Prospect Capital Corp (PSEC) 2014 Q4 法說會逐字稿

Good morning, and welcome to the Prospect Capital's fiscal year earnings release conference call.

(Operator Instructions)

Please note, this event is being recorded. I would now like to turn the conference over to Mr. John Barry, the CEO. Please go ahead.

Thank you, Zelda. Joining me on the call today are Grier Eliasek, our President and Chief Operating Officer; and Brian Oswald, our Chief Financial Officer. Brian?

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 disclosure, see our Earnings Press Release, our 10-K, and our corporate presentation filed previously and available on the Investor Relations tab on our website, prospectstreet.com.

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

Thank you, Brian.

With so many new investors interested our Company, we invite those new to Prospect to review separate and recently recorded webinars as an introduction to Prospect. Investors can access such webinars through the Investor Relations tab on our website, prospectstreet.com. During those events, we talked through our overview corporate presentation that is also available on our website.

Now on to our financial results for the fiscal year and quarter. Our net investment income, or NII, in the June FY14 was $357.2 million or $1.19 per weighted average share. Our net income in the June FY14 was $319 million, or $1.06 per weighted average share. Our NII in the June 2014 quarter was $84.1 million, or $0.25 per weighted average share.

Our net income in the June 2014 quarter was $71.7 million, or $0.21 per weighted average share. NII and net income decreased from March to June, primarily due to a decrease in originations from $1.3 billion in the March quarter to $444 million in the June quarter, reducing structuring fees.

We previously announced our shareholder distributions through December 2014. The December 2014 dividend will be our 77th shareholder distribution, and our 54th consecutive per share monthly increase.

Our NII has exceeded dividends by $31.1 million, and $0.09 per share over the cumulative history of the Company. Since our IPO 10 years ago to our December 2014 distribution at the current share count, we will have paid out $13.26 per share to initial continuing shareholders, and $1.3 billion in cumulative distributions to all shareholders. Our NAV stood at $10.56 on June 30, down $0.12 from the prior quarter.

We've delivered solid returns, while keeping leverage prudent. Net of cash and equivalents, our debt to equity ratio was 72.9% in June, up from 67.9% in March. We have substantial liquidity to drive future earnings through prudent levels of matchbook funding.

We are currently pursuing initiatives to trim our funding costs, opportunistically harvest certain controlled investments. And rotate our portfolio out of lower yielding assets into higher yielding assets, while prioritizing first lien senior secured lending. Our Company is locked in a ladder of fixed rate liabilities extending 30 years into the future, while most of our loans float with LIBOR, providing potential upside to shareholders should interest rates rise.

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

Thanks, John.

Our business continues to grow at a solid and prudent pace. Prospect has now scaled at over $7 billion of assets and undrawn credit. Our team has increased to approximately 100 professionals, representing one of the largest dedicated middle market credit groups in the industry.

With our scale, longevity, experience, and deep bench, we continue to focus on a diversified investment strategy that covers third party private equity sponsor related lending, direct non-sponsor lending, Prospect-sponsored operating buyouts, Prospect-sponsored financial buyouts, structured credit, Real Estate yield investing, online lending, aircraft leasing, and syndicated lending.

In June 2014, our controlled investments at fair value stood at 26.2% of our portfolio, an increase from 19.5% the prior year. This diversity allows us to source a broad range and high volume of opportunities. Then select, in a disciplined bottoms-up manner, the opportunities we deem to be the most attractive on a risk adjusted basis.

Our team typically evaluates thousands of opportunities annually, and invests in a disciplined manner in a low single-digit percentage of such opportunities. Prospect's originations in recent months have been well diversified across our nine origination strategies. Prospect originated and closed nearly $3 billion of investments during the FY14.

Our non-bank structure gives us the flexibility to invest in multiple levels of the corporate capital stack, with a preference for secured lending and senior loans. In June 2014, our portfolio at fair value consisted of 56.2% first lien, 19.2% second lien, 18% structured credit with underlying first lien assets, 1.4% unsecured debt, and 5.2% equity investments, resulting in 93.4% of our investments being assets with underlying secured debt.

