Welcome to today's earnings call for New Mountain Finance Corporation's Third Quarter 2022. I apologize for the confusion. I would now like to hand the conference over to our host, Rob Hamwee, CEO of New Mountain Finance Corporation. Please proceed.

Thank you, and good morning, everyone, and welcome to New Mountain Finance Corporation's Third Quarter Earnings Call for 2022. On the line with me here today are Steve Klinsky, Chairman of NMFC and CEO of New Mountain Capital; John Kline, President of NMFC; Laura Holson, COO of NMFC; and Shiraz Kajee, CFO of NMFC. Steve is going to make some introductory remarks, but before he does, I'd like to ask Shiraz to make some important statements regarding today's call.

Thanks, Rob. Good morning, everyone. Before we get into the presentation, I would like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of New Mountain Finance Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our November 8 earnings press release. I would also like to call your attention to the customary safe harbor disclosure in our press release and on Page 2 of the slide presentation regarding forward-looking statements. Today's conference call and webcast may 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 those statements and projections. We do not undertake to update our forward-looking statements or projections unless required to by law. To obtain copies of our latest SEC filings and to access the slide presentation that we will be referencing throughout this call, please visit our website at www.newmountainfinance.com. At this time, I'd like to turn the call over to Steve Klinsky, NMFC's Chairman, who will give some highlights beginning on Page 4 of the slide presentation. Steve?

Thanks, Shiraz. It's great to be able to address you all today, both as NMFC's Chairman and as a major fellow shareholder. I believe we have good news to report despite the difficult U.S. economic conditions of recent months. Net investment income for the third quarter was $0.32 per share, more than covering our $0.30 dividend per share that was paid in cash on September 30. Our net asset value was $13.20 per share, just a $0.22 or 1.6% decrease despite the rising interest rate environment as some gains on individual positions such as Haven helped offset the impact of rising interest rates on existing loans. We believe our loans are well positioned overall in defensive growth industries that we think are resilient in all times and particularly attractive in the challenging macro conditions of today. New Mountain's private equity funds have never had a bankruptcy or missed an interest payment, and the firm overall now manages $37 billion of assets. Similarly, our credit funds, including NMFC, have experienced just 6 basis points of net default loss per year since we began our efforts in 2008. Looking forward, the rise in interest rates can be a substantial positive for our quarterly earnings going forward since we chiefly lend on floating rates, which have been rising. Accordingly, we are pleased to announce that we are increasing our dividend to $0.32 per share, up from the current $0.30 per share for the fourth quarter. And New Mountain, as the manager, will give dividend protection, in other words, waive incentive fees if needed, to maintain this level through at least the end of calendar year 2023. As Page 13 of the presentation shows, there is also the potential to significantly outearn this $0.32 per share level at current interest rates if all other factors hold constant. This extra earnings could appear as special dividends or as deleveraging of our balance sheet. We believe the strength of New Mountain and of NMFC are driven by the strength of our team. New Mountain overall now numbers 215 team members, and the firm has developed specialties and attractive defensive growth sectors, such as life science supplies, health care information technology, software, infrastructure services, and digital engineering. Talent has also been rising within this team. And to this end, we are pleased to announce the key promotion. John Kline, who has helped lead NMFC and our credit effort since 2008, will be named CEO of NMFC effectively January 1, 2023. Rob Hamwee will continue as a key leader of the effort as Vice Chairman of NMFC and its Investment Committee, where I continue as Chairman. Rob, John, and I also continue as Managing Directors of New Mountain overall, working as we have before. Finally, we continue as major shareholders of NMFC, owning over 12% of NMFC's total shares personally. Rob, John, and I have never sold a share of NMFC even as we have been buying. With that, let me turn the call back to Rob.

