Stellus Capital Investment Corporation (NYSE:SCM) Q2 2020 Earnings Conference Call - Final Transcript

Jul 31, 2020 • 11:00 am ET

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Stellus Capital Investment Corporation (NYSE:SCM) Q2 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you, sir. [Operator Instructions] Our first question comes from Ryan Lynch with KBW.

Analyst
Ryan Lynch

Hey. Good morning, guys. Thanks for taking my questions. The first one, amaze [Phonetic] you guys, amended and extended your revolving credit facility, but I was curious because it looked like the revolving date was only extended to March of 2021 with the final maturity in October 2021. The final maturity being just a little over a year away and the revolver period six months, seven or eight months away. Now, I was just curious, that felt like a shorter time period than we've seen other BDCs typically when they extend the revolver period.

So, can you just talk about the much more challenging environment and uncertain environment in May, but just was there a pushback from the bank lending groups which were not extending that revolver to a longer, more pushed out date?

Executive
Robert Ladd

Yeah. Ryan, so this is Rob. I'll cover that. No, not at all. Very good support from our banking group. I think as you'll recall that, that amendment we worked on in April and then closed in May during the -- maybe more of the height of the pandemic. And so I think as a group, the thought was, let's get through this, see how the second quarter is, and then we'll readdress a longer-term extension, which we're in the process of doing.

Analyst
Ryan Lynch

Okay. And then, I think you want to make sure I got these numbers right. I know you gave some numbers out on the cash availability. But you had $23 million of cash and $45 million of capacity under credit facility as of June 30th. Can you provide the numbers of how much of that cash was remained in the SBIC, as well as of the $45 million of available credit facility capacity, how much of that capacity was fully available to access to you all today?

Executive
Robert Ladd

So with respect to -- and Todd, you should correct me if I'm mistaken here, but -- so cash at June 30, that's not in the SBIC entities, it was approximately $3 million. And in terms of the $45 million that could be borrowed, it would be roughly 30 -- let's say, 30 -- $37 million or $38 million that could be borrowed without increasing the borrowing base from any loans. And therefore, if we made any loans under the revolvers, we will be fully available. So we view it as fully available, but it can be drawn down to within -- I think it was $222 million of the $230 million without any additional borrowing -- additional assets contributed.

Executive
W. Todd Huskinson

Yeah, that's right.

Analyst
Ryan Lynch

Okay, okay. And then this quarter, it looks like you guys are stuck between your hurdle rates from an incentive fee standpoint. Given your kind of outlook as far as capital deployment, is it reasonable to expect that you guys will be operating to the low and upper end of your guidance, incentive fee hurdle rates for the foreseeable future?