Prospect's approach is one that generates attractive risk adjusted yields, and our debt investments were generating an annualized yield of 12.1% as of June 2014. We also hold equity positions and many transactions that can act as yield enhancers or capital gains contributors as such positions generate distributions.

While the market has experienced some yield compression in the past year, we have continued to prioritize first lien senior and secured debt with our originations to protect against downside risk, while still achieving above market yields through credit selection, discipline, and a differentiated origination approach. Originations in the June quarter were $444 million across 12 investments. We also experienced $170 million of repayments from five investments in the March quarter, as a validation of our capital preservation objective.

During the June quarter, our originations comprised 44% of structured credit, 35% third party sponsor deals, 14% operating buyouts, 3% real estate, and 4% syndicated loans. As of June 2014, we are up to 143 portfolio companies, with a fair value of $6.254 billion, a record total. Demonstrating both an increase in diversity, as well as a migration toward larger positions and larger portfolio companies.

Our number of companies is up 15%, and portfolio size is up 50% year-over-year. We also continued to invest in a diversified fashion across many different portfolio company industries. With no significant industry concentration, the largest is 9.8%.

Our Financial Services controlled investments and structured credit investments are performing well, with typical annualized cash yields ranging from 15% to 30%. To date, we've made multiple investments in the real estate arena with our private REITs, largely focused on multi-family, stabilized yield acquisitions with attractive 10 year financing. We hope to increase that activity with more transactions in the months to come.

We closed our platform acquisition of CP Energy in the September quarter in 2013, and closed multiple follow-on acquisitions in the December quarter. In the March quarter, we closed the Harbor Touch acquisition, with the simultaneous financing of an add-on acquisition. And in the June quarter, we closed the Arctic Energy acquisition.

We recently exited Air Mall at a 17% IRR, and 1.6 times cash on cash return. We currently have other one stop acquisitions under LOI, or near LOI, at attractive multiples of cash flow, with both double digit yield generation, and upside expectations.

In the past year, we have made three investments in non-controlled third party sponsor backed companies that brought our total investment in each such company to more than $100 million. Demonstrating the competitive differentiation of our scale, balance sheet to close one stop financing opportunities. We've also made multiple control investments, that each individually aggregate more than $100 million in size.

With our initial $92.6 million investment in Echelon to finance a diversified asset acquisition, we have now entered the aircraft leasing sector. Echelon focuses on acquiring aviation assets with attractive contracted cash flows, strong lessee credit attributes, and stable residual value characteristics. The Echelon management team expects to generate double digit yields through a focus on mid life aircraft.

Over the past year, we've also entered the online lending industry with a focus on prime, near prime, and sub-prime consumer, and small business borrowers. We intend to grow our investment, which stands at approximately $75 million as of today, across multiple third party and captive origination and underwriting platforms.

The majority of our portfolio consists of agented and self-originated middle market loans. In general, we perceive the risk adjusted reward in the current environment to be superior for agented and self-originated opportunities compared to the syndicated market, causing us to prioritize our proactive sourcing efforts. Our differentiated call center initiative continues to drive proprietary deal flow for our business.

As a yield enhancement for our business, we've launched a senior loan initiative. In which we would collaborate with third party investor capital that would acquire lower yielding loans from our balance sheet. Thereby allowing us to rotate into higher yielding assets, and to expand our ability to close scale one stop investment opportunities with efficient pricing.

Our credit quality continues to be stable. Non-accruals as a percentage of total assets stood at 0.1% in June 2014, down from 0.3% in June 2013, and 1.9% in June 2012.

We have booked $239.1 million in originations so far in the current September quarter, net of $322.3 million of repayments. Our net repayment, so far this quarter, is $83.2 million. Our advanced investment pipeline aggregates more than $400 million in potential opportunities, boding well for the coming months.

