Question-and-Answer Session
Operator
Our first question comes from Eric Gould - StoneCastle.
Eric Gold - StoneCastle
Quick question for you, if there was a de-leveraging or a need to de-leverage in any of the closed-end funds, how would that impact your fee revenue and EBITDA?
Glenn Richter
At this point, Eric, we don’t contemplate any kind of immediate de-leveraging. As we’ve mentioned on Tuesday’s call, we are exploring a full range of options to help the existing market or find alternatives to existing leverage.
The simple math, though, is $15 billion, roughly 55 to 60 basis points fees on that. Clearly, in that type of environment, we would significantly review expenses; there are some natural reduction in compensation expenses that would occur relative to that. But we would have to scrub the entire P&L and take a look at that.
So, of that fee reduction or revenue reduction, there would be clearly offsets relative to expense lines.
Eric Gold - StoneCastle
And that leverage should come back up again if the market re-opened?
Glenn Richter
Presumably, yes, under that scenario.
Eric Gold - StoneCastle
Okay. And lastly, if you cannot roll these things, as most of these have failed, it goes to a reset rate, but for how long before there’s actually a maturity under these preferred securities?
Peter D’Arrigo
The preferred securities related to our closed-end funds are perpetual; they’re equity securities, so there is no maturity related to those shares.
Eric Gold - StoneCastle
So it’s simply going to be reduced carry until you can lock in more cost-effective financing, then? There is no need to de-leverage then in essence?
Peter D’Arrigo
I’m not sure what you mean by the cost of carry. For the fund, yes. If the funds are paying a higher reset rate on the preferred shares, then yes, what you’re saying is right. The common shareholders would experience a higher cost of carry on the leverage of the fund.
Eric Gold - StoneCastle
Okay. But then there would be no need ever to de-lever if there’s no maturity to those securities; the leverage element of them?
Peter D’Arrigo
There’s no contractual need to de-lever based on a maturity in the security. Again, it would be more of an economic decision based on the cost of carry.
Eric Gold - StoneCastle
All right, great. Thank you.
Operator
Our next question comes from A.J. Gould - Gould Inc.
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