#37, David Altenhofen, Head of Credit Management, Accunia Credit Management

Hi, I'm Shiloh Bates and welcome to the CLO Investor Podcast. CLO stands for "Clarularized Lone Obligations" which are securities backed by pools of leveraged loans. In this podcast, we discuss current news in the CLO industry and I get to interview key market players. The content here is for informational purposes only and should not be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security. The views expressed in this podcast are those of the guests and do not necessarily reflect the views of flat rock or its affiliates. Today I'm speaking with David Altenhofen, head of credit management at Accunia Credit Management. He focuses on European CLOs up and down the stack. We discuss differences between US and European CLOs, CLO Manager Alpha, software loans, and captive CLO equity funds. Defaults in CLO debt are quite rare, but you'll hear about a recent European single B that defaults in. Some housekeeping items, I'm always looking for interesting guests to have on the podcast. Email us at [email protected] if you'd like to come on. And I recently put out a YouTube video and white paper on our CLO double B's misrated, which argues that their historical performance has been more in line with default rates of triple B or single A rated corporates. Let me know your thoughts. And if you're enjoying the podcast, please remember to share, like, and follow. And now my conversation with David Altenhofen. David, thanks for coming on the podcast. Thank you, Shiloh. I'm happy to be on. It was fun being on a panel with you in London a little while back. How did you end up in the CLO business? Well, it's a long and boring story, but I'm a trained economist from the University of Copenhagen. I graduated in 2008, early 2008, actually, and spent the first seven years of my career at the Danish Central Bank as an analyst. And before that, actually, while I was studying, I was a junior analyst at the Dansker Bank's macro research. So to some degree, I have a more, you could say, macro research, classical economist background. But then I moved to Acunia Credit Management in '14 since then I have been investing in CLOs and other things with three letters such as CLNs, ABS, SRTs. But it is predominantly CLOs I have been doing and we are doing. Tell us about your firm. Yes, Acunia was founded in 2008 and actually invested in the first CLO I think in 2009. So on the back of, you could say, the great financial crisis more or less, and have invested since then more or less, also in ABS, SRTs, and other type of, securitized and structured credit. We are a boutique credential situated in Copenhagen and we have approximately two billion euros AOM. Our clients are predominantly from the Nordics. They are high net worth individuals, family offices, and so on and so forth. We have a variety of funds and several of them, CLO funds. We have CLO funds with daily liquidity and open-ended funds. We have closed-end funds and so on and so forth. We invest across the cap stack from triple A's to equity. But I would say when we are especially activists in the mess part from triple B to single B's. And that's because that's just the risk return there is fits with the mandate of your hand investors or. Yes, to some degree, I think from the get-go, we are a credit boutique. We are focused on fixed income. We are focused on the cash flow. And hence, I think that's what makes perfect sense for our clients and I think a combination of a triple B and a double B trance can give you something like 7%, and that's what you call that, the lock-in number 7, it's double your money every 10 years. And what we can offer our clients is some sort of, you could call it a weights mandate, but where you get some sort of earning because many of our clients have locked in capital B, it in private equity, venture capital, and other areas where it's the dividends paid in, you could say is maybe a little bit different than what we're seeing from the CLO space. So what you mean by that is that the CLOs are paying cash distributions quarterly in comparison of private equity or something, you know, you're waiting a long time. That's the J-curve to actually get your return. That's what you're saying. Exactly. Fair point. So are there other CLO or structure product investors in Copenhagen? I'm sure her listeners will want to know the answer to that very important question. I think there's a lot. I mean, what I'm hearing, but again, that's, of course, the banks being polite is that I think outside of London setting up meetings in Copenhagen is relatively easy when CLO vendors come to town because we have the pension funds and others who invest in the product. And I think part of it is there's a little bit of differences among the Nordic people and it's just me speaking, of course, but I think the Swedes are a little bit more focused on equity to a degree at least, whereas maybe the Danes and the Finnish people are a little bit more fixed income. I think part of it is also because actually in Denmark, we have quite a large mortgage bond market. I think it's ranked among the larger markets in the world. So I think actually Danish people on average are quite sophisticated when it comes to various types of structured or securitized credit and fixed income. So you mentioned that you guys invest in CLOs and then I guess the close cousins to CLOs like the SRTs, the significant risk transfers. What's the most interesting to you these days? Is it CLOs or is it something related? I think fast the CLOs remain, you could say bread and butter, but we're quite active in the CLN space, meaning that we don't have an