Q4 2020 Portman Ridge Finance Corp Earnings Call
Ladies and gentlemen on today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the appointment Ridge Finance Corporation fourth quarter and full year 'twenty 'twenty financial results Conference call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.
Ask a question during this session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you acquired any further assistance. Please press star Zero I would now like to hand, the conference your speaker today G. Haviland Boyd. Please go ahead ma'am.
Thank you.
Morning, and welcome to Portman Ridge Finance Corporation fourth quarter, and full year 2020 earnings Conference call and earnings Press release was distributed yesterday March 11th after market close and a copy of the release along with an earnings presentation is available on the company's website at Www Dot Portman Ridge Dot com in the Investor.
It's actually on a ship you reviewed in conjunction with the company's form 10-K filed yesterday with the SEC.
As a reminder, this conference call is being recorded for replay purposes.
Please note that today's conference call may contain forward looking statements, which are not guarantees of future performance or results and involve a number of risks and uncertainties actual results may differ materially from those in the forward looking statements as a result of a number of factors, including those described described in the company's filings with the SEC for.
Rich Finance Corporation assumes no obligation to update any such forward looking statements unless required by law with that I would now like to turn the call over to Chad Goldberg Chief Executive Officer of Portman Ridge. Please go ahead Ted.
Thank you.
Welcome and good morning, Thank you for joining us today, and we hope everyone is healthy and doing well I'm joined this morning by our Chief Financial Officer, Jason Rus.
<unk> investment officer, Patrick Schafer.
For those of you who are new Department Ridge, our investment strategy is to focus on direct origination of senior secured debt investments to the middle market we.
We are affiliated with BC partners, a leading global alternative asset manager with more than $40 billion of assets under management and over 30 years of operating history in the U S. B.
D. C partners credit was launched in February of 2017, and has pursued a strategy focused on identifying attractive opportunities in any market environment across sectors and across sectors by leveraging the deal sourcing and infrastructure made available to us by BC partners.
Yesterday afternoon, Portman Ridge announced its fourth quarter and full year 2020 fiscal year financial results. We did on active and successful year in 2020, and we were very pleased with the progress we've made in managing and growing Portman Ridge.
Focus my remarks today on three areas first an update on our M&A activity in general.
Second an overview of our quarterly and full year results and finally, our perspective of current market conditions, including our general outlook for the first quarter of 2021.
Following that Jason will provide additional detail on our portfolio on our financial results and Patrick will do the same on the investment portfolio.
On October 28, we closed our merger with garrison capital this transaction, which has been the largest merger we've executed to date essentially doubled on our asset base and as we've discussed on previous conference calls. This is expected to result in a number of benefits Department Ridge shareholders.
Accordingly at year end total assets was what $600 billion compared to total assets of $300 million as at September 30th 2020.
As we stated before our approach heading into the closer to the merger was to immediately begin reducing portfolio risk on a combined leverage levels.
Did this through the opportunistic selling of acquired assets immediately after close by year end, we proactively monetized an aggregate of $92 $4 million of assets originated by garrison.
At or above fair value and use the proceeds to delever the portfolio within our targeted leverage range.
We ended the year with an average with a leverage ratio of 1.36 on a net cash basis compared to net leverage ratio of 1.8 times. When we acquired the garrison assets, which is a full two quarters ahead of our guidance on.
Top priority was getting on a combined leverage ratio to a target like to our target level and we're able to accomplish this without sacrificing evaluations and did not have to take any kind of timing risk.
Broadly speaking.
The addition of the garrison assets resulted in a substantial increase in the percentage of senior secured loans and particularly first lien senior secured debt in our investment portfolio, which is in line with our long term strategy of having the overall Portman ridge portfolio being comprised primarily of senior loans with a focus on first lien investments.
Our investment portfolio increased from 279 million at September $30th million to $488 million by year end and by far the largest component of the change was the addition of $204 million in senior secured loans from garrison.
Firstly on investments comprised 61 per cent of the debt securities portfolio at September 30th and at year end. This percentage was 81 per cent.
The addition of garrison assets also improved our overall diversification and at year end, we reported 109 portfolio companies across 28 different industries.
On the liability side, we assumed an on balance sheet, CLO, which had a principal balance outstanding of $252 million at year end and serves to diversify our funding sources.
As we stated we expect the merger to be accretive to Portman Ridge as net investment income per share driven in the near term by the spreading of fixed costs.
From a much larger AUM base overtime, we expect to continue rotating legacy assets, including those originate by garrison into higher yielding directly originated loans.
