Q3 2022 Hercules Capital Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Good day and thank you for standing by welcome to the Hercules Capital Q3, 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
To ask a question. During this session you will need to press star one one on your telephone and you will then hear an automated message advising your hand is raised.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Michael Hara managing director of Investor Investor Relations. Please go ahead.
Thank you Susan good afternoon, everyone and welcome to Hercules Conference call for the third quarter of 2022.
With us on the call today from Hercules are Scott Bluestein, CEO and Chief investment Officer.
Meyer CFO .
Hercules third quarter 2022 financial results released just after today's market close.
Can be accessed from Hercules Investor Relations section on our Investor Dot <unk> Dot com.
An archived webcast replay will be available on the Investor Relations webpage for at least 30 days following the conference call.
During this call we may make forward looking statements based on our own assumptions and current expectations. These forward looking statements are not guarantees of future performance.
Should not be relied upon in making any investment decision.
Actual financial results may differ from the forward looking statements made during this call for a number of reasons, including but not limited to the risks identified in our annual report on Form 10-K, and other filings that are publicly available on the SEC's website.
Any forward looking statements made during this call are made only as of today's date and.
And Hercules assumes no obligation to update any such statements in the future.
That I will turn the call over to Scott.
Thank you Michael and thank you all for joining us today.
Despite continued market volatility and general uncertainty around the economic and capital markets environment.
<unk> capital continued to deliver strong operating results in Q3.
Our results can be summarized by strong earnings growth and momentum improving yields record originations and stable credit.
Our record originations performance in the first half of 2022 continued with record Q3 gross debt and equity commitments of over $817 million.
Our gross fundings continued to be strong during the quarter with over $307 million, which once again led to strong net debt investment portfolio growth of over $105 million during the third quarter and a record 465 million for the first three quarters of 2022.
Year to date through Q3, 2022, we delivered record gross debt and equity commitments of $2 48 billion and record gross fundings of $1 1 billion.
Since the close of Q3 and as of October 31, 2022.
Our deal team has already closed $286 million of new commitments, bringing our total year to date closed new commitments to $2 76 billion, which is a new company record, surpassing our 2021 record of 264 billion.
We have pending commitments of an additional $176 million in signed non binding term sheets.
<unk>, our pending commitments, we are nearing the $3 billion mark for the year, a milestone achievement for Hercules capital.
This record level of originations and resulting record net debt investment portfolio growth is driving our core income and NII per share higher and combined with the current rate environment has put us in a strong position to be able to raise our quarterly base distribution to <unk> 36 for Q3.
Our third base distribution increase in the last 12 months.
Let me recap some of the key highlights of our performance for Q3.
Our record Q3 originations activity was once again driven by both our technology and life Sciences teams delivering strong performance during the quarter.
Our commitments and funding activity demonstrated balanced between our two core verticals, although our new commitments during the quarter were intentionally weighted more heavily towards the life Sciences companies.
We funded capital to 25 different companies in Q3 of which 12 were new borrower relationships.
For the first three quarters of 2022, we have added 37, new borrower relationships, which further expands our scale in the market and reputation as the lender of choice for growth stage companies looking for a long term and stable financing partner.
Continuing a theme that we have seen over the recent quarters, we were able to expand our funding relationship with numerous portfolio companies during Q3.
Our continued emphasis on prudent underwriting and conservative structuring on new originations once again resulted in a lower funding to commitment ratio.
This should continue to drive strong funding activity from the existing portfolio over the next several quarters irrespective of the market for new loan originations.
In addition, approximately 30% or $198 million out of the currently available unfunded commitments of $659 million will expire in 2022.
We anticipate that potential fundings from the remaining unfunded commitments will help drive further portfolio growth near term and should lead to continued earnings momentum.
Volatility across the equity markets, particularly for growth stage companies continued in Q3, although we saw more stability than we did in Q2.
Valuations for both public and private companies continue to be under pressure in the capital markets have become more selective on the equity side.
As a result, we expect our pipeline to continue to be strong near to medium term as companies continue to look for creative and non dilutive structured capital solutions from debt providers that they trust and that are best positioned to thrive longer term and through periods of volatility.
With four corporate investment grade credit ratings 100, plus full time employees over 700 million of liquidity, a very strong balance sheet and the ability to continue to raise new capital if needed. We believe that Hercules is best positioned in the asset class for continued and sustained success.
