Full Year 2024 Prospect Capital Corp Earnings Call
Speaker Change: Today, and welcome to the Prospect Capital in 4th quarter of fiscal year, 2020 for earnings release and conference call. All participants will be in a listen-only mode? Should you need assistance? Please signal conference specialists by pressing the star key followed by zero.
Operator: Release and conference call. All participants will be in a listen-only mode. Should you need assistance, please signal Conference Specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. And to withdraw your question, please press star, then two.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. And to withdraw your question, please press star then two. Please note this event is being recorded of an out-like to turn the call to over to Mr. John Barry, Chairman and CEO, please go ahead sir.
Operator: Please note this event is being recorded.
John Barry: I would now like to turn the conference over to Mr. John Barry. Chairman and CEO, please go ahead, sir. Thank you, Chuck.
John Barry: Joining me on the call today are Greer Eliza, our President and Chief Operating Officer, and Kristin Van Dask, our Chief Financial Officer.
John Barry: Thank you, Chuck, joining me on the call today, our Guru Isaac, our President and Chief Operating Officer, and Kristin Dandask, our Chief Financial Officer, Kristen.
Kristin Van Dask: Kristin? Thanks, John.
John Barry: This call contains forward-looking statements that are intended to be subject to safe harbor protection. Future results are highly likely to vary materially. We do not undertake to update our forward-looking statements.
Speaker Change: Thanks John. This call contains forward-looking statements that are intended to be subject to safe harbor protection. Future results are highly likely to vary materially. We do not undertake to update our forward-looking statements.
John Barry: For additional disclosure, see our earnings press release in 10-K filed previously and available on our website ProspectStreet.com.
Speaker Change: For additional disclosure, see our earnings press release in 10K filed previously and available on our website ProspectStreet.com now we'll turn the call back over to John.
John Barry: Now we'll turn the call back over to John.
John Barry: Thank you, Kristin. Prospect Capital Corporation is celebrating our 20th anniversary as a leading provider of private debt and equity to U.S. Middle market companies. Since 2004, we've invested $20.9 billion across 423 investments, exiting 303 investments. Over the past five years, we've generated higher total returns than our peer BDC median. In the June quarter, our net investment income or NII was $102.9 million, or 25 cents per common share. Our NIV was $3.71 billion or $8.74 per common share. At June 30, our net debt to total assets ratio was 30.5%. Unsecured debt plus preferred is 80.3% of total debt plus preferred for Prospect.
John Barry: Thank you, Kristin.
Speaker Change: Prosser Capital Corporation is celebrating our 20th anniversary.
John Barry: As a leading provider of private debt and equity to U.S. middle market companies.
John Barry: Since 2004, we've invested $20.9 billion across 423 investments, exiting 303 investments.
Speaker Change: Over the past five years, we've generated higher total returns than our pure BDC median.
Speaker Change: In the June quarter, our net investment income were NII was 102.9 million dollars, or 25 cents per common share.
Speaker Change: Our NAV was $3.71 billion, we're $8.74 per common share.
Speaker Change: At June 30, our net debt to total assets ratio was 30.5%. On secured debt, plus preferred is 80.3% of total debt plus preferred for prospect.
John Barry: We are announcing monthly common shareholder distributions of $6 per share for each of September and October. With a ladder representing our 86th consecutive such distribution, we plan on announcing our next set of shareholder distributions in November. Since inception, through October 2024, declared distribution, we will have distributed $4.3 billion or $21.12 per share, representing 2.4 times June 2024 common NIV per share and 4.1 times our Tuesday stock price. As majority shareholder in several private companies, we support company investments by providing capital, expertise, and guidance. When companies make acquisitions, purchase property, plant, and equipment, we need working capital.
Speaker Change: We are announcing monthly common shareholder distributions of six cents per share for each of September and October.
Speaker Change: With a louder representing our 86 consecutive such distribution, we plan on announcing our next set of shareholder distributions in November.
Speaker Change: Since inception through October 2024, declared distribution.
Speaker Change: We will have distributed $4.3 billion or $21.12 cents per share, representing $2.4 times June 2024 common NAV per share and $4.1 times
Speaker Change: Our Tuesday Stock price.
Speaker Change: As majority shareholder in several private companies, we support company investments by providing capital, expertise and guidance.
Speaker Change: When companies make acquisitions, purchase property, plant and equipment, we're need working capital.
John Barry: Including to meet increased demand, we often provide capital by directing such companies to pay for such expenditures using cash on hand instead of using such cash to make interest payments to us. Pick interest is typically covered by aggregate portfolio company enterprise value. Portfolio Company Enterprise Value is calculated by third-party valuation firms for June 32 or 24 covers or substantially covers our net debt, including all pick interest on a cruel for substantially all of our control company investments which had picked in the last two fiscal years.
Speaker Change: including to meet and increase demand. We often provide capital by directing such companies to pay for such expenditures using cash on hand.
Speaker Change: instead of using such catch to make interest payments to us. Recording the resulting payment and calling interest, we're a pick interest as additional debt.
Speaker Change: Pick interest is typically covered by aggregate portfolio company enterprise value.
Speaker Change: Portfolio Company Enterprise Value, as calculated by third party valuations firms.
Speaker Change: for June 32 to 4, covers or substantially covers our net debt, including all pick interest on a crew for substantially all of our control company investments which had pick in the last two fiscal years.
John Barry: Thank you.
Greer Eliza: I'll now turn the call over to Greer. Thank you, John. As of June 30, our portfolio at fair value comprise 60.3 percent first-line debt, that's up 3.8 percent from the prior year; 13.6 percent second-line debt, down 2.8 percent from the prior year; 6.9 percent subordinated structured notes with underlying secured first-line collateral, that's down 1.7 percent from the prior year; and 19.2 percent on secured debt and equity investments, up 0.7 percent from the prior year. Resulting in 81 percent of our investments being assets with underlying secured debt benefiting from borrower-pledged collateral. For the current September quarter to date, we've exited another 198 million of second-line debt, representing a further 2.3 percent decline to 11.3 percent.
Speaker Change: Thank you, I'll now turn the call over to Greer.
Greer: Thank you, John.
Greer: As of June 30, our portfolio at Fair Value comprised 60.3% first-lead debt, that's up 3.8% for the prior year, 13.6% second-lead debt, down 2.8% for the prior year.
Greer: 6.9% subordinated structured notes, with underlying secured first-lane collateral, that's down 1.7% from the prior year, and 19.2% unsecured debt in equity investments, up 0.7% from the prior year.
Greer: Resulting in 81% of our investments being assets with underlying secured debt benefiting from borrower pledge collateral.
