market companies in five key sectors. These are sectors in which we possess deep domain expertise, enabling us to ask the right questions and consistently deliver strong investment outcomes. They are business services, consumer, government services and defense, health care, and software and technology. These sectors have also been recession resilient, tend to generate strong free cash flow, and have limited direct impact to the recent tariff increases and uncertainty.

Core middle market, companies with 10 to 50,000,000 EBITDA is below the threshold and does not compete with the broadly syndicated loan or high yield markets unlike our peers in the upper middle market. The core middle market, because we are an important strategic lending partner, the process and passive terms that we receive is attractive. We have many weeks to do our diligence with care. We thoughtfully structured transactions with sensible credit statistics, meaningful covenants, substantial equity cushions to protect our capital, attractive spreads, and equity co investment. Additionally, from a monitoring perspective, we receive monthly financial statements to help us stay on top of the company.

With regard to covenants, unlike the erosion in the upper middle market, virtually all of our originated first lien loans and meaningful covenants which help protect our capital. Credit quality of the portfolio has remained strong. We have four nonaccruals as of June 30, which represented 2.8% of the portfolio at cost and 0.7% at market value. Two new investments were added and one prior investment was removed as it returned to accrual status. Subsequent to quarter end, one nonaccrual investment was put back on accrual and pro form a for the subsequent event, PNNT’s nonaccruals represent 2.6% of the portfolio cost and 0.6% at market value.

Since inception nearly eighteen years ago, PNNT has invested $8,900,000,000 at an average yield of 11.25% and has experienced a loss ratio on invested capital of approximately 20 basis points annually. This strong track record includes investments on primarily subordinated debt investments made prior to the financial crisis, legacy energy investments, and recently the pandemic. The provider of strategic capital, we fuels the growth of our portfolio companies. In many cases, we participate in the upside of the company by making an equity co investment. Our returns on these equity co investments have been excellent over time overall for our platform from inception through June 30.

We’ve invested over $583,000,000 in equity co investments and have generated an IRR of 26% at a multiple on invested capital of two times. As of June 30, our portfolio totaled $1,200,000,000 and during the quarter, we continued to originate attractive investment opportunities and invested $88,000,000 in four new and 28 existing portfolio companies at a weighted average yield of 10%. Our PSLS joint venture portfolio continues to be a significant contributor to our core NII. At June 30, the JV portfolio totaled $1,300,000,000 and during the quarter, the JV invested $22,000,000 at a weighted average yield of 9.8%. In the last twelve months, PNAC’s average NII return on invested capital in the JV was 17.9%.

The JV has the capacity to increase its portfolio to $1,600,000,000 and we expect that with additional growth in the JV portfolio, the JV investment will enhance PNNT’s earnings momentum in the future quarters. July 2025, PSLF partially refinanced its $300,000,000 debt securitization. PSLF refinanced the non AAA tranches and decreased the securitization’s weighted average spread by 68 basis points to 2.63% from 3.31%. From an outlook perspective, our experienced and talented team and our wide origination funnel is producing active deal flow. We remain steadfast in our commitment to capital preservation and disciplined patient investment approach.

We reiterate our objectives to deliver compelling risk adjusted returns through stable income generation and long term capital preservation. We seek to find investment opportunities in growing middle market companies that have high free cash flow conversion. We capture that free cash flow primarily through debt instruments, and we pay out those contractual cash flows in the form of dividends to our shareholders. Let me now turn the call over to Rick, our CFO, to take us through the financial results. Thank you, Art.

For the quarter ended June 30, GAAP and core net investment income was $0.18 per share. Operating expenses for the quarter were as follows. Interest and credit facility expenses were 9,200,000.0, base management and incentive fees were 6,400,000.0, general and administrative expenses were 1,500,000.0, and provision for excise taxes were $700,000 For the quarter ended June 30, net realized and unrealized change on investments and debt, including provision for taxes, was a loss of 3,600,000.0 As of June 30, our NAV was $7.36 per share, which is down 1.6% from $7.48 per share in the prior quarter. As of June 30, our debt to equity ratio was 1.3 times and our capital structure is diversified across multiple funding sources, including both secured and unsecured debt. As of June 30, our key portfolio statistics were as follows.

