Ladies and gentlemen, thank you for standing by, and welcome to the Portman Ridge and HCAP Conference Call. All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there will be a question-and-answer session. To ask a question during the session, you'll need to press Star one on your telephone keypad. If you require operator assistance, please press Star zero. I'd now like to turn the call over to a representative from the company. Thank you. Please go ahead.
Thank you, and welcome to today's call to discuss the proposed transaction recently announced between Portman Ridge Finance Corporation, a business development company externally managed by Sierra Crest Investment Management and affiliated BC Partners, and Harvest Capital Credit Corp, a business development company externally managed by Harvest Advisors . We are joined this morning by Ted Goldthorpe, CEO and Chairman of Portman Ridge, and Joe Jolson, CEO and Chairman of Harvest Capital, along with certain members of the Portman Ridge and Harvest Capital Credit Management teams. Before we begin, I would like to note that this call is being recorded, and replay information is available on our December 23rd, 2020, press release. Throughout today's call, we will reference an investor presentation that has been posted to the investor relations section of both the Portman Ridge and Harvest Capital Credit website.
While we will not be directly referencing each slide, the form of this presentation will generally follow a slide structure. If you have not done so already, we encourage you to download the presentation for review during the call. Please note that this call is the property of Portman Ridge, BC Partners, Harvest Capital Credit Corp, and Harvest Advisors, and any unauthorized rebroadcast of this call in any form is strictly prohibited. Today's conference call includes forward-looking statements and projections, and we ask that you refer to Portman Ridge's and Harvest Capital Credit's December 23rd, 2020, joint press release and their most recent filings with the SEC for important risk factors that could cause actual results and events to differ materially from those projections. Portman Ridge and Harvest Capital Credit do not undertake to update their forward-looking statements unless required by law.
With that, I'd now like to turn the call over to Chairman and CEO of Portman Ridge, Ted Goldthorpe. Please go ahead, Ted.
Thank you, and thank you all for joining us. I'm joined on today's call by Joe Jolson, Chairman and Chief Executive Officer of Harvest Capital Credit; Ted Gilpin, our Chief Financial Officer of Portman Ridge; and Patrick Schaefer, President and Chief Investment Officer of Portman Ridge. As we announced last night, Portman Ridge entered into a definitive merger agreement with Harvest Capital Credit that will result in the entity being merged with and into Portman Ridge. Before we begin, all of us on the call must note our appreciation for those who are attending so close to the holidays, as we recognize the timing is not necessarily ideal. We wanted to do a call as soon as possible as we could to ensure stakeholders were informed. Our strategy has been to benefit from growing a BDC with greater scale.
We believe this merger will deliver significant benefits to the shareholders of both companies and further validate our ability to consolidate the fragmented BDC space. As many of you know, this is now the third merger transaction entered into by Portman Ridge since BC Partners took over management, the first being with Oak Hill Investment Corporation that closed on December 18th, 2019, and then Garrison Capital that closed on October 28th, 2020. We feel that the timing of this transaction is well-suited from both sides, having just completed the successful Garrison transaction. We are now able to turn to Portman Ridge's attention to working with HCAP management on a successful combination. BC Partners is a leading global alternative asset manager with more than $20 billion of assets under management and over 30 years of operating history in the U.S. and Europe.
BC Partners Credit was launched in February of 2017 and has pursued a strategy focused on identifying attractive credit opportunities in any market environment and across sectors, leveraging the deal sourcing and infrastructure made available by BC Partners. I want to start off by outlining the details of the proposed transaction, then delve into the strategic rationale and benefits for both the Portman Ridge and Harvest Capital Credit shareholders. Then Joe Jolson, Chairman and Chief Executive Officer of Harvest Capital Credit, will share some of his thoughts on the transaction and the factors that resulted in HCAP electing to partner with us. For those of you reviewing the investor presentation, on slide three, we outline the details of this transaction.