Consistent with our historical approach to underwriting credit, we will remain patient and disciplined on new originations.
Irrespective of market conditions, and we do not plan to chase yields for higher risk transactions as we have seen some others do in the current market.
We are continuing to be even more selective than normal in terms of underwriting new credits with a continuing emphasis on later stage and more established companies, where we continue to believe that the risk adjusted profile is better at this time and we are continuing to avoid certain industries and end markets that we believe are more susceptible.
Two a potential downturn.
We anticipate that this approach will continue at least through year end.
During Q3 portfolio company exits and liquidity events for the industry continued to reflect the ongoing pressure in the equity markets.
Year to date, we've had five companies complete their ipos, including one in Q3, and 10 companies announced or complete M&A transactions, including three in Q3 and two recently in Q4 in.
In addition, we have one company that has registered for their IPO.
We are starting to see the uptick in M&A transactions that we anticipated on our last earnings call as evidenced by the five M&A transactions that have taken place within our portfolio since our last earnings call as.
As the IPO market remains uncertain and virtually shut down we continue to expect to see an acceleration of M&A transactions over the next several quarters.
Early loan repayments were approximately $125 million at the upper end of our guidance of 50 million to $150 million and a significant increase from the 33 million that we experienced in Q2 2022.
This level of early loan prepayments allowed us to once again deliver strong net debt investment portfolio growth in the quarter, which positions us well for continued strong earnings growth in the last quarter of 2022 and into 2023.
For Q4, 2022, we expect prepayments to remain between $100 million and 150 million. Although this could change as we progress in the quarter.
In Q3, we generated record total investment income of $84 2 million and net investment income of 50 million or <unk> 39 per share providing 108% coverage of our recently increased base distribution.
Our expectation is that both core income and net investment income will further increase in Q4.
Our portfolio generated a GAAP effective yield of 12, 9% in Q3, and a core yield of 12, 4%, which exceeded our guidance for the quarter and is indicative of the recent rate increases and higher onboarding yields for certain new loans.
With net regulatory leverage at a very conservative 96, 1% and continued robust liquidity across our platform our balance sheet remains very well positioned.
Credit quality of the debt investment portfolio remains strong and stable.
Our weighted average internal credit rating of 220 was slightly higher than the two three rating in Q2, but still at the low end of our normal historical range or.
Our grade one and two credits decreased slightly to 67, 4% compared to 74% in Q2.
Great three credits were slightly higher at 31, 3% in Q3 versus 29% in Q2.
Our rated four credits made up one 5% of the portfolio and we do not have any rated five credits in Q3.
As of our most recent reporting 100% of our debt portfolio companies are current with respect to contractual payments of principal and interest.
At cost and value respectively.
During Q3 Hercules had net realized gains of $5.3 million. This was comprised of gross realized gains of eight $4 million offset by three $1 million due to the right off of legacy equity and warns and the termination of Lawrence.
We ended Q3 with strong liquidity of over $700 million, which provides us with coverage of our available unfunded commitments and the ability to fund our ongoing anticipated business activity.
The venture capital ecosystem continued it's healthy pays for the first three quarters of 2022 with fund raising activity at a record $151 billion in investment activity at $195 billion. According to data gathered by Pitchbook and the National venture Capital Association.
After only three quarters the venture capital ecosystem continues to exhibit a healthy level of activity.
Investments have turned in the second highest year on record and fund raising has achieved an all time record high.
To put this into further perspective over $386 billion has been raised in the last three years.
With the amount of available capital to invest at historic highs, we remain optimistic that venture capital activity will begin to accelerate in the coming months and extend well into 2023.
Capital raising across our own portfolio remains strong in Q3 with our active portfolio companies once again, raising nearly $1.5 billion of new capital during the quarter.
We exited Q3 with undistributed earnings spillover of over $134 million or one dollar and three per share.
The undistributed earnings spillover continues to provide us with the added flexibility with respect to our shareholder distributions going forward and.
And the ability to continue to invest in our team and platform.
Year to date, we have added to our investment team credit team and legal team in anticipation of a more challenging macro environment and we will continue to invest in our platform to ensure our ability to thrive in any environment.
For Q3, we increased our based distribution to 36 from 35.
And we once again declared a supplemental distribution of 15.
We will continue to evaluate the quarterly variable based distribution with a particular focus on the debt portfolio growth and NII growth that we are expecting to materialize.
