Golub Capital BDC, Inc. (GBDC) CEO David Golub on Q2 2019 Results - Earnings Call Transcript

About: Golub Capital BDC (GBDC)
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Earning Call Audio

Golub Capital BDC, Inc. (NASDAQ:GBDC) Q2 2019 Earnings Conference Call May 9, 2019 1:00 PM ET

Company Participants

David Golub - CEO

Gregory Robbins - Managing Director

Ross Teune - CFO

Jon Simmons - Managing Director

Conference Call Participants

Christopher Testa - National Securities Corporation

Finn O'Shea - Wells Fargo Securities

Robert Dodd - Raymond James


Welcome to Golub Capital BDC, Inc.'s March 31, 2019 Quarterly Earnings Conference Call.

Before we begin, I would like to take a moment to remind our listeners that remarks made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than the statements of historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from the time [sic] in the Golub Capital BDC, Inc.'s filings with the Securities and Exchange Commission. For materials the Company intends to refer to on today's earnings conference call, please visit the Investor Resources tab on the homepage of the Company's website, www.golubcapitalbdc.com, and click on the Events/Presentations link. The Golub Capital BDC's earnings release is also available on the Company's website in the Investor Resources section. As a reminder, this call is being recorded for replay purposes.

I will now turn the conference over to David Golub, Chief Executive Officer of Golub Capital BDC.

David Golub

Thank you, Murdoch. Hello everyone and thanks for joining us today. I'm joined by Ross Teune, our Chief Financial Officer; Greg Robbins, Managing Director; and Jon Simmons, Managing Director. Yesterday afternoon we issued our earnings press release for the quarter ended March 31 and we posted an earnings presentation on our website. We're going to be referring to that presentation throughout the call today. Gregory is going to start off with an overview of GBDC's results for the second fiscal quarter of 2019. Ross is then going to take you through the results in more detail, and I'm going to come back at the end for closing remarks on three topics. First, I'm going to give a status update on the proposed merger with Golub Capital Investment Corp, or GCIC. Second, I'm going to speak briefly about our debt capital structure and leverage strategy. And third, I'm going to give you an overview of a recent deal that we think illustrates how we're using our competitive advantages to win in today's challenging market environment.

Let's start with the results for the quarter ended March 31. The headline is that GBDC had another solid quarter, driven by consistent net investment income, good credit results, not perfect credit results, we'll talk about that, but good credit results and a finely tuned balance sheet. For those of you who are new to GBDC, our investment strategy is–and since our inception has been–to focus on providing first lien senior secured loans to healthy, resilient middle market companies that are backed by strong, partnership-oriented private equity sponsors.

With that I'll turn the call over to Gregory.

Gregory Robbins

Thank you, David. Let's look at the details for the quarter. Net increase in net assets resulting from operations, or net income, for the quarter ended March 31, 2019 was $17.8 million, or $0.29 per share, as compared to $18.4 million, or $0.31 per share, for the quarter ended December 31. Net investment income, or as we call it, income before credit losses, for the quarter ended March 31 was $20.1 million, or $0.33 per share, as compared to $19.8 million or $0.33 per share for the quarter ended December 31. Excluding the $700,000 reversal in the accrual for the capital gain incentive fee, net investment income for the quarter ended March 31 was $19.4 million, or $0.32 per share, as compared to $19.3 million, or $0.32 per share, for the prior quarter.

Consistent with previous quarters, we have provided net investment income per share excluding the capital gains incentive fee accrual as we think this adjusted NII is a more meaningful measure. Net realized and unrealized loss on investments and foreign currency of $2.3 million, or $0.04 per share, for the quarter ended March 31 was the result of $1.9 million of net realized losses and $400,000 of net unrealized depreciation. This compares to a net realized and unrealized loss on investments and foreign currency of $1.4 million, or $0.02 per share, for the prior quarter. Despite the net realized and unrealized loss on investments this quarter, we continue to see solid investment income and credit quality from the portfolio as Ross will discuss further in a bit.

New middle market commitments totaled $116.1 million for the quarter ended March 31. Approximately 90% of the new investment commitments were one stop loans, 8% were senior secured loans and 2% were investments in Senior Loan Fund and equity securities. Overall, total investments in portfolio companies at fair value increased by approximately 1.9%, or $36.5 million, during the quarter ended March 31.

