Harvest Capital Credit Corporation
Q4 2016 Earnings Call Transcript

Published: 15 Mar 2017

[Operator:]

Good morning, my name is Samantha and I will be your conference operator today. At this time I would like to welcome everyone to the HCAP Q4 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks' there will be a question-and-answer session. [Operator Instructions] Thank you. Mr. Richard Buckanavage, you may begin your conference.

[Richard Buckanavage:]

Thank you. Good morning, everyone. And thank you for participating in this conference call to discuss our financial results for the quarter and year ended December 31, 2016. I'm joined today by our Chief Financial Officer, Craig Kitchin. Before we start our call, Craig, could you provide the Safe Harbor disclosure?

[Craig Kitchin:]

This presentation contains forward-looking statements which relate to future events or Harvest Capital Credit's future performance or financial condition. These statements are not guarantees of future performance, condition 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 time to time in our filings with the Securities and Exchange Commission. Harvest Capital Credit undertakes no duty to update any forward-looking statements made herein.

[Richard Buckanavage:]

Thank you, Craig. Before turning the call back to Craig, who will discuss our financial results in greater detail, I would like to highlight what we believe was a strong quarter and year end results despite facing a challenging deployment environment. We are pleased to report another quarter of strong earnings for the fourth quarter with net investment income or NII and core net investment income or core NII of $0.39 per share, which more than covers our dividend of $0.34 per share. For the full fiscal year ended December 31, 2016, Harvest Capital generated $1.60 per share of NII and core NII resulting in a different dividend coverage ratio of 119%. Our earning dividend for the third consecutive year will enable our shareholders to again benefit from meaningful spill over income in terms of dividend protection in 2017. The solid performance of the portfolio helped us to increase net asset value, which at $13.86 per share was $0.11 per share higher than at the third quarter end. In terms of deployment Q4 2016 was another slow quarter, we closed one new investment comprised of a $1.9 million senior secured term loan and $200,000 equity investment. The senior term loan carries a fixed rate of interest of 13%. This investment in Flight Engine Leasing III helped to continue to grow our aerospace parts vertical at 12/31 we had deployed approximately $10.3 million in this vertical representing 7.7% of the total portfolio. We are exploring opportunities to make further investments in this niche segment, which will likely increase our exposure to the asset class to 9% to 10% in the near term. We also closed two follow-on investments in an existing portfolio companies; the first was a $2 million senior secured term loan made to WBLII, invested in two tranches, one made in October and the other in December, both of which carry a fixed rate of interest of 14.5%. The other follow-on investment involved our participation in a small follow-on equity round completed by our portfolio company Brite Media, our share of which totaled $25,000, offsetting approximately $4.1 million of capital deployment activities during Q4, we did experience three repayments during the quarter, two which were initiated by us and the third was an early prepayment through the decision by the sponsor to refinance our facility. The first two exits involve syndicated loans made in previous quarters primarily for diversification purposes. Historically, we have referred to these types of loans as place holder investments and they typically generate substantially lower IRRs than debt investments made in our core lower middle market segment. The first was the sale of our $1 million senior secured debt investment in Atrium Innovations, which produced a 4.3% IRR for the period we held that investment. The second self-initiated exit was a $500,000 junior secured debt investment in Applied Systems, which generated 8.1% IRR upon exit. The third exit during the period was a prepayment of our entire $4.3 million senior secured debt investment in PD Products at par. The refinancing of our facility that resulted in this exit produced an IRR of 14.8%. Subsequent to quarter end, we experienced two additional exits. The first was the full repayment of our $3.8 million syndicated junior secured debt investment in North Atlantic Trading Company or NATC, which produced a 12.9% IRR upon exit, and the full repayment of our $1.7 million senior secured debt investment in WBLI that generated 15.6% IRR. Offsetting