Greer: For the current September quarter to date, we've exited another 198 million of second lean debt.
Greer: Representing a further 2.3% decline to 11.3%
Greer Eliza: We're quite pleased with our continued success and executing our plan to increase our first-line mix while reducing our second-line and subordinated structured notes exposure, thereby reducing portfolio risk. Prospects' approach is one that generates attractive risk-adjusted yields, and our performing interest-bearing investments were generating an annualized yield of 12.1 percent as of June. No change to the prior quarter. Our interest income in the June quarter was 89.2 percent of total investment income, reflecting a strong recurring revenue profile to our business. As of June, we held 117 portfolio companies, a decrease of 5, primarily due to repayments and exits from second-line loans from the prior quarter, with a fair value of 7.7 billion.
Greer: We're quite pleased with our continuing success and executing our plan to increase our first lean mix.
Greer: While reducing our second lean and subordinated structured notes exposure, thereby reducing portfolio risk.
Greer: Prospect's Approach is one that generates attractive, risk-adjusted yields.
Greer: and our performing interest bearing investments, we're generating an annualized yield of 12.1%.
Greer: As of June
Greer: No change for the prior quarter. Our interest income in the June quarter was 89.2% of total investment income, reflecting a strong recurring revenue profile to our business.
Greer: As of June, we held 117 portfolio companies.
Greer: A decrease of five from early due repayments and exits from second lean loans.
Greer Eliza: We also continue to invest in a diversified fashion across many different portfolio companies, industries, with a preference for avoiding cyclicality and industry concentration. Our largest industry concentration is below 20 percent. As of June, our asset concentration in the energy industry stood at 1.6 percent. Our concentration in the hotel, restaurant, and leisure sector stood at 0.3 percent, and our concentration in the retail industry stood at 0.3 percent. Nonacruals is a percentage of total assets stood at approximately 0.3 percent in June, representing a 0.1 percent decrease from the prior quarter. A weighted average middle market portfolio net leverage stood at 5.5 times EBITDA, even with a prior quarter, and substantially below a reporting peer.
Greer: from the prior quarter, with a fair value 7.7 billion.
Greer: We also continue to invest in a diversified fashion across many different portfolio company industries with a preference for avoiding cyclicality and industry concentration. Our largest industry concentration is below 20%.
Greer: As of June, our asset concentration in the energy industry stood at 1.6%.
Greer: Our concentration, the hotel restaurant and leisure sector is to the 0.3%
Greer: and our concentration in the retail industry is to 0.3%.
Greer: Nonacruals is a percentage of total assets, standard approximately 0.3% in June.
Greer: Representing a 0.1% decrease from the prior quarter, the weighted average middle market portfolio net leverage, stood at 5.5 times EBITDA, even with a prior quarter, and substantially below all reporting peers.
Greer Eliza: Weighted average EBITDA per portfolio company stood at 107 million, an increase of 1 million from the prior quarter. Originations in the June quarter aggregated 242 million. We also experienced 245 million of repayments and exits as a validation of our capital preservation objective, resulting in net repayments of 3 million. During the June quarter, our originations comprise 62.9% middle-market lending, 27% real estate, and 10% middle-market lending and buy-ups. To date, we deployed significant capital in the real-state arena through our private REIT strategy. Larger focused on multi-family workforce stabilized yield acquisitions with attractive in-place multi-year financing. To date on a cumulative basis, in-piracy is invested in 110 properties, with a $4 billion aggregate initial property value across multi-family, 83 properties, student housing, 8 properties, self-storage, 12 properties, and senior living, 4 properties.
Greer: A weighted average EBITDA per portfolio company stood at 107 million in increase of 1 million for the prior quarter.
Greer: Originations in the June quarter aggrated 242 million.
Greer: We also experienced 245 million of repayments and exits as a validation of our capital preservation objective.
Greer: Resulting in net repayments of $3 million.
Greer: During the June quarter, our Regenations comprise 62.9% middle market lending, 27% real estate, and 10% middle market lending in buy-offs.
Greer: Today we've deployed significant capital in the real state arena through a private street strategy.
Largie: Largie focused on multifamily workforce stabilized yield acquisitions.
Largie: with the attractive in-place multi-year financing.
Largie: Today, on a cumulative basis, Imperial C is invested in 110 properties.
Largie: With a $4 billion aggregate initial property value across multi-family, 83 properties, student housing, 8 properties, self-storage 12 properties, and senior living for properties.
Greer Eliza: In the current higher financing cost environment, we've added to our investment focus to include preferred equity structures, with significant third-party capital support, underneath our investment attachment points. We're also focusing on distressed sellers, where there is an opportunity to take advantage of the seller's need to recapitalize a property or generate liquidity to address other issues in their portfolios. In-piracy or private REIT has real-state properties that have benefited over the last several years from rising rents, showing the inflation hedge nature of this business segment, solid occupancies, high collections, suburban work from home tailwinds, high returning value added renovation programs, and attractive financing recapitalizations, resulting in an increase over time in cash yields as a validation of this income growth business alongside our corporate credit businesses.
Largie: In the current higher financing cost environments, we've added to our investment focus to include preferred equity structures with significant third-party capital support underneath our investment attachment points.
Largie: We are also focusing on distress sellers where there is an opportunity to take advantage of the sellers need to recapitalize a property or generate liquidity to address other issues in their portfolios.
Largie: and PRC or private read has real estate properties that have benefited over the last several years from rising rents, showing the inflation hedge nature of this business segment.
Largie: Solid occupancies.
Largie: Hi collections, suburban work from home, tailwinds.
Largie: Hi returning, value added renovation programs, in attractive financing recapitalizations.
Largie: Resulting in an increase over time in cash yields, as a validation of this income growth business, alongside our corporate credit businesses.
Greer Eliza: In-piracy as of June has exited completely 49 properties at an average net realized IRR to in-piracy of 24.4%, and an average realized cash multiple of invested capital of two and a half times, not including partially exited deals where we've received back more than our capital invested from distributions and recapitalizations. Our structured credit business has delivered attractive cash yields, demonstrating the benefits of pursuing majority states, working with world-class management teams, providing strong collateral underwriting through primary issuance, and focusing on favorable risk-adjusted opportunities. As of June, we held 532 million across 32 non-recourse subordinated structured notes investments, a reduction of 41 million from the prior quarter.
Speaker Change: NPRC as a June has exited completely 49 properties at an average net realized IRR to NPRC of 24.4% and an average realized cash multiple of invested capital of 2.5 times.