Turning to slide 4, you can see on the table the $0.29 per share we earned from a net income perspective, the $0.32 per share we earned from a net investment income perspective before accrual for the capital gains incentive fee, and our net asset value per share of $15.95 at March 31, 2019. As shown in the bottom of the slide, the portfolio remains well diversified with investments in 211 different portfolio companies and an average size of less than 0.5% of total portfolio company investments.

With that, I will now turn it over to Ross, who will provide some additional portfolio highlights and discuss the financial results in more detail.

Ross Teune

Thanks, Gregory. Starting on slide 5, this slide highlights our total originations of $116.1 million and total exits and sales of investments of $82.2 million, contributing to growth in total investments at fair value of 1.9%, or $36.5 million, to just under $2 billion as of March 31. Total payoffs remained at a more normalized level for the second consecutive quarter after remaining elevated for most of calendar 2018.

Turning to slide 6, this slide shows that our overall portfolio mix by investment type has remained consistent quarter-over-quarter and year-over-year. Our one stop loan continued to represent our largest investment category at 80%.

Turn to slide 7, this slide illustrates that the portfolio remains well diversified with an average investment size of $8.9 million. Our debt investment portfolio remains predominantly invested in floating rate loans. There have been no significant changes in the industry classification percentages over the past year.

Turn to slide 8, the weighted average rate of 8.7% on new investments this quarter was up from 7.7% in the previous quarter. This was due to an increase in LIBOR and an increase in the weighted average spread over LIBOR on new investments. The 70 basis point increase in the weighted average spread over LIBOR on new investments was due to a few larger deals with high relative spreads and not a general market move. Due to a few larger payoffs on existing loans with high relative rates, the weighted average rate on investments that paid off increased by 20 basis points to 8.7%. As a reminder, the weighted average rate on new investments is based on the contractual interest rate at the time of funding. For variable rate loans, the contractual rate would be calculated using current LIBOR, spread over LIBOR, and the impact of any LIBOR floor.

Shifting to the graph on the right-hand side, this graph summarizes investment portfolio yields and spreads for the quarter. Focusing first on the light blue line, this line represents the income yield, or the actual amount earned on the investments including interest in fee income but excluding the amortization of discounts and upfront origination fees. The income yield increased by 20 basis points to 8.8% for the quarter ended March 31. This was primarily due to the increase in LIBOR over prior periods. The investment income yield, or the dark blue line, which includes the amortization of fees and discounts, increased to 9.2% during the quarter also due to the increase in LIBOR. Despite the increase in LIBOR, the weighted average cost of debt, or the aqua blue line, declined by 10 basis points to 4.2% due to the benefit of lower spreads over LIBOR on our new debt securitization that we closed back in November 2018, as well as lower unused fees and lower deferred fee amortization.

Flipping to the next two slides, the number of non-accrual investments remained flat at three investments. As of March 31, non-accrual investments as a percentage of total investments at cost and fair value were 0.5% and 0.2%, respectively. These percentages decreased slightly from the prior quarter primarily due to the restructuring and partial write-off of one portfolio company investment. Fundamental credit quality as of March 31 remained strong with over 90% of the investments in our portfolio having an internal performance rating of 4 or higher as of March 31, as shown on slide 10. As a reminder, independent valuation firms value approximately 25% of our investments each quarter.

Reviewing the balance sheet and income statement on slides 11 and 12, we ended the quarter with total investments at fair value of just under $2 billion, total cash and restricted cash of $76.2 million and total assets of just over $2 billion. Total debt was $1.1 billion, which includes $587.6 million in floating rate debt issued through our securitization vehicles, $287 million of fixed rate debentures and $176.6 million of debt outstanding in our revolving credit facility. Total net asset value per share was $15.95. Our regulatory debt-to-equity ratio was 0.8 times, while our GAAP debt-to-equity ratio was 1.1 times, slightly above our target of 1 times.

Flipping to the statement of operations, total investment income for the quarter ended March 31 was $41.8 million. This is an increase of $2.4 million from the prior quarter, primarily due to higher interest income from a growing portfolio. On the expense side, total expenses were $21.7 million, an increase of $2.2 million primarily attributable to higher interest expense and higher incentive fee expense.

Turning to the following slide, the charts on the top provide a summary of our quarterly distributions and return on average equity over the past five quarters. Our regular quarterly distributions have remained stable at $0.32 a share, which is consistent with our net investment income per share when excluding the GAAP accrual for the capital gains incentive fee. The annualized quarterly return based on net income has averaged 8% for the past five quarters. The bottom of the page illustrates our long history of steady and frequent increases in NAV per share over time. For historical comparison purposes, we presented NAV per share both including and excluding our special distributions.

