Prospect Capital Corporation (PSEC) Q3 2015 Earnings Report, Transcript and Summary

Good day, and welcome to the Prospect Capital Corporation Third Fiscal Quarter Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to John Barry, Chairman and Chief Executive Officer. Please go ahead, sir.

Thank you very much, Denise. Joining me on the call today as in past calls are Grier Eliasek, our President and Chief Operating Officer; and Brian Oswald, our Chief Financial Officer. Brian?

Thanks, John. This call is the property of Prospect Capital Corporation. Unauthorized use is prohibited. This call contains forward-looking statements within the meaning of the securities laws that are intended to be subject to Safe Harbor protection. Actual outcomes and results could differ materially from those forecasts due to the impact of many factors. We do not undertake to update our forward-looking statements unless required by law. For additional disclosure, see our earnings press release, our 10-Q, and our corporate presentation filed previously and available on the Investor Relations tab on our website, prospectstreet.com. Now I’ll turn the call back over to John.

Thank you, Brian. Our net investment income or NII in the March quarter was $87.4 million or $0.24 per share. Our net income was $81.5 million or $0.23 per share, a decrease in structuring fees due to lower origination levels and a mix shift toward online loans, which do not have structuring fees but which are currently delivering an expected levered yield of approximately 18%, drove year-over-year differences. In December, we suspended our at the market equity issuances for the indefinite future due to unattractive share price levels. This reduction in equity and asset growth has resulted in lower origination volumes compared to prior periods. Our recurring interest income mix in the March quarter was a record 97%, up from 82% a year-ago, reflecting the high quality of our earnings stream, independent of non-recurring fee income. As a tax efficient regulated investment company our shareholder dividend payout requirement is based on taxable income rather than GAAP net investment income. Taxable income can be coupled meaningfully from such net investment income. In the December quarter, we generated taxable income of $93.7 million or $0.26 per share, a $0.01 per share more than our recently declared dividends. While regulated investment companies may utilize spill-back dividends in the subsequent tax year to count toward prior-year distribution requirements, taxable income consistently in excess of dividends enhances the possibility of future special dividends in order to maintain regulated investment company status. As described in detail in our release our CLO business generates higher taxable income which roughly tracks cash income, then GAAP income on a recurring basis throughout the life of each CLO. Our CLO business performance has significantly exceeded our underwriting expectations, demonstrating the benefits of pursuing majority stakes, working with world class management teams, providing strong collateral underwriting through primary issuance and focusing on the most attractive risk adjusted opportunities. As of March 31, we held $1.09 billion across our fleet of 34 non-recourse CLO investments. Our underlying CLO portfolio consisted of over 3212 loans and a total asset base of over $15.9 billion. As of March 31, our CLO portfolio experienced a trailing 12-month default rate of 0.05%, significantly less than the broadly syndicated market default rate of 3.79%. In the March 2015 quarter this portfolio generated an annualized cash yield of 20.6% and a GAAP yield of 15.4%, the latter up 0.5% from the prior quarter. In addition, we recently embarked on a strategy to further boost our CLO returns by refinancing higher cost liabilities with lower cost liabilities. As of today, we refinanced higher cost liabilities for three of our CLO investments, improving returns. We have previously announced monthly cash dividends to shareholders of $8.3333 per share for May, June, July and August 2015, with the latter representing our 85th shareholder distribution in our company’s history. We plan on announcing our next series of shareholder distributions in August. We’ve generated cumulative taxable income in excess of cumulative dividends to shareholders since Prospect’s IPO 11 years ago. From the IPO to March 2015, our taxable income is $34.1 million in excess of dividends to shareholders on excess of $0.10 per share. Since our IPO 11 years ago through our August 2015 distribution at the current share account, we would have paid out $13.96 per share to initial continuing shareholders and $1.6 billion in cumulative distributions to all shareholders. Our NAV stood at $10.30 per share on December 31, down $0.05 from the prior quarter, a relatively stable investment portfolio value in NAV per share during the March 2015 quarter. We have delivered solid returns while keeping leverage prudent. Net of cash and equivalence, our debt to equity ratio was 79% in March, up slightly from 74.2% in December. As of March 31, our asset concentration in the energy industry stood at 4.1%, including our first lien senior secured loans where third-parties bear first loss capital risk. We previously announced a strategy that we have been working on for many months to spin-off certain businesses in our portfolio, including our CLO structured credit business, online lending business and real estate business. We believe these dispositions have significant potential to unlock shareholder value through pure play earnings multiple expansion, moving strategies into faster growing non-BDC formats with reduced basket and leverage constraints, and freeing up 30% basket and leverage capacity for new originations at Prospect. These investment strategies have grown rapidly for us in recent years. And we believe these dispositions will provide expanded capacity to continue that growth. We anticipate these non-BDC companies will have tax efficient structures. We would likely seek to divest these businesses in conjunction with capital raises for each such business with the goal of leverage and earnings neutrality for Prospect. The size and likelihood of these dispositions, some of which are expected to be partial rather than complete spin-offs, remain to be determined. In March, we filed the initial registration statement for Prospect Yield Corporation, the CLO structured credit business. And we filed the first amendment in April. Yesterday, we filed the registration statement with confidential treatment in a non-registered company format for our online lending business. This morning, we filed the remaining non-registered investment company offering for the real estate business, again with confidential treatment. Our target timing for completion would be in the next several weeks or months of calendar year 2015. Prospect Capital will continue as the only multi-line BDC in the marketplace with a continued diversified focus on originations that includes the businesses being spun-out. We have substantial liquidity to drive future earnings through prudent levels of matched book funding. We’re currently pursuing initiatives to lower our funding costs, including refinancing of existing liabilities at lower rates, opportunistically harvest certain controlled investments, optimize our origination strategy mix including increasing our mix of online loans, and rotate our portfolio out of lower yielding assets into higher yielding assets while maintaining a significant focus on first lien senior secured lending. We recently announced the redemption of our 6.95% coupon baby bond traded under the symbol PRY on the New York Stock Exchange, with such redemption excepted to close on May 15. We also recently sold our first low yielding asset and expect sales of such assets to continue in the current June 2015 quarter and beyond as part of our portfolio optimization initiative. Our company is locked in a ladder of fixed rate liabilities extending approximately 30 years into the future, while most of our loans flow with LIBOR, providing potential upside to shareholders as interest rates rise. Thank you. I will now turn the call over to Grier.

