Q2 2021 Prospect Capital Corp Earnings Call
Good day and welcome to the second fiscal quarter earnings release and conference call for Prospect Capital Corporation, All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions.
To ask a question you May Press Star then one on your Touchtone phone.
Withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to John Barry Chairman and CEO. Please go ahead.
Thanks, Gary.
Joining me on the call today as usual I realize look our president and Chief operating officer, and Kristin Van <unk>, Our Chief Financial Officer Kristin.
Thank you 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 forecast due to the impact on many factors.
We do not undertake to update our forward looking statements unless required by law.
For additional disclosure see our earnings press release, and our 10-Q filed previously and available on the Investor Relations tab on our website Prospect Street Dotcom now I'll turn the call back over to John.
Thank you Kristen.
In the December quarter, our net investment income or NII.
Well, it's $81.6 million or 21 cents per common share.
Six cents from the prior quarter.
Our net income was $306 million or 80 cents per common share.
35 cents from the prior quarter, our N. A vs stood at $8.96 per common share in December up fees.
56 cents and 7% from the prior quarter and representing our third quarter in a row with NAV growth.
In the December quarter, our net debt to equity ratio was 61.
One 1% down.
Down 13% from March and down 7% from September.
In May we moved our minimum 1940 act regulatory asset coverage to 150% equally.
Equivalent to 200% debt to equity.
Have no plans.
To increase our actual drawn debt average beyond our historical target of 0.7 day 0.85 debt to equity.
And we are significantly below such.
Target range now.
We are announcing monthly cash common shareholder distributions of six cents per share.
For each of February March and April these three months represent the forty-second forty-third and 44th consecutive six cent.
Dividends.
Consistent with past practice, we plan on our next set of shareholder distribution announcements in may.
Since our IPO.
Nearly 17 years ago.
Through our April 'twenty 'twenty, one distribution at the current share count.
We will have paid out $8.60 per common share to original shareholders.
The aggregating over $3 $3 billion in cumulative distributions to all common shareholders.
Since since October 2017.
Our NII per common share has aggregated $2.55 well our shareholder distributions per share. However.
Aggregated $2.34, resulting in our NII exceeding distributions.
This period by 21 cents per share.
Our NII covered distributions and the June 2020 fiscal year and have covered distributions in the 'twenty 'twenty, one fiscal year to date as well.
We are also pleased to announce continued preferred shareholder distributions.
On the heels of successful launches over a 1 billion dollar five 5% preferred stock program and 250 million five 5%.
Preferred stock program.
Thank you I'll now turn the call over to Greer.
Thank you John.
Our scale platform with over $6 1 billion of assets and Undrawn credit continues to deliver solid performance in the current challenging environment on.
Our experienced team consists of around 100 professionals.
Which represents one of the largest middle market investment groups in the industry.
With our scale longevity experience and deep bench, we continue to focus on a diversified investment strategy that spans third party private equity sponsor related lending.
Direct non sponsor lending.
Prospect sponsored operating and financial buyouts structured credit and real estate yield investing.
Consistent with past cycles, we expect during the next downturn to see an increase in secondary opportunities coupled with wider spread primary opportunities with a pullback from other investment groups, particularly more highly leveraged one.
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.
And invests in a disciplined manner in a low single digit percentage of such opportunities.
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.
As of December our portfolio at fair value.
Prized over 47% secured first lien.
21 per cent other senior secured debt.
13% subordinated structured notes with underlying secured first lien collateral.
And 18% equity investments.
Which results in a stable 82% of our investments.
<unk> assets with underlying secured debt.
Benefiting from borrower pledged collateral.
Prospects approach is one that generates attractive risk adjusted yields and our performing interest bearing investments were generating an annualized yield of 12, 2%.
As of December, which was up 0.6 per cent from the prior quarter.
We achieved this increase despite a headwind from the past year decline in LIBOR that we expect stability now due to our LIBOR floors.
We also hold equity positions in certain investments that can act as yield enhancers or capital gains contributors as such positions generate distributions. We've continued to prioritize senior and secured debt with our originations to.
Protect against downside risk, while still achieving above market yields.
Through credit selection discipline, and a differentiated origination approach.
As of December we held 122.
Direct portfolio of companies.
Even with the prior quarter with a fair value of over $5 6 billion.
Which is an increase of 239 million from the prior quarter. We also continued to invest in a diversified fashion across many different portfolio company industries.
With no significant industry concentration the largest is 16%.
