TriplePoint Venture Growth BDC Corp.
Q2 2020 Earnings Call Transcript

Published: 6 Aug 2020

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the TriplePoint Conference Call. . Please note that, this event is being recorded. I’d now like to turn the conference over to James Labe. Please Jim, go ahead.

[James Labe:]

Thanks operator, and good afternoon, everyone. I’ d like to start by mentioning that some of us are in remote locations affected by the tropical storm which has made its way and continuing to make its way up the East Coast. And apologize in advance for any technical issues now or that may arise during the call. On behalf of TPVG, we hope that our shareholders and their families are healthy and continue to stay that way. Our first priority is protecting the health of our employees and supporting our portfolio companies during this global pandemic. As a global firm, we continue to work closely with our venture capital partners, entrepreneurs, and investors within the venture ecosystem.

[Sajal Srivastava:]

Yes, sorry. Sorry, everyone, I was dropped. Thank you, Jim, and good afternoon, precaution of the hurricane. I hope all of our stakeholders and their families remain safe and healthy during these challenging times. Just so where I am okay, as well. As, Jim mentioned, managing our existing portfolio has always been our highest priority, but is even more important during periods of significant volatility. We are proud on a number of fronts of the performance and developments within the portfolio, which we believe reflects the uniqueness of our investment strategy, the quality and durability of our portfolio companies, the potential for additional returns and value accretion from our investments over the long-term, and of course, the experience and efforts of our team. During the second quarter, we signed $93 million of term sheets with venture growth stage companies that TriplePoint Capital, up from $80 million have signed term sheets during the prior quarter, enclosed $14 million of debt commitments with four companies at TPVG. As Jim mentioned, a critical benefit of the TriplePoint Capital platform is our frequent communication with our select group of venture capital firms and our platforms robust activity in the venture lending markets, as demonstrated by our higher level assigned venture growth stage term sheets quarter-over-quarter. Furthermore, by having multiple vehicles of investment capital, and our co-invest exemptive relief order or sponsors able to allocate and co-invest dynamically across its vehicles based on investment strategy, capital available for investment and portfolio diversification and concentration targets and limits. Since the start of COVID TPVG has benefited from our platforms highly selective and continue deal flow from our best relationships, but acquired smaller allocations of these opportunities as we focus on maintaining flexibility and liquidity as we weather the COVID crisis. As we look to the rest of the year, as Jim mentioned, given TPVG substantial and growing liquidity position, we expect TPVG to take a larger portion of new debt commitment co-investments. During the quarter, we funded $21 million of debt investments to seven companies with a 14.4% weighted average yield. We also invested $125,000 of equity in one company and received warrants in four companies valued at $200,000. Our $21 million of fundings this quarter was down from our $79 million of debt investment fundings in Q1. Our reduced level of fundings to-date demonstrates the strong cash position and operating runway that exists at many of our portfolio companies, as well as the trust and confidence they and their venture capital investors have in us is a consistent and dependable financing partner. As we look to the rest of the year, we expect to see fundings returned to the $50 million to $100 million range per quarter by Q4.

[Christopher Mathieu:]

