Great Elm Capital's (GECC) CEO Peter Reed on Q4 2016 Results - Earnings Call Transcript

| About: Great Elm (GECC)
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Great Elm Capital Corp (NASDAQ:GECC) Q4 2016 Results Conference Call March 28, 2017 10:00 AM ET

Executives

Meaghan Mahoney - SVP, IR

Peter Reed - President and CEO

Mike Sell - CFO

John Ehlinger - Portfolio Manager

Adam Yates - Portfolio Manager

Adam Kleinman - COO & General Counsel

Analysts

Mickey Schleien - Ladenburg

Barry Bergman - Alba Investments

Chris Kotowski - Oppenheimer

Kyle Mowery - GrizzlyRock Capital

Phil Goldstein - Bulldog Investors

Ted Wagenknecht - AFR

Good day, ladies and gentlemen, and welcome to Great Elm Capital Corp's Fourth Quarter 2016 Financial Results Conference Call. At this time, all participant lines are in a listen-only mode to reduce background noise, but then we will be holding a question-and-answer session after the prepared remarks and instructions will follow at that time. [Operator Instructions]

I would now like to introduce your first speaker for today Meaghan Mahoney. You have the floor, ma'am.

Meaghan Mahoney

Thank you, Andrew, and good morning everyone. Thank you for joining us for Great Elm Capital Corp’s fourth quarter and fiscal year ended December 31, 2016 earnings conference call. As a reminder, this webcast is being recorded on Thursday on March 30, 2017. If you’d like to be added to our distribution list, please send an e-mail to investorrelations@greatelmcap.com. A slide presentation accompanying this morning's conference call and webcast can be found on Great Elm Capital Corp's website under the Investor Relations link at www.greatelmcc.com, as well as a copy of our earnings release and Form 10-K. A link to the webcast it also available on the Great Elm Capital Corp website.

Before I turn the call over to Peter Reed, I’d like to call your attention to the customary Safe Harbor statement regarding forward-looking information. Today’s conference call includes forward-looking statements and projections and we ask that you refer to Great Elm Capital Corp's most recent filings with the SEC for important factors that could cause actual results to differ materially from these projections.

Great Elm Capital Corp does not undertake to update its forward-looking statement unless required by law. To obtain copies of the latest SEC filings, please visit Great Elm Capital Corp's website under the Investor Relations tab or the SEC's website.

Hosting the call this morning is Peter Reed, Great Elm Capital Corp's President and Chief Executive Officer.

I'll now turn the call over to Peter.

Peter Reed

Thank you, Meaghan. Good afternoon and thank you everyone for joining us today. I am joined this morning by our entire investment committee comprised with myself, John Ehlinger; Adam Yates; and Adam Kleinman; as well as our Chief Financial Officer, Michael Sell; and Meaghan Mahoney from our Investor Relations team.

I would like to start by introducing our team and investment approach properly, recognizing that we are still new a manager for many of you. Following that background information, we will go through a review of the quarter and a discussion of one of the more prominent investments in the portfolio. We would then like to update you on proposed capital structure activity before we open up the line for Q&A. They are relevant in our prepared remarks. We will point you to the corresponding slide number in the deck that Meaghan referenced that is on our website.

If you may recall, November 3rd marks the conclusion of a year long process for Full Circle Capital Corporation, culminating with the merger with and into GECC. We wholeheartedly appreciate this significant support from the Full Circle stockholder base in building in favor of the merger and look forward through the opportunities with thoughtful stewards of your capital going forward.

The funds managed by MAST and our parent company currently owned approximately 62% of the shares of the combined BDC post-merger, which we believe results in a significant alignment of interest between us as the manager and our stockholders. Further, we implemented a number of stockholders friendly elements to our investment management agreement that we would be more than happy to discuss during our Q&A or in follow ups on this call, if it is of interest.

Let's start briefly on Slide 5 with who GECC is. We special situation focused business development company with the investments objective of generating attractive risk-adjusted returns by focusing predominantly on catalyst-driven second market investments opportunities. We will take deeper dive on what that means in just a minute.

