Navigator Global Investments Limited (NGI) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Navigator Global Investments Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]. I would now like to hand the conference over to Mr. Sean McGould, CEO. Please go ahead.

Thank you very much, and thanks, everyone, for joining this morning from Australia wherever anyone is listening. We're very excited this morning to announce the acceleration of the Dyal transaction. And I'm going to start the webinar just on the first page. And then as we're going through the presentation, I'll flip through and those are sort of speaking. We'll let you know what page we are referring to as I believe everyone has control of their own pages. I'm joined this morning -- in this evening by Ross Zachary, who's the Managing Director with NGI that many of you know, Amber Stoney, who is our Group CFO; and also by Kevin Purcell, who is with Dyal. And we are all here. We're available to answer questions after the presentation and look forward to any questions you may have. I believe there's also a way to type the questions in that was distributed with the notice of the webinar. So with that, I'm starting just on the first slide page here. And really since the inception of Navigator Global Investments we've really strived to become a leading alternative asset management firm. 2 years ago, we had the unique opportunity to partner with Dyal and acquired a portfolio of leading alternative asset management firms. In addition to acquiring the portfolio, we became partners with Dyal in identifying other high-quality firms that we could partner, own a stake with and help grow. Over the last few years, we've transformed NGI into an alternative asset management firm with over 30 investment strategies, 137 products and has significant operations around the world. We are very pleased to announce that we are going to accelerate the 2026 planned acquisition of the Dyal portfolio. The thesis for the original transaction was to diversify NGI products and to grow a high-quality earnings stream, and we believe we have achieved that goal. So now I'm going to switch to Page 2 of the document and just talk a little bit about the transaction overview. So before I hand it over to Ross, I want to walk through just some of the specifics of the transaction. And as I pointed out, they are highlighted on Page 2. NGI now has an extremely high-quality portfolio of some of the most experienced and respected alternative asset management firms in the world. The earnings from the Dyal portfolio have exceeded our initial expectations. We are very excited to take the next step in the growth path of NGI through the acceleration of the acquisition of the portfolio, which will provide enhanced earnings to NGI, a clean balance sheet and provide a clear path for growth. Dyal continues to show strong support for NGI strategy as they will increase their ownership of NGI at a substantial premium to the current market price. Over the past few years, NGI has created a compelling alternative asset management platform that has high-quality earnings and excellent growth prospects. We are very happy again to clean up the balance sheet, move forward with greater emphasis here on growth as well. And we believe that accelerating this transaction is in the best interest of all shareholders. So we're very excited about this development that we're reporting tonight. And I'm going to turn it over to Ross to go through more of the details of the exact transaction and why we're so excited about what's going on. So Ross, over to you.