As was the case with our transactions of OHAI and Garrison, this transaction will be done on a NAV-for-NAV basis and has been approved by both the Harvest Capital Credit and Portman Ridge Board of Directors, as well as the Special Committee of Harvest Capital Credit Board. JMP Group LLC has also agreed to vote their shares in favor of the transaction, as has Joe Jolson. HCAP shareholders will receive aggregate consideration equal to HCAP's net asset value at closing. This consideration will be funded using Portman Ridge shares valued at 100% of Portman Ridge's net asset value per share at the time of the closing of the transaction, and if required, the number of Portman Ridge shares would exceed 19.9% of the issued and outstanding shares of Portman Ridge Common Stock immediately prior to the transaction closing, cash consideration in the amount of such excess.
Additionally, HCAP shareholders will receive $2.15 million in cash from Sierra Crest, the manager of Portman Ridge, which is equivalent to approximately $0.36 per share. This payment mirrors a similar payment made by BC Partners as part of each of Portman Ridge's past transactions, including the mergers of Garrison earlier this year in October, OHAI in December of 2019, and the externalization of KCAP's management contract in April of 2019. This will result in HCAP shareholders receiving total aggregate value of approximately 104% of net asset value, net of estimated transaction expenses, from Portman Ridge and Sierra Crest from the combination of cash and stock consideration based on the September 30th, 2020, net asset values of both HCAP and Portman Ridge, and adjusted for our recent merger with Garrison Capital.
Based on Portman Ridge's stock price as of December 22nd, 2020, of $1.80 per share, the merger transaction, including the Sierra Crest additional cash payment, combined to value HCAP's shares at an aggregate of approximately $7.71 per share, which represents 79% of HCAP's September 30th, 2020, net asset value, net of estimated transaction expenses, and a 30% premium to HCAP's closing price of $5.91 on December 22nd, 2020. It is important to note that as part of the ongoing equity investment by our manager, BC Partners will continue to contribute all incentive fees actually paid through March 31st, 2021, to purchase newly issued Portman Ridge Common Stock at net asset value up to $10 million. Additionally, Portman Ridge has implemented a buyback program for up to $10 million.
Over the summer, we entered into a Rule 10b-5 stock trading program to facilitate the repurchase of shares of Portman Common Stock in accordance with this program. I would now like to provide an overview of the strategic rationale for this proposed transaction. First and foremost, we believe this transaction fits perfectly as part of our ongoing strategy of utilizing the benefits of greater scale and diversification throughout all aspects of our portfolio. This transaction is expected to be net income accretive for Portman shareholders, and shareholders will continue to benefit from the fully integrated BC Partners platform, which allows us to access industry diligence and expertise from over 30 years of private market investing. Similar to the Garrison and OHAI transactions, we believe the proposed terms are favorable for both sides and provide a further margin of safety for earning stability into the future.
This is a testament to the immediate cost synergies that we can achieve and reflective of our strategy. We believe that our differentiated middle market lending strategy will lead to better long-term performance, a more stable net asset value, and a better trading multiple. Because of Portman Ridge's flexible mandate and the management team's background, we are able to capitalize on attractively priced non-sponsor opportunities, an area of the market that a large majority of direct lending managers have historically not been active in. As we've done in other transactions, over time, we intend to rotate the HCAP portfolio to a portfolio of directly originated, high-quality, senior secured debt investments consistent with the approach taken on the Portman Ridge portfolio and with a focus on diversification.
BC Partners has proven its ability to execute strategically with our third merger transaction in the BDC space within two years of taking management of Portman Ridge. Going forward, we believe in the current macro environment will result in compelling opportunities to further grow our platform in light of the added benefits of scale. The addition of HCAP into Portman Ridge's portfolio will ultimately allow our company to compete for larger deals, spread fixed public company costs across a larger AUM base, as well as increase our capacity for higher-yielding, non-qualifying assets. This transaction continues the shift in Portman Ridge's portfolio composition by increasing the first-lien senior debt exposure investments, as well as decreasing the portfolio's exposure to CLO equity and second-lien investments.
On a pro forma basis, following the transaction, first-lien assets will represent approximately 70% of our combined portfolio, and the percentage of CLO equity will be reduced to around 3% of the combined portfolio. We also remain focused on growing the diversified portfolio of high-quality, privately originated, senior secured debt investments that we are managing, and the addition of HCAP assets increases the scale of the portfolio and our ability to speak for larger deals. Finally, Portman Ridge's current liability structure is extremely flexible, and we have unsecured bonds outstanding that are callable and a revolving credit facility that can be flexed up and down. We do not require any new financing to close this transaction. Let me highlight how this has worked in practice.
