Good day, and welcome to the Prospect Capital Corporation Fiscal Year Earnings Release And Conference Call. All participants will be in listen only After today's Please note this event is being recorded. I would now like to turn the conference over to John Barry, Chairman and CEO. Please go ahead.
Thank you Grant. Good morning, everyone. Joining me on the call today are Greer Elizyk, our President and Chief Operating Officer and Kristin Van Dask, our Chief Financial Officer. Kristen?
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 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 and our 10 K filed previously and available on the Investor Relations tab on our website prospectstreet.com. Now, I'll turn the call back over to John.
Thanks, Kristen. And thank you again to you and your team for all the work that goes into filing our 10 K, which is a massive document indeed. Everything you ever wanted to know about prospect is right in there? For the June 2020 fiscal year, our net investment income or NII was $265,700,000 or $0.72 per share. Matching our cash dividends in and uneventful and also under levered quarter for originations due to the virus in the June quarter our NII was $58,300,000 or $0.16 per share.
Our net income was $162,600,000 or $0.44 per share. As the value of many of our investments rebounded due to a combination of positive company specific and macro factors. In the June quarter our net debt to equity ratio was 69 0.6%, down 4.5% from March as we continue to run on under leveraged balance sheet. Following the risk off policy, we put in place eight quarters ago, Over the past 2 years, other listed BDCs have increased leverage with the typical listed BDC in June 2020 at 110 percent debt to equity or 40 percentage points higher than for us. We have not increased our leverage.
Instead, electing lower risk. In May, We moved our minimum 1940 act regulatory asset coverage to 150%. Which increased our cushion and our recently announced perpetual preferred equity issuance. While preferred stock provides us more equity, we do not intend to increase leverage beyond debt to equity. Prospect's balance sheet is highly differentiated from peers.
With 100 percent of Prospects funding coming from unsecured and non recourse debt. Which has been the case total debt in June 2020 compared to half that for the typical listed BDC. Our unsecured and diversified funding profile provides us with significantly lower risk and significantly more investment strategy and balance sheet flexibility. Our NAV rebounded to $8.18 per share in June, up $0.20 and 2.5% from the prior quarter. We've outperformed our peers during the past 2 quarters because we moved to cautiously optimistic and going on offense.
Cashed dividends of $0.06 per share for each of September October. The 37th and 38 consecutive $0.06 cash distributions. I will now turn the call over to Greer.
Thank you, John. Our scale platform with over $6,000,000,000 of assets and undrawn credit continues to deliver solid performance in the current challenging environment. Representing 1 of the largest middle market investment groups in the industry. With our scale, longevity, experience and deep bench, we continue to focus on a diversified investment strategy, 3rd party private equity sponsor related lending, direct non sponsor lending, prospect sponsored operating and financial buyouts structured credit, and real estate yield investing. Consistent with past cycles, We expect during the next downturn to see an increase in secondary opportunities, coupled with wider spread primary opportunities with a pullback from other investment groups, particularly highly leveraged ones.
As of June, our controlled investments at fair values to 43.2 percent of our portfolio, up 0.2% from the prior quarter. 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 1000 of opportunities annually and invests in a disciplined manner in a low single digit percentage of such opportunities. 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.
As of June, our portfolio at fair value comprised 46.9% secured first lien, an increase of 2.1% from March, 24.4% other senior secured debt, up 0.8%, 13.5% subordinated structured notes with underlying secured first lien collateral and down 0.2%. 1% unsecured debt, which is up 0.1% 14.2% equity investments, down 2.8%, resulting in 84.8 percent of our investments, up 2.7% being assets with underlying secured debt benefiting from borrower pledged collateral. Prospects approach is one that generates attractive risk adjusted yields, and our performing interest bearing investments, we're generating an annualized yield of 11.4 percent as of June 2020, down 1% from the prior quarter. This decrease is largely due to the decline in LIBOR, though we expect stability now due to our LIBOR floors. We also hold equity positions in certain investments that can act as yield enhancers or capital gains contributors as such positions generate distributions.
