Portman Ridge Finance Corporation [PTMN] Conference call transcript for 2023 q1
2023-05-11 13:15:24
Fiscal: 2023 q1
Operator: Welcome to Portman Ridge Finance Corporation's First Quarter 2023 Earnings Conference Call. An earnings press release was distributed yesterday, May 10, after market close. A copy of the release, along with an earnings presentation is available on the company's website at www.portmanridge.com in the Investor Relations section and should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements, which 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 in the company's filings with the SEC. Portman Ridge Finance Corporation assumes no obligation to update any such forward-looking statements unless required by law. Speaking on today's call will be Ted Goldthorpe, Chief Executive Officer, President and Director of Portman Ridge Finance Corporation. Jason Roos, Chief Financial Officer; and Patrick Schafer, Chief Investment Officer. With that, I would now like to turn the call over to Ted Goldthorpe, Chief Executive Officer of Portman Ridge.
Ted Goldthorpe: Good morning. Thanks, everyone, for joining our first quarter 2023 earnings call. I'm joined today, as previously mentioned by our Chief Financial Officer, Jason Roos, and our Chief Investment Officer, Patrick Schafer. I'll provide brief highlights on the company's performance and activities for the quarter. Patrick will provide commentary on our investment portfolio and our markets. And Jason will discuss our operating results and financial condition in greater detail. Yesterday, Portman Ridge announced its first quarter 2023 results. And continuing off the back of strong earnings momentum seen in fiscal year 2022, we're pleased to report yet another strong quarter of financial performance in the first quarter of 2023. Our total investment income, core investment income and net investment income for the first quarter of 2023, all increased in comparison with the fourth quarter of 2022 as we continue to see the impact that rising rates have in generating incremental revenues from our debt portfolio investments. Our core investment income for the first quarter of 2023 was $19.3 million, an increase of $1.6 million as compared to $17.7 million for the fourth quarter of 2022 and an increase of $4.2 million as compared to $15.1 million for the first quarter of 2022. Our strong performance this past quarter has allowed us to raise our dividend for the third consecutive quarter to $0.69 per share. This increase to our shareholder distribution also represents the fifth overall increase in -- over the past 7 quarters. Regarding our primary market as a whole, the bank failures of Silicon Valley Bank, Signature Bank and First Republic during March and April have further perpetrated the volatility and uncertainty -- perpetuated the volatility and uncertainty in the syndicated markets that we have noted in our early March earnings call, which historically is favorable to private credit businesses such as Portman Ridge. We remain bullish on new investment opportunities and the ability to rotate our portfolio at reduced risk and incremental returns. For new opportunities, spreads remain approximately 150 basis points wide as compared to the beginning of 2022, and upfront fees are up an incremental 100 to 200 basis points. Additionally, we continue to see strong equity contributions from sponsors and reduced leverage levels on new opportunities. Turning the focus back to the company. We continue to believe in the valuation of Portman Ridge as we continued repurchasing shares under the renewed stock purchase program. In the first quarter, we repurchased an incremental 35,613 shares following on the trend seen throughout 2022, where we repurchased a total of 167,017 shares at an approximate cost of $3.8 million. We expect this trend of repurchasing Portman shares to continue throughout 2023 as we're able to do so. On this call, Patrick will also walk through the portfolio upside cases for our net asset value. Our portfolio is largely in first lien debt and is now valued at a meaningful discount to par. If we experienced normalized defaults or even elevated default rates versus history, we believe there's embedded net asset value upside in the portfolio. This adds to our earnings momentum, driven by wider spreads on new originations and rising short-term interest rates to drive both potential NAV and earnings upside. With that, I will turn the call over to Patrick Schafer, our Chief Investment Officer, for a review of our investment activity.