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

Thanks, Grier.

As John discussed, we've grown our business with prudent leverage which we expanded last quarter through two scaled unsecured term debt offerings to help drive our earnings. Net of cash and cash equivalents, our debt to equity ratio stood at 72.9% in June, up from 67.9% in March.

We believe our prudent leverage, diversified access to matchbook funding, substantial majority of unencumbered assets, and weighting towards unsecured fixed rate debt demonstrate both balance sheet strength, as well as substantial liquidity to capitalize on attractive opportunities. Our Company has locked in a ladder of fixed rate liabilities extending 30 years into the future, while most of our loans float with LIBOR, providing potential upside to shareholders as interest rates rise.

We're a leader and innovator in our marketplace. We were the first company in our industry to issue a convertible bond, conducted ATM program, develop a notes program, issue an institutional bond, and acquire a competitor, as we did with Patriot Capital. Shareholders and unsecured creditors alike should appreciate the thoughtful approach differentiated in our industry, which we have taken toward construction of the right hand side of our balance sheet.

As of June 2014, we held more than $4.9 billion of our assets as unencumbered assets, representing approximately 80% of our portfolio. The remaining assets are pledged to Prospect Capital Funding LLC, which has a AA rated $877.5 million revolver with 29 banks, and with a $1 billion total size accordion feature at our option.

The revolver is priced at LIBOR plus 275 basis points, and revolves for three years followed by two years of amortization with interest distributions continuing to be allowed to us during the amortization period. We started the June 2012 quarter with a $410 million revolver at 10 banks, so we've seen significant lender interest as we've grown our revolver.

We are currently working on extending our facility, with a substantially longer revolving period and substantially lower cost than the current facility. We expect to announce the completion of this extension in the near future.

Outside of our revolver and benefiting from our unencumbered assets, we've issued at Prospect Capital Corporation multiple types of investment grade unsecured debt, including convertible bonds, a baby bond, institutional bonds, and program notes.

All of these types of unsecured debt have no financial covenants, no asset restrictions, and no cross defaults with our revolver. We enjoy a BBB rating from S&P, and a BBB+ rating from Kroll.

We've now topped the unsecured term debt market to extend our liability duration up to 30 years. We have no debt maturities until December 2015, with debt maturities expanding through 2043. With so many banks and debt investors across so many debt tranches, we've substantially reduced our counter-party risk over the years.

As of today, we have issued six tranches of convertible bonds, with staggered maturities that aggregate approximately $1.25 billion and interest rates ranging from 4.75% to 6.25%, and have conversion prices range from $11.23 to $12.61 per share.

We have issued a $100 million 6.95% baby bond due in 2022, and traded on the New York Stock Exchange under the ticker PRY. On March 15, 2013, we issued $250 million of 8 7/8% senior secured notes due March 2023. This was the first institutional bond issued in our sector in the last seven years.

On April 7, 2014, we issued $300 million of 5% senior unsecured notes due July 2019. We currently have $786 million of program notes outstanding, with staggered maturities between 2016 and 2043, and a weighted average interest cost of 5.38%.

During the June 2014 quarter, we issued equity at a premium to net asset value, and therefore, accretive. From April 1 through May 2, we sold approximately 7.7 million shares of our common stock in our ATM program, and raised $84 million of gross proceeds. We have not filed another after market equity program since that time.

We currently have drawn $104 million under our revolver. Assuming sufficient assets are pledged to the revolver, and that we are in compliance with all other revolver terms, and taking into account our cash balances on hand, we have over $850 million of new facility-based investment capacity.

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

Thank you, Brian. We can now answer any questions.

(Operator Instructions)

The first question comes from Terry Ma from Barclays.

Hello. So it looks like your originations were somewhat constrained this past quarter. So can you maybe just talk about your investment pipeline going forward, and how you plan on funding new investments given your leverage levels are close to 0.77 right now?