We've continued to prioritize senior unsecured debt with originations to protect against downside risk while still achieving above market yields through credit selection discipline and a differentiated origination approach. As of June, we held 121 portfolio companies flat with the prior quarter and with a fair value of 5,200,000,000. We also continue to invest with no significant industry Our asset concentration in the energy industry stood at 1.6%, down 0.1% from the prior quarter, Our concentration in the hotel restaurant and leisure sector stood unchanged at 0.4%, and our concentration in the retail industry stood unchanged at 0%. Non accruals as a percentage of total assets, at approximately 0.9% in June, down 0.7% from the prior quarter. Our weighted average portfolio net leverage stood at 4.5 times EBITDA, down 0.12 from the prior quarter.
Our weighted average EBITDA per portfolio company stood at 72,000,000 in June, similar to the prior quarter. Originations We also experienced $64,000,000 of repayments and exits as a validation of our capital preservation objective and sell down of larger credit exposures, resulting net repayments of $28,000,000. During the June quarter, Our originations comprise 53% real estate, 36% agent at sponsor debt, 2.9% rated secured structured notes and 8.5% corporate yield buyouts. Today, we've deployed significant capital in the real estate arena through our private REIT strategy. Largely focused on multi family workforce stabilize yield acquisitions with attractive 10 year plus financing.
NPRC, our private REIT, has real estate properties that have benefited over the last several years from rising rents, strong occupancies, high returning value added renovation programs, and attractive financing recapitalizations. Resulting in an increase in alongside our corporate credit businesses. NPRC has exited completely over 30 properties at a more than 20 percent IRR with an objective to redeploy capital into new property acquisitions. In including with repeat property manager relationships. We continue to monitor our rent collections, which are holding up well in the current environment.
Our structured credit business has delivered attractive cash yields, demonstrating the benefits of pursuing majority stakes working with World class management teams, providing strong collateral underwriting through primary issuance, and focusing on attractive risk adjusted opportunities. As of June, we held $709,000,000 across non recourse subordinated structured notes investments. These underlying structured credit portfolios comprised around 1700 loans, and a total asset base of around 18,000,000,000. As of June, the structured credit portfolio experienced a trailing 12 month default rate of 146 basis points, representing 177 basis points less than the broadly syndicated market default rate of 323 basis points. In June, this portfolio generated an annualized GAAP yield of 12.5%.
As of June, our subordinated structured credit portfolio has generated $1,210,000,000 in cumulative cash distributions to us. Representing around 87 percent of our original investment. Through June, we've also exited 9 investments, totaling 2 $63,000,000 with an average realized IRR of 16.7 percent and cash on cash multiple of one 0.5 times. Our subordinate structured credit portfolio consists entirely of to minority holdings in the same tranche. In many cases, we receive fee rebates because of our majority position.
As majority holder, We control the ability to call a transaction in our sole discretion in the future, and we believe such options add substantial value to our portfolio. Rather than when just terms, remove bond baskets in exchange for better terms from debt investors in the deal, and extend or reset the investment period to enhance value. We have completed 27 refis and resets since December 2017. So far in the current September quarter, we've booked 110,000,000 in originations and experienced $64,000,000 of repayments or $46,000,000 of net originations. Those originations have comprised 43.9 percent agent at sponsor debt, 22.7 percent non agent to debt, 20% rated secured structured notes and 13.4% real estate.
Thank you. I'll now turn the call over to Kristin.
Thanks, Greer. We believe our prudent leverage, diversified access to matched book funding, substantial majority of unencumbered assets, waiting toward unsecured fixed rate debt, avoidance of unfunded asset commitments, and lack of near term maturities, rate both balance sheet strength as well as substantial liquidity to capitalize on attractive opportunities. Our company has locked in a ladder of liabilities extending 23 years into the future. Today, we have 0 debt maturing and July 2022 or around 2 years from now. Our total unfunded eligible commitments to non control portfolio companies totals approximately $24,000,000 or less than 0.5% of our assets.