those exits were two additional investments totaling $3 million in the aggregate. The first was a $1 million follow-on senior secured term loan to WBLII, an existing portfolio company that carries a 14.5% yield. Second transaction being a $2 million investment in a junior secured term loan made to Turning Point brands formally known as NATC that carries a fixed rate of interest of 11%. The PD Products, NATC and WBLI exits represent our 25, 26, and 27 realizations since inception. After giving effect to these exits, our weighted average internal rate of return is 20.7% including place holder investment such as Atrium and Applied discussed earlier and 22.5% without such investments. This growing track record provides continued evidence of our disciplined investment strategy that emphasizes prudent growth, the generation of attractive risk adjusted returns, the protection of shareholder capital and producing recurring net investment income that supports Harvest established dividend. From a risk perspective, the portfolio continues to exhibit solid results with a weighted average risk rating of 2.01 at 12/31 despite up tick from 1.97 at prior quarter end. As of 12/31, we had one loan on non-accrual status with a cost basis of approximately $2 million or 1.4% of the total portfolio, and one loan on PIK non-accrual status with a cost basis of approximately $6.6 million or 4.7% of the total portfolio. Our keen focus on capital preservation is a major factor to our achievement of growth and net asset value per share of this past quarter, which was $0.11 higher than at September quarter end. We continue to remain prudent diversification across the portfolio, our top five abagore concentration increased modestly to 36.4% from 35% at prior quarter end. And the top 10 abagore concentration increased only modestly as well from 57% at 9/30 to 59% at 12/31. Our industry diversification remain sound as well, our largest sector concentration represents 13.4% of the total portfolio down from 13.6% last quarter and we continue to have no direct exposure to the oil and gas sector which has served as well over the past several quarters. At fiscal year end, December 31, our portfolio was comprised of approximately 56.8% senior secured debt investments up from 50% at 9/30; 39.2% junior secured debt investments and 4% in equity and equity like securities. As a result, approximately 96% of our total portfolio and 100% of our debt investments are secured by at least a first or second lien with no non-secured debt investments. Majority of our deployed capital is invested in floating rate investments, which are approximately 65% helps to insulate Harvest Capital's future earnings from the possible negative impact of rising interest rates, in fact, we will enjoy upside in net interest margin as interest rate rise, we are already beginning to see the benefits of that. For example, we estimate that NII would increase by approximately $475,000 with an increase in LIBOR of 100 basis points all else being equal. This equates to approximately $0.07 per share of higher annual earnings. Current state of the markets in the segment in which we primarily compete continues to be very competitive. Pricing continues to be the primary basis of competition. We estimate that between the end of Q3 2016 and today overall yields have impressed by 100 basis points. On average, we believe the compression as most impacted the attractiveness of mezzanine investments, so all else being equal; we are likely to be more weighted towards senior secured investments in the near term. Similar to my characterization of the market last quarter, the silver lining is at the shared number of deployment opportunities remains very high. Our first quarter 2017 pipeline has averaged almost 50% more transactions than the average pipeline throughout 2016. With that, we have definitive benefit of selecting the most attractive opportunities from a broader universe of investment options. The higher overall pipeline combined with the solid quality of the transaction volume has enabled us to effectively compete for investment opportunities and as of today, we have eight mandates totaling $18 million. This is the most activity we have witnessed since late 2015, consistent with my comments earlier, $12.5 million of the $18 million mandates were 70% are on the senior secured asset class. Although many of the transactions are expected to close in the next 30 to 45 days, there can be no assurance that they close within that timeframe or close at all. We hope to be in a position to discuss many of these investments in more depth in May when we report first quarter 2017 results. That concludes my formal remarks. So, I will turn the call back over to Craig.