Our portfolio remains highly diversified with a 158 companies across 37 different industries. The weighted average yield on our debt investment was 11.5%. We have four nonaccruals, which represent 2.8% of the portfolio at cost and point 7% at market value. Subsequent to quarter end, one nonaccrual investment was put back on accrual and pro form a for this subsequent event, nonaccruals represent only 2.6% of the portfolio at cost and 0.6% at market value. The portfolio is comprised of forty six percent first lien secured debt, two percent second lien secured debt, 13% subordinated notes to PSLF, 5% other subordinated debt, 7% equity in PSLF, and 27% in other preferred and common equity co investments.

90% of the debt portfolio is floating rate. Debt EBITDA on the portfolio is 4.7 times, and interest coverage is 2.5 times. Now let me turn the call back to Art. Thanks, Rick. In closing, I wanna express my gratitude to our dedicated team of professionals for their unwavering commitment to PNNT and shareholders.

Thank you all for your time today and for your continued investment and confidence in us. That concludes our remarks. At this time, I’d like to open up the call to questions. Thank you. If you would like to ask a question, please signal by pressing And our first question comes from Brian McKenna with Citizens.

Rick Valordo, Chief Financial Officer, PennantPark Investment Corporation: Great. Thanks. Art, I appreciate all the detail on the outlook into the back half of the calendar year. On the equity rotation opportunity specifically, if M and A activity continues to accelerate here over the next several quarters, what’s the ideal time line to sell a good chunk of the equity portfolio and then reinvest that capital? And then I’m assuming there’s some meaningful unrealized gains in this part of the portfolio.

So do you plan to pay out a substantial amount of these gains once realized in dividends? Or will you kind of look to hold off on paying incremental dividends and redeploy kind of the majority of that capital into new loans?

Art Penn, Chairman and Chief Executive Officer, PennantPark Investment Corporation: Thanks, Brian, and thanks for the question. In terms of timing, look, we believe that M and A will resume. We’re seeing it. So we think over the next twelve to eighteen months, there’s gonna be significant progress, hopefully, rotating out of both our equity contracts, which we don’t control, and perhaps some of our our control positions, which are, you know, some of the bigger chunkier names. So kind of a twelve to eighteen month horizon, you know, we’ll have to see, you know, in terms of what the characteristics are.

But our anticipation is to take the capital and roll it back into yields so that we can generate healthy NII for our shareholders.

Rick Valordo, Chief Financial Officer, PennantPark Investment Corporation: Okay. That’s helpful. And then just on the balance sheet, leverage stands at about 1.3x today. I’m assuming that’s a reasonable expectation over the next few quarters here. But once a meaningful portion of the equity portfolio is, in fact, rotated into the first lien loans, I mean, should we expect the leverage target to move a little bit higher here similar to PFLT?

Art Penn, Chairman and Chief Executive Officer, PennantPark Investment Corporation: Yes. Look, it’s a good question. I think just from the standpoint of matching, we think a first lien portfolio or certainly a heavier first lien portfolio could judiciously handle a little bit more leverage. So that would be a fair assumption, you know, assuming the portfolio kind of normalizes over time.

Rick Valordo, Chief Financial Officer, PennantPark Investment Corporation: Okay. Thanks so much.

Art Penn, Chairman and Chief Executive Officer, PennantPark Investment Corporation: And our next question will come from Robert Dodd with Raymond James. Hi, guys. On on the the the spillover income, obviously, 84¢. And, I mean, at at the pace you’re earning, obviously, forward curve, etcetera, etcetera. But, I mean, you you’re only 6¢ short a quarter right now.

That spillover would would tide you over for for a a a long time if you wanted to. But can you give us any color on on, like, where at what point would would in terms of working down that spillover, would you think it’s it’s low enough and it would be time to evaluate the dividend? I mean, your earnings profile might be different at that stage, obviously. But at what point do you think that’s low enough that a an evaluation needs to be made on on that? Yeah.

So I I look. I think that kind of jives with the prior question, Robert, which is Yeah. When can we normalize this portfolio? And once we normalize the portfolio, when can we rotate it into yield? So, you know, we think that’s a year, year and a half out, you know, kind of over time to be able to do that, come up for air after we normalize things and take a look at what’s sustainable, how much spillover we have at that point in time and and kind of reset the table at that point in time.