When we announced the Garrison merger, we noted that we could call their CLO in November, providing Portman Ridge with the ability to rightsize liabilities through any combination of these facilities, with a goal to more closely matching our liabilities to the size of the company and its investment strategy going forward. We were able to proactively monetize over $95 million of the total portfolio at or above fair market value in just a few weeks following the closing of the transaction. Our goal would be to implement a similar strategy here. We are essentially utilizing the benefits of scale from both sides of the balance sheet. While none of us can say we expected to see two business combinations in a tight timeframe, it certainly is not a concern.
As was the case with OHAI and Garrison, we foresee a smooth transition of the current assets between managers and will continue to apply BC Partners' stringent credit standards while redeploying the capital and assets originated by our platform. We see stability as being a key fundamental driver for this transaction. We believe the shift in the composition of our investment portfolio, along with the opportunity to optimize our liabilities and capital structure, will ultimately result in a more stable NAV performance over time. Investors in the combined company should also benefit from an increased float of the stock. The ultimate goal is to deliver strong and more sustainable risk-adjusted returns to shareholders, and we believe it is the best path to achieve it. With that, I would now like to turn over the call to Joe Jolson to discuss the transaction from HCAP's perspective and discuss next steps.
Thanks, Ted. I'm happy to join you today on behalf of HCAP, our Board of Directors, as well as its Special Committee, to discuss the strategic transaction with Portman Ridge. I also want to extend my apologies and thanks for everyone dialing into this call on Christmas Eve. Happy holidays, everybody. We appreciate it. Since the onset of the pandemic, we've been working with our portfolio companies to proactively address any operating issues, controlling our cost, and preserving our liquidity and net asset value for our shareholders. The goal was to provide adequate flexibility for our portfolio companies to weather the storm while reducing our credit risk wherever possible and positioning our capital for the best possible outcome when the economy returned to something closer to normal. HCAP focused all of its available resources on augmenting liquidity and ceased any new lending at that time.
These efforts started to bear fruit in the third quarter as we were able to substantially reduce our short-term debt outstanding as a result of managed payoffs, maintain a relatively stable net asset value, and improve our weighted average risk rating. As discussed in our third quarter earnings conference call, we made further progress in October and expect that our line of credit will be paid down to less than $5.6 million at year-end, which is maybe we have cash of about one and a half times that as free cash as well. HCAP's current portfolio is in much better condition as well. Nearly three-quarters of our portfolio is in the senior secured asset class, and in many cases, we are the sole debt provider to the portfolio company.
Despite the challenging economic environment as of quarter-end September 30, we had received approximately 87% of total interest payments due from borrowers, not on non-accrual status, and our weighted average yield was a lofty 12.6% at that date. Despite our solid progress in the past nine months, a careful analysis of our future prospects led our Board of Directors and its Special Committee to explore strategic options as the best possible outcome for our longer-term shareholders. Portman Ridge provided a compelling solution for our shareholders who have the option to take cash or stock. Over the months of interactions throughout the process, BC Partners' credit management team proved invaluable due to their experience in the BDC space, their experience and quality of their credit underwriting, and their demonstrated ability to bring certainty of execution at a time of significant uncertainty.
As HCAP's largest non-institutional shareholder and soon-to-be Portman's, I have agreed to elect to take stock in the merger, as well as to a 90-day lockup provision to ensure adequate liquidity for HCAP shareholders also electing to take shares. Portman currently trades at 65% of its net asset value, which is almost a 20% discount to the median valuation of its peer group below a $500 million net asset value. Despite having earned its dividend for the past three quarters in the pandemic and actually for many quarters before that, and its track record of being a highly successful consolidator, the merger with Portman Ridge is expected to be accretive immediately to net investment income as a result of a lower cost of funds, a lower management fee structure, and public company cost savings, and will also be neutral to net asset value, excluding transaction expenses.