Our combined balance sheet cash and undrawn revolving credit facility commitments currently stand at approximately $498,000,000. We are a leader and innovator in our marketplace. We were the 1st company in our industry to issue a convertible bond, develop a notes program, issue under a bond ATM, acquire another BDC, and many other lists of 1st. Now we're adding our programmatic perpetual preferred issuance to that list of 1st. Shareholders unsecured creditors alike should appreciate achieve.
As of June 2020, we held approximately $3,770,000,000 of our assets as unencumbered assets. Representing approximately 71% of our portfolio. The remaining assets are pledged to prospect capital funding, where in September 2019, we completed an extension of our revolver to a refreshed 5 year charity. We currently have $1,0775,000,000 of commitments from 30 banks with a $1,500,000,000 total size accordion feature at our option. The facility revolves until September 2023 followed by a year of Of our floating rate assets, 85.2 percent have LIBOR floors with a weighted average floor of 1.67%.
Outside of our revolver and benefiting from our unencumbered assets, we've issued at Prospect Capital Corporation, including in the past few years multiple types of investment grade unsecured debt, including convertible bonds, institutional bonds, baby bonds and program notes. All of these types of unsecured debt have no financial covenants, no asset restrictions, and no cross default with our revolver. We enjoy an investment grade BBB negative rating from S And P and investment grade B AA3 rating from Moody's and investment grade BBB negative rating from Kroll and an investment grade BBB rating from Egan Jones. We have now tapped the unsecured term debt to extend our liability duration out 23 years. Our debt maturities extend through 2043 With so many banks and debt investors across so many debt tranches, we have substantially reduced our counterparty risk over the years.
In the June 2020 quarter, we retired in full at maturity $128,000,000 of our April 2020 notes as yet another reflection of a successful term issuance raised and repaid. We also repurchased 1,400,000 of our program notes. We also continued our weekly programmatic intranotes issuance. In the current September 2020, quarter, we recently completed a successful tender offering for our July 2022 notes, retiring around $30,000,000 to take $29,000,000. Metal 1.3% cost.
In the first half of calendar year twenty sixteen, during market volatility, We reduced our leverage ratio by slowing originations and allowing repayments and exits to come in during the ordinary course. And we expect a similar benefit in the current environment. We now have 8 separate unsecured debt issuances, aggregating 1.9000000000 not including our program notes, with maturities extending to June 2029. As of June 2020, we had $680,000,000 of program notes outstanding with staggered maturities through October 2043. We also recently added a shareholder loyalty benefit to our distribution dividend reinvestment plan that allows for a 5% discount to the market price or have their own synthetic drips with no such 5% discount benefit, we encourage any shareholder interested in drip participation to contact their broker.
Make sure to specify you wish to participate in the Prospect Capital Corporation DRIP plan through DTC at a 5 percent discount and obtain confirmation of same from your broker. Now, I'll turn the call back over to John.
Thank you, Kristen. Now it's time for the Q And A.
We will now begin Our first question will come from Robert Dodd with Raymond James.
I got a couple. Just first of all, John, from the commentary, in your prepared remarks at the beginning, your leverage target 0.7to0.85. From how you worded that, that sounds to me like you're going to be for the calculation of that ratio, you're going to be treating the preferred as equity. Obviously, from an asset coverage ratio, preferred cancer's debt, So can you give us any color on what the target leverage would be on a kind of regulatory basis if the preferred was treated as a debt rather than equity?
Yes, it's glad to do that. And thank you, Robert. Just for, there may be some people on the call that don't realize that under the 1940 Act, preferred stock, including, this preferred, can be categorized as leverage for purposes of the statute and leverage limitations. But, perpetual preferred in my mind is an equity cushion for any debt that's above that. So that's why I look at our leverage ratio as the percent of as debt as a percent of our assets, excluding, the preferred.