[Craig Kitchin:]

Well, thanks Rich and good morning, everyone. Net investment income and core net investment income for the quarter were $2.4 million or $0.39 per share compared to $3.4 million or $0.54 per share in Q4 of 2015, for the year NII was $10.1 million or $1.60 compared to $9.7 million or $1.54, core NII was $1.60 compared to $1.52 in 2015. Couple of things to note, earnings for the quarter, number one, there were no major one time income items driving earnings in Q4. However, last year in the fourth quarter we had the Americana deal payoff, which generated approximately $0.15 and accelerated interest in fee income. And number two, in spite of the net appreciation in the portfolio during the quarter, the total return look-back feature in our management agreement kicked in again reducing incentive fee expense by $325,000 or $0.05 per share. Net income for the quarter was $2.8 million or $0.44 per share compared to $2.1 million or $0.33 per share in Q4 of last year, the increase was driven by $300,000 of net portfolio appreciation versus $1.3 million in net portfolio losses a year ago. Net income for the year was $6 million or $0.96 per share compared to $6.4 million or $1.3 last year. PIK income represented 7.2% of total interest income compared to 5.4% of interest income in 2015. It went up this year due to our investment in Yucatan which has a relatively large PIK component. Yucatan was a growth financing which is why it was structured the way it was, heavy on the PIK early and is a bit of an outlier. Overall though we still have a very small percentage of our overall income it is PIK. As of year end, the fair value of the portfolio was $134.1 million versus amortized cost of $139.1 million, reflecting $5 million of net depreciation in the portfolio. As of year end, we had total debt of $54.4 million for a debt-to-equity ratio of 62.5%, down slightly from 63% last quarter. Also as of year end, we had $7.6 million in cash and about $28 million of capacity on our credit facility. So with our cash and borrowing capacity, we have enough dry powder to continue executing the business plan in the short-term. And as I mentioned on prior calls, I would note that we've got about $22 million of lower yielding syndicated loans on the balance sheet that could be sold and invested in core deals with higher yields. These syndicated loans had a weighted average effective yield of 11.9% at year end. At year end, NAV was $13.86 it was up $0.11 per share from last quarter because we had net income of $0.44 per share which exceeded the $0.34 in dividends paid during the quarter. This was mentioned in the subsequent event section of our press release and our 10-K, but there was news after year end on SourceHOV, it's one of our level 2 asset portfolio companies that year end was marked at 67% of par. It is being merged into another portfolio company of ours Novitex and as a result the debt of both companies will be repaid at par plus a small prepayment premium for source. This will result in the reversal of approximately $1.3 million of depreciation in Q1 of 2017 which will add about $0.18 to NAV. One other thing I will mention is that we are carrying over approximately $2.8 million or $0.44 per share and undistributed taxable earnings into 2017 is the third year in a row we've carried forward undistributed earnings. So this should give investors added degree of comfort as to at least the sustainability of current dividend levels. And lastly, I'd like to mention at the market stock offering, we've filed a perspective supplement to our shelf in December registering a million shares for this program and I'd point out that we'll only sell shares above NAV, but given the recent run-up in our share price we are able to sell 107,000 shares raising $1.5 million in the first couple of weeks in February before a blackout period kicked in. This is an efficient and low cost way to raise capital and accretive to shareholders and then we're selling above NAV. We think it's just one example of the alignment of interest that exist between the company and shareholders in part because of the large inside ownership that exists with the company. And with that, I'll turn the call back over to Rich.

[Richard Buckanavage:]

Thanks, Craig. Thank you to everyone for participating in our call this morning and we understand that there maybe some questions. So Operator, could you please open the lines up for questions our participants may have.

[Operator:]

Certainly. [Operator Instructions] And your first question comes from Brian Hogan [William Blair & Company].

[Brian Hogan:]

Good morning.

[Richard Buckanavage:]

Good morning.

[Brian Hogan:]

My first question is sort of answered in your prepared remarks, but are you able to grow the portfolio in 2017 because it looks like you had net outflows here in the first quarter, obviously, first quarter is not done yet, but of a negative $2.5 million and then with the repayment of those two that are merging $11 million accumulative -- $13.5 million of outflows, but you said you have $18 million of mandate. Are you planning on growing the portfolio this year, or is it just too competitive? I know you had a strong pipeline.

[Richard Buckanavage:]

Well, certainly the goal is to grow the portfolio Brian to the extent that we believe adequate opportunities exist. And right now we do believe that there is certainly a strong pipeline in just the sheer number and the quality of those opportunities is high at the moment. So we are interested in continuing to deploy capital and that can certainly change as we've seen in quarter-to-quarter the market for deployment has changed very rapidly, but right now we feel very good about our ability to deploy capital in 2017. As you highlight, we face the headwinds of two rather meaningful investments that are going to exit in Q2 totaling a $11 million, but again that is a Q2 event and right now we don't have any further guidance in the public information available as to when in Q2 that might occur, but we're certainly confident in our ability to offset, in the short-term, those repayments plus those received subsequent to quarter end with the mandates that we have in hand. Given that some of those mandates are actually two existing portfolio companies, so high degree of confidence in those closing, the good news is, of the eight mandates, five are brand new transactions, so add to continued diversification in the portfolio by adding brand new investments. Hard to say when those closed, but we certainly feel that they are far enough along that many of those will close either earlier than or at least concurrent with the repayment Novitex and SourceHOV. So we think we can offset that kind of near-term repayment, and then, beyond that we don't have anything that's in the portfolio that we've highlighted or been notified that we see coming back to us any -- within the next couple of months. So we go into -- probably go into Q2 with some stability in the portfolio and looking to grow it in Q2 and beyond.

