Great Elm Capital Corp. 7.75% Notes Due 2030 Q1 FY2024 earnings call

• Raised nearly $60 million in fresh capital in recent months, including $24M equity in Feb and $34.5M notes in April.
• Rotated into higher-yielding investments, deploying ~$64M into new investments at avg 13% yield, and monetized $29M of assets at avg 11% yield. 69% of debt portfolio was floating rate at quarter end.
• Formed a CLO joint venture, expect distributions from H2 2024, aiming for mid-teens to low 20% returns from CLO structures.
• Specialty Finance had a sluggish start to 2024 but saw a pickup near Q1 end, with Jason Schwartz joining as Chief Credit Officer and exiting a position in lenders funding revolver.

In the first quarter, GECC generated NII of $3.2 million or $0.37 per share. NAV per share ended at $12.57 on March 31, down from $12.99 at year-end 2023, mainly due to illiquid Level 3 investments. Net assets as of March 31, 2024, rose to $119 million. Asset coverage ratio improved to approximately 180.2% from 169% at December 31. Total debt outstanding was ~$148 million as of March 31, with cash and money market securities at ~$9 million.

• Expect NII in Q2 to be relatively consistent with Q1. H2 NII expected to meaningfully outpace H1.
• Believe they remain well positioned to continue covering the dividend and Board may evaluate a special distribution around year-end.

• Volatility in the macro environment could impact capital deployments.
• Impact from inherited investments, where total nonaccruals as of quarter end were $4.7 million of portfolio fair value or less than 2%.

Q: Characterize the 29 investments made in the quarter by category?

A: Over half are first lien secured debt, and ~$10.8 million into CLO subordinated notes (CLO Equity).

Q: How is the CLO JV structured?

A: It's a joint venture where GECC is 75%, partner is 25%, investing in CLO securities and warehouse facilities.

Q: How will GECC access attractive investment opportunities given capital in CLO equity?

A: Initial investment was ~$10.8M, with ~$300M assets after April bond deal, expecting growth as attractive opportunities are identified.

Q: Role of JV partner?

A: Involved in CLO business, strategic relationship with GECC.

Q: Continuing initiatives in specialty finance boxes?

A: Continuing to evaluate deal opportunities but have high bar, not found suitable ones yet.

Q: Healthcare finance pressures?

A: Focused on asset-based receivable financing, judicious in deployment, monitoring cash flows closely.