ISTA, but that's the way to get access to ITREG's main ISTAG's crossover when we do trench investing, which is like the CDX, IG, CDX, high yield of Europe. So getting access to credit risk that way. In CLOs, what's the approach that you guys usually take? Is it you focused on, well, let's start with just Europe versus US, are you mostly a European investor? Predominantly a European investor, I think it's more or less all we do. We have one US CLO fund, but it's relatively small compared with the rest. We have since the get-go been focused on European credit for various reasons. I think one of the things is, it's a necessary condition that the CLOs are risk retention compliant and that part is a little bit difficult because the US market is, you know it better than me probably, but five, six times larger than in Europe, something like that? Yeah, 1.2 trillion in the US. Yeah, I think with 300, so okay, let's call it four of them. I think today only 20, 25% of those CLOs in US, that is our risk retention compliant. Hence, it's a subset we can invest in and another thing is we have some ESG restrictions. It's not that we are sales, sales, when it comes to ESG, but I mean, we need some sort of language in there. In Europe, I think ESG language is more or less, it's a minimum factor. You need to have it, whereas in the US, especially in Texas and other places, it takes a backseat. But what we focus on is no controversial weapons, no tobacco, no thermal coal. We don't have an issue in Europe with that. I think it's a little bit different in the US, so my long point was just that it's a subset of a subset when we invest in the US, another thing is we need to hedge, and it's difficult to make a perfect hedge of something we don't really know when it's cold, and it's costly to hedge it. I think for you, it would be more interesting to go the other way around, right? I'm just a US investor, but my understanding is that the performance of the underlying loans, especially over the last two years, has been much better in Europe than in the US. I think it's different for debt, because our base rate is higher, so you're getting higher distributions each quarter from your COO securities, but if you're investor in equity, you're seeing in Europe lower defaults and better recoveries, right? Both. Completely fair points. Another thing is actually, I think also, I mean, part of it is the proximity. I think in Europe, we know the companies, we know very sure, stark, in years and so on, so forth. I have less knowledge about the US market to be honest, and another thing is, of course, on the default rates, but you might have a view there on this yellow side. I think yes and yes. the latest I read from them is that there's like 30 defaults that CLOs in the 2.0 space and 13, that's one free, potential defaults in the CLOs space. Up till now recently we had the first one I think, the first impairment in Europe, but that's very recent, but the US is a little bit different market there, right? So it is. And if you look back over 30 years, the default rate on CLO double bees is about 23 basis points. It's a diminimest default rate, and if you put it on that corporate scale, it would rate more like somewhere between triple bee and single A. The double bee performance, and I'm talking about double bees because obviously there are some single bees in the market, but usually the double bee is the junior most debt sold. Investors generally have had a very favorable experience there, but in equity over the last, call it two years, the performance in the US has been tough. That's a combination of higher defaults, poor recoveries, also loans of reprised tater, so the CLOs just have less income. On top of that, CLO equity in our view just trades cheap. That was the setup coming out of last year, and then this year to add insult injury, you have the step up in AI capabilities, which could potentially put a risk some of the software business models you find in CLOs. For equity, it's been a tough go. I agree on that one. I think approximately four, five percent of FACUNIA's AUM is in CLO equity, but it is an area where we find it hard at the moment, I think. For the last six months, I think we have done four trades in CLO equity, and I think three of them has been in the secondary market, and that's been on the back of, say, Assumance and the weaker prices as of a low nav, so I think we have done one deal in primary recently. We're looking at a couple of them right now where we can participate in the warehouse, so from the early goings, we need to get some sort of various sweeteners. Can you call it that to make it more interesting? Your point is the natural profitability of the CLO out of the gate isn't great. You need to be in a profitable warehouse. You need maybe a manager fee rebate, maybe some concession from the underwriter. In the US, those three, the combination of those three probably wouldn't be enough to get somebody interested in the primary, like a true third party investor, where secondary trades for equity, it's much more interesting to buy stuff in the secondary. I agree completely, and again, three or four latest four positions has been in secondary, but of course, we're still looking, and I think in many ways, I mean, CLO equity can make perfect sense, and it's, of course, over the cycle, and it's not necessarily just the first or the day one arbitrage as everybody's talking about, but I still believe, and that's an ongoing discussion we also have internally, is this, if the single B trance, the six and a half to nine and a half percent trance is yielding almost 11 percent in Europe, what should the zero to six and a half trance yield