Patrick Schafer: Thanks, Ted. Turn to Slide 5 of our investment presentation and the sensitivity of our earnings to interest rates. As of March 31, 2023, approximately 89.2% of our debt securities portfolio were either floating rate with a spread to an interest rate index such as LIBOR, SOFR or Prime, with 52% of these still being linked to LIBOR. As you can see from the chart, the underlying benchmark rates on our assets during the quarter lagged the prevailing market rates and still remain significantly below the LIBOR and SOFR rates as of April 24, 2023. We expect this to normalize over time as the underlying one, three, six month contracts reset. For illustrative purposes, if all our assets were to reset to either a three-month LIBOR or SOFR rate, respectively, we would expect to generate an incremental $690,000 of quarterly income. Our liability costs would also rise relative to their Q1 levels. We would still expect a net positive benefit of approximately $0.06 per share, assuming all of our assets and liabilities are utilized in the same 3-month benchmark rates for an entire quarter. Skipping down to Slide 11. Both investment activity and originations for the first quarter were lower than the prior quarter, resulting in net repayments and sales of approximately $32.6 million. Net deployment consisted of new fundings of approximately $11.8 million, offset by approximately $44.4 million of repayments and sales. These new investments are expected to yield a spread to SOFR of 625 basis points on par balance and the investments were purchased at a cost of approximately 97% of par, which will generate incremental income to the stated spread. As mentioned during our last earnings call, it was our expectation that Q1 would generate more repayments than deployments as we intentionally drew up a portion of our revolver in Q4 2022 to invest ahead of several repayments. In February, we repaid $6.9 million of our 2018-2 secured notes. And in May, we expect to make another paydown of approximately $23 million. During the fourth quarter, we funded $5.6 million into our Great Lakes joint venture, which has taken us close to being fully funded under that commitment. Similar to our experience with new assets on the balance sheet, incremental investments in our Great Lakes joint venture have come at increasing spreads and widening OID, which should result in higher returns going forward. Our investment securities portfolio at the end of the first quarter remained highly diversified with investments spread across 28 different industries and 106 different entities, all while maintaining average par balance per entity of approximately $3.3 million. Turning to Slide 12. We had one incremental investment on nonaccrual as compared to December 31, 2022, which is a subordinated note in Lucky Bucks Holdings, which is valid at 24.75% of par. In aggregate, investments on nonaccrual status remained relatively low at five investments in the first quarter of 2023 as compared to four investments on nonaccrual status as of December 31, 2022. These five investments on nonaccrual status at the end of the first quarter of 2023 represents 0.3% and 1.5% of the company's investment portfolio at fair value and amortized cost, respectively. On Slide 13, as Ted mentioned in his opening remarks, if we focus on the top three rows of the table and exclude our investment in Pro R Holdings, which we have marked at 0, we have an aggregate debt securities fair value of $442 million -- $442.9 million, which represents a blended price of 91.11% of par value and is 85% comprised of first lien loans at par value. Assuming a par recovery, our March 31, 2023 fair values reflect a potential for $43.2 million of incremental NAV value of $4.52 per share. For illustrative purposes, if you were to assume a 10% default rate and a 70% recovery rate on this debt portfolio, there would still be an incremental $2.99 per share of NAV value over time as the portfolio matures and is repaid. This default rate is above anything the market is expecting or has experienced historically. Turning finally to Slide 14. If you aggregate these three acquired portfolios, over the last three years, we have purchased a combined $434.8 million of investments that have realized over 72% of these investments at a combined realized and unrealized mark of 102% of fair value at the time of closing their respective mergers. We were able to achieve these results despite the global pandemic in 2020 and most of 2021 and a weak market for almost all asset classes in 2022. In a similar vein as the previous slide, as of March 31, 2023, there remains an incremental $11.8 million of value as compared to par in these portfolios or $8.0 million when applying a similar 10% default rate and 70% recovery rate analysis. I'll now turn the call over to Jason to further discuss our financial results for the period.