Furthermore, as Portman shareholders, HCAP will benefit from their affiliation with a top-tier large global platform in BC Partners, particularly as they look to redeploy lower-yielding Garrison assets into higher risk-adjusted returns. As a result, I would expect a solid earnings and dividend track record to continue going forward. For those of us choosing stock, we will enjoy consistent dividends with upside should Portman narrow the trading discount to its peer group, let alone to its own NAV in the future. The parameters of the transaction for HCAP shareholders is that they will receive a combination of Portman shares valued at 100% of Portman's net asset value per share at the time of the closing of the transaction, and if required, the number of Portman shares would exceed 19.9% of the issued and outstanding shares of Portman Common Stock immediately prior to the transaction, which is roughly 14.9 million shares.
Cash consideration in the amount of any such excess, as well as an additional cash payment from Sierra Crest, the external advisor to Portman Ridge, of $2.15 million, or approximately $0.36 per HCAP share. With respect to the consideration being paid by Portman, each HCAP shareholder can elect to take cash or stock equal to the aggregate deal value, although the cash portion of the consideration could be reduced pro rata if the total election for stock is less than the number of Portman shares issued. Assuming HCAP shareholders elect stock or cash in a pro rata manner, the deal as a whole represents a combined $3.20 per share of cash plus 2.503 shares of Portman Ridge stock per HCAP common share, based on HCAP and Portman Ridge's most recently determined net asset values, and that would be including estimated transaction expenses.
The exact ratio for the stock component of the merger will be determined by the net asset values of Portman Ridge and HCAP as of the closing calculated at 5:00 P.M. New York time on the second day prior to the actual closing of the transaction. From a process and timing standpoint, we expect to file and finalize a preliminary proxy statement prospectus on Form N-14 in the next few weeks. Once the SEC comments are received, responded to, and resolved, we will set a record date and meeting dates for the special meeting of HCAP shareholders to request approval of the merger agreement. If shareholders approve the merger agreement and other routine closing conditions are met, the transaction will close shortly thereafter. We anticipate closing to occur in the second quarter of 2021.
For avoidance of doubt, the transaction does not require a vote from Portman Ridge's shareholders, increasing our view around certainty of close. I'll now turn the call back over to Ted for final comments, and obviously, we'll be available to answer any questions that anyone might have. Ted?
Thank you, Joe. I want to reiterate our excitement about this transaction and the benefits for both HCAP and Portman Ridge shareholders will receive. Our goal in the coming weeks and months will be to provide additional details surrounding the benefits of the transaction post-closing. In conclusion, we believe the combined company will have the benefit of having lower financing costs, a lower blended fee structure, a reduction in public company costs per share, and an increasing trading liquidity in the equity. With that, Joe and I would collectively like to wish everybody a happy holiday. And Operator, could you please open the line for questions?
At this time, I'd like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad. And again, if you'd like to ask a question, please press star one on your telephone keypad. And our first question comes from the line of Casey Alexander with Compass Point. Go ahead, please. Your line is open.
Yeah. Hi. Good morning. First of all, congratulations on structuring a transaction that looks like it's good for the shareholders of both companies. And secondly, actually, I think the call today is okay. I appreciate you guys not doing this in the middle of earnings. So my question is, and I guess this is for Ted and Joe, sort of what's the structure of the HCAP portfolio, both in terms of first-lien, second-lien, JV, equity, and also the percentage of directly originated versus possibly more liquid-type broadly syndicated assets?
Ted, do you want me to?
Yeah. You go, Joe.
Start off with?
Yeah.
Okay, so let me make sure our investments are primarily directly originated loans. There's a couple of investments that are broadly syndicated, but they also tend to be smaller deals and less liquid. And because of that, they get valued as Level 3 assets, if that's helpful. As we've been paying down our line, we've been managing some payoffs over the last nine months. And so we have roughly 15 plus or minus investments in the portfolio right now, and about 75% of them are senior secured. We're typically, if we're senior secured, we are the only lender at that level to the company. There's some of the 25% of the investments that aren't senior secured, there might be a small revolver ahead of us in many cases.
