Monroe Capital Corporation (NASDAQ:MRCC) Q3 2018 Earnings Conference Call November 7, 2018 10:30 AM ET
Theodore Koenig - President and Chief Executive Officer
Aaron Peck - Chief Financial Officer and Chief Investment Officer
Timothy Hayes - B. Riley
Robert Napoli - William Blair
Leslie Vandegrift - Raymond James
Christopher Nolan - Ladenburg Thalmann
Casey Alexander - Compass Point
Hello and welcome to the Monroe Capital Corporation’s Third Quarter 2018 Earnings Conference Call. Before we begin, I would like to take a moment to remind our listeners that remarks made during this call today may concern contain certain Forward-Looking Statements, including statements regarding our goals, strategies, beliefs, future potential, operating results or cash flows.
Although we believe these statements are reasonable based on management’s estimates, assumptions and projections as of today, November 7, 2018, these statements are not guarantees of future performance. Future time, this information may no longer be accurate as of the time of any replay or listening. Actual results may differ materially as a result of risks, uncertainty or other factors, including, but not limited to the factors described, from time-to-time in the company’s filings with the SEC. Monroe Capital takes no obligation to update or revise these forward-looking statements.
I will now turn the conference over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation. You may begin.
Good morning and thank you to everyone who has joined us on our call today. I’m with Aaron Peck, our CFO and Chief Investment Officer. Last evening, we issued our third quarter 2018 earnings press release and filed our 10-Q with the SEC.
For the third quarter, we generated adjusted net investment income of $0.38 per share exceeding our third quarter dividend of $0.35 per share. This represents the 18th consecutive quarter, we have covered our dividends with adjusted net investment income.
We are very proud to have been able to maintain a 35% per share dividend fully covered by adjusted net investment income without any reduction and our dividends since our IPO in late 2012. This is the testament to the overall Monroe Capital firm platform scale, our unique origination capabilities and our credit underwriting and portfolio management process.
As background, the private debt market remains highly competitive primarily due to the amount of new capital being raised this year for direct landing by both existing managers and new market entrants. This capital formation has led to the continuation of the borrower friendly market or most new deals have aggressive leverage structures and low pricing.
We have stayed the course in executing on our lower middle markets senior secured debt strategy. We believe this part of the market will perform well over the long-term as it has in prior credit cycles.
By adhering to our underwriting discipline and our selectivity in executing only on investments that we believe make good sense for the long-term, we are self selecting quality over quantity in this current market.
While in the short-term this may mean that our loan portfolio may not grow as aggressively as others. Our investment strategy and underwriting principles ensure that we will be focused achieving our long-term goals of delivering consistent earnings and a stable net asset value for our shareholders.
At quarter-end, our investment portfolio had a fair value of $482.3 million, a slight decrease from the prior quarter-end and included investments in 66 companies across 21 different industry classifications. This reduction in the size of the investment portfolio was due primarily to much more aggressive prepayment activity during the quarter.
In the quarter, we funded $52.1 million of new business, but experienced $60.4 million of sales, repayments and prepayment activity. While this is not our preferred ratio of new business funding to prepayments, we have to be patient and let the market come to us as we have always done in the past.
We cannot always fit new deal activity into nice and neat 90 day quarterly periods, evidence of that is since quarter-end we have funded approximately $30.3 million in net new loans. We are playing a long-term gain to win and we will not let quarter-over-quarter performance goals or the market dictate our credit underwriting policies.
As of September 30th, our largest position not including the investments in our MRCC Senior Loan Fund joint venture, which we refer to as our SLF represented 4.1% of the portfolio and our 10 largest positions excluding our investment in the SLF were 34.7% of the portfolio. Our portfolio was heavily concentrated in senior secured loans and specifically first lean secured loans.
92.3% of our portfolio consists of secured loans and approximately 86.3% is first lean secured. We are pleased with the construction diversity and the senior secured nature of our investment portfolio at this point in the credit cycle.
As of the end of the third quarter, our SLF had experienced portfolio growth to $134.9 million in fair value a 42% increase from the $94.8 million of fair value at the end of the prior quarter. The weighted average yield in the SLF portfolio decreased slightly to 7.4% from 7.5% at the end of the prior quarter. As of quarter-end, the SLF had debt outstanding on its leverage facility of $81.4 million at a rate of 4.6% or LIBOR plus 2.25%.