Turning to slide 14, this slide provides some financial highlights for our investment in Senior Loan Fund. The annualized quarterly return improved to 6.3% for the quarter ended March 31, but performance continues to be negatively impacted by unrealized losses on a few portfolio company investments. SLF’s investments at fair value on March 31 declined by 2.8% to $169.5 million from December 31st.

The next slide summarizes our liquidity and investment capacity as of March 31 in the form of restricted and unrestricted cash, availability on our revolving credit facility, and debentures available through our SBIC subsidiaries.

And I'll turn the call back to David for some closing remarks.

David Golub

Thanks Ross. So to sum up, GBDC had a solid second fiscal quarter of 2019. Let me shift now to the three topics I mentioned in my opening remarks.

Let me start with the update on the proposed merger with GCIC. We remain very excited about the pending merger with GCIC. To refresh your recollection, we discussed on our September 30, 2018 earnings call seven reasons that we think the merger with GCIC is compelling for GBDC. I'd like to just briefly reiterate those points today for new listeners.

First is the transaction would be immediately accretive to GBDC's net assets -- net asset value per share. Based on GBDC's NAV per share as of March 31 and GCIC's estimated NAV per share of $15 as of March 31, the accretion to GBDC's NAV would be approximately 4.5%. That's up a bit from where we described in September due to the growth in the size of GCIC and we anticipate that the level of accretion could increase a bit more as GCIC is expected to continue to grow between now and when the merger closes. The second point, because the transaction would be accretive to GBDC's NAV per share, the transaction offers the potential for additional value creation assuming GBDC continues to trade at the approximately 15% premium to NAV that GBDC's been trading on average over the last three years.

Third point, the combination of GBDC and GCIC would create the fourth largest externally managed, publicly traded BDC by assets, that has advantages in terms of scale. One of those advantages is the fourth point, which is the increased market cap can be anticipated to provide improved trading liquidity, broader research analyst coverage and other benefits. Fifth point, due to the overlap in the portfolios between the two companies, we expect the portfolio of the combined company to look a lot like standalone GBDC’s. Sixth, we expect the combined company to have better access to the securitization market than either company on its own, giving the combined company greater opportunities to optimize debt capital. And finally, seventh, we expect some operational synergies from eliminating redundant expenses.

In short, we think the combined GBDC-GCIC maintains all the elements that have made GBDC successful and gives it a number of additional advantages. We think the increased scale of the combined company will deliver, among other benefits, incremental earnings power, and GBDC's board previously announced its intention to increase GBDC's quarterly dividend to $0.33 per share after the closing of the merger, provided that the board reserves the right to revisit this intention if market conditions or GBDC's prospects meaningfully change. So where does the merger process stand? The short answer is we're making progress. You'll recall that GBDC and GCIC filed their preliminary joint proxy statement with the SEC on December 21, 2018, just prior to the government shutdown. The shutdown delayed the SEC review process, but I'm pleased to report we're now in discussions with the SEC, we're responding to SEC feedback and we're hopeful that we can finalize the proxy in the coming weeks.

Let's turn to the second topic I mentioned earlier, a brief note on our debt capital structure and leverage strategy. To refresh your recollection, at our 2019 annual meeting, which was on February 5, stockholders approved the proposal to increase GBDC's leverage limitation under the ’40 Act by reducing its required asset coverage ratio from 200% to 150% effective February 6. As we mentioned on last quarter's call, the primary near-term implication of this approval is that we'll have a bigger cushion to the regulatory leverage limit. We said it was GBDC's current intention to continue to target a GAAP debt-to-equity ratio of about 1.0 times. You can see on page 11, and Ross mentioned in going over today's earnings presentation, that GBDC's GAAP leverage as of March 31 was a little higher than that at 1.1. I'd offer two comments on that.

First, although quarter-end GAAP leverage was a bit over our target, our strategy and near-term expectations for leverage haven't changed. It remains our intention to target GBDC's leverage at about 1.0 times. Second, we currently anticipate that the proposed GCIC merger will be deleveraging for GBDC. So with GBDC running a bit above target now, we think the combined company will end up with leverage more in line with our target post-closing.

