This week we speak with Chris Flynn and Sam Tillinghast, co-CEOs and co-CIOs of THL Credit. Headquartered in Boston, with investment teams in Chicago, New York, Los Angeles and Houston, THL Credit manages a BDC that invests primarily in middle market mezzanine debt for companies seeking capital for growth and acquisitions.

The Lead Left: Chris and Sam, congratulations on the Perspecta senior loan joint venture. But first tell us about what the market looks like for you today.

Chris Flynn: Our origination pipeline continues to be robust. To some extent, there are issues that help drive that flow like banking regulation that creates opportunities for alternative lenders. In terms of how competitive the credit markets are, we take the longer view and remain very selective. Our BDC’s conservative growth is evidenced by the fact that we’ve only had two follow-on stock issuances since April 2010. We see lots of similarities to what happened in 2007 in the market today as it relates to aggressive pricing and structures.

Sam Tillinghast: In this environment, some managers choose to grow quickly by reducing their required yields. Others grow by maintaining yields but loosening their credit standards. We’re sticking to our underwriting criteria and managing our yields and some quarters that may mean that our BDC doesn’t grow.

CF: We think the joint venture with Perspecta is an appropriate way to create double-digit type returns for our BDC shareholders with a focus on first lien structures. It’s an attractive risk-adjusted return in our view.