Thank you, Steve. We have included a few new pages this quarter as a high-level summary of NMFC, our priorities, and our differentiated approach. On Page 7, we show NMFC at a glance, highlighting our best-in-class quality metrics, strong return track record over our 14-year history, and detailed disclosure of the acyclical sectors we have exposure to through our portfolio companies. On the following page, we highlight NMFC's differentiated approach to lending. Our defensive growth strategy enables us to focus on investing in strong businesses in acyclical sectors, providing insulation from macroeconomic headwinds, as Steve described earlier. We are not buying the market and proactively avoid the sectors of the economy where we think there is the most volatility and cyclicality. In addition, our credit business was founded with the idea of leveraging the intellectual capital of the full New Mountain platform. We have real sector expertise in these defensive growth sectors, thanks to a team of 89 investment professionals who focus day in and day out on these sectors. It is important to note our senior advisers, operating executives, and portfolio company CEOs have actually run similar businesses, which allows us to identify the most attractive opportunities in the market. This breadth of resources at our disposal allows us to go far deeper on diligence than a stand-alone credit firm ever could, ultimately allowing us to make better credit decisions and avoid mistakes. Steve spoke earlier about our shareholder alignment. We believe that these 3 elements: our defensive growth strategy, our integrated research and underwriting model, and shareholder alignment, have resulted in a proven track record of execution. This is demonstrated by our total return performance, consistent coverage of our dividend, and strong credit performance. Turning to Page 9. We believe our portfolio continues to be very well positioned overall, particularly for periods of volatility. The updated heat map shows the positive risk migration this quarter with 2 positions representing $93 million of fair value improving in rating and 2 positions representing just $34 million worsening in rating. We are pleased that over 92% of our portfolio is rated green on our risk rating scale. Conversely, our red and orange names, which represent our most challenged positions, now represent just 2.3% of the portfolio. Starting with the positive movers on Page 10. Haven, formerly known as Tenawa, which, as a reminder, ceased operations at its plant on April 14 due to a fire, migrated from yellow to green as the insurance carriers deemed the plant a total loss and confirmed the full payout of the insurance policy. The company has now received the full proceeds from the insurance carriers, which enabled them to repay our $46 million debt position at par post-quarter end and left meaningful residual equity value, which we expect to monetize over the next several months. The education business improved from red to orange as the impact of COVID on the industry further recedes. The 2 negative movers are both relatively small positions and include a business services company, which we placed on nonaccrual this quarter due to continued top line and execution challenges; and a health care business which has experienced some idiosyncratic headwinds combined with staffing issues. The updated heat map is shown on Page 11. As you can see, given our portfolio's strong bias towards defensive sectors like software, business services, and health care, we believe the vast majority of our assets are very well positioned to continue to perform no matter how the economic landscape develops. We continue to spend significant time and energy on our remaining red and orange names. We also wanted to highlight that we moved the page detailing leverage migration on the underlying portfolio of companies to the appendix. We are committed to our best-in-class disclosure, so we will continue to share this information going forward, but believe our heat map largely captures the impact of leverage migration. With that, I will turn it over to John to discuss market conditions and other important performance metrics.