But, you know, as we’re kind of, you know, working it working that rotation down, we we think we just wanna kinda keep keep it as it is. Got it. It. Thank you. On on looking looking at the outlook for for, obviously, M and A, as you said, right, it’s it’s ramping up.

The outlook does look better. When you look at the portfolio leverage, you know, at four seven interest coverage at two and a half, That should improve if if base rates come down. On the the originations you that you you think the the market terms right now, would you expect that, like, the leverage to be rising from here in the portfolio or or or holding steady? I mean, interest coverage improving, obviously, if they I mean, what what what kind of what what are market terms today on the deals you’re looking at versus what the average is in the the portfolio right now? Yeah.

So, you know, it’s a good question. And just to just to just to reset it, you know, when we we typically start a new platform with a little bit of a smaller company, it’s being bought from a founder entrepreneur or company. And the leverage will be lower at that point in time. It’ll be a smaller company. Leverage will be lower.

You know, the new loans we made in the past quarter, debt to EBITDA was 3.8 times. Out of the gate, interest coverage was 2.6 times. And that’s kind of, you know, a new platform for us as the company matures, as the company does add on acquisitions, as the company gets larger, you know, it kind of has been been balancing out to 4.7 times debt to EBITDA for the entire portfolio. So that’s that’s typically, you know, what it becomes over time. We generally have an aversion to going above five times.

I mean, we will do it occasionally when we have real conviction or it’s a larger company or, you know, we just feel like it’ll derisk or or deleverage relatively quickly. So rarely do we start out in a in a loan where it’s above five times. That’s just the way we’re constitutionally constitutionally set up. And and what it will will mean also is probably a a lower yield, but, you know, we’re okay with that. We’re okay with, you know, the lower risk end of the spectrum and those and the direct lending market.

So, hopefully, that that gives you an answer to your question. Yeah. Yeah. It does. That’s very helpful.

Thank you. And then one more if I can. I mean, you you you said about the the timeline twelve to eighteen months for equity rotation as well. Obviously, there’s some chunky positions in there. It did sound in the over month that you you seem a a little bit more optimistic about maybe a couple on a a shorter time frame?

Are there any that are, like, actually in the works that could happen this year? And, you know, would those if if they do it, would would those actually be material? Are you talking about maybe realizing some small positions this year? Yeah. So we are starting to see some rotation in the kind of equity column best.

You know, these are the singles and doubles, and we’re starting to see that, which is is nice. Some of those kind of core middle market companies are getting sold. We have pieces that are 1 to 5,000,000 in value, and we’re starting to see, you know, the wheels of commerce, you know, getting going there. In terms of the big bigger, chunkier, more controlled position, nothing nothing right now. But, hopefully, the the m and a spirits will get going, and and we can we can, you know, see more activity in some of the bigger names sooner.

Got it. Thank you. And we’ll take a question from Paul Johnson with KBW. Good afternoon. Thanks for taking my questions.

Just on one specific company in the portfolio, I think it’s been a while since the business came up, but 20 of control positions, JF intermediate, look like the mark was pretty stable quarter over quarter. Can you just maybe talk a little bit like how that business, I guess, is kind of performing year to date? It looks like the financials that you guys disclosed in the filing, it’s not profitable on a net income basis, but maybe more so on a cash flow basis if there’s a lot of depreciation in the business. But yes, was just wondering if you can kind of provide an update on how that investment is performing. Yes.

Good question, Paul. Company generates substantial EBITDA. We this was originally mezzanine deposition, which we rotated or was restructured into an equity position. Company is doing really well. Company is doing well.

EBITDA is up and significant. EBITDA is well north of $50,000,000 so it’s becoming a substantial company. Company executed a debt refinancing during the quarter. So last quarter, we had a debt position, a first lien loan position in the company. We were refinanced out by a club of of direct lenders.

So we saw the the equity position. We’re we’re pleased. We got really good demand on the on the debt side, some some really well known direct lenders, rent money to the company. And we’re well set up, hopefully, you know, in the not too distant future to to to see something on the equity. But, like, you know, the company’s ramping up well.