Finally, I want to describe a recent deal, and the reason I want to describe it is we've talked a lot about how we're operating in this borrower-friendly, late cycle environment and we've talked about how we're using our competitive advantages to provide us with an ability to continue to find attractive investment opportunities in this environment.

Well, in calendar Q1, GBDC, along with other vehicles managed by Golub Capital, invested in a one stop facility to support Roark Capital's acquisition of a company called Fitness Connection, an operator of gym centers primarily in Texas, North Carolina and Nevada. We liked the company’s compelling value proposition; it has strong unit economics, it's been consistently profitable, it's got a good growth strategy and a very experienced management team. What I want to focus on today is why and how did we win this mandate. And I've talked before about how we're using our competitive advantages, I hope this deal brings this idea to life.

So the first of the competitive advantages we brought to bear was incumbency. Golub Capital has been incumbent lender to the company since 2013. And this put us in prime position to provide financing in connection with the company's sale. In fact, the selling sponsor encouraged buyers to seek financing from Golub Capital as part of the sale process. Second advantage, sponsor relationships. The acquiring sponsor, Roark Capital, is one of Golub Capital's top sponsor relationships. We've done more than 30 deals with Roark since 2005. Third advantage, industry expertise. In addition to Golub Capital's longstanding relationship with Fitness Connection, the firm has extensive experience evaluating and lending to other fitness businesses including Equinox, Anytime Fitness and others. And the fourth key advantage is compelling products. You've heard me talk before about our market leadership in providing one stop facilities and the way in which one stops provide sponsors with an unusual and easy ability to scale up as they make acquisitions.

I think this was a key ingredient in the decision by Roark Capital to use Golub to provide a one stop financing for Fitness Connection. Our capacity to not only make the acquisition easy but to add to the facility over time to facilitate acquisitions provides sponsors with a really great solution when they're looking at a buy-and-build acquisition strategy. In short, the Fitness Connection deal showcased a number of the competitive advantages that you've heard me talk about and that we believe makes Golub Capital hard to beat on deals where we want to win.

With that, let me thank everyone for your time today and for your partnership and operator, can you please open the line for questions?

Question-and-Answer Session


[Operator Instructions] Our first question comes from the line of Christopher Testa. Please go ahead.

Christopher Testa

Good afternoon, guys. Thank you for taking my questions today. David, you had mentioned obviously that the merger is looking to be accretive -- excuse me, deleveraging, which I also expect as well. Could you give us an idea on how deleveraging you expect it to be? And I know it's based on a lot of factors; you guys are paying down some of the securitizations and you might very well just pay off a credit facility, I'm just wondering if you could provide a target range on how deleveraging you think it'll be?

David Golub

Sure. So just first to respond to one element of your question. We're not currently planning on paying down any debt facilities or any securitizations in connection with the merger. We do think there are opportunities to continue to improve the debt structure of the combined company given its scale post-merger. But there is no immediate plan to pay off existing facilities. The reason that the transaction will be -- is that I expect the transaction would be deleveraging is that if you look at GCIC today, it operates at a lower debt-to-equity ratio than GBDC does. Its ratio has been running more in the 0.85 kind of range. So, given that GCIC is expected at the time of the merger to be a bit bigger than GBDC, you can do the math and look at the combination of those two debt-to-equity ratios and average them and you come out, if you were looking at it today, at slightly under 1 times.

Christopher Testa

Okay, that's helpful. I was just referring to like the 2014 securitization has been just paid down a little bit. So, I didn't know if the plan was to pay that off entirely upon the completion of the merger, but that cleared that up as well. And kind of sticking with that David, obviously the larger balance sheet is going to afford you the ability to do a new securitization that could be pretty sizable. Is this something that you guys would initially be looking to do right after the merger or do you think that's going to take some time before you're able to put that together, maybe at least a few quarters?

David Golub

Well, I think our goal post-merger will be to have the right-hand side of the balance sheet consist of not one, but several different securitizations. We want the securitizations to have different reinvestment period end dates and to be with different counterparties, all in an effort to diversify risk. So we'll be looking to sculpt the right-hand side of the balance sheet over time to likely include one or two bank facilities and perhaps as many as four securitizations and the exact timing of when we're going to do those is going to depend on market conditions.

Christopher Testa

Got it. And I know that your one stop loans were a significant amount of the originations this quarter. Is this primarily due to a rebound in M&A, and if so, has the trend that you're seeing continued quarter-to-date and what's your outlook on that for the remainder of the year?

