Welcome to the Fidus Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Jody Burfening. Please go ahead.
Thank you, Gigi, and good morning, everyone, and thank you for joining us for Fidus Investment Corporation's Fourth Quarter 2021 Earnings Conference Call. With me this morning are Ed Ross, Fidus Investment Corporation's Chairman, Chief Executive Officer, and Shelby Sherard, Chief Financial Officer. Fidus Investment Corporation issued a press release yesterday afternoon with the details of the company's quarterly financial results. A copy of the press release is available on the investor relations page of the company's website at fdus.com. I'd also like to call your attention to the customary safe harbor disclosure regarding forward-looking information included on today's call. The conference call today will contain forward-looking statements, including statements regarding the goals, strategies, beliefs, future potential operating results, and cash flows of Fidus Investment Corporation.
Although management believes these statements are reasonable based on estimates, assumptions, and projections, as of today, March 4th, 2022, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties, and other factors, including, but not limited to, the factors set forth in the company's filings with the Securities and Exchange Commission. Fidus undertakes no obligation to update or revise any of these forward-looking statements. With that, I would now like to turn the call over to Ed. Good morning, Ed.
Good morning, Jody, and good morning, everyone. Welcome to our Fourth Quarter 2021 Earnings Conference Call. I'm going to open today's call with a review of our fourth quarter performance and our portfolio at quarter end, discuss the positive outlook behind the board's dividend decisions, and then offer you an update of our views on deal activity in the lower middle market in the year ahead. Shelby will cover the fourth quarter financial results and our liquidity position. Once we have completed our prepared remarks, we'll be happy to take your questions. Although the last quarter of the year is typically a busy time for us, the fourth quarter of 2021 was exceptionally busy, extending the trend of elevated velocity of M&A and refinancing activity to five consecutive quarters.
As you may recall from last quarter's call, we were underinvested at the start of the fourth quarter, and we expected to grow the portfolio by the end of the year. Although at the same time, some portfolio companies were evaluating strategic alternatives. What we didn't expect was that a couple of deals would come together quickly toward the end of the quarter. As a result, repayments were once again at very high levels, including a sizable level of equity realizations and ultimately exceeded originations. Amidst this flurry of activity, we continued to execute our proven investment strategy of carefully selecting investments in high quality, lower middle market businesses that possess resilient business models that generate excess levels of cash flow to service debt and that have positive long-term outlooks.
Leveraging the breadth of our and depth of our relationships with deal sponsors, our industry knowledge, and our differentiated perspective on financing solutions. Our portfolio performed extremely well during the fourth quarter. Adjusted net investment income, which we define as net investment income, excluding any capital gain incentive fee attributable to realized and unrealized gains and losses, was $12 million or $0.49 per share, compared to $10.7 million or $0.44 per share last year. Net asset value grew to $487.8 million or $19.96 per share, driven by a combination of strong operating performance and underlying portfolio value appreciation, and was boosted by net realized gains of $42.1 million or $1.72 per share, including $20.4 million from the sale of Mesa Line Services LLC.
Fidus paid a base quarterly dividend of $0.32 per share, a supplemental cash dividend of $0.04 per share, and a special dividend of $0.05 per share for a total dividend of $0.41 per share for the fourth quarter. For the first quarter, the board of directors, recognizing our extremely strong performances throughout the year and the exceptionally high level of net realized gains, increased the base dividend from $0.32 per share to $0.36 per share, a 12.5% increase, and revised the formula to calculate the supplemental dividend each quarter, distributing a greater share of surplus income generated by our portfolio to our stockholders. Previously, the supplemental dividend was equal to 50% of the surplus in an adjusted NII over the base dividend from the prior quarter.
Under the revised formula, the supplemental dividend is now equal to 100% of the surplus. For the first quarter dividend, the surplus is $0.17 per share or $0.49 per share of adjusted NII, less the fourth quarter base dividend of $0.32 per share for a total dividend of $0.53 per share this quarter. Base dividend of $0.36 per share and a supplemental dividend of $0.17 per share will be payable on March 25, 2022 to stockholders of record as of March 11, 2022. In terms of originations, we invested $101.2 million in debt and equity securities, of which $72.1 million or nearly three-quarters of the total was invested in first lien debt and $25.8 million was invested in second lien debt.
In terms of new portfolio companies, we invested $79 million in six of them, consisting of $18.5 million in first lien debt, revolving loans, common equity and warrants in Ascensus Midco Inc, a market leading provider of cloud-based talent management software solutions. $8.5 million in first lien debt, subordinated debt and common equity in Auto CRM LLC, doing business as Dealer Holdings, a leading SaaS-based provider of customer communication software to the auto repair market. $13 million in first lien debt in Green Cubes Technology LLC, doing business as Green Cubes, a leading provider of lithium power systems for motive, mobile and stationary power in the industrial automation, material handling and telecom markets. $5.7 million in first lien debt in Mobilewalla, Inc, a leading provider of consumer intelligence solutions.