I don't view the preferred as debt. So I haven't made the calculation that you're requesting, but perhaps
Greer or Kristin, yes, just go ahead, Greg. So our targeted with the preferred, Robert is is $1,000,000,000. So, that's about 0.3 of our common equity base. Though. So debt to common equity of 0.7to0.85 times would translate into debt plus preferred to common equity of approximately 1.0to1.
One five times. And then you I'm sure you could do the asset coverage translation thereafter.
Yes, I can. I appreciate thank you for that. On, on the, the, the common equity side, obviously, you utilized the ATM a little, in, in the quarter. I mean, can you give us any thought process on, on to what? I mean, your underlevered trading below book, why was the the ATM usage, appropriate in in the the view of the management or the board and and John, you might be able to give us some thoughts on why the board thought it was, was appropriate in this circumstance given it did cost you a little bit of NAV this quarter.
Yes. Well, while the stock market is doing very well, companies that are not FANGMe are not doing quite as well as the Nasdaq Top 5. In this virus and we need to be sensitive to that. Some of the companies in our portfolio at times caused us concern. As a matter of prudence, we felt that we should take every reasonable step that we could to minimize and control the risks from the economy impacting our portfolio in March in April and early May as we were sorting through the effects of the lockdown on our port Yes, it's true.
We came out of the, of the the difficulties of March April in better shape than we had any reason to expect. But one of the reasons we came out in better shape was because we pursued a risk off policy going back eight quarters. We lowered leverage. We did not take on additional leverage. We added to our regulatory flexibility and we obtained from our shareholders.
The right, the ability, subject to board approval to sell stock under the ATM if the board felt doing so was prudent. We felt that selling some stock a very minor amount, was a $5,000,000 of stock under the ATM in, I think it was, was it May or June, was a prudent and appropriate in order to demonstrate to anyone watching that we have that very large reservoir of equity available to us. And having demonstrated that, we felt that we could put that additional, defensive line back in the closet. We don't need it now. Turns out that our portfolios performed better than we had any right to expect And as a result, someone might say that we did things to protect against risk that in the end were unnecessary, but I have a fire insurance policy on my house.
I'm really glad to pay that premium, even though there has not been a fire. And I don't think there will be one. We believe we believe that taking steps that control and minimize risk are what our shareholders expect us to do. And that's why we sold whatever it was $5,000,000 of stock under the ATM.
I appreciate that. Maybe I can answer that. Yes.
So, hold on, Robert. Just one second. I think Greer has something to add, please.
Yes. Just to add, to that, I think the word insurance is an excellent one. And, also at hindsight, the word the praise is 2020 Perfect hindsight, and no one really knows where level 3 valuations will sell out ahead of time. You close the quarter and then you get to find out where they were. So a good, prudent risk manager, takes steps to protect on, both sides of the balance sheet, in this case, on the right hand side ahead of time.
So we did do a very small, very small amount of insurance. We see it immediately upon quarter end. We are under levered now. I think you'll see us as, you know, highly unlikely, users in the near future of the ATM for that reason. But we have optionality and demonstrate that that's a path, which is is very, very good to have.
And we never take for granted Robert, financing. We never take, for granted the bond market. We never take for granted bank market, we have lived and breathed through the dislocation of 2007 to 2009. Many of our peers have never gone through that before. And know what it's like when you have a strike of financing.
So we're determined to always have optionality multiple markets to access, the preferred market is a good example of derisking you talked about, where you on risk versus a common, I argue substantial derisking. Not only is there no maturity ever on that paper, it's truly perpetual. It also gives additional access to another market on top of the convertible bond market, the institutional market, our retail program notes, which are highly differentiated, the baby bond market, our bank financing, other financing. So we have many, many different markets to play in that derisk our business. And then finally on below now, since that was touched on, we are examining in real time various multiple accretive potential acquisitions, that are not identical to, but similar nature to ones we've done, in the past of purchases of businesses and portfolios.
