Q3 2020 Main Street Capital Corp Earnings Call
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Greetings and welcome to the main Street Capital Corporation third quarter earnings Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero.
On your telephone keypad as a reminder, this conference is being recorded it is now my pleasure to introduce your host Zack Fadem with Dennard Lascar Investor Relations. Please go ahead.
Thank you operator, and good morning, everyone.
Thank you for joining us for main Street capital Corporation's third quarter 2020 earnings Conference call.
Main Street issued a press release yesterday afternoon, the details the company's third quarter financial and operating results. This document is available on the Investor Relations section of the company's website at main SG capital Dot com.
A replay of today's call will be available beginning an hour after the completion of the call.
We remain available until November 13.
Information on how to access the replay was included in yesterday's release.
We also advise you that this conference call is being broadcast live over the Internet and can be accessed on the company's home page.
Please note that information reported on this call speaks only as of today November six 2020, and therefore, you are advised that any time sensitive information may no longer be accurate at the time of any replay listening or transcript revenue.
Today's call will contain forward looking statements and these forward looking statements are looking statements can be identified by the use of words, such as anticipates believes expects intends will should may or similar expressions.
These statements are based on management's estimates assumptions and projections as of the date of this call and there are no guarantees of future performance.
Actual results may differ materially results expressed or implied in these statements as a result of risks uncertainties and other factors, including but not limited to the factors set forth in the Companys filings with the Securities and Exchange Commission, which can be found on the company's website or FCC dot Gov.
Main Street assumes no obligation to update any of these statements unless required by law.
During today's call management will discuss non-GAAP financial measures, including distributable net investment income. Please refer to yesterday's press release for a reconciliation of these measures to the most directly comparable GAAP financial measures.
Certain information discussed on this call, including information related to portfolio companies was derived from third party sources and has not been independently verified.
And now I'll turn the call over to main Street CEO Dwayne Hyzak.
Thanks, Zack good morning, everyone and thank you for joining us today.
Joining me for our call today with prepared comments are David Magal, our president and Chief investment Officer, and Brad Smith, our CFO.
Also joining us for the Q and a portion of our call our Vince Foster our executive Chairman and Knakmuhs serve our managing director and head of our middle market investment group.
I want to start by saying that we hope everyone is staying safe and healthy during these very unusual times.
Given the ongoing impact of the COVID-19 pandemic similar to our costs for the last two quarters I will start today's call with some comments regarding the impact of the pandemic.
I will then comment on our overall performance in the third quarter, some developments within our asset management business.
Our investment activities and current investment pipeline.
Our outlook for the next few quarters.
Our recent dividend announcement and several other updates.
Following my comments, David and Brent will provide additional comments on our investment strategy investment portfolio financial results and future expectations, after which we'll be happy to take your questions.
Since our last conference call Weve continued to prioritize the health and well being of the employees and management teams and employees of our portfolio companies, while proactively working through the ongoing impact of the pandemic on our investment portfolio.
We greatly appreciate the ongoing efforts of these individuals and we continue to be very pleased with their efforts and actions throughout the pandemic.
While the economic environment since our last call has continued to be very challenging we are pleased with the performance across the vast majority of our portfolio companies has stabilized and started to improve.
Allowing us to recover a meaningful portion of the unrealized depreciation we experienced earlier this year with net appreciation of $48 million across our investments and a 3% increase in net asset value per share in the third quarter.
We continue to feel good about the overall quality of our investment portfolio and the leadership provided by the management teams of these companies and we currently expect to see continued fair value improvement in recovery in future quarters.
In addition, we are pleased that despite the impacts of the pandemic. We have continue to have success executing on new investments in both our lower middle market and private loan strategies, and we remain confident that our conservative capital structure and strong liquidity position will allow us to continue to manage through the current challenges and to successfully execute on the opportunities that exist with our.
Folio companies and in our pipeline of attractive lower middle market and private loan investment opportunities.
We're also very pleased with our recent closing of an agreement through which we became the sole investment adviser to HMS income fund, which has been renamed as MSC income fund.
We are excited about our plans for positioning this fund for the future. While also executing our overall strategy to grow our asset management business within our internally managed structure.
And continue to provide this unique benefit to our main street stakeholders.
We are also pleased to report that we continue to make good progress on our internal initiatives to organically grow our asset management business and we look forward to sharing additional details in the near future.
