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Participants

Peter Scusa; Investor Relations; Great Elm Capital Corp

Matt Kaplan; President & Chief Executive Officer; Great Elm Capital Corp

Keri A. Davis; Chief Financial Officer & Treasurer; Great Elm Capital Corp

Michael Keller; President; Great Elm Specialty Finance

Presentation

Operator

Ladies and Chairman. Good morning and welcome to the Great Elm Capital Corp third quarter, 2024 earnings conference call.
(Operator Instructions)
It is now my pleasure to introduce your host, Peter Scusa with Investor Relations. Please go ahead, sir.

Peter Scusa

Hello and thank you everyone for joining us for Great Elm Capital Corp's third quarter, 2024 earnings conference call. If you'd like to be added to our distribution list, you can email iinvestorrelations@greatelmcap.com, or you could sign up for alerts directly on our website. www.greatelmcc.com. I'd like to note the slide presentation posted on our website accompanying today's call. The slide presentation can be found on our website under events and presentations on our website. You can also find our earnings release and SEC filings. I like to call your attendant to the customer a safe harbor statement regarding forward-looking information also, please note that nothing in today's call constitutes an offer to sell or solicitation of offers to purchase our securities. Today's conference call includes forward-looking statements and we ask that you refer to Great Elm Capital Corp's filings with the SEC for important factors that could cause actual results to differ materially from these statements. Great Elm Capital Corp does not undertake to update forward-looking statements unless required by law to ping copies of sec filings. Please visit Great Elm Capital Corp's website under financials sec filings or visit the SECs website. I see the call today is Matt Kaplan. Great Elm Capital Corp's Chief Executive Officer who will be joined by Chief Financial Officer, Keri Davis, Chief Compliance Officer, Adam Kleinman, and Michael Keller, President of Great Elm Specialty Finance. I will now turn the call over to GECC CEO, Matt Kaplan.

Matt Kaplan

Thanks Peter and thank you all for joining us today.
I am pleased to report we had a busy and record setting quarter for GECC. We completed a $22 million attack onto the GECCI bonds in July with an institutional investor, utilizing our stuff for the first time. In August, we CLOsed the second CLO in our recently formed CLO JV in September. We priced our GECCH bonds at a lower rate than our previous other debt financings this year and utilized the proceeds to take out our notes maturing in January 2025, leaving us with no maturities for the next 20 months, and finally, I am pleased to report that our investment income was the highest ever in GECC's history and not only the highest but also the highest cash income quarter as well overall. It was a very strong third quarter for GECC with NII of $0.39 per share rebounding from $0.32 in 2Q and exceeding our quarterly distribution of $0.35.
Our NII growth was primarily driven by the increase in cash flows attributed to our CLO JV. In addition, we ended the quarter with NAV of $12.04 per share on September 30th, essentially flat from $12.06 as of June 30th. Further, we believe our portfolio remains solid and we continue to actively monitor our investments. Nonaccruals declined in the quarter and totaled $1.3 million or less than 1% of portfolio fair value as of September 30th. This compares to $9.4 million or approximately 3% of portfolio fair value as of June 30th. We believe the bulk of the impact to NAV from these non accrual positions has been realized.
Looking forward, we do expect NII to step down in the fourth quarter due to the uneven nature of CLO distributions at the start of their life.
As we scale and expand our asset base, we would expect these quarterly income fluctuations to normalize over time.
This year, we have completed numerous equity and debt issuances in excess of $130 million, adding a lot of noise into our 2024 numbers, while at the same time increasing our scale. These actions have laid a strong foundation for GECC as we look forward. Additionally, as distributions from our CLO focused JV continue to ramp combined with other income from our strategic capital deployments backed by our recent capital raises, we believe we remain well positioned to continue to increase our scale and to cover our dividend.
A key highlight this quarter is the early success of our CLO joint venture strategy, where we've deployed approximately $33 million through September 30th. We are encouraged by the first distributions from our CLO investments including a large initial distribution on our first CLO investment in July and a strong return on our warehouse investment related to the second CLO settling in August. Through the third quarter. We generated a strong cash return on our JV investment, receiving approximately $3 million in distributions on our $33 million invested. Our JV which holds majority CLO positions increases GECC's exposure to a diverse portfolio of broadly syndicated first lien loans. These largely floating rate investments held by the CLOs are financed primarily by long term floating rate debt mitigating interest rate risk. We believe our innovative structure provides superior financing as compared to typical BDCJD loan structures and also enhances our ability to minimize the book tax differences that holding CLO equity directly can create.
We continue to believe that our CLO joint venture will become an increasingly significant source of income for GECC as we continue to expand the vertical, targeting high 10% to 20% returns over time.
With this foundation in place, we are well situated to capitalize on the CLO asset class which has historically demonstrated resilience across various market cycles. CLOs represent one of the most established forms of nonrecourse finance bank loans making them an attractive addition to our investment strategy.
Moving on to our capital structure during the quarter, we also successfully issued $36 million of 8.125% GECCH notes due 2029 and the underwriters exercised their full shoe for an additional $5.4 million in October.
We subsequently used the net proceeds along with available cash to redeem all outstanding six and three quarter percent GECCM notes due January 2025.
The refinancing extends our debt maturity profile into 2026 and beyond, providing us with enhanced financial flexibility. Overall, we delivered a solid quarter of results supported by our enhanced investment platform, strengthened balance sheet and diversified portfolio. These core strengths create a strong framework to execute on as we seek to further advance our long term growth strategy. With that. I'd like to hand the call over to Keri Davis to discuss our third quarter, 2024 performance.