Thank you, John. Our business continues to grow at a solid and prudent pace. Prospect has scaled to over $7 billion of assets and undrawn credit. Our team has reached approximately 100 professionals representing one of the largest dedicated middle-market credit groups in the industry. With our scale, longevity, experience and deep bench, we continue to focus on a diversified investment strategy that covers third-party private equity sponsor-related lending, direct non-sponsor lending, Prospect sponsored operating buyouts, Prospect sponsored financial buyouts, CLO structured credit, real estate yield investing, online lending, aircraft leasing and syndicated lending. At March 31, our controlled investments at fair value stood at 27.7% of our portfolio. This diversity allows us to source a broad range and high volume of opportunities, then select in a disciplined bottoms up manner the opportunities we deem to be the most attractive on a risk-adjusted basis. Our team typically evaluates thousands of opportunities annually and invests in a disciplined manner in a low single-digit percentage of such opportunities. Prospect’s originations in recent months have been well diversified across our nine origination strategies. Prospect originated nearly $3.2 billion of closed investments during the 2014 calendar year. Our non-bank structure gives us the flexibility to invest in multiple levels of the corporate capital stack, with a preference for secured lending and senior loans. At March 31, our portfolio at fair value consisted of 55.6% first lien, 19.4% second lien, 16.6% CLO structured credit with underlying first lien assets, 0.6% small business whole loan, 1.4% unsecured debt and 6.4% equity investments resulting in 92.2% of our investments being assets with underlying secured debt benefiting from borrower pledged collateral. Prospect’s approach is one that generates attractive risk adjusted yields and our debt investments were generating an annualized yield of 12.4% as of March 31, an increase of 0.1% from the prior quarter. We also hold equity positions and many transactions that can act as yield enhancers or capital gains contributors as such positions generate distributions. While the market has experienced some yield compression in the two past years, we have continued to prioritize first lien senior and secured debts with our originations to protect against downside risk, while still achieving above market yields through credit selection discipline and a differentiated origination approach. We believe such a yield compression may have stabilized recently due to trading valuation discounts for peer companies. Originations in the March quarter were $219 million across one new and several follow-on investments. We also experienced $108 million of repayments in exits from several other investments as a validation of our capital preservation objective. During the March quarter, our originations consisted of 46% third-party sponsor deals, 43% online lending, 7% real estate, 2% operating buyouts, 1% CLO structured credit, and 1% syndicated debt. As of March, 31, we held 132 portfolio companies with a fair value of $6.6 billion, demonstrating both a long-term increase in diversity, as well as the migration towards larger positions and larger portfolio companies. Our number of companies is down 4% and portfolio size is up 10% year-over-year. We also continue to invest in a diversified fashion across many different portfolio company industries, with no significant industry concentration, the largest is 10.2%. Our financial services controlled investments and CLO structured credit investments are performing well with typical annualized cash yields ranging from 15% to 30%. Because of declining unemployment rates and declining commodity prices over the last year, we believe the outlook for consumer credit is positive as we proceed through 2015, boding well for our financial services companies. To-date, we’ve made multiple investments in the real estate arena with our private REITs, largely focused on multi-family stabilized yield acquisitions with attractive 10-year financing. We hope to increase that activity with more transactions in the months to come. In the June 2014 fiscal year, we made three investments in non-controlled third-party sponsored backed companies. They brought our total investment in each such company to more than $100 million. In the last two quarters, we made another three such investments, demonstrating the competitive differentiation of our scaled balance sheet to close one-stop financing opportunities. We’ve also made multiple control investments that each individually aggregate more than $100 million in size. We may look to harvest certain controlled investments in 2015 at a hoped-for significant gain over our initial cost. Over the past two years, we’ve also entered the online lending industry with a focus on prime, near prime, and subprime consumer and small business borrowers. We intend on growing this investment strategy, which stands at approximately 375 million today, across multiple third-party and captive origination and underwriting platforms. Our online business, which includes attractive advance rate financing for certain assets is currently delivering an expected levered yield of approximately 18%. We expect in the next several weeks to focus on securitizations of multiple pools of such assets to diversify our funding and increase our returns. The majority of our portfolio consists of agented and self-originated middle-market loans. In general, we perceive the risk-adjusted reward and the current environment to be superior for agented and self-originated opportunities compared to the syndicated market causing us to prioritize our proactive sourcing efforts. Our differentiated call-center initiative continues to drive proprietary deal flow for our business. As the yield enhancement for our business, earlier this year, we launched an initiative to divest lower yielding loans from our balance sheet, thereby allowing us to rotate into higher-yielding assets and to expand our ability to close, scale one-stop investment opportunities with efficient pricing. We closed our first par value sale of a lower yielding asset recently in the June quarter and expect significant such sales this quarter and beyond as a potential earnings catalyst for the future. Our credit quality continues to be strong. Non-accruals as a percentage of total assets stood at approximately 0.5% at March 31. Our weighted average portfolio net leverage stood at 4.2 times EBITDA, and our weighted average EBITDA per portfolio company stood at $45 million. We have booked $93.5 million in originations so far in the current June quarter. Our advanced pipeline aggregates nearly $200 million in potential opportunities with additions expected boding well for the coming months. Thank you. I’ll now turn the call over to Brian.