Thanks, Rob. Good morning, everyone. Since our last call in August, the overall investing environment across most asset classes has continued to be difficult. The challenges associated with higher interest rates, inflation, geopolitical stability, and pockets of economic softness have now receded. However, through this period, corporate direct lending continues to be one of the most resilient asset classes across all financial markets. Floating base rates, attractive spreads, secured debt structures, and low loan-to-value ratios have provided investors with valuable stability in an otherwise volatile investing environment. Additionally, our strategy of making loans to noncyclical defensive businesses provides an added margin of safety compared to that on the overall lending market, which generally has much higher exposure to inflation-sensitive, cyclical, and capital-intensive businesses within sectors that we avoid. While new deal activity remains materially lower than last year, we continue to see good opportunities to make add-on investments into existing portfolio companies and to finance select sponsor-backed purchases in the upper-middle market. In general, sponsor equity contributions remain very attractive, consistently ranging from 60% to 80% of enterprise value, while pricing is at the very wide end of historical ranges. Finally, it is important to highlight that the overall direct lending market continues to take meaningful share from the syndicated loan and high-yield bond asset classes as our private financing solutions offer an ease of execution, price clarity, and capital certainty that is still not available in these other markets. Page 13 presents an interest rate analysis that provides insight into the positive effect of increasing base rates on NMFC's earnings. We have updated this page to give more clarity into the impact of increasing base rates on our portfolio as well as to the timing of that impact. As a reminder, the NMFC loan portfolio is 88% floating rate and 12% fixed rate, while our liabilities are 52% fixed rate and 48% floating rate. Given this capital structure mix, we are long LIBOR and thus have material positive exposure to increasing rates. As we reported last quarter, we have experienced a lag on our assets resetting at a slower cadence than our liabilities. On the upper right side of the page, we show how this timing lag played out during the third quarter, where rate increases on assets occurred at a slower pace compared to that of our liabilities, resulting in a negative drag of 30 basis points. As shown on the lower bar chart, this mix caused a $0.02 headwind during the quarter compared to a hypothetical scenario where base rates were 2.5% on both assets and liabilities. To the extent rates stabilize at 3.5% or 4.5%, we would expect a material uplift in earnings to approximately $0.36 to $0.38 per share, all else being equal. Turning to Page 14. We present more detail behind the $0.22 decline in our book value this quarter. Starting on the left side of the page, we show that credit-driven fair value changes resulted in a net NAV decrease of $0.08 per share from Q2 to Q3. This minor decrease was driven by performance-related valuation decreases for 7 names, including Edmentum, which continues to have a strong outlook but modestly took down expectations for the year. These valuation declines were offset by a material write-off at Haven, which was unrealized at the end of Q3 but will be mostly realized by the end of Q4. Our remaining portfolio experienced $0.14 per share of depreciation associated with general spread widening in the overall credit market. In the context of the broader financial markets, NMFC's book value is very stable and reflective of a portfolio with strong credit quality and increasing future income potential. Page 15 addresses NMFC's long-term credit performance since its inception. On the left side of the page, we show the current state of the portfolio where we have $3.2 billion of investments at fair value with $59 million or 1.8% of the portfolio currently on nonaccrual. As mentioned earlier, we did put a business services company on nonaccrual, which represents $20 million or 0.6% of our current portfolio. NMFC's cumulative spread performance shown on the right side of the page remains strong. Since our inception in 2008, we have made $9.7 billion of total investments, of which only $347 million have been placed on nonaccrual. Of the nonaccruals, only $79 million have become realized losses over the course of our 14-year history. As shown on the next page, default losses have been more than offset by realized gains elsewhere in the portfolio. The chart on Page 16 tracks the company's overall economic performance since its IPO in 2011. As you can see at the top of the page, since our initial listing, NMFC has paid approximately $1 billion of regular dividends to our shareholders, which have been fully supported by over $1 billion of net investment income. On the lower half of the page, we focus on below-the-line items, where we show that since inception, highlighted in blue, we have a cumulative net realized gain of $16.8 million, which is basically flat with last quarter. This cumulative realized gain is offset by $73.9 million of cumulative unrealized depreciation on our portfolio, which increased this quarter by about $24 million, which was largely driven by valuation changes related to widening risk spreads in the general market. On the bottom of the page, in yellow, we show how cumulative net realized and unrealized loss stands at just $57 million, which remains a tiny fraction of the $1 billion of net investment income that we have generated since our IPO. As we look forward, our team remains very focused on reversing this small cumulative loss and maintaining best-in-class credit quality throughout the portfolio. Page 17 shows a stock chart detailing NMFC's equity returns since its IPO over 11 years ago. Over this period, NMFC has generated a compound annual return of 9.6%, which represents a very strong cash flow-oriented return in an environment where risk-free rates have been historically low. This year, NMFC's performance has compared favorably to most equity indexes and has materially exceeded that of the high-yield index as well as an index of BDC peers that have been public at least as long as we have. I will now turn the call over to our COO, Laura Holson, to discuss more details on our recent originations and current portfolio construction.