Sure. Thank you for your question, Terry.

We've got a number of repayments that have come in recently. And, in fact, we've had repayments in excess of originations quarter to date, and expect some other repayment activity potentially later on in the quarter. So that's one source of the originations.

Another source is, which is important potential cut outs for the future for our Company, is we've got an initiative going on right now to potentially sell off some of our lower yielding assets. We have some first lien senior secured assets yielding in the range of 6% to 7%, which acts as an overall drag on our weighted average yield.

And we're looking to potentially exit those, while retaining administrative control and stewardship of the same credits. So doing so in an attractive risk protected way, and then rotate into higher yielding assets. So that would be another important source of liquidity.

Thirdly, we announced recently that we exited Air Mall at a pretty nice return. And we're looking at other controlled investments in the portfolio for potential exit as well. So we have multiple sources there, Terry, of liquidity, and we also have debt capacity on top of that to boot.

Okay. Can you maybe just talk a little more about this senior loan initiative, and how big maybe that can get? You're already using a sizeable portion of your non-qualified bucket, so I would imagine there's not too much room for you to grow the senior loan initiative.

Right. We've observed how other companies in our industry have utilized the path that consumes a so-called 30% basket capacity. And we look at that usage, and the path we would take would not consume the 30% basket.

We would actually do so in a way so that our assets would be primarily qualifying, at least as one of the key strategies we're looking at. There's some other strategies that might utilize a portion of the 30% bucket, but we're looking at innovative ways that are different from how others have approached things.

Okay. And do you guys have a partner in place yet, or is this still in the works?

It's still in the works, but we've made a lot of progress in the last few months. You always have a little bit of a summer slowdown with these things, and we hope to make more progress towards Labor Day.

Okay, thanks. That's it for me.

Thanks, Terry.

The next question comes from Greg Mason from KBW.

Great, good morning guys, thanks for taking my questions. First, on the reversal of the excise taxes in the quarter and the prepaid excise tax asset, can you give us an estimate on the dividend spillover right now?

I'm going to ask Brian to handle that. Thanks, Greg.

The dividend spillover, we disclosed what it was as of August 31, which is what we filed our last -- well the period from which we filed our last return, we have a August tax year-end. And it was, I believe, about $108 million at that point. Obviously, we've used some of that this year as dividends have been in excess of NII, but we still have a significant amount of spillover to fund dividends in the future.

Okay, great. And then on some of the restructured holdco debt that you moved down to the operating Company in the quarter, several of them had some lower rates on it. And just trying to get a feel for how much of this quarter reflected the old rate versus the new rate. So can you maybe give us some timing of when those restructurings happened in the quarter for the new run rate?

Yes, most of those restructurings were done mid-May to mid-June. And those rate reductions should allow these portfolio companies to actually start to generate dividend capacity going forward.

Okay. Are there any remaining control companies that you still need to move the debt down to the operating Company level?

No, all of them have been moved at this point.

Greg, just to jump in there to supplement that answer.

Lest you think that some other is going to be some down tick in income from those companies, remember, these are companies where we own a significant portion of the equity as well. And have the ability to take recurring distributions, and do so for many of those.

We had a question, for example, this morning related to the First Tower, one of our investment that's less than 5% of our assets. And the rate being slightly less on the debt going forward than in the past.

I would encourage folks not to read too much into that for a Company like Tower which continues to do well. It's actually eclipsing year-to-date income year-over-year. And I just wanted to make sure that you get an accurate picture of the future there, Greg.

That's great color. And just thinking about since you brought up First Tower, looking at the income you were generating on your $273 million investment at 20%, and now it's $250 million at I think 17%, and the rest is put into equity. In your 10-K, you showed the net income for First Tower, and I believe it was negative. Does that mean, even if there's excess cash flow at First Tower because there's not GAAP income, that the dividends won't count as dividend income?