Speaker Change: Not including partially exited deals where we've received back more than our capital invested for distributions and recapitalizations.
Speaker Change: are structured credit business.
Speaker Change: has delivered attractive cash yields.
Speaker Change: Demonstrating the benefits of pursuing majority states.
Speaker Change: Working with world-class man's routines, providing strong collateral underwriting through primary issuance, and focusing on favorable risk-adjusted opportunities.
Speaker Change: As of June, we held 532 million across 32 non-recourse subordinated structured notes investments.
Greer Eliza: We expect to continue to amortize our subordinated structured notes portfolio and to reinvest into middle market senior secured debt and selected equity investments. As a result, the structured notes portfolio now comprises less than 7% of our investment portfolio and is expected to continue to decrease over time. These underlying structured credit portfolios comprise nearly 1,600 loans. In the June quarter, the portfolio generated a gap yield of 4.1%, up 0.8% from the prior quarter, and a cash yield of 22.3%, up 0.2% from the prior quarter. The difference represents amortization of our cost basis that returns capital to Prospect that we intend to use for other investment strategies and corporate purposes.
Speaker Change: A reduction of 41 million from the prior quarter.
Speaker Change: We expect to continue to amortize our subordinated structured notes portfolio, and to reinvest into middle market, senior secured debt, and selected equity investments.
Speaker Change: As a result, the structured notes portfolio now comprises less than 7% of our investment portfolio and is expected to continue to decrease over time.
Speaker Change: He's underlying structure credit portfolio comprise nearly 1,600 loans.
Speaker Change: In the June quarter, the sport folio generated a gap yield of 4.1%.
Speaker Change: 0.8% for the prior quarter, and a cash yield of 22.3% 0.2% for the prior quarter.
Speaker Change: The difference represents amortization of our cost basis.
Speaker Change: The returns capital to prospect that we intend to use for other investment strategies and corporate purposes.
Greer Eliza: Our aggregate subordinated structured credit portfolio has generated $2.1 billion in cumulative cash distributions to us through June, representing 126% of our original investment. Through June, we've exited 16 investments with an average realized IRR of 11.2% and cash and cash multiple of 1.3 times. So far in the current June quarter, the current September quarter, we've booked 161 million in originations and experienced 253 million of repayments for approximately 92 million of net repayments. Originations have consisted of 92% middle market lending and 8% real estate. Thank you.
Speaker Change: Our aggregate subordinate structured credit portfolio has generated 2.1 billion in cumulative cash distributions to us through June representing 126% of our original investment.
Speaker Change: 3 June, we've exited 16 investments.
Speaker Change: with an average realized IRR of 11.2% in cash and cash multiple of 1.3 times.
Speaker Change: So far, the current June quarter, the current September quarter, we booked 161 million in originations and experienced 253 million of repayments for approximately 92 million of net repayments.
Speaker Change: A Regenations have consisted of 92% middle market lending and 8% real estate. Thank you. I'll turn the call over to Kristin. Kristin?
Kristin Van Dask: I'll now turn the call over to Kristen. Kristen? Thank you, Greer. We believe our prudent leverage diversified access to match book funding, substantial majority of unencumbered assets, waiting toward unsecured, sick straight debt, avoidance of unfunded asset commitments and lack of near term maturities, demonstrate both balance sheet strengths as well as substantial liquidity to capitalize on attractive opportunities. Our company has locked in a ladder of liabilities extending 28 years into the future. Our total unfunded eligible commitments to portfolio companies, total is approximately 35 million, representing approximately 0.4% of our assets. Our combined balance sheet cash and undrawn revolving credit facility commitments currently stand at 1.4 billion.
Kristin Dandask: Thank you, Greer. We believe our prudent leverage diversified access to match book funding, substantial majority of unencumbered assets.
Kristin Dandask: Waiting toward unsecured sixth-rate debt, avoidance of unfunded asset commitments, and lack of near-term maturities demonstrate both balance sheet strengths, as well as substantial liquidity to capitalize on attractive opportunities.
Speaker Change: Our company has locked in a ladder of liabilities extending 28 years into the future.
Speaker Change: Our total undefunded eligible commitments to portfolio companies totals approximately 35 million, representing approximately 0.4% of our assets.
Speaker Change: Our combined balance sheet cash and undrawn revolving credit facility commitments currently stand at 1.4 billion.
Kristin Van Dask: As of June, we held approximately 5 billion of our assets as unencumbered assets, representing approximately 63% of our portfolio. The remaining assets are pledged to Prospect Capital Funding, a non-recourse SPV. In June, we successfully completed an amended and extended credit facility with a new five-year maturity. We currently have 2.12 billion of commitments, an increase of 168 million from March, from 48 banks, demonstrating strong support of our company from the lender community with a diversity unmatched by any other company in our industry.
Speaker Change: As of June we held approximately 5 billion of our assets as unencombered assets representing approximately 63% of our portfolio.
Speaker Change: The remaining assets are pledged to prospect capital funding, a non-requised SPV.
Speaker Change: In June, we successfully completed and amended an extended credit facility with a new five-year maturity.
Speaker Change: We currently have 2.12 billion of commitments and increased of 168 million from March from 48 banks, demonstrating strong support of our company from the lender community with a diversity unmatched by any other company in our industry.
Kristin Van Dask: History. The facility revolves until June 2028, followed by a year of amortization, with interest distributions continuing to be allowed to us. Our drawn pricing continues to be so for plus 2.05%. Outside of our revolver and benefiting from our unencumbered assets, we've issued a Prospect Capital Corporation, including in the past few years multiple types of investment grade, unsecured debt, including 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 currently have five investment-grade ratings, more than any other company in our industry.
Speaker Change: The facility revolves until June 2028, followed by a year of amortization with interest distributions continuing to be allowed to us.
Speaker Change: are drawn pricing continues to be so for plus 2.05%.
Speaker Change: Out of our revolver and benefiting from our unencumbered assets, we've issued a prospect capital corporation, including in the past few years, multiple types of investment grade unsickered debt, including convertible bonds, institutional bonds, baby bonds, and program notes.
Speaker Change: All of these types of unsecured debt have no financial covenants, no asset restrictions, and no cross-defaults with our revolver.
Speaker Change: We currently have five investment grade ratings, more than any other company in our industry.
Kristin Van Dask: We've now tapped the unsecured term debt market on multiple occasions to ladder our maturities and to extend our liability duration out 28 years, with our debt maturities extending through 2052. With so many banks and debt investors across so many unsecured and non-recourse debt charges, we have substantially reduced our counterparty risk. At June 30, 2024, our weighted average cost of unsecured debt financing was 4.25%, an increase of 0.1%, 1% from March 31, 2024, and an increase of 0.18% from the prior year, June 30, 2023.
