US private placement reliability keeps it on the Australasian agenda
Australian and New Zealand corporate borrowers were somewhat less active in the US private placement market in 2022 than they have been historically. But participants at a roundtable hosted by KangaNews and MUFG Securities in Miami in January note that this was in line with dramatically reduced corporate issuance across the board, and suggest US private placements will be a favoured option as soon as supply picks up.
USPP IN 2022
Swiss Globally, 2022 was a tough year for investors in all credit markets. How did the US private placement (USPP) market perform last year and did it continue to work for issuers?
BROOKS There was around US$100 billion issued in the USPP market in 2022. This was down from 2021 but in line with the five-year average. Overall, 2022 can be classified as a resilient year for the USPP market. Investors continued to put capital to work throughout the year despite a relatively volatile backdrop in credit and risk markets.
Some of the key themes established in past years continued in 2022, including a higher share of issuance coming from the financial institution space. Utilities, real estate and project finance also performed strongly. The year can be broadly separated into three issuance windows. Most of Q1 was business as usual with some very aggressive and tightly priced deals getting done.
Heading into Q2, inflationary pressures alongside the Russian invasion of Ukraine caused credit market volatility, and we saw issuers pull back from the USPP market given the rapid increase in credit spreads and yield. Investors were still putting capital to work during this period but we saw lighter issuance in the months from March to July as issuers were grappling with higher borrowing costs.
Toward the end of Q3 and into Q4, the decision makers at our issuing clients realised that base rates would likely be higher for longer and financing plans couldn’t be delayed any further. As a result, we saw a rush of transactions come to market later in the year. Most were well received by investors as they were slightly behind on their USPP capital allocations for the year.
Looking into 2023, we have essentially heard similar messaging from investors at the Miami conference to previous years. They generally have higher capital allocations to the USPP asset class and are seeking to continue to diversify their fixed-income portfolios. We expect Australia and New Zealand to play a key part in this diversification.
Swiss Moving specifically to USPP issuance from Australian and New Zealand issuers, how did 2022 stack up with expectations and historical norms?
CARR Globally, issuance from Australasian borrowers was about 50 per cent down, at US$20.6 billion in various capital markets. The US 144A market had around US$8 billion of issuance, dominated by one jumbo deal from CSL, with only two other investment-grade issuers into that market. There were only two issuers in the euro market while the Australian domestic market was down 75 per cent from what was a record year in 2021. If we take out some of the government-related issuers that did deals in the second half, the story becomes even bleaker.
USPP issuance was also down, at US$4.5 billion versus a long-term average of US$6-7 billion. However, there was a decent amount of activity – a total of 13 issuers accessed the market.
The interesting thing about USPP issuance from Australasia is that deal size contrasts quite starkly with 2021. Outside the Ichthys LNG transaction, 12 of the 13 deals were smaller than US$400 million. In 2021, a number of issuers – such as GIP Titanium and Queensland Titles – took US$500 million or more, or even, in the case of the WestConnex and GIP Capricorn transactions, more than US$1.4 billion. All these deals were led by MUFG Securities.
We have a lot of issuers with very long-dated assets that seek to match-fund with long-dated liabilities. But through the course of the year there was a bifurcation in pricing between the bank and bond markets. This resulted in a number of Australian corporates pivoting from capital markets transactions into, for example, the Samurai or Asian term-loan market. This was a key driver of activity on our desk through the year.
Certain issuers, however, wanted to fund and recognised the value of issuing long – out to 15 years – in the USPP market. It was the only market that could offer funding out to 15 years but a 200 basis point increase in fixed rates and a 100 basis point move in spreads made the decision-making process more nuanced.
The end result was somewhat of a compromise – there was long-tenor funding taking place but in smaller volume. We saw this in a lot of the books for the deals we led in the second half of last year: they were multiple times oversubscribed but issuers elected to take modest volume.
Swiss Did investors have to compromise on duration, or at least on the volume of transactions offering extended tenor?
HALLIDAY We saw a shortening of opportunities in the market last year. This was a bit of a struggle for our clients because the USPP market is primarily oriented toward life companies with a strong appetite for longer-duration assets. Across the board, we saw more opportunities come in shorter than what we target. Some of the infrastructure names were exceptions to this. It has always been a target of ours to look for longer duration. But what we saw in 2022 was issuers, perhaps out of sticker shock, trying to keep their issuance on a shorter timeframe than previously.
