Investcorp Credit Management BDC, Inc. (ICMB) Q1 2019 Earnings Report, Transcript and Summary

Welcome to the CM Finance scheduled earnings release of first quarter ended September 30, 2018. Your speakers for today's call are Mike Mauer, Chris Jansen and Rocco DelGuercio. [Operator Instructions]. I'll now turn the call over to your speakers. Please begin.

Thank you, operator. Thank you, all, for dialing in this afternoon. Joining me are Chris Jansen, my Co-Chief Investment Officer; and Rocco DelGuercio, our CFO. Before we begin, Rocco will give you our customary disclaimer regarding information and forward-looking statements. Rocco?

Thanks, Mike. I would like to remind everyone that today's call is being recorded and that this call is the property of CM Finance, Inc. Any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by visiting our Investor Relations page on our website at www.cmfn-inc.com. I would also like to call your attention to the safe harbor disclosure in our press release regarding forward-looking information and remind everyone that today's call may include forward-looking statements and projections. We ask that you refer to our most recent 10-Q filing for important factors that may cause actual results to differ materially from these projections. We will not update forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our Investor Relations page on our website. At this time, I'd like to turn the call back to our Chairman and CEO, Michael Mauer.

Thank you, Rocco. I'll begin today's call with a discussion of what we see in the leverage finance markets currently. Chris will review our investment activity during and after the quarter, and then Rocco will discuss our financial results. I will conclude with commentary on our portfolio and our outlook as 2018 winds up. As we have observed throughout the year, the leverage finance markets remain active and broadly borrower friendly. While we have seen specific instances of arrangers revising terms and structures to find a market [Technical Difficulty] level, most broader market syndications remained covenant-light, long-dated and decidedly favor the equity investors' interest. Faced with this dynamic, we have focused our origination efforts on the first lien portion of the capital structure. On companies and industries we know well and opportunistically in the short-weighted average life assets with better structures that are currently offered in the primary market. We've grown our portfolio over the past year from $271.9 million invested in 23 companies as of September 30, 2017 to $330.7 million invested in 30 companies this year. While the $330 million is on the high-side versus our usual target, in light of anticipated repayment after quarter-end, we seized opportunities when they presented themselves. Every one of our investments in calendar 2018 have been first lien or unitranche investments. Today, our portfolio has 28 names and approximately $300 million. Our pipeline is strong and we're excited about a number of deals we're doing due diligence on today. These perspective investments include club deals, secondary investments in club and syndicated loans, and opportunities we see through our strategic relationships with Stifel and Cyrus. We're utilizing the full breadth of our investment teams networks to leverage our origination capacity to source deals from arrangers, investment banks, teller BDCs, specialty lenders and our relationships around the market. We are always focused on secured lending to high quality management teams and companies. We are optimistic about the opportunities we're seeing and are working diligently to reinvest the proceeds of repayments we have received since quarter-end. I'd now like to turn the call over to Chris to discuss our portfolio of activity.