Jason Roos: Thanks, Patrick. As both Ted and Patrick previously mentioned, despite operating under a challenging economic environment, our results for first quarter of 2023 reflect strong financial performance. Our total investment income increased by $1.7 million to $20.3 million in the first quarter of 2023 in comparison to $18.6 million in the fourth quarter of 2022 as we continue to see the impact of rising rates and generating incremental revenue from our investments. The increase was largely due to higher paydown income, servicing fees, dividend income and interest income from rising rates as compared to the prior quarter. This reported total investment income also represents a $3.4 million increase from the $16.9 million of reported total investment income in the first quarter of 2022. Excluding the impact of purchase price accounting, our core investment income for the first quarter was $19.3 million, an increase of $1.6 million as compared to $17.7 million for the fourth quarter of 2022 and an increase of $4.2 million as compared to $15.1 million for the first quarter of 2022. Our net investment income for the first quarter of 2023 was $8.5 million or $0.89 per share, an increase of $1.4 million as compared to $7.1 million or $0.74 per share for the fourth quarter of 2022 and an increase of $600,000 as compared to $7.9 million or $0.82 per share for the first quarter of 2022. The quarter-over-quarter increase was largely due to the aforementioned impact of increased paydown income, servicing fees, dividend income and interest income from rising rates as compared to the prior quarter. As of March 31, 2023 and December 31, 2022, the weighted average contractual interest rate on our interest-earning debt securities was approximately 11.7% and 11.1%, respectively. We believe the portfolio remains well positioned in a rising rate environment to generate incremental revenue in future quarters. Total expenses for the quarter ended March 31, 2023, were $11.8 million compared to total expenses of $11.5 million seen in the fourth quarter of 2022. This was predominantly driven by rising costs associated with the interest expense on our debt, offset by reduced expenses related to administrative services, professional fees and other general and administrative costs, areas where we have focused on reducing overall expenses. Our net asset value for the first quarter of 2023 was $225.1 million or $23.56 per share as compared to $232.1 million or $24.23 per share in the fourth quarter of 2022. The decline due to our debt and equity securities was primarily driven by paydown activity and sales as well as mark-to-market movements within our portfolio. On the liability side of the balance sheet, as of March 31, 2022, we had a total of $358.3 million par value of borrowings outstanding, comprised of $79 million in borrowings under our revolving credit facility, $108 million of 4.875% notes due 2026 and $171.3 million in secured notes due 2029. This balance represents a quarter-over-quarter decrease of $19.9 million, driven by a $13 million repayment on our revolving credit facility and a $6.9 million repayment on the secured notes due 2029. As of the end of the quarter, we had $36 million of available borrowing capacity under the senior secured revolving credit facility and no remaining borrowing capacity under the 2018-2 revolving credit facility as the reinvestment period ended shortly after our draw on November 20, 2022. As of March 31, 2023, our debt-to-equity ratio was 1.6x on a gross basis and 1.4x on a net basis. From a regulatory perspective, our asset coverage ratio at quarter end was 162%. This is at the high end of our target range, driven by the drawing of the remaining capacity under the 2018-2 revolver in advance of its expiration in the fourth quarter of 2022. Lastly, and as announced yesterday, a quarterly distribution of $0.69 per share was approved by the Board and declared payable on May 31, 2023, to stockholders of record at the close of business on May 22, 2023. This is a $0.01 per share distribution increase as compared to the prior quarter and a $0.06 per share distribution increase as compared to the second quarter of 2022. This also marks the third consecutive quarter of a stockholder distribution increase and the fifth stockholder distribution increase over the last seven quarters. With that, I will turn the call back over to Ted.
Ted Goldthorpe: Thank you, Jason. Ahead of questions, I'd like to reemphasize that we believe we are well positioned to take advantage of opportunities that arise from the current market environment by continuing to be selective and resourceful in our investment decision-making. Overall, we believe we remain situated to continue to deliver attractive returns to our shareholders throughout 2023. Thank you once again to all our shareholders for ongoing support. This concludes our prepared remarks, and we will now turn it over to the operator for any questions.
Operator: And your first question come from the line of Christopher Nolan of Ladenburg Thalmann. Your line is open.
Christopher Nolan: Hi, guys. Jason, I missed it, the unrealized depreciation, was that from mark-to-market? Or is there a particular...
Jason Roos: Yes, the movement in the unrealized is largely mark-to-market. There's also some of that as it relates to the accretion as your cost basis creeps up, but largely mark-to-market. And then the realized, the bulk of that, I guess, two-thirds of that -- more over two-thirds of that was related to a flip between unrealized and realized. Predominantly driven by -
Christopher Nolan: Yes. And then generally, the leverage ratio is quite high. What's the thoughts in terms of dialing that back given the
Patrick Schafer: Yes. Chris, it's Patrick Schafer. So I think a couple of things, which is we tend to focus more, at least internally on net leverage because we are sitting on cash that at any given point, we could choose to repay down various different facilities or invest, so we'd like to kind of keep flexibility depending on market conditions and being able to react quickly. I would say that with that said that we saw a small paydown of the 2018-2 facility in Q1, and we have a larger one that's kind of expected to be about $23 million in this quarter to pay down. So a decent amount of the cash that was sitting on the balance sheet as of March 31, was effectively earmarked for a paydown that because of the 2018-2 facility structured like a CLO, whereby you kind of have one paydown per quarter. So we sort of -- we're sitting on the cash to then make the paydown in sort of where we are now kind of mid-May. So again, I think our general expectation is that as repayments come in, we will naturally sort of close the gap between gross and net leverage, and that is sort of our plan in going forward. So again, it was kind of an intentional strategy at Q4 that we anticipate kind of continued paydowns over the course of this year.