Thanks, John. As shown on Page 18, we originated almost $125 million in Q3 in our core defensive growth verticals, including software, business services, and consumer services. We primarily funded these originations with repayments and a modest amount of sales, keeping us fully invested and at the high end of our target leverage range. We continue to have great success targeting and sourcing high-quality deals within the niches of the economy where we have the highest conviction and expertise. Since quarter end, overall deal activity has been consistent, but more borrowers continue to migrate to the direct lending market as the syndicated market remains somewhat closed to new issues. As always, we remain extremely selective on credit and are focusing on the highest quality opportunities in a widening opportunity set. We expect to remain fully invested in our target leverage range as our deal flow absorbs any proceeds from ordinary course loan repayments. Turning to Page 19. We show that our asset mix is consistent with prior quarters, where slightly more than 2/3 of our investments inclusive of first lien, SLPs, and net lease are senior in nature. Approximately 8% of the portfolio is comprised of our equity positions, the largest of which are shown on the right side of the page. Assuming solid operating performance and the supportive valuation environment, we believe these equity positions could continue to increase in value and drive book value appreciation. We hope to monetize certain of these equity positions in the medium term and rotate those dollars into yielding assets. As discussed earlier, we expect Haven to be a near-term example of this as we realize the equity proceeds over Q4 and Q1. Page 20 shows that the average yield of NMFC's portfolio increased from 10.3% in Q2 to 11.3% for Q3, largely due to the benefit of the increasing forward LIBOR curve. Spreads remain wider and the supply/demand imbalance continues to favor lenders, which helps support our net investment income target. Turning to Page 21. We show detailed breakouts of NMFC's industry exposure. We have further enhanced our industry disclosure this quarter to provide more insight into the significant diversity within our software, business services, and health care sectors. As we have stated, we believe these sectors are well positioned in an inflationary environment, given the pricing power and margin profile that comes with the largely tech and services nature of these industries. In our view, the chart demonstrates the differentiated domain expertise our team has developed and shows why we operate with confidence in any economic cycle. The sectors we focus on have attractive cash flow characteristics such as high EBITDA margins, minimal CapEx and working capital needs, and flexible cost structures. As a result, as interest rates rise, we believe most of our borrowers have sufficient free cash flow to cover the increasing interest burden, which I will touch on more on the following page. We have successfully avoided nearly all of the most troubled industries while maintaining high exposure to the most defensive sectors within the U.S. economy that we believe can perform well in more volatile macro environments. We added Page 22 this quarter to highlight the trends in the scale and credit statistics of our underlying borrowers. As you can see, the weighted average EBITDA of our borrowers has increased over the last several quarters to over $130 million. While we first and foremost concentrate on how an opportunity maps against our defensive growth criteria and internal New Mountain knowledge, we believe that larger borrowers tend to be marginally safer, all else equal. We also show the relevant leverage and interest coverage stats across the portfolio. Leverage has been largely consistent. Loan to values continue to be quite compelling, and the current portfolio has an average loan-to-value of just 41%. From an interest coverage perspective, we've seen modest compression as base rates rise. But as I mentioned earlier, we think the free cash flow characteristics and growth profiles of the industries we focus on lend themselves to a decent cushion. The weighted average interest coverage on the portfolio is still north of 2x today. Finally, as illustrated on Page 23, we have a diversified portfolio across over 100 portfolio companies. The top 15 investments, inclusive of our SLP funds, account for 38% of total fair value and represent our highest conviction names. With that, I will now turn it over to our Chief Financial Officer, Shiraz Kajee, to discuss the financial statement.

