Prospect Capital Corp (PSEC) 2008 Q3 法說會逐字稿

Hello. And welcome to the Prospect Capital Financial Results for the Third Quarter Ending March 31st, 2008 Conference Call. (OPERATOR INSTRUCTIONS)

Now, I would like to turn the Conference over to Mr. John Barry, Chairman and CEO. Mr. Barry, you may begin.

Thank you, Camille.

Joining me on the call today are Grier Eliasek, our President and COO; and Bill Vastardis, our CFO. Bill?

Thanks, John.

This call is the property of Prospect Capital Corporation. Unauthorized use is prohibited. This call contains forward-looking statements within the meaning of the securities laws that are intended to be subject to Safe Harbor protection. Actual outcomes and results could differ materially from those forecast due to the impact of many factors. We do not undertake to update our forward-looking statements unless required by law. For additional disclosures, see our earnings press release and our 10-Q filed previously.

Now I'll turn the call back over to John.

Thanks, Bill.

Our net investment income for the third fiscal quarter was $12.9 million, or $0.54 per weighted average number of shares for the quarter, an increase of approximately 84% and 50% from the prior year-over-year quarter on a dollars and per-share basis respectively.

We estimate our net investment income for the current fourth fiscal quarter ended June 30th will be $0.43 to $0.51 per share. We expect to announce our third fiscal quarter dividend in June.

Now, Grier Eliasek will comment on our investment activity.

Thanks, John.

On March 31st, the fair value of our portfolio was approximately $429 million in 31 portfolio companies. As of March 31, our portfolio generated a current yield of 16.8% across all our long-term debt and equity investments, including dividend, net profits, interest and royalty income.

Last quarter, we completed two new investments which consisted of North Fork and American Gilsonite, as well as follow-on investments in the existing portfolio, including Unitek, totaling approximately $32 million.

Additionally, we monetized three positions last quarter -- Ken-Tex Energy, Evolution Petroleum and TLOGH. Ken-Tex represented a 69% cash on cash realized IRR. As of today, we now have 32 portfolio companies, aggregating approximately $492 million of assets calculated as our March 31 investment portfolio, plus additional investments net of repayments.

In the current quarter, we have made two new investments in Ajax and Peerless, aggregating approximately $60 million. We've also announced the final monetization of Cougar Pressure Control, which represented a 31% cash on cash IRR for us, bringing our average cash on cash IRR on successful realizations to 57% across the portfolio.

In late December, we announced that we engaged RBC as a financial advisor to explore strategic alternatives, including the potential sale of our largest 100%-controlled investment, Gas Solutions, a midstream gathering and processing business in East Texas. This monetization process is ongoing, and extensive discussions are occurring with multiple interested parties. Management seeks entering into a definitive purchase agreement before the conclusion of the Company's fourth fiscal quarter, but can make no assurances as to the likelihood or timing of any agreement.

In late March, Royal Bank of Canada provided a $38 million term loan to Gas Solutions II Ltd, a wholly owned subsidiary of Gas Solutions, the proceeds of which were used to refinance all of Citibank's approximately $8 million of outstanding senior secured debt, as well as to make a $30 million cash dividend distribution to Gas Solutions. The Company has non-recourse access to this cash at Gas Solutions, in addition to the Company's other assets and undrawn revolving credit facility.

In early May, Gas Solutions II Ltd purchased a series of propane puts at $0.10 out of the money and at prices of $1.53 per gallon and $1.39 per gallon, covering each of the next two forward 12-month periods respectively. These hedges have been executed at close to the highest market propane prices ever achieved on a historical basis. Such hedges preserve the upside of Gas Solutions to benefit from potential future increases in commodity prices.

Gas Solutions is generating approximately $24.3 million of unadjusted plant operating income based on annualizing the performance of the six months ending March 31, which is an increase of 74% from the previous year. For calendar year 2008, Gas Solutions estimates, based on current commodity prices and annualized run rates, that it would achieve more than $30 million of unadjusted plant operating income.

We continue to execute on our balanced business model, addressing the controlled buyout, direct lending and sponsor finance segments. The team is busy addressing investment pipeline, aggregating more than $400 million in potential transaction value.

In the past few months in the new financing marketplace, absolute yields have increased despite the drop in LIBOR, and leveraged multiples have decreased; both risk-reward dynamics working significantly in our favor.

Thank you. I'll now turn the call over to Bill.

Thanks, Grier.