Further we expect to announce another supplemental distribution program is part of our queue for earnings report now that the full 60 from our most recent supplemental distribution program has been paid out.
In closing.
Our momentum has continued through the first three quarters of 2022, and we remain well positioned from all aspects to take advantage of market conditions and grow our core income generating assets and as a result, the earnings power of the business.
We will remain steadfast with our core themes of maintaining a strong balance sheet and staying disciplined on new underwritings, while continuing to invest in our teams and our platform.
We remain thankful to the many companies management teams and investors that continue to make Hercules their partner of choice I will now turn the call over to Seth.
Thank you Scott and good afternoon, ladies and gentlemen, Hercules continues to be positioned extremely well to navigate the current market.
And operating environment.
Are operating platform in Q3 benefited from over $475 million of investment portfolio of growth year to date.
Rising interest rate environment, and a strong balance sheet that is funded primarily with fixed.
Right long dated unsecured term loans is combination of events.
Increased net investment income to $50 million or 25% quarter over quarter increase or 39 per share in Q3.
This was achieved by delivering another record core income combined with a more normal volume of prepayments.
<unk> remains strong and Nonaccruals continued to be less than 1% of the portfolio positioning us well to continue to generate strong operating results.
With that in mind, let's review the following areas income statement performance and highlights NSV unrealized and realized activity leverage and liquidity and then finally the financial outlook.
First income statement performance and highlights as previously mentioned net investment income was $50 million or 25% more quarter over quarter.
Or 39 per share in Q3.
Total investment income was $84.2 million as guided in the second quarter earnings call driven by 21% growth and the debt portfolio year to date on strong new business.
Lower prepayments and an increase in benchmark rates.
Are effective in core yields in the third quarter, where 12.9% and 12.4%, respectively compared to 11.5% and 11.3% in the second quarter the.
The increase in the core yield was due to an increase in coupon interest as a result of base rate interest increases.
We expect this trend to continue with the full quarter impact of the third quarter fed policy interest rate changes as well as the decision today.
Turning to expenses are gross operating expenses for the quarter increased to $36.1 million compared to $35.1 million in the prior quarter net.
<unk> cost recharged it.
Our operating expenses were $34.2 million <unk>.
Interest expense.
Expense and fees increased to $16.7 million from $14.2 million in the prior quarter due to the growth of the investment portfolio and slightly higher weighted average cost of debt.
SG&A expenses decreased to $19.4 million from $29 million in the prior quarter the midpoint of my guidance.
Net of costs recharge to the RIAA the SG&A expenses were fairly stable at $17.5 million.
Are weighted average cost of that was four 4% slight increase compared to the prior quarter, reflecting a full quarter of the two institutional that financings completed in June as well as greater utilization of the credit facilities due to growth of the investment portfolio.
R O E or NII over average equity increased 270 basis points to 14.7% for the third quarter and R O.
Or NII over average total assets was six 9%.
Let us now switch our focus to NSV.
Realized and realized activity during the quarter are NSV increased four cents per share to $10 and $47 per share. This.
This represents an <unk>.
Per share increase of 0.4% quarter over quarter.
Net investment increase income accretion due to the modest use of the ATM and realized gains were offset by dividends paid in the quarter, including the 15 cents per share spillover distribution of 2021 earnings.
Regarding our recent dividend declaration. The early announcement was related to our spillover distributions from 2021 to ensure compliance with the registered investment company tax rules, we needed to declare the dividend before October 15th.
The net realized gains of $5.3 million comprised of $8.4 million of gains from the disposal of equity in Warren positions.
And gain on foreign exchange offset by $3.1 million of realized losses related to losses and write off of legacy equity in warrant positions.
Moving next to leverage and liquidity are gap and regulatory leverage were 113.2% in 100.3%, respectively, which decreased compared to the prior quarter. Despite the net growth and the investments due to the modest use of the ATM.
Netting out leverage with cash on the balance sheet or net gap in regulatory leverage was 109% and $96 1% respectively.
We ended the quarter with liquidity of $700 million as a reminder, this excludes capital raised by the funds managed by our wholly owned RIAA subsidiary. We believe are strong liquidity positions us very well in the current rate environment.
We continued to access the ATM during the third quarter and raised $43 million, resulting in at 10 cents per share accretion to nev.
Finally regarding the outlook points for the fourth quarter, we are increasing our core yield guidance range.