Thank you, Laura. For more details on our financial results in today's commentary, please refer to the Form 10-Q that was filed last evening with the SEC. Now I'd like to turn your attention to Slide 24. The portfolio had over $3.2 billion in investments at fair value at September 30 and total assets of $3.3 billion with total liabilities of $2 billion, of which total statutory debt outstanding was $1.7 billion, excluding $300 million of drawn SBA-guaranteed debentures. Net asset value of $1.3 billion or $13.20 per share was down $0.22 or 1.6% from the prior quarter. At quarter end, our statutory debt-to-equity ratio was 1.26:1. However, net of available cash on the balance sheet, net leverage is 1.23:1, within our target leverage range. On Slide 25, we show historical leverage ratios and our historical NAV adjusted for the cumulative impact of special dividends. Consistent with our goal of minimizing credit losses and maintaining a stable book value over the long term, you will see that current NAV adjusted for special dividends is not far off from our NAV, back to our IPO over 11 years ago. On Slide 26, we show our quarterly income statement results. We believe that our NII is the most appropriate measure of our quarterly performance. This slide highlights that while realized and unrealized gains and losses can be volatile below the line, we continue to generate stable net investment income above the line. For the current quarter, we earned total investment income of $78.1 million, a $5.3 million increase from the prior quarter. This was due to higher interest income from base rate resets, offset by lower fee income in the quarter. Total net expenses were approximately $45.6 million, a $4.2 million increase quarter-over-quarter due primarily to higher base rates on our floating rate debt. As discussed, the investment adviser has committed to a management fee of 1.25% for the 2022 and 2023 calendar years. We have also pledged to reduce our incentive fee if and as needed during this period to fully support our new $0.32 per share quarterly dividend. Based on our forward view of the earnings power of the business, we do not expect to use this pledge. It is important to note that the investment adviser cannot recoup fees previously waived. This results in quarterly NII of $32.5 million or $0.32 per weighted average share, which exceeded our Q3 regular dividend of $0.30 per share, as a result of the net unrealized depreciation in the quarter but an increase in net assets resulting from operations of $7.7 million. The Slide 27 demonstrates that 95% of our total investment income is recurring this quarter. You will see historically, on average, over 90% of our quarterly income is recurring in nature, and on average, over 80% of our income is regularly paid in cash. We believe this consistency shows the stability and predictability of our investment income. Turning to Slide 28. The red line shows our dividend coverage. While NII exceeded our Q3 dividend, the dividend protection program could have provided additional coverage if needed. As previously mentioned, based on our preliminary estimates, we expect our Q4 NII will be in excess of $0.32 per share. Given that, our Board of Directors has declared a $0.02 per share or 7% increase in our Q4 dividend to $0.32 per share, which will be paid on December 30 to holders of record on December 16. On Slide 29, we highlight our various financing sources, taking into account SBA-guaranteed debentures. We had almost $2.3 billion of total borrowing capacity at quarter end with over $315 million available on our revolving lines, subject to borrowing base limitations. As a reminder, both our Wells Fargo and Deutsche Bank credit facilities covenants are generally tied to the operating performance of the underlying businesses that we lend to rather than the marks of our investments at any given time. Finally, on Slide 30, we show our leverage maturity schedule. As we've diversified our debt issuance, we've been successful at laddering our maturities to better manage liquidity, and over 75% of our debt matures on or after 2025. Post-quarter end, we issued a $200 million 3-year convertible note at a fixed rate of 7.5%. Proceeds of the successful private placement will be used to tender for our 2018 convertible note due in 2023, and any residual proceeds will be used to repay other outstanding indebtedness. Furthermore, our multiple investment-grade credit ratings provide us access to various unsecured debt markets that we continue to explore to further ladder our maturities in the most cost-efficient manner.

Thanks, Shiraz. In closing, we are optimistic about the prospects for NMFC in the months and years ahead. Our long-standing focus on lending to defensive growth businesses, supported by strong sponsors, should continue to serve us well. We once again thank you for your continuing support and interest, wish you all good health, and look forward to maintaining an open and transparent dialogue with all of our stakeholders in the days ahead. I will now turn things back to the operator to begin Q&A.

The first question today comes from the line of Bryce Rowe from B. Riley.

I wanted to maybe start here on the dividend. Nice to see the uptick here to $0.32. Maybe you could comment a little bit on how you're thinking about the dividend from a future perspective, especially given the rise in rates and the favorable impact it might have on the earnings stream. Will you seek to maybe put in place some level of cushion so that dividend coverage will, in fact, be in excess of the dividend paid?

It's a good question, and we want to operate the business with significant coverage for the dividend. The slide on Page 13 provides some insight into our expectations for net interest income, assuming interest rates remain where they are for some time. We intend to ensure that there is a meaningful cushion for the dividend from net interest income.

Okay. And then maybe a follow-up on that, Rob. In terms of maybe terms and conditions right now with newer originations. Are you all seeing any higher type of floors within the transactions? With the thought that maybe rates are going up now, but perhaps they go back down at some point in the future, so are you seeing higher interest rate floors within your transactions?