You know, we we we we got out of our loan, and now we’re just gonna let the company grow and got some out on acquisitions that it can make. So we feel it’s well set up to to increase in value, hopefully, and over time, turn into cash for our shareholders. Appreciate that. And are you in the full controlling position of the equity there, or are you partnered with a sponsor at all? Yeah.

We’re we’re partnered with with an independent sponsor. Got it. Okay. Appreciate the call from me. Thank you.

And our next question will come from Melissa Liddell with JPMorgan. Hi.

Brian McKenna, Analyst, Citizens: Thanks for taking my questions today. A lot of them have already been asked and answered, but wanted to follow on your comment about the joint venture and being able to further scale that. The similar question on the on the equity rotation. I’m curious how you’re thinking about the time frame for fully optimizing the JV and sort of the environment that would need to exist in order to do that.

Art Penn, Chairman and Chief Executive Officer, PennantPark Investment Corporation: Yeah. Look. We we think, certainly, over the next probably six to nine months, we can we can fully optimize the JV. And, of course, you know, the JV could continue, it could grow. So, you know, kinda one step at a time, you know, we we feel like we could optimize the JV fully, you know, in the next six to nine months.

Brian McKenna, Analyst, Citizens: Okay. That’s helpful. Thanks. And then on the activity side of things, I’m curious if there’s anything that you’re anticipating on the repayment side in the near term that we should also be thinking about?

Art Penn, Chairman and Chief Executive Officer, PennantPark Investment Corporation: I’d say normal routine. Look. When there’s deal activity, there’s good news and there’s bad news. The good news is there’s new deal flow. The bad news is some of your existing deals get called out, and that’s that’s typical.

And that’s okay. And and and I referenced to getting some some some of these equity co investments liquid. That’s typically what happens. You you make the loan. You have an equity co investment.

The company gets sold. You you lose the loan. The loan gets part out, and you get your cash on the equity co investment. So we’re starting to see some of that as as M and A, you know, resumes.

Brian McKenna, Analyst, Citizens: Okay. Thank you.

Art Penn, Chairman and Chief Executive Officer, PennantPark Investment Corporation: And moving on to Aaron Cyganovich with Truist. Thanks. I was wondering if you could just

Robert Dodd, Analyst, Raymond James: comment on the competitive environment. Always tends to be a lot of capital kind of available in the wings in the middle market these days. Anything you’re seeing from either pricing pressure or and you mentioned the covenants were pretty much, you know, stable in your in your neck of the woods. So what are you what are you seeing in the from a competitive environment?

Art Penn, Chairman and Chief Executive Officer, PennantPark Investment Corporation: Yeah. Yeah. I’d say it’s a good question, Aaron. Look. There’s no doubt if there’s competition, there always is competition.

It ebbs and flows. I think the competition is there. It’s pretty much the same players behaving in the same way that they historically behave. So, generally, the competition’s rational. You know, certainly relative to the upper market, it’s it’s a lot more rational because we’re still getting covenants.

We still get the monthly financial statements. We get the equity to invest. We have time to do our diligence, but it’s competitive. And and, certainly, as deal flow comes back, we’re hoping that, you know, that will increase the supply, which, by definition, may reduce competition a little bit. So but, you know, it’s competitive out there, and and that’s where we’re where where we rely on our existing relationships, incumbency, you know, 190 some companies across the platform.

You know, there’s such decent and good deal flow within the portfolio. You know, big part of our our new deal opportunities, the existing portfolio with these companies grow. They need add on loans. They need DDTL. Or we’re in there with those sponsors.

And, you know, when you’re talking to the sponsors day in and day out about their portfolio, obviously, we get a get a good early first call and a good last look in any of the deals. So there’s a lot of deal flow. We are, you know, we remain selective about, you know, what we put in these portfolios. I’d say we’re in a pretty good spot right now. Thanks.

Appreciate it. And the next question will come from Christopher Nolan with Ladenburg Thalmann. Hey, guys. Art, if the given you have a 2026 debt maturity and given the strengthening business environment and the possibility of lower rates, it’s a general idea to, ideally, have the income from these equity rotations offset any higher coupons from refinancing the debt. Yeah.

No. It’s a it’s a good question. That’s another variable, Chris. And and by the way, Chris, welcome back to to PennantPark, and I wanna welcome back Aaron Saganovich. Also, we have the prior question back to PennantPark as a research analyst.