then? Typically, in the new issuance right now, when we do a normal scenario, standard scenario, as we run it, in wounds analytics and in our own proprietary models, I mean, it's high single digits or low double digits. I think that's the issue right now. In terms of your manager selection, are there any particular hot buttons for you or what kind of helps a manager to make the cut at your firm? Without going down the long and winding road, I think it's important to stress that I like cellos for three reasons, and one of them is that the underlying collateral deltones, in Europe, we have seen almost 30 years now of performance, and I think we've had two negative years, 2008 and 22. And overall, it's been steady as she goes cash flow from the senior secured bank loans, being leveraged on that as the cellos are fine. And then you have the cello technology. I mean, you have locked in liabilities, you don't have any market triggers. The third part is, of course, that you have an active manager. It's a bit like the icing on the cake or the cherry on top, meaning that, again, if you in two out of 25 years have had negative return, all this should be fine, depending, of course, where you are in the capstack and so on. But I still believe that maybe especially over the next five, 10 years, we will see more dispersion in Europe, which we have seen in the US. We will see more cheering, which is another thing. We don't have a lot of, or haven't had a lot of manager cheering in Europe. We are starting to see that now as well, also in primary, not only in secondary. So back to your question, sorry for taking that detour, but in regards to your question, we have a more quantitative way where we do manage a ranking every month across 15 variables based on the data from the TRC reports. And hence, it's typical classical credit metrics, such as the triple C exposure, the B3 exposure, senior and secured second lean, but also like historical data, how much defaults has this specific manager had and so on and so forth. And we pair that with a more, you could call it a qualitative view on the manager. I mean, the ease of access to this manager, the quality of analysts and so on. We have several calls with the managers and follow-ups and so on, especially when there's something like software going on. So we use those to combine a whitelist and then we have a black list as subset of managers. We won't invest. And I'm not naming names here, though. Some managers suggest a bit more aggressive, maybe, is the right word. You could argue that you would like that in the equity part, but I think if you're in the single beast double beast, not so much. And we have also seen that the liquidity of some of those managers in the lower tiers, it's more difficult. It can take days, weeks to sell a bond or a note from those menus, whereas if it's, what is viewed by the market as a Q1 menu, you can sell it in 30 minutes. For the managers that have outperformed historically, is your view that they have some kind of repeatable alpha or systems that's going to enable that outperformance to continue into the future, or is it that some managers have just, and this would be the cynical view, that some managers have just, for whatever reason, avoided some of the bigger defaults. And that gives them a great track record now, but going forward, their chances of avoiding defaults are just kind of maybe comparable to other managers. And in the US, there's like almost 200 managers now, which is hard to believe. I think in Europe, there's 75, something like that. We are getting there as well. To some degree, there's also a little bit of luck, because what we have seen historical, and you know that much more in the US, because we have seen more mini cycles, so to speak, rather than like a big credit cycle, as we did see during GFC, right? For instance, in the US, you had the oil and gas, and you had some managers back then that were overexposed to oil and gas, and they were hit by that oil energy. In Europe, we have had retail in, I think, 16, 17, some managers being overexposed there, and then came Amazon or whatever. Healthcare, we had 22, where the cost shut up and suddenly healthcare wasn't no longer the conservative or whatever you call that sector. And now it's, I mean, as a late software, it's another one. Maybe that's the interesting part will be overcoming years, because we have seen some of the, at least in Europe, I don't know how it is in US, you tell me, but in Europe, we have seen some of the tier one managers, the so-called quotation mark, conservative managers, they have been overexposed to healthcare and software, and they have a little bit of issues right now. If you have 15, 15%, software, and the market is eight, nine, whatever it is, depending on how you categorize the various credits, that's difficult. And on top of that, you also have chemicals, you have building materials being hit by energy prices. I mean, you cannot be all on the way to all these sectors. One of the things that I've seen that maybe left me a little bit cynical and manager help performance or alpha is just that every time there's a new cycle or something that's creating kind of winners and losers in the loan portfolio, that it's just a different group that's hit this time. There's not a group of 5% of CLO managers that underperform each year and that they're the ones that buy all the bad loans. That's definitely not the setup. I completely agree with your point. For me, it's not necessarily about, again, back to the common about the manager being the cherry on top because in reality, it's about the CLO technology and it's about the underlying loan market or the collateral. But