$16.5 million in first lien debt in NetBase Solutions, Inc., doing business as NetBase Quid, a global leader in artificial intelligence powered consumer and market intelligence. $16.8 million in second lien debt and common equity in Suited Connector LLC, a leading marketing technology platform for digital customer acquisition across most consumer verticals, including financial services, home services and insurance. These new investments reflect our continued focus on companies that are relatively insulated from the adverse effects of the pandemic, including supply chain disruptions and margin compression due to rising material, freight, and labor costs. In terms of repayments and realizations in the fourth quarter, we received proceeds totaling $153.7 million, with nearly 2/3 of the total from second lien and subordinated debt investments.
We also successfully monetized equity investments in seven portfolio companies, realizing $42.1 million of gains in Q4, having spent the time and effort on optimizing outcomes. From my perspective, this reflects well on the team's portfolio management skills and further differentiates Fidus in the market. We're patient, we're focused on the long term, and we deliver strong results for our shareholders. In terms of sales and exits, we received payment in full of $7.1 million, including a prepayment penalty on our subordinated debt in the Transonic companies. We received payment in full of $12.1 million, including a prepayment penalty on our second lien debt in Pool and Electrical Products.
In addition, we received proceeds of $10 million and a realized gain of $9.1 million on our equity investment in Pool and Electrical Products related to the sale of the business. We received payment in full of $11.2 million on our second lien debt in B&B Roadway and Security Solutions. In addition, we received a distribution of $0.7 million and a realized gain of $0.2 million on our equity investment related to the sale of the business. We received payment in full of $30 million on our existing subordinated debt investments and rolled $10 million into a new subordinated debt investment in BCM One Group.
In addition, we received proceeds of $3.3 million and realized a gain of $2.5 million on the exit of our equity investments from the sale of our equity. We received proceeds of $7.5 million and realized a gain of $6.4 million related to the exit of our equity investment in Revenue Management Solutions. We received proceeds of $2.3 million and realized a gain of $1.8 million related to the exit of our equity investment in Alzheimer's Research and Treatment Center. We received payment in full of $13 million, including a prepayment penalty on our first lien debt investments in Specialized Elevator Services Holdings. In addition, we received proceeds of $2.3 million and realized a gain of $1.3 million related to the exit of our equity investment.
We received payment in full of $13.9 million on our subordinated debt investment in UVO. In addition to these sales and exit, we closed deals on two control investments during the quarter, and I wanted to take a moment to share with you some details about them. First, GreenFiber. As you might recall, Fidus assumed control of GreenFiber in late 2019 after several difficult operating events.
Throughout our ownership period, our team worked side by side with an outstanding management team, and ultimately, we facilitated a strategic transaction that merged Greenfiber with another company to create Applegate Greenfiber Intermediate, the leader in the cellulose insulation arena under new private equity sponsorship. As part of this transaction, the assets of US Greenfiber were sold, and we received a new $9.6 million subordinated loan and $12.8 million of equity in Applegate Greenfiber Intermediate in consideration for 81% of our second lien debt investment in US Greenfiber. As the former company winds down, any residual proceeds will go to pay down the remaining $5.2 million of US Greenfiber debt on our books.
The fair value of the residual debt and equity investments in US GreenFiber is marked at zero, and we have placed this debt investment on non-accrual status. We believe this transaction positions our investments for positive outlooks while lowering our risk. Second, Mesa Line Services. As you might recall, we assumed control of Mesa Line Services in the second quarter of 2021 after several self-inflicted company events occurred. Following the ownership transition, we invested meaningful capital to shore up the company's financial position while working hard to improve the overall operations of the business and positioning the company to be sold to a strategic buyer. As a result of our approach and portfolio management skills, the company was sold, and we received payment in full of $26.5 million, including a prepayment penalty on our subordinated debt investments.
In addition, we received a $21.6 million distribution and realized a net gain of $20.4 million on our equity investments, reflecting the value we created. Very proud of the work our teams put into these control investments and the outcomes of each of them, showcasing our capabilities, which are differentiated in this industry. To put repayments and realizations for the fourth quarter in perspective, over the course of 2021, we received $472.8 million from a diverse set of deals and exited 11 portfolio companies. Subsequent to the end of the quarter, we invested a total of $62.6 million in 4 new portfolio companies.
We invested $10.8 million in first lien debt and common equity of a leading provider of alternative out-of-home advertising across the convenience store and gas station, retail, truck side, and transit markets, among others. We invested $22.4 million in first lien debt and common equity of Micronics Filtration Holdings, Inc., doing business as Micronics Engineered Filtration Group, Inc., a global provider of aftermarket and OEM filtration equipment and consumables for use in mining, chemical wastewater, and various other industrial end markets. We invested $15 million in second lien debt of Quest Software US Holdings, Inc., a global cybersecurity, data intelligence, and IT operations management software provider.