Based upon the positive developments, we have seen in our existing portfolio companies, coupled with the future benefits of the growth in our asset management business and the attractive new investment opportunities. We are seeing in our lower middle market and private loan strategies. We are confident that the third quarter represented the low point for our distributable net investment income or deny and we.
Expect to see increases in our DNA high in the fourth quarter and future quarters, which Brent will cover in more detail.
Now turning back to our results for the third quarter. These results reflect the continued negative impact of the pandemic on the overall economy. Most specifically in a significant decrease in the amount of dividend income we realized from our equity investments and an increase in the number of investments on nonaccrual status at quarter end.
We remain confident that the decrease in dividend income is a temporary issue partly due to the conservative approaches many of our portfolio companies are taking in managing their capital and liquidity in response to the pandemic and we believe this dividend income will recover as the impacts of the pandemic subside.
Our team also continues to maintain significant focus on working through those underperforming investments to realize the best possible outcome for our stakeholders.
Despite the negative impact of these items and the resulting level of DNA NII in the quarter as a result of our diversified investment portfolio together with the advantages of our differentiated investment strategy, the increasing benefits from our asset management business.
Our strong investment pipeline our.
Our efficient operating structure and alignment of interest with our shareholders combined with our conservative capital structure and strong liquidity position, we remain comfortable with our commitment to maintaining a stable monthly dividend payment level going forward.
To that end earlier this week, our board declared our first quarter 2021 regular monthly dividends of 28.5 cents per share payable in each of January February and March and amount that is unchanged from our monthly dividends for the fourth quarter.
Now turning to our investment activities in the third quarter and our current investment pipeline, we completed lower middle market investments of $46 million in the quarter, including an investment and one new company and financing for acquisitions by two of our existing portfolio companies and as of today, our characterize our lower middle market investment pipeline as.
As above average.
We continue to be very active in our lower middle market strategy and we have several new investment opportunities in the pipeline that we expect to close in the fourth quarter.
Also included in this investment pipeline are several additional follow on investments in existing portfolio companies as our companies are increasingly more comfortable with the current business conditions and are actively looking to execute on various attractive growth opportunities.
We also believe that the last few months have caused many entrepreneur owners to refocus their financial and estate planning priorities and consistent with our historical experiences over the last two decades as the industry, leading partner for lower middle market companies and their management teams, we believe that our unique combined debt and equity investment offering.
And our ability to be a long term to permanent partner for the companies, we invest in positions us as the favorite investment partner for these business owners in the current environment.
During the third quarter, we continued the successful focus of our non lower middle market investment growth on our private loan portfolio, resulting in this portfolio growing by $16.9 million on a net basis in the quarter, while our middle market portfolio decreased by two and a half million dollars consistent with our previously stated objectives.
As of today, our characterize our private loan investment pipeline as average.
And in closing our officer and director Group has continued to be regular purchasers of our shares investing approximately $400000 during the quarter.
On a collective basis, our director and Officer group owns Ministry shares that.
Okay, and approximately $98 million at quarter end.
With that I will turn the call over to David.
Thanks, Duane and good morning, everyone.
As Dwayne highlighted in his remarks during the third quarter the negative impact of COVID-19 began to lessen and visibility improve for our portfolio companies.
As a result, we saw the general environment for our existing product portfolio companies stabilized as compared to earlier this year.
During the quarter. We also saw a meaningful uptick of new actionable investment opportunities in our lower middle market and private loan portfolios, a significant portion of which we expect to close in the fourth quarter.
We attribute this increase in part due to the uncertainty around the presidential election, and perceived concerns related to potential negative tax consequences for business owners seeking a sale of their privately held businesses.
During the quarter. We also saw several of our existing lower middle market portfolio companies make opportunistic acquisitions a trend. We believe will continue in the fourth quarter and in the beginning of 2021.
Opportunistic tuck in acquisitions should further contribute to the long term value creation, we expect our lower middle market portfolio companies can accomplish through the equity appreciation achieved from these external growth initiatives.
Our intentional and differentiated investment strategy continues to serve us well during this prolonged time of market dislocation with our portfolio well diversified by end market industry vintage and security type.
This diversification has been the cornerstone of our philosophy over 13 years as a public company.
Because of the seasonal nature of our lower middle market portfolio, our portfolio company leverage in this segment of our business remains modest with a median net senior debt to adjusted EBITDA ratio of 2.7 to one and a median total adjusted EBITDA senior interest ratio of 2.7 to one.
As of September Thirtyth, we had investments in 193 portfolio companies spanning across more than 50 industries.