Thanks, Mike. We were active in both the primary and secondary markets during the quarter and made investments in seven portfolio companies, including 6 new portfolio companies. All of our investments this quarter were in first lien loans. We also had two full realizations during the quarter. We invested in the first lien loan of Qualtek in connection with its LBO by BrightStar Capital. Qualtek is a provider of turnkey, engineering, construction and program management solution to the telecom and power sectors. Our yield at cost is approximately 8.8%. We purchased a first lien loan of Arcade Bioplan. Arcade is the leading provider of sampling solutions for the personal care and beauty industry. It is a short-dated loan maturing in 2021, with the yield at cost of 9.8%. We also purchased a first lien loan of 4L Technologies. 4L focuses on recovery, remanufacturing and remarketing of technology assets. This is another short-dated term loan maturing on 2020 with the yield at cost of 8%. We invested in the first lien loan of ProFrac, a pressure pumping services provider. Our yield at cost was 8.6%. We also purchased a first lien loan of Fusion Connect. Fusion is a public company, which operates as a telecom and internet services provider, focusing on the small, medium business and enterprise markets. Our yield at cost is 11.4%. We also invested in the first lien loan of US Lumber, a distributor of building materials in the United States and Canada. Our yield at cost is 8.6%. We invested in the new first lien loan of Intermedia, which was an existing portfolio of company of ours. The new first lien loan has a yield at cost of approximately 8.7%. As I mentioned earlier, we had 2 realizations during the quarter. Our first was our second lien loan to Intermedia, which refinances capital structure in full. The fully realized IRR was 14.2%. Our other realization during the quarter was International Wire. We sold our position over the past two quarters and our fully realized IRR was 9.8%. After quarter end, we added to our positions in Bioplan at an 8.6% yield and 4L also at an 8.6% yield. Our weighted average yield on Bioplan is now 9.0% and 8.2% on 4L. We invested in the first lien loan of Cook & Boardman, supporting its LDO by Littlejohn. Cook & Boardman manufacturers architectural doors, frames, door hardware and related building products. Our yield at cost was 8.3%. We had three full realizations after quarter end as well. First, we receive repayment of our first lien loan to AP Gaming. This was our lowest yielding asset at 6.7% at cost. Our fully realized IRR on this position was 7.4%. Over the course of all of our investments in AP Gaming, dating back to the fourth quarter of 2013, our realized IRR was 9.8%. We sold our position in Intermedia's first lien loan at a gain. We held this position for about 4 months. Given the opportunity to make investments in shorter-dated loans with more price upside, we felt this was a prudent shift toward better opportunities. Our fully realized IRR for the short holding period was approximately 16.8%. Finally, we repaid on our second lien loan to Montrose Environmental. Like AP Gaming, Montrose was one of our largest positions. We're extremely pleased with our 15.2% IRR on this investment. Reflective of our efforts to continue to diversify the portfolio, our portfolio company count stood at 30 as of September 30, and it's 28 today due to the repayment activity after quarter end. Using the GICS standard as of September 30, our largest industry concentration was energy, equipment and services at 12.1%, followed closely by professional services also at 12.1%, followed by hotels, restaurants and leisure at 9.8%, commercial services and supplies at 9.7% and media also at 9.7%. We expect that our investment in energy will decline further in the current quarter as US Wells first lien term loan will be repaid as part of the company's merger with MatlinPatterson Acquisition Corp, which is currently scheduled to close on November 9. I'd now like to turn the call over to Rocco to discuss our financial results.

Thanks, Chris. For the quarter ended September 30, 2018, our net investment income was $3.4 million, or $0.25 per share. Fair value of our portfolio was $330.7 million compared to $293.6 million at June 30. Our investment activity accounted for $39.2 million increase in our portfolio, offset by $1.7 million decrease from depreciation of positions held, and by $300,000 realized losses. The weighted average yield of our debt portfolio declined 29 basis points from 11.19% on June 30 to 10.90% on September 30. Two major factors contributed to the decrease in our average yield. First, our investments during the quarter had an average yield of 9.2% versus a 10.6% average yield on investments realized in the quarter. And second, the increase of our portfolio by a net $39 million at an average yield below prior portfolio average. As of September 30, we had 1 investment on partial accrual and no investments on non-accrual. Our portfolio consisted of 61.5% first lien investments, 3.6% unitranche investments, 34.7% second lien investments and approximately 0.2% equity, warrants and other positions. 98.2% of our portfolio was invested in floating rate loans and 1.8% fixed rate position. Both 1- and 3-month LIBOR are in excess of all applicable rate floors of our loans. Our average portfolio company investment was approximately $11.2 million. Our largest portfolio company investment was Caelus at $24.7 million, followed by PGi at $24.6 million. We were 0.86x levered compared to 0.68x levered at June 30. Finally, with respect to our liquidity, as of September 30, we had $2.7 million in cash, $1.4 million in restricted cash, and $38.1 million of capacity under our revolving credit facility. Additional information regarding the composition of our portfolio is included in our Form 10-Q filed yesterday. With that, I'd like to turn the call back over to Mike.