Christopher Nolan: Final question. In your conversations with portfolio companies, how is the conversation going in terms of mitigating their financial risk to banks or whatever. I think you -- get away from this bank or that bank or lower your leverage? Or -- how is the general conversations going on that front?
Ted Goldthorpe: I mean I think every company is doing a full analysis of where they hold cash and what their cash is invested in. Also managing cash has become much more important because when rates have gone from 0% to 5%, obviously, cash management becomes more important. We thankfully had no material impact or exposure to any of the banks that have failed. And so I think generally speaking, people are getting much more conscious of where they have their money. And so we get frequent updates from our companies about how they're dealing with the situation, and we feel very comfortable about cash management across the portfolio. I think we can have a much longer conversation about this at some point.
Patrick Schafer: I think, by and large, the biggest take away that we've seen in our portfolio companies is they're no longer having sort of one bank, one solution for all their treasury work. They always have a kind of a secondary bank account with a different bank just in kind of an event of an emergency or kind of if you need to move money or keeping a little bit of, let's say, dry powder for a couple of payroll period, just something in a separate bank account. So I think it's just a little bit more prudent in terms of having multiple kind of treasury functions and treasury relationships as opposed to wholesale changes.
Christopher Nolan: That's it for me. Thanks guys.
Ted Goldthorpe: Thank you.
Operator: Your next question comes from the line of Ryan Lynch of KBW. Your line is open.
Ryan Lynch: Hi, good morning. A follow up on kind of the question regarding just kind of the movement in NAV. I know in some of the past quarters also, you talked about kind of a lot of your markdowns are more kind of market related versus credit related. This quarter, I think a lot of BDCs, and I know you can't speak for the other ones, but, but you're certainly going to be compared to other ones, actually had some NAV increases because credit was relatively stable, and they sort of started to write some of those mark-to-market losses up a little bit in the quarter. You guys actually had some markdowns this quarter. So how should we think about that from a comparative standpoint, if a lot of these previous markdowns that you had in your books were truly mark-to-market sort of spread-widening markdowns. When should we expect and why aren't we seeing any sort of recovery yet?
Patrick Schafer: Yes. So a couple of different answers to that, Ryan. I'd say, broadly speaking, and again, we -- similar to others, I suppose, but we send out a majority -- again, this is across our platform. But a majority of our names in Portman Ridge as well. But a majority of our names to third-party valuation firms and generally speaking, the kind of collective market rates, market yields kind of how you ever want to think about how they do sort of their discounts discount rates on the cash flows for debt securities, generally speaking was flat over the course of the quarter. So again, if you kind of think about our initial conversation or Ted's initial remarks about kind of continuing to be able to put out new dollars at kind of 150 basis points wide of kind of what we were doing a year ago, you still have elevated returns in sort of the new-issue market, which, again, in our view and the view of our third-party valuation firms does put a bit of a ceiling in terms of sort of recovery to par if you have assets that are still priced at L475, L5, L525 , et cetera. So again, I think the market is generally speaking -- kind of holding up well, but when you just -- when you look at a portfolio in aggregate, just new money being put out at a certain price, there's just only so much increase you could expect from your book from yield perspective. And then the last -- and the additional -- so that's kind of broadly speaking. So that's why our book as a whole, I'd say kind of generally speaking, was sort of flat to maybe slightly up on an individual asset level perspective, just from a market yield. And then specifically, we had a relatively meaningful markdown on one position, Lucky Bucks Holdings, which again would be credit specific and credit driven. So again, I would say that a decent chunk of our NAV markdown was from that one specific asset.