No, it does not mean that. The GAAP recognition of dividends is based on taxable earnings for dividend recognition for RIC, not GAAP earnings. And, of course, the GAAP earnings are going to be colored by the debt we put against such assets, and depreciation, and other factors.

We look at the recurring cash flow power generation of the Company, which of course is also governed by the first lien credit documentation with the bank group as well. But we're pleased with the direction that Tower is going.

Okay, great. And then one final question, and I'll hop back in the queue.

For the past two years, you've always released the next three months dividend announcement with the earnings simultaneously. And we didn't see that last night, making the dividend announcement with the earnings.

What should we think about that? Is there anything we should read into that?

Not really, Greg. The Board has announced dividends going out through the end of December, which is a pretty long runway. And we thought we would just digest information from the market and how the portfolio is performing, and have more to say about that next quarter.

We also, I would add to that, continue to have spill back income as Brian had said earlier, as a bank so as to the value of dividends for the future as well.

Okay, great. Thank you guys.

The next question comes from Ron Jewsikow from Wells Fargo Securities.

Good morning, and thanks for taking my questions. Kind of following up on Greg's dividend question. We understand that you have spill over income and other items. But just looking at dividend policy in 2015, would you be more apt to pay out a dividend that was at least somewhat supplemented from spillover income, or would you want to pay out of just quarter NOI?

Both areas are available acceptable baskets to support a distribution in our mind, both ongoing quarter-to-quarter as well over the long term. And we encourage folks to think about our business a little bit longer than one individual quarter. And there can be some lumpiness in originations, for example, and we saw that last quarter with a lower quarter for us in originations right on the heels of a $1.3 billion, $1.4 billion record origination quarter in the March quarter.

So there could be some lumpiness to deal flow going in, as well as with exits that can drive some variability in results. Primarily because of upfront fee income associated with such originations. So hopefully that helps you in terms of looking at both the short-term and the long-term from current earnings, as well as spill back.

Yes, it definitely does. And then, just a quick question on the conversion of some of your debt investments to increased equity stakes and the control companies. Does that relate to any covenants at the operating Company level, such as net debt to EBITDA?

The question is in terms of restructurings and moving debt, did we have to look at debt to EBITDA as one potential --

Yes, did covenants drive some of the increased equity stakes when things were pulled from the holding Company to the operating Company level?

Yes, in some cases we're not going to negotiate those deals with third party bank groups with sureties in some cases that have bonding aspects. And then you have third party management teams, and stakeholders as well. So I think folks don't appreciate or realize that there's a negotiation involved with people outside of our immediate control, and you end up with what you end up.

But again, we own substantial amounts of equity of those controlling deals. And as they perform and are able to pay distributions in excess of servicing interest and debt out of taxable earnings, so that's also available for -- to support investment income at Prospect, and the dividend as well.

And then, just my last question following up on that. These equity stakes, do most of them not have restricted covenants then on paying dividends to you guys, or could you give a ballpark percentage?

As you can imagine, that's a significant area of intense focus as we're negotiating. The deals that are the most sensitive to that are the asset intensive ABL facilities with our financeco book, of which we have three such companies. And we've negotiated, in all those cases, a 100% pay out of income.

In other cases and other companies the third party is in control. But we've been a lender that we've noticed isn't necessarily been the case. But that's an important condition precedent, if you will, for our being interested holding such businesses.

Because the whole point is that we hold those companies very tax efficiently with RIC qualifying income as partnerships not as C corps. And we want to be able to maximize the distribution pay out of those businesses.

And those businesses also run with an availability cushion as well. Because there's seasonality involved, there's growth, and they want to make sure they have a cushion. A cushion against bumps in the economy, et cetera. But all three of those have a 100% pay out in the documents.

All right, makes total sense. Thanks for taking my questions.

Sure.

The next question comes from Christopher Knowland from MLV & Company.

Hello, Chris.

Hello, Grier. How are you doing?

Back to the dividend for one second. Did Brian mention what the spillover income was? Because I might have missed it.