Thanks, Sean. If you could please flip to Slide 3. We would like to review some of the highlights and discussion the reasons, we're so pleased about this transaction. The transaction has compelling strategic and financial rationale which repositions NGI to unlock shareholder value. On the strategic side, we are deepening our already successful partnership with Dyal Capital, the global leader in investing in management companies of market-leading alternative asset managers globally. Dyal's increased conviction in the company, in addition to the continuation of their support by engaging with our underlying partner firms is a key differentiator and a competitive advantage for us as we focus on executing new growth initiatives. In addition, this transaction provides the opportunity to broaden the shareholder base through an entitlement offer as we focus on making progress towards our goal of index inclusion over time. There are strong financial benefits to the transaction. Most immediately, we will generate increased cash flows due to the full ownership of the NGI strategic portfolios, profit distributions starting on July 1 of this year. To give you a sense of this impact, you'll see on this Slide 3, that if you consider the average of the last 3 years of portfolio profit distributions, NGI would have received $29 million of additional cash flow with little incremental expense associated with that. If you just looked at fiscal '23 distributions, this would have resulted in $35 million of incremental profit distributions to Navigator. This step-up in cash flow next year will result in greater flexibility to meet our obligations to provide capital to our 2 most recent partners in the private market alternatives area. The transaction fully extinguishes the 2026 liability related to the planned redemption payment. As a result, Navigator will emerge from the transaction with roughly 1x net debt to EBITDA, which we feel is a sustainable level to fund the deferred consideration of our existing investments as well as continue to support the growth of the company over time. By proactively addressing the overhang from the original 2021 transaction with Dyal and increasing our exposure to this highly diverse and strong performing portfolio, we are repositioning the company to achieve our objectives that we set out on just under 3 years ago. Since then, we have proven the company's ability to identify and execute new partnerships with established but growing alternative asset managers, and we intend to capitalize on the strong pipeline of potential opportunities and our growing ecosystem globally to deliver substantial shareholder value over time. Slide 4 provides a summary of the key transaction terms. We have agreed with Dyal that Navigator will acquire the remaining distributions from the NGI strategic portfolio for a total notional consideration of $200 million. The purchase price is comprised of considerations for both the early settlement or accelerated 2026 redemption payment as well as consideration to Dyal for the profit distributions they would have received in fiscal '24 and '25 under the current terms of our agreement. The funding of the transaction is a key highlight and further emphasizes how we are repositioning the company for growth. $120 million of the $200 million consideration will be provided to Dyal through a placement of new ordinary shares at AUD 140 a share, which is a meaningful premium or about 40% above where the company has been recently trading or more precisely, roughly 36 [ with ] premium to our 90-day [ due of ]. The remaining $80 million will be funded through an entitlement offer to be launched following shareholder approval later this year for shareholders on the register at that time. We are pleased to welcome existing shareholders to invest alongside Dyal in this entitlement offer as we reposition the company for growth. As a result of the transaction, Dyal will remain a committed long-term shareholder and has voluntarily entered into new escrow agreement. They have voluntarily entered into a 180-day escrow period for their currently free to trade shares as well as keep the rest of their existing and all new shares under escrow until following Navigator's fiscal 2026 results. Dyal intends to add their nominee to Navigator's Board of Directors and will be granted an observer right while committing to preserving the independent majority of the Board as well as an independent chair. This transaction was intentionally structured to align interest and present a compelling investment opportunity to our existing and future shareholders. You can please flip to Slide 5, you will see a summary of the portfolio. We will now receive the full profit distributions of going forward. The portfolio consists of 6 high-quality proven and scaled institutional alternative asset management businesses with strong track records, deep resources and talent and a proven history of distributing profits. One of the reasons we see a continued positive outlook for these unique and high-quality assets are the preserved alignment of interest. We own economic interest ranging from 8% to 25% of the partner firms alongside key management or founders of each business. Our sustainable alignment with these key stakeholders preserves an environment to generate strong investment and operating results as well as the prudent and deliberate management of the business to ensure the teams are properly incentivized to generate strong returns and build enterprise value over time. Leaving Lighthouse and our other strategic investments aside, this portfolio in itself represents a highly diversified set of businesses, deploying over 30 different strategies through over 130 products, which have all been proven to be uncorrelated to one another over time. This diversification benefit has been illustrated by the profits generated at the portfolio level before and since the first stage of the acquisition in 2021. The portfolio has already contributed to the high-quality and resilient nature of Navigator's AUM and earnings over the past 2 years in which we saw the overall asset management sector struggle through a challenging market environment. These recent results illustrate the clear benefit of partnering with proven and high-quality firms such as these 6 partners. If you please flip to Slide 6, it provides an update of the key metrics of the portfolio since we first announced the acquisition