Speaker Change: We've now tapped the Unsecured Term. Market on multiple occasions to ladder our maturities, and to extend our liability duration out 28 years, with our debt maturities extending through 252.
Speaker Change: With so many banks and debt investors across so many unsickers and non-recourse debt torches, we have substantially reduced our counterparty risk.
Speaker Change: A June 30th, 2024, are weighted average cost of unsickered debt financing was 4.25%. An increase of 0.1% from March 31st, 2024, and an increase of 0.18% from the prior year, June 30th, 2023.
John Barry: Now I'll turn the call back over to John. Thank you, Kristen. We can now answer any questions.
Speaker Change: Now I'll turn the call back over to John.
John Barry: Thank you, Kristin.
John Barry: We can now answer any questions.
Operator: Question and answer session.
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John Barry: Question and answer session
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Operator: If at any time your question has been addressed and you would like to withdraw your question, please first store then two, and at this time we'll pause momentarily to a symbol or roster.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question.
Speaker Change: Please first star, then two, and at this time we'll pause momentarily to a symbol roster.
Finian O'shea: The first question will come from Finian O'Shea with Wells Fargo Securities. Please go ahead. Hey, everyone. Good morning. A couple of questions on the preferred convertible preferred to start out. Those conversions picked up this quarter, and we want to see what trends you're seeing post quarter in those. And second part, the psec sort of, you know, crisis option as described if the board determines there's a risk to, you know, 40 Act limitations, ratings, liquidity. Can you describe under what circumstances you envision the prospect board forcing the conversion in all of these? Could it be something as simple as, you know, one of the rating agencies or a dividend cut, or would it have to be a more, a more onerous liquidity constraint?
Speaker Change: Thank you for watching!
Speaker Change: And the first question will come from Finian O. Shay with Wells Fargo Securities. Please go ahead.
Speaker Change: Hi everyone. Good morning. A couple of questions on the about preferred to convertible preferred to start out on those.
Speaker Change: Conversions picked up this quarter and we want to see what trends you're seeing post-quarter in those in a second part.
Speaker Change: The P-Sex sort of um
Speaker Change: You know, crisis option, as described, if the board determines, there's a risk to, you know, 40 acclimatations, ratings, liquidity, can you describe like under what?
Speaker Change: what circumstances you envision.
Speaker Change: the Prospect Board.
Speaker Change: Forcing the conversion and all of these could it be something as simple as, you know, one of the rating agencies or dividend cod or would it have to be a more onerous liquidity constraint. Thank you.
John Barry: Thank you.
John Barry: Sure. I guess let me just ask that question. Is this something in a legal document like break glass here? If your house is on fire, here's the path out. I mean, why are we talking about something like that? Well, it's in the documents that not only the holder can convert them, but the Prospect Board could as well. And it would be at your stock price; it would be very diluted to common. It was a bit diluted; this border of that. Okay. Well, first, I'm sure there's lots of things and lots of our documents that are risk controls.
Speaker Change: Sure, I guess let me suggest.
Speaker Change: and that question.
Speaker Change: Is this something in a legal document like break glass here, if your house is on fire or here's the path out? I mean, why are we talking about something like that?
Speaker Change: Well, it's in the documents that that.
Speaker Change: Not only the holder can convert them, but the prospect board could as well and it would be that your stock price, it would be very diluted to common. It was a bit diluted this border on that.
Speaker Change: First, I'm sure there's lots of things and lots of our documents that our risk controls.
John Barry: I'm not going to just try to risk them all here. You've found this one. No one's discussed it with me. I'm on the board. I'm the Chairman. We've never discussed it. Never contemplated it. Never thought about it. Okay. So fair enough. You don't anticipate evoking that.
The chairman: I'm not going to just try to whisk them all here. You found this one. No one's discussed it with me. I'm on the board. I'm the chairman. We've never discussed it. Never contemplated it. Never thought about it.
John Barry: How about a follow-up on the more standard issuer option conversion when the 5.35 preferred stock is out of the way. I think that's the hurdle for that. Do you anticipate converting it then, or do you want this preferred domain in place, or do you want to list it, or ultimately convert it? How do you see that? Well, if it ain't broke, don't fix it, right? If everything is going well, if we're meeting all of our obligations, if we have five investment grade ratings, if we have over 50 banks in our credit facility, no, we're not running over and looking at break glass here.
Speaker Change: Okay, so fair enough, you don't anticipate, it's looking that. How about a follow-up on the more standard?
Operator: Release and Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero.
Speaker Change: Issue or Option conversion when the...
Operator: After today's presentation there will be an opportunity to ask questions. To ask a question, you may press star than one on your touch tone phone. And to withdraw your question, please press star than two.
Speaker Change: When the 5.35 preferred stock is out of the way I think that's the hurdle for that. Do you anticipate converting it then or do you want?
Operator: Please note this event is being recorded.
John Barry: I would now like to turn the conference over to Mr. John Barry. Chairman and CEO, please go ahead sir. Thank you, Chuck.
Speaker Change: Do you want this preferred domain in place or do you want to list it or ultimately convert it? Like how do you see that?
Speaker Change: We don't have a structure for fun.
John Barry: Joining me on the call today are Greer Eliza, our president and chief operating officer and Kristin Van Dask, our chief financial officer. Kristin?
Speaker Change: Well, if it ain't broke don't fix it right? Is everything is going well?
Speaker Change: if we're meeting all of our obligations.
Speaker Change: If we have five investment-grade ratings, if we have over 50 banks in our credit facility, no, we're not running over and looking at break glass here. I'm amazed at these questions.
Kristin Van Dask: Thanks, John.
Kristin Van Dask: This call contains forward-looking statements that are intended to be subject to safe harbor protection. Future results are highly likely to vary materially.
John Barry: I'm amazed at these questions. I'm just amazed. No, we're not contemplating any of that. We're not thinking about it. We're not cogitating on it. We're not reviewing it. We're not discussing it. We don't see any reason to spend time on stuff like that. I'm amazed you are. There's five investment-grade ratings. How many banks are in our facility? What was it? 50 years? You don't know. You don't even know. And you cover us? How much do we just increase the bank facility by how many banks? I think you mentioned it was a couple more banks. Hey, why are you relying on me?
Kristin Van Dask: We do not undertake to update our forward-looking statements. For additional disclosure, see our earnings press release in 10k filed previously and available on our website ProspectStreet.com. Now we'll turn the call back over to John. Thank you, Kristin.