Murray, we're very pleased for the progress we've made so far in terms of the integration of garrison into our platform and we remain well ahead of plan in terms of execution.
In December we announced our plan to merge with harvest capital Credit Corporation the <unk>.
This transaction makes sense for apartment ridge for many of the same reasons. We've noted on our previous mergers, we're adding further size and diversification to the existing platform, increasing increasing the leveraging of public company expenses immediately while improving trading liquidity visibility and the capability and flexibility to speak for larger deals and the longer.
Term.
The harvest portfolio will also continue to shift our portfolio composition to first lien assets, we're working towards it expecting closing to occur in the second quarter of this year.
Taking a step back.
Yeah.
Taking a step back I want to briefly comment on Portman Ridge is M.
M&A activities and provide some big picture commentary.
Since April of 2019, when we assumed management of the company. We've acquired two investment portfolios with a third hopefully to be closed and integrated sometime in the second quarter of this year assets.
As we embarked on these transactions in each instance, we've made it clear set of objectives, namely to immediately take action opportunistically to rotate assets in order to Derisk each transaction and also shift the portfolio composition towards high quality senior secured debt investments along.
Along the way we've also worked to gradually reduce the percentage of non core assets, such as our CLO equity and second lien investments, which both occurred both naturally as we acquired the garrison portfolio and also as a result of proactive asset sales and wind downs.
We're now able to discuss our track record to date in more tangible terms, we closed the Oh high transaction in late 2019 and assumed a book of largely liquid second lien investments very shortly after close we are merely monetized approximately 40 per cent of the book the remaining portfolio performed at or above our expectations throughout 2020.
Despite COVID-19, which I believe is a testament to the underwriting assumptions, we made when we acquired this portfolio.
With respect to garrison as I mentioned before we monetize close to a $100 million of assets at or above fair value shortly after close and reduced leverage to within our target ratio.
Certainly we have benefited from the overall economy and market strengthening compared to when we announced the transaction, but I work our ability to work quickly and managing a portfolio. The size of garrisons is important to note.
In summary, we believe we've been able to demonstrate an ability to close transactions quickly repositioned the portfolios.
As necessary and immediately begin to capture synergies.
And now with the passage of time, we are beginning to demonstrate a track record and that our underwriting in each of these transactions has been accurate.
Shifting gears now to our financial performance for the fourth quarter and full year for the.
For fourth quarter of 2020, we generated net investment income per share of 14 cents, excluding the impact of gains realized in connection with the garrison merger adjusted net investment income per share on the fourth quarter was eight cents per share.
This adjusted net investment income per share of eight cents compares to net investment income per share of six cents for the third quarter.
And reflects our continued coverage of our quarterly distributions, which were also six cents per share on the fourth quarter.
Net asset value per share at year end was $2.88 compared to net assets per share of $2 85 at September 30th $2.71 at June 30th and $2 69 at March 31st Jason.
Jason will go into further detail, but the primary drivers of the staff increase per share.
What are the broad based strengthening of our portfolio due to middle market spreads continue to tighten throughout the quarter as well as the improving portfolio company performance.
Net partially by transaction costs associated with the garrison merger.
Excluding the garrison transaction costs net asset for share value per share increased by two five per cent as compare to September 30th.
Overall, we're very pleased where we stand from both on an investment portfolio perspective, and we're comfortable with our financial position.
Previously discussed our portfolio composition continues to shift towards first lien investments and we'll continue to do so pro forma for the harvest assets.
Subsequent to year end, we exited one of our CLO equity positions at fair value further reducing our exposure to this asset class.
As a percentage of our total investment portfolio pro forma for the sale seal equity CLO securities now comprise less than four per cent of our total portfolio down from 16% when we execute the K Cup transaction.
I've covered on this before but I want to reiterate the Portman ridge as liability structure is extremely flexible.
We have $77 million in unsecured bonds that are callable and our secured revolving credit facility that can be flexed up or down.
But the garrison merger.
We now also have $252 million per.
Par value of subordinated notes in connection with the CLO. These.
These notes become callable in November and during February we made an $88 million.
Pay down consistent with the initial garrison investment thesis.
On March eight 2021, Portman Ridge received a corporate investment grade rating of Triple B minus with a stable outlook from Egan Jones. We are currently assessing our options with respect to the ideal mix of debt, we would like to hold on our balance sheet relative to where assets investment strategy going forward.
Turning briefly to market conditions as many people on this call know market conditions gradually improved throughout the year.