Thank you, Rocco. Last quarter, we received several questions at the end of our conference call regarding our positions in Bird Electric and US Wells, both of which were held in Blockers. We use Blockers in both situations to shield our investors from potential rig issues and legal liability. We wanted to review and make sure we were perfectly clear on the last call. We did not and we will not take any additional fees based on weather an investment is held directly or through an SPV or through a Blocker entity. Use of these vehicles is to protect and benefit shareholders, not to enhance fees to the manager. Today, we do not hold any positions in Blockers. That said, if we do utilize a Blocker in the future, we fully expect to do the same analysis we did with Bird and US Wells and follow the same internal guidelines we used last quarter. Turning now to our current portfolio. In total, our marks this quarter were down approximately $2 million. The most significant of these were positive changes to Caelus and Montrose Environmental and negative changes to Montreign and Trident Health. Caelus remains a company we feel very positively about. The maturity is coming relatively soon, April of 2020. Given the short maturity, good performance and our belief capital markets will be open to the company, we increased the mark from 93 to 95. Our mark on Montrose Environmental increased from 98, which was our original cost to par. We expected repayment in full prior to September 30. That repayment slipped into the current quarter. Since quarter end, we were repaid at a call premium of 101. We marked a position without that premium at 9.30 since repayment was not absolutely guaranteed. We decreased our mark on Montreign, the operator of Resorts World Catskills Casino in upstate New York. The loan funded the construction of the property, which was executed well with a significant equity investment. However, early customer traffic has lagged expectations and the casino is not yet as profitable as we had hoped it would become. We believe the increased profitability is contingent on further planned development at the broader property over the next 18 months. We decreased our mark from 98 to 92. And finally, we decreased our mark on Trident Health. This is the last portfolio company where the investment was made before our IPO in February of 2014. The fair value decreases were on tranches A and tranche B second lien term loans, and on the Holdco loan. All three positions were created from the old second lien term loan in late 2017. We continue to think about that value conceptionally as a mark on the pre-restructured second lien. In that context, our mark decreased from 48 to 38. Our Tranche A is an interest only instrument, and we approach its value as a discounted stream of cash flows, because another party owns the principal risk in that tranche. Our Tranche B is a traditional second lien with principal and interest attributable to it. The Holdco Tranche A is a non-interest bearing loan, which will realize value if and when the enterprise value of Trident reaches through second lien Tranche B through various investors in Trident holding company. Weakness in Trident's fundamental result to challenging secular environment for health care service providers and a short-dated leverage debt profile and concerns about potential for additional future changes to the capital structure, all concern us. We continue to monitor the credit closely, receive monthly results and hope to work with all the stakeholders to find a stable long term path for the company's recovery and growth. Our investment activity in the quarter grew our portfolio by $39 million. But as I mentioned, this was part - in part issue of timing of the investments and expected repayments. Montrose Environmental's repayment, which was originally slated for September slipped into October and was responsible for over half of the net growth from investment activity. We entered the quarter slightly under-levered at 0.68x, which is below our target of plus or minus 0.75x. As of September 30, we were comfortable at 0.86x levered. But we're also aware that the leverage would decline after quarter end. Using our 09/30 marks, we are currently leveraged at approximately 0.8x today. We had a slight shortfall in NII coverage from September quarter as discussed on our last - as expected and discussed on our last. Due to the expenses of the new baby bond and we partially earned our incentive fee in this September quarter. But we expect to fully cover the dividend and earn our incentive fee in the December quarter. We have continued to deliberately decrease our average position size to diversify our portfolio through an increased number of investments in a broader array of sectors. We remain extremely selective in our new investments and vigilant in monitoring existing portfolio. The team underwrites conservatively, focuses on quality management teams, sustainable capital structures, security packages, and financial covenants for the protection and preservation of value over the long term. We focus on preserving capital and maintaining a stable NAV across our current portfolio. Over the past 18 months, we have demonstrated stability with our quarterly NAV staying in a range of $12.32 to $12.57. We are sensitive to the ebbs and flows of capital related to repayments and reinvestments, and we remain disciplined in finding appropriate returns and protections for our capital. Our Board of Directors declared a distribution for the quarter ended December 31, 2018 of $0.25 per share, which will be payable on January 3, 2019 to shareholders of record as of December 14, 2018. We believe our dividend level is consistent with our ability to generate NII without reducing our investment quality or changing our focus from secured lending opportunities, and further believe our quarterly dividend is both sustainable and attractive to our shareholders. We modestly under-earned our dividend in the September quarter due to the offering expenses [Technical Difficulty] baby bond, but over-earned our dividend in the March and June quarters, and expect to fully cover $1 annual dividend this year. Our run rate portfolio yield and current portfolio size give us confidence as we finish calendar 2018. Earlier this year, our Board authorized a share buyback program. In the quarter ended September 30, we repurchased approximately 11,000 shares of stock at an average price of $8.97, representing a 27.7% average discount to our NAV. Since inception, the program through today, we have repurchased almost 74,000 shares, increasing our NAV by about $0.02. As a reminder, our total capacity for repurchases under this program is $5 million, of which we have used $660,000. We expect to continue to execute on repurchases going forward. Operator, please open the line for Q&A. One last item before we go to Q&A. Just want to make sure that everyone saw on the earnings release issued last night, there was an immaterial misstatement on the liabilities section of the balance sheet. To clarify, we have corrected that mistake and issued a new earnings release this morning. There were no issues or misstatements with the balance sheet as displayed in the 10-Q. With that, I'll pass it back to the operator.