Thanks, Grier. We believe our prudent leverage, diversified access to matched-book funding, substantial majority of unencumbered assets, and weighting towards unsecured fixed rate debt demonstrate both balance sheet strength, as well as substantial liquidity to capitalize on attractive opportunities. Our company has locked in a ladder of fixed-rate liabilities extending approximately 30 years into the future, while most of our loans float with LIBOR providing potential upside to shareholders as interest rates rise. We’re a leader and innovator in our marketplace. We were the first company in our industry to issue a convertible bond, conduct an ATM program, develop a notes program, issue an institutional bond, and acquire a competitor, as we did with Patriot Capital. Shareholders and unsecured creditors alike should appreciate the thoughtful approach differentiated in our industry, which we have taken towards construction of the right-hand side of our balance sheet. As of March 2015, we held more than $5.1 billion of our assets as unencumbered assets, representing approximately 76% of our portfolio. The remaining assets are pledged to Prospect Capital Funding LLC, which has a AA rated $885 million revolver with 22 banks and with a $1.5 billion total size accordion feature at our option. The revolver is priced at LIBOR plus 225 basis points and revolves until March 2019, followed by a one-year amortization with interest distributions continuing to be allowed to us. Outside of our revolver and benefiting from our unencumbered assets, we’ve issued at Prospect Capital Corporation multiple types of investment grade unsecured debt, including convertible bonds, a baby bond, institutional bonds and program notes. All these types of unsecured debt unsecured debt have no financial covenants, no asset restrictions, and no cross defaults with our revolver. We enjoy a BBB rating from S&P and a BBB+ rating from Kroll. We’ve now tapped into the unsecured debt market to extend our liability duration up to 30 years. We have no debt maturities until December 2015# with debt maturities extending through 2043. With so many banks and debt investors across so many debt tranches, we’ve substantially reduced our counterparty risk over the years. As of today, we have issued six tranches of convertible bonds with staggered maturities that aggregate approximately $1.25 billion, have interest rates ranging from 4.75% to 6.25%, and have conversion prices ranging from $11.23 to $12.61 per share. In January, we repurchased $8 million of such convertible bonds at an accretive discount to par. In 2012, we issued a $100 million, 6.95% baby bond due in 2022 and traded on the New York Stock Exchange under the ticker PRY. In April, we provided notice to our - of our intent to redeem this baby bond on May 15, and we intend to refinance this position with lower cost liabilities. On March 15, 2013, we issued $250 million of 8.875% senior secured notes due March 2023. This was the first institutional bond issued in our sector in the last seven years. On April 7, 2014, we issued $300 million, or 5% senior secured - senior unsecured notes due July 2019. We currently have $779 million of program notes outstanding with staggered maturities between 2016 and 2043 at a weighted average interest rate of 5.23%. We currently have drawn $103 million under our revolver. Assuming significant assets are pledged to the revolver and that we are in compliance with all revolver terms. And taking into account our cash balances on hand, we have over $739 million of new facility based investment capacity. Now, I’ll turn the call back over to John.