As of December our asset concentration in the energy industry was one two per cent.
On the hotel restaurant leisure sector, 0.4%.
And then the retail industry zero per cent.
Non accruals as a percentage of total assets stood at approximately 0.7% in December.
<unk> from the prior quarter.
Our weighted average middle market portfolio net leverage stood at 4.97 times EBITDA.
John 0.31 from the prior quarter and substantially below our reporting peers, our weighted average EBITDA per portfolio company stood at 83 million in December.
Which was an increase from $78 5 million in the prior quarter.
Originations in the December quarter aggregated $346 million.
We also experienced $338 million of repayments and exits as a validation of our capital preservation objective.
And sell down of larger credit exposures, which resulted in net originations of $8 million.
During the December quarter, our originations comprised 75% middle market finance.
20, 418 per cent real estate, and 0.2% middle market lending buyouts.
Day, we've deployed significant capital in the real estate arena through our private REIT strategy.
Largely focused on multifamily work force stabilized yield acquisitions.
With attractive 10 year plus financing.
N P. R C. Our private REIT has.
Has real estate properties that have benefited over the last several years from rising rents.
Strong occupancies high returning value added renovation programs and attractive financing recapitalization.
Resulting in an increase in cash yields as a validation of this income growth business alongside our corporate credit businesses.
On P. R. C. As of December has exited completely 33 properties at an average IRR of 23 five per cent with an.
<unk> to redeploy capital into new property acquisitions, including with repeat property manager relationships. We continue to monitor our rent collections, which are holding up well in the current environment.
Our structured credit business has delivered attractive cash yields.
And strain the benefits of pursuing majority stakes working with World class management teams, providing strong collateral underwriting through primary issuance and focusing on attractive risk adjusted opportunities.
As of December we held $745 million.
Crossed 39, nonrecourse subordinated structured notes investment.
These underlying structured credit portfolios comprised around 1700 loans and a total asset base of around 17 billion.
As of December the structured credit portfolio.
Experienced a trailing 12 month default rate.
206 basis points down <unk> 14 from the prior quarter.
And representing 177 basis points less.
On the broadly syndicated market default rate.
383 basis points.
In December this portfolio generated an annualized cash yield of 17, 2%.
And GAAP yield of 16.8 per cent.
As of December our subordinated structured credit portfolio.
Has generated 1.26 billion in cumulative cash distributions to us.
Representing around 90%.
Of our original investment.
Through December we've also exited nine investments totaling 263 million with an average realized IRR of 16, 7%.
Cash on cash multiple of 1.48 times on.
Our subordinated structured credit portfolio consists entirely of majority owned positions.
Such positions can enjoy significant benefits compared to minority holdings in the same tranche.
Many cases, we receive fee Arabia, it's because of our majority position.
As the majority holder, we control the ability to call a transaction in our sole discretion in the future and we believe such options add substantial value to our portfolio.
We have the option of waiting years to call a transaction in an optimal fashion rather than when loan asset valuations might be temporarily low.
As majority investor can refinance liabilities on more advantageous terms remove bond baskets in exchange for better terms from debt investors on the deal and extend or reset the investment period to enhance value at.
We've completed 27.
Refinancings and resets.
Since December 2017.
So far on the current March quarter, we have booked $12 million on originations and experienced $53 million of repayments.
For 41 million of net repayments originations have comprised 50 615 per cent real estate.
$41 four per cent middle market finance and two per cent middle market lending buyout.
Thank you I'll now turn the call over to Kristin.
Thank you Greg.
We believe our prudent leverage diversified access to matched book funding substantial majority of unencumbered assets weighting toward unsecured fixed rate debt avoidance of unfunded asset commitments and lack of near term maturities demonstrate both balance sheet strength as well as substantial liquidity to capitalize.
Eyes on attractive opportunities.
Our company has locked in a ladder of liabilities extending 22 years into the future.
Today, we have zero debt maturing until July 2020, Kim our total unfunded eligible commitments to noncontrolling portfolio companies totaling approximately 21 million or lessons 0.4 per cent of our assets.
Our combined balance sheet cash and Undrawn revolving credit facility commitments currently stand at approximately 845 million.
We are a leader and an innovator innovator in our marketplace. We were the first company in our industry to issue a convertible bond develop a notes program issue under a bond ATM acquire another BDC and many other lists of first.
Now we've added our programmatic perpetual preferred issuance cute Atlas debt first.
Shareholders and unsecured creditors alike should appreciate the thoughtful approach differentiated in our industry, which we have taken toward construction of the right hand side of our balance sheet.
