ECN Capital Corp

TSX:ECN

Earnings Call Transcript 2021-Q4

[Operator]

Thank you

for

standing

by.

This

is

the

conference

operator.

Welcome

to

the

ECN

Capital

Fourth

Quarter

2021

Results

Conference

Call.

As

a

reminder,

all

participants

are

in

listen-only

mode

and

the

conference

is

being

recorded.

After

the

presentation,

there

will

be

an

opportunity

to

ask

questions.

[Operator Instructions]

I

would

now

like

to

turn

the

conference

over

to

Mr.

John

Wimsatt. Please

go

ahead,

sir.

[John Wimsatt]

Thank

you,

operator.

Good

afternoon,

everyone.

First,

I

want

to

thank

everyone

for

joining

this

call.

Joining

us

today

are

Steven

Hudson,

Chief

Executive

Officerr;

and

Michael

Lepore,

Chief

Financial

Officer.

A

news

release

summarizing

these

results

was

issued

this

afternoon

and

the financial

statements

and

MD&A

for

the

three-month

and

year

end

period

ended

December

31, 2021

have

been

filed

with

SEDAR.

These

documents

are

available

on

our

website

at

www.ecncapitalcorp.com.

Presentation

slides

to

be

referenced

during

the

call

are

accessible

in

the

webcast

as

well

in the

PDF

format

under

the

Presentation

section

of

the website.

Before

we

begin,

I

want to

remind

our

listeners that

some

of the

information

we

are

sharing

with

you

today

includes

forward-looking

statements.

These

statements

are

based

on

assumptions

that

are

subject

to

significant

risks

and

uncertainties.

l

refer

you

to

the

cautionary

statement

section

of

the

MD&A

for

a

description

of

such

risks,

uncertainties

and

assumptions.

Although

management

believes

that

the

expectations

reflected

in

these

statements

are

reasonable,

we

can

obviously

give

no

assurance

that

the

expectation

of

any

forward-looking

statements

will

prove

to

be

correct.

You

should

note

that

the

company's

earnings

release,

financial

statements,

MD&A

in

today's

call

include

references

to

a

number

of

non-IFRS

measures,

which

we

believe

help

to

present

the

company

and

its

operations

in

ways

that

are

useful

to

investors.

A

reconciliation

of

these

non-IFRS

measures

to

IFRS

measures

can

be

found

in

our

MD&A.

All

figures

are

presented

in

US

dollars

unless

explicitly

noted.

And

with

these

introductory

remarks

complete,

I'll

now

turn

the

call

over

to

Steven

Hudson,

Chief

Executive

Officer.

[Steven K. Hudson]

Thanks,

John,

and

good

evening

and

welcome

to

ECN's

fourth

quarter

earnings

call.

Turning

to

slide

6,

we're

happy

to

add

Source

One

to

our

operating

banner,

and

our

operating

partner

banner,

welcome

aboard.

Turning

to

slide

7,

slide

from

our

recent

Investor

Day.

As I

mentioned

at

Investor

Day,

we

have

three

core

components

of

our

robust

business

model.

First

of

which

is

our

deep

origination

platforms.

We

have

5,000

nationwide

dealers

between

Triad

and

Source

One,

and

Kessler

Group

has

the

background

and

history

of

6,000 affinity

credit

cards

created

by

KG.

Beside

the

origination,

platforms

are

committed

loan

partnerships,

which

we

continue

to

expand

and

broaden

these

partnerships,

as

we'll

highlight

shortly

in

the

Triad

section,

we've

got

great

news

to

report

on

these

expanded

partnerships.

And

underpinning

the

first

and

second

component

is

our

robust

and

industry-leading

servicing

advisory

and

portfolio

management

platforms.

This

is

a

significant

source

of

recurring

revenue

for

ECN.

Turning

to

slide

8,

a

slide

you've

seen

before.

We've

completed

the

Service

Finance

sale

for

$2

billion

in

cash.

It

represents

a

6.5

return

on

investment

in

four

years.

Turning

to

Source

One,

the

new

addition

to

the

ECN

partnership

and

family.

Source is

prime

RV and

marine

loans

for

consumers.

It's

100% consistent

with

ECN's

proven model

of

prime

credit

assets,

asset

light,

no

recourse

obligations

on

behalf

of

banks

and

credit

union

partners.

And

finally,

and

probably

most

important

is accretive

to both

2021

and

2022,

[ph]



operating

earnings (00:04:07).

Turning

to

page

9,

our

tuck-in

strategy

-- acquisition strategy

led

by

John

Wimsatt

is

underway.

Source

One

marks

the

first

[indiscernible]



(00:04:18) strategy

which

we

will

continue

to

roll

out

in

2022 and

2023.

It's

really

important

to

us

as

we

look

at

these

opportunities

that

they

be

accretive

to

the

ECN,

that

they

be

asset-light

and

fee-orientated

business

within

our

core

scope

of

competency.

Third,

that

the

high

quality

credit

assets

are

in

demand

by

our

existing

institutional

partners,

our

funding

partners

and

that

be

non-recourse,

and

that

we

have

very

limited

integration

risk.

We

think

Source

One

scores

well

in

each

one

of

those

components.

Turning

to

page,

the

slide

10,

a

little

bit

on

the

fourth

quarter,

which

we'll

get

through

in

a

moment.

Happy

to

report

$0.06

of

EPS

this

quarter.

$0.01

is

from

the

sale

of

our

credit

card

portfolio

and

service

finances

reported

as

discontinued

operations

in

the

fourth

quarter.

We

are

reiterating

our

guidance

for

2022 and 2023

from

our

Investor

Day.

And

as

I

mentioned

at

that

Investor

Day,

I'm

guiding

you

to

the

high

end

of

that

range,

and I'll

speak

to

that in

a

moment.

January

and

February

have

been

strong

at

the

business,

tried

at

the

high

end

of

its

origination

for

those

months.

Those

two

months

don't

make

a

year,

but

they

certainly

underpin

the

first

quarter.

We're

quite

confident.

I

think

our

past

execution

and

strength

of

these

businesses

gives

us

a

high

degree

of

confidence

in

our

earnings

forecast.

Source

One

is

above

our

expectations,

so

it's

above

the

high

end

and

KG is

at

the

high

end.

So

I

think

the

first

quarter

will

put

us

in

great

shape.

Triad's

continued

results

are

strong.

The

fourth

quarter

had

a

51%

increase

in

originations.

We are

fully funded

through 2022

and

2023. We

are

pleased

to

announce

our

multiyear

partnership

with

Blackstone,

and

we'll

speak

to

that

in

a

moment.

