Good afternoon, ladies and gentlemen, and welcome to the KCAP Financial, Inc. First Quarter 2014 Earnings Conference Call. An earnings press release was distributed yesterday, May 7, 2014. If you did not receive a copy, the release is available on the company's website at www.kcapfinancial.com in the Investor Relations section. [Operator Instructions] As a reminder, this conference is being recorded today, Thursday, May 8, 2014. This call is also being hosted on a live webcast along with a copy of the earnings call presentation, which can be accessed at our company's website, www.kcapfinancial.com, in the Investor Relations section under Events. In addition, if you would like to be added to the company's distribution list for news events, including earnings releases, please contact Denise Rodriguez at (212) 455-8300. Today's conference call includes forward-looking statements and projections, and we ask that you refer to KCAP Financial's most recent filings with the SEC for important factors that would cause actual results to differ materially from these projections. KCAP Financial does not undertake to update its forward-looking statements unless required by law. I would now like to introduce your host for today's conference, Mr. Dayl Pearson, President and Chief Executive Officer of KCAP Financial. Mr. Pearson, you may begin.

Thank you, and thank all of you for joining KCAP Financial for a review of the first quarter of 2014. This afternoon, I'll review some important highlights and activities from the first quarter as well as providing some context to our direct lending business and the performance of our asset manager affiliates. I will then turn the call over to our Chief Financial Officer, Ted Gilpin, who will provide a recap of our first quarter operating results and our financial condition at the end of the quarter. We will then open the line for your questions at the end of the call. A presentation outlining a few of our key accomplishments in the quarter can be found in the IR section of our website. First, let me provide a brief recap of some important highlights from the first quarter, which are summarized on Page 3 of our earnings presentation. In the first quarter of 2014, our net investment income, or NII, was $0.24 per share compared to $0.24 in the fourth quarter and $0.23 in the third quarter of 2013. Our first quarter distribution was $0.25 per share, unchanged from the fourth quarter. I would now like to discuss the performance of our direct lending businesses and asset manager affiliates in more detail. I continue to be pleased with the execution of our direct lending team and the acceleration in deal flow and originations. This acceleration began in the fourth quarter and has continued into the first. While credit markets remain competitive, we continue to see attractive opportunities. Specifically, as you can see on Slide 4, we have closed $20.5 million of direct new originations in the first quarter at a weighted average yield of 10 point -- I'm sorry, 11.9%, which follows a robust origination volumes that we experienced…

Thank you, Dayl. Good afternoon, everyone. I'd like to start by covering some of the high-level financial information then go into a little more detail on specific metrics. As of March 31, 2014, our net asset value stood at $7.62, which is up 1.5% sequentially from $7.51 at the end of the fourth quarter 2013. The company declared a $0.25 distribution in the first quarter, which is consistent with the level paid in the fourth quarter of 2013. Net investment income was $7.9 million or $0.24 per basic share for the first quarter of 2014. The same as the fourth quarter of 2013. I'd like to now review the component pieces net investment income for the 2014 first quarter. First, interest income on our debt securities. For the 3 months ended March 31, 2014, was $5.25 million or $0.16 per share, compared to $4.8 million and $0.14 per share for the fourth quarter of 2013 and $2.5 million or $0.08 per share in the year ago quarter. As Dayl mentioned earlier, investments which we have made in our direct lending platform are producing increased deal flow and investments at more attractive yields. As a result, our debt securities portfolio continues to grow as a percent of our total investment income, and today stands at approximately 41% versus the 36.8% of investment income in the fourth quarter of 2013, just under 22% of the investment income in the first quarter of 2013. Second, dividends from the investments in CLO securities. These were $4.9 million or $0.15 per share, that's first quarter of 2014, similar to the fourth quarter's 5 million per share -- or $5 million and $0.15 per share. Third, our asset manager affiliates. The AMA's dividend it up to KCAP Financial, $3 million or $0.09 a share in the…

[Operator Instructions] Our first question is from Mickey Schleien of Ladenburg. Mickey M. Schleien - Ladenburg Thalmann & Co. Inc., Research Division: I'm curious as to how you see CLO equity behaving if short-term rates were to begin to rise since a CLO's interest income wouldn't immediately increase to the large share of loans on the left-hand side due of the balance sheet with floors, but interest expense on the right-hand side would increase right away. So given the amount of leverage in a typical CLO, that lag, I'm assuming would depress distributions to the equity tranche at least for a while. So what do you expect for distributions from your CLO equity investments if that were to happen? I'm sure you've probably stress tested the portfolio.

I think there'll be some short term reduction, if that happens. But if rates continue to rise, that will start to reverse because you have more assets than you do liabilities. So there'll be some short term pain, I don't think it's going to be all that significant. I think the last time we looked at the analysis, I think it's probably changed a little bit. I think about 2/3 of the loans in the CLOs have floors, it's probably more like 75% today. Because we have more newer loans in the new CLOs. But in terms of how people price CLO equities, I think most people have priced in sort of the yield curve moving up. So I don't think in terms of volatility of sort of equity prices, I don't think -- again, I think most people assume that, and that's certainly built into our models. When we model out the distributions, we've assumed that increasing rate. So that's all baked into the model in terms of determining the IR. Mickey M. Schleien - Ladenburg Thalmann & Co. Inc., Research Division: Fair enough. And my follow-up question is unrelated, but I saw that you marked down, was that Advanced Lighting, I think is the name, Advanced Lighting Technologies, below 90, which is a first lien loan, which at that mark, would indicate some stress. So what's the outlook for that company? And what caused the market to decline?

