Pennantpark Investment Corp (PNNT) 2011 Q1 法說會逐字稿

Good morning and welcome to the PennantPark Investment Corporation's first fiscal quarter 2011 earnings conference call. At this time, all participants have been placed on a listen-only mode. The call will be open for a question-and-answer session following the speakers' remarks. (Operator Instructions).

It is now my pleasure to turn the call over to Mr. Art Penn, Chairman and Chief Executive Officer of PennantPark Investment Corporation. Mr. Penn, you may now begin your conference.

Thank you and good morning, everyone. I would like to welcome you to our first fiscal quarter 2011 earnings conference call. I am joined today by Aviv Efrat, our Chief Financial Officer. Aviv, please start off by disclosing some general conference call information and include a discussion about forward-looking statements.

Thank you, Art. I would like to remind everyone that today's call is being recorded. Please note that this call is the property of PennantPark Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by using the telephone numbers and PIN provide in our earnings press release.

I would also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking information. Today's conference call may also include forward-looking statements and projections and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these projections. We do not undertake to update our forward-looking statements unless required by law.

To obtain copies of our latest SEC filings, please visit our website at www.PennantPark.com, or call us at 212-905-1000.

At this time, I would like to turn the call back to our Chairman and Chief Executive Officer, Art Penn.

Thank you, Aviv. I'm going to spend a few minutes discussing current market conditions, followed by discussion of investment activity, the portfolio, our overall strategy, and then open it up for Q&A.

As you all go, the economic signals have improved, with many economists expecting a growing economy going forward. With regard to the more liquid capital markets and in particular the leveraged loan and high-yield markets, the substantial rally that we saw in 2010 has continued in the early part of 2011.

A healthy current yield plus upside from credit improvement resulting from an improving economy continues to be attractive to investors.

We remain focused on long-term value and making investments that will perform well over several years. We continue to set a high bar in terms of our investment parameters and remain cautious and selective about which investments we add to our portfolio. Our focus continues to be on companies or structures that are more defensive, have low leverage, strong covenants and high returns.

As prior cycles have proven, our new investments in this environment may end up being some of our best. We significantly reduced competition in the middle market. We took full advantage of the 2010 vintage and are well positioned to capitalize on the 2011 vintage.

As credit investors, one of our primary goals is preservation of capital. If we preserve capital, usually the upside takes care of itself. As a business, one of our primary goals is building long-term trust. Our focus is on building long-term trust with our portfolio companies, management teams, financial sponsors, intermediaries, our lenders, and of course, our shareholders.

Since our inception four years ago, we have become a first call for middle-market financial sponsors, management teams, and intermediaries who want consistent and credible capital. As an independent provider free of conflicts or affiliations, we have become a trusted financing partner for our clients.

As the market has gotten more active, we are completing more transactions for well-regarded financial sponsors with whom we have had long-term relationships. Since inception, we have financed companies backed by 54 different financial sponsors.

We have been active and are well-positioned. For the quarter ended December 31, 2010, we invested about $100 million with an average yield on debt of 15% and expected IRRs generally ranging from 13% to 18%. Our normalized yield on debt was about 14% after adjusting for free equity they came with one of our debt investments.

Average debt to EBITDA on new investments was approximately 4 times. We expect to continue to find investments with attractive risk/reward characteristics in this environment to grow our income. Net investment income was $0.31 per share.

We have continued to be active since quarter end a goal of growing income. Because of our growing income, we have announced an increase in our dividend to $0.27 per share.

As a result of initiatives to focus on high-quality new investments, solid performance of existing investments, and continuing diversification, our portfolio was constructed to withstand market and economic volatility.

The cash interest coverage ratio, the amount by which EBITDA or cash flow exceeds cash interest expense, continued to be a healthy 2.8 times. This provides significant cushion to provide stable investment income. Additionally at cost, the ratio of debt to EBITDA on the overall portfolio was 4.5 times, another indication of prudent risk.

The structure of investments in our portfolio is also relatively low risk. It consists primarily of cash paid debt instruments and only 8% of the portfolio is preferred and common equity. There were no new non-accruals last quarter. Out of 102 investment we have made since inception four years ago, we have had only three companies on nonaccrual, all of which have been reorganized.