Great. Thank you, Sajal, and hello, everyone. Let me take you through an update on the results for the second quarter. Total investment and other income were $23.8 million for the second quarter of 2020 as compared to $20.8 million for the first quarter. The weighted average annualized portfolio yield was 13.7% on the total debt investments for the second quarter. The increase in total investment income was primarily driven by a higher average portfolio size and fees earned from pre-payments during the quarter. Total operating expenses were $12.3 million for the second quarter, as compared to $8.6 million for the first quarter. Total operating expenses for the second quarter consisted of $4.3 million of interest expense, $3.2 million of bass management fees, $2.9 million of incentive fees and $1.8 million of general and administrative expenses. The increase in overall operating expenses is primarily driven by an increase in management fees and interest expense from a larger average investment portfolio and an income incentive fee during the second quarter. Net investment income for the second quarter was $11.5 million or $0.38 per share compared to $12.2 million or $0.41 per share in the first quarter. As we previously discussed in detail total net realized gains on investments totaled $801,000 and net unrealized gains on investments for the second quarter were $8.9 million. The net increase in net assets from operations for the quarter was $21.2 million or $0.69 per share compared to a net decrease of $5.1 million or $0.17 per share in the first quarter. At quarter end, total assets were $719 million including $693 million of investments at fair value and $23 million in cash. We ended the quarter with total net asset value or NAV of $405.5 million or $13.17 per share, compared to $395 million or $12.85 per share as of March 31, an increase of 2.5% quarter-over-quarter. We reported on funding commitments totaling $180 million -- $151 million or 84% of this total will expire during 2020 and $29 million will expire during 2021. In addition, all of our unfunded commitments have a prime rate floor set to 3.25% or higher. We believe we have a strong liquidity position as of quarter-end. Some of this has been from our proactive efforts, such as our accretive $80 million public equity raise in January or $70 million private term notes funded in March and our $50 million advisor back credit facility in May. The remaining positive impact of our strong liquidity position has been from our high quality portfolio, which was generated -- which has generated strong loan pre-payments and loan amortization payments during the first half of 2020. This enhanced liquidity and our overall lower leverage profile gives us capacity in excess of our existing unfunded commitments to grow the portfolio. As of June 30, the company had total liquidity of $165 million consisting of $23 million in cash and an additional $142 million of availability under our revolving credit facility. We continue to have the flexibility under an existing accordion feature to expand the current $300 million commitment under our revolving facility by up to an additional $100 million. Aggregate outstanding borrowings as of June 30 were $303 million consisting of $75 million of the retail fixed rate baby bonds, which mature in 2022, which are listed on the New York Stock Exchange $70 million of private term debt which matures in 2025 and $158 million outstanding under our revolving credit facility. Given our aggregate borrowings as of June 30, we've reported a leverage ratio of just 0.75 times leverage or an asset coverage ratio of 234%. During the second quarter, we distributed $0.36 per share from ordinary income as part of our regular quarterly distribution. We are pleased to announce that for the third quarter of 2020, our Board of Directors has declared a distribution of $0.36 per share on September 15th, to stockholders of record as of August 31. We're also pleased to note that while we covered our distributions for the quarter with ordinary income, we are also continuing to estimate spillover income as of June 30 of approximately $8.9 million or $0.29 per share to support additional distributions in the future. So this completes our prepared remarks. And now at this time, we'd be happy to take your questions. And so operator could you please open the line at this time?

[Operator:]

. At this time, we will pause momentarily to assemble a roster.

[James Labe:]

Operator before we take our first question, we missed the Safe Harbor language at the beginning of the call. So, I'd like to direct everyone's attention to the customary safe harbor disclosure in our press release. Regarding forward-looking statements, and remind everyone that during this call management has made and will make certain statements that relate to future events or the Company's future performance or financial condition, which may be considered forward-looking statements under Federal Securities Law. You're asked to refer to the Company's most recent filing with the Securities and Exchange Commission for important factors that could cause actual results to differ materially from these statements. The Company does not undertake any obligation to update any forward-looking statements or projections unless required by law. Investors are cautioned not to place undue reliance on any forward-looking statements made during the call, which reflects management's opinions only as of today. To obtain copies of our latest SEC filings, please visit the company's website at www.tpvg.com. With that operator, we'll take our first question.

[Operator:]

Our first question comes from Finian O'Shea from Wells Fargo. Please, Mr. Finian, you can proceed.

[Finian O'Shea:]

Hi, good afternoon, everybody. First question, Jim I think you mentioned life sciences in your remarks, is that indicative on you looking at opportunities in that arena?

[James Labe:]

No, I would say generally, we're going to continue with the technology is the overwhelming bulk and focus of our portfolio was always. I was commenting in general how in the overall environment, those are areas that are on the increase but in this environment, but having said that, there are many technologies, medical technologies, healthcare technologies, technologies related to -- that we're actively involved with already and looking at now as new investments. So there's always a fine line. But right now, our game plan is not in the pure, let's say, biosciences in those areas unless so there's activity because we're always following our select venture capital investors who are predominantly technology.

[Finian O'Shea:]

Sure, just thank you for that there just clarifying. And another question, Sajal or Jim, on the second quarter or post-COVID capital raises. Can you give us some high-level color, is that what then would normally be unscheduled or were they more than would normally be unscheduled, more urgent type raises. And the second part to that. Understanding venture capital structures can be very nuance and bespoke. Are there any instances where new round would effectively dilute or coming ahead of your position.