We invested $14.4 million in subordinated debt, preferred equity, and common equity of CIH Intermediate, LLC, a technology-based risk management firm that provides education and customized price risk management services to businesses affected by volatility in agriculture markets. We also received $13 million in repayments consisting of the following. We received payment in full of $6.7 million on our second lien debt investments in Mirage Trailers. We received a distribution on our equity investment in Frontline Food Services, LLC, formerly known as Accent Food Services, resulting in a realized gain of approximately $200,000. We received a distribution on our equity investment in SpendMend LLC, resulting in a realized gain of approximately $6.1 million.
The fair value of the portfolio at quarter end was $719.1 million, equal to 115.7% of cost, reflecting the underlying performances of the portfolio companies and appreciation in the fair value of the portfolio, offset by repayments and realizations. We ended the fourth quarter with 70 active portfolio companies and eight companies that have sold their underlying operations. While we had high levels of repayments and originations during the quarter, overall, the portfolio remains well-structured to produce recurring income and through our equity investments to provide us not only with incremental profits, but also a reasonable margin of safety. Our portfolio continues to perform well and remains well-positioned from a risk perspective for the current business environment.
Over the course of 2021, our investments in first lien debt nearly doubled on a fair value basis, while repayments were concentrated in second lien and subordinated debt investments. As a result, first lien debt grew to approximately 65% of our debt portfolio as of December 31st. In terms of the total portfolio mix on a fair value basis, debt investments comprised about 77% of the total and equity investments accounted for the remaining 23%. Looking back on 2021, this has been a period of high velocity from a deal activity perspective, and we set records in terms of originations, repayments, and net asset value.
Over the past five quarters, with repayments of $573.5 million exceeding originations of $450.6 million, we have seen a rotation of a large majority of our debt portfolio into new portfolio companies without sacrificing yield. While also being equal, we would have preferred to have ended the year in a net origination position. The high level of repayments is a testament to the overall health of our portfolio and to the strength and resiliency of our portfolio companies. Especially in light of the pandemic, which made them attractive candidates for M&A transactions and from a credit perspective for refinancing's and recapitalizations. Looking ahead to 2022, we expect another busy year with strong deal flow, although in all likelihood, not at the velocity levels of 2021.
The outlook for M&A and refinancing's in the lower middle market remains strong, and some companies are planning to initiate strategic alternatives in the coming months. As a result, in 2022, we're positioned to both grow the portfolio and monetize some of our equity investments while staying focused on our long-term goal of generating attractive risk-adjusted returns and delivering value for our stockholders. Now I'll turn the call over to Shelby to provide some details on our financials and operating results. Shelby?
Thank you, Ed, and good morning, everyone. I'll review our fourth quarter results in more detail and close with comments on our liquidity position. Please note I will be providing comparative commentary versus the prior quarter, Q3 2021. Total investment income was $24.1 million for the three months ended December 31st, a $2.9 million increase from Q3, primarily due to a $1.9 million increase in fee income, a $0.8 million increase in dividend income, and a $0.1 million increase in interest income. The increase in fee income was driven by a one-time $1.3 million management fee related to the successful exit of our investments in Mesa Line Services.
Total expenses, including income tax provision, were $21.7 million for the fourth quarter, approximately $5.5 million higher than the prior quarter, primarily due to a $4.9 million increase in the capital gains incentive fee accrual. Excluding the accrued capital gains incentive fees, total expenses in Q4 were $12.1 million, a $0.6 million increase versus Q3 due to the annual excise tax accrual, which was $0.5 million in Q4, and a $0.2 million increase in income incentive fees. Note, the capital gains incentive fee is accrued for GAAP purposes, however, is only payable to the extent cumulative realized gains exceed realized losses and unrealized depreciation. As of December 31st, 2021, we had accrued capital gains fees on the balance sheet of $29.2 million, of which $6.1 million is payable. Turning to our capitalization.
In October, we successfully issued $125 million of unsecured notes at 3.5% interest rate. The net proceeds and available cash were used to pay down the outstanding balance on the line of credit of $40 million at closing and to fully redeem $82.3 million of public notes due in 2024, with interest rates ranging from 5.375% to 6%. Given the notice requirements, the bond redemptions occurred on November 2nd, so we had one month of incremental interest expense on the public notes in Q4. In conjunction with the bond redemptions, we realized a loss on extinguishment of debt in Q4 of $1.6 million related to the unamortized deferred financing cost on the redeemed bonds.
Taking into account the debt financing, the weighted average interest rate on our outstanding debt was 3.7% as of December 31st, 2021. We ended the quarter with $374.6 million of debt outstanding, comprised of $107 million of SBA debentures, $250 million of unsecured notes, and $17.6 million of secured borrowings. Our debt-to-equity ratio as of December 31st was 0.8x or 0.6x statutory leverage excluding exempt SBA debentures. Net investment income, or NII, for the three months ended December 31st was $0.10 per share versus $0.21 per share in Q3. Adjusted NII, which excludes any capital gains, incentive fee accruals, or reversals attributable to realized and unrealized gains and losses on investments, was $0.49 per share in Q4 versus $0.40 per share in Q3.