[Brian Hogan:]

Sure. The yields under the new investments on the eight mandates, are those compared to your current levels or is it lower -- you mentioned broadly at 100 basis points lower yields in the market from a year ago. But --

[Richard Buckanavage:]

Yes. Right now if I take the three follow-on investments out of the equation just because they are being done at identical levels to the existing pricing in the investments that we have. So of the five investments of the eight that are brand new, the average return if I'd have to look at the same asset class that's in our portfolio, we've lost about 50 basis points. So 100 basis points is really kind of an average between mezz and unitranche and we believe that the compression has been more pronounced at least currently in the mezzanine asset class, which has made a little less attractive to us today, not that we're not still looking at that asset class, but we certainly are also always looking at the relative value, the mezzanine investment versus the unitranche investment and when those two begin to approach each other then obviously we're not a buyer in mezzanine we're more of a player in unitranche, I think that's kind of where we're today.

[Brian Hogan:]

All right. PK and CRS reprocessing on both non-accruals, obviously, once been on PIK non-accrual, but they have been -- any other due dates pushed out, I think PK is one of your past due and [indiscernible] preprocessing was previously September and now is March and now September of this year. What is the outcome of those and what point do they get recycled and put back on accrual because those things that there is still a lot of vast income there?

[Richard Buckanavage:]

Well, two very different situations so I'll take one at a time. With regards to PK, we're not as optimistic as we're on CRS as to recovery on that one at least the full recovery, I would say that -- that one will come to ahead in my expectation that will come to ahead by the time we report the next -- the first quarter's earnings. So my guess is, we had something to report there. With regards to CRS, we actually have a lot of optimism there and we -- lot of things that are kind of improving, but not to the point that we need them to improve to begin either stabilizing the fair value or better you have to start increasing it. But, I will say this that we've got collaborative effort on all parts, the management of the company, the equity owners and the various lenders that are in that company, we were all working towards a common goal. And that one is a -- I think you've followed this one long enough Brian is, is a global business and there is some global issues that this company is dealing with outside the company is control and certainly outside our control. So we've been patient with them and we think a lot of positive steps have occurred, but that one is going to -- that one is going to take some time or I think there are some -- just global movements that -- company as to deal with and it just going to take some time. So I don't expect to have much to report in May for you on that one, but I certainly think in 2017 at some point our expectation is the tide will turn for the company.

[Brian Hogan:]

All right. And then, last question for now I guess. Actually before but SBIC license, what are your thoughts there of obtaining one obviously with your leverage close to being maybe enter your target and obviously you have some transitory assets that you could recycle and stuff like that, but obviously enhance your leverage and potentially returns, what are your thoughts there on SBIC?

[Richard Buckanavage:]

Yes. As we've said historically it's something that we think makes sense for us to look into I think that -- I guess the communication that we're getting from folks down there is that given the change in leadership that things have slowdown pretty materially until the new head is able to get in there and understand what's going on, and put their own mark on the SBA. So we don't expect a whole lot of activity there. I think other than we certainly haven't seen any new BDCs I think it's really been folks that have already had one or two applying for their third, so we're seeing some success there, which is encouraging for the BDC space, but my guess from a new license for a BDC there -- anyone who might be pursuing this is going to be delayed somewhat from maybe from where they thought they would be and I think we would fall into that category.

[Brian Hogan:]

All right. Thank you.

[Operator:]

And your next question comes from Ryan Lynch [KBW].

[Ryan Lynch:]

Good morning. Thanks for taking my questions. First one, I have a couple of technical maybe modeling questions first maybe better for Craig. But, as I look at your Q1 earnings and as I look at my model assuming that there is no big appreciation or depreciation in a portfolio no realized, unrealized gains or losses in Q1. It looks like the way I'm running that -- the total return hurdle is still going to limit your incentive fee and in fact, it looks like it's going to lower your incentive fee below even what was earned in the fourth quarter of 2016. So can you provide any sort of guidance obviously I know it depends on what the portfolio does as far as gains or losses, but assuming that those are flat, do you guys expect the incentive fee to be reduced in the first quarter and it could be potentially be reduced lower than what we saw in the fourth quarter?