The statistics we have mentioned relating to interest coverage and EBITDA multiples highlight an important point about the vintage of our investments. Almost all the current investments were made after June 2007, when the credit market started to deteriorate. As a result, the investments completed after June 2007 tend to be in more defensive sectors, have lower leverage multiples, tighter covenants, and better pricing. To date, our investment thesis on those companies remains generally on track.

We are pleased with the performance of the portfolio through the stress test of the last few years. During the recession, on a weighted average basis based on cost, the EBITDA of the core portfolio was down only 7.2% from initial investment to its lowest point.

We are in good shape from the standpoint of liquidity. As of December 31, we had in total about $225 million of available liquidity, which included $45 million available under our credit facility, about $60 million of assets with coupons less than 9%, which we intend to continue selling and rotating into higher yielding new investments, and up to $120 million of additional SBIC financing.

Additionally on the credit facility, a new lender joined the syndicate and we used the accordion feature to grow our facility from $300 billion to $315 million in total size. This brings our total available liquidity to $240 million, pro forma for the increase in the credit facility.

With regard to those assets that have suboptimal below 9% coupons, we intend to continue to rotate the proceeds of those sales into higher yielding new investments, which could significantly enhance our income. Last quarter we sold or were repaid on about $40 million of these suboptimal assets at attractive prices.

We continue to grow our SBIC and about half our new investments last quarter went into the SBIC. Aviv will give an SBIC update later.

We had some significant realizations last quarter. Our long-standing $29 million position in Swift Transportation was taken out at premium by the company upon their IPO. The IRR was 17.5%.

TriZetto refinanced its mezzanine debt with first lien debt and our $20 million position was called out at a premium, which resulted in an IRR of 16% on the debt. We are pleased that we still have an equity co-invest in that company which should generate additional return over time.

We continue to focus on being matched from the standpoint of fixed and floating interest rates. 14% of the portfolio has an interest rate that floats, another 34% floats but has a floor which protects income in this low base rate environment and the remaining 52% is fixed rate.

In terms of new investments, we had another active quarter, investing in attractive risk adjusted returns. Our activity was driven by a mixture of M&A deals, refinancings, and growth financings, and virtually all of these investments, we have known this particular companies for a while, have studied the industries, have a strong relationship with the sponsor, or have differentiated information flow.

Let's walk through some of the highlights. We invested $12 million in senior secured notes of Affinity, which is a leading direct marketer, retailer, and publisher that targets recreational vehicle owners and outdoor enthusiasts. Covad is a leading provider of broadband services. We invested $7 million in a first lien in senior secured loan. Platinum Equity controls the company.

We purchased $23 million of subordinated debt of Escort. Escort is a designer, manufacturer, and marketer of radar detectors. Escort is sponsored by Falconhead Capital.

MailSouth provides direct mail solutions serving rural and suburban markets across the US. We purchased $15 million of subordinated debt. Court Square is a financial sponsor.

We invested $16 million in subordinated debt and $2 million in equity in PAS Technologies. PAS is a leading provider of repair and overhaul services for the aerospace, oilfield, and industrial markets. KRG controls the company.

VPSI is the largest provider of professionally managed commuter van pools in the United States. We invested $18 million in first lien secured debt and $2 million of equity to back the purchase of the company by TPG growth.

Turning to the outlook, we continue to believe that 2011 will be active. We are seeing a rise in the level of middle-market M&A which over time should drive a substantial portion of our investment activity.

Much of our business will be driven by companies that need a financing solution and don't have many options as finance companies, CLOs, and local banks have exited the market. Due to our strong sourcing network and client relationships, we are seeing strong deal flow.

Let me now turn the call over to Aviv, our CFO, to take us through the financial results.

Thank you, Art. For the quarter ended December 31, 2010, the investment income totaled $20 million and expenses totaled $8.8 million. Management fees totaled $6.3 million. General and administrative expenses totaled approximately $1.3 million.

Taxes totaled about $100,000 and the SBA and credit facility interest expense totaled $1.1 million. Accordingly, net investment income was $11.2 million or $0.31 per share.

During the quarter ended December 31, net unrealized gain from investment was $18.7 million or $0.52 per share. Net realized gain was $2.3 million or $0.06 per share. Net unrealized loss from credit facility was $6.6 million or $0.18 per share and excess net investment income over dividend was approximately $1.8 million or $0.05 per share. Consequently, NAV per share went from $10.69 to $11.14 per share.