KG

front, adjusted

earnings

came

in

at --

pre-tax

earnings

at

$17.2

million,

and

we

mentioned

earlier

our

specialty

lending

company,

which

is

an

affiliate

of

Blackstone,

which

we

launched

with

a

$450

million

portfolio

of

-- credit

card

portfolio

purchased

in

the

fourth

quarter.

We

feel

that

KG

has

delivered

on

its

promise

to

prove

to

the

financial

markets

that

we

could

successfully

introduce

institutional

investors

into

acquiring

and

managing

credit

card

portfolios.

Turning to

the

operating

highlights

on

slide

12

on

– with

respect

to

Triad,

happy

to

report

operating

adjusted

earnings

of

$13.9

million,

up

56%

year-over-year.

Originations

are

up

52%

and

our

floorplan

assets

stood

at

$182

million.

We're

also

happy

to

report

that

we

added 15

new

funding

partners,

institutional

investors

who

purchased

our

loans

in

2021

that

we've

– we're

about

to

announce

the

Blackstone

partnership.

We're

maintaining

our

guidance

of

$1.4

billion

to

$1.6

billion; and,

again,

I

would

guide

you

to

the

high

end

of

that

range.

Turning

to

slide

13,

it's

a

slide

we've

provided

at

Investor

Day.

I

wouldn't

comment

on

it

other

than

say

it's

a

good

slide.

But

the

very

bottom

part

of that

slide,

last

bullet

I think,

is

very

important

and

very

significant.

We're

pleased

to

announce

our

new

multiyear

funding

partnership

of

Blackstone

in

the first

quarter.

It's

a

two-year-plus

commitment

to

purchase

up

to

$1.25

billion

of

manufactured

home

loans

and –

sorry,

book

chattels,

and

land-home,

and

bronze

and

silver.

It

goes

across

the

entire

menu

of

products.

This

is

really

the

third

chapter

of

our

partnership

with

Blackstone.

It

started

with

a

very

successful

service

finance

program

for

$1.5

billion.

It's

followed

on

by

a

multibillion-dollar

commitment

with

respect

to

credit

cards.

And

this

is

the

third

chapter.

We're

very

happy

with

this

partnership.

We

see

lots

of

runway

going

forward.

Slide

14,

I

won't

speak

to.

Again,

this

was

a

slide

at

Investor

Day.

Originations

on

15

or

as

presented

the originations

at

50%

growth

continued

to

demonstrate

the

robust

nature

of

the

Triad

platform.

The

origination

bridge

on

slide

16.

I

just

take

a

moment

and

highlight

the

not

sure

the

color

blue

showing

up

on

your

screen,

but

the

light

blue,

the

aqua

blue,

which

is

land-home

for

2022.

And

if

you

think

about

land-home

in

the

industry,

land-homes

market

size

is

3

times

the

size

of

chattel.

Our

chattel

business

stands at

about

$1

billion

of

forecasted

originations

for

2022.

That

means

our

land-home

opportunity

is

approximately

$3

billion.

So,

forecast

of

$300

million

indicates

that

the

$2.7

billion

opportunity

over

the

next

several

years.

We

feel

confident

about

the

continued

origination

growth

and

profitability

of

Triad.

Turning

to

slide

17.

Again,

we

added

slide

from

Investor

Day.

I

would

guide

you

to

the

high-end

$70

million.

Turning to Source One, John.

[John Wimsatt]

Thanks,

Steve.

So,

on

page

18, we

are

reiterating

the

guidance

for

Source

One

that

we

introduced

at

Investor

Day

2022.

We're

thrilled

to

have

added

Source

One

as

an

operating

partner

and

our

first

acquisition

and

our

tuck-in

strategy,

and

really

think

there's

a

substantial

opportunity

for

platform

growth

over

time.

The

end

markets

in

Marine

&

RV

have

very

similar

demographics

to

Triad

and

the

model

is

on

target.

Asset-light

prime

credit

on

behalf of

bank

and

credit

union

partners.

We

intend

to

follow

the

proven

playbook

we

use

that

service

finance

and

Triad

to

drive

growth

and

have

identified

significant

growth

opportunities,

which

we

detailed

in

Investor

Day.

We're

currently

anticipating

26%

growth

in

originations

at

the

midpoint.

Importantly,

we

have

started

2022 strong

with

January

and

February

origination

growth

ahead

of

plan

at

31%

and

40%,

respectively,

without

the

benefit

of

any

of the

growth

initiatives

which

are

still

in

early

stages.

We'll

update

you

as

we

move

forward.

The

addition

of

Source

One

adds

around

$12

million

to

$14 million

adjusted

operating

income

before

tax,

which

is

47%

growth

at

the

midpoint

year-over-year.

Page 19,

we

review

Q4

results

for

KG,

which

produced

adjusted

operating

income

before

tax

of

around

$17.2

million,

an

increase

of

87%

year-over-year.

This

includes

a

realized

gain

of

around

$2.5

million

net

of

tax

from

the

earlier

announced

sale

of

ECN's

credit

card

investments

to

SLC, as

discussed

in

Q3.

As

discussed

at

Investor

Day, KG

added

a

significant

new

co-brand

partnership

in

Q4

with

a

major

Canadian

bank.

Also,

as

previously

discussed,

KG

launched

the

partnership

with

SLC for

the

CCIM

platform.

In

Q4,

as

part

of

this

launch,

we

closed

$450

million

CCIM

portfolio

transaction

and

sold

ECN's

on-balance

sheet

credit

card

investments

to

SLC.

These

transactions

and

the

long-term

partnership

with

SLC

validate

the

thesis

of

the

build-out

of

the

CCIM

platform.

Page

20, we

repeat

a

brief

recap

of

some of

the

highlights

from

2021.

As

discussed at

Investor

Day,

we

will

now

segment

KG

into

partnership

services,

CCIM,

and

performance

marketing,

primarily

as

a

result

of

the

growth

of

the

CCIM

platform.

We

touched

on

the

partnership

services

in CCIM

highlights,

but

I

wanted

to

highlight

the

performance

marketing.

In

performance

marketing,

the

KG added

10 new

marketing

clients

including

many

in

new

verticals

and

on-boarded

its

first

card-as-a-service

client.

Card-as-a-service

is

particularly

exciting;

and

as

noted at

Investor

Day,

KG

has

added

two

more

credit

union

customers

that

are

larger

than

our

launch

client

and

has

partnered

with

one

of

the

major

card

networks

to

launch

a

card

program

for

a

$60

billion

bank.