No. The floors haven't really modified. Now that the spreads are higher, the market overall is dislocated. So we're getting the benefit on new deals, not just of the higher base rate, but also of higher spread and call protection in just better terms generally. But one term that hasn't changed materially is the floors.

The next question today comes from the line of Ryan Lynch from KBW.

And John, congratulations on the promotion. It’s well deserved. I also want to congratulate your team on a really impressive slide deck. You’ve always had a great presentation, but I really appreciate the recent improvements. My first question is a bit complex, so I hope you can follow my thought process. I did some quick calculations based on Slide 13 and Slide 22, using them together. If I assume that your effective LIBOR rate in Q2 was around your floor rate of about 1%, and it increased from that 1% in Q2 to the 2.2% effective rate shown on Slide 13, it appears that your interest coverage on Slide 22 decreased from 2.4 times to 2.1 times. This indicates that approximately a 120-basis point increase in rates lowered your interest coverage by about 0.3 times. Similarly, a roughly 100-basis point increase seems to reduce that interest coverage by about 0.25 times. Looking at the current forward curve at 5% compared to that effective rate of 2.2% at the end of the third quarter, you’re facing a potential increase of almost 300 basis points, which my calculations suggest could lower your interest coverage by about 0.7 to 0.8 times from your current 2.1. This is just an average; some companies may have significantly higher interest coverage, while others may have noticeably lower. This is the kind of analysis investors are considering regarding credit quality, not just in your portfolio but across the BDC sector. Specifically regarding your portfolio, how well do you think it is positioned to withstand a substantial increase in interest rates over the coming year? I would appreciate your insights on my quick calculations and how investors should approach the impact of rising rates on your portfolio.

Yes. Ryan, it's a great question. We've been spending an inordinate amount of time focusing on exactly that question. I'm going to actually let Laura Holson get into some of the details there. Laura?

Yes, I agree it's a good question. As Rob mentioned, we devote considerable time to examining this across our portfolio. I would argue that the numbers aren't as severe as you've suggested, and there are a couple of reasons for that. Firstly, the analysis on Page 22 is a point-in-time estimate, relying on EBITDA for the last twelve months. Therefore, your calculations don't account for the growth of our underlying portfolio companies, which, as we've noted, operate in robust industries. A significant advantage is that there is a natural cushion from quarter to quarter due to the growth of these companies. Additionally, as you pointed out, this is an aggregate average across the portfolio. We've conducted a detailed analysis on a name-by-name basis for all our major positions. Even when we adjust base rates to 5% or higher, we continue to show an interest coverage ratio exceeding 1 to 1.5 times for our significant debt positions, excluding items like ARR or recurring revenue loans. This should clarify why we feel comfortable, along with other factors I previously mentioned regarding the portfolio's characteristics. The underlying portfolio companies have multiple strategies they can employ if rates continue to rise. The analysis on Page 22, while informative, is static and does not capture many of the growth and cost structure levers we believe will provide additional cushioning and coverage. Moreover, we've discussed loan-to-value ratios in past calls, and we believe that sponsors, supported by significant equity cushions that are junior to our debt, would step in to provide funding if necessary. This gives insight into our perspective on the situation.

I'm glad you mentioned the growth profile. I'm curious about the current growth trends you are observing in your portfolio. I'm not sure what data you have available; some companies report a quarter late while others provide monthly financial statements. I've noticed an index that tracks private middle-market businesses on a month-to-month basis for revenue and EBITDA growth. For the first two months of the third quarter, July and August, the overall index indicated a 2.1% decline in earnings, with technology sector earnings down by 3% and health care down by 5% year-over-year during that timeframe. I would love to hear about the trends you are observing in your portfolio based on the latest data, and I'm interested to know whether this information is from the prior quarter or if you have any current monthly data to share.