As we have discussed in the past, MRCC is well positioned for future interest rate increases. With all of our portfolio is invested in floating rate debt with rates floors. Given the current LIBOR level, we have surpassed the level of the LIBOR floors and all our loans and therefore MRCC is situated to meaningfully benefit from any increase in short-term interest rates going forward.
In addition, we have $150 million outstanding in fixed rate debt from SBA debentures and $69 million outstanding in fixed rate debt from the recent issued 2023 notes, which will allow us significant interest rate arbitrage and any increase in LIBOR in the future. We have worked purposefully to create approximately $184 million of fixed rate liabilities going into this niche credit cycle.
We have around $148.5 million of additional capacity today to invest from our current bank line of credit. We are currently working with our existing lenders to allow us to implement 150% asset coverage ratio in our credit agreements, so that we may fully take advantage of the regulatory relief from the small business credit availability act, which we have already received shareholder approval to implement.
We continue to maintain approximately $0.46 per share of un-distributed net investment income, which in our view provides a significant cushion to our ability to maintain a consistent quarterly dividend payment to our shareholders without returning capital.
I’m now going to turn the call over to Aaron who is going to discuss the financial results in more detail.
Thank you, Ted. During the quarter, we funded a total of $44.7 million in loan investments, additionally we funded $7.4 million in equity to the SLF.
This growth was offset by sales and complete repayments on fixed yields and partial repayments on other portfolio assets which aggregated $60.4 million during the quarter. As Ted mentioned, since quarter end, we have grown the portfolio by a net $30.3 million investing in seven new companies and experiencing pay-offs on two companies.
As September 30th, we had total borrowings of $235.5 million including $51.5 million outstanding under our revolving credit facility, $69 million of our net 2023 notes and SBA debentures stable at $115 million. Future portfolio growth will be funded by the substantial availability remaining under our revolving credit facility, which was paid down with the proceeds from the unsecured notes offering.
As of September 30th, our net asset value was $264.8 million which was down marginally from the $270.7 million in net asset value as of June 30. Our NAV per share decreased from $13.35 per share at June 30th, to $12.95 per share as of September 30th. This decrease was primarily as a result of unrealized mark-to-market valuation adjustments.
In particular, we took an unrealized markdown on our debt investments in Rockdale Blackhawk. During the quarter, due to continued liquidity pressures as a result of non-payment of outstanding account receivable by certain insurance companies payers, the company was forced to file for bankruptcy.
As we have stated in previous call, we continue to believe that the company has significant assets in excess of its debt and we are pursuing all potential avenues for recovery. It is important to note that the issues faced by Rockdale Blackhawk are unique from a credit perspective.
The liquidity issue was created primarily by an aggressive act of non-payment by one of its insurance company payers. This was not a situation where the company experienced negative patient trends or declining revenue. On the contrary, Rockdale was growing substantially prior to this non-payment.
Rockdale is pursuing all of its option with regards to recovering this substantial unpaid account receivable from an insurance company and we remain optimistic that there will be a positive settlement based on the merits of the company’s claims. Due to the uncertainty over the timing and the amount of recovery on this investment, we have placed the pre-petition debt to this borrower are non-accrual status at this time.
Turning to our results. For the quarter ended September 30th, adjusted net investment income or non-GAAP measure was $7.7 million or $0.38 per share a slight decrease when compared to the prior quarter. At this level per share adjusted NII comfortably exceeded our quarterly dividend of $0.35 per share.
Looking to our statement of operations, total investment income for the quarter was $13.8 million, compared to $14.8 million in the prior quarter. The decrease in total investment income for the quarter was primarily as a result of reduction in interest income principally due to additional non-accruals and a reduction in fee income associated with the prepayments partially offset by an increase in dividend income from the SLF.
While we experienced prepayment activity in the quarter due to the over vintage of many of these loans there was no appreciable amount of prepayment penalty due. This quarter generated fee income significant below our average historical level.
Moving over to the expense side. Total expenses for the quarter of $6.1 million included $2.9 million of interest and other debt financing expenses, $2.2 million in base rent fees and $1 million in general administrative and other expenses.
Total expenses decreased by $0.9 million during the quarter, primarily driven by a decrease in incentive fees during the quarter. Our third quarter incentive fees were reduced due to the total return requirement in our management agreement.
As for our liquidity, as of September 30th, we had approximately $148.5 million of capacity under our revolving credit facility. As of the end of the quarter, we had fully drawn all of our available $115 million in SPA debentures.