Thank you, Brian. I think we can open the line for questions now.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Terry Ma of Barclays. Please go ahead with your question.

Hey, guys. Can you maybe just give us a little bit more color on your equity positions? It looks like some of them were marked up significantly and maybe can you talk about the color specifically?

Sure. We had significant rights [ph] evaluation in the last quarter in our consumer finance businesses, as well as our real estate business. And as I said in our prepared remarks and we’ve said elsewhere, we think this is very much the year of the consumer compared to many other prior years, you are seeing a stronger consumer wallet in general out there. And that’s translating on the consumer financial services side into declining delinquencies and declining charge-offs really across the board in our installment businesses as well as our auto finance business. And then that’s helping on the multi-family residential side, which dominates our real estate business with an improvement in rents and a reduction in occupancy, all of which are helping to drive valuation. In addition to that, you’ve seen cap rate compression, helping out valuation on the real estate side and you’ve seen continued strong robustness of valuation of consumer financial assets, which, of course, is a significant logic and driver for both our online spin, as well as our real estate spin. Does that help Terry?

Yes, it does. You talked about - you closed your first sale of a lower-yielding asset in June. Can you maybe just give us a sense of how much additional opportunity there is to sell lower-yielding assets in the next couple of months?

Quite a lot. I think we’ve only sold approximately 10% or so, a little bit less of the approximately three-quarters of $1 billion of 5% to 7% low- yielding assets on our balance sheet. And it took us several months to figure out the right way to structure those sales from an accounting standpoint, from a legal standpoint, but now that, we figured that out. We have a growing stable of buyers for those assets and we intend on continuing with the portfolio optimization to sell those lower-yielding assets and then redeploy into much higher yielding assets, ideally at our weighted average yield, which in the past quarter was about 12.5%. So we view that as a meaningful earnings driver for the future. It doesn’t show up in the March quarter, of course, because we just sold the first one here in the June quarter. We expect for that pace to pick up in the coming weeks and months.

Okay, got it. Thank you. That’s it from me.

Thank you.

The next question will come from Christopher Nolan of MLV & Company. Please go ahead.

Hey, guys. Grier, for the online lending, what is the unlevered yield for those loans?

Chris, it’s approximately 10% to 11% in that range, weighted average.

I mean, you made the comments, am I misheard that you are looking to ramp up the online loans? Will all the incremental loans you put on, will those be rolled over into the spun out entity or are you thinking about doing online loans after the spin in the Prospect Capital vehicle?

Sure. And I want to clarify, I was quoting returns net of expected losses, which is how we think about everything in that business, not just [Multiple Speakers]

And also across the entire book.

Across the entire book.

Not differentiated according to origination source.