Our largest portfolio company represented approximately 2.8% of our total investment portfolio fair value at quarter end and 2.9% of our total investment income for the last 12 months.
The vast majority of our portfolio company investments represented less than 1% of our assets and our investment income.
During the third quarter contributions from our lower middle market portfolio continued to be well diversified with 44 of our 69 lower middle market companies with equity investments, having unrealized appreciation at quarter end.
And the most recent quarter the dividend income we receive from our portfolio companies with significantly lower when compared to the same period of last year.
This was expected and consistent with what we've experienced in prior periods of market disruption as our portfolio companies with our support to maintain cash for liquidity purposes, instead of making distributions.
Several of our portfolio companies that decided not to make distributions earlier. This year now intend to resume distributions in the fourth quarter. We view this as a positive indication of the health of those companies and as main Street management, we continue to encourage our portfolio companies to only make distributions when they are certain it is prudent to do so.
It continues to be our portfolio managers goal to achieve distributions from our portfolio companies as appropriate in an effort to assist main street to get back to comfortably covering our monthly dividends as we have consistently done in the past.
Our lower middle market investment activity in the third quarter included investments of approximately $46 million, including an investment of $26 million in one new lower middle market investment, which after aggregate repayments of debt principal and return of invested equity capital from several lower middle market investments resulted in a net increase of approximately 30.
$2 million in our lower middle market portfolio.
We also exited our lower middle market debt and equity investments in rubber aggregates, realizing a gain of $4 million.
At quarter end, our lower middle market portfolio included investments in 70 companies, representing approximately $1.2 billion at fair value, which is a 115% of our cost basis.
Our private loan investment activity in the third quarter included investments in five new portfolio companies, representing approximately $85 million and commitment and $71 million in cost basis.
As of September Thirtyth main Street's private loan portfolio included total investments of approximately $744 million of fair value across 68 unique companies and during the quarter. We had a net increase in the cost basis of this portfolio of approximately $69 million.
In our middle market portfolio, we had investments in 42 companies, representing approximately $441 million at fair value and during the quarter. We had a net decrease in this portfolio of $2.4 million.
The total investment portfolio at fair value at quarter end was approximately 102% of the related cost basis, and we had 12 investments on nonaccrual status, which comprised approximately 2.6% of the total investment portfolio at fair value and 7.1% at cost.
Our current expectation is that we will reduce the number of investments on nonaccrual status by three to four investments during the fourth quarter as we continue to proactively work through these nonaccrual investments with management teams and financial sponsors as these companies.
During the outlook for the remainder of 2020, we intend to focus our efforts on continuing to thoughtfully make investments primarily in new lower middle market and private loan opportunities.
Our ability to provide flexible debt and long term equity solutions has always been a key differentiator for us in our lower middle market business.
In the current environment, our ability to move quickly and provide 100% of the outside debt and equity capital to close the transaction is particularly important for smaller privately held businesses and thereby advisers.
We are confident that in the current environment, we will be able to prudently deploy capital with very attractive risk adjusted return profile and we intend to create significant shareholder value with this proven investment strategy.
With that I'll turn the call over to Brent to cover our financial results capital structure and liquidity position.
Thanks, David our total investment income in the third quarter decreased over the same period in 2019 to a total of $52 million, primarily driven by a decrease in the dividend income due to due to the negative impacts from the co vid pandemic and a decrease in interest income primarily due to lower LIBOR rates the change in total.
Segment income also includes a decrease of 1.3 million related to lower levels of accelerated income for certain debt investments when compared to the third quarter of last year.
Our operating expenses, excluding non cash share based compensation expense increased 5.4 million over the same period of the prior year to a total of $18.9 million primarily related to an increase in deferred compensation expense due to the increase in the fair value of our deferred compensation plan assets.
The ratio of our total operating expenses, excluding interest expense as a percentage of our average total assets was 1.4% for the third quarter on an annualized basis and 1.3% on a trailing 12 month basis. Thanks.
The activities of our external investment manager benefited our net investment income by approximately $2.2 million during the third quarter through the allocation of $1.9 million of operating expenses for services, we provided to it and point $3 million of dividend income.
We recorded a net realized loss of $13.9 million during the third quarter, primarily related to the realized losses from the exit of three middle market investments and the restructure of a middle market investment, partially offset by a realized gain related to a lower middle market investment.
We recorded net unrealized appreciation on the investment portfolio of $48.4 million during the third quarter, primarily related to 13.9 million of net appreciation on our lower middle market portfolio 16.9 million of net appreciation on our private loan portfolio 13.