Speaker Change: I'm just amazed. No, we're not contemplating any of that. We're not thinking about it, we're not co-agitating on it, we're not reviewing it, we're not discussing it, we're not seeing any reason, it's been time on stuff like that, I'm amazed you are.
John Barry: Prospect Capital Corporation is celebrating our 20th anniversary as a leading provider of private debt and equity to U.S, middle market companies. Since 2004, we've invested $20.9 billion across 423 investments, exiting 303 investments. Over the past five years, we've generated higher total returns than our peer BDC median. In the June quarter, our net investment income or NII was $102.9 million or 25 cents per common share. Our NIV was $3.71 billion or $8.74 per common share. At June 30, our net debt to total assets ratio was 30.5%. Unsecured debt plus preferred is 80.3% of total debt plus preferred for Prospect.
Speaker Change: We have five of them, that's been great ratings.
Speaker Change: I'm going to back to our facility, do you know?
Speaker Change: What was it 50 years ago? You don't know, but you don't know. You don't even know. And you cover us?
Speaker Change: How much do we just increase the bank facility by with how many banks?
Speaker Change: I think you mentioned it was a couple more things. Well, why are you relying on me? You're a research guy.
John Barry: You're a research guy.
John Barry: Okay, can we go to the fair enough of this topic? Break glass here. Oh, the buildings on fire. Quick, I've got to break glass. How ridiculous.
Speaker Change: Okay, can we go to the fair up on this topic? Great craft, sure. Oh, the buildings on fire. Quick, I've got a break glass.
Finian O'shea: Can I ask one on the CLOs? There was a lot of movement on realizing, unrealized there, less so on earnings and cash flow. But can you talk about the sort of what was underneath maybe change in assumptions here and what that might mean for the earnings trajectory. Absolutely. Thanks. Absolutely. So how much do you think that affected that reclassification affected our net asset? you by? Can you tell me? You don't know, and you're a research guy, and you're a research guy. Well, but you're right. You prepared this question like you're some type of expert. Okay, it didn't affect the NAV1 penny.
Speaker Change: How am I doing this?
Speaker Change: Get cast one on the the CLO's
Speaker Change: Um
Speaker Change: There was a lot of movement on realizing, on realizing, on realizing there are less so-on earnings in cash flow.
Speaker Change: but can you talk about the sort of what was underneath?
Speaker Change: Maybe change in assumptions here and what that might mean for the earnings trajectory. That's what I'm going to say forward. So how much do you think that affected our net that reclassification affected our net asset value by?
John Barry: We are announcing monthly common shareholder distributions of $6 per share for each of September and October.
John Barry: With a ladder representing our 86th consecutive such distribution, we plan on announcing our next set of shareholder distributions in November. Since inception, through October 2024, declared distribution, we will have distributed $4.3 billion or $21.12 per share representing 2.4 times June 2024 common NIV per share and 4.1 times our Tuesday stock price. As majority shareholder in several private companies, we support company investments by providing capital, expertise and guidance. When companies make acquisitions, purchase property, plant and equipment, we need working capital.
Speaker Change: Can you tell me?
Speaker Change: You don't know, and you are research guy, and you are real to that.
Speaker Change: Well, Luke, but you're right.
Speaker Change: you prepared this question like you're some type of expert. Okay, it didn't affect the NAV-1 penny, okay?
John Barry: Okay? So now you're asking about another irrelevant, immaterial, non-burger. It's just called a reclassification. All right. The fair value was at X. It was moved from unrealized to realized. This is what accountants do. They move things from right down to right off, back and forth. It's very important to them. It doesn't mean anything to me. It doesn't affect the NAV1 or the company one penny. It doesn't affect the future or the past, one penny. But you think it's a big deal. Just like break glass here. Whoa, whatever you want to ask about.
Speaker Change: So now you're asking about another irrelevant, immaterial, non-berger, it doesn't, it's just called a reclassification, right? The EqFair value was at X.
Speaker Change: It was moved from unrealized to realized, this is what accountants do. They moved things from right down to right off.
John Barry: Including to meet increased demand, we often provide capital by directing such companies to pay for such expenditures using cash on hand instead of using such cash to make interest payments to us. Pick Interest is typically covered by Aggregate Portfolio Company Enterprise Value.
Speaker Change: Back and forth, it's very important to them. It doesn't mean anything to me. It doesn't affect the NAB here, the company won't pay. It doesn't affect the future or the past won't pay. But you think it's a big deal. Just like break last year.
John Barry: I'll do one more. By the way, why don't you do the world a favor and do a little research before you come on an earnings call with absurd questions like this? You don't even know what you're talking about.
Speaker Change: Wow, what are you going to ask about? I'll do one more in the week. By the way, why do you do the world of favor and do a little research before you come on an earnings call with absurd questions like this?
Finian O'shea: One more on the read. Did you guys put I think about 20 million into their this quarter? Can you talk about what that went into underneath? Was that for more working capital, CapEx, or how do we think of that? Here we go again. The read owns a giant portfolio of multi-family properties. Giant. The read generates huge cash flows up to Psec. You probably don't even know what they are. And each time the REIT wants to go buy a new building, prospecting an investment company, injects capital into the REIT to buy a new building. What is complicated about that?
Speaker Change: You're even know what you're talking about.
Speaker Change: One more on the read, did you guys put?
John Barry: Portfolio Company Enterprise Value is calculated by third-party valuation firms for June 32 or 24 covers or substantially covers our net debt, including all pick interest on a cruel for substantially all of our control company investments which had picked in the last two fiscal years.
Speaker Change: I think about 20 million into their this quarter. Can you talk about what that went into underneath? Was that for more?
Speaker Change: Working Capital, CapEx, or how do we think of that in this episode? You know, here we go again. Here we go again. We, the Reed owns a giant portfolio of multi-family properties.
John Barry: Thank you.
Greer Eliza: I'll now turn the call over to Greer. Thank you, John. As of June 30 our portfolio at fair value comprise 60.3 percent first-line debt that's up 3.8 percent from the prior year, 13.6 percent second-line debt, down 2.8 percent from the prior year, 6.9 percent subordinated structured notes with underlying secured first-line collateral that's down 1.7 percent from the prior year, and 19.2 percent on secured debt and equity investments up 0.7 percent from the prior year.
Speaker Change: John.
Speaker Change: The Reed generates huge cash flows up to peace that you probably don't even know what they are. And each time the Reed wants to go buy a new building.
Speaker Change: Project Being an Investment Company.
Speaker Change: and Jack's capital into the re, to buy a new building. What is complicated about that?