SPAETH We also saw several deals from Australian issuers that probably would have been a lot bigger – and were marketed as such. But when the sticker shock regarding how much it would cost came in, those deals were not upsized. This typically led to an allocation issue.
On the flip side, bearing in mind how much the swap spread would cost Australian issuers, I can totally understand the toggle whereby they would like to borrow long. But it is very expensive to do so, so they borrow less.
To give an example, in one deal we would have liked to have made a significant investment but we got just US$15 million. As for spreads, these were determined by the market and applied to all issuers – higher spreads were not unique to any specific issuer.
Macro outlook for 2023 and beyond part one
MUFG Securities expects markets to perform better in 2023 than they did last year, if only because they have already priced in a lot of the downside risk and the shocks of 2020-22 were so outlandishly large. The most likely outcome may be a shallow recession and equally gradual recovery.
JOYCE Although 2023 will be a tricky year, I think there are reasons to be optimistic. Where we are now from a market economic perspective is one of those fundamental points in time, such as 1918, 1945, 1989 and 2008. Some of these were geopolitical events, others were specific to markets.
When we look at the last two years, the magnitude of what has happened, almost all of which was unanticipated, is staggering. We have had the first truly global pandemic in a century, the first land war in Europe in 70 years, last year we had the biggest surge in inflation in 40 years and the fastest Fed [US Federal Reserve] tightening cycle in 40 years.
It wasn’t just the Fed – 84 per cent of central banks globally, or more than 90 central banks, tightened policy at the same time. We know monetary policy operates with a 12- 18 month lag. Due to all the events I have described, last year the aggregate returns for bonds and equities on a combined basis were the worst in a century.
The good news is this year should be better. This time last year the Fed was just beginning a brutal tightening cycle, whereas now we know we are at the end, even though there are still some things to pay attention to. In January 2022, inflation was at the early stages of a historic surge, whereas this year inflation will come down a lot – and maybe faster than we think. How much of it is sticky, and how long it takes to get the last bit out of the economy, is relevant. But it should still come down a lot.
CARR We saw ongoing activity in the USPP market because, from a relative perspective, it stacked up very well versus other bond markets. But, as we just discussed, the bank market was also very strong throughout 2022. For example, we had a client that needed to fund approximately A$1 billion (US$629 million) during the year – which it could have done comfortably in the USPP market. But the delta between three- and five-year bank pricing and 15-year USPP pricing was just too wide to justify taking the volume.
WATERS My perception is that USPP margins typically react a little more slowly to world events. However, in 2022 there was an exaggeration of the sticker shock because margins in the USPP market seemed to move almost as quickly as those in the public market. It was a bit of a shock to see banks stay pretty stable in their margins while the USPP market followed the public market very closely in a very short period of time.
HALLIDAY Generally there has always been a lag in our market – whether up or down – relative to public spreads. We certainly saw them widen out, but toward the end of the year they came in considerably.
SPAETH I agree, but I also agree that the USPP market moved faster in 2022 than it normally does. I can only speak for us, but my sense was that this pervaded the market. By the end of the third quarter, we had already largely satisfied our clients’ needs for the year.
This didn’t mean that we stopped investing, but it did mean we became more selective in what deals we participated in. I can think of at least four deals where normally we likely would have done something but either they didn’t fit our desired maturity buckets or the pricing was not very compelling. We were much more picky about duration and relative value. My sense is this wasn’t just us.
“Last year, when public market spreads increased quickly, we needed to follow them. The private market as a whole took a little longer to react. This resulted in us being slow in putting out money in the first part of the year, but we had a pretty good year when private market spreads caught up to the public market.”
GLEASON We look at things on a relative-value basis: every time we invest we are comparing against other opportunities available, such as public corporate debt. We don’t have a bogey for putting dollars out; our focus is relative value. If we can show this is a good deal for the client – due to diversification, excess spread or attractive covenants – we will participate.
Last year, when public market spreads increased quickly, we needed to follow them. The private market as a whole took a little longer to react. This resulted in us being slow in putting out money in the first part of the year, but we had a pretty good year when private market spreads caught up to the public market.
While I agree that the USPP sector moved quicker than usual last year, reacting quickly to public spread moves and to public market spread movement isn’t unusual for Nationwide.