<unk> million of net appreciation on our middle market portfolio $2.5 million of net appreciation on our other portfolio and $2 million appreciation relating to our external investment manager.
Our operating results for the third quarter resulted in a net increase in net assets of $78.2 million or one dollar in 18 cents per share.
Our overall capitalization and liquidity remains strong as our total liquidity is currently approximately $600 million during the third quarter. We continued to enhance our overall liquidity position by issuing a 125 million follow on to our outstanding investment grade notes that mature in April 2024, and raising approximately $8 million.
Net proceeds on our ATM equity issuance program.
We were also pleased to have recently increased the capacity under our revolving credit facility by $40 million and we continue to feel that our conservative leverage strong liquidity and continued access to capital have us well positioned for the future.
As we look forward to the fourth quarter, we expect that we will generate distributable net investment income of 53 to 56 cents per share as our results begin to recover from the impacts of the pandemic and says on a pace and expectation to cover our monthly dividend rate with distributable net investment income over the years.
Next few quarters with that I will now turn the call back over to the operators, who can take any questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to be one of your questions from the queue for participants using speaker equipment and maybe that's the.
Sorry to pick up your handset before pressing the star Keys. Our first question comes from Robert Dodd with Raymond James. Please go ahead.
Hi, guys on on that dividend income obviously.
Lastly, Nash this section it was depressed.
Two years since I was a two year recession, which has not changed situation, we have Matt and you're talking about dividend income starting to rebound in Q4.
What's your confidence level thats, not just and catch up.
Have.
In a depressed levels.
First the quarters in some of that has to balance out. This is the beginning of a trend.
In terms of overall dividend.
Distributions from your portfolio companies is that sustainable into 2021.
Thanks, Robert what I would say there is that part of the reason we expect the dividend income to start recovering is that as we touched on in our per prior comments that the you know the the the view that our management teams across the portfolio you have about their current business conditions is significantly better today than it was couple of quarters ago as soon as they continue to get more.
Comfortable they will be more comfortable and paying out dividends as opposed to retaining added liquidity for their business. We don't expect them to take all that liquidity that they've built over the last couple of months in pay it out in the fourth quarter, we think that.
We'll continue to be gradual in their approach to utilizing their liquidity. So we don't expect that it will be a a one time event. We think it will be something that will play out over the next three to four quarters as our results continued to improve and the economy overall heels and they continue to be more and more comfortable releasing some of that liquidity that theyve retained over the last.
Six months.
Got it I appreciate that all on the pipeline.
Yeah, no good but what about can we get an up tick in pipeline below market, but David's comment was was part of that was.
On potentially motivated by by the time of planning and May be changes to two two tax.
Hey, now Siemens granted a week ago thing things seem different but it seems more likely that that probably will be.
Material changes.
Tax.
Okay, So anything else next year.
Is there any expectation that that might change.
The shape of the pipeline.
As you know as we go through Q4 oil into next year.
And given things seem to income tax from connectx expectations seem to be changing pretty dramatically pretty quickly.
Yes so.
The.
Folks we tend to deal with in the private community as far as business owners are keenly focused on taxes and a lot to do their decision, making take place earlier this year looking at liquidity. So for those all of those owners that we're looking for liquidity event anyway. When you get the disruption in the noise in and around the election, we find that people will.
So perhaps their business will be impacted shift from a majority sale to minority sale, but taxes are top of mind. So I think with some of the uncertainty irrespective of who's in office. There is a heightened awareness of it and a push to move forward and to get offers in transactions closed before year end and Thats certainly.
What we see.
But again a lot of that activity is not exclusive to tax changes what actually happens, it's more of a fear than anything else.
Got it got it I appreciate that one more liquid pipeline locally 12, nonaccruals that and have you said you expect real for those.
Q Q drop off in Q4, I mean, there's obviously some of your portfolio companies file bankruptcy or those in in that 12, and then the three the ones you expect to drop off is that because you expect to exit.
Or you expect to restructure and put them back on accrual.
I think it'll be a combination of both of those it will be all company specific based upon.
Where the company you assist today in what we've been doing with the management teams and the equity owners and financials financial sponsors of those companies to work through the issues that they've had to deal with over the last couple of quarters I don't think theres, one or the other this a real driver its a combination of company specific issues that will will drive the outcomes, we do expect.
To have as David said in his comments a number of those non accruals that we we work through and would expect to see that number decreases would move into the fourth quarter.
I appreciate it. Thank you. Thank you.