John Barry: What is it about that that you don't understand? I don't have the numbers right at my fingertips. The read pays dividends. It's like any read. They pay dividends. And then when the REIT wants to go buy something else, Prospect Capital Corporation will consider whether or not to inject more capital into the REIT and grow the REIT's capital base, which, as Greer said, has generated a 21% IRR. That's not high enough for you. Where do you get that elsewhere? No way. Maybe venture capital. This is an extremely high performing read. Maybe you missed that because you didn't do the research.
Speaker Change: What is that about that that you don't understand? I don't have the numbers right at my fingertips to read past dividends, it's like any read.
Speaker Change: They pay dividends and then when the rate wants to go buy something else
Greer Eliza: Resulting in 81 percent of our investments being assets with underlying secured debt benefiting from borrower pledged collateral. For the current September quarter to date, we've exited another 198 million of second-line debt representing a further 2.3 percent decline to 11.3 percent.
Speaker Change: Prospect Capital Corporation will consider whether or not to inject more capital into the and grow the reach capital base, which is Greer said has generated a 21% IRR. What? That's not high enough for you?
Speaker Change: Where do you get that elsewhere? No way. Well, maybe venture capital. This is a venture capital. This is an extremely high-performing ring.
Greer Eliza: We're quite pleased with our continued success and executing our plan to increase our first-line mix while reducing our second-line and subordinated structured notes exposure thereby reducing portfolio risk. Prospects' approach is one that generates attractive risk-adjusted yields, and our performing interest-bearing investments were generating an annualized yield of 12.1 percent as of June. No change to the prior quarter. Our interest income in the June quarter was 89.2 percent of total investment income reflecting a strong recurring revenue profile to our business.
Speaker Change: May be you missed that.
Finian O'shea: I appreciate the answers. I'll hop back in the queue. Thanks, John.
Speaker Change: because he'll do the research.
Speaker Change: We're trying, I appreciate the answers, I'll hop back in the queue, thanks John.
Greer Eliza: Let me expand on a couple of items here on those three topics. First, with the preferred, there was one chunky conversion from the largest holder institution in Israel. I think we know what's going on in Israel right now, and there's a need for liquidity. The size of that holder is head and shoulders larger than any other holder. and a highly distributed private wealth raise, so that will not be repeated. Second, related to the preferred, we can't invoke the issuer option conversion that you mentioned because there are new A4M4 series and not just the 5.35% listed preferred, so that doesn't exist.
Speaker Change: Let me expand a couple of items here on those three topics.
Speaker Change: First with the preferred, there was one chunky conversion from the largest holder, an institution in Israel.
Speaker Change: I think we know what's going on in Israel right now and there's a need for liquidity.
Speaker Change: The size of that holder is head and shoulders larger than any other holder in a highly distributed private wealth ray, so that will not be.
Greer Eliza: As of June, we held 117 portfolio companies, a decrease of 5, primarily due to repayments and exits from second-line loans from the prior quarter, with a fair value of 7.7 billion. We also continue to invest in a diversified fashion across many different portfolio companies, industries, with a preference for avoiding cyclicality and industry concentration. Our largest industry concentration is below 20 percent. As of June, our asset concentration in the energy industry stood at 1.6 percent.
Speaker Change: Repeated.
Speaker Change: 2nd relay to the preferred.
Speaker Change: We can't invoke the issue or option conversion that you mentioned, because there are a new A4M4 series and not just the 5.35% listed preferred, so that doesn't exist or discussing something that documents.
Greer Eliza: You're discussing something in the documents; is that as legacy and cannot be invoked. Number three, you also missed that we've been exchanging preferred, as opposed to having conversions. That's been quite successful from some of the older 5.5% holders to newer series that prefers. Our current one is a floating rate one and is non-convertible and is non-diluted. Weeks back that to continue as well. Related to CLOs, which is John mentioned, there's no NAV impact from the reclassification. I think you ask about that every quarter. That's now less than 7% of our portfolio and amortizing off. It's a very small part of our book, and the reclass has to do with older deals.
Speaker Change: is legacy and cannot be invoked. Number three, you also missed that we've been exchanging prefers as opposed to having conversions. That's been quite.
Speaker Change: Successful from some of the older.
Speaker Change: Five and a person holders to newer series, the prefers are current one, is a floating rate one and is non-converitable and is non diluted weak expect that to.
Greer Eliza: Our concentration in the hotel restaurant and leisure sector stood at 0.3 percent and our concentration in the retail industry stood at 0.3 percent. Nonacruals is a percentage of total assets stood at approximately 0.3 percent in June, representing a 0.1 percent decrease from the prior quarter. A weighted average middle market portfolio net leverage stood at 5.5 times EBITDA, even with a prior quarter, and substantially below a reporting peer, are weighted average EBITDA per portfolio company, stood at 107 million, an increase of 1 million from the prior quarter.
Speaker Change: and continue as well. Related to CLOs, which is John mentioned, there's no Daven Pack from the Reclassification. I think you asked about that every quarter that's now less than 7% of our portfolio and amortizing office.
John Barry: Very small part of our book and the reclass had to do with older deals, again, successful business, force its generate double digit IRRs.
Greer Eliza: Again, successful business force, it's generated double-digit IRRs on a cash realized basis and is generating 22% cash yields right now, with capital being returned to us. And then finally, on the REITs and the question about the $2,000 investment, two important items. One, we purchased value add multi-family; there's an ongoing multiple year need for value added capital expenditures that's ordinary, that we're making new investments during high IRR investments and upgrading units in common areas. You don't do all that at times; you're when you purchase a property, you do that over multiple years. Again, we've exited a close to 50 properties at a 24 or 25% realized IRR to an FX cash on cash multiple, as I discussed.
John Barry: on a cash-realized basis, and is generating 22% cash yields right now with capital being returned to us.
Greer Eliza: Originations in the June quarter aggregated 242 million. We also experienced 245 million of repayments and exits as a validation of our capital preservation objective, resulting in net repayments of 3 million. During the June quarter, our originations comprise 62.9% middle-market lending, 27% real estate, and 10% middle-market lending and buy-ups. To date, we deployed significant capital in the real-state arena through our private REIT strategy. Larger focused on multi-family workforce stabilized yield acquisitions with attractive in-place multi-year financing.
Speaker Change: and then finally on the REIT and the question about the $2 million investment to import items one.
Speaker Change: We purchase value at
Speaker Change: Multifamily
Speaker Change: There's an ongoing multiple year need for a value at a capital, expenditures that's ordinary that we're making new investments.
Speaker Change: Durnley High RR Investments in Upgrading Units and Common Areas
Speaker Change: If you don't do all that at times zero when you purchase a property you do that over.