And there's a couple of credits where we might be, even though we have liens, we might be viewed as a mezzanine investor. We have a couple of equity positions that were invested alongside the debt when we made the original investments, and they've been pretty successful consolidators. And those are detailed as well in our September 30 SOI. Hopefully, that's helpful. We don't have any CLO equity and no broadly syndicated credits in the sense that they'd be readily liquidatable at a bid-ask spread.
Any loans on non-accrual?
Yeah. We do. As of September, there were four loans on non-accrual. One was one of the few broadly syndicated loans that we had that's been resolved. We actually, in October, we got in early November, we got paid off on that in two tranches and actually made a profit on that investment. And another one of our longer-lived non-performers is we recently took active management of the company, and its performance has improved dramatically in the last six months and is back on accrual status this quarter. And we're hoping to be out of that investment potentially in the next six months. So at year-end, I think our non-performers will be down to a couple of credits, and in total, the amount might be maybe 6% of our investment portfolio. Hopefully, that's helpful.
Yeah. That's very helpful. Thank you for that detail. I appreciate you taking my questions, and happy holidays to everybody on the call.
Same to you.
And again, as a reminder, if you'd like to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from the line of Ryan Lynch with KBW. Go ahead, please. Your line is open.
Hey. Good morning, all, and thanks for taking my questions. First off, congrats on the merger. This looks like it can definitely be a win-win for both entities. Ted Goldthorpe, maybe first for you. You have done several mergers over the last several years. Obviously, you took over the KCAP entity, and then you've closed on OHAI as well as Garrison very recently. Can you maybe just talk about the track record, the performance? I guess maybe specifically on OHAI because Garrison just kind of recently closed. But can you talk about your track record of when you initially announced those deals? You obviously had an investment thesis for why you were buying those assets.
Can you just talk about how that investment thesis has played out over time for those mergers and maybe specifically OHAI because that's the only one that's had a little time period between closing and today?
Yeah. We can answer both, actually. So on the OHAI transaction, the portfolio was largely liquid second-liens on big companies. And by and large, it's performed at or above our expectations for the last 12 months, even despite COVID. So that part of the portfolio was a very well-underwritten book. And within a week of that transaction, we de-risked it by 40% at or above NAV. So these transactions were doing well below NAV from a stock price perspective. I mean, in that transaction, we de-risked 40% of the portfolio within a couple of weeks above NAV. And so I think, and then when we did the, and there were two kind of legacy assets in that portfolio, one of which we've monetized already at a price that was, again, equal to higher than where we took it on.
And there's one other legacy asset that was probably worth less than when we took it on because it's in the oil and gas space, but it's a very, very small part of our overall portfolio. So I think if you backtest Oak Hill, I think our underwriting assumptions were very, very solid, and I think that kind of pulled its way through. Garrison is a little different in the sense of we announced the transaction right in the midst of COVID. So obviously, the portfolio has performed much better than what we expected. And a lot of that was driven by, obviously, the market coming back and the economy coming back. So I would say I think we did a good job underwriting that portfolio, but a lot of that also, we honestly just benefited a lot from what happened in the overall economy.
But on that portfolio, same thing. We lined up close to $100 million of asset sales, which we executed above NAV. So when we took that portfolio on at close, we de-risked a big chunk of that portfolio, got our leverage down to where we wanted to be above where we took on the valuations. So I think you're asking a great question, which is you always have to backtest our underwriting assumptions when we do these mergers. I think we feel very, very good about our process and our underwriting on both the last two deals we've done.
Okay. That's good background and good color on how things have played out. Then specifically with Harvest then, and Joe, you touched on this a little bit regarding the portfolio, but today, or at least as of 9:30 A.M., I know things have changed.
About 20% of the portfolio at a cost basis was on non-accrual, and we tracked something about 15% of some other investments were marked around 80% or so. So there's a significant amount of stress going on in that portfolio. Now, Joe, I know you mentioned that I think General Nutrition Centers was purchased. I think Infinite Care had improved financial performance, and maybe GK Holdings has had some improved financial performance recently. But Ted, maybe can you just talk about, as you're diligencing Harvest, how did you get comfortable with a portfolio that has a decent amount of investments on non-accrual or written down?
Yeah. So we were given access to full information, and we were given access to all the files. So our team has underwritten the whole portfolio, and we feel very comfortable that NAV is NAV.