2022

should

be

an

exciting

year

for

card-as-a-service.

Finally,

on

page

21,

we

are

reiterating

our

2022

guidance

from

Investor

Day.

We

raised

adjusted

operating

income

before

tax

guidance

from

$52 million

to

$59

million

to

$55

million

to $60

million,

which

is

roughly

15%

growth

at

the

midpoint

after

adjusting

for

the

realized

gain

on

sale

of

the legacy

credit

card

portfolios

to

SLC.

With

that,

I'll

hand

it

over

to Michael

to

discuss

the consolidated

financial

summary.

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

Thanks,

John.

Turning

to

page

23

and

the

Q4

consolidated

operating

results.

Key

highlights

are

Triad

originations

of

$300

million,

which

is

a

new

record

for

the –

for

a

quarter.

We're

up

52%

compared

to

the

same

prior-year

quarter,

reflecting

continuing

strong

growth

in

their

business.

Q4

adjusted

net

income

applicable

to

common

shareholders

was

$13.8

million

or

$0.06

per

share,

compared

to

$1.5

million

or

$0.01

per

share

in

the

prior-year

quarter,

again,

reflecting

the

strong

growth

at

both

Triad

and

KG

in

Q4.

Discontinued

operations

in

Q4

reflect

the

$1

billion

gain

on

the

sale

of

service

finance

after

taxes

and

transaction

costs.

In

addition,

to

complete

the

wind

down

of

the

legacy

business

and

return

$35

million

in

capital

in

the

near-term,

we

have taken

the

following

charges

on

our

legacy

assets:

$11.4

million

in

aviation

assets;

$14.6

million

on

a

legacy

corporate

aviation

asset;

$2.4

million

in

C&V;

and

$11.1

million

on

our

railcar

assets.

Turning

to

page

24

and

the

balance

sheet,

key

highlights

are

that

total

assets

were

down

over

$600

million

compared

to

Q3,

as

a

result

of

the

sale

of

Service

Finance.

Total

debt

was

down

approximately

$240 million,

primarily

due

to

the

net

cash

flows

from

the

sale

of

Service

Finance,

and

debt

will

increase

again

at

the

end

of

Q1

when

we

mix

the

income

tax

payment

due

on

the

sale

of

Service

Finance.

We

completed

two

issuances

of

senior

unsecured

debentures

in

Q4,

of

CAD

86.25

million,

and

CAD

60

million,

respectively.

These

debentures

carry

interest

rates

of

6%

and

6.25%,

or

approximately

4.5%

after

tax,

and

can

be

settled

by

the

issuance

of

ECN

shares

at

the

company's

option.

For

this

reason,

they're

treated

as

equity

pursuant

to

our

senior

line

covenants,

and

therefore,

represent

attractively

priced

long-term

capital

for

the

company.

The

proceeds

from

the

senior

unsecured

debentures

funded

the

acquisition

of

Source

One

and

the

retirement

of

the

Series

A

preferred

shares

at

the

end

of

Q4.

Turning

to

page

25,

in

the

income

statement,

total

revenues

of

$69.5

million

were

up

94%

compared

to

Q4 2020.

And

total,

again

reflecting

the

strong

performance

of

both

our

Triad

and

KG

businesses.

The

increased

revenues

drove

increased

–

250%

increase

in

adjusted

EBITDA,

and

as

noted

previously,

Q4

2021

adjusted

EPS

was

$0.06

per

share,

slightly

above

analysts'

consensus

for

the

quarter,

compared to

only

$0.01

per

share

in

the

same

prior

year

quarter.

Turning

to

page

26,

in

operating

expenses,

key

highlights

are

higher

business

segment

operating

expenses,

primarily

driven

by

the

growth

in

originations

and

managed

assets

and

new

products

at

Triad

and

higher

revenues

at

KG.

Overall, operating

expenses

increased

by

67%

year-over-year

compared

to

total

revenue

growth

of

94%

year-over-year,

demonstrating

the

strong

leverage

in

our

business

model.

Corporate

operating

expenses

of

$4.6

million

compared

to

$5.4

million

in the

same

prior-year

quarter.

Finally,

legacy

business

expenses

of

approximately

$1.6

million

were

largely

offset

by

legacy

business

revenue

of

$1.6

million.

And

finally,

turning

to

page

27

and

a

consolidated

2022

forecast,

which

is

unchanged

from

our

Investor

Day

as

noted

earlier.

Key

highlights

include

business

segment

operating

income

range

of

$129

million

to

$144

million.

Adjusted

operating

income

before

tax

range

of

$92

million

to

$101

million.

And

adjusted

EPS

of

$0.29

to

$0.31

per

share.

And

an

effective

tax

rate

of

approximately

20%.

And

with

that,

I'll

turn

it

back

to

John.

[John Wimsatt]

Thanks,

Michael.

Page

29

is

a

slide

that

you've

seen

before.

But

I

thought

it

was

again

important to

highlight

that

ECN has

returned

in excess

of

$2.5

billion

shareholders

through

buybacks,

quarterly

dividends,

and

the

special

distribution

from

the

Service

Finance

transaction.

Being

an

excellent

steward

of

capital,

our

shareholders

has

been

a

prime

directive

and

will

continue

to

be

going

forward.

Management

are

substantial

shareholders

and

we'll

make

– we

make

all

our

decisions

with the

goal

of

maximizing

shareholder

value.

And

with

that,

I'll

turn

that

back

to

Steve

to

conclude.

[Steven K. Hudson]

Thanks,

John.

Just

by

way

of

summary

on

slide

30.

Service

Finance

was

closed

and

provided

a

$7.50

special

dividend

to

our

shareholders.

We're

quite

proud

of

that

track

record

and

quite

proud

of

our

partnership

with

Mark Berch

and

his

team.

On

the

Source

One

side,

happy

to

have

closed

that

transaction

as

part

of

John's

acquisition --

tuck-in

acquisition

strategy.

We

think

that

this

transaction

will

bear

a

lot

of

fruit

and

some

others

to

come.

And

the

successful

operating results

reflected

by

the

$0.06

in

the

quarter.

Those

results

combined

with

the

execution

by

the

team

and the

employees

and

partners,

gives

me

a

high

degree

of

confidence

in

our

ability

to

deliver

earnings

at

the

high

end

or

slightly

above

the

high

end

of

our

forecast

for

2022.

Happy

with

our

track

record

on

our

return

of

capital

to

shareholders.

I

think

it's

reflects

–

[ph]

I

don't (00:17:58)

think

it

does

reflect

our

commitment

as

good

stewards

of

capital.