At low multiples of cash flow on an accretive basis. We don't close very many of those. We're highly selective but getting that authorization that we did in the spring gives us that optionality, as John said, to go on offense. Back to you, Robert, if you have some other questions.
No, I appreciate that, that color. And, yes, I went through, obviously, 'six, 'two, 'nine as well, and you know, insurance does come to mind. Just one more if I can. On the CLO yields, obviously, your your default rates have performed better than the industry average, but your yield came down. There's a number of drivers on the gap level yield accounting that could result in that lowering.
Is that because, you expect cash flows in there to be blocked or you expect, default rates to move meaningfully higher than they are like them. Could you give us any color on what resulted in the reduction in the gap yield, which obviously relies on your, your forward assumptions. And then also potentially, if you can give us any color on what happened on the cash yield also came down substantially, was that blocking defaults, etcetera? Any color you could give us on that
Sure. And we'll take that first and see if John wants to add to it. On the cash front, there's a bit of a one time factor from the quarter pertaining to assets versus versus liability. So, liabilities in the CLO market are generally pegged to 3 months LIBOR? While, on the asset front, a high percentage north of 50% of borrowers have elected 1 month LIBOR seeking slightly more advantageous borrowing costs.
And as a result, when you have an aggressive move in the fed, 150 basis points in the month of March, the repricing happened faster to be paid less on assets, while liabilities took another another quarter to kick in. So that's a one time factor. There was actually the biggest driver of the, the cash yield drop that that would not reoccur. On the GAAP yield front, which, as you noted, is a modeled assumption, basically a calculation of a levelized yield That's a combination of factors, for reduction. Part of it is a drop in LIBOR.
So the unlevered or unhedged, if you will, portion, does move up and down that the return based on LIBOR and of course the forward curve moved down pretty significantly in in that 90 month or 90 day period. There's also an assumption of higher defaults and and partial mitigation of higher asset spreads, but the latter has, that mitigant, if you will, is not quite as much as one would imagine because collateral managers are de risking, they're also risk off, using John's excellent parlance, they're going after higher rated assets to reduce the probability of default, so substituting a higher rated asset, which on its own would have a lower spread. So you're not necessarily seeing a huge jump in asset spreads to compensate. I think the good news is that the pace of both collateral downgrades in the syndicated market as well as tranche downgrades? Has substantially slowed.
There were some pretty dire projections in the earlier part of spring back in the in the March, April timeframe that did not come to fruition, and I'd seen a one point a prediction of something like a 12% default rate, that's probably about half now as a consensus prediction. So there'll be defaults are becoming a lagging indicator. There'll be a continued uptick that's already kind of modeled in. But so far, based on the economic backdrop, it doesn't look at, it'll be nearly as bad as before. You asked about diversion of cash flows, about a quarter of deals, are experiencing that And what's easy to forget is the benefits of securitization financing that are substantial and show themselves in times like the this is not the type of financing where you have a trip of a covenant and human beings in a conference room far away with downward faces make proclamations at your expense can accelerate foreclosed, put pressure, what have you.
Instead, structured credit CLOs are self healing vehicles and the indenture rules today and cash goes to either purchase new collateral or retire some liabilities, you get back on-site and over collateralization tests and cash flow streams get freed up back to the equity after a period of time. We're projecting within, 3 months that those diversions will be less than 10% of deals approximately and we'll reap the benefits from that self healing process. But what it also shows is the benefits of having a diversified book of about 40 deals, get only about a quarter of those are experiencing, diversions that call it a kin to a short term pick on the unlevered loan market equivalent, that's a pretty decent analogy. John, anything you'd add to that?