in August of 2020. At the time of the acquisition, we intentionally invested in high-quality, proven businesses that had performed and operated through challenging market conditions. This portfolio added high fee-yielding AUM across a diversified set of products and strategies on scale businesses, which we knew had embedded operating leverage as performance improved and AUM will increase. The portfolio has demonstrated resilient and improving key trends since the acquisition. At the portfolio level, it now generates an average management fee revenue yield of 115 basis points up from 104 basis points at the time of the acquisition and has over 75% of AUM eligible to earn incentive fees. AUM growth has been strong since the acquisition. Now at over $45 billion of AUM or over $8 billion on an ownership-adjusted basis, we see these businesses as even better positioned to generate strong profits over time. If you can flip to Slide 7, we can take a further look at the recent financial performance and discuss some of the drivers of exactly why we are so excited to bring these incremental earnings into the company at this time. You will see on the top of the slide from the past 5 years of financial performance, there has been strong management fee revenue growth given the increase in AUM and preserve fee yield, as well as very strong performance fee revenues driven by exceptional investment performance. It is important to note that these results were generated during challenging market conditions where all alternative managers were not able to execute as successfully as our partners in this portfolio. Average pretax profits attributable to our ownership interest are now about $47 million on average for a 5-year basis and $58 million over the last 3 years of results. As we think about the drivers of this strong financial performance, we are not surprised that these established, proven investors and operators have been able to deliver strong results. In recent years, the alternative strategies in this portfolio have clearly proven their ability to add alpha generation and the portfolio diversification benefit to their end clients, and these 6 leaders are particularly well positioned for continued success. In addition, market conditions, which have led to a challenging environment for most traditional or beta-oriented strategies, have resulted in improved opportunity set for our partner firms to capitalize on. Due to several factors, we do not see the low interest rate policies or muted market conditions that characterize the 2010's returning. In fact, return expectations for most of these strategies generally increase with the recent structural increases in interest rates globally. Current conditions will continue to support the overall ability to generate strong absolute and relative returns for their clients, therefore, generating strong profits for Navigator shareholders. Slide 8 will shed some light on the increased financial resources of Navigator going forward. Using fiscal '23 as a basis, you can see that the pro forma for this transaction, Navigator will have $154 million of revenue and $82 million of EBITDA as compared to $119 million of revenue and $47 million of EBITDA today. Our overall margin is expected to increase substantially as the acquisition comes with only a marginal increase in expenses to manage and account the portfolio going forward. As mentioned earlier, our leverage profile is also greatly improved. Our current net debt ratio shown here for fiscal '23 of 1.8x includes the deferred consideration for Marble and Invictus as well as drawn debt on our existing credit facility, but that ratio excludes the redemption liability settled here today. We will emerge from the transaction at roughly 1x net debt to EBITDA with the resources in place to fund our near-term obligations and pivot our focus towards growth. Slide 9 provides an overview of our current and pro forma shareholder base. This transaction illustrates Dyal's conviction in the business and preserves an alignment between Dyal and non-Dyal shareholders with a focus on broadening Navigator shareholder register over time. As mentioned during the transaction highlights, Dyal is increasing their ownership in Navigator as a result of this transaction. Their existing 36% ownership split between ordinary shares and mandatory convertible notes will increase to an estimated 51% split between notes and shares. Assuming a 100% take-up rate in our planned entitlement offer, Dyal will have roughly 45% voting ordinary shares as compared to their 19.9% today. The convertible notes outstanding are equity in every way except for voting rights. They participate in Navigator's dividends, and we consider them when looking at the total numbers of shares outstanding. The $80 million entitlement offer related to this transaction will be run on a pro forma basis for shareholders on the record date and on an as-converted basis, where Dyal will be taking up their 36% pro rata allocation alongside existing shareholders. As a result of the transaction, Navigator's fully diluted shares outstanding will increase from roughly 304 million today to 555 million shares in the future. To take a step back from the transaction and focus on the outlook and our strategic objectives, we wanted to provide an update on our focus going forward on Slide #10. Since 2021, Navigator has evolved into a highly diversified alternative asset management company with exposure to $68 billion in AUM across 11 partnerships globally. We are highly focused on continuing to expand this footprint further across the alternative asset management sector to provide our shareholders a uniquely high quality and growing earnings stream that will benefit from the secular growth and profitability characteristics known in the sector. There will be no change to the operating structure of the company as a result of the transaction and the management team will continue in their existing roles. We see a huge opportunity in front of us and are committed to focusing the current team and resources where we can deliver value. As such, Sean and I will remain focused on driving strong results across the current businesses and the company will evaluate opportunities to add additional senior management resources to Navigator when it could be complementary to these efforts. I will now turn it to Amber to highlight some of the more financial benefits of this transaction.