For the three months ended December 31st, we recognized approximately $42.1 million of net realized gains, primarily from our equity investments in Mesa Line Services, Pool and Electrical Products, Revenue Management Solutions, BCM One, Alzheimer's Research and Treatment Center, and Specialized Elevator Services. Turning now to portfolio statistics. As of December 31st, our total investment portfolio had a fair value of $719.1 million. Our average portfolio investment on a cost basis was $8.8 million at the end of fourth quarter, which excludes investments in eight portfolio companies that sold their operations that are in the process of winding down. We have equity investments in approximately 82.1% of our portfolio companies, with an average fully diluted equity ownership of 4.7%. Weighted average effective yield on debt investments was 12.3% as of December 31st.
The weighted average yield is computed using the effective interest rates for debt investments at cost, including the accretion of original issue discount and loan origination fees, but excluding investments on non-accrual, if any. Now I'd like to briefly discuss our available liquidity. As of December 31st, our liquidity and capital resources included cash of $169.4 million, $1.5 million of available SBA debentures, and $100 million of availability on our line of credit, resulting in total liquidity of approximately $270.9 million.
Subsequent to year-end, we paid down $20 million of SBA debentures in our second SBIC fund and borrowed an incremental $31.5 million of SBA debentures in our third SBIC fund. Taking into account subsequent events, which includes incremental SBIC debt availability, we currently have approximately $267.3 million of liquidity, which includes $31.5 million of available SBA debentures. Now I'll turn the call back to Ed for concluding comments. Ed?
Thanks, Shelby. As always, I'd like to thank our team and the board of directors at Fidus for their dedication and hard work and our shareholders for their continued support. I will now turn the call over to Gigi for Q&A. Gigi?
As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes to the line of Robert Dodd from Raymond James. Your line is now open.
Good morning, and congratulations on a good quarter. Good is obviously understating that. Couple questions, Ed. I mean, first on Mesa, I mean, thank you for the color on that. I mean, you mentioned earlier in your prepared remarks some deals that came together really fast. I wonder if that was one of them, 'cause if I look back, I mean, you took it over in Q2. In Q3, it was marked below cost, so the equity was marked at zero. Then, obviously, you just had a large positive equity realization on that.
Can you give us any more color on just like how fast that deal came together and was it unanticipated to happen this early in the process or anything like that? Because obviously the gain versus the mark in Q3 is pretty startling.
Sure, sure.
In a good way.
Yeah, in a good way, I think. Great question, Robert. Look, you know, we took over Mesa, understanding the business well, but understanding it was a great franchise, if you will. It obviously also had some issues that, you know, we had to manage and deal with. We did that throughout our investment. I would. You know, what I would say is our intent was not to hold the business for, you know, as an owner for the long term, if you will. We always had the intention of kind of shoring things up, and then we felt like we knew it was a great franchise, and that we could, you know, kind of right the ship and liquidate our investments.
The company performed relatively well through that period, you know, post our acquisition, though it did need some support from a capital perspective and liquidity perspective. Ultimately, you know, we were having some one-off conversations, you know, from a sale perspective, and one of those came together very quickly. I'd say, you know, I don't know, probably two and a half months start to finish. You know, given the complexity of the situation, we did not think it could move that quickly, but it did. It ended up coming together at the very end of December. That's kind of the synopsis of it.
I appreciate that. Yeah. Thank you for that additional color there. I mean, on not just Mesa, but everything, I mean, is any of the gain in Q4 shielded from the previous losses? Not that you have a lot of those. Or, you know, being held down in the blocker or anything like that, or is all this going to flow to investment company taxable income? If that's the case, I mean, separate question, but related, what's the spillover or undistributed taxable income estimate for the end of the year?
Sure. Why don't I let Shelby jump in on that one? Probably more in her domain. Shelby?
Sure. Great question. We had some, again, for tax purposes at the RIC, some carryforward losses from 2020 of approximately $25 million. However, while some of our gains that we realized in 2021 were in the blocker, some of the more substantial ones were not. As a result, Robert, to your point, you know, we have in our spillover about $19.9 million of gains. Now incremental gains at the RIC will need to go into the spillover calculation and ultimately be distributed. At the end of the year, we had $1.56 of estimated spillover, which included the $19.9 million of gains recognized in 2021 at the RIC.
Thank you for that level of color. On that basis, I mean, you know, it's a great air quotes around problem to have. The new dividend policy, base dividend is $1.24. If you distribute all the surplus this year, you know, spillover wouldn't grow, but you'd still be bumping up against the edge of how much spillover the IRS will generally let you keep. I mean, you can move declaration dates around and things like that. I mean, I guess the point is the board obviously already increased the dividend and change of policy. Is there anything else in discussion to manage that?
Because I don't think you wanna, you know, squeeze yourself into making dividend decisions based on what the IRS tells you to do.
Sure. Let me just start with our estimated spillover of $1.56 at the end of 2021. You know, kind of with our new increase in the base dividend and supplemental dividend policy, we will chip away at that and make a pretty big dent. To your point, we will likely need to declare our fourth quarter dividend earlier in advance of filing our tax return on October 15th in order to fully satisfy and distribute the $1.56. Looking forward to 2023, you know, we'll just have to kind of continue to monitor activity in 2022. As you've kind of noted, you know, any incremental gains will impact spillover that we have at year-end 2022, and then that'll obviously impact dividend decisions that we need to think about in 2023.