HAIRSINE The pricing impact was exacerbated by underlying rates and this was part of the sticker shock for all the boards of issuers. It wasn’t just that spreads were widening: rates were also moving very rapidly.
The June to September period in particular was very difficult: we couldn’t really pick when or where things were going to settle. This environment was a very difficult and challenging one in which for boards to understand where a deal should be done at. The natural reaction was not to go to market.
SPAETH In the natural gas space in particular, two or three issuers explored coming to market in the late April to early June time frame – even launched deals – and then pulled out. The amount of credit spread increase on a generic natural gas utility company was as great as I’ve ever seen.
Overall, credit spreads are still way wider than historic norms – although they peaked in September. We were doing 30-year first mortgage bond deals in the high 100s basis point margins, whereas typically this would be in the low 100s for a high-quality issuer.
CARR The situation being described was amplified by the fact that issuers were comparing the bank and bond markets. Bank market pricing in Australia and New Zealand kept contracting right into the fourth quarter. The two markets were going in very different directions.
WATERS We funded in the bank market at the end of 2022 and we found it very competitive. We chose the bank market because margins had increased dramatically and there was increased execution risk. I can certainly confirm that domestic bank margins were slow to react and, even when they did, there was still very strong competition among the domestic banks that kept downward pressure on margins.
TE PAA It was similar in New Zealand. Execution risk is the biggest factor for us in choosing whether to issue a bond: we want to have certainty of a deal completing. Whenever we do a refinancing, we compare all markets and look at the cost of swapping back to floating-rate New Zealand dollars.
Having said this, the bank market in New Zealand is different from Australia in that there are fewer options as there aren’t as many banks. Our preference is to have a small number of relationships, whether in the bank or USPP market – we prefer to deal with a small group of banks or investors. We want to have fewer investors and to keep them happy by doing repeat transactions. The MUFG team has been very supportive of helping us secure this over the past five years. We also need long-dated funding because we have long-dated assets.
We are a smaller issuer – our deals are typically in the range of US$150-200 million – and we are slightly less price sensitive than other issuers. The USPP market is one we will continue to tap on an ongoing basis. We believe there is appetite for our bonds when we want to do a deal, which is really positive for Powerco.
“We have essentially heard similar messaging from investors at the Miami conference to previous years. They generally have higher capital allocations to the USPP asset class and are seeking to continue to diversify their fixed-income portfolios. We expect Australia and New Zealand to play a key part in this diversification.”
HAIRSINE It is similar for Aurizon Network. We did a fair bit of funding in 2020 and 2021, and we are now well placed with the capacity our relationship banks will extend to us. Pricing has been good in the shorter-tenor bank funding market. Given our maturity profile, we were able to sit out of markets for 12-18 months. But we are at the point where we need to return in order to manage our risk. We know we will have to come to market this calendar year, possibly a couple of times.
We have an interesting debt book in the sense that we have funded twice in the euro market but this is unlikely to be open to us in the near term. As a result, in the last couple of years we have had to adjust our views on the markets we want to be present in. The long-dated and buy-and-hold nature of the USPP market suits us. We have done some internal structuring on our debt documents to allow us to access the market easily.
What I’ve said relates to Aurizon. We also did a deal on a bridge takeout for acquisition facilities, led by MUFG. It was an interesting transaction because we had to divest a primarily thermal-coal exposed asset due to competition concerns. We were aware of the ESG [environmental, social and governance] lens when we structured this deal, in the sense of how to make things comfortable for investors given the uncertainty of thermal coal in five or 10 years’ time. At the same time, we wanted to get things lined up for the issuer so its capital structure was ‘set and forget’ for the next 10 years.
Carr Let’s now shift focus to the outlook. Tom Joyce is predicting a rally in Q4 of 2023 and already this year we have seen US spreads come in by 10-15 basis points, so the short-term direction is positive for issuers. Our observation from distributing loans into Japan and Asia through Q4 2022 and the start of this year is that cost of funds for banks in the region is starting to feed through the system. As a result, directionally we are seeing the opposite from last year – that is, bond spreads coming in and loan market spreads widening, albeit in a measured way. I’m interested in issuer plans for the year and how the prospect of a recession, which might cause spreads to widen again, might affect them.