Remarked last quarter, we were seeing spreads tightened to nearly pre COVID-19 levels, which remains unchanged.
We also noted that we were seeing spreads remain wider indirect loan origination market relative to liquid credit market and this situation has also continued.
Transaction volume was strong in the fourth quarter, but it slowed down since the beginning of the year, which we'd note is a relatively normal pattern for our business and.
In addition to M&A activity refinancing activity was robust repayments for the quarter were typically were higher than typical spark spread largely by pent up capital markets transactions during most of 2020.
Looking ahead to the end of the first quarter of 2021, which will occur very shortly at this point given current market condition conditions. We expect our current portfolio will continue to exhibit stable performance.
We remain focused on continue to ensure that we cover our dividend each quarter.
Given we're at our target leverage level, we are being very discerning on in terms of making new investments and continuing to avoid sectors that have been directly impacted by COVID-19.
And other corporate news, we've previously discussed the $10 million stock repurchase program that we announced in March of 2020, and <unk> five one plan that was subsequently entered into during the summer.
This program expired on March 5th 2021, and on March 11th 2021, the board of Directors approved a new $10 million stock purchase program with substantially the same terms as the prior program.
We continue to believe that buying back our stock makes sense for shareholders.
Continue to be impacted by by blackout periods and restrictions around some of the M&A. We've done, but we will we will buy equity when we have windows to legally do so.
And now I'd like to make a brief introduction we're joined today by our new Chief Financial Officer, Jason Rus, Jason joins the company. After nearly 20 years of experience in financial leader leadership positions, including at Wells Fargo Securities and price Waterhouse Coopers.
Jason brings to Portman Ridge, a wealth of technical and controller ship expertise that'll help us drive the process needs within our organization as we continue to grow where for.
We're fortunate to have someone with jason's experience and background joining our team.
With that I will turn over the call to Jason for an overview of financial results and then Patrick Schafer, Our Chief investment Officer for <unk> for a review of our investment activity before concluding the call for some additional remarks.
Yeah.
Great. Thanks, Ted and good morning, everyone.
I'm very happy to have joined the team, especially during such a dynamic time in the company's development I look forward to getting better acquainted with all of you soon.
I will now recap the financial results and our financial position for the fourth quarter and full year 2020.
Given the garrison merger I wanted to take a moment to describe the impact of merger accounting towards financial statements this quarter on.
Under GAAP the merger was accounted for as an asset acquisition, whereby the value of the consideration paid for the assets. The garrison resulted in our purchase price discount and the amount of approximately $40 million.
Yeah.
This discount is a function of the accounting in setting the value consideration paid based on part on the Portman Ridge share price at the closing date of the acquisition.
Total value of consideration paid is used to staff the new cost basis in the assets acquired by allocating the value for each asset based on the relative fair value of the assets acquired upon the closing date of the transaction.
This purchase price discount resulted in a onetime unrealized gain as those acquired assets for mark to their fair value.
Clothes, which is a noncash event.
This discount will accrete in the net investment income over the remaining lives the debt instruments and will be accelerated right sales or pay downs that may occur.
The discounted allocated to equity instruments will be recognized net investment income only a part of realization events such as the sale transaction. This will not have an impact on our NAV per share.
GAAP net investment income for fourth quarter was $8 9 million or 14 cents per share, which put our full year net investment income at 34 cents per share.
For the garrison purchase accounting that I just described our adjusted net income net investment income for the fourth quarter was eight cents per share.
This compares to net investment income of six cents per share in Q3.
At year end, we had total investments excluding derivatives of 488 million and net assets of $216 million or $2 88 per share.
Paired with total investments of 279 million.
Net assets of 126 million for $2 85 per share in the third quarter of 2020.
This marks the third straight quarter that we had increased NAV per share.
The increase in NAV per share for the quarter was mainly attributable to unrealized gains across our investment portfolio, including the acquisition of the acquired garrison assets.
The primary components contributing to total Q for unrealized gains of 29 million included $24 million on our debt securities portfolio, $1 2 million and our legacy CLO equity position and to your point 6 million on our investments in joint ventures.
As Ted mentioned, we continued to observe strengthening market conditions, which resulted in the continued improvement in our valuations.
On the liability side of the balance sheet. There was a substantial change from the prior quarter as we assume the garrison CLO in connection with the merger.
As a result, we recognized $252 million in par value of senior secured notes that are due at the end of 2029.
In addition to these notes we also had $49 million in borrowings under our credit facility and 77 billion and this takes on an 8% notes due 2022 for a total of 378 debt.