David Golub

I think, Q1 -- calendar Q1 was only okay from an origination standpoint, not surprising given that it followed the market disruption that we saw in calendar Q4 of 2018. So my expectation is -- I actually expect the origination environment to improve over the course of 2019 relative to Q1.

Christopher Testa

Got it.

David Golub

I’d also add one dark side of that improvement, which is my expectation is payoffs are going to increase too. So we've benefited in the last several quarters from below average levels of payoffs. And my expectation is that low payoffs don't last forever. They tend to rebound when you have a situation like what we have today, by which I mean stabilization after a market tantrum.

Christopher Testa

Got it. Now I certainly agree with that and last one for me if I may and then I'll hop back in the queue. The volatility in 4Q18 was certainly short-lived but do you feel that that's given a lot of sponsors sort of a skittishness and that they’re -- despite the rebound in the loan market -- that they're still very nervous about this and are valuing platforms like yours with certainty of close even more than they had prior to the volatility?

David Golub

We did very well from a market share standpoint in calendar Q4 and calendar Q1 on the deals we wanted to win because of the dynamic that you're describing. In many cases, sponsors were desirous of reducing uncertainty by choosing buy-and-hold options as opposed to syndicated solutions due to the nervousness you were just describing. The truth is that sponsor memories on these sorts of issues last about a week, and so you can't realistically expect that is going to sustain if syndication markets rebound and get hot again. Right now, syndication markets are in an odd period where there's not that much supply. And so I think we're in an in-between market right now, where there certainly are lots of sponsors who prefer not to go the syndicated route, but we're seeing a return to the more generally borrower-friendly environment that we've seen for most of the last three years compared to the short-lived, more lender friendly environment of Q4 -- calendar Q4 and early calendar Q1.

Christopher Testa

Okay, that's great color and that's all for me. Thank you for your time today.


Thank you. [Operator Instructions] We do actually have a question on the line from a Fin O'Shea from Wells Fargo Securities. Please go ahead.

Fin O'Shea

Thank you, I was thrown off by the one and the four. So first question on your slides, there's the portfolio quality, slide 10 and, appreciating the color here, language on the third category which is maybe out of compliance covenants. Can you expand with color on what's going on in those -- for me, from an outsider's view, my understanding is maybe it's covenants about 30%, which is a pretty good slate of decline but maybe these loans are non-compliant with some other form of maintenance covenants, given it seems a generally well-marked or performing category there. So any color you would add on what is typically happening in a category three company?

David Golub

Sure. So let me start with some context. First, for those who aren't so familiar with the rating scale. So we rank each of our positions, each of our loans at the end of each quarter one to five. And the concept is that most loans begin as a four and stay a four if they continue to perform as we expect them to and they continue to have the kinds of credit characteristics in terms of debt ratios and likelihood of getting into difficulties that they started out with. If the company grows and starts paying down debt and starts to look better from a credit perspective, it becomes a five. If it starts to show some weakness relative to the starting point, it gets downgraded to a three and three is -- it does say on this page it may be out of compliance with debt covenants -- that's not the core most important criteria for a downgrade to a three. It's a -- this is a credit quality measure so it's how well is the company doing and how do its credit metrics look.

So, we have companies that are that are in category three where there has been a debt covenant compliance issue, we have companies that are in category three where there is -- where they're in full compliance with all of their covenants, but we believe that the risk embedded in those loans has gone up since the time of the closing. An example of a category three loan would be a company like Oliver Street Dermatology, where we believe that the risk embedded in that loan has increased since close.

Fin O'Shea

Sure, thank you for the color on that. Another generally on -- you talked about Fitness Connection and incumbency as an advantage, which certainly appears to be a meaningful one for not only larger BDCs but perhaps BDCs in general. Can you talk about -- we see a lot of add-on's and recaps and whatnot driving that kind of deal flow but in a sponsor-to-sponsor transaction what's -- if you were to roughly quantify it how often will those issuers stick with you as the lender?

David Golub

When we're incumbent lender and we want to remain in the credit, it's very unusual for us to lose in a sponsor-to-sponsor transaction. Very, very, very unusual.