Amber, are you there? You are on mute.

Apologies. I will start again. So just on Slide 11, with the 2023 financial year ending soon, we're pleased to be able to provide an update that we expect adjusted EBITDA to be between $47 million and $48 million for the full year. As Ross outlined, some of the key benefits of the transaction are a stronger balance sheet and increased earnings and associated cash flows. This puts us in a position to target a net debt position of approximately 1x adjusted EBITDA on a go-forward basis. After completion of the transaction, our key liabilities will be any drawings on our existing loan facility and the remaining deferred consideration of [ liabilities ] for the Marble and Invictus investments. At this time, we have $10 million drawn on our $70 million facility and the deferred consideration to be paid over the next 2 years is $103 million, acquiring the full earnings from the NGI Strategic portfolio puts us in a strong position to meet these funding requirements. Finally, I note that the current dividend policy remains in place, and we expect to pay $0.03 to $0.04 annual dividend on the current ordinary shares and convertible notes, which equates to a combined 304 million shares on a fully diluted basis in September this year. Just moving to Slide 12, this sets out the expected FY '23 adjusted EBITDA across the NGI business and also shows the pro forma impact of the transaction as if it had occurred on the first day of the 2023 financial year. With the current FY '23 EBITDA, we expect Lighthouse to deliver a little over $21.5 million. As for the NGI Strategic business with $28 million, this represents the earnings from the NGI strategic portfolio as well as the Marble and Invictus investments. After other group costs of $2.2 million, adjusted EBITDA is guided to $47.5 million being the midpoint of our guidance range. From a pro forma perspective, had that transaction occurred on 1 July 2022, NGI would recognize income, all of the distributions received from the NGI strategic portfolio for this financial year, which would be an additional $34.9 million. This additional revenue would have delivered a pro forma adjusted EBITDA results for FY '23 of $82.4 million. Moving to Slide 13, in terms of the balance sheet impacts, this shows that the pro forma impact of the transaction and what it would have been on NGI's 31 December 2022 balance sheet. The key benefit to this 31 December balance sheet would be to reduce liabilities by about $139 million. This represents $137 million carrying value of the redemption liability as well as the impact of a proposed amendment to the convertible notes that exist today that they receive full equity treatment. After taking into account estimated transaction costs, the corresponding increase in equity in the balance sheet, and this represents the 200 million of new shares to be issued less the one-off P&L impact of paying out the redemption liability early. Following completion, this one-off impact will be offset by the ongoing higher earnings from acquiring full distributions from the NGI strategic portfolio from 1 July 2023. Slide 14 sets out the indicative transaction timetable. NGI and Dyal have started a detailed term sheet and we expect to finish transaction documents to be completed and signed in mid-July. This is a significant transaction and requires shareholder approval, and we expect to hold an extraordinary general meeting in September with execution of the entitlement offer shortly after and a target to close the transaction in November 2023. With that, I will hand you back to Sean.

Thank you, Amber. And just before opening it up for any questions. Again, I just want to point out, just highlight some key points here. One, this has been -- the transition that we've made over the last 2 years has really been in the work for a number of years. We wanted NGI to be a holding company of interest in these leading alternative asset management firms, and we've made tremendous progress on that over the past 2 years. NGI has created a larger, more diversified earnings stream, which we think has a lot of stability to it, good growth potential to it. And we're very excited to acquire the remaining portion of the strategic portfolio. The NGI balance sheet is going to be clean and simplified. This will help clean up everything allows for growth going forward, and we think greatly simplifies the capital structure of the company. We have a partnership with Dyal that will help grow the business. Dyal is a leader in the world at what they do. We've had a great partnership over the last 2-plus years and look forward to working together to grow NGI. And we are really excited to continue to evaluate new opportunities as we've done with strong firms and are now in a position to continue to further execute on additional acquisitions going forward. So there is a strong commitment, obviously, on behalf of Dyal and great alignment with the other shareholders. The directors of NGI, including myself, will also be taking up our portion of the entitlement offer, which I think is important. So we're just very excited as to how this positions the company for growth going forward. And with that, operator, if you could open it up for any questions, I would appreciate it.

[Operator Instructions]. Our first question comes from Lafitani Sotiriou with MST Financial.