As of December 'twenty 'twenty, we held approximately four point Q1 billion of our assets as unencumbered assets, representing approximately 74 per cent of our portfolio they're going on.
The remaining assets are pledged to prospect capital funding where in September 2019, we completed an extension of our revolver to a refreshed five year maturity.
We currently have one point here on the 775 billion of commitments from 30 banks.
The facility revolves until September 2023, followed by a year of amortization with interest distributions continuing to be allowed to us.
All of our floating rate assets, 89.6% have LIBOR floors with a weighted average floor of 1.62%.
Outside of our revolver and benefiting from our unencumbered assets, we've issued at prospect Capital Corporation, including in the past few years multiple types of investment grade unsecured debt.
<unk> convertible bonds institutional bonds baby bonds and program notes.
All of these types of unsecured debt have no financial covenants, no asset restrictions and no cross defaults with our revolver.
We enjoy an investment grade triple B negative rating from S&P and investment grade B double a three rating from Moody's.
And investment grade Triple B negative rating from Kroll.
And in investment grade Triple B rating from Egan Jones.
We've now tapped the unsecured term debt market on multiple occasions to ladder, our maturities and to extend our liability duration out 22 years.
Our debt maturities extend through 2043.
With so many banks and debt investors across so many debt tranches, we have substantially reduced our counterparty risk over the years.
In the December 2020 quarter, we completed successful tender offerings from <unk>.
Hiring around 66 million of our 'twenty 'twenty two notes 30 million of our 2023 notes and 10 million of our 6.375 per cent 'twenty 'twenty four notes.
In the current March quarter through tender processes. We have retired 20 million in 2025 notes and another 27 million at 'twenty 'twenty, two nuts, thereby taking that tranche down to 136 million.
We recently in the current March quarter issued 325 million in unsecured debt maturing in January 2026, with a coupon of $3 seven per cent.
We have continued to.
Substitute more expensive term debt with significantly lower cost revolving credit with an incremental one three per cent cost and our newly issued 2026 notes.
We also have continued with our weekly programmatic internet issuance on an efficient funding basis.
We now have eight separate unsecured debt issuances aggregating $1 4 billion not including our program notes with maturities extending to June 2029.
As of December 2020, we had $759 million of program notes outstanding with staggered maturities through October 2043.
We also recently added a shareholder loyalty benefit to our dividend reinvestment plan or drip that allows for a 5% discount to the market price for jet participants.
As many brokerage firms either do not make trips automatic or have their own synthetic drips with no such five per cent discount benefit we encourage any shareholder interested in drip participation to contact your broker makes.
Make sure to specify you wish to participate in the prospect Capital Corporation Drip plan through DTC at a 5% discount and obtain confirmation of seemed from your broker now I'll turn the call back over to John.
Yeah.
Sorry.
Thank you Kristen we could take questions now.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
Withdraw your question. Please press Star then two.
This time, we will pause momentarily to assemble our roster.
The first question is from Finian O'shea with Wells Fargo Securities.
Hi, everyone. Good morning, Thanks for having me on.
I guess first question.
Greer on the on the CLO portfolio this quarter.
You saw a pretty good rebound there and yields I know I know cash yields were up this quarter for that.
Net class but.
Any.
Any expanded color on.
Our longer term fundamental improvement there.
Sure. So this portion of our book, which is about 13% of our book a small small portion of our assets.
Essentially worked as as advertised a these are <unk>.
Self healing vehicles and you go through a time of stress like you saw in 2000.
20 <unk> income.
Including a host of a low ratings downgrades rippling through.
The the syndicated loan market.
And you see you saw a temporary dispersion or diversion rather of cash flows on a.
Minority of deals and that is largely.
Abated now cash yields up to 17.
2% that was up about 1100 basis points.
From the prior quarter and GAAP yields up about 320 basis points.
So just under 17% from a longer term perspective.
We're saying not just.
An increase in loan prices, but now a reversal of those ratings downgrades becoming upgrades.
Which tend to be slower than the downgrades are typically the asymmetric.
But that's a moving in the right direction you saw a trough ing.
Trailing 12 month default rates as well we've always outperformed.
The overall loan market.
Generally by about 50%. So that has continued but youre seeing a decline in those LTM default rates and would expect that.
That two two to continue just looking looking forward in a run off of things that occurred a 12 months prior for defaults.
So we're we're optimistic about the loans space, where we're also seeing benefits from LIBOR floors by the way.