Next question comes from Bryce Rowe with National Securities. Please go ahead.
Thanks, Good morning, Duane and David and Brian.
Good morning, Bryce wanted to maybe follow up on that.
Good morning Duane.
Yes, I wanted to follow up on some of Roberts questions there, but.
But maybe first I wanted to talk about the HMS.
And that.
The change to you all now being the sole advisor size, obviously salvi.
Accretion in the base management fee that.
You will charge for your service is there can you talk about.
Kennedy the I guess the structure now from an incentive fee perspective on assuming that you're not earning the incentive fee at this point, maybe I'm wrong.
And what have you made any changes to that.
Yep Pricers Theres no changes to the to the incentive fee portion of the the management fees fees or the you know the only change we made was to reduce the base fee. As you said from 2% to 1.75 in terms of visibility to earning the incentive fee, we have not been earning it over the last couple of quarters I believe the last time, we earned it was either Q4.
Four of 19 or Q1 of of a 20, but it's been several quarters. Since we earned any any incentive fees there and just given the impacts of coated we don't expect to earn incentive fees in Q4, and then obviously 2021 will be dependent upon the recovery both in the broader economy as well as here with the dividend income that we've touched on on the.
Main street side. So there is no change to the calculation, but it's just going to be.
A few quarters before we expect to have visibility to any incentive fee income from that from that relationship.
Okay. That's helpful delight.
In terms of.
Maybe then that the activity the pipeline I mean, obviously the private loan activity picked up here in the in the third quarter and it's in it's been more of a focus for you all over the last several years.
Maybe you could touch on what you're seeing from a pricing perspective now.
Have you have you tried to expand your network in terms of.
The other other firms that you that you will.
Club up with to do those deals.
And then kind of curious what the what the participation looks like within within these recent deals in terms of other other firms.
Sure. So I'll, let Nick you touched on the pricing here in just a minute I think when you look at the activity you I'd say, it's a combination of a couple of factors. One is as you said to you the parties that we've been participating with either with us leading and bringing third parties into participate with faster, whereas other parties, leading we participate in there are there aspects.
These are opportunities as we've been doing this for a few years were just seeing those relationships provide more consistent opportunities for you or for new investments. We're also seeing direct relationships with sponsors where we've been in a transaction with them as we've done a good partner on the senior lender side I'm as they have future opportunities, we're seeing more opportunities to go.
Direct and I'd say, that's where you're seeing as you have more opportunities to lead and bring other people in to participate with us than what we would have seen a couple of years ago on the pricing I'll, let let Nick give some some commentary on that it's a for a non cobot infected company. What we're seeing is maybe 25 to 50 basis points wider than.
Year ago, but Thats also combined with probably a maybe a quarter to half turn less leverage.
Much better document overall like you kind of put that all together on a pure pricing basis, it's not a huge movement.
But you are seeing better terms and better structures, a little less leverage than if you're just doing a straight same leveraged same weaker document potentially it's probably more than 100 basis point range, but in the reality is we're seeing 20 by 50 basis points, which is a better overall loan structure.
Okay. Thanks, Nick.
And maybe I mean, maybe a maybe a couple of more if you don't mind.
Obviously, a lot of discussion around dividend income from your your lower middle market portfolio companies have nice to see.
That dividend income pickup when you have when you kind of think about it ex HMS.
No. It's all a pick up in the third quarter.
From from the level, we saw in the in the first and second quarter, not a huge increase but quite a bit of a pickup.
And I'm curious if there was any there was it it was a chunky dividend it might come in as it happens sometimes or did you did you see more participants or more.
One more portfolio company to contribute distribution this quarter than you did in the first half of the year yes.
Yeah, I'd say that.
There wasn't if there wasn't a material change one way or another when you look at the composition of the the individual companies they contribute to the use of the dividend income we do see movement for the quarter were different companies will have higher dividends and they may have had in prior quarters, but overall if you look at the the composition across a number of portfolio companies I don't think you would see.
See a significant difference in Q3 versus prior quarters.
Okay. Okay, and then last one for me just on on balance sheet leverage.
You've talked in the past.
I will now trying to take advantage when when investment opportunities are more attractive.
In recessionary like.
And we've seen leverage go up a little bit, but you are still well below what.
What what others are operating at within the BDC space. So is there is there a little more appetite to take on a bit more leverage.
And.
Can you help us think about kind of what a what a target targeted leverage level might be over.
Over the next you know next year or so.