With respect to liquidity and unfunded commitments, our aggregate unfunded commitments stood at $32 9 million at December 31, 2020, and we reported $7 million in unrestricted cash cash equivalents with an additional $66 million of available borrowing capacity under the credit facility.
As of December 31, 2020, our debt to equity ratio was one seven times from a regulatory perspective, our asset coverage ratio as of December 31, 2020 was 156% which is above the statutory requirement for bdcs.
Of 150 per cent.
As Ted mentioned during the first quarter of 2021, we repaid 88 million on figures in CLO debt.
Our objective has been and will continue to be focused on maintaining overall leverage to a range of 1.25 to one four times.
In terms of distributions in 2020, we paid a consistent six cents per share each quarter, resulting in 24 cents per share.
For the year.
We recently announced the quarterly distribution.
On <unk> on February 12th for share holders of record on February 22nd and was paid on March 2nd.
Our overarching goal is to continue to cover our distribution each quarter and keep this relationship is stable and consistent as possible.
We repurchased a total of 734403 shares of stock during the year I had on average price of the dollar.
<unk> per share under the stock repurchase program.
Which as Ted noted expired on March 5th 2021 and on March 11th 2021, the board of directors approved a new $10 million.
<unk> repurchase program under substantially the same terms.
Also as previously mentioned on December 23rd we announced our intention to merge with harvest credit Capital Corporation under the terms of the proposed transaction and it was and was the case with our transactions although high at garrison.
This transaction will be done on a NAV for NAV basis, whereby each cap stockholders will receive aggregate consideration equal to H GAAP net asset value of closing consisting of newly issued shares of Portman Ridge stock valued at 100% of NAV per share.
To the extent that the number of Portman Ridge shares exceed 19, 9% for the total issued and outstanding shares of performance pre transaction shares cash consideration in the amount of for such excess will be paid.
Based on December 31, 2020, net asset value for Portman and September 32020 for harvest.
Current excess cash amount is expected to be $15 4 million.
Furthermore, H GAAP stockholders will also receive an additional cash payment of $2, one 5 million from our investment advisor share at crest.
This will result in H GAAP shareholders, receiving total aggregate value of approximately 104% of that.
Net of estimated transaction expenses.
We remain on track with the current process and expect closing to occur in the second quarter.
Finally, I'd like to note that we will be transitioning to Deloitte as our audit firm effective as of the end of the first quarter.
While we had no issues or disagreements with KPMG the broader BC partners organization is moving on to functions to Deloitte and Portman Ridge is included as part of this change.
We look forward to working with the Doi team and thank the KPMG team for their partnership with us today.
With that I would like to turn the call over to Patrick Schafer, Our Chief investment Officer.
Okay.
Thanks, Jason.
The fourth quarter was relatively quiet for us in terms of new investment activity given the merger with garrison and our intention is to derisk the balance sheet following closing.
During the quarter, we made investments into six borrowers one of which was the BCP great Lakes joint venture and five of which were brand new borrowers all of which were completed alongside other BC partners entities and.
In aggregate do you see.
Investments totaled $24 2 million of face value, 88% of which were first lien securities and the remaining 12% being net add on to the great Lakes joint venture.
The weighted average spread on the new investments, excluding the great Lakes joint venture with 648 basis points.
As to be expected given both the garrison merger and overall improvement in the capital markets were very active during the quarter with dispositions in total we exited or repaid on 45 positions three of which were proactive sales of legacy gave us on assets.
Aggregate.
This represented a carrying value of $135 $4 million.
<unk> and a gain of approximately $1 $1 million.
Specifically related to the proactive garrison asset sales.
These 30 positions, representing an aggregate carrying value of $92 4 million and resulted in a gain of approximately <unk> $6 million.
Excluding the impact of the garrison merger and associated purchase price accounting as well as the reversal of previously unrecognized income on Roscoe medical.
Debt and equity securities accounted for approximately $2 1 million unrealized gain while CLO equity positions accounted for a $1 $2 million unrealized gain on joint venture on our two joint ventures accounted for the remaining $2 $6 million of unrealized gains.
On an equivalent basis as of December 31.
Portman Ridge.
$437 7 million of debt Securities marked at 92, 4% on par and yielding a standard spread to LIBOR of 679 basis points on accruing debt securities.
This compares to $226 2 million of debt securities marked at 94 percentage of par and yielding a stated spread to LIBOR of 715 basis points on accruing debt securities.