I only disclosed what we had disclosed, which was through August of last year. A good estimate would be to take whatever our dividends are in excess of NII, and reduce that amount by that difference.

Okay. And then going out beyond December in terms of the dividend, given that the Company has not covered the dividend for any quarter for FY14. Is a return of capital part of the plan just to maintain the pay out, or is the policy once the spillover income is exhausted, adjust to the right size of dividend for the earnings?

Our policy strategy is to focus on paying out dividends out of taxable earnings, and to avoid return of capital distributions over the long term. And we do have a spillback available to us to support that, but we also have catalysts which we hope will drive our earnings going forward.

I mentioned our work on reducing our financing costs, which we hope and expect could have a significant impact on our business. Our work on the senior loan initiative. We have right now, I think, over $400 million of assets that are earning 6% or 7%, actually maybe it's $600 million now. And if you can rotate those into double-digit yielding assets, then that should be highly accretive to our business.

Then I mentioned our potential exit of control deals. That if we exit at the right price, we can then reinvest into income producing new investments properties to help drive income, and we have debt capacity to boot. So we have a few different levers, if you will, to pull there, Chris, which we hope can help drive the future.

Grier, as a follow-up to that, incrementally, back of the envelope estimate, you needed about 100 basis points improvement in overall yield of net investment income to cover the dividend. Do you think all those initiatives that you're outlining could achieve a full coverage of the dividend?

Well, we'll have more to say about that, Chris, in the future. Because some of them are further along, for example, the reduction in our financing, as Brian indicated, we hope to have more to say about that in the near future. Some of those are a little bit longer term initiatives.

Great. And the last question, peak debt to equity ratio, I know you guys as I recall mentioned 0.70 would be the peak, now we're beyond that. What's the thinking on that?

When you say peak, we've talked about running our business somewhere in the 0.6 to 0.75 debt to equity range. But these are rough guidelines and averages, and you might have your leverage go a tad higher if you're expecting a big payoff to occur a week later.

Right now, our revolver has almost nothing drawn on it, for example. And we just had a almost $200 million repayment that had been in the works. So these things are going to go along a sine curve if you will.

But if we run at 0.75 give or take debt to equity, that's a pretty sizeable cushion compared to one-to-one. Especially when you consider that 93% of our assets, including the underlying, are secured debt instruments that are quite comfortable and capable of covering that debt with a sizeable cushion.

So we feel very comfortable about that, and we also would point out other factors that sometimes get lost in the mix. One is, how we have a significant amount of long term funding that's fixed rate, and gives us to have the ability to benefit if and many folks say when short-term rates should spike.

The other aspect, of course, is that we only encumber about 20% or so of our assets for a revolver. So you've got the other 80% of assets unencumbered to benefit term lenders and equity shareholders alike. So when you have those significant de-riskers in the system, I'm not saying you'd run at 0.99 to 1, but you have arguably a lot more headroom because of those dynamics.

Great. Thank you for taking my questions.

Thanks, Chris.

Next question comes from Finn Roche from Raymond James.

Hello, guys, thank you. We saw the lower levels of share issuance this quarter. Was that a function of less compelling incremental yields out there in terms of your cost of capital, or was that due to negotiations with the SEC?

As we disclosed, Finn, in our financials, we decided to curtail capital raising, and we have that in our documents. In terms of the opportunities we're seeing and how that drives the need for capital, we've got a decent pipeline right now. We're being very selective in the current market.

You did see about a 40 basis point decline in yield from the March quarter to the June quarter. But we see a lot of that as maintaining credit quality and credit discipline, as evidenced by our 0.1% fair value non-accrual rate at 6/30. So we're not chasing yield in our minds, we're not chasing that incremental riskier deal.