In late March, we priced two secondary offerings of 2.45 million shares of common stock, raising $37.6 million in gross proceeds. At March 31st, borrowings under our credit facilities stood at approximately $91 million.

Currently the Company has approximately $138 million drawn under its credit facilities, with $62 million undrawn. In addition to its corporate cash, the Company has non-recourse access to an additional $30 million of cash at Gas Solutions.

In mid-April 2008, the Company entered into an engagement letter with a lender that has agreed on a best-efforts basis to lead a syndication group in an increase to the Company's revolving credit facility -- from $200 million to approximately $400 million. Such facility is anticipated to have pricing similar to the Company's existing facility. The engagement letter is not a final commitment, and the closing of the facility is subject to the lender's final internal approval and other conditions customary for a transaction of this type.

Now I'll turn the call back over to John.

Thank you, Bill.

We can answer questions now.

(OPERATOR INSTRUCTIONS) Robert Dodd, Morgan Keegan.

Hi, guys.

First one, obviously, is, can you give us a rundown on watch list credits and any changes there, and how things are looking for those, the -- obviously the coal businesses, WECO, et cetera?

Okay. Well, let's start with the coal businesses.

Starting last year -- well, actually, midway last year, we brought in Sid Young to run those businesses from Massey. He's an experienced coal manager; he has done a good job. He does a better job every month, frankly. And towards the end of last year, we had -- Whymore was profitable month-over-month -- not every single day, but each month. We felt that was an achievement in a low-price environment. Whymore was still burdened by coal contracts in the 40s.

Genesis was breakeven to losing money. We encountered a number of problems, the main problem being that our recovery rate, being the percentage of rock, ash and dirt that we pull out of the ground, that is actually coal as opposed to rock, ash and dirt -- being about half of what we expected. So Genesis continued to be breakeven to -- depending on the week and the day and the month -- to losing money, and most days losing money.

We looked very carefully at shutting Genesis down; decided that we were close enough to breakeven that we should keep it running. We then obtained a new contract from [Kok] carbon, which was a more favorable contract than the Duke contract that we had, and which replaced the Duke contract.

And since then, Genesis has been close to breakeven but a little bit underneath, Whymore has been steadily profitable, and we purchased another coal property, Travelers. This all occurred in January, or maybe it was the first week of February.

Since then, coal prices have increased from perhaps the low to mid 40s, low 50s, into the 80s. And we have locked in attractive coal pricing where we have the production. And we're running off our older contracts, and we're looking to hedge the new production, with the result that each month, each of these properties does better.

Genesis continues to have a recovery problem, which tends to offset the increase in prices. We don't know if were going to be able to solve that or not; we're still hopeful that we can. Whymore continues to expand its profitability week after week, month after month. We have -- back to Genesis -- we have other reserves at Genesis which we are addressing, and which we've -- taken us two years to get them permitted.

Some of you may not know this, but when we invested in Genesis, it was for the reserves that are upcoming, not for the two -- really, three smaller mines that we've opened and mined. So if the Genesis plan actually follows the original plan, the mine that is yet to be opened will be a good mine. Of course, we always keep our fingers crossed on mines that are not yet opened.

Back to Whymore -- Whymore has expanded its reserves, has expanded its permitted properties, has cut deals with surrounding landowners, and is continuing to be profitable and is increasing its profitability.

Travelers looks like it should be the most profitable of the three. And we just started production at the end of March, beginning of April. So it's too early to tell, but we're very optimistic; we control that company is well.

Lastly, Unity -- remember Unity? Well, we haven't given up on Unity, because we're the second [liener] there. And unity is sitting on top of metallurgical coal. And while our good friends, Karl Singer and Keller Smith, who are the principals in Unity -- and by the way, Karl is a shareholder in our company -- had become frustrated with their ability to mine that coal profitably. The metallurgical coal is now worth, in some places, $350 a ton, as opposed to $110.

So we're taking another look at Unity; we don't hold much out because of the bankruptcy process making it so difficult to do anything there. But we're benefiting from higher coal prices just like everyone else in Appalachia.

So those are the coal businesses. In the case of ESA and THS and ICS, which are three companies that are affiliated in the government contracting business -- we have brought in management that has already, in the last month, achieved impressive improvements in the revenue and in the profitability of those companies, especially THS.

This is too recent and too early for us to start boasting about it, but we're very happy. We see a huge opportunity there, in government contracting especially, with veterans. And we've hired new management that is very excited about the opportunity of bringing veterans home from Iraq and giving them jobs in the security business and in the contracting business.