[Operator Instructions]. Our first question comes from Owen Lau from Oppenheimer.

Okay. Your first lien loans has been - the percentage has been increasing and reached 62% of the total portfolio. Can you please remind us your target percentage of the first lien loan and the timing to achieve this target?

Yes. Historically, if you go back a couple years, we talked to a mix of 50% plus or minus between first lien and 50% plus or minus with second lien. I believe, if you go back, you saw our second liens go into the high 50s or low 60s at one point. As you just noted, we are now just over 60% first lien. We do not have a stated target within first versus second lien. I will tell you that, as we've talked about on the last several calls, we continue to see this market as one that is more borrower friendly and that the terms for the junior pieces have become worse for us, less protections. So we will continue to look at and opportunistically invest in second liens. But in the meantime, until we find opportunities that have the right protections or the market shifts, which it will at some point, we will continue to have a bias toward first lien or unitranche for protection purposes.

Okay, that's very helpful. My second question is, how should we think about half of your portfolio size in the fourth quarter in 2019? I mean, based on my math, you have about $28 million net portfolio outflow so far in the fourth quarter. And your leverage, you just mentioned was above 80%, down from 86% at the end of third quarter. Given your pipeline comments, should we expect the portfolio to decline a little bit in fourth quarter and grow again in 2019? Or would you also use that excess cash to pay down your debt somehow in fourth quarter and manage the cash and grow the portfolio in 2019? Thank you.

Yes. Thank you for the question. There's a couple of pieces to that. Number 1 is, we will continually manage our debt outstanding under the revolver to the extent we have excess cash, we do attempt to pay that down and we'll re-borrow opportunistically as investments come available. On the investment side, as you saw in the last quarter, where we were at 0.86x to extent that we have investments that we see that we like the return and those returns are anywhere from 8% to typically 12% right now, probably more on the lower and higher end, we will invest in them, especially if we've got visibility as we did last quarter of repayments coming over the next 10 to 12 weeks. Our pipeline today, there are several opportunities that could close before quarter end, but I caution that we constantly see those either slip, fall away, because we don't like them something comes up through our diligence or terms change. So our target will continue to be in this 0.75 plus or minus 0.1. So, call it, 0.65 to 0.85. And to the extent that we can hold it in that 0.8, we will. But there's no - we cannot be specific in saying that this quarter will be lower than next quarter, because it really is a function of the opportunities in front of us. With that, there are several opportunities we're working on now, at least 2 of which would be in the $10 million plus or minus that could close before quarter end.

Our next question comes from Leslie Vandegrift from Raymond James.

Just a quick check. The repayments first quarter were AP Gaming and Montrose, right. Was there another one I didn't hear?

We are excited - it's Chris, Leslie. We are expecting a pay down actually tomorrow of our US Well position.

Okay.

It's been announced the company is being purchased by a public Special Purpose Acquisition Corp. and part of that is the refinancing of that one.

And then the only other thing, Leslie, is that we're under NDA, so I can't say who it is, but there is another one that has identified that they may. They're looking at a strategic transaction that would cause a refinancing of our existing, so we don't know what will happen, but they have started discussions on that.

Okay, perfect. Thank you for that color. And then on Trident, on the smaller Tranche A for the second lien, did you say that that one is non-income producing up to a point? Or was that the other holders piece of that?

There's so many tranches here, I want to just make sure that I answer this exactly correct.

Okay. The one with the cost of about $2.5 million.

Our Tranche A is interest-only, okay.

Got it. Okay, that's what I heard. Okay. And then, the - sorry [indiscernible] you had a good amount of originations in the quarter and you discussed a lot of that in the prepared remarks, some very quick re-payers, short term, high IRR investments. Can we expect that kind of pace to keep up over the next two quarters? Was that more of just timing for the calendar third quarter?