I think it's not about choosing the winning managers. It's more about avoiding the losing managers. I think that's the point. Like credits in general, you don't need to pick the winners you need to avoid the losers. I've been doing various types of manager rankings for like 10 years. And honestly, There's no. many of the same names in the Botswm Quartz Oil now then was back then. One thing on the manager performance that is definitely true is that if people think the manager is good and they've outperformed in the past, don't really know if that outperformance is going to continue or not, but those managers do get good debt execution. They do have docs or terms in their deals that are favorable as to equity investors, whether or not the outperforming the loans are not the structural benefits at the inception of the deal are very real, of course. When I started doing COLO equity like 15 years ago, I was going to conferences and meeting other people that had like my same job. And one of the things that kind of struck me was kind of a classifies COLO equity investors broadly into two camps. So one camp is they've found managers that they've fallen in love with that they found some, I don't know, expertise or systems or whatever it is where they're like, no, I'm doing these COLO equity of these call it 10 managers or whatever it was. So that was kind of like one camp and then the other camp was I just want to buy COLO equity as cheap as possible. I'm not betting on any manager alpha. I know when I'm buying equity cheap, maybe I just met with two COLO managers and don't have any particular view on which one will outperform the other, but I do know through COLO modeling when I'm buying equity cheap, that's kind of like what I'm doing. It sounds like you're kind of maybe somewhere in between those two extremes. I'm not necessarily convinced that the cheapest equity is always the best if you know what I mean. I think honestly it's also about just getting various vintage, various managers diversification I think that helps. So in Europe, how much software alone risk is there in that typical COLO? The market is like eight, nine percent maybe a bit more depending on what you again categorize as software. Let's call it eight to ten and there are some managers just in the middle of that and then of course as mentioned, there's some very overweight and there's some very underweight. How are you feeling about the risk there at this point? I don't know if you got the same impression. I think one of the most set sentence at the credit flux in me was there will be winners and there will be losers. Let's see, my analysts are covering it, but I think it's more the whole you don't necessarily run when you're a COLO manager. You don't run a small mid-cap equity fund. I know some maybe feel like that and they feel like it's great to be overweight, say software or whatever the flavor of the month is, but I think it's more about being somewhat diversified across sectors and then let the leverage work for you also for the equity. I think it's still too early to guess where we are going with this. I think some of the managers we've spoken with the last one we had a call with, I think they had eight percent exposure to software and they mentioned one percentage point of that. So one in eight of the software they had, they felt like we're in some sort of problems or especially when there's a re-fire coming. That's kind of the take I'm getting from COLO managers in the US that for the most part, the price action on these loans is that they've traded from like part to like 90 cents. They haven't defaulted for the most part. They're not distressed, but certainly their risk is up. And there are going to be some incremental defaults due to AI displacement. And that's tough for equity because the default rate was coming down towards the end of the year, which was good news for equity. And now we have this overhang where some companies are going to be winners and some are losers and in the COLO format, you don't really benefit from the winners. They just repay you apart. The losers stick around and default. I'm not expecting huge defaults from the software bucket, but incrementally it's going to add a little bit to the pain that we felt over the last two years in equity. So at the credit flux panel that we did together, we talked a little bit about captive COLO equity funds. So those are funds where an investor commits to do the next call it four deals from one manager in a drawdown structure. Is that like the common COLO equity set up in Europe or is it more third party investors like you and me? The common one is the captive equity fund to be honest. So on the panel, I made the argument that captives are pretty bad for our industry. What I was saying was people have committed to these captive funds. The manager is incentivized to form COLOs and to start earning management fees and they do that irrespective of the initial projected profitability of the COLO. That means too many COLOs are created. It means too much downward pressure on loan spreads because there's just a lot of demand for senior secured loans. The end financing costs for COLOs remain elevated or at least above where they would otherwise be again because they're such demand for COLO debt. What's your take on that? Do you think that's broadly accurate or? Yes, I think as I also alluded to on the panel, I'm very much agree with your view. Of course, as a third party equity investor, you could say, but the thing is I think to some degree they distort the self-correcting mechanism of the COLO market, meaning that I mean normally when the arbitrage or some years back when the arbitrage