We're maintaining a significant focus on senior secured debt, again with 93% of our assets with an underlying secured debt instrument. And we're being quite risk averse in the current environment, where we see some deals trade away at leverage attachment points we don't like. So we're going to maintain credit quality discipline, and of the thousands of deals we see I think our book to look ratio is in the low single digit rate, probably 1% to 2%.

Having said that, we're still finding attractive opportunities. Having nine different origination strategies gives us the ability to look quite broadly at the market, and again be disciplined about it.

We're seeing some interesting opportunities right now, for example, in real estate that had been a little bit quieter. Year-to-date, we were more active last year, but now we're seeing some interesting opportunities in the current environment.

Last quarter, structured credit was quite active for us. So we've got enough of a wide purview that we should be able to find good looks in any given quarter for new originations. It's just a question of to what degree.

Okay, thank you. And then just on specialty consumer finance, we've seen a lot of companies receive inquiries from various regulatory agencies. Have you experienced any of that?

Regulatory compliance is -- it's very, very important, in all of our portfolio companies, and Prospect as well. In not just the financial services companies, but with consumer finance, there is a regulatory risk associated with investing in that sector.

We've been investing in that sector going back to 2007, when we were a lender to regional management and it's now a public Company. That loan paid off years ago, and now we own three financial services companies, I believe, which aggregate about 7% or so of our assets. Right, Brian?

Yes.

It's a relatively small percentage. However, having a compliance culture we think is critically important. And as our team members help to supervise those companies at the Board level, insisting upon proper compliance audits, third-party regulatory help, it is important. So we're pleased with how things are going, and we view that as a continuous improvement project.

Well thanks very much for the color, thank you.

Sure.

Next question comes from Greg Mason with KBW.

Great, thanks. I had one follow-up question. On the ATM program, I know the April Barclays program. You had 20 million shares, you've sold 5 million before you stopped the program. I think in the K, you said you were going to stop until you had filed this 10-K.

So I guess my question is, is that program now back effective? That's my first question. And then, how do you think about using it?

The answer is no on the first question. And on the second question, as we look at an ATM program compared to other types of equity issuance, as we've said in this format in the past, we're a big fan. And we view it as efficient, low cost, just in time, done right, accretive capital raising.

Having said that, we're not going to raise capital unless we see a good use for it, based on what's going on in the pipeline and the left-hand side of the balance sheet. So we have utilized that program in the past. We did not, as of several months ago, and we'll have to see about the future based on the opportunity set and based on making sure we would be doing so if we were doing so accretively.

If you saw those good opportunities, obviously, you'd want that to be effective. Is there just a time frame here that that ATM program could be effective, or is there something you have to accomplish to get that back up and running?

No, we haven't made any final determinations yet on that, Greg, and it will be against an opportunity set that we see in the market.

Okay, great. I appreciate it.

And then one final question, just to see if there are any one time movements in the quarter. I think it seemed like AJAX had a $3.8 million PIC reversal as their sale is coming up, which seems like that was a negative one-time event. First off, did that happen in this quarter, and were there any other one-time events on the revenue side?

That was the only real event on the revenue side that was non-recurring. Dividend income is always lumpy for our companies, because we recognize it as it comes in. It's not a continuous thing. But, and yes, AJAX was done in the June quarter.

In general, we don't use a lot of PIC income, Greg, as you know having followed us for many years. Because the thing about PIC income is you can recognize it short-term, but it ultimately doesn't get paid, it gets reversed. So that's not very helpful unless you're confident, and getting the cash in is a lot more confident and inspiring than PICing.

Sure.

And we have some instruments, for example, in the control book, which contractually allow for PIC but get paid in cash. So sometimes people get confused about that and think that that PIC contract potential is the same as actually PICing on a quarterly basis, which it is not.

Got it. Thanks, guys.

Thank, Greg.

This concludes our question and answer session. I'd like to turn the conference back over to Mr. John Barry for any closing remarks.

Okay, well thank you all very much for participating in our call, and I hope everyone has a nice lunch. Thank you very much.

Thanks, all.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Have a good day.