As of September 32020.
$165 7 million of debt securities portfolio, Mark and blended price of 91, 9% for par and stated spread to LIBOR of 658 basis points. When see aircrafts took over management of Portman Ridge on April <unk> 2019.
Yeah.
Turning to slide 12, non accruals as of December 31, 2020 represented two 4% of cost and <unk>, 8% for fair value on the investment portfolio as compared to three 2% and one 2% respectively as of September 30.
Eight investments were on non accrual status as of December 31, 2020.
With that I will turn the call back over to tangible book.
Thank you Patrick.
In closing I want to.
To again state how pleased we are with the progress we've made with Portman Ridge. We believe we are off to a strong start in 2021 and are optimistic for a more normalized operating conditions through the rest of the year low.
Looking ahead, we're working it.
We're working towards hopefully another successful closing with the harvest capital merger and we expect to continue our work on portfolio integration rotation as well.
Our transactions to date have brought about significant changes to the Portman ridge profile in terms of size capital structure and portfolio composition over these many months in.
In the long run however, our ultimate goal remains steadfast, which to deliver strong and sustainable risk adjusted returns to shareholders.
We believe the successful execution of these transactions are key.
To achieving this goal.
I'd like to thank all of our shareholders for your ongoing support and confidence in us and I'd now like to turn it over to the operator for any kind of lined up for any questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone so let's try a question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from Ryan Lynch with <unk>. Your line is now open.
Good morning, Thanks for taking my questions.
First of all I'm on I had was related to slide number five.
<unk>.
You guys accelerated I.
I would say the pace of exiting some of the legacy garrison investments in the quarter.
Uh huh.
I am Sue part part of that was driven by kind of the elevated leverage range, but now that you all are kind of your targeted leverage range today.
Should we expect the pace of that rotation out of those garrison assets to slow down meaningfully.
Yes, I mean, that's a great question.
I'll turn it over to Patrick but what I'd say is we really we spent a lot of time before these transactions closes lining up.
Asset sales and so as you recall, we did 40 per cent of Ohio and about a bit in the first couple of weeks and same with garrison. We just didn't feel comfortable with the leverage range, but we would expect to see elevated repayments and reductions on the garrison portfolio, but nothing like nothing like we saw on the fourth quarter. I mean, we were very very proactive about.
Monetize at a big chunk of the book and I don't think Youre going to see that pace continue.
Yeah, just to get on that.
That's right Ted and did you think that would note on the curious on your portfolio was one <unk>.
Tends to be a little bit more liquid still even than the legacy our legacy.
Pardon portfolio, so as we think about.
Optimizing our risk return within the portfolio theoretically those garrison assets might be a higher priority in terms of asset sales and then number two the garrison portfolio generally speaking is a little bit more.
More mature than then.
Porn portfolio, just given that debt BC partners has been on Virginia assets over the last several years. So it would be likely to expect that the garrison portfolio would be subject to greater repayments just in the ordinary course, and I don't think it would be anything essentially strategic on for park.
Okay.
Okay understood.
And then one congratulations on the investment grade ratings from Egan Jones number one and then.
On that point.
Longer term I know it may look a little bit and maybe a little bit on transitional you know windows on harvest merger coming out but longer term.
What sort of composition do you think is ideal for your liability structure in terms of you know on.
On secured debt credit facility debt and then I know there are pieces of debt like you guys. Currently have a securitization, which I think it's probably going to be winding down, especially with the repayment, but but just longer term. What do you see is the ideal state for the composition of your liability structure.
Yeah.
Yes, so great question Ryan.
We're still sorting out a little bit this metric by the way.
I think going forward, even in the long term unsecured bonds will remain a very integral part of our financing strategy given the flexibility that they provide I think bigger picture, we would probably look ultimately to consolidate our revolving facility as well as the CLO liabilities in the longer term.
Though we still have a fairly long reinvestment period on that CLO.
Theres nothing theres nothing imminent on the horizon, there or that we would need to do but I do think thats, probably the area, where we would look to try and consolidate from a liability side.
Okay and the other thing I'd add the only thing I'd add is we do have a number of near term maturities coming up on the bond side and we also have no near term maturities on when.
Pro forma for the harvest transaction. There is also some near term maturities. So that's something we're very focused on and giving them more unsecured debt is pricing these days.
We think we can realize significant savings for our shareholders and it all drops the bottom line. So we've been hurt obviously by reductions in LIBOR over the last or rates. The last 12 to 18 months. So theres no reason why we shouldn't benefited from as well by locking in cheaper liabilities as well.