We

continue

to

have

an

NCIB

active

in

the

marketplace.

And

as

my

final

comment

before

we

open

to questions,

as

I

mentioned

earlier,

at

the

risk

of repeating

myself,

I

would

guide

you

to

the

high

end

of

the 2022

guidance.

We

have

a

high

degree

of

confidence

that

we

will

meet

or exceed

those

targets.

With

that

operator,

we

are

happy

to

open

the

call

to

questions.

[Operator]

Thank

you.

We

will now

take

questions

from

the

telephone

lines.

[Operator Instructions]



Our

first

question

is

from

Tom

MacKinnon

with

BMO

Capital.

Please

go

ahead.

[Tom MacKinnon, Analyst, BMO Capital Markets Corp. (Canada)]

Yeah.

Thanks

very

much, and

good

afternoon.

The

Blackstone

Partnership,

you

mentioned

you've

got

third

chapter

of

it

now

with

them

helping

out

on

Triad

to

the

tune

of

$1.25

billion.

Is

the –

how

can we

see

that

relationship

evolving

further?

Is

there

a

potential

for

them

to

purchase

more

with

respect

to

Triad?

Is

– can

they

do

anything

with

Source

One?

Have

they

indicated

they

do

anything

more

with

Kessler?

Just

the

relationships

evolving

and

evolving

rapidly

here,

and

just

wondering

if

you

can

add

some

color

with

respect

to

that.

Thanks.

[Steven K. Hudson]

Thanks,

Tom.

It

is

an

important

relationship,

I

would

say.

We

treat

our

100

funding

partners

as

all

equally

important

because

we

pride

ourselves,

although

these

are

non-course

relationships,

we

want

our

assets

to

perform

and

I

think

that's

reflected

in

this

growing

Blackstone

partnership

and

the

first

two

legs

that

performed

at

or

above

their

expectations.

This

is

an

important

step

forward.

We

still

have

a

number

of

core

funding

partners

at

Triad.

To

answer

your

question,

I

think

it's

safe

to

assume,

Tom,

without getting

into

details

that

we

wouldn't

look

at

an

acquisition

that

probably

didn't

involve

some

input

from

Blackstone.

I

have

to

kind

of

stop

there.

But

we

don't

make

an

acquisition

that

our

bank

partners

don't

look

at.

We

don't

make

an

acquisition

that

our

funding

partners

don't

want

to buy

assets.

So,

I

think

it's

safe

to

assume,

Tom,

that

they

have

some

input

on

Source

One.

Clearly,

they're

not

buying

Source

One

paper

yet,

but

I

think

that

they've

–

we

certainly

cherish

their

views.

[Tom MacKinnon, Analyst, BMO Capital Markets Corp. (Canada)]

Okay.

That's

good.

And

with

respect

to

Triad,

I

think

we

talked

about

average

ticket

sizes

increasing

nicely

throughout

2021.

Can

you

tell

us

what's

been

driving

that?

I

mean,

what

are

you

seeing?

Is

it

really

just

for

the

industry

or

is it -- are

you

seeing

higher

ticket

specifically

with

respect

to

Triad?

And

where

might

you

see

some

of these

higher

tickets

coming

from?

Are

they

in

silver

or

bronze

or

land-home

or

chattel

or

where

are

you

seeing

them?

[Steven K. Hudson]

I

think

the

ticket

size – I don't

think

the ticket size

is uniform

across

all products,

Tom.

So,

it's

not

–

it's

all

above.

You're

seeing

price

increases

at

the

manufacturers

as

they

deal

with

inflationary

pressures.

That's

part

of

it,

Tom.

The

other

part –

and

they've

been

successful

in

passing

that

along,

which

benefits

us

because

we

get

higher

tickets

and

higher

origination

fees

and

higher

management

fees because

our

balances

are

higher.

I

would

say

that

the

– probably

the

bigger

component

other

than

– sell-side

inflation

is

just

demand.

The

unprecedented

demand

for

affordable

housing.

This

is

the

solution.

Maybe

John

wants

to

jump

in.

[John Wimsatt]

Yeah.

Tom,

I'm just

going

to

add.

So,

in

2021,

we

saw

obviously

substantial

demand

for

manufactured

housing

really

across

the

board.

What

you

saw

in

the

industry,

chattel

pricing

overall

was

up

around

20%.

Our

pricing

in –

at

Triad

was

actually

up

around

25%.

Now,

that's

skewed

a

bit

because

we

launched

the

land-home

business,

which

has

much

higher

ticket

sizes

than

you

would get

in

your

typical

chattel

because, remember,

you're

financing

not

just

the

home,

but

the

land

as

well.

And

so

we

did

a

little

bit

better.

Once

you

adjust

out

the

land-home

side,

we

were

a

little

bit

better

than

the

market.

If

the

market

was

up

20%,

we

were

up

21%

or

22%

in

terms

of

pricing.

That's

really

a

function

of

demand

and

it's

really

a

function

of

the

builders

are

passing

along

pricing

through

the

dealers

to

the

customers,

which

obviously

benefits

us

quite

a

bit

since

we

get

paid

a

percentage

of

the

interest

income

over

the

life

of the

loan.

[Tom MacKinnon, Analyst, BMO Capital Markets Corp. (Canada)]

Okay.

That's

great. And

my

last

one

is just

a

quick

numbers

question,

the

$2.5

million

after-tax

gain,

what

was

the

pre-tax

gain

on

that?

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

Tom,

it's

like –

it

was

$5

million.

[Tom MacKinnon, Analyst, BMO Capital Markets Corp. (Canada)]

Okay.

Yeah.

It

seems

to

be

a

healthy

tax

rate

applied

to

that.

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

That's

costs

applied

to

that

as

well.

So,

it's

not

all

tax.

It

factors

tax

and

factor

compensation.

[John Wimsatt]

Yeah.

If

you

think

about

the

revenue

line

would

have

been

around

$5

million.

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

Yeah.

[John Wimsatt]

That

is

again

like

you

would

think

of

that,

any

other

business

that

there

were

expenses

associated

with that,

so

people

are

in

comp,

et cetera,

as

a

result

of

that

gain,

strip

that

out

and

after

taxes

too.

[Steven K. Hudson]

Tom, as

you

know,

the

team

that

built

that

portfolio on

our

balance

sheet,

most,

I

think

almost

all

their

compensation

was

deferred

until

we

had

a

successful

exit.

So,

you've

had, you

had

the

comp

deferred.

So,

you're

right,

it

is

a

big

number,

but

the

deferred

comp

–

not

to

the

management

team

at

ECN,

to

the

people

that

originated

and

managed

that

portfolio

that

accounts

for.