I've got a range of questions, if I may. The first one is just in relation to the rights issue price. Can you just -- I think you've indicated that's going to be around $1 level. Could you just go through the process for determining that? Would there be much variance between now and the November around that indicative $1 right issue price.

Sean, let me take -- it's Ross, shall I take that one?

Yes. I'm sorry, Ross, yes.

That's okay. Laf, thanks for the question. I think the answer -- the short answer is what we wanted to do was put the road map out to complete this transaction. I think it's hard for the company to formally set the price now, but that is indicative and we think is a good level to reward existing shareholders for participating and reinvesting in the company alongside Dyal. So it's not going to be set just as a matter of process and a matter of keeping the flexibility that we need to have to ensure ultimate success of the offering and ultimately, the best funding of this transaction, but we're comfortable with that as an indicative level.

And so just a little bit more on that, what level of confidence or what's the process? Like what's stopped you from, say, moving it to $1.20 or $1.30 at a later date. So you've put a dollar marker on the ground. What are some of the determining factors that you'll use if it was to change from around $1?

From my perspective, and obviously, you have the whole team here, and we'll have some very experienced advisers on the offer when we launch it. I think it will be around investor engagement, what the register looks like at that time and ultimately, making sure we have the best net outcome for all shareholders, including non-Dyal shareholders.

Okay. So just moving on to one of the comments. I think you made, Ross, around now that the structure is cleaner, that you can pivot to focus towards growth. Can you just elaborate on what that means now. I think financial year '24 , you've got meaningful payments still to be made for Marble and Invictus but outside of that, it's kind of coming -- it's falling away really and your cash flow is stepping up. So can you just talk to what ambitions you have now that you've got a cleaner structure and what you mean by this pivot towards growth?

Sure. And I think you're spot on. I think if you look at the company's ability and the time line to provide that additional growth capital to those 2 recent partner firms, it becomes a much closer time when we can look at converting what is a pretty strong pipeline of existing opportunities. So really since we launched the Dyal transaction 3 years ago, we focused on building a really deep pipeline of speaking with established primarily private market alternative asset managers who have a need for growth capital and we're looking for a long-term credible strategic partner like Navigator. These generally will look like Marble, Invictus as well as our other partner firms. So think of firms who have been in business for a while, have a clear edge and a repeatable investment process and the ability. They've shown an ability to grow AUM and profit, and we believe that our capital and our partnership will put them on the path to continue to grow in a really meaningful manner. From a specific business perspective, we look at the alternative asset management sector as a whole, and we think Navigator will be the most compelling strategic value proposition if it's as diversified as possible. So if you think of the business today, we're very well covered across kind of the credit and liquid -- excuse me, the liquid credit and hedge fund and parts of private credit that access the real estate markets. We're looking specifically across other areas of real assets, but really actively more in the corporate private market land. So across areas of private credit and private equity where we think these partners can use our capital to fuel growth. The pipeline is pretty active and take some time to convert deals. So we've remained active. And I think as those financial resources come on as a result of this transaction, we'll look to convert that. But really, the goal will be the continued diversification and scale of the platform with managers that are proven and positioned to grow.

Okay. So then how should we think and investors or shareholders or potential investors think about you, guys, not getting into a similar position to what you've just been in and that is almost overcomplicating and getting stuck in this overextending or having too many deferred payments to make. So if we start to think about the cash flow and your balance sheet and the debt that you can take on, will you be structuring it so that it's -- you've got all these deferred payments still or with any new transaction? Or how should we have confidence that you'll find the right balance between dividends and -- and -- or is there going to be a set policy on how you approach the equity stakes and investments, which, of course, you should be entertaining and doing, but how should we think about it from a simplification perspective and not overextending?