I mean, I would say there are more assets on a watch list than our previous deals. But that being said, some of these assets actually we think have upside, and we actually think some of them have some near-term upside, and again, remember that the NAV that we pay is struck at close, so there's a number of assets in this portfolio that are going through, I would say, some sort of transition, so the NAV will be struck at close, so shareholders have some kind of, there's some timeline there, but number two is we underwrote NAV, and our view is the book is marked correctly, and we do think, and we do think even though there is a higher percentage of non-accruals here, we do think there's upside on certain of these positions.
Okay. And then as far as some of the pro forma numbers as far as leverage goes, Harvest obviously was sitting on a decent amount of cash. I think their net leverage was close to 0.6 times if you back out cash. Can you just talk about pro forma for the Garrison merger closing and then pro forma for Harvest closing as of today? What would the leverage be on this combined entity? And then also, I know you said you didn't require any additional financing to close this transaction, but Harvest has a couple of pieces of debt. They have a credit facility and a bond outstanding. Do you intend to roll? But I know their credit facility was coming due soon. Do you intend to roll any of that debt over on the Portman's balance sheet?
Yeah. That's a good question. So I think we don't have any financing contingencies. We can close this transaction based on our current credit lines. We would assume the HCAP bonds, which don't have a change of control provision in them. And then the idea would be more likely than not, at some time relatively soon, we would look to refinance our bonds. That's probably what we will do post-close. So that's the liability side. On the leverage side, yeah, I mean, the transaction is obviously deleveraging for us. And if you look at the merger agreements from our previous transactions, there's restrictions around new originations by HCAP. So we expect the leverage ratio we've guided people to, which is kind of 1.3-1.5 short-term, we don't think that's going to change as a result of this transaction. So this transaction is deleveraging for us.
And as you know, we've already deleveraged ourselves from the Garrison transaction. So I think our target leverage ratio is probably not going to change.
Okay. Makes sense. Those are all my questions I had today. So I appreciate the time. Thanks, guys. Great.
Thanks, Ryan. Have a good holiday.
You too.
Our next question comes from the line of Steven Martin with Slater. Go ahead, please. Your line is open.
Hi guys. You don't let any moss grow on your rocks. Can you talk about expense savings when you closed the Garrison deal? You had said that basically no people came over, no real estate came over. You added one or two people. What does it look like here?
I think, well, I mean, if you take a step back, I mean, the big cost savings on these deals is typically public company costs. So we only have to pay one audit fee, so we save that. We obviously get some synergies on the finance staff, which shareholders bear the brunt of. So the ability for us to have a smaller finance staff per share obviously drops the bottom line. And obviously, in this transaction, Harvest gets to roll onto our financing facilities, which are cheaper. So all of that, we don't have to do a lot of execution to realize an immediate accretion. A lot of it is just natural from saving public company costs on a small company and then cheaper financing.
Can you quantify, if you broke that down into three buckets, sort of public company costs, administrative costs, and interest savings, what those three buckets would look like?
Yeah. I know you have that.
Ted, I don't know if you want me to. You may not be as familiar with our cost kind of thing. If you want me to add some color to that.
Yeah, of course.
The admin cost on a regular basis that our shareholders have reimbursed the manager for are $350,000 a quarter, so $1 million for a year. So I would think that most, if not all of that, would be cost savings, all right? I would estimate that we've done a good job of getting our public company costs down in the last year. We changed auditors to do that as well as legal lawyers with a negotiated fee structure. And I think that if you look at that right now, it's backing out anything like these kind of transaction expenses. You're probably looking at maybe $1.25 million a year in public company costs, maybe a little bit more than that. Hopefully, that's helpful.
Okay. And what about on the financing side? What do you think the interest savings are?
Our line is there's a LIBOR floor, and it's 450. So we're paying 550 right now.