[John Wimsatt]

Yeah.

Just

because

the

$5

million

is

really

a

revenue

number...

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

Yeah.

[John Wimsatt]

...there

are

expenses

associated

with

it.

And

then

after

tax,

it

was

$2.5

million.

So,

the

tax

rate

itself

isn't

materially

different.

[Tom MacKinnon, Analyst, BMO Capital Markets Corp. (Canada)]

So,

the CCIM

revenue

would

have

been

$5

million

less

excluding

that

one-timer.

[John Wimsatt]

Revenue.

Yes.

[Tom MacKinnon, Analyst, BMO Capital Markets Corp. (Canada)]

Yeah.

Okay.

Thanks.

[Steven K. Hudson]

And

then,

Tom,

you

know

that,

as

we

mentioned

before,

the

return

on

this

portfolio

was

exceptional

for

ECN

shareholders

return

was

over

35%

compounded

over

the

period of

time,

which

exceeded

our

expectations.

But

more

importantly,

it

proved

up

the

model

that

we

could

allow

the

Blackstone's of

this

world

and

others

to

--

in

the

past,

these

trades

were

bank

to

bank, and

now

they're

bank

to

institutional

investors.

So,

the

concept

made

us

a

lot

of

money,

and

the

team

that

did

the

deal,

we

got

– they

finally

got

paid

as

it was

sold.

[Steven K. Hudson]

Okay.

Thanks

for

that.

[John Wimsatt]

Thanks,

Tom.

[Operator]

Our

next

question

is

from

Nik

Priebe

with

CIBC

Capital

Markets.

Please

go

ahead.

[Nik Priebe, Analyst, CIBC Capital Markets]

Yeah.

Thanks.

Just

a

couple

of questions

for

me.

Going

back to

the

Blackstone

partnership

at

Triad,

should

we

– I

guess

we

should

just

be

thinking

of

that

as

a

large

funding

partner,

right?

And

should

we

think

of

the

commercial

terms

being

generally

comparable

to

other

funding

partners

with

Triad? Or is that a relationship because of the size, you may have made

concessions

there?

[Steven K. Hudson]

I don't

– we

don't

comment

Nik

on individual

economics,

but

I

would

assume

that

a

larger

deal

gives

us

better

economics.

[Nik Priebe, Analyst, CIBC Capital Markets]

Yeah.

Okay.

Fair

enough.

[Steven K. Hudson]

Yeah.

And

I

think

the

most

important

part,

and

I

wouldn't

say

that

that's

a

big

number.

The

most

important

part

here

is

that,

since

we've

owned

Triad

and

Source

One

is

new,

is

we've

really

focused

long

and

hard

on

counterparty

exposures

that

when

we

bought

these

businesses,

serious

small

credit

unions

who

are

important

to

our

business.

But

as

we've

rapidly

grown

this

origination

side,

we

pushed

for

more

substantive

counterparties.

The

– after

we

get

through

the

first

two

years

with

Blackstone

that

turns

into

a

perpetual

program.

And

that's,

if

you

can

assume,

that's

where

– it's

going

to –

that

is –

that

arrangement

is

going to

become

the

template

for

other

businesses.

So

a

little

more

money,

Nik, but

more

importantly,

longer

term

and

a

perpetual

program.

[Nik Priebe, Analyst, CIBC Capital Markets]

Understood.

Okay.

And

then

on

the

charges

on

the

legacy

assets, so

I

think

were

included

in discontinued

operations,

what

was

the

nature

of that?

Was

it

just

writedowns

or

impairment

charges

to

bring

the

carrying

value

closer

to

fair

value?

Is

that

how

we

should

interpret

that?

[Steven K. Hudson]

What?

No,

it's

a

really

good

question, Nik.

The

–

what

I

wanted

to

do

was

rapidly

exit

those

businesses

because

I

wanted

the

capital

back

to

deploy

it

in

John's

tuck-in

M&A

strategy.

We

had –

we

clear

them,

we

could have

held

on

for

another

two

or

three

years

and

worked

out,

but

that

was

the

last

bit

of

the

legacy

business

that

[ph]



Al

just did (00:27:14)

such

a

great

job

on

cleaning

up

but

I

wanted

the

capital.

So

those

are

marks

on

those

books

where

we

rather

sold

them

like

in

rail

or

we

will

sell

them

very

shortly

here

in

the

next

few

weeks.

[Nik Priebe, Analyst, CIBC Capital Markets]

I

see.

Okay.

Understood.

Okay.

That's

it

for

me.

Thank

you.

[John Wimsatt]

Thanks,

Nik.

[Operator]

Our

next

question

is

from

Jaeme

Gloyn

with

National

Bank

Financial.

Please

go

ahead.

[Jaeme Gloyn, Analyst, National Bank Financial, Inc.]

Yeah.

Thank

you.

So

just

looking

at

the

MD&A

on

the

legacy

assets, just so

I'm clear

on

this.

So

the

$107

million

total

assets

held

for

sale,

that

would

be

much

lower

now?

I

suppose,

or

is

it

completely

at

zero?

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

Hi,

Jaeme.

It's

Michael.

It's

–

there's

about – there's going to be

about

$50

million

remaining

and

it's not

to

be

legacy

anymore.

We're

just going

to

bring

them

on

to --

we're going to get rid of assets

held

for

sale. I

mean,

no

discontinued

ops

next

year.

So,

there'll

be

about $50

million

remaining

of

– mostly

aviation

assets

that

are

under

various

leases

that

we'll

just

keep

on

our

--

going

forward

as

corporate

assets.

[Steven K. Hudson]

Jaeme,

just

to

be -- Michael's

question,

there's

nothing

left

that

we

can

sell,

that

the

remaining

aircraft

are

under

mid-

to

long-term

leases,

we'll

sell

them,

there's

no

more.

We

put

a

mark

on

them.

So,

there's

no

more

losses

coming.

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

Yeah.

[Jaeme Gloyn, Analyst, National Bank Financial, Inc.]

Okay.

Got

it.

Going

back

to

the CCIM

revenue

in

Kessler.

So

I

guess

adjusting

for

the

gain,

the

revenue

would

have been

around

$14

million.

That

seems

a

bit

higher

than

the,

I

guess,

guided

run

rate

on

a

quarterly

basis.

So

what

else

might

be

driving

strong

revenues

in

the

quarter

or

is

that

the

run

rate?

[John Wimsatt]

Yeah.