I expect we will have -- I'm hoping we will have a lot more to say about that on the next call. And yes, we do believe recovery of capital there, as with the coal companies, is on the horizon for us; no guarantees.

Then there's WECO. The problem that we have with WECO that is a difficult problem to solve is that we have a power plant which generally seems to be mechanically working well, and we need to purchase wood. And we've been frustrated in our ability to purchase wood at the prices that we need to purchase it to make the plant profitable. We believe that that's a problem that is solvable. We've tried a number of ways of solving it; none of them work all that terribly well. The plants that are nearby us shut down when wood is expensive. They simply are peaking plants. We run all year; we have long-term contracts.

We have a number of initiatives that we continue to work on relating to both methods of obtaining more wood more cheaply. We entered into a contract with a company called [Kosinow] two weeks ago, who is the number-one factor in purchasing wood for wood plants in New England. We've closed down our own in-house wood supply outfit; they just were not competitive with the market. So we're going with a market solution there.

The plant itself operates fairly well. We believe that there are still improvements that can increase the megawattage there. We also are aware that the value of the power and the value of the [rex] that the plant produces have increased substantially in the last six months in a high-energy cost environment. And we are looking to unlock that value.

Nevertheless, we have kept the coal companies where they are. We have marked down WECO on a fairly steady basis, just taking into account the possibility that the things that we hope to achieve may not come to pass.

So coal properties in WECO are contributors to the reduction in our NAV. We'd like to see that be turned around, and I think it can be. But as I said, there can't be any guarantees on anything like that.

That leaves Iron Horse Coiled Tubing. And in the case of Iron Horse, we're engaged in a number of initiatives, the primary one being having David Belzer work with another company on a transaction that would involve a build-out of additional coiled tubing rigs, high-tech coiled tubing rigs, and in combination with another company.

So those are the -- I believe those are the companies where we are focused as an informal watch list.

Thank you.

[Jim Bellessa, D.A. Davidson & Company].

Good morning.

Morning, Jim.

I like these periods when you're having such nice net investment income, but I'm not appreciating so much the write-downs of the portfolio. What explains -- and one [situation] where you wrote it up, and then wrote it down again?

Well, let me jump in first, and Grier will give a more detailed answer.

Bear in mind, Jim, that this is not like -- for example, one of our competitors runs a senior loan investment portfolio. And the value of those loans can go up and down, basically when interest rates move. Our portfolio is a mezzanine junior capital portfolio which includes significant amounts of equity positions in addition to subordinated loans.

And so as a result, what you'll find in our company -- and I know you already know this, but maybe everyone else doesn't -- is that there will be more "credit problems" than a senior loan, pure senior loan portfolio will have. But there will also be higher equity returns. The number I think Grier just quoted was 58, 62%. And there will be more variability in the value of our equity holdings.

So for example, Gas Solutions is worth a lot more this year than last year, we think. NRG appreciated tremendously in the first year and a half of our ownership. Then there were some changes in their marketplace. And the write-ups that had been recommended by Hulahan and affirmed by our Board of Directors were reversed. And I can tell you that variability's not going away, because NRG is now doing very well again. And Grier, I'm sure, has a lot of detail on this.

Most of the delta net asset value, Jim, between 12/31 and 3/31, was due to reversing partially an unrealized -- prior unrealized write-up for energy manufacturing, which is still at a premium to original costs. And the reversal was done in caution. Because around the -- in the early months of the year, NRG had a couple soft months there, as some of the business they do, constructing mud tanks, softened for onshore rig construction.

What's occurred more recently, in the last month or two as the backlog has rebuilt significantly, is the Company's added to its offshore business to better diversify, not be beholden to the more volatile onshore reconstruction market. So to management's credit, they've responded to the market by going after additional pools of demand, and pretty significant ones at that.

Nonetheless, in caution, determined to reverse some of the prior unrealized gains for that particular business, at least as of 3/31. And of course, we'll revisit the topic next quarter.

The sale, or potential sale, of Gas Solutions is seemingly taking longer than anticipated. Can you explain that?

Yes.

By the way, Jim, I wanted to add one other thing on NRG. The good performance has come in -- or, put it this way -- the enhanced performance, since the 3/31 valuation has been coming to us, since that valuation was complete. So were that to continue, we would expect that to be written up again.

Of course, we do try to moderate the amount of write-up/write-down in the portfolio, if we can. Unless we think it's sustainable, we're reluctant to move too far too fast.

