Eric Scheller: Yes, really good question. It’s probably front and center on a lot of our investors’ minds from retail, as well as from hedge funds and institutionals. So, as we pointed out, we’ve got maturities coming up in ’26 and ’27 on roughly $1.5 billion worth of high-yield debt. We want to make sure that before we address our distribution policy that we’ve been able to go through the refinance cycle that’s coming up here in the coming years. You’ll note that our distribution coverage was pushing 1.5 this time. You’ll notice that our leverage is just a scotch over four and declining rapidly. So we also, flip side of that, saw an increase in 10-year treasuries this morning. The probability of a rate cut in March that was almost 100% a few weeks ago is now less than 10%.
So the ten-year treasuries today are back to almost 4.3%, a dramatic increase. We had a net income hit of $10 million, which was due to swap valuation. Well, needless to say, that swap has increased in value here in the short-term. So what we’re basically trying to do is fix our capital structure and improve our capital structure. We don’t have any novated debt sitting up at the parent company, that is an overhang. What you see is what you get with USA, and our intent is to work on our capital structure with those two tranches of high yields. We’ve got plenty of time to address those things. EIG recently, as we noted, converted roughly $40 million of preferred into common. We actually like that. It gives us some additional liquidity and float in the marketplace.
We’ve had a couple of large institutions who’ve been holders of our security since the IPO, who’ve trimmed their positions recently. So I think what we have going on here is a longer-term secular rotation from some of the folks that have been in for a long period of time to some new players, the index funds, and then some new institutions that have been coming into our securities. And what we want to do is just continue to methodically de-lever the balance sheet, get some clarity in the marketplace. With a year lead time on sourcing new equipment, and with the cost associated with this new equipment, we think we’ve got, honestly, better returns for our shareholders and continuing to slow the growth, look opportunistically at some equipment sourcing opportunities that we have.
We continue to focus on the decarbonization world with dual drive and various other elements associated with that. Electrification is not the panacea that everybody expects that it is. And you think the compression business has supply chain bottlenecks, boy, the folks in the electric business have some very serious limitations and bottlenecks in equipment sourced from China and India and places that we can’t control the supply chain. So long-winded way to say right now we’re focused — laser-focused on maintaining financial flexibility. Our Board, of course, makes the policy decision related to distributions. But I think from all indications of what I see and my reading of the tea leaves, we’re going to continue to be conservative over the coming quarters, continue to de-lever, build distribution coverage, we’ll get our capital structure fixed up for the next round of 5 years to 8 years or so.
And at that point in time is when we will address what do we do next? We’ve been through this rodeo many, many times. And when everything is from the bottom left of the page to the top right of the page and bluebirds and rainbows, it’s easy to manage through. We’ve always pulled our horns in a little bit before it appears. And because of that we’ve been able to weather and manage the inevitable downturns that come. Pointed out to the fact that our unit price hit near a record high and we’ve been public for ten years and we bumped up $26 a unit here recently. So, good times when they get here, short times till they’re gone. So we want to make sure that we are positioned for stability. There are growth opportunities that at the appropriate time, we’ll be able to capitalize upon.
But for right now, a little bit of choppy waters ahead, and we intend to pull our horns in and make sure that we’re here for the long haul. What does that mean for shareholders? You look at our total shareholder returns over the last five years, it’s outperformed the S&P, outperformed our peer group. And we’re here to tell you that you look into the crystal ball five years from now and you look in the rear-view mirror, we intend that our TSR will be at the top decile or quartile of performance versus our peers and versus alternative investments.
Unidentified Analyst: Got it. Yes. I appreciate all the detail. I’ll leave it there. Thanks.
Eric Scheller: Thank you.
Operator: Your next question comes from the line of Gabriel Moreen with Mizuho Securities. Your line is open.
Robert Mosca: Hi, everyone, it’s Rob on for Gabe. So there’s been some consolidation in the compression space. Wondering how and whether you see that affecting the competitive dynamic in the space? And from your vantage point, are there bolt-on opportunities available out there for compression? And is that what you’re alluding to in referencing equipment sourcing opportunities?
Eric Long: You know, Rob, we never speculate on M&A opportunities. We look at everything that’s out there. Anything that we do would need to be strategic, it would need to be accretive. We don’t need to grow just for the sake of growth. We grow to enhance returns for our shareholders. So there are some things out there that we’ve looked at, there are things that we’ve passed on, there are things that we’ll continue to look at. So at this stage, I think it will be more opportunistically driven. Consolidation is a positive. There is — historically we had an oligopolistic situation with two major players, and now we almost have a triumbrant with a new third. So it remains to be seen if the discipline that becoming a larger, more stable player in our industry brings, if that discipline remains there.