212.5% to 13.5%, excluding any future benchmark rate changes as a reminder, approximately 95% of our debt portfolio is floating with a floor. So the recent interest rate hike and any additional in 2022 will benefit our core yield going for.
Forward.
Although very difficult to predict is communicated by Scott, we expect $100 million to $150 million prepayment activity in the fourth quarter.
We expect our fourth quarter interest expense to increase compared to the prior quarter due to the balance sheet growth experienced in the third quarter.
For the fourth quarter, we expect SG&A expenses of.
$20 million to $21 million in a similar level of our allocation of expense compared to the third quarter.
In closing we are positioned extremely well to benefit from this market and we're looking forward to continued growth of our core income.
I will now turn the call over to Susan to begin the Q&A portion of the call Susan over to you.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced please stand by while we compiled the Q a roster.
Okay.
[noise]. My first question is from Crispin Love of paper Sandal Sandler Your line is open.
Good afternoon, everyone. So you said early in your comments.
You're avoiding certain industries and markets I was just curious if you could give a little bit more color. There maybe the types of deals that you're passing on and what industry you are interested.
Interested in in currently.
Thanks Christian.
Asked that question a lot and consistent with prior quarter's we're not going to publicly speak to the industries that were avoiding I think if you look at some of our soi disclosure it should become fairly evident, but we have a pretty.
A pretty cautious look at certain industries right now given the macro environment and given some of the equity market volatility that we have seen and we expect to continue to see.
So we are being very cautious I will say that we've shifted the portfolio over the last several quarters to be much more centered around established stage and expansion stage companies and so when you look at sort of the three buckets that we consider part of the venture ecosystem early stage expansion stage and established stage companies were.
Largely out of early stage investing at this point in the vast majority of our portfolio right. Now is in the latter two buckets, which we think is just a safer credit profile in this environment.
There are some obvious things that we have avoided historically and that we will continue to avoid so we're not touching any deal that we believe have cannabis exposure, we're not touching any deals that we believe have crypto exposure and then for any more clarity, we're just not going to make any public comment.
Alright, and thank God, that's helpful. And then cross I'm looking at your your core Yoga Guy I think he said, 12.5% to 13.5% as I'm just looking back to the last couple of quarters. So you gain 12.4 in the third quarter <unk> 11.32nd quarter based on the.
Recent rate hike that we saw in the third quarter do you think the core yield your excuse me core yield towards the higher end of you <unk> <unk>.
<unk> or is there a reason to came up thank God and then Relatedly is there a point, where you'll hit a ceiling on what you'll get a new regardless of future rate increases.
Yeah, great questions Christian yet, we give a wide range because of course, we are going later stage and a lot of the companies that we're approaching and introducing to the portfolio and at times that may introduce a lower court yield.
To the portfolio compared to the existing portfolio I do think it's fair that will probably be at the midpoint of that range or maybe to the upper end, but we're also trying to make sure that we're very cautious acknowledging the fact that there could be a turnover in the portfolio and that could change, but it's got maybe on the historic perspective of the industry and where you are.
And where there is it might be a cap.
I think it's fair to assume Crispin at some point there will be a cap in terms of how much more appreciation you'll see from a core yield perspective, but we certainly don't think we're at that point yet.
Alright, I appreciate you taking my questions that makes sense on the latest stage of companies.
Thanks, Chris Ma'am.
Thank you.
Our next question.
Cause we compile our next question comes from Kevin Fault J M. P security your.
Your line is open.
Hi, good afternoon, and thank you for taking my question.
First question is on portfolio company liquidity Dot on the lost earnings call you, Sir insightful statistics around portfolio accompanied with would be just curious if you had updated dot that you could share with most of the September quarter and.
Thanks, Kevin similar and consistent with what we do during Covid, we did not update that and we don't plan to update that on a quarterly basis I will say, though that we do track liquidity on a pretty consistent basis, and we really did not see a material change quarter over quarter. So to the extent that we did provide that guidance publicly you wouldn't see material.
Difference I would also note that this is the third consecutive quarter, where fund raising at the portfolio company level has remained strong and each of Q1 and Q2, we saw our debt portfolio companies raise over $1 billion of new capital that actually accelerated a bit in Q3, where our portfolio companies raised.
Nearly 1.5 billion and we've had several events already take place in queue for so.
We're watching liquidity very closely obviously, given some of the stress that we're seeing in the market, but as of the most recent data that we have we continue to be comfortable with how the portfolio was positioned as it relates to liquidity.