Speaker Change: multiple years, again we've exited.
Greer Eliza: To date on a cumulative basis, in-piracy is invested in 110 properties, with a $4 billion aggregate initial property value across multi-family, 83 properties, student housing, 8 properties, self-storage 12 properties, and senior living for properties. In the current higher financing cost environment, we've added to our investment focus to include preferred equity structures, with significant third-party capital support, underneath our investment attachment points. We're also focusing on distressed sellers, where there is an opportunity to take advantage of the sellers need to recapitalize a property, or generate liquidity to address other issues in their portfolios.
Speaker Change: A close to 50 properties at a 24 or 25% realized IRR to an AFX cash and cash multiple as I discussed.
Greer Eliza: We also did a very attractive preferred investment that's been a terrific way to handle the current cap rate, financing cost, interplay, and are quite pleased to expect a mid to high teens return on that investment. The REITs an important portfolio company, but again less than 20% of our book. What seems to get lost here is that the vast bulk of what we do is senior secured and first lean middle market lending as opposed to the smaller businesses being discussed.
Speaker Change: We also did a very attractive preferred investment that's been a terrific way to handle the current cap rate, financing costs, interplay, and are quite pleased, expect a mid- to high-teens return on that investment.
Speaker Change: The REITs are an important portfolio company, but, again, less than 20%.
Speaker Change: of our book, what seems to get lost here is that the vast book, what we do is senior secured and first lien, middle market lending as opposed to the smaller businesses being discussed. Thank you.
Greer Eliza: Thank you. Thank you, Greer.
Operator: This concludes our question and answer session.
Greer: Thank you, Greer.
John Barry: I would like to turn the conference back over to Mr. John Barry for any closing remarks. Please go ahead, sir.
Greer Eliza: In-piracy or private REIT has real-state properties that have benefited over the last several years from rising rents, showing the inflation hedge nature of this business segment, solid occupancies, high collections, suburban work from home tailwinds, high returning value added renovation programs, and attractive financing recapitalizations, resulting in an increase over time in cash yields as a validation of this income growth business alongside our corporate credit businesses. In-piracy as of June has exited completely 49 properties at an average net realized IRR to in-piracy of 24.4%, and an average realized cash multiple of invested capital of two and a half times, not including partially exited deals where we've received back more than our capital invested from distributions and recapitalizations.
Greer: This concludes our question and answer session. I would like to turn the conference back over to Mr. John Barry for any closing remarks. Please go ahead, sir. Okay, everyone. Well, we've got to really start. Have a wonderful day. Bye now.
John Barry: Okay everyone, well we got to really start. Have a wonderful day. Bye now.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: [inaudible]
Greer Eliza: Our structured credit business has delivered attractive cash yields, demonstrating the benefits of pursuing majority states, working with world-class management teams, providing strong collateral underwriting through primary issuance, and focusing on favorable risk-adjusted opportunities. As of June, we held 532 million across 32 non-recourse subordinated structured notes investments, a reduction of 41 million from the prior quarter. We expect to continue to amortize our subordinated structured notes portfolio and to reinvest into middle market senior secured debt and selected equity investments.
Greer Eliza: As a result, the structured notes portfolio now comprises less than 7% of our investment portfolio and is expected to continue to decrease over time. These underlying structured credit portfolios comprise nearly 1,600 loans. In the June quarter, the portfolio generated a gap yield of 4.1%, up 0.8% from the prior quarter, and a cash yield of 22.3%, up 0.2% from the prior quarter. The difference represents amortization of our cost basis that returns capital to Prospect that we intend to use for other investment strategies and corporate purposes.
Greer Eliza: Our aggregate subordinated structured credit portfolio has generated 2.1 billion in cumulative cash distributions to us through June, representing 126% of our original investment. Through June, we've exited 16 investments with an average realized IRR of 11.2% and cash and cash multiple of 1.3 times. So far in the current June quarter, the current September quarter, we've booked 161 million in originations and experienced 253 million of repayments for approximately 92 million of net repayments. Originations have consisted of 92% middle market lending and 8% real estate.
Kristin Van Dask: Thank you. I'll now turn the call over to Kristen.
Kristin Van Dask: Kristen? Thank you, Greer. We believe our prudent leverage diversified access to match book funding, substantial majority of unencumbered assets, waiting toward unsecured, sick straight debt, avoidance of unfunded asset commitments and lack of near term maturities, demonstrate both balance sheet strengths as well as substantial liquidity to capitalize on attractive opportunities. Our company has locked in a ladder of liabilities extending 28 years into the future. Our total unfunded eligible commitments to portfolio companies, total is approximately 35 million, representing approximately 0.4% of our assets.
Kristin Van Dask: Our combined balance sheet cash and undrawn revolving credit facility commitments currently stand at 1.4 billion. As of June, we held approximately 5 billion of our assets as unencumbered assets, representing approximately 63% of our portfolio. The remaining assets are pledged to prospect capital funding, a non-recourse SPV. In June, we successfully completed an amended and extended credit facility with a new five-year maturity. We currently have 2.12 billion of commitments, an increase of 168 million from March, from 48 banks, demonstrating strong support of our company from the lender community with a diversity unmatched by any other company in our industry.
Kristin Van Dask: History. The facility revolves until June 2028, followed by a year of amortization with interest distributions continuing to be allowed to us. Our drawn pricing continues to be so for plus 2.05%. Outside of our revolver and benefiting from our unencumbered assets, we've issued a Prospect Capital Corporation, including in the past few years multiple types of investment grade, unsecured debt, including 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.
Kristin Van Dask: We currently have five investment grade ratings, more than any other company in our industry. We've now tapped the unsecured term debt market on multiple occasions to ladder our maturities and to extend our liability duration out 28 years with our debt maturities extending through 2052. With so many banks and debt investors across so many unsecured and non-recourse debt charges, we have substantially reduced our counterparty risk. At June 30, 2024, our weighted average cost of unsecured debt financing was 4.25%, an increase of 0.1%, 1% from March 31, 2024, and an increase of 0.18% from the prior year June 30, 2023.
John Barry: Now I'll turn the call back over to John. Thank you, Kristen.
Operator: We can now answer any questions. Question and answer session. To ask a question, you may press store then one on your touchtone phone.
Operator: If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please first store then two, and at this time we'll pause momentarily to a symbol or roster.
Finian O'shea: The first question will come from Finian O'Shea with Wells Fargo Securities. Please go ahead. Hey, everyone. Good morning.