I

mean, remember

when

we

sold

a

number

of

the

portfolios

that

we

sold

over

to

SLC, we

got

to

realize

the

number

of the

performance

fees

in

the

quarter

that

we

would

have

recognized

over

a

longer

period

of time.

Those

were

earned. So,

we

don't

view

those

as

sort

of

one

time.

Going

forward,

what

you

saw

and

we

tried

to

describe

in

Investor

Day,

the

biggest

difference

between

CCIM

in

2021 and –

versus

2022

is

we

no

longer

have

those

assets

that

are

sort

of

on

the

balance

sheet

which

is

not

– means

we're

not

earning

interest

income

or

we're

not

earning

equity

returns

anymore.

We're

just

turning

those

management

fees.

So,

if

you

look

at

the

year-over-year

guidance

for

CCIM,

it

will

truly

be

an

asset

manager

going

forward.

It's

not

going to

be

a

reflection

of

principal

returns.

[Jaeme Gloyn, Analyst, National Bank Financial, Inc.]

Okay.

Got

it.

And

just

so

I'm

clear

the

guidance,

is

that

reflecting

base

management

fees

and

some

performance

fee

revenue

or

just –

or

is

it

just

on

the

base

management

fee?

[Steven K. Hudson]

Do

you want

to

go?

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

It's

basically

just

base

manager

fees

in

2022,

but

we

obviously

have

the

opportunity

to

continue

to

earn

further

upside...

[Steven K. Hudson]

In

performance.

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

...in

performance.

[Jaeme Gloyn, Analyst, National Bank Financial, Inc.]

Okay.

That's

great.

Thank

you

very

much.

[John Wimsatt]

Thanks,

Jaeme.

[Operator]

Our

next

question

is

from

Geoff

Kwan

with

RBC

Capital

Markets.

Please

go

ahead.

[Geoffrey Kwan, Analyst, RBC Dominion Securities, Inc.]

Hi.

Just,

I

had

one

question. When

I

kind

of

think

about,

how

the

business

has

evolved

over

the

years,

whether

as

a

Service

Finance

and

Triad

and

Kessler,

probably

part

of

the

realization

of

the

yield

and

credit

quality

of

what

those

businesses

do

but,

from

a

funding

perspective

maybe

having

really

low

rates

and

the

lack

of

yield

opportunity

for

financial

institutions

and

institutional

investors

maybe

attracted

them

to

those

assets.

But

as

we

start

to

see

rates

increase,

do

you

see

some

of your

funding

partners

now

having

that

same

allocation

or

maybe

shift

a

bit

of their

allocation

to

other

investments?

And

as

a

result, do

you

kind

of

think

about

focusing

still

on

trying to

diversify

and

deepen

those

funding

relationships?

[Steven K. Hudson]

I

think

it's

a

good

question.

If

you

look

back

to

three

or

four

years

ago, when

we

saw

a

bump

in

treasuries.

You

were –

we're

able

to

see

both

Service

Finance

and

Triad

come

along

with

increased

pricing.

So

I

think

we're

in

good

shape,

Geoff.

Our

pricing

will

track

the

marketplace.

So,

we're

not

going

to offer

compress

yields

to

our

institutional

investors.

That

said,

the

demand

from

banks

and

credit

unions,

life

insurers,

sovereign

wealth

funds

is

unprecedented.

If

we

had

$4

billion

in

manufactured

home loans

in 2022,

it

all

be

sold.

And

it's

not

terribly

price

sensitive.

But

I

think

the

key

takeaway

here

in

this

comment

is

that

we

have

a

history

of

being

able

to

price

increase

rates

into

our

product.

[John Wimsatt]

Yeah,

Geoff. And

I

was just

going to

add

like

if

you

go

back

and look

at

Investor

Day,

there's

a

slide

in there

that

talks

a little

bit

about

interest rate

risk.

And

it

shows

that

Triad,

for

example,

is

–

had

a

very

consistent

premium

over

mortgages

for,

I don't

know,

I

can't remember

how

long

that

chart

goes

back,

but

at

least

a

decade.

And

frankly,

it

goes

back

way

longer

than that

if

we

wanted

to put

it

out

there.

So,

these

are

assets

that

have

similar

to

better

credit

quality

than your

traditional

mortgage

with

a

lack

of

complexities

because

prepayments

are

very

rare

because

of

ticket

sizes,

et

cetera.

So

this

is

a

really

high-quality

asset.

You're

getting

several

hundred

basis

points

of

excess

yield

for

it.

So

I'm

not

really

worried

that

we're

not

going to

have

demand

for

the

paper

any

time

in

the

near

future.

Similar

to

what

you

see

at

both

Source

One

and

KG,

these

are

different

asset

classes,

obviously.

But

these

are

asset

classes

that

where

you

can

get

excess

yield,

have

good

credit

quality.

They're

in-demand

assets

by

financial

institutions

really

across

the

board,

whether

it's

banks,

credit

unions,

institutional

investors,

insurance

company.

So,

we

feel

pretty

good

about

the

group

of

businesses

that

we

have.

We

think

there's

going to

be

demand.

And,

yeah,

we're

always

trying

to

continue

to

diversify

our

funding

partners.

[Geoffrey Kwan, Analyst, RBC Dominion Securities, Inc.]

Great.

Thank

you.

[Operator]

Our

next question

is

from

Vincent

Caintic

with

Stephens.

Please

go

ahead.

[Vincent Caintic, Analyst, Stephens, Inc.]

Hi.

Thanks.

Good

evening.

Just

I

guess

one

related

question.

But

the

–

so,

the

market

prices

have generally

been

volatile

and

you

sold

noncore

assets

and freed

up

some

capital

there.

Just

curious

how

the

pipeline

is

of

potential

tuck-in

acquisitions

and

what

you

might

be

looking

for.

And

then,

relatedly,

how

you're

thinking

about

deploying

capital

for

share

repurchases?

Thank

you.

[Steven K. Hudson]

I'll

let

John

jump

in

here.

Vincent but

the – I

think

the

impact

and

what's

happened

on

the

geopolitical

front

has

caused

some,

private

equity

firms

and

others

that

were

building

finance

platforms

to

now

realize

they

haven't got

an

exit

through

capital

markets.

And

then pricing

is

better.

But

maybe,

John,

you

want

to.

[John Wimsatt]

I

mean, look, Vincent

you

know,

and

we've

talked

about

this

quite

a

bit.

We

look

at

an

awful

lot

of

potential

transactions,

but

we're

very

picky

in

terms

of

the

type

of

things

that

meet

our

criteria.