didn't work, you stopped printing COLOs. The was increased because there was not the same type of demand from the COLOs and from the warehouses. On the other hand, limited or finite supply of COLOs out there, meaning that the cost of capital went down and a new equilibrium was found to to speak where the arbitrage made sense again. As a true economist, you could say on the one hand side, on the other hand side, I have heard some arguing that the COLOs can keep printing even when spreads are somewhat wider and that can have a stabilizing effect on the loan market. To some degree, I can follow the argument, but back to my point former when comparing with say the single B COLO with the yield of 11, and I know you don't have the optionality on all that, but on the other hand, you do have some sort of subordination. I mean, you need to have more than 6.5% losses before you get burned on the single B. There's something there at least from a third party equity investor perspective, and I don't know if going forward, if there's room for somebody like you and me in this space, if this keeps going this way, I mean. The percentage of equity that sold to captive funds, I mean, I think it increases every year, and one of the rebuttals to my argument on our panel was investors prefer to do captive equity. That's why there's so much money in it. Who are you? Shiloh to say that it's not a good way to invest in the asset class. I thought about that, and I think it's a good comment, but I would think about that two ways. So one is that when the market is 20% captive and 80% third parties, the captives aren't a problem for the market. But when it reverses, when it's 80% captive, then the captives are a problem. I don't think there's like a published number on what captive equity is as a percentage of total issuance, but it's certainly a lot now. I think so that the reason that so many people have signed up for these funds is that people just aren't aware of how negative the returns will be or have been. What I mean by that is that on our market for equity, as you know, there's like 10 different key variables when a silo is forming where you can change your modeling assumptions. And basically for any deal, you can find a way to get it to model to a low or mid-teen returns. There's certainly some assumptions that'll get you there. The problem is that in the real world, that's hard to get all those assumptions to agree with what you initially wanted. Anybody can say from a captive fund manager could tell any investor, hey, like I just bought a new silo formed you on the equity and we're targeting mid-teen returns. Like anybody, a very junior silo person could find a way to pencil out the returns wanted, but the question is, are those going to be the assumptions that actually play out? And my guess is the answer's no. So that kind of enables the fact that you can come up with your own projected returns, kind of enables the captives to continue to find investors because they can find assumptions that work. And then the other part of it is just in valuation. So my guess is that in the captives, they're not marking their portfolios to market using secondary market trades. Their investors are not seeing that maybe this silo bought equity at 90 cents and where a third party investor like you or I would have cared would have been at 80 and 80s also the price where this vibrant secondary market that we're in, that's the price. Over time, I would expect, listen, over the last two years, Silo equity has been disappointing in general. If you're tied to one manager, and the less the manager did some like herculean job, then you're going to be disappointed. And it's kind of interesting, like I sometimes talk to investors who are in these captive funds, they think they're doing great. And I'm like, who am I? I mean, it's possible that some of them just happen to be like in the right deals with the right managers. But listen, if you had to bet your average investor in a Silo captive fund is getting smoked, that would be my base case. At least it remains to be seen, you could argue. And to some degree, I think the yield you get on the equity, let's call it high single digits, something like that. Or maybe even low double digits, whatever you get out is much better than we have seen for years in the private equity part. So maybe that's what they're comparing it to. And that is, and I think Silo equity is doing fine. We do mark to model, we use an external price source for all our Silos and all the Silos get a daily mark. We can see the changes daily. And we don't do marks on model every quarter or whatever some of these might do. Part of it is just comparing it to the historical returns as of late in the private equity side. And there I think. And also, I mean, you de-risk in the Silo equity space quite quickly because the cash flow is so front loaded, right? I still believe it doesn't take away the fact that the arbitrage is just not as attractive as it has been. And to some degree, you need that. Well, I think also if you're a captive fund, you would have been better off if you're in Europe than the US again, because the performance of underlying loans has been better across the pond. The other thing that kind of came out on our panel was, hey, your Silo equity was previously like a mid-teen return opportunity. Maybe it's just not that. I mean, maybe everybody needs to settle in Silo equity for a lower return than potentially in the past. But the challenge with that kind of line or to follow the logic there is just that, well, there's a double B that's issued by the Silo and that should set a floor for the return on equity. You wouldn't presumably