WATERS We generally agree with these observations. Engagement with investors is very high and we are seeing margins start to come in this year as a result of increased investor confidence. We are now better positioned to be looking at the USPP and public markets. I am slightly concerned about the view that Tom Joyce anticipates widening margins on the horizon. Nevertheless, we think there will be good opportunities for issuance this year.
This is part of the reason for attending the Miami conference and meeting with investors. We have continued to update investors every year via video calls and sending out presentations. But nothing beats face-to-face communication with investors and lenders. We are here to say we are committed and want to be engaged – the USPP market is a core one for Ausgrid and it is an extremely important part of our funding profile.
TE PAA USPP is also a core market for Powerco: it represents around 50 per cent of our total funding. As our business gets bigger and we support our customers to decarbonise, and as New Zealand moves toward more electrification, we will need more funding. We want to target keeping USPP debt at around the same percentage of our total.
This means we will continue to issue bonds. We have refinancing to do and the reason we – our chief executive, chief financial officer and treasurer – are here in Miami is to make ourselves available to talk to investors. We want to ensure everyone is up to date on our strategy and what is happening with the business. This will help set the scene for when we are ready to issue a new bond.
HAIRSINE It is very much the same for Aurizon. USPP investors are very different from Australian domestic accounts. We are very supportive of the Australian market but sometimes it is not as supportive of corporate issuers – the tap gets turned off. We are keen to bring USPPs into our funding mix because we think this will reduce execution risk.
WATERS One of the characteristics of the USPP market is the very strong relationships that are built. Where there are periods of volatility, it heightens the thought process to know we can call an investor and decision maker to have a conversation about potential issues or timing of a potential transaction. There is a great sense of comfort in knowing the USPP investor base is so supportive, contactable and open.
GLEASON We very much appreciate the accessibility of Australian management. For almost all the credits I have invested in, management reaches out on a quarterly or semi-annual basis and we talk about what is happening in the business. In addition, the banks have made themselves available, as have the rating agencies. There is a very good information infrastructure supporting Australian debt for the USPP market.
Macro outlook for 2023 and beyond part two
In a more challenged economic environment, US private placement (USPP) investors say the value of industry and issuer selection will be greater than ever, as will robust structural protection in deals.
GLEASON At Nationwide, we believe there will be a recession in the US. The issues are the timing and depth of the recession – we think it will happen either late this year or early next.
We have a slightly more bearish view than Tom Joyce’s (see box on p28) in that we think the recession will be a little deeper. We think that even if we avoid a technical recession, we will still feel the economic pain as if we were in one. On the bright side, we think Australia will skip by without going into recession. We are pretty optimistic about Australia’s outlook.
HALLIDAY The Voya Investment Management house view is also that we are going into a cyclical downturn. I won’t opine on how deep or wide it will be, but our expectation on the credit side is that we have to brace ourselves for things to slow down and for companies to start being stressed.
We are renewing our focus on structural protections and the covenant packages we expect to see in the deals we look at. This is for new production but also for existing names, to make sure we are aware of the stress points.
We expect there to be stress points in the portfolio. But, in general, we are confident the portfolio is well positioned. One of the attractions of the USPP market is the covenant protections and structural enhancements found in our transactions. We think this will bode well for us in the coming downturn.
Covenants and other structural features provide important downside protection when the market is going into a downturn, so they are a focus for us.
We are equally focused on finding the right sectors to invest in. Our portfolio and the USPP market overall have generally had very strong credit performance in past recessions. We find good companies – like those here today – that have performed well in downturns and we look for ways we can support them. Sector selection is just as important to us as covenant protection.
THE IMPORTANCE OF ESG
Swiss How important is environmental, social and governance (ESG) for investors? Does sustainability come into issuer discussions?
GLEASON Yes – ESG is incorporated into every underwriting decision we take. We are still working out the details of how this looks and works, though. We are not paying up for green bonds at the moment, but we are certainly evaluating each deal in an ESG context – whether this means how ESG affects refinancing or specific incident and performance issues. Our shop turned down a couple of deals last year as a result of ESG-related concerns. It is becoming a greater part of the core discussion and we need to ensure that, as a lender, we do not taint our overall brand.
Swiss Has the USPP market progressed to the point that investors are not just looking at labelled bonds but at the overall sustainability credentials of issuers?