At

a

very

high

level,

it's

all

the

things

that

we

always

talk

about,

asset-light,

no

recourse,

prime

credit

assets

on

behalf

of

banks,

credit

unions,

et

cetera.

Or

our

partners,

right,

we're

trying

to

add

to

that

partnership

base.

I

think

we

see

a

number

of

opportunities

here

over

the

next

several

quarters

that

are

potential

tuck-in

acquisitions.

But,

we're really happy

with Source

One. I

think

it's a

good example

of

the kind

of thing

that

we

can

do.

Not

only

do

we

get

a

great

financial

deal

on

the

way

in,

it's

accretive,

we

feel

really

good

about

the

transaction

that

we

did.

We've

identified

a

number

of

different

ways

that

ECN

can

do

what

it

does

and

really

work

with

the

company

to

grow

the

business

and

really

create

a

multiple

of

the

current

earnings.

To

the extent

that we

could

find

those

kinds

of

opportunities,

we'll

jump

on

them

and

continue

to

build

out

the

tuck-in

strategy.

[Vincent Caintic, Analyst, Stephens, Inc.]

Okay.

Great.

And

then

on

share

repurchases,

if

you

could

just

remind

us

how

much

you're

able

to

do

and

how

you're

thinking

about

share

buybacks.

[Steven K. Hudson]

Well,

we've

got

a

fair amount

of

dry

powder

coming

into

this,

and

since we

don't

have

a

lot

of

utilization

on

our

senior

line,

so,

I

– when

we

see

value,

we'll

– we

will

execute.

We

are

in

the

midst

of

this

tuck-in.

Tuck-in

strategy

is

important

to

us,

so

I

want to

keep

some

dry

powder

as

we

go

into

2022, particularly

as

the

capital

markets

get

-- well

remain

–

particularly

as

they remain

with

this

level

of

volatility. But

if

the

stock

is

presented

to

us

at

a

reasonable

value,

we

will

purchase

it.

[Vincent Caintic, Analyst, Stephens, Inc.]

Great.

Makes

sense.

Great.

Thanks

very

much.

[Steven K. Hudson]

Thanks,

Vincent.

[Operator]

Our

next

question

is

from

Mario

Mendonca

with

TD

Securities.

Please

go

ahead.

[Mario Mendonca, Analyst, TD Securities, Inc.]

Good

evening. Michael,

can

we

go

through

just

a few

detailed

questions

first?

Your

corporate

interest

expense,

can

you

give

us

an

idea

of

the

quarterly

run

rate

for

2022, and

maybe

the

same

for

preferred

share

dividends?

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

Preferred

share

dividends

since

we

retired

the

One

series

is

going to

be

in

the

$1.3

million

to

$1.4

a

quarter

going

forward,

depending

on

exchange

rates.

And...

[Mario Mendonca, Analyst, TD Securities, Inc.]

And

the

corporate interest

expense?

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

Corporate

interest

expense,

believe

that

should

run

about

$5

million

a

quarter.

But

let

me...

[Mario Mendonca, Analyst, TD Securities, Inc.]

Okay.

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

I

can –

I'll

confirm

with

you

offline,

if

that's

okay.

[Mario Mendonca, Analyst, TD Securities, Inc.]

Yeah.

Yes.

Doesn't have

to be too

precise.

I just

want to

make

sure

I'm

not

making

any

big

mistakes.

One

other

quick

thing,

Michael,

to

understand

where

things

got

recorded

this

quarter,

I

do

see

a

big

gain

associated

with

the

sale

of

Service

Finance

going

through

this

quarter,

the

$928

million

gain

on

discontinued

operations.

Is

the

charge

associated

with Legacy

business

netted

against

that

gain?

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

Yeah.

It's

all

recorded

in

the

discontinued

operations

and

the

MD&A,

well,

there's

a

breakdown

of

the

various

components.

[Mario Mendonca, Analyst, TD Securities, Inc.]

Okay.

So,

that

helps

me

understand

where

everything's

recorded.

Now,

Steve,

we

could

go

back

and

just

revisit

the

big

decision

you

made

many

years

ago

when

you

decided

to

get

out

of

all

these

Legacy

businesses,

aviation,

rail,

everything

else.

It

was

a

big

decision

at

the

time,

and

I

think

one

could

argue

that

it

paid

off

really

big,

as

evidenced

by

the

sale

of

Service

Finance.

But

I

think

this

is

a

good

time

to

maybe

just

reflect

back

and

say,

clearly,

there

was

a

lot

of

value

added

by

the

Service

Finance

purchase

and

sale,

but

there

was

also

a

lot

– there were

also

a

lot

of

write

downs

on

all

the

Legacy

business.

My

suspicion

is

that

the

value

added

by

Service

Finance

dwarfs

any

write

offs

related

to

the

Legacy.

But

what would

be

helpful

for

me

to understand

is

how

great

were

these

write

offs

on

the

legacy

business

from

that

time

you

made

that

important

decision

to

exit

the

businesses

to

today

when

you're

essentially

done?

And

I'm

asking

the

question

that

way

because

I

really

want

to see

how

that

compares

to

the

value

created

by

Service

Finance

transaction.

[Steven K. Hudson]

Yeah. Fair

enough, Mario. I

think

if you

look

at

the breakdowns

on

legacy,

you'll

have

to

reflect

on

the

sale

of

our

US

vendor

business

to

PNC,

which

was at

a

substantial

gain.

[Michael Lepore, Chief Financial Officer, ECN Capital Corp.]

1.6 times

book.

[Steven K. Hudson]

Yeah.

So,

that

one

also

go

through

and

see

where

the net

ended

up,

Mario.

But

probably

was

a

little

bit

of

money

lost

after

you

back

to

look

at

that

gain

against

the

other

ones.

I

think

the

important

part

I've

learnt

over

the

three

decades

now

is

that

I

never

believed --

I

now

believe,

but

I

never

believed

that

we could

actually

have

a

model

where

we

could

rent

out

balance

sheets

from

credit

unions,

banks,

lifeco,

sovereign

wealth

funds.

And

by

sticking

with

their

credit

adjudication,

we

created

this

model

which

is

a

far

better

model

than

we

have

in the

past.

A

lot

of

our

assets,

if

you

look

to

our

vendor

finance

business,

we

sold

to

PNC.

That

would

qualify

for

our

flow

arrangements

now,

but

I

didn't

know

that

at

the

time,

Mario.

And

in

terms

of

this

last

go,

I

think

there

will

be

some

interesting,

smallish

type

tuck-ins

and

I

wanted

the

capital

available

to

do

it. And

we

could

have worked

them

out

over

the

next

two

and

a

half

years.