Sometimes floors are work to your advantage sometimes to your advantage.
You know on the floor is obviously above prevailing rates.
And there is an increase in prevailing rates it works a little bit to your disadvantage in terms of if that's how your assets are structured are here the work to the advantage because of those floors, often on 100 basis points or so with LIBOR close to zero.
We're being paid nicely on the asset side of the ledger.
With the floor plus plus the spread while the liabilities are.
Have no such floor. So a number of positive things occurring here. This again is just a small part of our book.
And and and not not likely to grow on our balance sheet.
Any follow ups their opinion.
Debt that was helpful. Just if I could do one follow up on the right side of the balance sheet.
For your perhaps Christian I think you were saying that.
You would utilize the revolver more but we've noticed that.
Any additional.
I mean, I guess, how much ideally would you say and then.
If you have the numbers can you remind us of your available borrowing base.
I'll answer the first part and I'll ask Christian to to respond on the on the borrowing base, which of course is on iterative topic as you fun more originations you pledged more of the borrowing base growth. So it stair steps upward as opposed to being static.
But from revolver utilization standpoint.
Historically, the longterm, we've only had about 15% utilization, we've stepped that up to be a closer to 35% and we'd like to strike the right balance between having significant liquidity on hand.
At all times and that's an important derisking.
Derisking element.
With utilizing our most efficient form of financing.
We have been retiring more expensive.
Debt through a series of tenders are we just called.
A more expensive traded baby bond.
That that'll actually be retired this week from notice it was given.
Almost 30 days ago in conjunction with our new.
Institutional bond.
Issuance. So you know, we're calling paper that is in the <unk>.
Five to six and a half ish percent range and we're replacing it.
With paper and or the 3% to 4% range on a term.
Basis, plus the revolver is just over 1% money.
So we've made nice strides to trim our cost of financing on.
On the right hand side of our balance sheet.
We'd like to continue shaping that and use that as a driver.
But then of course, there's in terms of utilizing financing period, we are under Levered.
Pretty significantly right now with only 61 per cent.
Net debt to equity versus a target range of 70 to 85.
And we're cautious, but we have a nice pipeline of deals where we look to deploy that.
That capital as well so cost of financing in the amount of financing on.
Our significant levers to pull as positive earnings catalysts as we see it for the future and we have about $845 million of combined cash and Undrawn revolver.
Chris you want to comment on the borrowing base, which again is static and increases as you pledge more assets.
Or were you just mentioned the 845 that we have on the cash and Undrawn and we currently have about $370 million borrowed with an additional 430 night on.
Additional $430 million available on our current borrowing base.
Thank you both of you and congratulations on the good quarter.
Thanks Danielle.
The next question comes from Robert Dodd of Raymond James.
Hi, guys.
Congrats on an impressive record of among other things on that yeah. Congrats on being the top hundred stop on Robinhood too.
So the N b.
Performance, obviously up 7% a good chunk of that came from two assets in particular, I mean, not all of it by any means but a good chunk of it into debt and Andy on meat. So I've got a question couple of questions about that on incident.
Obviously, a material backup first time that it's been marked above cost in a while on that business. It obviously been troubled.
So.
More than a decade I think before you got involved with it.
So.
The question is has there been another restructuring I mean, what's changed that now seems to be on.
On a better path.
You know, obviously dental was impacted by Covid, there's been a rebound that box.
And there's still some headwinds that book book.
What drove the big bulk up in that business this quarter.
Sure.
Well I'm not sure I completely agree with your insurance has been sort of a troubled company for the longer term. The company has has two parts to it it has a a.
Medicaid a day.
This business in a substantially in Oregon, and then outside of Oregon has a fee for service is.
Business in in other.
States, primarily in the Western region.
Hum.
The Medicaid based business actually end up being a substantial plus cash.
Or cyclicality are in the course of the past year. When you paid a per member per month, a rate and your utilization.
Drops your cost dropped, but you're still pay the same amount.
We saw substantial outperformance in that part of the business model compared to fee for service is broadly speaking out there.
In the industry, so while you're subject to reimbursement risk in and what does it what does the Medicaid enrollment in a particular region.
You have other substantial benefits during downturns that that's shown through quite brightly the business has been picking up market share and also betting from an overall growth of enrollment in that state and just a general improvement in the blocking and tackling inefficiencies brought.
Speaking on across our across the business. So you know dental services, our recurring revenue business get your teeth clean twice a year.