As a reminder, our entire portfolio and credit facility are marked to market by our Board of Directors each quarter using the exit price provided by an independent valuation firm or independent broker-dealer quotations when active markets are available under ASC 820 and ASC 825.

In cases where broker-dealer quotes are inactive, we use independent valuation firms to value the investments.

Our overall debt portfolio has a weighted average yield of 13.4%, up substantially from 12.7% last quarter. On December 31, our portfolio consisted of 45 companies and was invested 40% in senior secured debt, 14% in second lien secured debts, 38% in subordinated debt, and 8% in preferred and common equity.

Our SBIC continues to make progress. As of December 31, we had invested $15 million of equity and drawn $30 million of SBA debt in our SBIC subsidiary. We have the ability to draw another $70 million of debt without putting any additional equity into the SBIC. After that, we have the option to invest another $25 million of equity and receive an additional $50 million of SBA debt.

With regard to the dividend, as of December 31, our run rate net investment income assuming no changes continues to be greater than our increased dividend of $0.27 per share.

As you know, BDCs are obligated to pay out at least 90% of their net investment income. If we make no new investments and our portfolio continues to perform, our income will continue to be higher than our dividend.

Additionally, undistributed net investment income in excess of dividend paid was approximately $3.7 million or $0.10 per share as of December 31, providing additional cushion for future dividends.

Now, let me turn the call back to Art.

Thanks, Aviv. To conclude, we want to reiterate our mission. Our goal is a steady, stable, and growing dividend stream. Everything we do is aligned to that goal. We try to find larger, less risky middle market companies that have high free cash flow conversion. We capture that free cash flow primarily in debt instruments and we pay out those contractual cash flows in the form of dividends to our shareholders.

In closing, I would like to thank our extremely talented team of professionals for their commitment and dedication. Thank you all for your time today and for your continued investment and confidence in us.

That concludes our remarks. At this time, I would like to open the call to questions.

(Operator Instructions). Ram Shankar, FBR Capital Markets.

Good morning, Art, Aviv. Thanks for taking my questions. Congratulations on another strong quarter. The fixed-rate book is about 52% now. I think it was 49% last quarter. Is there a target in mind for you this year as you prepare for higher interest rates?

It's a great question. I think we're going to try to roughly keep it mixed around 50-50. One thing to note is that the SBIC financing that we have today floats. That gets fixed every six months. So we're looking forward to fixing that SBA financing, which will help us align fixed versus floating a little bit better than we are today.

We did sell off some of these suboptimal assets this quarter or this past quarter, which did not have floors on them. So that's why that percentage of non-floor floating went down.

Okay, and a broader question. In terms of the market opportunity that you see there, are there any particular signposts that you are watching that we should be watching that may suggest a change in those dynamics?

No, look, we trade and we operate in a market that's below the threshold of the public high-yield market. As you know, the public high-yield market has been very, very strong. So far the risk reward in the traditional middle market remains very good. The competitive framework remains good. The competitors remain relatively rational.

But you have to always watch and you always have to be cautious and there's times when it's a great time to invest and 2009 and 2010 were. We think 2011 will be, but we have to be watchful and prudent as we go along.

Okay, thanks for taking my question.

John Stilmar, SunTrust Robinson Humphrey.

Good morning, gentlemen. Just really quickly, Art, if we were to look over the past three months, what has been the biggest change for either -- for both PennantPark as well as the market? And then finally as we look forward, what was the one thing that occurred -- or what are some things that occurred during the quarter that were probably the biggest elements that you weren't expecting?

Good questions. In terms of the change, look, we had a big M&A -- a big level of M&A coming into the December quarter, December 31. A lot of people were trying to get deals done because tax laws were being considered, whether they be increased taxes in capital gains or increased taxes in carried interest, which presented a larger than normal amount of deal activity in December.

Typically there's a seasonality to the deal business. Typically even in regular years people are trying to get deals done by year-end and then the first-quarter, it's a little slow in the first month or two as things ramp back up. This year we are feeling the same thing. It's nothing abnormal or unusual. Things start off a little more slowly in January, starting to pick back up again.

Again, tough for us to predict what we are going to do pre-March 30 or post March 30, but you should know there's been a seasonality as usual in the deal business.