Okay. That's helpful.
I believe you said in the past that you tend to lean into funding activity in life Sciences, and the life Sciences vertical when there is elevated volatility in the market and I'm. Just curious if you're funding activity is starting to reach that given a transitioning market backdrop.
It does and I made that reference in my prepared comments we.
We had a very strong quarter with respect to that Commitment's. There was a record quarter for us with $817 million. We continued to see strength from both our technology and life Sciences team during the quarter, but if you look at the breakdown of our actual commitments in the quarter. There was more of a waiting this quarter too.
<unk> the life Sciences side and that was intentional given some of the macro environment that we're seeing.
Okay that makes sense then I appreciate you taking my questions and congratulations on a really nice dreams.
Thanks, Kevin.
Thank you one moment please.
The next call comes from Kenley F. R. B C capital markets. Your line is open.
Hi, Thanks for taking my question one question on an internal credit grading wondering if you could talk about some of the key factors that you received that's driving some of the movement of companies within those within those buckets Sir thanks.
Sure. Thanks, Thanks, Ken so it really not a lot of movement quarter over quarter last quarter. We were at 2.13 in terms of weighted average credit rating across the desk portfolio.
Slight uptick to 220 in Q Q3, and that's really if you look at our historical moves that's not a material move in any way 2.20 is still at the very low end of our historical range, which in normal periods has been in the two two to 2.45 range there was a little bit.
A movement in terms of the individual ratings from the rated five loans improved. So we have no rated five loans. The rated one loans moved down slightly the primary driver there was actually the fact that we did some new deals with existing rated one credits every time, we do a new deal we tend to move those deals.
Back to a rated too because we're resetting our underwriting expectation and then there was a little bit of movement within the twos threes and fours, but really nothing of note.
Gotcha very helpful. There and just one follow up wondering if you can just update us on some of the potential I'll look for.
Stream from the private credit fund <unk> advisor I think you've talking to pass by the potential for seeing some some dividends from that side of the business at some point. Thanks.
Yeah sure can this is seth so at.
At the moment, where it clearly doing the cost sharing and the BDC is benefiting a little bit from.
Loans to help finance.
As it comes into a cash flow positive position, we expect that dividend flows potentially in the back half of next year could occur or early parts of 2024, and so we would expect the BDC to really start to see the the true benefit of the management fees.
That is collecting overcoming costs that it's being allocated.
But it is really don't forget dependent on tax earnings and profits determine the timing of it Scott.
And I would just maybe add a few things to what <unk> said, if you look at our quarterly disclosure. We are disclosing the amount of deals that we are funding out of our private fund business in 2021 that was over $225 million a fundings year to date through Q3, so including the most retched.
Information in our press release, which was just released we have already funded nearly 325 million out of the private fund business. So as you can see if you combine the 2021 numbers in the year to date numbers that business is ramping up considerably which gives us continuing comfort that not only where are we going to continue to see the <unk>.
Reimbursement, but that the dividend income stream as a performance fee and as a management fee start to pick up will continue to provide some substantial value for the shareholders of HTC.
Gotcha very helpful. Thanks again.
Thanks, Ken.
Thank you one moment please.
Okay.
Our <unk> our next caller is Christopher Nolan Uhm <unk> go ahead. Please.
Oh I'm sorry, my my mistake.
Next question is from Ryan Lin said K B W.
Hey, good afternoon I.
Had a question on just broader market dynamics I mean, you guys put up some some good slides on the overall venture capital activity going on and and and from your slides you can see that I fund raising has has been really strong continues to be really strong in 2022, but but mergers and acquisitions. So exit activity is really just.
Just fallen off a cliff so far in 2022, an investment activity has dropped over 2021, but still remains healthy, but I'm just wondering how should we read kind of that drop off in mergers and acquisitions.
And an exit activity.
How does that what should we read into that as far as how you guys are looking at the environment and how is the health of the D C market today.
Thanks Ryan.
Great question, let me speak first to sort of the V. C market just broadly in terms of fund raising an investment activity.
We have historically tracked those two statistics on a quarterly basis, because we think that they are most reflective of the health or vibrancy of the ecosystem and they're both equally important V C fund raising and V C investment activity.
If we look at fund raising first the year to date data has been incredibly robust of $151 billion raised through the first three quarters that is already representative of a record year for the industry.