[Sajal Srivastava:]

Yes. great question, Fin. Let me start and Jim please jump in. so, I would say I think going into Q2, an area of concern for many of us was the ability for investors VCs and the like to conduct due diligence remotely using Zoom. As we saw at Q1, a number of the rounds that equity rounds that closed during Q1 were around that had started before sheltering in place. Diligence have been done, ends have been met in person. And so, I think we were pleased to see the rate of new investment activity in Q2 and here in Q3 with funding processes that started in the midst of COVID where investors have not met management teams in persons and issuing term sheet electronically. And so, I think that's a promising sign where nowhere near the same level of activity for new investments that we were a year ago in pre-COVID but nevertheless a promising sign. I would say then with regards to the nature of the rounds, I would say generally speaking we're seeing those companies that are benefiting from tailwinds from COVID are no doubt continued, have the ability to raise equity capital and follow-on rounds in financing. There definitely some companies would bumps along the way where existing investors are showing their support and they're putting in more capital. Typicaly that's in the form of convertible debt versus traditional equity financing because they don’t want to set valuations. And your next comment in terms of the impact of these financing to us. So, the period of business right where lenders were secured, we're senior to all the capital from the VCs whether or not it's equity capital or convertible debt. That capital is or is even if it's convertible debt is junior to us. But I do think given the realities of COVID, evaluations are all over the place. And so, I would say the impact to us has not been any impact to our security positions from that incremental capital. But the impact has been if you look the warrant and equity book, there were a number of companies which closed either flat or lower valuations than the prior rounds where investors have the opportunity to take advantage of market conditions. And has result the warrant and equity book, I talked about that 41 million at cost had some mark downs on the equity basis on an interim basis as result of flat-to-down rounds but no change in our where we sit in the press structure as a result of those financings.

[James Labe:]

Yes. and I think Sajal covered that nicely. These are generally not emergency round kind of situations. And if anything they are helping through the new environment kind of plans which generally are as I said lower burn rates, much longer a cash runway. We have company, some of them three years plus of cash on hand. And more let's say realistic plans which are aimed towards cash flow, breakeven or profitability using existing cash. So, it's a little bit more I guess I'd say flexibility and saneness in view of the economic environment. And yes, we're not aware of any venture capital equity or in any kind of circumstance coming in front of our debt.

[Finian O'Shea:]

Very helpful. As always, thank you. And then just the final questions. We expand, you can go into our a portfolio company. Looking at Prodigy Finance, that's a decent sized maturity at the end of 2020, now 18.7 million. My understanding is that student loans for international students which I'd imagine with my limited information is pretty challenged. Is there any context or color you can provide on the status of that lender obligation?

[Sajal Srivastava:]

Yes. I'll take the first cut. So, just to clarify that's a lender to international graduate students. So, I'd say Prodigy lends to those graduate students attending top tier business school, engineering school and law school. So, the folks that have a higher likelihood of getting jobs regardless of crisis. So, I would say the very focused approach or thoughtful approach, they're not lending to under grads, they're not lending to just any graduate programs but very focused on those degrees particularly again business schools, engineering schools and then a small percentage of law schools. And then top schools only. So, I'd say the good news is very focused on higher quality company or sorry obligor based than traditional students.

[Finian O'Shea:]

Okay, that's helpful. That's all from me, thank you.

[Sajal Srivastava:]

Great, thanks Fin.

[Operator:]

Our next question comes from George Bahamondes from the Deutsche Bank. Please George, you can make your question.

[George Bahamondes:]

Great, thank you. I missed a point in your prepared remarks. You've mentioned some spillover income for the dividend. Can you just quickly flag that for me here, please minutes.

[James Labe:]

Sure. Chris you will take that

[Christopher Mathieu.:]

Sure. So through the quarter end June 30, we had some 2019 spillover into 2020. So as we covered and more so covered our dividend in Q1 and Q2 so spillover income in the aggregate is estimated at $8.9 million. So that's about 0.29 penny per share.

[George Bahamondes:]

Great. Thank you. And just as you think about the current environment and maybe how Sajal you have referenced obviously because more difficult to do due diligence we assume how has your kind of underwriting diligence process evolved and also just in terms of have the terms really shifted meaningfully, some additional context around, how maybe the underwriting process or maybe the terms that you are seeing has maybe evolved from what you are seeing pre-COVID?