Yes. I think the performance has been off. This is a company we've been a lender to since 2006. And it has some cyclicality in the business unrelated to necessarily the economy. They sell a lot into municipalities and other things like that. So it has a tendency to go up and down. I think the long term outlook for the business is still good, but I think that's where we feel we should be marking it right now based upon the recent performance. Mickey M. Schleien - Ladenburg Thalmann & Co. Inc., Research Division: Okay. And lastly, given that you're warehousing for a new CLO or one of the AMAs is, is your base case assumption that, that second CLO will close sometime this year?

Certainly. We would be very surprised if it didn't close this year. Yes.

Our next question is from Andrew Kerai of National Securities Corporation.

I just wanted to touch on the direct lending business a bit. So it looks like within that, you kind of placed a little bit more emphasis on kind of the junior secured or the mezz type investment. It seems like you're kind of rotating out of the sort of the senior secured lower-yielding assets which, as you pointed out, has benefited the yield on your book. But can you give us a sense, I guess, maybe some of the leverage attachment points you're seeing in some of those deals from just a debt-to-EBITDA multiple?

It really depends upon the industry and the transaction -- the structure of the transaction. I mean some of them have been total leverage below 4x. Some have been total leverage above 4x. We think they've been pretty reasonable. We stayed away from the 6x transactions. But large multiples can be a little bit misleading because you can handle multiple of 4.5x EBITDA but if the company doesn't have a lot of CapEx, they're still generating a lot of cash flow and it's a stable business. We're very comfortable with that. And then you can see another business at 3.5x with lots of CapEx and cyclicality, and we might not be comfortable lending the business at 3.5x. So EBITDA multiples are great from a valuation perspective. It's great for sort of a sanity check. But I think when we're looking in a business, we're looking at the company's total operating cash flow and ability to service debt. So...

Sure. And then, as you grow the book here going forward, I mean, what's kind of your ideal mix of first-lien versus sort of junior or mezz debt? I mean, you're 50% for total performance mix of first-lien and I think it's 13% second-lien mezz, I mean, how does that mix shift change? You kind of emphasized the direct lending platform versus some of your more senior secured investments here.

Yes. I don't think it's going to change dramatically. I think the junior capital part of it will move up somewhat, but I think -- we have the balance sheet securitization, which really is primarily a first-lien focused because of the way it's structured. So that's sort of $140 million of our balance sheet is in that securitization. And so, if you back at the CLO equity and asset manager, the rest of it is going to be a mixture of first-lien, second-lien, and some smaller equity pieces but it's not going to change dramatically or move up -- the percentage of junior capital will move up a bit over the course of the next quarter but not dramatically.

Sure. No, that makes sense. And then the last question I had is just about liquidity. Here, I mean, with you guys are basically about 0.76 or so from just a leverage standpoint. At the end of the quarter, I mean, it's sort of the idea that you continue to be whatever placeholder assets you have remaining in terms of mapping the liquidity as well as the pay down could obviously come in through the rest of our book or is your plan to maybe take that leverage up a little bit through maybe something like another unsecured issuance or maybe another on-balance sheet securitizations in time -- some time here in 2014?

Look, I think we'll look at all different alternatives. I think right now, sort of outside the securitization, we have more than $35 million of liquid assets that we can rotate out of. We also do get prepayments from time to time. We haven't gotten dramatic number of prepayments recently. And within the securitization, there's probably another $16 million -- or $16 million to $20 million of lower yielding assets that we want to -- really sort of placeholder that we want to move into the more appropriate middle-market loans. So I think we'll continue to see some rotation there, too. So I think, from a liquidity perspective, we're pretty comfortable right now. But you know, at some point later in the year, we're going to take different alternatives in terms of growing the balance sheet if it's appropriate.

[Operator Instructions] Your next question is from Troy Ward of KBW. Troy L. Ward - Keefe, Bruyette, & Woods, Inc., Research Division: I apologize if you've mentioned this in your prepared, I hopped on a little late, I got sidetracked. You priced the new CLO after the end of the quarter, obviously, but does the fair value at the end of the quarter, does it reflect any of that impact of the new CLO?

Troy, it's Ted. We don't -- even though it did price before we did the valuation, we only -- the practice is to only value it once it actually closes. So it didn't close 'til May so it's not reflected in the valuation. Troy L. Ward - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. That's what I thought. Can you just remind us what is the cash flow characteristics of that? I know there's a lag before you start to realize income off of a new closed CLO. Can you just remind us of what that is for modeling?

Yes. Well, for us, we accrue on it. So we'll start accruing right away on it. There's a lag in the cash and we've done all of our sales in an accrual basis.

Generally, the first payment is not for 4 or 5 months. But we started -- we model out, as we talked about earlier, we model out the cash flows based upon certain default assumptions and interest rate assumptions, and other things that we started accruing day 1. Troy L. Ward - Keefe, Bruyette, & Woods, Inc., Research Division: Yes, I recall that now. And then I knew you built out the direct lending platform, and obviously, the income generation from that is really starting to show and that's great. But how should we be thinking about comp for the full year? Historically, it seems like we saw some seasonality in Q1 with regard to some comp expense, and we didn't seem to have seen that this year, or did we, and then we just -- are we going to run at a higher level going forward? So can you just give us a little color on what you think the comp expense will look like for 2014?

I don't think it's going to be dramatically different in the first quarter. I mean -- one thing that is a little high in the first quarter is some of the operating expenses related to the audit and other things. But I think the comp -- maybe an anomaly last year because of some severance issues, but it should be pretty -- if we're doing our job correctly, we should be accruing for bonuses and all that ratably over the year.

[Operator Instructions] And I'm showing no further questions at this time. I'd like to now turn the conference back over to Dayl Pearson for closing remarks.

Thank you, all, very much. And we'll be talking to you again in August. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day.