Turning to Slide 6 to introduce our external manager, Great Elm Capital Management or GECM, the GECM team is comprised of 14 people with over 100 years of aggregate investment experience. During our team's tenure with MAST Capital Management, we have deployed in access of $17 billion in credit investments across more than 550 issuers in 20 plus countries, complimenting the experienced investment team of 9 with a robust legal, operations, finance and investors relations team.

There is an organizational chart on Slide 7 for you reference. As this is our first formal call, we thought it was an opportune time to describe our differentiated investment approach and philosophy in more detail. Please refer to Slide 8 to 10. In contrast to most publicly traded BDC, our approach is not to focus on originating loans to smaller and middle market companies at par value, but instead to lend the middle market businesses, predominantly domestic through purchases of debt instrument through the secondary market with originations done solely on an opportunistic basis.

We believe that this approach is executed by the Great Elm Capital Management team over the past 15 years under MAST will results in the potential for both growth in NAV per share as well as in the distribution from today's 7% levels, which means tend to supplement with special distribution overtime. Our approach involves investing in both leveraged loans and high yield bonds sometimes has significant discounts to par seeking a total return opportunity and not just interest income.

Our investment team is comprised of sector focused research analysts with significant experience investing in leverage middle market credits as well as experienced with restructurings in work-outs. We believe the debt with this experience is an incredibly important, as we have invested across multiple credit cycles and market downturn executing the same investment philosophy.

Turning to Slide 10, let's discuss our philosophy on investing. First and foremost, we are keenly focused on downside protection and preservation of capital. For each investments we make, we conduct thorough bottom up investments and legal due diligence, including a comprehensive review of credit documents.

Our in-house legal experts are integrated in the research process with Adam Kleinman, our Chief Operating Officer and General Counsel, serving as a member of our investment committee. This in-depth research process allows us to identify and access the margin of safety in each investment that we make.

Second, we believe that concentrating in one's best idea leads to investment outperformance overtime, while we don’t expect to have opposition side as larger as our current position in Avanti Communications Group going forward. We potentially expect that the more concentrated portfolio from our teams as compared to other publicly traded BDCs.

Lastly, we seek to invest with a differentiated view from the markets. We believe that taking a contrarian stance has the potential to generate outsized returns. For instance, in Avanti, we clearly have a different view than the market. We are confident for a number of reasons, a collateral package, the size of the addressable market that is serving and it's pricing advantage versus its competitors to name a few.

While for many, it can seem risky to invest in several situations. Our extensive experience with credit investing, in-house to legal expertise and experience with workouts and restructuring should give us a significant advantage in these types of hands-on opportunities.

Now that we have covered some of our background and approach to investing, let's discuss Q4, our first quarter managing the combine Great Elm in Full Circle portfolio.

I’ll turn it over to Mike Sell, our Chief Financial Officer to discuss the financial results in Q4.

Mike Sell

Thanks Peter. Please turn to Slide 12 for snapshot of the financial and portfolio highlights in the quarter. As of year-end, our net asset value was $173 million which equates to $13.52 per share. The fair value of our investments is $154.7 million. We had $66.8 million in cash and cash equivalents, which we view as a significant amount of liquidity to deploy its new and follow on investment opportunities.

Let’s turn to Slide 13 to walk through the quarterly financials. Total investment income for the period ended December 31st, was $5.8 million, against expenses of approximately same amount resulting a net investment income of $5,000. It's important to note that at the outside of the partial quarter, we have approximately $3.5 million in merger and formation related professional fees that should be considered onetime in nature.

Absent onetime fees, net investment income for the period would have been approximately $0.28 per share which was well in access at the $16.06 per share distribution for the same period. Lastly, net realized gains for the portfolio were approximately $270,000 which equated to approximately $0.02 per share with unrealized depreciation on investments during the period of $13.5 million.

Now, let me turn the call back to Peter to discuss portfolio highlights, activity and Avanti.

Peter Reed

Thanks Mike. Let's now turn to Slide 16 to talk about some of the portfolio highlights and what we view is reflective of our investment approach. Today, despite the state of the credit markets, we have constructed a portfolio with a weighted average current yield of 12.76% that is comprised almost entirely a senior secured credit instrument, much of which is personal in nature.