Ryan Lynch: Okay. Understood. And then following up on our question, I understand the difference. Obviously, net leverage came down a bit this quarter ex cash. You guys are now within your leverage range. So I guess as we sit here today, you guys from a net leverage standpoint, I think are now within your range. How should we think about where you want to take leverage from this point because you guys are in the range but at the higher end of the range. On one hand, you have a deal environment really good as far as the quality of deals out there, probably not a lot of deals to be done, but the quality of deals are really high. At the same time, we're coming into a choppier probably economic period where I think we all basically every agency expecting rise in default and we've seen rise in fall in the BDC space, which would maybe speak to it may be better to have lower leverage. So what are you guys thinking from a leverage standpoint at this point going forward since you guys are at the upper end, are you guys comfortable with this? Or is the intention to just to bring it down knowing that the deal environment is really good right now.
Ted Goldthorpe: Yes, it's a great question. So I think a couple of things. One is, I think we want to bring down our gross leverage. And again, there's a nuance to ours because we drew on that cheap facility last quarter. So that will start deleveraging, and I do think that overall, we will probably not increase leverage from where it is on a net basis of anything, we'd probably take it down. This is the first time in like a long time, like in 10 years that we've seen, it's actually more accretive for us to invest new money at these kind of rates than it is for us to buy back stock. We are going to buy back stock because it's a guaranteed return versus a non-guaranteed return when you put out money. But that threshold has now been crossed, which means it's an incredibly interesting environment for us. The good news -- here's the good news. The good news is, and we showed it in our deck, repayment activity was incredibly muted last year, and we've seen a pickup this year, not to historical levels but at higher levels. So our book is beginning to churn. And because we have some older vintage names from some of these acquisitions we've done, we actually have seen some of the older names getting taken out, and we can redeploy the money into newer, wider-spreading, better names, right? So -- we expect to be able to take advantage of this environment a little bit differently than others, like some others can take up leverage. I think our thing is we'll probably keep leverage flat or take it down, but we can still take advantage of the environment because we are getting paid off at a higher rate than others just because we have some older vintage names from these acquisitions. So we've seen -- again, we've seen elevated repayment activity all year this year versus last year. And again, we can replace that with newer, safer, lower leverage, wider spreading names. So I think we kind of like -- I really don't think it's prudent for us to take up leverage. And so like I think we can take advantage of the environment just through natural churn.
Ryan Lynch: Okay. And then what do you guys -- like what are your thoughts around the dividend? Obviously you guys raised it in the quarter. You guys have pretty significant dividend coverage in the quarter. You guys provided a slide showing where is probably going to go with current phase of the base now. Obviously, everybody knows the expectation is that base rates aren't going to stay at these levels. And I think wealth managers are trying to keep base dividends at a level that can be earned in multiple interest rate environment. So what are your thoughts on kind of your current core dividend and the extremely high coverage level, which isn't uncommon in the BDC space at this point, but it's very high. And then do you guys have any thoughts about supplementals or special dividends? Do you guys have any thoughts on -- or philosophy on how those could supplement a core dividend?
Ted Goldthorpe: Yes. That's a great question. So again, our philosophy generally speaking, is we prefer to pay a higher core dividend that our investors can wake up every day and know they're getting versus specials. That's generally our philosophy. That being said, you made a comment in your question, you're dead right, which is this is like -- the interest rate curve comes down pretty dramatically, like people are kind of expecting 200 basis points of cuts over the relatively -- in the next couple of years. And so it doesn't matter what we believe or not believe. So we run all of that stuff through our earnings model. And we still think that today's dividend, we can pretty easily cover it, even if the Fed cuts rates by 200 basis points. So we look at not only current rates, but where the market's telling you rates are going to go. And again, I don't see the Fed cutting rates anytime soon, but it doesn't matter what I think. We show -- we overlay our dividend coverage analysis with the forward curve. And that's kind of how we think about our core dividend. So that means that it's higher for longer and the Fed -- and the interest rate curve is wrong, which historically it has been, then we'll pay out specials. So again, first principals, we want to pay a high core dividend, and we don't -- and we favor that over specials. That being said, to the extent that it's higher for longer, we'll just pay specials to our shareholders and buy back stock.
Ryan Lynch: Okay. That’s all from me. I appreciate the time today.
Ted Goldthorpe: Thanks Ryan.