When you look at the investment data there has absolutely been a pretty significant slowdown or pullback from what we experienced in 2021, when we look at the year to date data and we compare it to any previous year outside of 2021, it's actually very strong very healthy and.
Still fairly robust so in comparison to last year, which was a record year. There has been a significant slowdown in pullback, but we continue to look at the data that we're seeing with an optimistic lens because it does reflect very strong <unk>.
Investment activity, just not on a year over year basis, because you're comparing it to record levels of investment activity of $344 billion.
In 2021.
In periods of volatility, it's not a surprise to see if you look historically at other periods of volatility you've seen the same sort of the same thing happened in the industry that exit activity slows down considerably on the IPO side that market has essentially been nonexistent year to date, we have had a couple of IPO events. We've.
Had five year to date, including one in Q3, but we expect ipos to continue to be fairly slow for the next several quarters on the M&A side, it's been more active than what we've seen on the IPO side, but it's still down and what we would attribute that sort of the downtick too is the <unk>.
Certainty of the market.
A lot of companies trying to figure out what to do next a lot of companies and boards right now we're in that sort of exploration stage, where they're having discussions should they rave dilutive equity should they approach secured lenders for non dilutive debt financing or should they explore M&A.
In Q3 in our portfolio, we saw an uptick in M&A activity, some of which were disclosed some of which have not yet been disclosed because those conversations are ongoing and I will just tell you anecdotally from the conversations we're having with our 100 portfolio companies. We continue to expect to see a healthy level.
Of M&A certainly over the course of Q4 and into the first half of next year.
Okay.
Couple of backdrop on the market. The other kind of martyr question that I had I mean, there's been a pretty significant drawdown of of deposits flowing out of tech focused banks.
I would just love to hear what if any sort of impact that would have on your your investment outlook and potential competition in the marketplace.
Yeah. It doesn't it doesn't change much for us in terms of the outlook.
We really don't compete with banks on the vast majority of deals that we do.
There are a handful of banks that will see from time to time, there are a handful of credible and reputable longstanding banks that we will partner with on an occasional basis we.
We expect that to continue and with respect to how the banks are doing in terms of deposits. We're funding it could cause the banks to be a little bit more conservative and certainly a little bit less aggressive, but I would tell you that in the majority of deals that we go after we're not competing head to head with commercial banks.
Okay.
That's helpful commentary I appreciate your time this afternoon. Thanks.
Thanks Ryan.
Thank you one moment please.
And our last question at this time comes from Christopher Nolan Ladenburg Thalmann. Your line is open.
Hey, guys. Most of my questions have been if it gets a little poem life Science rotation is there a favorite area like drug development or devices or services with.
Yeah, I mean, if you look at our historical data and if you look at the makeup of our current portfolio in terms of our disclosure.
There is certainly a bias towards diversified drug discovery drug development, but we have exposure to virtually all sectors of the lifestyle answers ecosystem in our emphasis is continuing to be on having a diversified portfolio, whether it's with respect to our textbook or or life Sciences book.
On the capital structure excuse me at this point I've been asked earlier, but given that you guys have growing so big and fries is becoming an issue where you're focusing on later stage companies and a consideration of basically securitizing deals and just getting them off the balance sheet.
So it's not really consideration right now we've been very successful.
Utilizing unsecured debt in the capital markets.
As well as in the rare instances, we've done some of the securitization we did pay off those two that we had historically last year.
And you know not removing them from the balance sheet and the way that you're you're talking about but.
We would look to secured funding when we saw that it was the right opportunity for our balance sheet, but at the moment, we've been pretty successful utilizing a combination of the credit facilities, where we have great support from the institutions that back us in that capacity.
As well as.
Making trips to the capital markets at the rate cadence and timing because.
Because of the credit facility capacity and go in the unsecured round.
Okay, Great <unk>.
Thanks, Chris.
Thank you.
At this time I would like to turn it back to Scotland. This dean for closing remarks.
Thank you Susan and thanks to everyone for joining our call today as a final note we will be participating in both the Jeffries BDC stomach and Fitch ratings BDC conference on November 16th the.
The JMP Securities financial services in real estate conference on November 17th.
And the K BW Midtown March on December 14th all of which are taking place in New York.
If you would like to arrange a meeting with the Hercules management team. Please contact each of the financial institutions mentioned directly or Michael HERA, We look forward to reporting our progress on our next year and earnings call. Thank you all and have a great rest of the day.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
The conference will begin to T to raise your hand doing Q&A you can dial 911.
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