As of 12/31, 92% of our invested capital was in senior secured credit investment. Despite this focus on top of the capital structure opportunity, our overall credit portfolio had a weighted average dollar price of approximately $0.78 highlighting the potential for significant price depreciation in addition to the high current yield.

Furthermore, echoing back to our comments on our focus on concentration in terms of our investment philosophy. The top five divisions in the portfolio represented just over half of our invested capital at 51% of the portfolios fair value at year-end. Lastly, a little more than two-thirds of the book 58% within investment ideas that are reflected of the way in which GECM intends to invest going forward, after having successfully exited nearly $20 million of legacy Full Circle positions in Q4, again a much quicker transformation of the portfolio than we have anticipated.

Turning to Slide 16, as of year-end we had 21 debt investments that represent 154 million in fair value and five equity investments, representing $0.5 million as of the same time period.

Turning to Slide 17 to walk through our quarterly portfolio activity. On the investment front between the close of the transaction and year-end, we made three new investments and five add-on investments totaling $43 million at a weighted average price of $0.9255 and a weighted average current yield overflow of 12.18%.

On the monetization front between the close of the transaction and year-end, we monetized in-part or in-fold 16 investments at a weighted average price of $0.9852 and a weighted average current yield of 10.54% including the complete exit at the net gain of six legacy Full Circle positions.

What does it mean? We believe this indicates that we are rotating the portfolio into greater total return opportunity the entire current yield while maintaining our keen focus on downside protection through investing in senior secured instrument.

Slides 18 and 19 provide additional detail on the breakdown of the portfolio in terms of where we are in the capital structure, floating versus fixed rate and the industry breakdown. One important thing to note, if we consider the direction of interest rates and our current exposure to fixed rate instrument is in relatively short duration nature of our credit portfolio with a weighted average maturity of approximately two years.

We believe this helps to mitigate the interest rate risk of our portfolio as we can redeploy into higher yielding opportunities at our current fixed rate investment to realize. Additionally, the weighted average yield on the fixed rate instrument in the portfolio is 10.85% a significant margin above the current distribution rate.

Let's turn to Slides 20 and 21 to discuss an update on Avanti Communications Group. Let's start with a brief overview of Avanti. Who it is? What it does? And what the current opportunity and situation is? Avanti is a UK-based satellite services company that provides data communication services in rural parts of Europe, the Middle-East and Africa. Today, Avanti has three satellites in orbit, two additional satellites under construction and an international fiber network connecting datacenters in several countries as well as valuable spectrum in orbital slots.

As you may recall from prior filings, in July Avanti announced the commencement of a strategic review process and the potential for a liquidity shortfall. In September, it launched a consent solicitation process called PIK or pay in time, its next interest payment in lieu of paying in cash. Nearly 90% of noteholders supported this consent solicitation process reducing the cash interest burden payable to bondholders in October by nearly $30 million.

Post the completion of the strategic review process this January, the Company announced another consent solicitation process this time to incur up to 132.5 million in a super senior indebtedness and for the approval of the payment of PIK interest on the existing notes. In late January, Avanti announced the successful completion of the second consent solicitation process. We view this as a significant positive for Avanti for several reasons.

First, this incremental liquidity both from the additional capital raised and from the Company's fee collection allows the Company to complete the build and launch of HYLAS 4, the Company's largest satellite today. We believe this satellite will launch in the second half of calendar year 2017 and will add 28 gigahertz in capacity to its existing fleet as well as additional coverage of Europe, the Middle-East and Africa.

Second, we believe that Avanti will be more valuable from a strategic perspective with the completion and launch of HYLAS 4.

Third, a key consideration to the large bondholders in the consent solicitation with the ability to have a seat at the table and that was accomplished with newly appointed independent directors and another three board seats filled by representative of significant notes.

Lastly, GECC is now a debt holder and an equity owner of Avanti Communication. We believe there a significant upside potential in this position from the Company continuing to operate on a standalone basis or from strategic interest.