In terms of things that we weren't expecting, look, we have seen a big rally in the public liquid markets. It's been larger than we thought, quicker than we thought. On one hand, that's good because it provides an exit and a refinancing for some of our deals. On the other hand, as buyers, we always like a little more fear. It seems that the fear that was in the market over the last year or two is eroding and again we have to be thoughtful about that as we analyze the risk/reward in the marketplace.

Great. Thank you, gentlemen.

John Hecht, JMP Securities.

Good morning, guys. Nice quarter. A couple questions. First of all, I think you had about $85.5 million of combination of prepay and sales. Can you -- how much of that was related to prepay and how much of that was related to just sort of asset sales and rotation? And with respect to prepay, obviously you referred to some seasonality, but I'm wondering if you can give us some more color on what your expectations for the near-term and repayment and prepayment and what's driving that?

So, thanks, John. On the $85 million, it was about half and half. About half was out of our control. The companies decided to refinance themselves and of course when someone takes you out, some people in the BDC business say, gee, that's a bad thing. We have a different attitude, which is when a company pays you back, you say thank you because you are not always sure that they will. So we are thankful that both Swift and TriZetto paid us back. And the other half was this non-core below 9% yielding portfolio that we sold into the market.

In terms of are we going to see more prepays? Yes, if the markets continue to rally when companies can refinance cheaper, they are going to try to do so. And if we're picking the right credits and ultimately that's what it's about for us is picking the right credits, those credits are going to deleverage and they are going to take us out. So that's good news and again, we thank them.

And we will find some good risk/reward around the quarter. There's always someone who wants access to our capital. We have to be prudent and judicious and cautious about who we give it to and who we lend it to and invest it in, but we are never worried about finding interesting deals to replace deals that are getting taken out.

You worry about risk/reward that you are getting. You worry about the market environment you are in, but so far we are seeing some pretty good deal flow and we are pleased with what we are seeing in the market.

Okay, and with respect to the market opportunities, can you tell us what's driving the activity? Is it -- are you finding good opportunities in the primary market or new financing market versus the secondary market? And in the new issue market, we've heard that there was a lot of dividend recap-driven activity in Q4. You referred to M&A activity. What are going to be the biggest [post] points in that for the next few months?

We think the biggest driver will be middle-market M&A, which was kind of on hold for a couple years there. Obviously a lot of deals got done in 2010. We think there's going to be an active calendar again in 2011. So that's going to be probably number one.

Number two is a continued refinancing wave. There is still a wall of maturities out there that has to get dealt with in some way shape or form. We think refinancings will continue to be part of it.

In terms of buying paper in the secondary market, by and large that opportunity is lower than it was a year ago. There are still some opportunities. Particularly there are some opportunities kind of in our traditional middle-market area, but for the BDC and our main mission of steady, stable and growing dividend stream, we've got a limit that amount that we do there because we have to make sure that we have companies that we think are current and will help us pay our dividend.

So that will continue to be an element of what we do, but it will be smaller than what was in 2009 for sure and certainly in 2010.

Okay, last question you referred to still a positive competitive environment price. You are a price maker rather than a price taker, I would gather given the discussion. But we've seen some IPOs of some new BDCs and appear there's a reasonable pipeline. Are you concerned that the attractive IRRs you're seeing will get impacted by new formulation of pockets of capital to come into this market?

Yes, look we're always focused on supply/demand. We think the middle market is so large and the gap is so large that all of this is a drop in the bucket when you compare it to the finance companies that have had problems, when you compare it to the regional and local banks who are burdened by real estate, when you compare it to the CLOs, who are wondering how -- what their future is.

So we think all this new formation is a drop in the bucket relative to the overall opportunity. That said, you always have to be careful and you have to be watchful if there's going to be competitors who come in who are doing irrational things. You have to let them do their irrational things and stand down and sit on the sidelines while they fill up doing things that you wouldn't necessarily do as a prudent asset manager.

So we think the opportunity remains large for 2011, but we are watchful and, look, in terms of new BDC formation or new formation of other pools, the market will determine who gets the capital or not. Typically the people who are getting the capital are people who've got a good track record in the past and people who have been rational investors. And the people that we see coming into the market so far seem to be very rational investors.

Okay, so the people who are attracting public capital are people that have been around. So you haven't seen any kind of new entrants that impacted the market in an irrational fashion?

That's correct.

Okay. Thanks very much.

Rick Shane, JPMorgan.