Got it. Thank you.
We are actively monitoring it because as you highlight, we do have a high-class problem here is that
Yeah.
You know, we've generated a fair amount of spillover and are approaching kind of the upper limits of what you can reasonably distribute, even if you declare your fourth quarter dividend early.
Okay. I really appreciate that, Shelby. Thank you. One more if I can. I'm monopolizing everything. Just on the environment, I mean, you said, you know, 2022 probably down versus 2021 in terms of originations, not surprising given how active it was. You've already done $62 million, I think, in what is a seasonally slow quarter typically. I mean, you know, last year you did $63 million in the first quarter. It sounds like activity is still very elevated right now. I mean, is that the feeling that you think it's gonna slow down through the rest of the year, or is that just conservative assessment?
Sure. Let me just touch on the market for a second, if I could, and then I'll answer that question. The Q4, as everyone knows and I think has heard, was you know, extremely robust from just an overall market activity perspective. You know, M&A was active. There were premiums being paid for very good businesses that haven't been impacted meaningfully by COVID-19 and the other issues that are out there, which are numerous. And there's a fair bit of capital, right, that are chasing good businesses and, you know, from both a lending as well as an equity perspective.
What I would say as I sit here today is that activity levels are still relatively healthy, but I do not think that they'll be at the same levels as last year. You know, I think at the moment, quite frankly, the market and from a deal flow perspective is recovering a little bit. It takes some time to build pipelines at the various M&A shops and other shops. Yes, it's still active, and we do expect the year to be active absent any, you know, huge events that end up derailing the economy and slowing things down in a material way. At the moment, you know, there's both healthy M&A. It's a healthy M&A and lending environment from our perspective.
Company performance is pretty good, generally speaking, and you know, especially those companies that you know aren't as exposed to the issues of inflation and the other issues that are out there. We're keeping an eye on it, right? It's an interesting environment, and there's a lot of moving pieces. We are continuing to focus on those businesses that are less exposed to the environment, if you will. You know, evaluating some opportunistic investments where we have second way out type situations, meaning asset support and IP, that kind of thing. Hopefully that's helpful color.
I think you know the market is active, not robust like it was last year, but I'd say active, which is a good thing and bodes well for us to continue to grow our portfolio.
Thank you. Thank you for that color . Again, congratulations on a really good quarter and particularly for, I mean, you know, US GreenFiber and Mesa that you had to take control of and generated a very good outcome.
Thanks, Robert. It's good talking to you.
Thank you. Our next question comes from the line of Ryan Lynch from KBW. Your line is now open.
Hey, good morning, and thanks for taking my questions. I would just echo, you know, Robert's comments on, you know, really nice quarter and really nice 2021 all around. One thing I was just wondering if you could help out with, do you guys have the total level of equity proceeds received in the quarter, whether it's through scaled equity investment or like, you know, in the case of Mesa, a distribution received? I was trying to get a sense of kind of the total level of non-yield equity investments or distributions that came here in the fourth quarter.
Shelby, do you?
If you don't have it all.
Yeah. I might get back to you offline, Ryan, on that detail, if that's all right.
Yep. That'd be great if you could follow up with that. The other question I had was, you guys right now are sitting on, you know, $170 million of cash, and only $17 million on your facilities. You guys are in a pretty strong sort of net liquidity, you know, cash position. Kind of a two-part question as you guys look to deploy that capital. You know, as you guys have had, you know, great realization throughout the year, it seems you've gotten that you've gotten to this place, you know, from really, you know, great gains in your portfolio.
Have you considered putting that cash in any sort of like temporary high quality, lower yielding investments that have liquidity, number one, or do you plan on keeping it, you know, just in cash? Number two, have you thought about basically expanding, you know, the size of deals or the portfolio company size that you guys are looking to put capital into, which would be slightly larger deals than you're doing now in order to put that capital or are you guys just gonna continue kind of the same process you guys have always done and same investment strategy you guys have done in the past?
Sure. Great question, Ryan. Let me just touch on originations and repayments for this quarter just to set the table, and then I'll answer those questions. You know, what we expect this quarter, I mean, I guess first and foremost, our focus, and it's always been there, is on capital preservation and generating attractive risk-adjusted returns. You know, for us these days, what that means is a majority of our investments are first lien investments, typically in recurring revenue type models. Obviously we're also continuing to make, you know, what I'd call opportunistic, but second lien and subordinated debt investments like we always have for, you know, superlative situations in companies. That's the approach.
So far this year, this quarter, we've made four new investments, which we highlighted. We expect additional origination activity this quarter as well. We also expect some existing portfolio companies to make some acquisitions where there'll be some modest increases in, you know, our exposure to those companies as well. That's kind of the state of play from that perspective. You know, from a repayments perspective, you know, we announced that Mirage was sold and our debt was repaid there. Our equity investment was also sold, but we haven't received the equity proceeds yet. We do expect a gain, a small gain there, but it's not the number that we know yet.