Yes, I would say that we've always wanted to maintain a conservative position with significant liquidity and I think after.
After what we've dealt with over the last couple of quarters I think our views of the benefit to doing that you'll have had been reinforced I think we would not expect to see a significant change in our profile you may see it move around a little bit quarter to quarter.
As we have new investment activity that you that you that increases for a quarter or two but overall if you look at on a long term basis I would not expect to see a significant change in our expectations from a from a leverage and liquidity standpoint.
Okay. Thanks, a lot appreciate Bryce.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad. Our next question comes from Kenneth Lee with RBC. Please go ahead.
Hi, Thanks for taking my question I'm wondering if you could just further expand upon your comments in terms of the key drivers for improving we're seeing potential proving distributable net investment income over the near term just curious as to you know potentially what kind of assumptions are being built in thanks.
Thanks, Ken So there is a couple of drivers there one obviously is the transaction that we completed.
Through which we became the sole advisor to HMS. So we we have not had that prior to two 930 really that relationship as we announced in our press release last week Youll starts on October Thirtyth. So.
That will be a driver both in Q4 with incremental income versus Q3, but also.
Additional benefit in Q1, as we have that benefit for the full quarter as opposed to two months. So thats you. That's one of the drivers I think David touched on his comments and Weve given in some of our responses here to the questions your dividend income.
From our alumina market companies will be another big driver, we do expect that that benefit of that improvement to be gradual over multiple quarters, but we are seeing.
[music] improvement there. So we expect to see that number continue to increase both in Q1, I mean, sorry, Q4, and Q1 and going forward is that we continue to move forward from where we've been over the last couple of quarters. The last big driver is just the new the new investment activity as we touched on we're seeing robust activity and very.
Tract of opportunities both in our lower middle market business and private loans. So as we see those those new investments come on in Q4, and then Q1 as well you that incremental investment income that comes from those investments will also be a key driver that improvement.
Great very helpful. Thats, all I have thank you very much.
Thank you.
We have a follow up from Bryce Rowe. Please go ahead.
Thanks, sorry to belabor the call just thought I might try to get Vince involved at peace.
If he's there.
And Duane I'm sure you could play backup if if he's not available we come to the point now where we've.
We've moved past the comment period for the proposed FSC changes.
I know you all have been involved with.
With what that process from the Nova.
Very start and so just wanted to get any perspective or or or update that you all might have related to related to that thanks Bryce.
Yes. Good question, we're not we're actually not passed the comment period, because the comment period I think began when though their proposal. The proposals were released before they appear to efficiently in the Federal Register and the six to 60 day comment period Didnt begin to run until.
It appeared in the Federal Register which is fairly recent so we are we're working with SP I and others in the.
In the industry on draft comments, we've actually.
Made a first we've actually turned a draft of of SBH comments.
And.
I expect others to comment as well so I think we all feel pretty good about it and we don't see any real objection anywhere.
And again I think that the proposed rule gets us part of the way there and so we want to we want to applaud their efforts and try to encourage more effort to get US further there in terms of.
In terms of you know get us.
Let us eligibility complete eligibility Bakken indicee, so that you'll you'll see more on that probably in the next 30 45 days.
Okay, and then does that.
Getting you all the way there so to speak to that.
With with the index eligibility.
Well that kind of fall on individual bdcs to TNT to lobby with S&P and Russell or is it being spearheaded by a particular particular group.
Well, we're trying to work we're trying to use our best contacts with Russell and its parent company to try to try to enter into direct.
No no substantive negotiations or discussions with them.
On the other hand, they don't really have an independent view per se there they want to know what their constituents prefer and so they are in the process of tolling there.
Their subscribers.
And the other mutual funds et cetera to want to try to see if they have a view if so what is it how strong strongly as it held is there some consistency there so I think they're they're pretty neutral on the topic.
That's the only reason, we say part of the way there now is that.
If you you know you get footnote disclosure, if you're a fund that has less than 10% acquired funds are bdcs in terms of your portfolio.
Over 10% you don't get relief and so that's why we feel so since most funds were going to have less than 10% EPS.
That's part of the way there. It's it's out of the expense table in into a footnote. We don't know how Russell's got to react to that but it's a fit is positive movement and it should be positive in general for those funds that you know we're concerned about having it in the expense table. So.
Got it.
Okay. Thanks, a lot there.
This concludes today's Q and a session I would like to turn the floor over to management for closing remarks.
We thank everyone for joining us. This morning, we look forward to talking to everyone again after our year end earnings release.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Yeah.