But that’s another variable out there is the debt maturities and what the rates are gonna be at the time as we get closer to maturity. So, you know, that’s that’s, you know, variable we have to consider. Again, we’re hoping we can get some significant equity rotation, rotate the the cash and the yield and and and look at where we stand at that point in time and and and adjust accordingly. So but you’re you’re right to point that out. That is a variable out there.

And just a follow-up on that note. Is using the Truist credit facility to refinance these notes a possibility just given a lot of talk from the administration about crushing the Fed to reduce rates? Yeah. Look. We we have a very attractive facility with Truist.

You know, we’re constantly talking to them and other lenders about our liability stack, and we’re trying to match our liability stack to the assets to make sure they make sense. You know, there’s different ways to fund the operations, whether it be credit facility, bonds, securitization. We do securitization well in the past, the JV. So we have a number of different tools to finance, you know, the deal flow, and, we want to remain matched and prudent about the amount of leverage and the type of leverage that we put against the assets. And our next question will come from Casey Alexander with Compass Point.

Yeah. Good afternoon, Art. I it I was reading, actually, a summary of the transcript of the call, and there was a entry there that that said merging the BDCs remains an option post equity rotation resolution in PNNT, which my question is that that if you throw the government out of the portfolio and and don’t include the equity from PSLS, So the equity of PNNT is 27% of the total portfolio. Kind of for for for for that merger to make sense, kind of what percent would you have to get that down to so that it wouldn’t be highly dilutive for PFLP shareholders? Yeah.

Look. I I think our still our long term target for equity, excluding JV equity, is about 10%, which is similar to kind of where we are in the p l PFLP portfolio. I think it paid her 9%, something like that. So that would be a little more normalized. And, I answered the question of Brian McKenna’s question he asked every quarter, you know, and I answered the same way, which is all all things are always on the table.

We never say there’s no no options. But I said I said and which I always say is we’ve gotta you know, either way, we’ve gotta normalize the PNNT portfolio, whatever we do. So that’s still the goal, and that’s what we’re focused on. And and, hopefully, we can execute on that, and then we’ll come up for air and and and and look at what we do. Yeah.

My my second question is, are are you are you still doing equity co invest? And and if so, is that just exacerbating the problem? Or or are you, you know, just doing straight debt deals now and and and using that to help you reduce the amount of equity in the portfolio? Yeah. So, look, the the equity column that is is a deal by deal kind of analysis.

We if we do the debt, we usually get an option to look at the equity. We then analyze the equity separately. And if it makes sense, we think as an investment, we will continue to do it. We’ve got a very good long term track record as we stated. The the equity heavy nature of the P and N portfolio today is is really conversions of debt to equity, not the equity to invest portfolio.

Right? So equity to invest portfolio, we’re investing $1.02, 3,000,000, whatever it is, as a tag. It’s been a very strong, you know, two times MOIC, 25, 26% IRR over eighteen years. Granted sometimes, the the rotation is quicker. You know?

Sometimes it’s slower. It’s been slower recently. But it’s it’s been a good it’s been a good addition to all these portfolios. But each each individual equity investment needs to stand on its own two feet, and and and and so far, it has. And then, again, the chunkier positions have been conversions.

And and on those situations, we’re we’re trying to get better. Obviously, those were debt investments that did not work out well by definition. We we make mistakes from time to time, and we try to learn from those mistakes and and get better. And and most of these, you know, chunkier positions were kinda long standing deals that we’ve made long ago. Our underwriting track record in in the last number of years has been very, very strong if you look across the platform.

So, you know, it it may take a little while to get some of these equity chunky equity positions rotated. We will do our best at our job as fiduciaries for our investors, and we’re going do everything we possibly can to maximize shareholder value. Great. Thank you. And that does conclude the question and answer session.

I’ll now turn the conference back over to Mr. Art Penn. I want to thank everybody for their time today and listening to the story. A reminder that our next quarterly earnings is a 10 ks, so we’ll be reporting a little later in the quarter, probably shortly before Thanksgiving, kind of mid November. So look forward to speaking to folks then.

And again, thank you for your time today. Thank you. That does conclude today’s conference. We do thank you for your participation. Have an excellent day.

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