[Craig Kitchin:]

Hi, Ryan. This is Craig. It's a good question and you're reading it right. The total return look back for those that are familiar with, it goes back 12 quarters. And the reason that it's going to acquire for one more quarter is that first year post IPO, we had either four quarters out of the gate where either the incentive fee was unearned or it was waived by the manager, so we could earn that 9% dividend that first year. And so those first four quarters, the company built up a cushion where there was a lot of net income, but no incentive fees paid and this coming Q1 of 2017 is that last quarter where we've got a quarter three years ago rolling off that this issue will impact it. So, you're right if we're depreciation neutral or if it's below the line neutral, it will impact incentive fees for Q1. Once we get past the Q1 though it will be those legacy issues are behind us.

[Ryan Lynch:]

Okay. And then, one more technical kind of accounting question. If I look at your G&A expenses in the first three quarters of 2016 is about $225,000, look at your admin services expenses, it was about $210,000 for the first three quarters of 2016. In the fourth quarter, those numbers jumped to $344,000 and $276,000, so a pretty big jump as well as I see in subsequent events you guys disclosed that the new administrative agreement with JMP is going to be increased to $1.2 million that's going to be the cap at least, so it's the maximum, which would equal if it run to the maximum, it will run to like $300,000 per quarter. So can you just give any color on what do you guys are kind of thinking about G&A expenses as well as administrative expenses in 2017.

[Craig Kitchin:]

Yes. Couple of things on that. I think the G&A outside of the admin expenses in Q4 were little bit higher than normal because we had some refresh cost on our shelf. And then, we got comments from the SEC that ended up taking longer than what they probably should have and so we just had higher legal expenses and other cost related to that -- expense that was a big part of it. And then, I think going forward is probably the best thing to do just a model in the capped amount on the admin reimbursement. We've sort of been running the low cost for the first four years post IPO, but one of the things that we consider and we've recognized the HCAP is a small BDC. But we're also dealing with a lot of portfolio companies, BDCs, they are three and four times our size that have the same number of companies. So and these tend to be smaller borrowers and maybe less sophisticated, so they take at least as much effort as some of the larger portfolio companies. So I think the $1.2 million partially reflects that.

[Ryan Lynch:]

Okay. And then, you mentioned competition in the market you said about 100 basis points yield compression, you said, it sounded like that the competition market was mainly being very competitive on pricing with that 100 basis points yield compression. Can you just talk about, is competition affecting what you're seeing in terms of total buyout amount or leverage multiples or covenants on the new deals getting done in the lower middle market. And as well as if competition is stronger you still have some capital to deploy does that mean you guys slowdown portfolio growth or what you guys have done in the last couple of quarters or are you guys thinking about just taking lower yielding as you said maybe moving up to some more senior secured investments, but continuing to grow their portfolio.

[Richard Buckanavage:]

Yes. Ryan, similar to what I've characterized 2016 is being was very competitive, it largely was competitive on the basis of price and that continuous really to be the case. We haven't seen a strong push upward on leverage, most if not I'd say certainly 90% of what we look at in the lower little market is sub-four times through our last caller. So we haven't seen a material up tick there. Covenants really in the lower middle market have never been at risk of either going away or becoming some sort of feature that you have in the covenant like, like you have in some of the larger ends of market. So it's really been pricing where we faced most competition. And I think today we still see a number of opportunities are attractive despite some compression I think I said earlier about 50 basis points from the unitranche investments that we're making in Q3 and Q4 into Q1 in the mandates that we have that despite the compression of 50 basis points we still think there is a risk adjusted return there that's appealing to us and one that we're willing to make. I think unless able to make that judgment on the mezzanine asset class when we've just seeing more compression there. Then we've seen on the unitranche side and to take the second lien position for us, there is certainly an added risk element there and when we're not getting a couple of 100 basis points of premium to do that than we're not as attractive to that asset class. So with regards to growth, we still think there is a lot of growth opportunities out there. As I mentioned earlier the pipeline which for 2016 averaged in the low 20s is now averaging in the high 30s. Today about 38 transactions totaling approximately $201 million, so lot of activity out there, the quality is high which means there is a lot of attractive investments to make. We're going to hopefully win our fair share and grow the portfolio in 2017 and to extent that changes and the pricing continues to compress. We may dial back deployment as you said as we have done in historically in the last couple of quarters. We have not been that attracted to what that was. But, that was largely due to the quality of the pipeline, although pricing could compress, it was really what impeded our growth in 2016 was the quality of the opportunities, which I would say purported to mediocre for most of the year, and now we are in a very different environment for whatever reason the quality has picked up substantially. So, we are optimistic that we are going to win our fair share in 2017 and unless that changes, I would say growth in the portfolio was expected.