Over to Gas Solutions -- I think as you know, when you sell an asset, and you start the process of selling it, you don't know how long it might take. And that is going to be true whether you sell a car or a house, or a bicycle in your garage. This is an attractive property to quite a number of people. We're looking to get the best price that we can get. And we're more interested in a process that results in the best price on terms that we believe are appropriate for this asset. And as a result, we go through portions of the process that are very time-consuming, that are rigorous, that take a longer period of time than maybe somebody might wish. But we're very comfortable with the process.

Now, it so happens that when you do sell an asset like this, some percentage of the time, somebody comes in, and they have a "preemptive bid." And they say, Oh, I want to take this [right off the] market. I don't want anyone else looking at this. I want to start due diligence today. I think I can close in three weeks. That does happen.

We do have people who I think might want to follow such a process; we don't think their bids are high enough. So as a result, we're going through the more -- what I would say more lengthy, deliberate process. And as with all these processes, we're unable to say exactly how long they will take, or when or if there will be a closing.

I will say that the property has become more valuable, at least in our minds, since we started the process, so that's not the worst thing.

You're saying that it has a EBITDA run rate of $30 million, if I'm reading this correctly, on a 2008 forecast calendar year. Yet it's on your books at something like $54 million. So obviously, to get $54 million, you aren't capitalizing a $30 million run rate.

Well --

Let me try to walk you through that, Jim.

So we show a fair value of about $54 million. We also have new third-party debt of $38 million from RBC, which brings one to a total value, when you add those, of about $92 million. As we've also disclosed, we have $30 million of cash via dividend recap that we did at the asset level, that sits available to us as additional dry powder and liquidity, unencumbered cash, non-recourse cash, that we can draw upon as Prospect Capital when we deem appropriate at the Gas Solutions Holdings, Inc. level.

So that's -- when you add it up, that's the total value, including the cash.

Do you view the $30 million of cash dividend capture, or whatever you called it, something you will use? Or is it just going to be sitting there available in case you can't expand your credit facility?

Well, we have it available to us. We can't say for sure whether or not we'll use it. In the near future, as we've disclosed, we are deeply embedded into a credit facility upsizing process, spending a lot of time on that process, with a lead administrative agent. We're pleased with how that's going.

So it's hard to tell if we'll use it. It'll be -- it'll really be dependent upon transaction-flow volume, when and how and if deals heat up, to see if that'll be required. We have, absent that, more than $60 million of additional liquidity, before you talk about that cash, before you talk about the $200 million increase from $200 million to $400 million for our credit facility. So it depends upon how things play out timing-wise.

What's the situation on credit facilities? You had originally one, and then you've gone to another. And now you're talking about a third potential syndicate. Why doesn't the same bank just, over time, increase your line of credit without having to go around and have you shop for another bank?

Well, it's a fair question. It's a pretty meaningful upsizing -- from $200 million to $400 million. We don't have the ability to talk freely about specific names, which wouldn't be appropriate until a specific transaction is closed. But it's normal and appropriate for a facility of that size for there to be more than one bank. And frankly, we think that's good for our company as well. Having more than one lender is good diversification. From a credit facility standpoint, it's good relationship management for our product needs as a company along a variety of avenues, not just this specific facility. So we think it's good for us to have more than one lender.

Jim, I guess I'd also say that I don't have the data or a spreadsheet right in front of me that would demonstrate this intuition. But I think for one institution to extend a loan on their balance sheet to us of $200 million is a pretty significant commitment. And we would not expect that single institution to want to increase that on an [all-alone] basis.

So I feel actually that we have pushed the envelope there with one institution being our primary lender at this point.

We're also looking at, Jim, over the longer term, $400 million will in the future go to $600 million, and then $800 million, and then $1 billion. And we don't want to have all our eggs in one institutional basket, so to speak, that reaches a limit after a point. We want other lenders -- and we've had multiple lenders in the past -- we want other lenders to grow with us, and help grow our balance sheet and our needs over time. So introducing and expanding those relationships earlier is important for us as part of our long-term strategy.

And given where LIBOR is, given the cost of debt relative to the cost of equity, we certainly want to be maximizing that, and we are doing so.

Thanks for your responses.

Thanks, Jim.

[Robert Dodd, Morgan Keegan].

Hi, it's me again.

One housekeeping one first -- can you give us what the Gas Solutions dividend was in this quarter?

$3 million.

$3 million, okay, got it.

And then, looking out -- pipeline, backlog, et cetera -- what are you seeing in terms of the number of opportunities? I assume it's growing. But I mean, what's the kind of quality mix that you're seeing come through the door here, as mezzanine opportunities?