GLEASON We have always looked at ESG issues – it just wasn’t labelled as such or brought to the fore as much as it is now. The approach is more structured now, with a report out of the evaluation and review included in our investment recommendation – including an issuer’s governance structure, its plans going forward and its history. We do this for every issuer – whether or not it is a green bond.
TE PAA My impression from USPP investors is they have always considered ESG. There have always been ESG questions from investors. Over the past 12 months, a lot of agencies have started offering ESG assessment, so there is access to data that didn’t exist before. We are certainly getting more questionnaires from investors on ESG than we have in the past. This is useful as it helps us understand what the focus is for our investors.
WATERS There has been a lot of change in markets over the last few years but I am definitely seeing more focus on issuers’ overall credentials nowadays. As investors increase their knowledge, they seem to be less focused on single sustainable tranches of bond deals – they want to see that a company, in its entirety, is sustainable.
One of the things we are doing is embedding ESG concepts into the DNA of the business – into the behaviour of our people, our teams and our objectives – and exploring how to measure and rate our performance. Regardless of how debt is structured, the underlying risk is the corporate risk. This lies in the way companies are managed and I believe this is where the focus of sustainability will shift to, rather than single transactions.
HAIRSINE We have been approached in the past about the idea of sustainability-linked bonds (SLBs). However, I agree that we prefer not to target individual SLB tranches but instead focus on telling the story of what the business will look like in five or 10 years’ time. We see it as important to demonstrate tangibly how we are going to get there and we believe this is the most important thing for investors.
A lot of investors tell us that what they can and can’t participate in within their mandates has changed. There is also more nuance coming into discussions. For example, we can talk in a lot of detail about the different types of coal in our business and what they are used for. These kinds of issues are now baked into the ESG questions we are asked. This is helpful for us because we can point to parts of our credit that will work for some investors but might not work for others.
Swiss So this nuance makes things more complex but it also gives issuers in hard-to-abate sectors more opportunities?
HAIRSINE That's right.
Brooks What do investors think about having an ESG-labelled tranche – is this helpful for your underwriting? If so, should there be a price benefit?
HALLIDAY From our point of view, the overarching theme is to convince management that we want to see ESG principles incorporated across the board, rather than just invest in a green tranche of debt.
In our business the key issue going on right now, particularly in Europe, is regulatory: the disclosure component is the primary thing we are looking at. Our industry association has developed ESG surveys that are directed toward making sure the right information is disclosed by issuers in the deals in which we are participating.
We do an ESG analysis now for all our investments, regardless of sector. We need to ensure we are compliant with what our clients expect from us as managers.
Swiss Is this made more difficult because of the lack of standardisation or harmonisation of data and measurement metrics?
HALLIDAY Geographically, disclosure is more prevalent among European issuers. US issuers are a little slow to the game. But everyone is coming to the same conclusion: ESG is not going away. It will be a component of issuing and investing in debt going forward.
Swiss Does this have a link with price? Would it be reasonable to assume there would be a cost for investors to buy labelled tranches?
HALLIDAY It is not something we are willing to pay up for because our clients are not dedicating funds or portions of the portfolio to ESG product. I could imagine managers that have segregated accounts directed toward ESG investments being more keen to participate in and pay up for these transactions.
WATERS I would very much like to see a larger benefit for issuing a green bond compared with a vanilla bond. But the reality is the world is changing fast and everyone involved in the bond market is studying ESG now, whether they are investors, issuers or rating agencies.
It will become the norm for companies and investors to focus on ESG issues as part of credit assessment. It seems that companies that are not providing this information will find it harder or more expensive to borrow. So, rather than a benefit for issuing green, it is more likely issuers will be penalised for not being able to demonstrate strong ESG credentials.
SPAETH ESG has always been important for us. What has changed is that it is being measured. We are going through a big process with our client right now, trying to figure out what is an appropriate measure. On one hand, we want to be realistic: we don’t want to make a whole universe of companies uninvestable. But we also believe it is important to be mindful of these issues.
This is why we think metrics can be helpful: asking issuers where they were a decade ago, where they will be a decade from now and where they are now. I agree, too, that it is becoming much more nuanced. We are trying to be much more thoughtful rather than just saying we can’t invest in a company. We have always been concerned about governance issues.