Now, I'll turn the call back over to Mike Sell, to discuss the number of capital structure updates.

Mike Sell

Thanks Peter. We have a number of items that we would like to discuss with respect to capital activity and capital structure.

First, with respect to our distribution policy, now turn the Slide 23. In late December, we declared our Q4 distribution of $16.6 per share as well as the decoration of our Q1 distribution of $8.3 per share per month. Based on the NII generated by the portfolio in Q4 excluding one-time deal related fees, we believe this distribution is well supported by the portfolio's current earnings power.

We will seek to augment this baseline distribution level with special distributions to the degree that our investment company tax full income and related distribution requirement to feed our distributions going forward. Additionally, our Board of Directors declared a distribution for Q2 of $8.3 per share per month with the record date payable day scheduled available in the press release and the earnings presentation.

We finished 2016 with approximately $1.8 million or $0.14 per share of undistributed investment tax full income that we will have to distribute in 2017 in addition to our 2017 tax full earnings.

Next, with respect to our stock buyback program, let's turn to Slide 24. During the period ended December 31, 2016, we purchased approximately 98,000 shares of our stock through our stock buyback program at average discount to our December 31 NAV of 21%, utilizing $1.1 million of our $15 million 10b5-1 program. Moving that forward to Q1 through March 24, 2017, we purchased approximately 338,000 shares cumulatively at a weighted average discount to our December 31, NAV of 17%.

In aggregate, we have used $3.8 million of cash today under our 10b5-1 program where we have systematically bought shares in the open market as they traded below 90% of NAV. The discounted purchases today represent expected accretion to NAV per share for approximately $0.10 as the instruction in program. In addition to the authorized $15 million 10b5-1 our Board of Directors authorize a further $35 million in share re-purchase capacity, which we view as potentially accretive to our stockholders as well as further evidence of our intense focus on alignment of interest with our stockholders.

Turning to Slide 25 to discuss our announced common stock self-tender, last night, we announced we will conduct a modified Dutch auction and therefore up to 10 million of our common stock at a price between 85% and 90% of our last published NAV of $13.52 per share or range of $11.50 to $12.17 per share. Further details on the mechanics, the offer will forthcoming upon the launch in the self-tender offer.

And lastly turning to Slide 26, we will be filing a resale registration statement via a Form N-2 in the coming days to register the currently unregistered shares with the MAST Funds and Great Elm Capital Group Inc received in consideration for their premerger contributions as we are contractually obligate to register these shares before the end of Q1 2017. Great Elm Capital Group shares are subject to a loss up for one year post the closing of the merger.

Let me turn the call back over to Peter for closing remarks and then Q&A.

Peter Reed

Thank you all for joining us today. We had quite a bit to cover as our first earnings call as the publicly-traded company and given the amount of capital structure activity we have underway. In closing, we are excited about the current portfolio, the investments we have made to date and the rate that which we have been able to rotate out of the legacy Full Circle portfolio and into our go forward class of total return opportunities.

We believe we have a significant alignment of interest with you, our stockholders, and look forward to growing our MAST per share and distribution together going forward. Thank you again for the support and confidence that you've placed in us and for your significant support with the Full Circle merger.

With that, we will turn it over to Andrew to open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Mickey Schleien from Ladenburg. Your line is open.

Mickey Schleien

Peter I wanted to start with the high-level question. I appreciate that you are pursuing a differentiated strategy, but as you and I have discussed, there is a general reluctance by investors to pay BDC managers to pick credit as opposed to originating them. So, in that regard and regarding that hesitancy, could you give us at least some background on your keens historical results employing the same sort of investments strategy that GECC is using, so that we can get a sense of the risk and return balance?

Peter Reed

I understand and appreciate the question that you are asking, however the Securities and Exchange Commission doesn’t want us talking about the returns from the MAST fund or any of that so there is really nothing I can give to you on the matter. I can tell you and of course of the merger that was a diligent item that came up from the financial advisors to both circle and think if they are on work and they came with their conclusion. That's really all I can say about it.