I think that's a great question, Laf. I mean, first and foremost, the goal is to capitalize on what are some very unique and really compelling opportunities in a pretty fragmented structure -- excuse me, a fragmented market, where we have access to these deals. So when you think about, as you said, some of the complications and deferred payments that were structured into our recent investments, those were made as a result of really wanting to capitalize on what we thought were the most compelling and value-add future assets. I think this transaction is a really good illustration that we've learned a lot. We've learned a lot about what the market is looking for. We've learned a lot about what shareholders value, and that's also, as you're saying, a primary consideration going forward. So it will be a balance. It will be a balance of identifying the strongest, most promising managers while structuring a really good alignment of interest for them, providing them the capital, but in a way that the market can feel like is clear. They can comprehend it and that they can see the value add earlier on. So we don't have a set policy per se right now, but we're going into every new opportunity with the lessons learned of the original Dyal transaction as well as how the deferred consideration on our most recent transactions were viewed.

Sorry. And just to extend on that, that makes sense. And so will you move to a more standardized dividend policy. So as a percentage of underlying earnings payout ratio? Or would you still look to have a sort of a flat amount?

I think in the short term, over the next year or 2, it will remain in this flat amount just as we make our way through the deferred consideration and weigh up any new opportunities. But we do see in the longer term once that settles into a more business-as-usual perspective that we could revise that dividend policy.

Okay. So just moving on. So Dyal, with a fully diluted 51% equity stake, is that -- I think they've made indications in the past what they consider to be a natural levels or at least on the voting right overall. Where do they see themselves over the longer term? Do I see that coming down as a percentage, I thought that they ultimately only wanted to be no more than 40%. Can you clarify some of the -- what their position is?

Yes, Kevin, if you like to answer that?

Yes. So the concept around the 46.5% is really to -- we're taking as much common equity as we can without you really functionally having boarding control of the business. And that was important to us to really show the market that we want to be aligned with maximum common equity. Ultimately, we hold this in a fund -- doesn't have a term to it. It's a permanent capital fund, but we're looking to provide liquidity to our investors over time. The structure it's such that the vast majority of our equity share here is locked up until 2026. And we really want to create value over the medium and long term and then gradually look to liquidate on a very slow methodical basis that doesn't create any overhang and it provides the liquidity to our investors over the longer duration. But I think the most important thing is to create significant value over the medium, long term for [ RLPs ]. But also not having a specific control of the business.

Just 2 more questions.

For everyone's here on the call. Kevin is actually from Dyal, Sean formally introduced him, but we wanted to have him represent Dyal and so you could hear from him directly.

Okay. No, sorry. Thanks for the clarification. 2 more questions for me. One, you talked to hiring some more extra staff management staff. I think it's flat as part of the -- managing the NGI strategic relationship. Can you just elaborate on that? Because I thought these were passive stakes. So what will these extra management do? Is there a change in the structural level of involvement engagement with these portfolios? Could you clarify?

Yes. I think a couple of things on that. One, originally, when Navigator really just held Lighthouse, my role at the Navigator level was very simple. I was running the entity Lighthouse and that was a significant asset of NGI at the time. Now with these additional ownership interest and ongoing acquisition -- the potential to acquire additional firms, we want to make sure that we are staffed appropriately to go tackle these opportunities. And also, very importantly, to help the existing firms execute on their growth plans and their strategies going forward. So yes, they are passive minority stakes, but at the same time, we have a strong interest in helping them grow and helping them use our expertise. I've been an operator in the space now for 25 years. I will continue to focus a substantial amount of my time on Lighthouse, which is the key holding of NGI, but I certainly want to assist in other areas of the holding company. But again, we want to do more than just provide financial capital to these businesses and just monitor them, and that's going to take some additional resources. But as Ross pointed out, we don't think they are significant now in terms of the scale of the business overall and the platform that we've built now. And I think that's really important to understand our strategy. We do feel like this is a significant step up in scale and the earnings we have can help us grow future earnings and make investments. And just going back to your original question, I think that the balance sheet is simplified. I think it will continue to remain simplified. I think in the transactions where we purchased interest in these other firms, there will be a component of a deferral there based on either how the firms do or when they need the capital because sometimes it's not efficient if we're making a $50 million or $60 million investment in one of these businesses. They may only need $25 million this year, and they may need another $25 million 3 years down the road. I think we understand and understand certainly through Dyal's expertise in managing the funds they have in their leading position globally, how best to structure these transactions to maximize returns and to maximize the effectiveness to the underlying businesses. So there is more to it than simply just making an investment and monitoring. We actively want to help these businesses grow and reach their full potential. And the pipeline of potential opportunities remains really large. So we need to make sure we have the resources that are dedicated to go through that in a timely manner and make decisions quickly and efficiently and then go forward from there. But I don't think in relation to the scale of the business, the additional resources that we'll bring on will be all that significant.