[Sajal Srivastava:]

Yes. Let me start and Jim please jump in. So I'd say George one of the great things of our approach is we only lend to companies backed by our select group of leading venture capital investors and there is a reason behind that strategy, those portfolio companies and loans to companies backed by those top tier VCs outperform not only during bull markets but more importantly our data and our track records show that their portfolio companies outperform during more challenging times and so I'd say what hasn't changed is the fact that we focus on our select VCs and we think that's a critical element of validation risk mitigation and credit support by focusing on higher quality sponsors and their better portfolio companies. With regards to kind of market dynamics and pricing and structures, I'd say and Jim will jump in as well is that I would say that the market conditions haven't materially changed pre-COVID, midst of COVID, I would say that markets continue to be robust from demand from debt also with regards to equity investment activity as we've articulated. So we haven't seen material changes in spread. We continue to see activity bank and non-bank and so I think that's what's also holding structures and terms we haven't seen rates go lower. We haven't seen rates generally go higher but again we're only commenting on companies backed by our sponsors. If we were to push yields up in my opinion it would imply that we were taking higher risk or lending to lower quality companies which is not our approach. If anything in this environment we've raised the bar in terms of the profile of companies, new companies that we're lending to where we're particularly focused on only lending to companies that are either seeing tailwinds or no impact from COVID. If we have a company that's in a sector that's maturely impacted or a company that's been maturely negatively impacted by COVID and that automatically challenges us from lending to them or restricts us from lending to them plus cash runway. We lend to companies that have cash. If they're out of cash or they're soon out of cash we're not going to lend to them. So holding the bar if not raising it with regards to existing cash runway and cash on hand is another way that we again have improved our underwriting targets and metrics in this environment. Jim? Anything to add?

[James Labe:]

Yes. I can just echo that and also quickly add that invest, to Sajal's point investments today are in the COVID period and we take that into account. That's obviously benefit, absolutely no sacrifice in our investment discipline at all or our due diligence process. It's the same rigorous thing. There is fallout as a result of the current economic environment in investment discipline or quality and if anything instead of meetings we're still conducting them they happen to be online but we're not taking any shortcuts or anything different on that front and then finally in terms of pricing I would agree. There really, really isn't a change. There is continued opportunities here. There hasn't been any kind of deterioration and there won't be a triple point because this market is not about pricing. This is a very specialized market. There is very few and far between players that understand, have the track record and it's more about the reputation references and relationships than it is with someone 50 basis points lower. I mean these things may be more middle market BDC and middle market traditional lenders with venture lending they're very high barriers and it's a very specialized due diligence and this is not about pricing and spreads and those kinds of things. This is about quality deals and reputation and running with the best venture capital backed companies and our select venture investors who we worked with. One of them the other day was commenting Jim it's been 36 years we've worked together.

[George Bahamondes:]

Great. That's helpful. Thank you for those comments and last question for me in your response just now, you did reference the difference in business model and the dynamics of venture lending relative to kind of traditional BDC lenders. As we think about the current environment and as we've spoken to other folks in this space as they've reported earnings obviously the dynamics are different but as borrowers have asked for relief they've given us a sense of kind of how these conversations have gone and just was wondering if in a hypothetical scenario where one of your positions was asking for some form of relief or some sort of amendment to a covenant how would a conversation like that go typically and when you think about traditional BDC lenders they might ask for additional capital from the sponsor for a few quarters of relief around any sort of covenants. Can you just kind of help me understand how that might differ in the venture landing space versus your traditional BDC as we think about the current environment?

[Christopher Mathieu:]

Yes George, great question. I'd only first say we don't want to reveal all of our secrets. So some of our sponsors may be listening or they see versions of the transcripts so, I would say at a high level the triple point approach in fact, I mean it's even in our filings. We're very collaborative, there's a reason why we choose to work with the sponsors that we do. These are sponsors that we have long-standing existing relationships with, as Jim mentioned we have 130-plus years and so I think one of the good things is we know how they think, they know how we think given we've worked together a number of scenarios we have multiple portfolio companies. It's not just one-off lending opportunities within their portfolios. So we're very much a trusted collaborative partner for them and their portfolio companies and so it's just again it's being transparent. It's trying to solve the problem and but it's also not about being a pushover. There is a very different risk return profile for venture lending versus venture equity and there is a role in place and objectives that we have versus they have and I'd say every situation is case specific but I would generally and broadly say a sponsor putting in more money is a great sign of validation. That's what all of us as lenders regardless of whatever middle market venture segment you are in seeing a sponsor put in more capital is great and is important not only from a cash runway perspective but also it shows sponsors don't have endless supplies of capital and so the fact that they're putting more money into an existing investment shows support, shows that they do believe that they're going to make return. That's a signal in itself as the lender we are senior to all their equity capital and the only way they make return is if we get paid off and so I would say our approach collaborative. We're trying to, we're not trying to kick the can in three and six months and then have the conversation again. I think conceptually we're trying to solve longer term problems but I think the difference though too is in venture lending. The expectation is these companies should be raising rounds every 12 to 24 months and so what we're trying to solve for is how do we give this company enough time to achieve additional milestones to validate the next round of financing is kind of plan A. Plan B is how do we give this company enough time for milestones or to complete a strategic process or option three is how do we give this company enough time to enable ourselves to foreclose on assets and liquidate assets. So I think those are the scenarios we look for and I think that's how we play it with our sponsors.