Mickey Schleien

Okay, appreciate that. A couple of few more questions, I see that at the December, at December 2016, more than half the portfolio was level three. How often were you sent those positions to third parties for valuation? And are those third parties going to give you a positive or a negative assertion?

Mike Sell

Thanks Nick, appreciate the question, this is Mike Sell. Our level three investments other than one to that significantly de minimis are all sent to third-party valuation agents for review and we received positive confirmation on the valuation range from those third-party agents.

Mickey Schleien

Okay. In terms of the portfolio, I see that in December there weren't any second lien investments. I was curious what the reasoning was for that at least to that point what the reasoning was for that decision?

Mike Sell

So, I understand the question and I think that’s a hot topic in the industry right now. We are more of bottoms up organization, so we didn’t make a cautious decision that said second liens in the portfolio. But rather it'd be the review of the opportunities that were available, what came into the portfolio, what we deployed into none of those happened to be second lien investments.

Mickey Schleien

So was that you think credit, it's not that you wouldn’t consider a second lien?

Mike Sell

Correct.

Mickey Schleien

Okay. And going back to the risk return equation, can you give us a sense of the average portfolio company EBITDA and the leverage that you are attachment points in the portfolio?

Mike Sell

I don’t have that at our finger tips. It's somewhat complicated by the fact that some of those numbers are subject to non-discloser agreement that we have with the Company. So, broadcasting even the aggregate statistics publically, we need to go look into that. We will follow up with you.

Mickey Schleien

Okay, I mean that’s an important data point whether we are talking a strategy of pursuing $50 million to $75 million EBITDA companies or $5 million to $10 million EBITDA company, so look forward to that. And just a couple of questions on the right side of the balance sheet, the 8.25 notes are redeemable and there is certainly a lot of demand of these types of investments. So, I'd like to understand whether you are considering refinancing them in order to at least mitigate some of the spread compression that we've seen persist even into this calendar quarter?

Mike Sell

I would say that we are intensively focused on both the composition at the right side of our balance sheet and the cost, at right side of our balance sheet.

Mickey Schleien

Okay, well in relation to that are you looking at a line of credit, I realize you have a plenty of liquidity at the moment, but would it seems that a line of credit would make sense with an insurance policy and are you looking at that? And could you -- do you have any idea of what kind of terms of bank would give you given your portfolio and the strategy you are pursuing?

Mike Sell

No, I think that we are confidently pursuing the best way to optimize the right side of our balance sheet. At this point, I can't go any further and say what determines might be under our credit facility or what alternative we are in, and what those cost when we have something that is definitely will be sure to let you know.

Operator

Our next question today comes from the line of Barry Bergman from Alba Investments. Your line is open.

Barry Bergman

I just have a quick question. MAST capital itself owns a quite bit of GECC, and I am wondering, I know the registering it however just by sort of things of that the Company willing to do anyway. Do you thinking those selling and participating in Dutch auction at all or though they are a longer term investors and letting us sort of go? The other thing and my other question is when you saw the Full Circle portfolio and I congratulate for that. Where did that those executions took place versus book value?

Peter Reed

Sure, thanks Barry and nice to hear from you this morning. I think as part of the end to MAST will clarify -- sorry part of the tender offer, not the end to MAST will clarify intention with respect to the upcoming tender. And I think that's really all can say at the moment and that will become more clear soon. I think in overarching comment is MAST, Great Elm Capital Group and Full Circle all came together on this with a long-term view of driving stockholder value and remains to be true today. On your second question which I believe is a reference to the Full Circle position that we exited in Q4, if that's the right question the answer is there was a small gain relative to book value.

Barry Bergman

Got it.

Mike Sell

Monetized approximately $20 million of fair value of Full Circle's legacy positions and I believe the aggregate gain on that was about a $160,000.

Barry Bergman

Just because I don't have numbers, what was the full amount that they contributed at the time of the merger? I am just trying to understand how much of the portfolio you kind of jettison? But excuse me.

Mike Sell

We revalued the portfolio at 11.3 for purchase accounting purposes. I believe the aggregate contributed value of the Full Circle portfolio was give or take $75 million.