Yes. Leslie, it's Chris again. I mean, that - we don't anticipate that, but as Mike said, to reiterate his point is, we kind of take what the market gives us. If there are good opportunities out there, we'll take it, especially in the case of an Intermedia, where we feel like there's more compelling opportunities currently given us by the market. There's no real plan to -

Okay.

As you remember last summer, Leslie, we had the opposite effect. I think we were way under-levered over the summer in '17.

Yes, yes. It can definitely be lumpy, I just didn't know if the outlook for the end of the year was similar.

I would not say that it's similar to where we were at 0.86, there is I think the potential to maintain, where we are depending on how some things close. Even though we have planned the US Well, repayment is still coming this week, and maybe one more, but there is a pipeline to replace that.

Okay. And my last question, if I can. You guys have started to do some unitranche loans, first lien. Given the - your average hold size, do you guys - how often do you guys use the Stifel platform? Or I guess what impact does excess that platform have when you've been able to get these unitranche loans that tend to be bigger than your traditional wholesale.

Stifel has presented several opportunities to us. I think everyone knows that Montrose was one of those opportunities. There are a couple others we're working on now. With them, those are not near term. But I would say that Stifel has always been a benefit to us. They are not the driving force behind the origination. The team's broad relationships and context really is what drives that.

Our next question comes from Christopher Nolan from Ladenburg Thalmann.

On Montreign, which is the upstate New York gambling company. This is the - as I recall, this is the second quarterly call that you've highlighted that portfolio company. How much below plan is it?

I think we are under NDA, so we cannot discuss specifics of their performance. We're giving you directional guidance that it's below plan. But beyond that, under NDA, we really can't go in specifics.

Okay. But given that it's on two consecutive calls, that must be something material I would think.

It's been our history, Chris. When we have openings like this, just to recall, they opened in February, which was a little bit early. And the weather this summer has not been conducive and that has held up construction on a couple of their projects, which will help attract more gaming visitors and more actually overall entertainment visitors there specifically. And as public knowledge there's as a golf course, which will be redesigned and reopened, and a large water park with one of the major national, if not international operators, so not a risk to - construction risk to our borrower, but clearly big drivers of more gaming - more gamers to come.

Okay. Also, the yield on new loans was 9.24%, which seems to be a dip from the prior quarter. Is that simply just reflecting the head of market for first lien loans?

Yes. So I'd say that is - I think that a 100% accurate. I don't know that it's the just competitive market for first lien loans. It's the competitive market overall and the reason I say that is, you've seen a shift for us on some second lien loans like the Montrose one that we went out of, and so the average yield to come down as we are more conservative in the current market that's aggressive, not only first but second lien, to make sure that we're comfortable with the overall portfolio in new investments. So I would say that you're exactly right. And we're going to be a little bit on the more conservative side in this environment.

Given - and final question, given that and lower yields, any consideration on dialing back the balance sheet leverage and/or just buying back stock and sort of reinvesting in new companies, given where your share price is?

Well, we do have the program in place and we'll continue that. But the leverage, ironically, the more we do first lien and the less we do second lien, the more we're comfortable with leverage at a slightly higher level, because of the underlying risk of the investments is a lower risk on a first lien portfolio than a second lien.

Our next question comes from Paul Johnson from KBW.

I only have one. It's a fairly general question. But we've heard a lot of talk in the market about a greater preference toward lenders that can originate basically the entire yield charge. Are you guys seeing any kind of push back or difficulty in securing and participating in deals that you want because of this? I'm just curious if that's something that you're - you guys have seen?

We've seen and heard the same things you have. We have not experienced it as an institution. I don't know if that is part of the - I'll call it the boutique advisors, the underwriters that we work through. We've also heard a little bit of contrary information from the sponsors, where we've got relationships, that a lot of the middle market banks have become better at distributing their investments, meaning their - the debt under the PE investments than going to a single lender because single lenders can be a lot harder for the equity sponsors to deal with. Also, where there are large people who are trying to commit to entire deals, our experience has been that it usually ends up that there's a large person that's driving within our 40% or 60% of it, but in the end, the borrower likes to have a club around where one person cannot vote on everything in control, everything. So that has worked to our advantage that these clubs typically both from smart people who are the anchors as well as smart sponsors. We've got good relationships on both sides and we've been able to participate in those clubs.