Thanks. Good morning, Art. When we look at the portfolio, there's an interesting bifurcation that's going on. The existing investments spreads are clearly tightening and you are able to mark up the investments. And the new investments are coming on at very high yields, which suggests that at least in that niche spreads aren't tightening quite as much. Are we seeing a strategic and sort of cyclical rotation in your strategy at this point?

It's a great question and you are hitting on a great point. A lot of what we did in 2009 and in 2010 was in 2009, certainly we bought a lot of paper at a discount to par, stuff that was more liquid where we new sponsors, where we knew the company, but it was more liquid where we could buy paper at $0.70, $0.80 on the dollar or where the new issues -- or the primaries issues were at very good risk/rewards of bigger companies.

And as the cycle -- that has all played out very well and you can see it in our marks and that's kind of the 2009 vintage will be as we call it a museum piece because it was very tough to invest in 2009 and actually lose money because the risk/reward was so good.

2010 was very good also but 2010, we saw the return to middle-market M&A and what we saw in the last quarter of the year for us was traditional mezzanine deals for middle-market sponsors and middle market companies where we were doing 14% coupons with 2, 3 points of upfront fees and if we coinvest. That's a very traditional mezzanine deal in the middle market, unlike buying shared and second lien in the secondary market at $0.80 or $0.85 on the dollar.

So you are correct to point out a shift that's gone on. Our job -- we say our main goal here in PennantPark Investment Corporation is to generate IRRs of 13% to 18%. And to do that, kind of in the last quarter of 2010, the main way to do that was traditional mezzanine deals and middle market companies. We could do that a year earlier, buying paper in the secondary market that was a bit more liquid. So you are pointing out an excellent shift.

Great, thank you very much.

Troy Ward, Stifel Nicolaus.

Thank you and good morning. Art and Aviv, could you just give us a little indication on the timing of the closings in the fourth quarter, just so we get an understanding of when the earning assets came on the balance sheet?

The majority came on at the end of the quarter. So our run rate, our run rate -- if you look at our income per share, it was $0.31, about $0.02 a share was other income, which is kind of nonrecurring of call premiums or one-time amendment fees. Our current run rate is in excess of $0.29 a share on a recurring basis excluding any one-time fees.

Great, that's helpful. And then can you talk a little bit, Art, about your liability strategy? Obviously we've seen other BDCs in the market with different term structures and even a convert. Can you just talk to us about what you are thinking about the liability side of your balance sheet over the next 12 to 18 months?

It's a great question and we are starting to spend a bunch of time on it. Our credit facility matures in 16 months, so we've got some time. In the meantime, we're going to optimize the SBIC financing, which is very attractive long-term financing. And we are going to over the course of the next year evaluate all these different flavors of financing. It's nice that BDCs are continuing to have access to the debt capital markets and that there's different flavors of debt, whether they be straight debt, whether they be converts, whether they be securitizations. And we are going to work to analyze all of them.

And over time, by next year at this time, we are sure we will have our plan of attack laid out in terms of how we are going to long-term finance the business as our revolver matures in 16 months.

Okay, great. And then one of the comments you made is you play kind of underneath that high-yield market. Given the strength in the high-yield market that we've seen in the recent quarters, can you tell us kind of where that line is today? Is that line coming down?

It's a great question. The line -- I can't give you a real good answer for that, to tell you the truth. The big investment banks still want to do big deals. There's some midsized investment banks who do -- who are willing to bring smaller deals to market. Generally we are playing underneath that threshold. Sometimes we will play -- sometimes if there's a really good risk/reward we might participate in one or two of those deals.

But the majority of what we did in the last quarter of 2010 was EBITDA of $20 million, $30 million, $40 million. That is still too small for the high-yield market. It seems as though the high-yield market is coming down to some cases $70 million, $80 million, $90 million of EBITDA. So we are still in a world that's kind of beneath that radar.

Okay, then finally the new originations you put on in the fourth quarter are a mix of both senior and second lien. Can you give us just what you are seeing there? Specifically in the senior market, are you starting to see competitors return? Does it feel like that trends are going to push you more towards senior or second lien going forward?

So about 40% of what we did last quarter was senior. The rest was kind of traditional subdebt mezzanine and a senior when we do it since we are very disciplined about what yields we're putting into this portfolio, so the senior that we are doing we think at least has an IRR of 12%, 13% all in when you count on all the bells and whistles.