Correct. That’s the weighted average; prime loans unlevered net of losses will be in the high single-digits and near prime will be a few hundred basis points above what it is quoted. To answer your question about the spin-off, what we’re anticipating doing is spinning off our consumer business to have a pure consumer focused company and for that spin to be in its entirety for the consumer book, which makes the most sense from a regulatory standpoint, because we have bank facilities that - right now we have three bank facilities and we’re planning on having two securitizations in the next several weeks as well. And it would be pretty awkward to do a partial spin. From an equity standpoint, the consumer book is about $325 million give or take of assets and our equity is in the $150-ish million range and growing. So between that and dry powder, there we want to make available to that type of business that’s growing rapidly. Yes, you’d want to spend the entirety of it to make sure you’ve got good critical mass, as well as visibility on additional cash to ramp. The small business lending activity, which we have, which is considerably smaller than consumer right now in the range of just under $50 million approximately. Right now, we envision that staying at Prospect Capital Corporation for a couple of different - for different reasons, one, it helps to enhance the pure play story to have a consumer-focused business being spun as opposed as to something also doing small business we think. Number two, small business loans are 70% basket assets different from consumer loans. So, we actually think they fit just fine within a BDC structure. Number three, most of the small business lending out there, you have personal guarantees from the small business borrowers, who are typically subprime in nature. You have the benefit of both small business credit as well as the small business company owner. But the APRs tend to be a lot higher in that business and you - we haven’t put any leverage against those assets and we don’t plan on doing so. So you don’t need additional financing, it’s 70%, stay the PSEC, so that’s our logic there, Chris.

Okay. Thank you for taking my questions, Grier.

Thank you, Chris.

The next question will come from Robert Dodd of Raymond James. Please go ahead.

Hi, guys. I’m going to keep it general for this one. Looking at the ROE you’re generating at the moment about 9.5%, to earn the dividend from an NII basis, so I understand the taxable distinction. But from an NII basis, you need that to be modestly high, 9.7% declare the dividend obviously pushing 10%, it would be better. Can you link these various strategic avenues you’re approaching rebalancing the portfolio to high yields, the spins, et cetera. What’s kind of the rank ordering that you would expect that importance to be in terms of driving that ROE higher, ultimately protecting NAV and maybe even enabling shareholders to see some dividend growth eventually?

Sure. Well, I would say portfolio optimization, Robert, is probably the top of the list. When you talk about rotating out of 6% yielder and putting them into 12% yielder. That’s mathematically a pretty significant driver when you talk about taking three quarters of $1 billion of assets and doing that, that’s number one. Number two, refinancing our liabilities. We also expect to be an earnings driver, some of which we’ve already done. As Brian mentioned in his prepared remarks, we called our baby bond, which has kind of stuck out like a sore thumb as our most expensive financing at a highly diversified liability stack, the very first moment we could win when call protection rolled off and we gave notice on April 15 and that bond has been called in a week’s time. So that 7% yielder is being replaced initially by our credit facility Prospect Capital Funding, which on an incremental basis a purely marginal cost analysis basis when you look at the incremental draw cost compared to unfunded commitments what Brian about 2% incremental cost approximately. So you’re placing 7% money with 2% money on $100 million call, which we think is a driver. We’ve also been refinancing some of our program notes. And one of the nice benefits of those is unlike the institutional side, where you have non-call life bonds that you can’t pre-pay in any fashion. The program notes the five to seven year notes typically can be called in - after one year. So we’ve been optimizing our liability stack. So that would be number two. Number three is - and maybe that will rise to be higher priority than number three based on the numbers, it’s little bit tough to tell. We’re looking at selling one or more of our controlled deals sometime this year. And we obviously look to do so, if we think we’re getting attractive number and then taking those proceeds and reinvesting in a diversified array of income producing securities. We’ve got some companies on the control side that has some interesting growth attached to them. And if we can monetize and get a growth multiple for something and then reinvest into income producing securities, which is our significant objective and mantra, then we will seek to do that. So those are some of the big earnings drivers that we are looking at to drive growth in the future Robert.

Okay, got it. Thank you.

Thank you.

The next question will come from Gregg Abella of Investment Partners Asset Management. Please go ahead.

Good morning, gentlemen.

Hi, Gregg.

So this is really more of a suggestion maybe then a question, but Prospect’s been around for a while and it’s managed through a much higher interest rate environment than we have now. So it might be interesting when you’re presenting to advisors and analysts if you could point out what Prospect’s yield was relative to short-term and long-term treasuries in the past and what the discount to NAV was back then. I don’t know for a fact, but I’m willing to bet that the discount wasn’t as severe than that, probably the yield was pretty similar to what it is now and it just seems like not just Prospect, but anything of the high yield nature is sort of - has a distorted price and you might be able to lay a lot of fears about what would happen in rising rates if you can point out that it’s already baked into the mix?