It's a good question, Robert.

So as you know, we have three lines of business. We buy companies holding debt and equity, sometimes a very significant portion of that on the capital structure. We make direct loans to companies that are closely held, and we provide financing to institutional private equity funds that purchase companies that pursue other opportunities.

All of those areas are quite robust for us. I'd say in the buyout business, our ability to one-stop a transaction, to put up the debt as well as the equity, is a significant, significant differentiator in the current market, where financing is increasingly difficult for sponsors to get. So we're seeing a lot of activity there.

Our strategy is to call up a lot of M&A shops and to ask them about their busted auction, the buyers that failed to close; the situations where we can come in, pay a lot less, but execute a deal expeditiously. We don't like participating in [white sale] auctions, but we do like negotiated deals where prior auctions have failed.

So that -- we're seeing a lot of robustness there. The direct lending business continues, a lot of it natural resource-based companies, given the commodity environment -- lots of activity there. We're very cautious about commodities as always and are insistent upon hedging, as you see with our disclosure about purchasing puts for Gas Solutions. And we have regular risk management policies and negative covenants that require companies to hedge.

And then thirdly, the sponsor finance business -- we're also experiencing a significant amount of volume. That's where a fair amount of our diversification push is coming from, which is important as we look to expand and upsize our credit facility to build towards one-to-one leveragability.

Sponsors that a year ago had money basically given to them -- people were giving away their money and accepting unreasonable risk for it -- as you know, Robert, we stayed out of that business; we saw it as a mispriced business. We're happy to do so. So while others have taken hits in their marks, we don't have that legacy type of over-leveraged and underpriced sponsor paper to contend with.

Now in the existing market, we're regularly seeing not just second-lien opportunities, but also unitranche [of] one-lien, senior lien opportunities to extend credit at lower multiples, deals that had leverage of five, six turns a year ago. We're looking at one-stops that -- two to three and a half turns by comparison. So the leverage has come down by two to three turns. And the yields have gone up. We're looking at double-digit coupons on those transactions.

So we're very happy with that, Robert. We see that activity continuing, and you've seen that in recent deal announcements, as well as the $400 million-plus pipeline that we disclosed we currently have.

Just going back to the commodity exposure, if we can for a second -- I realize you like to hedge out a couple of years. Well, the terms on most of your deals extend beyond that. So what -- how has your underwriting approach changed in terms of your long-term commodity price you're factoring in, in reference to what happens three years out, once the current -- or the initial hedging program lulls off? I realize that you constantly have [them] push it out a year. But if commodity prices do come down substantially over the next three to five years -- which is no sure thing, obviously -- how is that factored into your underwriting?

Well, it's a good question, Robert. And we constantly worry about that around here. We're -- [mean reversion belief folks] -- at least I am. And whenever you have highest-of, greatest-of, and when we have maximum concern, and we want to de-risk the situation -- people remember what happened in real estate and technology in prior years. So we don't have any extrapolation euphoria as folks are wont to do from the recent past.

Actually, in the direct lending business, our average maturity is more in the three-year timeframe. So we don't have long-term horizons there. We also want to have a much more senior secured push [of] portfolio. We have scheduled AIM/PLUS cash sweeps that kick in for many of those deals. So we seek to de-lever the situation as rapidly as possible.

And the typical hedges that are put on -- I talked about two-year hedging for propane, with Gas Solutions, because propane's a less liquid market, and you just get knocked down too much going beyond two. But where we're hedging crude and hedging gas, you can go much further out. And we actually have three-plus years of hedging in many of those companies.

So we're locked in in the senior secured, and very well over-collateralized, and with healthy cash flow coverages in many of those companies. We've also exited certain positions as well to show the full turn. TLOGH's an E&P company, Ken-Tex was an E&P company, just to pick a couple of examples for deals we monetized in the past quarter.

Okay. Thank you.

Thank you, Robert.

[Chris Doucet, Doucet Asset Management].

Good morning, guys. This is Chris Doucet from Doucet Asset Management. Congratulations on a good quarter in a challenging environment.

Thank you. Was that Doucet Asset Management, Chris?

Yes, it is, sir. We had a few questions for you guys.

Can you give us an update on Integrated in North Carolina? I didn't know if you'd mentioned that particular name in your comments earlier.

Integrated North Carolina?

Integrated Contract Services?