A lot of the early on with the virus or concerns about going to the dentist theres still a little bit of a lingering.
No impact of that but we're not nearly where we were in the spring of 2020 from that standpoint, So we're happy with the trajectory of the business.
Performing well you know valuations continue to be robust from a comps.
Standpoint.
Yeah. So that's entered into and I would say I, we didn't really see our valuations is concentrated in a couple of credits we had an across the board robust increase in valuations in the book I think we had.
Maybe 20 plus credits roughly.
Yeah more than a million dollar increase.
And valuations, whereas.
On the downside.
Maybe only four or five deals that debt had a more than a million dollar.
Decrease so the increase in valuations is it was very much broad based.
Across the book and not just concentrated in one or two.
A third point, but $120 million that he appreciates it did come from two assets that's that is.
No not even even split but on the week if I can.
At the risk of taking up a value.
Old issue.
What point does it become a.
So you get maybe spin off isn't like let him to discuss but it's 30% of that it'd be debt.
That's that's a very large concentration that yes, there's there's diversity out of lots of different properties that if you had a.
Our manufacturing business that had a 100 different products you you still wouldn't want them on your packaging business to be 30%, if you've any day, even if that product set was diversified.
What's the right.
Level for that to account for.
Portfolio concentration because right now it looks like if it continues on this path, which.
I don't think there's any reason to.
But what I know, it's going to become an even more concentrated part of the book.
And what's the right level.
Right well a couple of predicates there cannot share in complete agreement the first as we have historically.
Sold individual assets.
As we have have preceded fact, we've sold 33 properties, so well while N P. R C in our real estate business have.
Performed strongly from a cash flow and.
And total return and realized IRR standpoint, there's 33 exits have generated a 23, 5% IRR.
IRR.
You know as we sell assets selectively.
And you'll probably see us continue to pursue that you know 2020 with a little bit muted for M&A across the board not just not not just within real estate.
Then that's a mitigating factor to what I'd call a high quality problem of having increases and positive results. We we don't look at it through the way you started the question of a single concentration we when we look at this on more of a look through basis.
From a business standpoint, where we have dozens of separately financed.
On properties with a diversity of management teams and the diversity of our geographies. So much like you wouldn't take or middle market lending book and say, that's a 69% concentration either so real estate is about 19% of our assets.
It is a very significantly diversified our there is no cross collateralized.
Debt or other obligations.
Every asset has its own individual financing.
So we look a look through basis in terms of portfolio construction.
And our allocation to to real estate I think it's unlikely to see your real estate kind of takeover the book a become a majority or anything like that.
We maintain a balanced origination approach that includes real estate includes corporate credits.
I mean, you mentioned spinoffs I suppose that could be interesting to consider at some point potentially but what you see is that.
<unk> market.
<unk> R.
Higher and this has been the case for actually several years, Robert compared to public Reits.
And there's a number of reasons for that one is the leverage which assets Ron.
One is the I.
I think the players in the market and the capital that's aggregated earmarked in the private market is different from the public REIT side of things.
Some of it maybe macro fashion sentiment.
Comparing read started out the tech stocks.
But you do better selling your individual assets in the private marketplace as opposed to putting them into a separate stand on public format.
But that's something we can continue analyzing over time in case that in.
In case that changes.
Yeah.
That said if I can make a request to your point on I mean, if I look at in the disclosures in the Q that we have on N. P. R C.
I mean, there to pay debt revenue minus opex minus interest expense.
Simplified cash flow, it's negative obviously, that's not representative of your your your point.
Average IR on exits is 23% so perhaps you could you could.
It was a paper give us better disclosure on the REIT about cash flows.
And the mechanics of the IOL, all because right now we look at the disclosures it appears to be a cash flow negative business.
That does represent quite a large chunk of that database. So that's just a request, but other than that congratulate well, Rob if I can respond to that because I mean.
A couple of day, but first of all.
Real estate generates depreciation right. It's a debt that's not an investment company and it doesn't use investment company accounting Reits don't use investment company accounting right. So the depreciation they spin off.
Which they've been money spent years prior is a factor number one and number two is what you're quoting there is also after giving effect to the.
On interest rates that are price of capital Corp charges to N P. R C.
Which of course comes you know comes to pizza, because the home team.
So so so so we're a beneficiary of that debt you know substantially absorbs a good chunk of the net operating income. So I don't think looking at some type of net income figure, which includes noncash depreciation and amortization that was from what it's worth that's excluding the depreciation on that.