As of September 30th, the SLF had made investments in 39 different borrowers aggregating $134.9 million at fair value with the weighted average interest rate of approximately 7.4%. We had borrowings under our non-resource joint venture credit facility of $81.4 million.
We would expect the SLF to continue to grow over the next few quarters. To assist with this growth, we recently amended the SLF’s credit facility to increase capacity to $150 million and increase from the capacity outstanding at quarter-end of $100 million.
I will now turn the call back to Ted for some closing remarks, before we open the line for questions.
Thank you Aaron. Since going public with our IPO in 2012, we have generated a 44% cash-and-cash return for our shareholders based on changes in NAV and dividends paid since our IPO assuming no reinvestment in dividends.
We believe that this performance compares favorably to our peers and puts MRCC in a small group of BDCs and has delivered this level of performance for our shareholders. Based on our pipeline of both committed anticipated deals, we expect to increase our new investment momentum for the remainder of the year with growth in both our core portfolio and within the SLF.
We believe that Monroe Capital Corporation provides a very attractive investment opportunity for our shareholders and other investors for the following reasons. Our stock pays at current dividend rate in excess of 11%, our dividend is fully supported by consistent adjusted net investment income coverage for the last 18 straight quarters.
We have a very shareholder friendly external advisor management agreement in place that limits incentive management fees payable in periods where there is any material decline in our net asset value. And we are affiliated with our best-in-class external manager with seven offices located throughout the U.S. over 100 employees and approximately $6.1 billion in assets under management.
MRCC is one of the few BDCs that has access to distinct proprietary deal flow which should result in differentiated returns and an increase in shareholder value over the long-term.
Thank you all for your time today. and with that I'm going to ask the operator to open the call for questions.
[Operator Instructions] Our first question comes from the line of Tim Hayes with B. Riley. Your line is open.
Hey, good morning guys. Thanks for taking my questions. My first question, I notice this is a seasonally slower quarter, but was there any hesitation to lend in front of the midterm election and just reflecting those results. How do you view the landscape for a small businesses?
Interesting question, that is a good one. I didn’t anticipate that one. No, our companies we focus on the middle market, lower middle market and most of these companies have been around for a long time. The space is pretty stable, it’s not driven by election results or whether or not one party is in or the other party.
When we are focused on earnings historical earnings, future earnings and we think that if anything we will probably end up in - we had anticipated a divided house that was might got and we are going to anticipate a relatively stable period where we don’t think much is going to be get done in Washington with the divided house over the next couple of years.
And I think it will be a good environment for lending provided that the competitive pressures abate a little bit in terms of rate and leverage. Those are the two things I’m more focused on.
Got it. Okay that is really helpful. And then I appreciate your comments on Rockdale another credit, I’m curious on if carryon, it seems like that was the only new portfolio company placed on non-accrual. Just wondering if you have any comments on that credit?
Yes. First on Rockdale, I just want to say a couple of words there. It’s a situation where we had a rapidly growing hospital borrower and unfortunately that the life we live in today, the insurance companies sometimes rightfully and sometimes wrongfully exerts a tremendous amount of pressure over healthcare reimbursement.
And we have a situation here where this was not a underwriting issues, it’s got a credit issue with the company. This was an insurance company that took lateral action that we feel is wrong and caused a significant liquidity issue with the company as well as other companies in the same industry.
And the company with our support is going to pursue recovery of all of the receivables do it aggressively. So, I just want to clear that up on Rockdale and Aaron will talk about Curion.
Yes. So, on Curion just to be clear, because it’s a little confusing. We didn’t put all of Curion on non-accrual. What has happen is the company have a little bit of the liquidity softness, the private equity owners chose not to support the company with additional investments.
And so we were in a position where we as part of our restructuring agreement with that sponsor took over effectively some promissory notes that we didn’t pay for, which has material, so we paid nominal amount.
But they have material upside, that is the note that we put on non-accrual, basically something that we were handed for free as part of restructuring, because the notes themselves the regular loans that we made originally are not markdown considerably.
We think there is a really good long-term recovery for Curion, company is still current and paying interest on our notes - on our loans it’s just this one piece that we got as part of our restructuring that wasn’t prudent put on accrual.
So although it’s possible we will get a significant recovery on that and eventually accrual investment income at this point it just didn’t seem prudent to approve that.