That makes sense. And just to comment on the deferred payment. And I would expect the nature of the acquisitions or part acquisitions and minority stakes you purchased for that to be the case. I guess what I was looking for were some parameters around how much overall net debt, I guess, exposure to EBITDA as a multiple that you're willing to move to, so that we're not in a situation where you've entered so many contracts that the cash flow can get a bit tight if earnings tip down? And I guess it will be great to get some of those parameters going forward now that you simplified the structure even though we may not get it today. The last question I have is around, have you got any sort of hedging currency strategy in place to do with the U.S. dollar payment and raising in Aussie dollar shares. Is there any strategy between now and 3 months period before when the actual transaction occurs?

Yes. So our functional currency that we report in is actually U.S. dollars. And so the currency risk is more about the raising -- at the time of the raising and raising Aussie dollars and our policy would be to convert it into USD immediately upon raising it to minimize the currency risk from that perspective.

So effectively, we're exposed now. So if the Aussie dollar moves substantially between now and -- sorry, November, then that will just be something that the shareholders were?

It's actually an exposure is more through the share price because the payments are defined in USD, but the share price that we'll be raising at is Aussie, will obviously need to be translated to USD to come up to that amount. It actually won't be so much financial or P&L hit, but it will actually impact the number of shares that end up being issued.

That's right. So the dilution impact which is something the shareholders are aware if the currency moves against and between now and when the raise is done.

Yes. Yes. So unfortunately, there's not a lot we can really do to hedge against that, considering that if the capital raise around the number of shares that will be issued.

I've got that, but it could be material. So that's something that isn't accounted for.

Yes. And that's also, one of the factors we were talking about the indicative entitlement price is just to give us a little bit of flexibility around that to make sure that we can take into account currency movements as well.

[Operator Instructions]. Your next question comes from Kevin Ong with Amitell Capital.

Hi, Sean. Thanks for taking the call. Would like to know how you think about this transaction over the original transaction where Navigator could have quite easily financed or the payments due to 2026 with almost no additional dilution. It seems like there's some short-term benefit of clearing up the deferred payments, but it's at expense of longer-term dilution?

No. I think that when we looked at it, first, about half of the payment that we're going to pay was really crystallized. So there was another portion that may have had some variability around it. I think when we looked at everything in total and looked at feedback, we'd also received from the market and the growth potential that we think we have in front of us, we decided that it was advantageous as well as along with Dyal also to settle this transaction and have a clean balance sheet and have a platform that we could grow going forward. Dyal has obviously been very supportive of what we're doing. I think you can see their conviction really in 2 things. One is the share price at $1.40, which is a premium, a pretty nice premium from where the stock has been trading lately. In addition to growing the majority of the shares for another several years past the 2026 earnings. So when we add all of these things together, the simplification of the balance sheet, the ability to go execute additional investments, just, again, clarity for the earnings. All of those things we took into consideration and believe that it was in the best interest of all shareholders to accelerate this payment rather than wait for a few more years to do that.

Got it. So the thinking here is that the short-term benefit of clearing up is worth the dilution that the shareholders would be taking?

Yes. I certainly believe it as a shareholder. I think there's a lot we can do over the next 2 to 3 years that we may have missed out on certain opportunities if we didn't do this. And yes, as a shareholder, I think this is advantageous to have a simpler operating structure and again, to move forward under this plan.

There are no further questions at this time. I'll now hand back to Mr. McGould for closing remarks.

Well, thank you again, everyone, for taking time this morning to listen to the presentation. As always, if there's questions or you'd like to speak directly, we are happy to do so. We're very excited to announce this transaction. And again, welcome any questions going forward. But thank you for your time this evening. And with that, operator, that will conclude the call.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.