Yeah. But I think the better way to frame it. See, this is Patrick Schaefer, by the way. We kind of look at it the opposite way than you're referencing, which is we build it from kind of the bottom up to say, I think when we take over the portfolio, we don't expect meaningful increases in the admin expense relative to the existing Portman business. So as Joe said, if Harvest had 1.4 of an admin expense, that number is almost all savings. And similar, as you think about the interest expense, we're obviously taking over their bonds. So that would be a dollar-for-dollar swap on the interest expense for that $25 million piece of liabilities. And then when you look at it on a net basis, their credit facility is relatively de minimis.
I would think of it as being a non-significant increase in interest expense related to that piece of liability structure.
Okay. Well, then that leads into my second question. You've now done two accretive acquisitions, or one is done and one's in the on-deck circle. How soon thereafter can we expect that you'll revisit the dividend?
I mean, I think from our perspective, I think our dividend is in a good place. These transactions, both Garrison, Oak Hill, and Harvest, will just increase additional buffer to our dividend coverage. So I don't think there's any real short-term plan to increase the dividend, if that's the question. But I think what it does do is it provides further cushion to our existing dividend. To the extent that we can sustain earnings growth and higher earnings, we'd obviously revisit our dividend policy.
Right, and hopefully, the market sees that as effectively lowering your discount rate.
Yeah. I mean, I think the market looks at our dividend, and some would question, given the high dividend yield, is it sustainable? And so I think if we continue to over-earn our dividend, which we've been doing for the foreseeable future, I think the market should become less of a question. Let's put it that way.
All right. How does the pendency of another transaction impact your ability and/or willingness to buy back stock in this intervening period?
Again, it doesn't change our view. I mean, our stock's at a level where it just makes sense for us to be buying it back for our shareholders. The challenge we've had is, number one, we're constantly in blackout period because of all this strategic stuff we've been doing. We've had implemented a 10b5-1, obviously an automatic buyback program, but you can't have that in place when there's a proxy outstanding. So we have been buying back stock whenever we can, and it doesn't change our view. I mean, this transaction is deleveraging for us, and it increases our float. So concerns about having too small of a float and concerns about leverage are mitigated on this transaction. This transaction should deleverage us, and we have a bigger float. So we should still keep buying back stock.
I mean, given that the other deal closed and you won't have a proxy ready for this until probably sometime in January or maybe February, you do have a window here where you can try to take advantage because then what's going to happen is you're going to go into blackout because of this proxy. Then the deal will close. Then you're going to have your annual proxy. So you're going to have a lot of periods of blackout.
Yeah. Steven said we still obviously have coming up on year-end as well, and we haven't published combined Garrison Portman numbers yet. So we probably would be restricted from turning back on the 10b-5 anyway until we get out a set of financials. So there's always something going on, as I think. It doesn't change our view that we want to buy back stock.
All right. One last one. Can you comment? And you did a little on what's happened subsequent to yours and/or the Garrison portfolio. And then you did comment a little on Garrison, but I don't know if that incorporated sort of the last 30 days.
Yeah. I mean, Garrison.
Steven, when we close the transaction, are you asking about fair value or are you asking about deleveraging? A little of both. I mean, I think your markets have continued to improve, albeit a little slower, and you've had more time to deleverage. And I understand there are a lot of transactions happening all the time. So transaction counts are up. So I would presume both of those would have resulted in, forgetting deal expenses, an NAV bump subsequent to 9/30 or 10/26 or whenever you valued the Garrison portfolio.
Yeah. That's our expectation as well. Like I said earlier in the call, I think post-close, I think the Garrison portfolio has performed in line to better than we underwrote. And obviously, the markets have continued to recover. So yeah, we would expect our combined entity fair value to be higher at year-end, any transaction costs.
Okay. Thank you very much.
And again, as a reminder, if you'd like to ask a question, please press star followed by the number one on your telephone keypad. And there are no further questions at this time. I'd like to turn the call back over to management.
Great. Well, thank you so much for dialing in. Again, we deeply apologize to get everybody on the phone on a holiday, but on behalf of Joe and I, we're very excited to do this transaction together, and we think it's a good one for our shareholders, and so we want to wish all of you a very, very happy holiday, a very safe holiday, and of course, Joe, myself, and our entire management teams are available to speak at any time if anybody has any questions, so thank you very much.
Ladies and gentlemen, this does conclude today's conference call. We thank you for your participation. You may now disconnect.