So the senior that we end up doing, if that's our box is more stretch senior, more unit tranche oriented, it's less the traditional senior debt. So today two-tiered capital structure will have 3 times first lien and the mezz will go to anywhere between 4 and 5 times. And so we are either doing that mezz or we are doing a piece of stretch senior that will go to call it 4 times. That will kind of stretch it down a little bit more than a traditional first lien deal.

So the traditional first lien markets have normalized and are normalizing. It's going to be hard for us to get our rewards that we need for PNNT buying traditional first lien. So for us, it's basically a stretch senior unit tranche world or a mezzanine world.

Thanks, Art.

Bryce Rowe, Robert W. Baird.

Art and Aviv, you touched on the maturity of the credit facility here in 16 months. Obviously that facility is carrying very attractive pricing right now. Any thoughts as to where that pricing might go in 16 months?

Well, you are seeing other BDCs get facilities in some cases L plus 300, in some cases L Plus 350. That seems to be where other BDCs are getting bank debt capital today. We are also going to consider securitization technology. We're also going to consider straight bonds. We're going to consider converts as part of the overall opportunity.

Okay, thank you.

Jasper Burch, Macquarie.

Good morning, gentlemen, and thank you for taking my question. I guess just starting off, thank you for touching on your long-term debt capital structure and what you are looking at. I just wanted to make sure that there's no restrictions on your current facility on taking an additional debt, correct?

We can't take on any additional secured debt without their approval. Now, we did have to get their approval to set up the SBIC and they were very supportive on that.

So essentially when you do change your debt capital structure it's going to either come with a refinancing of that facility or some sort of agreement?

Right, or we will do something that is unsecured, so we could theoretically do unsecured.

Excellent, and then just looking at your equity and your equity cost of capital and how you are looking to grow longer-term, I think it's pretty obvious that capital raises here or around here would be accretive. Obviously you guys are conscious of your costs and about growing too fast.

I was just wondering if you could give us some more color on if you have any sort of metrics that you are looking at in terms of your outlook on how fast you can deploy capital, leverage target, anything that might sort of give us a good idea of just your thought process.

Yes, we don't -- Jasper, we don't come to the office every day and say, gee, we need to put X dollars to work a quarter or else people are going to be disappointed. We come to the office and say, is there a good deal to do? Is the deal that we're looking at today a good deal? Which does mean and could mean volatility and lumpiness in our pipeline and we just don't disclose our pipeline. We don't know what a pipeline really means because to us a deal is not a deal until it actually happens.

We don't sit here and put out press releases every time we do a deal to promote things. We're just kind of let's come into the office every day and find a good deal and if we can find a good deal, we will do it.

So it's very kind of opportunistic and based on remaining focused on finding good risk/reward and not necessarily having a particular target about originations or growth where we want to be or whatever. We think the growth should just be organic and based on doing what one good deal after another, hopefully.

With regard to issuing stock, we have no current intentions but as every BDC management team does, we evaluate the markets from time to time. So that is kind of what it is and we don't know -- we don't have any current intentions right now to do anything. But we will see how things go over time.

Okay, then one last sort of broader question. I think obviously the cycle is little bit different than past cycles. I think spreads sort of tightened in the higher middle market a little faster than a lot of people expected and then it has taken a lot of time for capital to start flowing back down into the smaller middle markets of your competitive area.

I was just wondering are there any other major differences that you are seeing sort of in this cycle versus past cycles that we should keep in mind when we're thinking about things?

Look, as I said earlier to a question, we were surprised at the speed of the rebound in the public liquid markets. We were very active in 2009. If we knew how quickly things would be rebounding, we would've been even more active. We were saving a bit of dry powder for time for more of the opportunity over time.

So we are a little -- we are a bit focused on the fear factor and how much fear there is left in the market, if any. And we are going to have to be very focused on and disciplined about risk/reward and be ready to stand down when there is not good risk/reward and ready to aggressively put money to work when there is a good risk/reward. Today there is good risk/reward, but things have moved quickly.

All right, great and thank you for taking my questions.

Okay, everybody, I think that wraps it up. We appreciate all your time and focus today and we will talk to you next quarter. Thank you very much.

Ladies and gentlemen, that does conclude today's presentation. We thank you for your participation.