Okay.
And then.
Just one last one for me.
How active are you guys in the market as far as deploying new capital into two new portfolio companies, obviously you've hired.
Very active on the M&A right deal flow was what was basically shut off or for several quarters. There you know in the spring and summer months, but now we've got markets picking back up.
Active should we expect you as far as deploying new capital given given all the M&A that you got cash going on in the background.
Yeah, I mean, our primary I mean, we have never seen the level of deal activity that we saw in the fourth quarter of last year.
This should be very robust as well there's a lot of.
There's a lot of private equity activity on.
Most of our activity that we're seeing now is on the sponsor side you know theyre non sponsored businesses continue to be consistent I would say.
But on the sponsor side, you know a lot of pressure on private equity firms to return capital to their investors. So a lot of portfolio a lot of portfolio companies up for sale a lot of expedited processes and so yeah. I mean the deal the deal environment was very robust for the fourth quarter and we've kind of seen it spillover into this year. So.
So we'll see what happens I I wouldn't I wouldn't be surprised to see it slow down in the next couple of quarters, but it still continues to be very active.
From our perspective.
We're kind of Lucky we came into this year.
You know very invested.
And the benefit of that as I think you're going to see I don't think you'd see us massively increase our net investment activity, but our gross investment activity. You'll see has picked up a lot. So a lot of our I would say weaker credits, we're proactively trying to get refinanced out of and replace them with what we would do.
Higher quality credits at similar spreads. So I think I think we've done a really good job the last three months, probably probably faster than we expected for.
I would call high grade on our portfolio, we think we've taken a lot of risk out of our portfolio, while maintaining spreads and so I don't think you're going to see where we're at a pretty elevated leverage levels now, meaning we're at right within our range, but I don't think we want to go up that much. So I think youre going to see high gross low net.
I would phrase it.
Patrick do you want to add anything to that or.
No idea.
Only thing I would add is BC partners as a platform has remained very active so while portman.
As an entity has been relatively muted given the M&A activity on.
Our platform is still very much active and involved in the market.
It just makes it relatively easy to get Portman backend. So we're still maintaining our dialogues with the sponsor our sponsor relationships, many intermediaries and things like that.
No.
Thank you for that.
Yeah.
Yeah.
I appreciate the time this morning, thanks, Thanks, Brian.
Thank you.
To ask a question you will need to press star one on your telephone.
And our next question comes from Christopher Nolan with Ladenburg Thalmann. Your line is now open.
Hey, guys.
Ted is it correct on following up Brian's question debt for 2021, you expect.
Most of the improved economics from Portman ridge to be from the restructuring of liabilities.
Yeah, I mean, we expect we would expect to see savings to our shareholders from the various things we went through on the liability side over the course of for the next couple of quarters.
Great and.
And I guess, there's follow up on.
On Roscoe medical.
Just that was cured and Thats backer curing.
Excuse me.
Yes, that's correct.
It started paying cash interest as of September. The September month is paying monthly cash interest there was a bit of a timing mismatch around the accrued interest that ultimately got capitalized as part of a renegotiation in October we're still kind of bled over from Q3 into Q4 as of September bump it.
Accruing and paying cash interest.
Final question on operating expenses.
Yeah.
They sort of on guidance you can give jason in terms of.
You should expect in terms of quarterly run rates per operating expenses.
Yeah sure yeah. So.
You'll see Q4 is a little bit higher than normal.
The operating.
Gross profile in part because of the professional fees.
You know there was outside the uptick in that space given that Q3 was a little bit under undersized given some.
Positive negotiations, we had with vendor price in Q3, so it's a little bit higher than uptick there because of that but I would I would expect once the M&A.
It starts to stabilize a little bit that number will start to come down on a run rate basis.
The admin services Youll see that ticked up.
A bit as well as the other G&A.
In part because I would say.
One time expenses pumping up because of the M&A activity associated with garrison.
Just to give a little.
Color on that or would expect to see.
About 25% to 30, 30% of debt.
It's come off the bad debt increase going forward.
Great. Thank you for taking my questions.
Sure.
Thank you once again to ask a question. Please press star one on your telephone.
I'm not showing any further questions at this time I would now like to turn the call back over to Ted book.
For closing remarks.
Again, we'd like to thank everybody for dialing in this morning, and we would we would like to thank our shareholders for their continuing support and we wish everybody remains healthy and safe and if you have any questions at all call any member of management at any time. Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Yes.
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