You know, at this point we also had two other equity realizations, Frontline, which is the old Accent Food Services, you know, small gain, and then a $6 million gain with regard to SpendMend. We've obviously had some realizations, but most of it's equity, quite frankly. We do not expect any additional meaningful realization activity as I sit here today. Now, having said that, we've got a full month to go. We got surprised last time. Some of that was, you know, we just were able to facilitate a couple transactions quicker than we thought.
In summary, I think repayments are gonna be a little bit lighter, if you will, this quarter than they have been the past five quarters by a long shot. That's a good thing with regard to trying to grow the portfolio and utilize some of the cash that we have. Secondly, I'd say, you know, just given the velocity over the last five quarters, our portfolio is pretty young. I expect repayments to occur. Some of them are, you know, quite frankly, things we're trying to engineer, but they're not huge numbers.
My belief system is repayments will be lower over the foreseeable future, and that we should continue to be able to grow the portfolio in a meaningful way here as we move forward. Getting to your two questions, I'd say, you know, we're not looking to just deploy the cash into other lower yielding investments at this point in time. We believe that we can actually utilize the cash for investment here over the next, you know, call it six- 12 months. We do think it's gonna be an active year and again lower repayments.
There's, you know, only time will tell, as we all know, and we do get surprised from time to time, but that's kind of what we see. We're staying focused on, you know, the basics of our business and what we like to do. In terms of expanding the size of the deals, from time to time, yes. Where we are looking to do that would be a first lien loan that maybe we would, you know, create a follow structure, first-out, last-out structure, but maybe we'll do a unitranche structure where, yes, it would impact yields a little bit. Overall, you know, that would have us deploying a little bit more capital.
That's the only thing that we're doing a little bit of, but I don't think that'll be to the degree that it greatly impacts, you know, our business model. Hopefully that's helpful. It's a little long-winded, but I wanted to give you some context.
Yeah. That, that's helpful. That's good context. I think I would agree with your overall sentiment. I mean, you definitely don't wanna stray too far from, you know, your, you know, your core and your original strategy, which is, you know, obviously put up some fantastic, you know, long-term results. You know, I would agree with all that. I appreciate the time today. Those are all my questions. Again, congrats on the really nice quarter.
Thanks, Ryan. Good talking to you.
You too.
We'll follow up.
Thank you. Our next question comes from the line of Bryce Rowe from Hovde. Your line is now open.
Thanks. Good morning, Ed and Shelby.
Good morning, Bryce. How are you?
I'm good. Ed, I wanted to ask about the deals here in the fourth quarter. I think historically you have done more, or at least recent past, you've done more of the last out type structure. I only saw one of the deals here in the fourth quarter that followed that type of last out structure. It sounds like, you know, based on your answer to Ryan that, you know, that was purposeful, so to speak. Maybe we start to see, you know, less of that type of structure or something else kind of just, I guess, idiosyncratic with the deal flow in the fourth quarter.
Yeah. I don't think it was as purposeful. It wasn't overly purposeful. I think we look at each transaction, you know, on a standalone basis, and there's a lot of things that go into it. First and foremost, what's the quality of the business? We figure out what's the right structure. Is it, you know, is it a first lien investment? Is it second lien investment for us? You know, how do we, if we like the company and the situation, you know, how do we, you know, find a way to get involved?
There are also times when we wanna, you know, make sure we, you know, have, you know, provide a loan that provides the value and that it needs to win the business, but also puts us in a position to manage the investment in a way that we think is appropriate. I you know, I think every deal is different. But you know, speaking to the comments that I've, you know, I made to Ryan, I do think one way to deploy a little bit more capital at attractive yields, especially given the cash on our balance sheet, is to do some unitranche investments that are dollar one as opposed to follow-ons that we may have structured. There are a lot of factors that go into that.
Do we need to move really quick, or do we have time to make sure we have a partner on that follow transaction? It's hard to generalize, if you will. You know, we are continuing to focus on the quality of the assets that we invest in. First lien, I think, will continue to be a large majority of what we do. You know, what's follow and what isn't. It's kind of case by case, quite frankly. There are a couple cases where we're investing in the whole security, which does end up driving a little bit more, you know, dollars out the door, which is a good thing for, I think our shareholders at this point. Hopefully that gives you some clarity.
No, that does. That I kind of figured it might be like that, but just thought I would ask. I wanna ask about the right side of the balance sheet. It's kinda nice to see continued drawdowns of the SBA debentures. You know, and it feels like you're starting to find more places for SBIC-eligible investments. Can you talk to that a little bit? And then, Shelby, I wanted to ask you if we're gonna see a loss on the prepayment here of the SBA debentures that you paid down in the first quarter. If you could help quantify that'd be helpful.