Okay. Got it. I appreciate the comments on both Curion and the clarification on Rockdale there too. Maybe if I could just poke at maybe one more the worth collection, another large debt investment that is kind of marked at a little of discount to PAR. Not on non-accrual or anything, but just curious maybe if you could comment on what accounts for the discount there and if you have any concerns for that credit?
Yes. So [indiscernible] is an interesting business, it's owned by private equity sponsor who has been supporting the business. the company has marked this period as basically flat down the tiny bits and flat period. The company is going through a fairly aggressive reorganization plan, not reorganization plan, but repair to the business that sponsors make some management shifts and things appear to be on a positive trajectory there.
But for a period it was a challenge deal, because a little bit of the space they are in. they are in our retail space that is pretty unique, that is sort of in-person retail rather than in in-store retail which we thought would be a better strategy given what is on our store front retail.
But this had a little trouble on the recruiting side for the advisors, but everything seem to be headed in the right direction on that deal as of now. So we don’t have any significant concerns and nothing has really changed materially since last period.
Okay, really appreciate that. And then just one more for me quick little modeling clarification. The share count look to just increase a little bit. Just wondering if you could remind me if there was a drip involved or there are some stock comp or what exactly accounted for that?
Yes. So you may know that we have an ATM program in place. So in the earlier part of the third quarter, we raised a little bit of money accretively under the ATM, something like $2.3 million. So that accounts for the small increase in share count this quarter.
Got it. Okay, appreciate the comments.
Thank you. Our next question comes from the line of [indiscernible] with Oppenheimer. Your line is open.
Yes good morning. Thank you for taking my question. Thank you for the comment on Rockdale. Just want to make sure I understand this correctly. How should we think about the path or further the markdown in retail fee of Rockdale? I mean what is assumption of the current mark, does this mark already reflect the recovery?
Okay. I will take the shot of that answer and then Aaron will fill in. So what we have done is we have got a variety of assets here at Rockdale to collect against. There is facilities and there is some very large accounts receivable. There is a plan in place currently a legal proceeding to collect those account receivable.
Assuming that we collect the accounts receivable, we are going to be covered under our loan with plenty of headroom there. Obviously litigation is always a - there is some I'm sure, and some doubt, so we have taken what we thought was a reasonable mark on that this quarter.
We feel that based upon the information we have available to us today and the legal advice that we are getting and the opinions we received we think we have a pretty good mark and hopefully we will have some upside there.
But like everything else, we are trying and do this in a conservative fashion and we thought it was appropriate to take the mark this time.
Yes. I will just add to that. I mean as you know we are required to mark every assets to what we believe is a fair market value in every quarter, based on the available information. And we use independent third-parties to assist us in that and we have done nothing different this period than any other period and nothing different with this investment than other investments.
We given all the information we have to an independent third-party evaluation firm who has done What Ted has described, which is try to put reasonable probability of outcomes on the assets and the liquidation of assets and the recovery of assets and sales of business units and things of that nature.
And I will just say probably there is a range of outcome some of which are considerably higher and some of which are lower. So, this is the best expectation of what we think the fair value of the loan is today based on the view of the independent third-party and all the contingencies.
Okay that is very helpful. The next one for me is about American Community Homes. I saw there were a little bit markdown on that debt loan across the different transit and it looks to me that also withdrew an efficient note of $1.6 million during the quarter and you marked that down subsequently. Could you please add more color on that as per the situation on that?
Sure. So, American Community Homes is an interesting business, it’s in the residential mortgage origination space and they also retain a mortgage servicing rights portfolio.
If you know anything about what is going on during the most recent period with regards to mortgage origination with the expansion of the rates and rates going up. The mortgage origination business is across the country really have seen a bit of slowdown on both refinancing and particularly refinancing, but also the something on new home purchase.
And so the company was unfortunately slow to make adjustment to its business model to account for the reduction in new mortgages and fees associated with that and so that created some liquidity pressure, which have fund into the business.
Having said that, the company has a very substantial portfolio of mortgage servicing rights, which have significant value and typically in a market where rates are increasing and mortgage originations are slowing that usually is the natural hedge when you look at the mortgage servicing rights book.
Because mortgage I would say a little technical, but mortgage servicing rights are basically an IO, because they are directly and what I mean by that is an interest only strip, so as rates go up they typically become more valuable and not less valuable.
And so our expectation is that we have significant downside protection through this fairly large portfolio of mortgage servicing rights, the only trouble of the business is because the mortgage origination business is slow and liquidity became a little tight it’s harder for the company to retain as many new mortgage servicing rights as they would have liked, which would have created a more value for us.