For big industrial clients, clearly we should also be concerned about sustainability issues because they affect the business. Being environmentally responsible is part of sustainability; why would we want to lend to a business and then find out after the fact that it has been doing something wrong on the ESG front? Also, as an individual, I don’t want to be punitive but I want to be a good citizen. I think all of us want to do the right thing.
MUSCAT The measurement and reporting piece is crucial, especially as investors increasingly call for high-quality, transparent, reliable and comparable reporting on ESG matters. We have a lot of data and much of the information is already tracked and reported in some shape or form.
Putting it all together in a concise document that can be consumed by investors and compared with our peers is the next challenge. I come from the financial reporting side of the business and I believe sustainability reporting will become more structured over time as standardised frameworks are developed and adopted by companies across the world.
For example, the ISSB [International Sustainability Standards Board] was expected to finalise its sustainability-related disclosure standards by the end of 2022, which will become a mandatory part of financial statement disclosure over the coming years. This will make it a lot easier for investors and other stakeholders to assess and compare the ESG performance of companies from across sectors and geographies.
Swiss Public investors talk a lot about their role in funding transition. Do USPP investors believe they have a similar role to play?
SPAETH Yes – and it is manifesting itself in different ways. There are so many different sides to the impact of the Russia- Ukraine war, to take one example. At a very high level – and maybe people haven’t realised this yet – the cost of a unit of energy is very important to the lifeblood of any economy. Managing this cost in a way that is sustainable, green and economically viable is a very gentle balancing act.
Even within the regions of the US, if they are not very careful the consequences over the next decade could be substantial. There is a lot of money in global capital markets but investors have to be more thoughtful. At the moment we are looking at ESG issues on a case-by-case basis.
PATTISON I would add that we are finding opportunities now in spaces we wouldn’t have a number of years ago, driven by transition. Renewable power was a small part of our market 10 years ago, and now it is an important component. One of our large investments in Australia is a company called Tritium, which builds electric vehicle charging stations. A decade ago, we wouldn’t have been able to invest in this kind of company.
We get asked about hydrogen investments quite frequently now. This type of technology is still too early in its development stage for us to see actionable opportunities, but these are the types of opportunities we will see over time that are new and part of the transition.
HALLIDAY I’m sure we have all put money toward the transition – for example all the allocations we have all made to renewables over the years. This shows that we are putting money toward the belief that we have to change our actions in order to help improve the environmental situation globally.
Swiss In some ways, investing in a renewable energy company is easy compared with investing in a fossil fuel company that has a plan to transition.
HALLIDAY We all have a view on what is necessary to transition energy policies. But what we are able to do, as investors, can sometimes be limited. For example, taking a company that has a 60 per cent coal portfolio down to 30 per cent is the right policy move, but we may not be permitted to partake in this transition due to overarching concerns about exposure to coal assets.
Carr One of the hallmarks of the USPP market is its flexibility – such as delayed draws and the availability of non-US dollar currencies. Is there anything on the issuer wish list that would make it even more attractive?
TE PAA I have found the USPP market to be quite dynamic in meeting some of the flexibility we have discussed. Since I’ve been at Powerco, we have been through a covenant restructure, a separate amendment process and we have done New Zealand dollar floating rate notes. The market has been very responsive to our requests.
There is likely more coming, for some of us, with decarbonisation and electrification because some deals that were done quite a few years ago might need to be changed. My expectation is that some of us will need to talk to existing investors about future changes with decarbonisation in mind.
WATERS I agree that the USPP market is very dynamic, forward-thinking and supportive. The relationships in this market are like being on a journey – and the path we are on at the moment is how ESG is affecting all of us. Changes will have to come, for issuers and investors, but it will be positive as both sides are moving in the same direction. This gives us a great sense of comfort.
HAIRSINE We went through a pretty complicated consent process last year and it was easier dealing with USPP investors than with our banks. This market works really well for us.
MUSCAT It is my first time to this conference in Miami and I have noticed a couple of things over the last few days. The depth of the conversation with investors has been great – there is a lot of interest in really understanding our business, including the risks and opportunities. I have found conversations to be very engaging, informed and thoughtful.
Second, I went to the USPP bootcamp yesterday and the word ‘relationship’ was mentioned a number of times. Today, I have really seen this in action – this is a very relationship-oriented market and there is a great sense of community, which appears to be a very strong foundation to how the market operates. It gives me confidence that, when we are working on a deal, the support we need from USPP investors will be there.