Yes. Well, maybe you got on late. What I mentioned to you was that in the case of ICS, we have ICS, we have THS; we have a new company we're in the process of forming down there, called Veterans Securing America. We have new management for all three companies. This is very excited new management which believes they can build a very successful company on the foundation -- what was left of the foundation -- of the companies that were there. And we will see if that happens.

It turns out the government contracting business is a business that most well-organized management teams should be able to make money in, especially if they're one of only five bidders on a Wright-Patterson contract, which I believe is $1.8 billion over ten years. So we have a management team in there that is extremely excited to pursue that and has already produced some gains for us.

And what I'd like to really do is wait for another quarter before we announce some kind of victory there. We do have collateral, we do feel that where that's booked, it's realizable now. But what we're trying now to do is to increase the value of what we have, and also recover the capital that's embedded in other things like buildings.

Okay. Thanks for that explanation.

Just two more quick questions -- the Peerless and Ajax transactions you recently did -- are those two transactions indicative of the types of deals and the types of structures that I should see coming into the portfolio in the near future?

Well, Chris, Grier answered this question in a slightly different way before. And so, what I would tell you is I believe that -- to expand on what Grier had to say, I see us as having the same three businesses, although the sponsor business to me has two pieces to it. One is working closely with sponsors on negotiated transactions, where we work hand-in-hand purchasing a company. And the other is purchasing sponsor loans from the Wall Street trading desks. And I'm a little bit less of a fan of the second business. Yet there are some very good-quality credits that are available there, and at good pricing in this marketplace.

So for me, we make direct loans, we do our own leveraged buyouts, and we make loans to sponsors either by buying off of desks or working closely with the sponsor to -- really to, on a negotiated basis, to close a transaction.

The buyout business for us, if you look at our portfolio -- if you just pulled out the leveraged buyouts alone -- we've done very well. I don't know that we've lost any money in any of them. And I think Grier just read off that our IRR's 62%.

So we continue to do those. We have a set of people here who really like to do those. We're value buyers; we don't like to pay more than three, four, five, five and a half times cash flow, so that means we have to kiss a lot of frogs to do very few deals. Significant resources goes into that business. Not a lot of capital is put to work, but the capital that's put to work earns a good return.

So are we going to do more of that? We are going to do more of that. Is it going to increase as a percent of our portfolio overall? I can't predict that. We're not trying to make it a lesser or greater percentage. It's probably about 20, 25%, maybe 30% of what we do. I would see it staying in that range as we go forward.

All right. And one final question -- in your due diligence, what have you found the EBITDA multiple ranges are from midstream assets? Where do they trade? And what are the factors that would cause Gas Solutions to trade at the high end or the low end of that range?

Well, I guess the first thing that I wanted to comment on -- Grier answered the question about the valuation -- our valuation process -- people can read about it in our prospectus. It's a disciplined process. It is designed to fair-value these assets. Determining a fair value is not always the same, exact, precise thing as predicting what something might sell for in a favorable environment -- and so you're probably going to have discrepancies -- or what could happen, I suppose, in an unfavorable environment.

So you may well have some discrepancies between -- well, one thing we do know is, when you actually sell something, the likelihood that you will hit to the penny, where it's fair value, it is close to, if not infinitesimally, close to zero.

So what causes these things to trade at higher and lower multiples? Well, I think, Chris, you could probably give us the list as easily as we could give it to you. But since you asked the question, why don't we go first here.

One is commodity prices. Two is people's view of whether those commodity prices and spreads that are inherent in a midstream business are going to be sustained or grow. Number three, synergies; number four, whether or not somebody is on an acquisition program; number five, their own cost of capital; number six, their perception of competition. Those are just a few of the things.

And just in case your next question is, are you people trying to work all those factors in your favor here -- answer -- yes.

All right, guys.

One of the -- just to add, Chris -- one of the areas that's encouraging for us as we're selling this asset is the Alerian MLP Index is up --

Right.

-- 10 to 15% since March, having gone through a decline of 10 to 15% from February to March. So MLPs are surging out there. I'm not saying that an MLP, a publicly traded one, would necessarily be the definitive winner of a competitive process [here]. But certainly, those are logical potential buyers. And their currency's getting a lot stronger day by day.

All right. Thanks for taking my questions, guys. And good luck with the quarter and the sale of Gas Solutions.

Thank you, Chris.

Thanks, Chris.

(OPERATOR INSTRUCTIONS)

We show no further questions at this time. I would like to turn the Conference back over to Mr. Barry for any closing remarks.

Well, thank you, Camille.

We appreciate everyone's time, and we hope everybody has a wonderful day. Bye.

Thank you.

The Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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