So, instead they are selling mortgage servicing rights on a significant portion to deal liquidity. But long-term, we expect the recovery here, sponsor here has made significant changes to management and as advisors in who have made fairly large cost cuts to the business, which we don’t think will impact the business profitability going forward negatively, but only positively. And our expectation is that the company can be improved and that our loan will eventually be - we will enjoy a full recovery.
And we also have some equity in this business as well, which has some potential upside in the future as well, but for now this is the fair market value on the loans. There were some additional funding I mentioned on the term loan during the period, which is what you are seeing with regards to the increase in funding.
Okay. Thank you. That is helpful. That is it for me.
Thank you. The next question comes from the line of Robert Napoli with William Blair. Your line is open.
Good morning, Ted and Aaron. So, I guess in-line with the stability of the book value and the dividend, I mean how confident are you Ted that the dividend is very solid at current levels as there, what would expected for that dividend that have to be reduced?
I can't see based on where we sit today any issue with the dividend. We have over earned the dividend significantly. We have done everything at manager level support that including waving incentive management fees when necessary and I can't see any current situation where the dividends at risk.
The company we have got $482 million portfolio that is throwing off solid income. We have got a lot of really good performing borrowers. We have got a couple that are little more challenged, but in the scale of things, it's no different than any other loan portfolio.
We are going to have 2% 3% or 4% of our borrowers in any given point in time, where we are in more credit watch and we have been doing this now since 2012, since our in closing our sixth years and this quarter is no different than any other quarter other than we have taken one particular company we have got an issue with one of the account debtors and we are going to treat that like we do with any other situations, we are going to aggressively go and collect that debt.
We have signaled to the market and we try to be transparent in what is happening and with transparency sometimes peoples have questions, but at the end of the day the dividend is very, very secure and as you know I'm a big owner of the stock and where it is right now. I can see there is a lot of upside so where the stock price is?
Yes and I will take that one thing Bob. As you know we are underleveraged to our target leverage. So part of our expectation is as we continue to grow the book carefully as Ted talked in his prepared remarks, we should be able to overtime grow the asset portfolio by taking advantage of some excess leverage, which is really well priced leverage and hopefully drive performance to keep supporting NII, which will support the dividend.
So that is part of the game plan. Right we are definitely way beneath where we have targeted leverage and that is because we have been really careful about where the market is and what opportunities we are seeing. But our pipeline is pretty strong and fourth quarter has already seen nice running with some good deal and we think that can help support the dividend also going forward.
What is the timing of the Rockdale litigation. When would you expect to have a resolution and is it any - can they get out of bankruptcy, do you expect them to get out of bankruptcy?
The timing is there is a proceeding going on now and it's arbitration proceeding, it's a mandatory arbitration proceeding. So unlike normal litigation we don't think this is going to last forever, but it's certainly going to be a 2019 event.
And we got a couple of assets that we can move on as well. So my guess is that we will have more guidance at least the direction we are going by the end of Q1 and then we will be able to speak to it. But today, our focus is on liquidating as many of the realizable assets as we can and paying our debt down and getting us back on site with that.
And then just on stability of booked value and the incentive fees. And what are your thoughts on - would you expect to be paying incentive fees in the fourth quarter, the first quarter and how confident are you that I mean - the book value is obviously come down some that you can maintain or get stability in a book value?
Well, that is our focus right now is to stabilize book value, we are trying to take some medicine at this point and we have taken the right downs on some assets where we think from our third-party advisors have recommended and we have done that, we complied with all of our third-party independent valuation proceeding. And going forward, we are going to continue as a management team to support the company like we always have and that means less incentive fees, that is what is going to mean for us.
Thanks. And last question just the growth of the SLF, what is your outlook for the growth and what is your expected contribution to earnings from that SLF overtime?
Well I will tell you that if you look at the trends, the trends are all positive there. It’s a significant earnings contributor, it’s growing at a pretty good cliff over the last two quarters. And we have just increased our senior credit facility for the JV by about a third. We have grown I think about 40% quarter-over-quarter and that is a good contributing asset and I imagine that will continue to grow over the next several quarters.
Thank you. Appreciate it.
Thank you. Our next question comes from the line of Leslie Vandegrift of Raymond James. Your line open.
Hi. Good morning. Thank you for taking my questions.
Hi. The first question on Rockdale, is Rockdale Blackhawk related to Little River Healthcare that is offer or not Texas that both declared single fee on the same day?