John Barry: A couple of questions on the preferred convertible preferred to start out. Those conversions picked up this quarter and we want to see what trends you're seeing post quarter in those. And second part, the psec sort of, you know, crisis option as described if the board determines there's a risk to, you know, 40 act limitations, ratings, liquidity. Can you describe like under what circumstances you envision the prospect board forcing the conversion in all of these? Could it be something as simple as, you know, one of the rating agencies or a dividend cut or would it have to be a more, a more onerous liquidity constraint? Thank you.
John Barry: Sure. I guess let me just ask that question. Is this something in a legal document like break glass here? If your house is on fire, here's the path out. I mean, why are we talking about something like that? Well, it's in the documents that not only the holder can convert them, but the Prospect Board could as well. And it would be at your stock price, it would be very diluted to common.
John Barry: It was a bit diluted, this border of that. Okay. Well, first, I'm sure there's lots of things and lots of our documents that our risk controls. I'm not going to just try to risk them all here. You've found this one. No one's discussed it with me. I'm on the board. I'm the chairman. We've never discussed it. Never contemplated it. Never thought about it. Okay. So fair enough. You don't anticipate evoking that.
John Barry: How about a follow-up on the more standard issuer option conversion when the 5.35 preferred stock is out of the way. I think that's the hurdle for that. Do you anticipate converting it then or do you want this preferred domain in place or do you want to list it or ultimately convert it? How do you see that? Well, if it ain't broke, don't fix it, right? If everything is going well, if we're meeting all of our obligations, if we have five investment grade ratings, if we have over 50 banks in our credit facility, no, we're not running over and looking at break glass here.
John Barry: I'm amazed at these questions. I'm just amazed. No, we're not contemplating any of that. We're not thinking about it. We're not cogitating on it. We're not reviewing it. We're not discussing it. We don't see any reason to spend time on stuff like that. I'm amazed you are. There's five investment grade ratings. How many banks are in our facility? What was it? 50 years? You don't know. You don't even know. And you cover us? How much do we just increase the bank facility by how many banks? I think you mentioned it was a couple more banks. Hey, why are you relying on me? You're a research guy.
John Barry: Okay, can we go to the fair enough of this topic? Break glass here. Oh, the buildings on fire. Quick, I've got to break glass. How ridiculous.
John Barry: Can I ask one on the CLOs? There was a lot of movement on realizing, unrealized there, less so on earnings and cash flow. But can you talk about the sort of what was underneath maybe change in assumptions here and what that might mean for the earnings trajectory. Absolutely. Thanks. Absolutely. So how much do you think that affected that reclassification affected our net asset? you by? Can you tell me? You don't know, and you're a research guy, and you're a research guy.
John Barry: Well, but you're right. You prepared this question like you're some type of expert. Okay, it didn't affect the NAV1 penny. Okay? So now you're asking about another irrelevant immaterial non-burger. It's just called a reclassification. All right. The fair value was at X. It was moved from unrealized to realized. This is what accountants do. They move things from right down to right off back and forth. It's very important to them. It doesn't mean anything to me.
John Barry: It doesn't affect the NAV1 or the company one penny. It doesn't affect the future or the past one penny. But you think it's a big deal. Just like break glass here. Whoa, whatever you want to ask about. I'll do one more.
John Barry: By the way, why don't you do the world of favor and do a little research before you come on an earnings call with absurd questions like this? You don't even know what you're talking about.
Finian O'shea: One more on the read. Did you guys put I think about 20 million into their this quarter? Can you talk about what that went into underneath?
John Barry: Was that for more working capital, CapEx, or how do we think of that? Here we go again. The read owns a giant portfolio of multi-family properties. Giant. The read generates huge cash flows up to Psec. You probably don't even know what they are. And each time the read wants to go buy a new building, prospecting an investment company, injects capital into the read to buy a new building. What is complicated about that?
John Barry: What is it about that that you don't understand? I don't have the numbers right at my fingertips. The read pays dividends. It's like any read. They pay dividends. And then when the read wants to go buy something else, prospect capital corporation will consider whether or not to inject more capital into the read and grow the read's capital base, which as Greer said has generated a 21% IRR. That's not high enough for you. Where do you get that elsewhere? No way. Maybe venture capital. This is an extremely high performing read. Maybe you missed that because you didn't do the research.
Finian O'shea: I appreciate the answers. I'll hop back in the queue. Thanks, John.
John Barry: Let me expand on a couple of items here on those three topics. First, with the preferred, there was one chunky conversion from the largest holder institution in Israel. I think we know what's going on in Israel right now, and there's a need for liquidity.
John Barry: The size of that holder is head and shoulders larger than any other holder, and a highly distributed private wealth raise, so that will not be repeated. Second, related to the preferred, we can't invoke the issuer option conversion that you mentioned because there are new A4M4 series and not just the 5.35% listed preferred, so that doesn't exist. You're discussing something in the documents, is that as legacy and cannot be invoked. Number three, you also missed that we've been exchanging preferred, as opposed to having conversions. That's been quite successful from some of the older 5.5% holders to newer series that prefers, our current one, is a floating rate one and is non-convertible and is non-diluted weeks back that to continue as well.
John Barry: Related to CLOs, which is John mentioned, there's no nav impact from the reclassification. I think you ask about that every quarter that's now less than 7% of our portfolio and amortizing off, it's a very small part of our book and the reclass how to do with older deals. Again, successful business force, it's generated double digit IRRs on a cash realized basis and is generating 22% cash yields right now with capital being returned to us.
Greer Eliza: And then finally, on the REITs and the question about the $2,000 investment, two important items. One, we purchased value add multi-family, there's an ongoing multiple year need for value added capital expenditures that's ordinary that we're making new investments during high IRR investments and upgrading units in common areas. You don't do all that at times, you're when you purchase a property, you do that over multiple years. Again, we've exited a close to 50 properties at a 24 or 25% realized IRR to an FX cash on cash multiple as I discussed. We also did a very attractive preferred investment that's been a terrific way to handle the current cap rate, financing cost, interplay and are quite pleased to expect a mid to high teens return on that investment.
Greer Eliza: The REITs an important portfolio company, but again less than 20% of our book, what seems to get lost here is that the vast bulk of what we do is senior secured and first lean middle market lending as opposed to the smaller businesses being discussed. Thank you. Thank you, Greer.
John Barry: This concludes our question and answer session. I would like to turn the conference back over to Mr. John Barry for any closing remarks. Please go ahead, sir.
John Barry: Okay everyone, well we got to really start. Have a wonderful day. Bye now.
Operator: The conference is now concluded. Thank you for attending today's presentation.
Operator: You may now disconnect.