Gregg, that’s an excellent suggestion and I think we as an industry need to do a better job of communicating that to the outside world and do a better job of communicating that, in a rising rate environment, we expect for floating rate asset sensitive company and industry to do well or at least not be harmed by an increase in rates and you seem to see recent trading activity of sell-off yield indiscriminately when there is concerns about rates going up. So that’s an excellent suggestion Gregg. And we’ll think about incorporating that type of historical data analysis going forward.

Thanks, guys.

Thanks.

The next question will come from Allen Morford of Investors first. Please go ahead.

Hello.

Hi, Allen.

Hi, Allen. You’re right here. We can hear you, sir.

Yes. I’m very concerned about a number of things and investors right now are suffering with 25% discount from net asset value. And you guys continue to collect a fee based upon net asset value. I don’t think that’s really fair in this environment. I think if you take a look at your stock and long-term, the big issue in terms of net asset value has directly been related to your excessive fees. And there have been some situations here recently where some very, very large investors have come in and in effect done a proxy to either have the management reorganize their fee structure or take them out. And your fees are just incredible it just doesn’t make any sense to me. I do not believe you’re acting as a fiduciary because of these fees and I’d like you to comment to that?

So I think we missed the first part of your question with some echoing. Look on the subject of management fees declined in the March quarter compared to the prior quarter. We have a significant performance component that people pay careful attention to and earnings went down and incentive fee and overall management fees went down. So we think that’s in place, number one. Number two, our management team in really broader company and all you see publicly are the Form 4 filers that counts. Pick a handful of the 100-plus people that work here. So what you see publicly is understated. I purchased well over $10 million of stock in the last year and deeming it to be a good investment and supporting the overall company. So a couple of thoughts there, but we do appreciate your concerns and we’re working hard to arrest the discount situation by focusing on driving earnings, longer-term, trying to have that translated into an increase in the dividend. There is no guarantees in that, but we’re working on drivers, which we think will be helpful toward that objective, and better education about, not just what our company does but about the recurring and sustainable nature of the earnings we produce. This quarter for example, we started communicating how virtually 100% of our revenue comes from interest income, 97% to be exact as opposed one-time structuring fee and one-off types of income, which we think is a demonstration of the high quality nature of our earnings stream. So we think that’s a factual and positive message to get out there and to be helpful, where obviously as an industry, you’re seeing kind of macro things result in discounts across the industry, not just specific to our company pertaining to interest rate concerns and some of the things we talked about with Gregg, but we appreciate very much your comments Allen. Thank you.

I have another question.

You really need to go on.

Allen, in the interest of time, we’re going to go into the next question. So, thank you, sir.

Our next question will come from [indiscernible]. Please go ahead.

I hope you can hear me. So - can you hear me?

We can indeed, Lisa [ph], go ahead.

Okay, thank you. I’m listening through the call this morning and you really - indirectly you really did answer his question, there it just seems like, it’s like whatever you can get away with and that you done it that way. And I think that you need to correct that. And my other [indiscernible] conference call to talk about, my question is when should we expect the staff to at least go up 50% [indiscernible], do you see that in the forecast are not really?

Well Lisa as we said in last - to the last question we’re working on things to demonstrate from a communication standpoint, the recurring nature of our earnings for that to get out there, we don’t think a 12.5% dividend yield, which will convey potential risk texture [ph] is appropriate. When you look at our business, that’s predominantly a first-lien senior secured lending business with very thoughtful and protective and laddered liabilities attached to it, within a registered structure that limits indebtedness to less than one-to-one. So we don’t think that’s appropriate. We’re trying to do more in enhanced communication to assist with that message as well as to communicate that in a rising rate environment, we’ve floating rate assets. Our whole industry is sold off to a discount situation, not singular and unique to our company. And we understand the frustration and rest assured some of the largest shareholders in the company we’re concerned about addressing that as well. Thank you very much.

Okay thank you. We need to go onto the next question. Okay. I think we are all set now. Thank you very much. Have a wonderful lunch.

Ladies and gentlemen, the conference has now concluded. We thank you for attending today’s presentation. You may now disconnect your line.