The

railcars

we're

going

through

a

two-year

retrofit.

We

could

have

worked

our

way

through

the

entire

two

and

a

half

years,

but

I

think

this

is

a

better

call.

[Mario Mendonca, Analyst, TD Securities, Inc.]

So,

would

I be

correct –

sort

of.

Let

me

see

if

I

can

summarize.

Would

it

be

fair

and

maybe,

John,

some

of

these

numbers

might

stick

in

your

head

a

little

bit

as

well.

Would

it

be

correct

to

say

that

the

value

created

by

the

PNC

sale,

the sale

to

PNC

mostly

offset

the

write-offs

in

the

legacy

business

such

that

we

can

kind

of

look

at

the

Service

Finance

gain

or

value

created

their

sort

of

unadulterated

and

say,

that

was

the

value

created

by

that

decision

way

back

to

exit

everything

and

go

into

this

model?

[Steven K. Hudson]

Yeah.

I

think

that's

fair.

Our –

I

think

that's

a

fair

assessment.

Let

us

do

the

math,

but

I

think

that's

a

fair

assessment.

The

assets

we

have

in

our

balance

sheet,

if

you

go

back

to

the

time

that

we

split,

were

credit-good

assets.

So,

we

should

have

been able

to

protect

book

value.

So,

we'll

go

back

and

improve

that

up.

And

I

just – and

then

I

can

talk

about

Service

Finance.

Service

Finance

was

a

great

business.

I

think

Triad

and

Source

One

are

better.

And

why

do

I

say

that

is

because

we

have

very

deep

pocketed

partners

who

need

these

origination

platforms

and

they

value

them

differently

than –

we

look

at

people,

how

they

value

ECN

from

the

perspective

of

a

public

or

shareholders.

They

value

these

assets

as

they

take

the

raw

yield

less

their

cost

to manage

it

off

their

deposit

base.

So,

it's

a

very

large

gain.

If

you

look

at

Truist,

they

had

forecasted $300

million

of

income

off

of

Service

Finance

within

three

years.

Same

sort

of

math

holds

true

for

Triad

and

for

Source

One,

although

it's

somewhat

smaller

for

the

time

being.

[John Wimsatt]

Can

I

just

add?

Mario,

the

other thing

to

remember

is

remember

when

ECN

spun

out

from

Element,

okay?

So,

if

you

go

back to

that

time,

we

came

out, we

were

about

$1

billion,

$1.1

billion

market

cap

at

the

time.

Do

you

remember

the

businesses?

We

were

in

rail.

We

were

in

commercial

equipment

or

equipment,

finance,

aviation,

and

a

bit

of

CMV.

And

we

were

in

direct

competition

with

Wells

Fargo,

with

Huntington

Bank,

with

guys

that

were

funding

these

things

on

balance

sheet

with

deposits.

You

had

a

business

that

was

rapidly

moving

towards

a

single-digit

ROE

and

potentially

to

a

mid-single-digit

ROE.

We

were

lucky

because

those

were

attractive

assets

to

the

banks

who

had

been

buying

these

things

using

their

deposits.

So, we

were

able

to

sell

the

equipment

business

for

sort

of

1.6

times

book.

Give

or

take

we're

able

to

sell

the

balance

of

the

portfolio

somewhere

close

to

book

give

or

take.

And

then

we

had

a

workout

portfolio

that

we

had

to

work

out,

which

no

doubt

we've

taken

some

losses

to

get

there.

But

to

put

that

in the

context,

we

took

that

capital.

We

turned

it around

and we

bought

Service

Finance,

we

bought

Triad,

we

bought

the

Kessler

Group.

And

as

a

result

of

that,

we've

returned

over

$2.5

billion

to

shareholders

through

buybacks,

through

dividends,

and

through

the

special

dividend.

And

we

remain

at

a

market

cap

that's

about

$1.4

billion,

or $1.5

billion today.

So,

in

my

opinion,

just

looking

at

this,

the

transition

over

the

last

several

years,

the

losses

that

we've

taken

in

the

legacy

portfolio.

And

clearly,

you

could

argue,

maybe

we

should

have

just

blown

them

out

two

years

ago

and whatnot.

But

we

thought

we

could

work

them

out

for

better

results.

At

this

point,

it's

clear

to us

that

taking

that

capital

back,

redeploying

it

into

our

core

strategy

will

yield

far

better

returns

than

we

will

work

these

things

out

for

the

next

two

and a

half

to

three

years.

[Steven K. Hudson]

And,

Mario,

the

risk

of

running

out,

I

just

want

to

– I

highlighted

the

sale

of

our

US

equipment

financing

business,

the

PNC.

If

look

at

rail,

we

completed

a

very

large

rail

sale

substantially

all

the portfolio,

in

essence,

at

book

value.

So,

if

you

look

at

this

$11

million

loss,

it

represents

I

think

three

quarters

or

one

half

of

1%.

So,

let

me

do

the

math

for

you,

but

I

think

you'll

find

that

it's

a

push

over the

entire

business

that

we've

been

able

to

deliver.

[Mario Mendonca, Analyst, TD Securities, Inc.]

Those

are

all

great

points.

And

I

understand

them,

and

I

certainly

understand

the

market

value

argument.

I

just

think

that

in

times

like

this

when

you're

kind

of

at

the

end

of

a

particular

point

in

your

history,

it's

worthwhile

asking

what

did

you

– like

it's

worthwhile

looking

at

the

bad

stuff

as

well

not

just

all

the

great

stuff.

And

that's why

I

want

to really

satisfy

myself

that

it

was

worth

it, and

it's

certainly

seems

it,

certainly

to

shareholders,

but

that's

the

nature

of

the

question,

I

want

to

be

really

satisfied

with

this.

[Steven K. Hudson]

Yeah.

We

can

do

a

recap

for

you

of

the

pluses

and

minuses

on

the

legacy business.

But

there's

no

doubt

in

my

mind,

Mario,

that

the

businesses

we

have

because

of

the

strength

of

the

origination

platforms

and

the

moat

that

have been

built

around

them

have

significant

value

to

US

investors.

And

I,

we

want

to

continue to

grow

Triad

and

Source

One

and

Kessler,

but

I

have

no

– I

have

no

doubt

based

upon

conversations

I

have

what

those

assets

are

worth.

[Mario Mendonca, Analyst, TD Securities, Inc.]

Thank

you.

[Operator]

As

there

are

no further

questions

registered,

this

concludes

today's

conference

call.

You

may

disconnect

your

lines.

Thank

you

for

participating

and

have

a

pleasant

day.