Well, yes, just for the benefit of people on this call who may not have a PhD in physics and therefore have an edge over the rest of us analyzing CLOs or have been, here with us for how many years have you been with us, Kristen, 12 years now? So for people who are not steeped in CLOs, what is helpful to understand is that they are exactly as we are described self healing. And what it means is, if there are credit problems within the COO, even defaults, even non payments. What happens is uses the incoming cash to pay down debt until the debt to equity ratio is restored. When capital is used to pay down debt it de risks the CLO.
That's good news. It also though reduces the return. COLs are levered vehicles, part of their, really one of the ways in which they generate returns is by borrowing at very low rates and investing at higher rates. Well, when you pay off that very cheap AAA leverage, in order to restore a returns to the equity will decrease, and that's natural. It's of course way better than having a default on something that we own.
So, that's all I have to add. Kristen, do you have anything you'd like to add to the CLO discussion? Robert, anything else?
Just one clarification on that self healing and the projection that in 3 months, you'll be under 10% diverted. Is that the assumption built into the current GAAP yield or is the GAAP yield just assuming status quo on that front?
So the GAAP yield will will model out. I mean, it bottoms up every single deal. So there's quite a lot of calculations that go into it as you can imagine. It'll be bottoms up and differ by deal, but yes, that's that's appropriate part of the cash flow modeling because that's how the each indenture works.
Thank you.
Our next question will come from Finian O'Shea with Wells Fargo Securities. Please go ahead.
Hi, everyone. Good afternoon. Thanks for having me on. I just had a question on taxable income, understanding that you don't have that, that information finalized yet for the August year end. But can you offer us any direction from the major portfolio drivers that would lead you to expect, lower or higher taxable income this year as it relates to your net operating income level?
Any color there you could provide?
Greer?
Sure. So we concluded some years ago, Finian, that taxable income while it may be and is a driver of the tax regulatory a minimum risk distribution requirement for a company like ours from sort of a bare minimum standpoint. Is not really a distribution policy if you're seeking to provide a long term stabilized yield to investors? So in other words, choosing to pay a distribution to investors becomes, something to do on more of an economic base this in a business basis and looking at, perhaps other metrics with greater weight like like net investment income. And the reason taxable income is not so reliable for a business like ours, is because we as part of our tax return include other types of streams that beyond just basic loan book, which of course we have, first lien loans, some second lien loans, etcetera.
And where you see a decoupling is in 2 primary areas. One is our controlled investments that are Financial Services Companies that We figured out some years ago, perhaps one of the lists of many firsts in the industry. That we could purchase a Financial Services business and hold such business as a tax partnership and not have a corporate taxpayer at the portfolio company level. As a result, as long as that was a good tax, Rick, set of revenue streams coming to us. So First Tower is a good example.
But you pick up as part of that other tax shields, like, for example, goodwill amortization will be 1. Associated with that business that we bought just over 8 years ago and it's been a wonderful investment for us. I might add very high teens, yields, and higher than that, total returns to date we've already gotten over money back from that investment just off of current cash distributions. That's a long term hold business and frankly, and team do a wonderful job running that. 2nd area is in the CLO structured credit business.
We were just talking about, where taxable income and cash and GAAP yields can decouple quite substantially, especially if you have volatility in particular year and especially where you have, migration and portfolio turnover in those businesses. So for example, if you have a pool of loans in a CLO with an average price of, say, $95,000,000. If a collateral manager sells one loan at 95 and purchases, another loan also at 95. There may be no delta, immediate delta from an economic standpoint. But from a tax standpoint, those five percentage points act as a tax shield and a deduction in that particular year that would reduce taxable income.
And this is one of those years because of what's transpired with the virus. Another example would have been energy and its impact back in, say, 2015. And to a certain extent, 2016, as you saw rotation away from from that sector for obvious reasons. The good news is as a result, you can have particular situations, and we think that's likely to happen this year. We don't know for sure but some portion of, a taxpayers, tax characterization would be a tax, but not economic return of capital distribution, which of course will be subject to to 0 taxation, for that investor.