To answer your first question, yes, we are, you know, a little bit of it's, you know, just luck, if you will. What deals qualify for the SBA is obviously a critical, you know, component of whether we're using those facilities. When they do qualify, we generally try to utilize, you know, or at least partially utilize at a minimum, you know, the SBA program and the dollars. That has worked well for us in the past. We think it'll continue to work well for us going forward. We have had a number of transactions that qualify, and thus we're utilizing the program. Yeah, I think you should expect that we'll continue to do that, as the transactions are evaluated.
You know, if they do qualify, then we're gonna continue to use that program. You know, obviously the financing is attractive, but also it's served us well over the years and, you know, we wanna continue to be a good partner with the SBA as well. Shelby, you got any other comments there or wanna answer this one?
Sure. Just as it relates to the $20 million debt repayment, Bryce, you are correct. We will have a slight realized loss on extinguishment of that debt for the unamortized cost. It's probably gonna be in the order of $200,000-$300,000.
Okay. I assume, Shelby, that you were able to kinda get in to the March pooling with the SBA debentures you pulled down in February. What was the rate that you kinda locked in?
I don't know that I've seen the rate published yet. The rate from the September pooling was particularly low. It was 1.3%, so I would imagine it would be slightly higher than that. I don't know that I've seen the published rate available yet.
Okay. That's it for me. I appreciate the time and really congratulations on the quarter. It's nice to see. Thanks.
Thanks, Bryce. Good talking to you.
Thank you. Our next question comes from the line of Sarkis Sherbetchyan from B. Riley Securities. Your line is now open.
Good morning, Ed and Shelby, and thank you for taking my question here.
Good morning.
Wanted to focus a little bit on the disclosure here in the press release, saying that, you know, variable rate securities were about 68% of the debt portfolio. I think that compares to about 56% in the prior quarter. If we go back to the last four Q period, it was about 37%. Just wanna get a sense for, you know, is this more of a strategic shift in mix given maybe the anticipated, you know, rate moves, or how should we be thinking about that?
I think from my perspective, it correlates directly with the fact that, you know, a large majority of the investments that we've been making and structuring have been first lien investments over the last three years. All of those are structured as variable rate loans and typically with LIBOR floors. I think we made the comment, but it's almost amazing. We've had a fair number of second lien and subordinated debt investment repayments over the last 12 months. So the dollar amount greatly reduced, if you will. The dollar amount of our second lien and or our junior debt investments went down probably by half, probably reduced, you know, by 50%.
I think the combination of most of the new investments are variable rate investments, and we've had a lot of fixed rate investments repaid. That's, you know, that's how we ended up in this position of a, you know, large majority of our debt investments being in a variable rate category at this point. Hopefully, that's helpful.
Yeah. Yeah, that's helpful. Thank you for that. I guess a follow-up to that, you know, if you can maybe remind us how you're thinking about target leverage levels for the BDC, you know, given that second liens and junior, that mix is basically pushed dramatically lower. Any updates there? How should we be thinking about that?
Sure. Great question. You know, I think as we've talked about it in the past, it's 1-to-1 GAAP leverage is a general target for us. We are comfortable with higher leverage, if situations drive us there. As you know, our SBIC funds are levered 2-to-1, for instance. We went through the great recession on a 2-to-1 basis without any issues. We feel very comfortable at higher leverage points. At the same time, obviously, we've got a lot of cash to deploy, and that'll be a large majority of our investment dollars. As we discussed, just a few moments ago, we will use new SBIC debentures to fund investments, as they qualify, for sure. Other than that, we're gonna use cash.
Then obviously, you know, moving towards a target leverage, of 1-to-1 is something we wanna do here over the medium term, you know, maybe even by the end of the year. You know, we will see on that piece of the puzzle. 1-to-1 is a number that we feel very good about. We could go higher, but that's not the target. You know, there's really no change in that thinking, you know, since last time.
Understood. One final question, if I can ask about for the variable component of the loans that you have in the portfolio, what would you say would be the weighted average LIBOR floor?
A large majority of them have a 1% floor, but there are. We have one that doesn't have a floor, and we have a couple that I think are 50 basis points. I don't know what the weighted average is. I've never done that calculation or had it done for me. I'd say it's ninety basis points would be my guess.
Got it. Thank you for the color.
Sure. Good talking to you, Sarkis.
Thank you. Our next question comes to the line of Mickey Schleien from Ladenburg. Your line is now open.
Good morning, Ed and Shelby. Hope you're well.
Good morning, Mickey.
Ed, just at a high level, following up on the interest rate question. You know, interest rates may be a lot higher by the end of this year than they are right now. You know, how do you feel about your borrowers' abilities to service their debt, you know, when you think about their trends and their revenues and their margins?
Sure. Great question, Mickey. I think, you know, what we've seen, at least the large majority of the companies that are in our portfolio, you know, what I would say worked hard to adjust to the new normal and are finding ways to prosper. You know, what that has meant is that, you know, a fair number of companies had to raise prices to offset cost increases. Now you're talking about you know, interest rate increases potentially. But thankfully, most companies have, you know, adjusted to this new normal and have been able to do that. There are some that are lagging but are in the process of doing it. You know, thankfully, we don't have many companies that don't have an ability to increase prices.