Operator: Your next question comes from the line of Steven Martin of Slater. Your line is open.
Steven Martin: As a follow-up to this last question, where did your spillover stand at the end of the year?
Jason Roos: Let me get back to you on that, Steve. I think we're right around -- I'll have to get back to you on that. I think it's around $0.40, but don't quote me on that.
Ted Goldthorpe: The reason it's complicated is because we've done all these mergers, we were able to generate a lot of tax benefits out of that. So even though we've been comfortably over earning our dividend, which would normally you could do math and just see we have a lot of spillover income. That's been -- we've been able to shield a lot of that just through some of these mergers. So Jason's team has done a really good job of mitigating tax impacts. So our spillover income today is still relatively muted. But we'll get you the exact number.
Steven Martin: Okay. On deal flow, you've talked a little bit about it. What do you see going on this quarter? And are you seeing new deals? Are sellers finally lowering their price expectations. What's going on in that order?
Ted Goldthorpe: So there's some interesting observations, just generally speaking, just based on data. So prices in Europe have come down more than a turn for the average LBO. Prices in the U.S. have not come down, again, based on trailing data. I would say I think it's a little bit like -- it's going to take a little while for the adjustment period, like our deal flow is down pretty dramatically just for like day-to-day deal flow. The quality of our deal flow has gone way up. And the reason for it is, if you're willing to borrow money at S plus 700, which is what we -- it's our average issuance price, you need to have a pretty compelling reason to take the money. And so a lot of what we're seeing is instead of new LBOs, which is our core business, a lot of it is add-on acquisitions and some of the niche lending that we do. So I would say best time ever to be in our business. We're getting private equity returns for credit risk. So we're really excited about the environment, but deal flow is like way down. Deal flow is down, I don't know, 75%. So the average LBO in the fourth quarter, this is the thing that's interesting. Prices haven't come down in the U.S., but leverage has. So the average LBO total leverage has gone from 6x to 4.4x. And what that is, is people are just backing into their fixed charge coverage ratios. So companies are asking us for a lot less leverage and despite the fact that purchase prices haven't really come down.
Patrick Schafer: I'd say the thing I'd add to that to what Ted said is, in addition to quality going up, the aggregate total deal flow is down, quality is up and also our hit rate is theoretically up a lot as well. I just think over the last several quarters, just the general fundraising environment for private credit has been a little bit challenged. So you're seeing more opportunities to be able to kind of either win deals or win shares of deals that perhaps would have gone to just one individual. So again, I'd say we -- the deal count is down, but I don't feel like we have a problem sourcing and finding enough attractive deals to actually refill the pipeline on repayments and things like that.
Steven Martin: Okay. And then it sounds like if leverage is down and prices aren't that means there's more equity being put into these situations?
Ted Goldthorpe: Yes.
Steven Martin: Okay. What are you seeing on the amendment modification -- in the amendment modification category?
Ted Goldthorpe: Mean Patrick could speak to it as well. I would say we're seeing a lot of amendments, but a lot of them are SOFR-LIBOR conversions, like we're seeing -- I mean, that's just natural as your book ages. I would say on like what I'd call core amendments, I don't know, non-SOFR transition. I would say it's -- they're up. They're up. I wouldn't say anything alarming. We've had -- this is the time of the year where you get a lot of amendments around delayed financials. So amendment activity is up. I wouldn't say it's anything to be concerned about. I mean one thing we didn't mention on the call is for the first time in five quarters, we're seeing margin expansion in many of our portfolio companies. So on a trailing basis at least. And again, we all know things are going to get worse going forward. But on a trailing basis, our company is doing better because price increases are now running through the system and then labor shortages and things like supply chain are abating. So the stats in our portfolio companies are actually getting better on a trailing basis, which is kind of interesting.
Steven Martin: Good. Thanks a lot.
Ted Goldthorpe: Thank you, Steve.
Operator: Currently, there are no further questions at this time. So I'd like to hand back to our presenters.
Ted Goldthorpe: Great. Well, thank you for everyone for joining us today, and we look forward to speaking to you again in early August when we will be announcing our second quarter results. And as per always, please feel free to reach out to any member of the management team for any questions. Thank you very much.
Operator: That does conclude our conference for today. Thank you for participating. You may now all disconnect.