Our next question comes from David Miyazaki from Confluence Investment.

I guess, good afternoon to you. This question is kind of thinking about how your cost of capital is matched against the assets that you're adding to the left side of your balance sheet. So if we think about your constant debt, you recently did a baby bond and I would imagine that the all-in cost for a 6.125% coupon is probably 6.5% to 7%. Your cost of equity right now, if we were to use your dividend yield as a proxy for the cost of equity, it's about little over 12%. And then if we - one of the things that I oftentimes look at is, is what is your dividend relative to your net asset value to show what kind of sort of net earnings power you need to have to cover your existing dividend? That's about 8%. And so there's a lot of different ways to look at what your cost of capital is and what your earnings power needs to be. But if you're adding assets that are safer and senior secured at 8.5%, I'm not sure that after fees and costs that those are actually going to be accretive to either earnings or even the net asset value. So where do you - how do you reconcile all of this, when you think about what you're underwriting versus your cost of capital?

Yes. David, it's a great question, and thank you. Well, several parts to that. The additions that we did during the September quarter were about 9.25%. I'd agree with your view on the cost of capital and you can look at it a lot different ways, the baby bond in the range you talked about. The other thing that we've tried to stress here is that in the current environment, we are trending toward this more conservative, and if you want to use last quarter's 9% to 10% first lien type opportunities, 8% to 9% some of them, 9% to 10% others, that is fair. The baby bond is a 5-year bond. And one of the things attractive to us about it was that it is a bullet maturity, unsecured, it's not amortizing down. And that our view of this market, and all of us on this call from your side and our side have been through more cycles than we can count. And so, going to a conservative state where we're trending down from closer to 12% yield on the portfolio, trending down toward 10% in this environment to us is the right thing to do. While at the same time, putting on longer fixed 5-year liabilities where you've got an increasing rate environment, and we saw a LIBOR on the floating rate side go up about 30 basis points over the last 90 to 180 days seems to make sense. And we would expect that - I can't tell you when or I'd be off doing something else, but we will hit another cycle. And in that cycle, the yields will tick back up, the structures will go in our favor, and we are positioning to be in the right position for that. In the meantime, it's about making sure we cover the dividend. We earn some of our incentive fee, we're not earning a ton of it, but we are doing what we think is a very good job and doing the right thing by shareholders. Hopefully, I addressed your question.

Yes. I mean, sort of. I mean, I understand there's certainly utility in terming out part of your debt costs for a multiplicity of reasons beyond rising short term rates. So I can appreciate. That's kind of a business decision as much as it's a capital allocation decision. But I guess one of the things that - and I'm running off of the top of your head, what you said earlier, the $5 million authorization on your repurchases and you've run $600,000 or so, I think is what you said so far.

Yes.

So the vast majority of it has not been utilized. So one thing that is I look at where you're at going forward. If you're on-boarding loans at a 9% yield today, and these are part of a shift to improve the overall portfolio from a risk perspective, so that you are ready for kind of all-weather. And I think that's a - it's a good strategy, it's a conservative sound strategy. But today, you can go buy those 9% loans at $0.65 on the dollar by buying back your own stock. And so, that actually is quite a bargain, if you like to buying them at par or whatever was that you're buying them when you put them on your balance sheet. Now by repurchasing them, you're effectively buying them at a huge discount. It seems to me that you can continue to move to the credit profile of the portfolio in the right direction and still do things that are accretive.

We are trying to do all of that. It's a matter of timing. It's also a matter of a point in time versus long term, but I'd agree with you generally on everything.

Okay. So I mean, I guess my message - and hearing your response to sort of this matching up of capital - cost of capital and your capital allocation policies, it seems to me that utilizing more of the repurchase authority would be prudent along many different lines?

We expect to continue to use it, absolutely. At the same time, as I said earlier, I think that if you told me that we were going to be in a permanent state of where we are today, that we would act differently than believing that the markets will cycle and that we've got to have a long term view.

Right. I mean, I understand that. But if US Well pays down and you buy back shares and concentrate your new loans by doing so, you kind of achieve it all. And that's why I would encourage the uses of greater repurchases.

[Operator Instructions]. At this time, we have no further questions.

We'd like to thank everyone, and we look forward to speaking to everyone next quarter. Thank you, Operator.