[James Labe:]

Yes and I would agree. I would second that approach and that we're all in this together as the approach; the investors, lenders, the entrepreneurs, the companies to work through when things don't go according to plan during this environment.

[George Bahamondes:]

Great. That's awful color and that's also it for me this afternoon. Appreciate for you guys. Thanks for answering my questions.

[Operator:]

Our next question comes from Casey Alexander from Compass Point. Please Casey you may proceed.

[Casey Alexander:]

Hi, good afternoon. I have a few questions. One is why in through this pandemic unlike the last time the stock traded at a significant discount, has the company not chosen to at least put in place a backup share repurchase program and potentially take advantage of the significant discount in the stock?

[Sajal Srivastava:]

Yes. I think Casey as we said last quarter liquidity is at a premium. We see other sponsors, other platforms doing, I would say non-shareholder friendly things to get access to more capital and so I would say from our perspective given our funding capacity unfunded commitments making sure and ensuring we have sufficient liquidity to meet those needs is tantamount and priority number one and then as we come out of the crisis and we feel we have reserve capital or excess capital a shareholder buyback would make sense but again we're still in the middle of the pandemic. We don't know when it's going to end and we're not going to sacrifice the long-term success of the BDC and the precious liquidity that we have.

[Casey Alexander:]

Well, that's a tough answer Sajal when you hold on to a highly volatile asset such as crowdStrike. If liquidity were that precious then CrowdStrike would have been sold as soon as you saw the dynamics of the pandemic.

[Sajal Srivastava:]

No, I think again for us maintaining enough liquidity to meet our unfunded obligations to have again the magnitude of unfunded commitments that we had coming out of Q1 that's why our advisor put a backstop facility in place was to ensure that if all the unfunded commitments came in we had sufficient liquidity to do that. We've now kind of crossed over through the end of Q2 here in Q3 and we're now in a position where everything came in more than excess capacity which again we don't envision that happening. So now it would make sense to think about and consider it but not during Q1 or Q2.

[Casey Alexander:]

Well I think your shareholders would appreciate it. My second question relates to reported really significant losses in 2019 has had tremendous problems specific to the pandemic, I mean it's, I don't think it's through any problem of their own and has been trying to raise an additional capital and at least according to press reports has thus far been unsuccessful and you still kind of have that marked at 98. Can you tell us where that is in the credit risk buckets and maybe give us some color as to what's going on with ?

[Sajal Srivastava:]

Yes, I can start and then Jim jump in. So again we can't comment specifically on portfolio company situations but they are rated yellow in our credit watch list and so I think the difference for us as a lender cash runway is always an important metric. So those companies that may be negatively impacted by COVID there's no doubt that we take that into account from our fair value perspective but then we look to cash runway sponsor support and their ability to raise incremental capital and service our debt as for how we look at our credit and our value for the credit and so that's how we look at Notel.

[James Labe:]

Yes, I can only add that it is yellow. It is not anything lower than that and these are privately held companies. So as you know we're not really in a position to talk about the status of these but I would say we are in close touch with all of our companies in this category and we'll stick by we feel for many of these companies it will be their continued support. We are in close touch with investors and I think we can have to leave it at that as it is a privately held company.

[Casey Alexander:]

Okay. Thank you for taking my questions.

[Operator:]

Our next question comes from Ryan Lynch from KBW. Please Mr. Ryan you may proceed.

[Ryan Lynch:]

Hey good afternoon and thanks for taking my questions. I wanted to first just talk about maybe you could use a broader framework or you could specifically talk about CrowdStrike if you'd like but you guys have a general framework or process of how you guys determine when to sell publicly traded equity investment like that? I mean you guys sold a portion of that position. It's been a great investment for you guys but you guys also held on to a portion of it. So can you talk about what was the decision that went on either there specifically so just a portion of it but hold on to some of it or just a general broader framework of what is the process or framework that you guys use to determine when to exit a publicly traded equity investment?