I'm, sorry to interrupt but.
That's just how I see my point I mean, if I have if there was more disclosure we'd have an easier time figuring that okay. As it is just revenue minus opex minus interest excluding depreciation and fair.
Fair value adjustments was negative but that doesn't tell the whole story.
We will again, that's after it pays piece that though.
Understood. That's a huge factor there's a significantly I just want for the record. This is a significantly profitable net operating income business.
It's not a money loser at all period full stop but we will we will review the disclosures and where do you put in a ton of disclosures, we really saw that at annual financials for for N. P. R. C. We are pages and pages of additional disclosures, but we're happy to take any comments suggestions.
Feel free to make them and we will definitely evaluate them always happy to evaluate it.
Increasing and improving disclosure stuff for sure, but this is not a money.
Money, losing business by any stretch.
Thank you that's all my questions. Okay. Thank you.
And this concludes our question and answer session I would now like to turn the conference back over to John Barry for any closing remarks.
Okay, well I do have a couple.
One is that the.
The improved performance that enter them.
Is the result of the.
Persistence diligence hard work dedication of a wonderful management team.
That we have there we have two people leading.
The effort there who have overcome challenge after challenge many outside of their control.
That's one of the I guess, it's not exactly a secret, but I think people often fail to appreciate the importance of having a great management teams at our portfolio companies and one of the absolute best is the team add into debt.
They've done a fabulous job.
Well yeah.
On the internal prospect team.
Which spans many many hours on that asset optimizing it has done a wonderful job, we hope to see more of that normally what happens in our business. Unfortunately.
There's a problem and we are handed the keys to a company has occurred with internet.
That is after the sponsor has tried everything.
Every hail Mary pass every every good indifferent and bad idea.
And.
They have all failed and the sponsor.
A brand name leveraged buyout firm on the tip of everyone's tongue on the front page of the Wall Street Journal again and again.
Has completely given up.
I wish that were all that happened.
But usually what also happens in the case of certain sponsors and we know who they are.
Hollywood the company out.
Well.
We can't fix this.
We've tried everything.
So that's we've with as much money in our pocket as possible and give it the prospect.
And then occasionally there's a demand that we pay money for that privilege, which.
We have never.
Exceeded too.
So we definitely started out deep in our own end zone.
When we take over these companies.
And I think the case of incident.
Shows that we're getting better and better at doing with the sponsor should've done.
In the first place.
And performing where the sponsor has failed and fixing problems that should have been identified.
Net of us.
And and fixing them and in the case of venture debt, we started by making significant management changes and that's the whole story there.
In the case of a REIT or any other asset class.
Where we invest I hope we continue to have this problem that Robert Dodd has identified where the asset class performed so well.
Under our supervision.
Supervision that we have to think about.
Rebalancing by spinning off assets selling assets and the like.
We hope to have that problem again, and again and again throughout and across our portfolio turns out that the REIT is fully diversified many many properties there.
I've noticed talking to our shoulders at many of our shareholders.
Appreciate the stability.
Are the cash flows at prospect Capital Corporation.
Maybe one business unit is doing better than another.
Given time, maybe aircraft leasing is doing well at one point in real estate is not doing so well.
We're online lending is doing better than.
Then our energy business.
Shareholders I speak too like to know that because of the diversity.
All of our assets.
And the diversity of the cash flows the significant cash flow as those assets throw off.
That a problem in the oil patch is not.
A giant hit.
Two N a V or a our income on.
Or travel.
Largely shutting down.
In the airline business.
Isn't another.
Heavy blow.
To us.
Because what happens is.
Where people can't eat in restaurants, how exposed to wait to that not very hotels same.
So while the idea of spinning things off.
When they do really well has some facial attraction to shareholders I speak too.
Like to know that there are our eight cylinders under the hood.
They're all operating making this car drive as steady as she goes.
So while we will consider.
Spin offs.
Right now it's not it's not at the top of our list and as far as the real estate business.
Being extremely highly.
Profitable and remunerative.
You cannot you can't be earning these these high irr's almost 30%.
If the business.
We're not positive.
Cash flowing in every single quarter.
So we are going to continue to work.
With what has worked well in the past we're going to be steady as she goes we're not going to be making any.
On a sudden changes to business strategies that have worked well for us since 1988.
We believe steady as she goes.
Okay. Thank you everyone have a wonderful afternoon bye now thank you bye now.
The conference has now concluded. Thank you all for attending today's presentation. You may now disconnect your lines have a great day.
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