So it's hard to estimate what that percentage will be as pointed out ahead of time, but I think it's likely to be some percentage, meaningful percentage this year related to a 0 tax return of capital situation. And again, if you're a taxpayer as investor, that's very good news indeed. John, anything you'd add to that? No.
Yes, sure. Thanks for all that color. And I guess just one sort of follow on on the regular dividend, obviously a little bit under earn this quarter as you reduce leverage and so forth, taking more conservative approach. Are you Are you, do you think you're able to maintain this dividend level while you maintain this conservative posture at the BDC, I know you declared, I think, a couple more months of the current payout. But any outlook on, you know, getting earnings back up to the dividend level or, or, you know, kind of under earning for a little while?
Finian, thank you very much for that question. I really appreciate it because We've actually, in the, I guess, what, 16, 17 years running this particular public company paid close attention to our dividend policy. And what we've noticed over the 17 years is what we noticed back in 2003 and 2004, our shareholders value this dividend, most of all, the stability predictability of the dividend. Anyone, I'm sure there are many people on this call familiar with the capital asset pricing model, Miller Modigliani. So do we really need professors to tell us that the lowest discount rate and the highest multiple is applied to the steadiest most predictable, most reliable, most boring, cash flow.
No, no, we don't. So our intention is to leave that dividend exactly where it is indefinitely. For as long as possible in the absence of some, compelling reason to make an adjustment? We would hope any adjustment would be on the positive side. But for now, my outlook is just imagining $0.06 per month as far in the future.
As I can see. Our shareholders expect that they want it. Some of them need it. Many of them need it. Now what happens when we go to a quarter where we don't earn the dividend?
Well, that will happen from time to time. You're reminding me of an amusing occurrence on our earnings call. I think it was perhaps 10 or 12 years ago when we, in fact, it was this call right after the K when I was asked the exact same question. And I said, well, there's 9 innings in a baseball game. We may not score a run-in every single inning.
And, in fact, I knew that we were going to do very well in the very next quarter and we did but I couldn't say that on the earnings call. And in this case, I don't know what we're going to do next quarter, but we usually out earn the dividend. And I think Grier will be able to give you some statistics for that. So you set a dividend most of the time you out earn it in a time like this, you may, under earn it. But that doesn't, that's not going to lead us to be making a change in the dividend.
We want this dividend to last as long as anyone can imagine at this steady, eddy, very boring, 6¢ per month, Agreer?
Sure. In terms of the earnings drivers to close the cap and gap and then ideally leapfrog passed and grow earnings from there. We have a number of drivers, Finian, one of the most straightforward ones is to simply rotate our liabilities into lower costs liabilities, because the biggest headwind for us and for others in the past quarter was the 150 basis point drop in short term rates when you have assets pegged to floating rates, even with floors, there's still with some impact, non trivial impact on our revenues. So, we can get a good chunk of that back by simply utilizing our revolving credit facility, which has 4 years to run, to a greater degree And we are intensively working on that rotation. You might have seen we just tendered for a good chunk of our bond to come due in a couple of years.
And, and you'll see us attack other term debt. We've already done a good job of cleaning out, 100% of other term debt due over the next of years, absent, that tranche I just mentioned. And it's economically advantageous to do so because our incremental cost of utilizing our floating rate facility is about 1.4%. So it's massively accretive, to use that to repurchase and, in arguably, a no brainer, to repurchase debt that that matures inside of the revolver, which we have a couple of traunches. That's one big catalyst that's it's pretty straightforward.
How long it takes to do that really depends on some of those tendering programs. And I think you've seen in the past, we've tend to do this multiple times. The second, catalyst is our preferred program. Add that to the list of historic prospect, 1st on a programmatic basis. And we see that as significantly accretive to, the common equity, that program.