invest in equity if you could buy a double B and get a similar return. So there's a floor on what could make sense for Silo equity for sure. Exactly. And I agree. And in Europe, we have the single B that's somewhat the floor there. What's the spread on a US double B at the moment, Moll? So it's sofa plus, call it like five, five and a half depending on the deal. And then if you do private credit, which is one of my focuses, it's more like sofa plus 800. It's a decent return. Impressive. I take it. You don't do any. I mean, private credit. I think there's only been a few Silos issued in Europe with that mandate. Did you look at those? No, I think for us, it's still too early. I know you like the asset class. It takes time to delve into it. And I think it's too early for us in Europe, at least. I have in the past actually been investing in some US private credit Silos, but it's a more mature market over there. I think especially now, or maybe right now, it's actually the right time to build a warehouse and buy some private debt from maybe some BDC or something like that right in the US. That should be some opportunities right now. Would be my guess without looking at it. You are the expert there, I think. I think people are kind of expecting that BDCs and private credit funds that are seeing high redemptions will be a four-seller of assets. I'm not seeing that. It's not my view. One reason is just that the loans optionally prepay at a 25% rate or thereabouts per year. In the private funds, the typical tender amount is 5% a quarter or 20% a year. So even if the fund, even if these private credit funds don't grow and I think for the most part they are still growing, just the natural repayment of loans is enough to meet any redemptions and then they also have lines of credit and I'm not expecting to see any kind of fire sale of private credit assets. If there is one, I hope to be invited, but not expecting it. So David, is there anything topical that we have in touched on in this conversation? As I mentioned before, we have now seen the first impairment of a rated chance in Europe. As mentioned, I think it was 30 till date from 12, 13 in US and now we have the first one in Europe. We are seeing, my analyst is seeing something like a 60% recovery on that single B Trash. And if under these assumptions, it's something like 3% IRR from issue and Spagon 18. It's not great, but it's not terrible either. I think if it's the one single B out of, I don't know how many it is now. Is it 950? We have issuances in Europe, I think. In the 2.0, I think that's actually quite okay. Agreed. And then another thing, we are collecting data daily on B Wix in Europe. And I think an interesting part has just been that actually in the missed part, the single B Trash has been the most B Wicked Trash across Trilobies, double Bs, and single Bs. I think that's been an interesting de-risking from investors or of value rotation out of Europe into US. But at least, I think it's been like 900 million euros. We have seen on B Wix in single Bs this year, which is more than both double Bs and Trilobies. And it is the tiniest Trash in the whole stack. So it's actually quite interesting. But it's worth noting that the DNC part on that is also somewhat higher than what we have seen on double Bs or Trilobies at least year to date. Do you know why single Bs are much more common in Europe than the US? I probably heard some argument once, but I tend to have forgot that maybe it's about the underlying diversification. I don't know if you're more diversified in US. So maybe there's something about detachment, detachment. Honestly, I don't know actually. For like a US probably syndicated CLO, it's 8% equity in Europe. What's the comparable number? Now it's actually down to like six and a half, seven percent equity. So we're somewhat more levered now. Okay. So the single B is replacing some of the equity in the cap stack. Exactly. What's the single B rate today? For like a new issue. Spread. Your rider plus, I think 850 is would be from a normal manager in quotation marks, but I mean we have seen some above 900 also and we have seen a few maybe with turbos, but I think 850, 860 would be my best guess plus your rider, but your rider is something different here than over at your place. So our base rates like 3.7 for sofa. You would still get 10, 11% on a single B. I think especially in a single B's because that's also a little bit more. Let's call it esoteric tranche because it's quite thin and the investor base there is also quite fickle. Some US hedge funds like that play, but when they're gone, suddenly there's not a lot of buyers back and we have actually de-risked our exposure. We had I think close to 20% in our main fund double B single B. We had 20% single B's and now it's more like 12, 14. So we have de-risked a little bit following all these things going on. Great. So David, my closing question is always describe a CLO in 30 seconds. At the risk of sounding like chat GBT first of all, it's not an asset class. It's a technology, right? Second, a CLO is like a bank, but it's a well-designed bank. You have locked in liabilities for let's say 10, 12 years so you cannot have a bank run like a normal bank and you have the assets where you can sell those loans. Let's call it T plus 20, T plus 60, something like that. It will build bank with covenants that makes it difficult to get too much exposure to one sector, too large exposures to single name. So I think it's in many ways a very fine bank with a finite life. But David, thanks so much for coming on the podcast. Really enjoyed it. Thank you likewise. Take care. 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