Fin O'Shea

Okay. Actually do one more on the -- I think as Chris touched upon the unitranches as a stable and rising percent of the deal flow and perhaps that means you're staying more in the core middle market, which contrasts with most, if not all, of your very larger peers and certainly appreciating that terms are generally better on the direct middle market side. But a lot of them are really doubling down on this saying that the volatility and skittishness of the syndicated markets is making that market where fewer people can compete on even better. So would you say that, at this juncture, that may be becoming more true, are you -- can we expect you to still be kind of concentrating on the core middle market bracket?

David Golub

Yes, I think that's a fair characterization, Fin. We're going to continue to concentrate on the core middle market bracket. I'd say we'll be involved in transactions that run the gamut from backing companies that are $10 million of EBITDA all the way up to companies that are that are $100 million. So, we're not ruling out participation in anywhere along the spectrum. But if you look at where most of our activity is you are correct, it's in core middle market land. I'd say the piece -- if you ask your question differently -- which is the piece that I see is the least attractive right now, the piece I see as least attractive would be backing companies that are in the $10 million to $25 million EBITDA range where we're finding the combination of pricing and terms and leverage that's being offered frequently leaves the lender in a situation where the risk reward is not attractive.

Fin O'Shea

Thank you, David, for the color today.


[Operator Instructions] We do have a question on the line from Robert Dodd with Raymond James. Please go ahead.

Robert Dodd

A couple of questions. First, a somewhat technical one about the merger. You mentioned you're working with the SEC and you hope you get the proxy effective in a few weeks. Can you remind us what's the minimum timeframe between an effective proxy and actually holding the shareholder vote? Is 30 days the minimum or is that -- is there some longer period you have to wait?

David Golub

To be honest, I don't remember the minimum that's required. But I think a reasonable expectation is that, it's going to be between 30 and 60 days after the mailing of the proxy that we’d have a vote.

Robert Dodd

Got it, I appreciate that, thanks. And then just one on the SLF. Obviously a couple of quarters of some unrealized mark downs, when I look at slide 14, though, in the last two quarters it hasn't paid a dividend and either -- I think you want to obviously one of the total economic return. But this last quarter March, the annualized return 6.3%, that's actually the highest in the last five quarters. But didn't pay a dividend this quarter, whereas March 18, June 18, September 18; all did pay a dividend but actually had a lower return. So can you give us some thoughts on when should we or what metrics should we be looking at to determine or project whether that business is likely to be in a position to pay a dividend; because it doesn't look like it's simply a return hurdle.

David Golub

So we look at the dividend as being something that should be paid when there are cumulative profits. Bear in mind that the way -- the impact of paying a dividend is it increases NII before incentive fees, which would mean given where we've been after the last couple of quarters it would increase incentive fees. So paying a dividend would be good for the manager and bad for shareholders and by not paying a dividend, we have a higher amount of net realized and unrealized cap gains, which means that net income is higher. So that's actually net good for shareholders. So we're not in a rush to restore the payment of dividends, until such time as we think that this entity is earning -- on a cumulative basis -- is earning profits. I'd also point out one other thing on this page, which I'm sure you've noticed, which is the senior leverage on SLF is now 1.1, which looks a whole lot like the company. So, I know you asked before what makes sense to do with SLF and what is our long term strategy on SLF and I've said we like having it around because we think that in a different market environment it would be attractive to expand it. We're not in the market environment that we think it makes sense to expand it but we're -- but we think it's a nice tool to have in the toolkit if market conditions shifted and we did find this market more attractive. At some point as this continues to shrink, it doesn't make sense to keep her up and so wanted to be clear that we're highly cognizant of that.

Robert Dodd

Got it, I really appreciate that color. If I can kind of tag on a follow up, the fair value of the assets currently I think $3 million below cost, right, and to your point, so that means it's essentially $3 million in the whole, so to speak, on economic profit. So would it be fair for me to maybe conclude that you wouldn't be looking to pay a dividend until kind of its total returns, between its income and its markups, that it kind of recaptured that.

David Golub

Yes, I don't think you can just look at the difference between cost and fair value of the assets because the second point you made is right, which is it has achieved a level of profitability over time. So I think what you want to be looking at is cumulative profits.

Robert Dodd

Got it. I appreciate that. Thank you.


Thank you. There are no further questions at this time. I'll turn the call back to you. Please continue with your presentation or closing remarks.

David Golub

Great, well thanks everyone for joining us today. Appreciate your attention and your partnership and as always if you have additional questions or topics that come up before we chat in our next quarterly meeting, please feel free to reach out.


That does conclude the conference call for today. We thank you for your participation. And we ask that you please disconnect your lines.