Yes, most of our borrowers provide us with quarterly financial information. We have complete Q2 numbers from all our portfolio companies, and within the next week or two, we expect to see a significant number of companies report Q3 results. I can discuss the Q2 numbers we've observed so far and the few Q3 figures that have come in. We're still witnessing strong top-line growth trends, which include both price and volume factors. Due to the pricing power of our borrowers in the industries we focus on, we're seeing the potential for meaningful price increases, even as volumes have leveled off somewhat. Overall, top-line growth remains healthy. However, we will continue to monitor margins for obvious reasons. The good news is that our sectors, primarily tech and services, do not face significant supply chain, freight, or raw material inflation issues. The main concern is labor and wage inflation, though we see some signs of improvement in that area. Starting from relatively high EBITDA margins allows us to handle some margin pressure. In summary, we are experiencing strong top-line growth and a slight margin pressure, but it is not a significant concern in the overall picture.

That's helpful. We discussed interest coverage, EBITDA, and revenue growth trends. I'm curious about the performance of public equity indexes for software-related companies, which, while your book is not entirely software, is the largest sector. That index is down about 40% year-to-date. I would like to know how software multiples have changed in private middle-market businesses this year and what implications, if any, that has for your current portfolio companies.

John, do you want to handle that one?

Sure. I'm happy to address that. Thank you, Rob, and thank you for the questions, Ryan. When we examine software, using revenue multiples for simplicity, we note that last year, strong software businesses traded at revenue multiples ranging from 20 to 30 times. This year, however, we've observed a decline in these multiples for high-quality businesses, dropping to around 6 to 10 times in the public market. Our sponsor clients are still acquiring excellent software businesses, generally paying between 6 to 10 times revenue, which often appears to be a bargain compared to the previous year's valuations of these world-class companies. On average, our attachment points through a total unitranche loan are capped at 2 to 3 times revenue, which represents a maximum 50% loan to value, and usually even better. In summary, I believe the decrease in software multiples primarily reflects issues in the public market, rather than being a significant concern for a unitranche lender positioned at the top of the capital structure, where yields remain strong.

Thank you for the updated slide; it's always impressive. I found the upgraded slide deck particularly useful, especially Slide 13, which illustrates your earnings trajectory, highlighting the mismatch in rate resets for the third quarter and the long-term implications of LIBOR. That's all I have for today. I appreciate your time.

Great. Thanks, Ryan, and thanks for the comments. We appreciate it.

We have a follow-up question from Bryce Rowe from B. Riley.

I apologize for extending the discussion. I had a few more questions that I thought might come up. Regarding upcoming debt maturities, you've effectively addressed the larger issue with the convertible notes offering. Can you share your thoughts on the unsecured notes maturing in 2023? Are you considering using your credit facilities to pay those off, or are you looking into the unsecured market?

Yes. Go ahead, Shiraz.

Yes, Bryce. Yes, I mean, I think, on the unsecured side, we're always looking at the markets. It's not very attractive right now. The bond market is closed right now. The unsecured market is open, but rates are what they are. I think, we feel confident. We've got the convert done. We've tackled sort of the major item that's coming due next year. In terms of the maturities that's coming up earlier part of the year, we feel confident, we have enough availability and we're evolving lines to take care of those. And also, we touched on it briefly earlier. We potentially could delever the business as we get repayments coming in on some of our positions. So that's on the table as well for us to consider. But we feel like we have enough levers right now to take care of maturities without having to do something unnatural.

That's helpful, Shiraz. I have one more question. You've had a successful year in terms of generating gains, and I'm curious about your estimated spillover position. Are we anticipating some level of distributable events in late 2022 or early 2023, or is it possible to carry some of that into 2023?

Yes, not much at this moment. Earlier this year, we did see some gains from our real estate portfolio, although we also had losses from previous years to balance that out. Therefore, there wasn’t really anything that would cause a spillover into next year. We believe that if some of the equity positions mentioned by Laura earlier come to fruition in the medium term, we could find ourselves in a different situation next year. Currently, we feel that we are slightly above flat, but it is not a significant spillover.

Thank you. There are no additional questions meeting at this time, so I'd like to pass the conference back over to Rob Hamwee for any closing remarks. Please go ahead.

Great. Thank you. And once again, thanks, everybody, for their time. We really do appreciate it. You obviously know where to find us for any potential follow-up. And otherwise, look forward to speaking to everybody in the weeks and months ahead. Thanks. Have a great day.

This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.