[Sajal Srivastava:]

Sure. I will start and then Jim and Chris please jump in. So Ryan, as you know we are subject to lockups so for the majority if not all of our portfolio companies when they go public we're subject to the 180-day lock-up as our other insiders employees and other investors. So at a minimum we're sitting on our positions for at least six months and then any of those folks that familiar with the venture world post lockups that's when funds start distributing to their LPs to lock in their returns and so you naturally see downward pressure on stocks shortly or right after the lockup expires. So listen we're not a hedge fund. Our policy is as we've said is to liquidate in an orderly fashion in a reasonable time period after our lockups expired but we also have the benefit of not being pressured to lock in returns, not being pressured to distribute to LPs immediately like traditional funds are and so we want to time it appropriately so that we don't get disadvantaged by the pressure from funds and other investors in those companies. But again our model is not to hold these positions for a material period of time after the lockup expires. Clearly with Q1 this year our priority was managing our debt investment book and among other things and so staying if you had to in our discussions internally clearly credit number one our employees well maybe employees number one, portfolio number two, credit portfolio and the public portfolio obviously a significant amount of volatility obviously, we have conversations with research analysts to get the reports talk to other folks and to get insights and so it's a balance but I'd say generally orderly process and then I think with the larger positions CrowdStrike was a particularly large position. I think our perspective was we still believe there is some real value of that company and so we wanted to take the majority of our money off the table, the house money and 20 million as Jim said was equal to the amount that they actually drew from our loan of the 40 million commitment and then leave a little bit left and see how it goes in the next quarter too.

[Ryan Lynch:]

Okay. That makes sense and CrowdStrike's been up in a home run position. As far as your unfunded commitments go you guys provided a nice disclosure about 180 million outstanding but it looks like quite a bit expire at the end of this year. Is your intention to kind of to get that number lower and allow some of those to expire or are you comfortable running at this balance meaning you guys will continually go out there and kind of as you guys see good opportunities to just to ramp up that that commitments number to kind of hold it static. Just trying to get an indication on how comfortable you guys are with that unfunded commitment level today given a large amount of runoff is coming towards the end of the year?

[Sajal Srivastava:]

Yes. Great question. I will start then Chris and Jim please jump in. So you're absolutely right. I mean we have the benefit of underlying knowledge with these companies. So 180 million material amount burns off by the end of this year and as you've parsed through the list I mean there are also a number of companies Ryan which are sitting on huge positions of stockpiles of cash. I will pick one, which is raised a 300 million round of equity financing in Q1 and so it's a balance. We're taking real-time analytics in terms of our portfolio companies understanding and expectations on them on utilization and so the good news is we're part of a larger platform that's always in the market and originating and has multiple pools of capital to allocate. So TriplePoint is always in market working with our sponsors and their portfolio companies originating the best deals and then as it comes to TPVG we allocate those venture growth stage transactions and the appropriate byte size for TPVG based on capital available, portfolio diversification other concentrations and so as you saw in Q2 held back materially from TPVG's perspective on the byte size given the unfunded commitments, the liquidity the fact that we had to put in a backstop just in case wanting to have maximum flexibility and liquidity and as we saw much lower utilization as we see these unfundeds burn off we're now turning the spigot back on for TPVG as we indicated in the prepared remarks and growing those unfunded commitments but we want to be mindful that they could all come in at the same time and it's a balance between milestone and -- milestone so I would say we're looking to replenish but we're not looking to grow it to 400 million per se because especially in light of where the capital markets are right now you can't rely on future financing to be a source of funding for your portfolio. You need to make sure you have all the liquidity from existing resources either on hand or portfolio amortizing in order to live up to your obligations and obviously credit facilities.

[James Labe:]

Yes. I would agree. It's absolutely a balance. It's always been a balance. We're not ever managing or running our business according to unfunded that's not however having said that especially here during the pandemic we thought it was very mindful and thoughtful particularly to our shareholders to take a close watch on that and be cautious on the cautious side.

[Ryan Lynch:]

Okay. Understood. I appreciate the time this afternoon.

[James Labe:]

Thanks Ryan.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to James Labe for any closing remarks.

[James Labe:]

Thanks operator. In short, I'd like to say we will continue to focus on maintaining many of the things we've been talking about in this call; flexibility and the liquidity as we continue to work through this pandemic but going to close again by expressing my appreciation to everyone on the line for your continued interest and we wish you continued good health and talk to you, speak with you again really soon. Please take care and thank you. Goodbye.

[Operator:]

The conference has now been concluded. Thanks for attending today's presentation. You may now disconnect.