Barry Bergman

Okay, so about 20% is that. Does it give 30 million or 20 million? I forgot.

Mike Sell

No, it's 20, it's a little bit north of 20%.

Barry Bergman

Okay, got it. Is that a continued that you're kind of headed down to monetize that piece of it?

Mike Sell

So, in the subsequent events we talk about some position which has since been monetized with our legacy Full Circle position and consistent with our expectation is transitioned from the full circle portfolio to the things that Great Elm intends to be doing going forward has been candidly faster than we expected. We continue to make progress on that front. We expect that momentum to carry us through the calendar year.

Operator

Thank you. Our next question comes from the line of Chris Kotowski from Oppenheimer. Your line is open.

Chris Kotowski

I wonder if you can, you've discussed that the Avanti position is bigger than you'd want. Just on a steady state going forward basis. How large will distribute typical buy size be or position size be? And what kind of returns should we expect -- again we understand it’s opportunistic and there's probably likely to be a bigger dispersion than you might see elsewhere, but do you have a hurdle rate in mind in the current environment as to what kind of assets you'd want to put on the balance sheet?

Peter Reed

Thanks Chris and good question so you're right on Avanti bid, the positions contributed from the MAST funds were a negotiated point in the transaction and we said before and I imagine we'll continue to be saying that size of the current Avanti position as you've identified is larger than we intend for any position to be going forward. That being said, I would expect each of position sizes or bite sized in something mid single digits percentages of assets with to the occasional position that is approximately 10% that size or maybe slightly higher than that. That’s my expectations.

With respect to returns, we don’t have a particular hurdle in mind. We are very positive in both the cost of our debt capital as well as the distribution that we pay to our investors, which does influence how are the rate at which we need to get to make an investment. The best thing that I think I can point you to is the commentary where the new investment that we made during the quarter with the little bit in excess of 12%, and I think that’s while you correctly identified a broad deferred returns I think that’s reasonably representative of what we are looking at today.

Operator

Our next question comes from the line of Kyle Mowery from GrizzlyRock Capital. Your line is open.

Kyle Mowery

Good morning Peter, Mike and Meaghan. Two questions from me and then one comment, if I may. With respect to following up on the previous callers question about Avanti, 25% is significantly higher than mid-single digit to 10% as you just led out Peter. I mean could you just talk about you represent a negotiate transaction but could you just unpack that a little bit for us?

Peter Reed

Sure thanks Kyle and thanks for the question. So, yes, we have a significant position size. We are -- as we said before and I think we will continue to say, we don’t intend for that to be representative of a position size versus single investment going forward. As you might imagine, we are trying to remedy that overtime. We are keenly focused on the tradeoff between getting that position side more in line and making sure that we get appropriate value for our stockholder toward acquisition. So that does in fact create some tension that we wrestle with. There is a relatively complex consent solicitation that’s a subsequent event that we have led out in the press release and we sort of hit that the high point there.

Kyle Mowery

Okay but in terms of how we ended up in this position? Is this something that was desirable from the mass point of view to slide this over or how did this really occur?

Peter Reed

Okay good question and that I think clarifies from your earlier question. Its disclosure in the public domain the rough quantum of debt owned by the MAST funds and it’s a lot more that what was contributed in this transaction. This transaction I man the Full Circle merger. The entire portfolio, if we contributed from the MAST funds this merger was a keen subject of negotiation between ourselves and their financial advisors for Full Circle. I believe that a key component in winning the deal for the MAST funds there is a Great Elm Capital group was the relative scale that we could bring on a combined basis due to transaction. There were only so many ways in which Great Elm Capital Group and mass could deliver in necessary scale is a transaction and the results if the portfolio that we started with. So hope the MAST funds and Great Elm Capital Corporation believe that there is significant upside in the Avanti position and continue to drive forward making sure that we realize that upside and deliver returns for our stockholders.

Kyle Mowery

Okay, thank you very much for that clarification and that actually feeds into my second question which is you've referenced growing NAV per share. Would the main driver of growing NAV per share be the purchase of debt that your team believe is worth par, but what's accrued for last than par value is that the core driver of growing NAV per share going forward?