It is programmatic. The capital does not come in all upfront. That's true on the way in on the other hand, that allows us to have just in time type of financing as we ramp originations to match capital coming in, and we are doing that, that ramp, right now, which is really callous number 3, putting existing capital to work even before getting to deploying capital from new issuance in an accretive fashion. We have the existing borrowing base about 500,000,000 of liquidity that'll just grow as we add more eligible assets and pledge them, and Not surprisingly, our activity was quite muted ourselves and many others this past quarter. When you're in the lending business, you're reluctant to deploy capital amidst a macro downturn, why lend money if profitability might be going down.
That's sort of like a deflationary environment you'd rather wait to hit, proceed bottom and then deploy your capital then. With less underwriting risks. So we're behaving, we think, prudently and intelligently there, and we're seeing stabilization. In the underlying marketplace with companies out there. Other catalysts include our real estate business, that's been a huge bright spot for us in the last several years.
And you look at, 33 realizations with, 23% realized IRR. And we have other deals we're looking to harvest. We're putting money into new deals. So we put money in. We upgrade, the, individual units and common areas.
In a value added fashion. We enhance net operating income. We might take a dividend, or we might just go ahead and sell the business. Ahead of that and then rinse and repeat with other assets, highly diversified by geography, by property, by property manager. So that's been a significant driver for us, and we hope will continue to be.
We also are pleased with some of the improvements occurred in the controlled operating book. So we continue to focus relentlessly on those improvements And then there's additional acquisitions, as I mentioned, we're working on a number of those that we think will be accretive. And should a financial downturn, come to bear, financial be on fundamental or can to what started to occur in March and snap back relatively quickly? We're ready for that as well. Secondary purchases, of assets, liquid, illiquid, loans, structured paper, Patriot type portfolio deals.
And then on the right hand side of our balance sheet opportunistic repurchases of debt at a discount, which we executed to a certain extent as well. So those are all potential cattle drivers for the future Finian to enhance profitability.
I appreciate the color very much. And if I could I'm sorry for a third question, if I may. Promise the last one. Appreciating all of your your color on the dividend and perhaps under earning it temporarily, would would the option, that's on the table a few of your peers have chosen to go with in paying up to 80% of the dividend in stock or 90% this year, commonly known as the ACAS letter. Is that on the table, is that part of your thinking in terms of getting through the recession and your company's posture, that is paying the dividend in stock?
Well, Finian, why don't I start by, saying that we can't We have no current intention of paying dividends in stock. In part because we have no reason to. The company is generating, you saw the cash numbers. I think our shareholders prefer cash. And we haven't noticed that companies do well, when they distribute dividends in the form of stock, unless there's a good reason and usually the good reason is there's a problem.
We're not having a problem right now. We don't see one on the horizon, so we don't have any current plan to be issuing stock in place of cash Brier, would you add anything to that?
Yes, I'd add to that. I mean, I guess you've seen some companies do that. They don't have much liquidity our company is very strong liquidity. We manage our business to have substantial liquidity available to us at all times in the several 100 of 1,000,000 category, not even including other levers to pull to build liquidity beyond that. So that seems like something applicable to other companies is not us.
In addition, I had talked before about the, yes, about taxable income, folks seem to use stock as a means of meeting their minimum risk distribution requirement So if they need to do that, perhaps it's a mechanism, it's, I've seen what others do there. It's a little bit laborious. You've got to do an election of the shareholder stock versus cash. It's kind of hard to imagine doing that as a monthly dividend payer as well. We've been a monthly dividend payer for quite some time.
So to do that election every month, I'm not sure I've ever seen folks do that. So a number of issues with it, I'm not saying it would never be available in some type of dire situation downturn that we don't face today. I guess the IRS made that mechanism available to everybody, REITs and RICs to utilize as they see fit without the need for a private letter ruling, but I don't we don't see this as something that, that we need to do.
Okay. Thanks so much everybody. This will conclude our question and answer session. I would like to turn the conference back over to John Barry, Chairman and CEO, for any closing remarks.
Okay. Well, thank you, everyone. We appreciate your interest in our company, and we look forward to seeing you all. And others on the next earnings
The conference has now concluded. Thank you for attending today's presentation.