Most of the companies in our portfolio possess pricing power, which is a big deal. As you know, in most industries, there's competitors, and that means the issues facing our portfolio companies are also facing their competitors as well. That's not a bad thing, especially in times like this. You know, the second piece is just how we, you know, go about structuring and underwriting, you know, our investments. You know, first and foremost, we make sure there's adequate enterprise value cushions for our loans, typically 40%-60% equity in a capital structure. A fair bit of cushion as you might imagine for our loans.
Secondly, you know, the liquidity positions of the companies to make sure they're in a strong liquidity position. Lastly, they've they're strong, you know, resilient capital structures that can withstand, you know, the issues that everyone's facing, quite frankly, today. What I would say is with rates being as low as they are, and the interest coverage of our portfolio, the cash interest coverage being 3x , which is very high relative to, you know, if I go back to the 1990s or I go back to the 2000s, you know, prior to the Great Recession, you know, we were more in the 2x or 2- 2.5x . There's a fair bit of cushion in our portfolio and at the portfolio company level to weather any interest rate increases.
I guess that's a long-winded way of saying we feel pretty comfortable with our portfolio overall, just the quality of it, but secondly, with its ability to deal with any increases in rates, that are, you know, projected, obviously. Hopefully, that's helpful.
Yeah, that is helpful, and thank you for that explanation, Ed. Thinking just in terms of idiosyncratic risks, do you have any portfolio companies with, you know, sort of exceptional risks to what's going on in Ukraine? You know, I'm thinking about a company that might need to import something that all of a sudden they can't buy, or they export something that they can't export anymore, or maybe just a very high level of risk related to energy prices.
Sure. You know, sitting here today, Mickey, I don't think we do. I'm unaware of any situations where, you know, we are highly concerned, if you will. I will tell you, better to be lucky than good sometimes. We were looking at a company that had a fairly large number of their employees in Ukraine, but we did not end up pursuing that transaction. That was over the summer this year. Obviously we knew there were some tensions, but that, you know, that didn't drive it as much as just it just didn't end up being a situation that we were comfortable with. At this point in time, I'm probably glad that that didn't happen for a large number of reasons, including the war.
Right now, I'm unaware of any companies that are being hugely impacted, you know, by the war at the moment.
I understand. Ed, we can't have a Fidus earnings call without asking about Pfanstiehl, which is now 8% of the portfolio. It's, you know, sort of the gift that keeps on giving. I did notice a dividend payment in the fourth quarter. I just, you know, I know you can't give us specifics, but can we expect continued sort of annual dividends from Pfanstiehl, assuming you continue to own it? You know, it's obviously doing extremely well, but to have anything in the portfolio that concentrated, you know, includes its own risks. You know, are you thinking about, you know, potentially monetizing at least part of that position to reduce the investment risk in the portfolio?
Great question. Just to reiterate, you know, kind of what the company is. It's a manufacturer of high purity sugars, carbohydrates for injectable drugs or biologic drugs, many that are used in the oncology arena. Company also participates in the vaccine arena. The company has been for a long time and continues to perform very well. The positives are definitely outweighing any potential negatives with regard to the COVID-19 outbreak. You know, the valuation reflects the risk profile and the outlook of the investment. You know, with regard to incremental distributions, the company is positioned to continue to make distributions is what I would say.
We have nothing to do with that decision-making, and so, it's hard for me to answer it other than to say that the company's in a position to continue to make distributions as it you know, moves forward. Obviously, that's always subject to change, but as I sit here today, it's in a very good position. In terms of monetizing, you know, this investment or any other equity investments, we're always evaluating, you know, what's the right time to try to create a transaction or in most cases, sponsors are in control of our, you know, of our portfolio companies, and we're pretty aligned with them with regard to that same type of decision-making. Is this a good time to exit? Do they have a general desire to create realized gains over time?
The answer is yes, and we do as well. I feel like there's strong alignment with a large majority of our portfolio companies. In the cases where you know they're not funded sponsors always trying to generate you know gains when the time is right, you know we obviously you know evaluate situations and try to determine if it's a good time to either lighten up or try to you know attain liquidity. That's an ongoing battle, but at the same time, you know, we don't wanna rush anything and we you know we're never gonna be perfect here, but we're clearly not trying to leave tons of money on the table either, right? It's a balancing act.
It's impossible to get perfect, but we're, you know, continuing to evaluate things on a constant basis and do the best we can. Hope that's helpful.
Yeah, yeah. It is. Notwithstanding your answer, you know, congratulations on a very good quarter. We certainly appreciate the efforts that your management team has undertaken this year. That's it for me.
Thank you, Mickey. Appreciate it very much. Good talking to you.
Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Ed Ross, CEO, for closing remarks.
Thank you, Gigi. Thank you everyone for joining us this morning. We look forward to speaking with you on our first quarter call in early May 2022. Have a great day and a great weekend.
This concludes today's conference call. Thank you for participating. You may now disconnect.