Peter Reed

I think you've correctly identified one of the themes different avenues in which we can achieve that objective and certainly gains on portfolio like that who has contribute to that growth and NAV per share. Last night's press release which what we believe is a significant issue or self tender at a substantial discount to the NAV per share illustrates our commitment to driving that return in any way that we can think off that we believe make sense before our stockholders. So I think there are a couple of different avenues we've identified ones, we announced another one last night and are continued 10b5-1 program are examples of the ways in which we are focused on driving that NAV per share.

Kyle Mowery

Thank you for taking my questions. Just a comment on that tender I command the team for making that decision for too many BCs fail to do that for reasons of their they're on management fees et cetera, so I just want to command the team for being willing to shrink the flows in the short-term to execute the long-term vision. So with that, I'll see the line.

Peter Reed

Thank you, Kyle.

Operator

Thank you. Our next question comes from the line of Phil Goldstein from Bulldog Investors. Your line is open.

Phil Goldstein

Thanks, excellent presentation guys. Most of my questions actually have been answered already but add to points I wanted to make. One is on the legacy notes, how about changing the symbols so we get rid of old full symbol?

Peter Reed

So, I think that's a method purposely good comment and hopefully we will be addressing one way or the other we're going to be addressing that.

Phil Goldstein

Okay. And the second is just yes again to reiterate it's nice to see the tender. Did I get it right is the range 10% to 15% of the last reported NAVs is that correct?

Peter Reed

Yes, the range is targeted to be approximately 10% to 15% below NAV.

Phil Goldstein

Okay, as a suggestion I mean I can do the work but you guys maybe have done it already, but assuming a full subscription at different levels that would be interesting to see what kind of accretion to the NAV will occur at those different type points. I don’t know have you done that.

Peter Reed

I think we would expect to see somewhere in the 1% to 1.5% accretion if it's fully taken up.

Phil Goldstein

Yes.

Peter Reed

And I think that will be specified in the tender offer document.

Phil Goldstein

Yes, I mean look we can all do the math, but you have probably done under it. Okay that was it.

Peter Reed

Thank you, Phil.

Operator

[Operator Instruction] Our next question comes from the line of Ted Wagenknecht from AFR. Your line is open.

Ted Wagenknecht

Just thought I could ask the question maybe a different way than other folk have approached so far. Was Avanti contributed in the same percentage relative to the other assets contributed as what held in the existing MAST portfolios?

Peter Reed

Without necessarily totally following you, I think the…

Ted Wagenknecht

Was it contributed in strip, I guess?

Peter Reed

In a strip, multiple…

Ted Wagenknecht

Is MAST Holding, Avanti in the same weight compared to its other assets as it contributed a Avanti to GECC?

Peter Reed

I appreciate your question. I unfortunately can't go into the position side of this MAST. But perhaps we can -- I don’t have the number at my finger tips, but in the public domain it's a reference to on what debt to math and it's a significant amount and it's more than it's held by GECC. I can't talk about the position side within the math private fund.

Ted Wagenknecht

Can you talk about current AUM of the MAST private funds?

Peter Reed

I cannot.

Ted Wagenknecht

Does that have to do with -- does current AUM have to do anything with how cost or split between G or I guess calling that a GECC level? Does the representative -- I guess does MAST total AUM have anything to do with how costs are allocated to GECC?

Peter Reed

No. Mike will take that.

Mike Sell

Yes, costs are allocated between relative platform based on multitude of drivers and some of which go as granular as our spent on what project, and I think doing anything as simplest because based on AUM is going to be -- it would be misleading the chance.

Operator

[Operator Instruction] Looks like, we have no other questions is in the queue at this time. So, I would like to turn the call back over to management team for closing comments.

Peter Reed

Thank you again for joining us. We look forward to our continued dialog and pleased to let us know if we can get helpful with anything in follow up.

Operator

Ladies and gentlemen, thank you again for your participation in today's conference call. This now concludes the program and you may now disconnect at this time. Everyone have a great day.

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