Yes. Yes. Little River is the trade name that the company was operating Rockdale Blackhawk.
Okay. Thank you. And as of the last August earnings call, I mean that bankruptcy has already occurred. Was there reason was it still not public or why was it not flagged at the last earnings call?
Yes. So Leslie, the bankruptcy is kind of is not really the determining factor here of recovery. So, the issue and what has changed from last quarter this quarter is, at the time of the call last quarter, it was a view of the advisors that were supporting the management team and the company at Rockdale that it would be still in a position to generate significant EBITDA in terms of business around and there will be an ongoing entity, then the bankruptcy would effectively just be reorganization in order to get rid of some facilities potentially and look its unsecured claims all the normal bankruptcy related items.
Since that time in this quarter, there has been a sort of change in reversal of the view point as to whether this company really has significant enterprise value or if it’s more of an asset value play. So, we have been consistent in saying that we felt that there was a significant asset value here, but what was reputed in last quarter mark and expectations when we held the call was that there might be still some significant enterprise value here, which was way into the fair market value where as now this thing guide more on an assets value basis.
Okay. And on the dip loan Rockdale, they are due 12/31, so in this quarter for the new smaller loans I think one was $5.7 and then one is under $1 million. What is the outlook for those loans?
Yes so look this loans usually you start with a fairly tight maturity and option what they want to do. This will take longer my guess than the current maturity. So it's reasonable to assume that the party is in expansion on the dip loans.
Okay. Thank you for taking my questions.
Thank you. Our next question comes from the line of Christopher Nolan with Ladenburg Thalmann. Your line is open.
Hey guys. You took the cost debt basis of Rockdale from $18 million last quarter down to $13 million. Do you expect a further decline in your continued pace of exits in this quarter?
Christopher thanks for the question, it's a good question. We do not at this time anticipate a further decline. We feel that where the asset is marked today is reflective of the recovery value of the individual loan assets that make up the collateral pool.
Got you. And Ted, do you anticipate a resolution where you get paid off, or you could basically turn your debt position into an equity position as a company which is a still going on or I mean what do you looking at here? Is it going to be just?
Yes that is another good question. I do not anticipate turning our debt position into an equity position. At this point, in this particular asset we are in recovery mode only and normally you know we would look at if we had confidence and a growing concern value, growing concern operation or a strong management team we will do that to generate the maximum recovery.
Here we are very, very focused on asset recovery, which is facilities, properties, plants equipments and some very large accounts receivable. We are going to take a very aggressive approach on those accounts receivables, we think we are on good ground. We have been advised by several law firms that we have got very solid recovery prospects here and we are going to pursue every potential recovery at our debt over our debt and above our debt.
Okay, great. Thank you for taking my questions.
Thank you. Our next question comes from the line of Casey Alexander with Compass Point. Your line is open.
Hi. Just to clarify. What was the date of the Rockdale bankruptcy?
I think it was near the end of July.
Near the end of July.
Did you sale any stock under the ATM program after you became aware of the bankruptcy.
I have to check on that, but I don't think though. Having said that - I want to make this clear. The bankruptcy is not - as lot of people don’t know the credit part of it - see the bankruptcy is somehow a meaningful element in the recovery of the company in terms of its negative.
Bankruptcy is often very positive as it deals with unsecured creditors through the court system. So the bankruptcy isn't terribly relevant in terms of recovery and mark on this company. it's really a strategy change and obviously we didn’t sell any equity assets at Rockdale Bank.
But it's not a it's not something that is particularly meaningful with regards to the recovery plan. It's just a way to get out of our recovery, it didn’t change much of the situation with how we view that.
Okay. Then did you disclose it as a subsequent event when you issued the baby bonds in October?
I will get back to you on that. I don’t believe we did.
That is all of my questions is. Thank you.
That is just about materiality and I don’t think we viewed it as a material situation with regards to the recovery on the name.
Well, I would have to say the action of the stock today are these different way, but thank you for taking my questions.
Thank you. Ladies and gentlemen, at this time I would like to turn the call back over to Ted Koenig for closing remarks.
Okay. Thank you, thank you everyone for joining us on our call today. I look forward to updating you on another call next quarter with some results and some of our recovery actions and our performance for the next quarter. So, thank you very much. We will talk to you soon.
Ladies and gentlemen, that conclude today’s call. Thank you for participating. You may now disconnect. Everyone have a wonderful day.