[Ryan Lynch:]

Just maybe one more kind of follow-up on that. And so, when we talk about growth in the portfolio, you guys do have some capital -- little bit of capital on your balance sheet, a little bit of leverage capital leased, but you guys are again towards your upper limit, you guys issued a little bit of equity through your ATM at above book value which is nice, I mean, over the next -- maybe the remainder of the first quarter and the second quarter it looks like you guys are going to have some pretty big repayments coming in, but you guys also have a strong pipeline. I mean how are you thinking about funding future portfolio growth that you guys want to get leverage levels up to the point 0.75, is that pretty tight range? Even though you guys are at a price to book right now or you guys can issue capital accretively to book value, you guys do have some excess capital, so how are you thinking about funding this capital growth going forward?

[Richard Buckanavage:]

Well, clearly, we have some additional capacity under our leverage facility and so we do expect to hopefully migrate through additional deployment up to that 0.75 range that's been our historical guidance and obviously, we are below there today. And so that's certainly one area we -- the ATM is uncertainly an option that we hope to take advantage of in 2017 to grow our equity base which then unlocks additional leverage capacity. We are certainly interested to extend the deployment environment really exists, we are certainly interested in raising more equity if that makes sense and that's really the -- I think that's the really relevant part of that, if it makes sense. And I think surprised us in 2016 was just the sheer volatility in the pipeline and one quarter when we -- I think my comments from Q3 were fairly optimistic about the environment we thought actually pricing was improving. And within 60 to 90 days it became very evident to us that that was not the case and in fact in the first quarter of 2017, we have seen it go in the opposite way. So, we would like to see a sustained attractive deployment environment and if that does persist, I think we would look at -- doing an accretive equity raise. But, we want to have that confidence that ability to put that capital to work exist because if it doesn't then -- then we raised equity that doesn't support the dividend and that impacts the support for the dividend. So, we are going to be very thoughtful about that, but that's really the tea leaves that we are trying to read and get comfort with is that there is a sustained pipeline of opportunities for us to deploy capital. And if that's the case, clearly at some point, we need to raise equity to continue to support the growth of the business.

[Ryan Lynch:]

Okay. That makes sense. Thanks for answering my questions.

[Richard Buckanavage:]

You are welcome.

[Operator:]

And your next question comes from Mitchel Penn [Janney Montgomery Scott].

[Mitchel Penn:]

Hi, guys.

[Richard Buckanavage:]

Good morning, Mitchel.

[Mitchel Penn:]

Quick question on the credit facility. It looks like the revolving period goes through April of 2017 -- April 30, how does that impact you guys?

[Craig Kitchin:]

Hey, Mitchel. This is Craig. You are right the revolvers out did in April, we are working with our lending group on getting that extended, we got the terms of the extension agreed to and there was a couple of tweaks to some of the baskets in the borrowing base that we are still trying to haggle through with them. But, we expect to have something to announce here either before on our next earnings call.

[Mitchel Penn:]

Okay. Next question, the yield compression, have you seen any increase in pre-payment speeds on the loans in your portfolio, so economically is it cheaper for an existing borrower to refinance in the new issue market?

[Richard Buckanavage:]

Yes. I think Mitchel, I think you have to look at the vintage, I think the extent that something is couple of years in. I think you are right. I think it becomes situation where the prepays are not high enough to prevent someone from looking to potentially refinance that credit facility. If it's down to 1% and you can -- on a prepayment and you can pay and you can save 1% each and every year. That's obviously a refinance opportunity that folks most likely will be looking to make. Some of the newer vintages where we still might be in the 3% range or the 4% range, I would say that still probably remains a pretty big barrier to repayment, even if they can shave a 100 basis points off, off the facility. And then, of course, the strategy for that particular business plays into that whether the owner envision themselves owning that business for another 1 or 2 years then maybe a refinance doesn't make any sense or 3 or 4 years maybe a refinance does make some more sense. So, I think it's really vintage dictated and because of the way prepay has stepped down.

[Mitchel Penn:]

Got it. Thank you.

[Operator:]

[Operator Instructions] And there are no further questions at this time.

[Richard Buckanavage:]

Okay. Well, thank you everyone for participating this morning. We look forward to talking to you in early May about our first quarter results.

[Operator:]

Ladies and gentlemen, this does conclude today's conference call. You may now disconnect.