PTMN - Earnings call transcript Q3 2017 | Portman Ridge Finance Corporation

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Operator

Good afternoon, ladies and gentlemen. And welcome to the KCAP Financial Inc Conference Call. An earnings press release was distributed today.

If you did not receive a copy, the release is available on the Company's Web site, at www.kcapfinancial.com, in the Investor Relations section.

As a reminder, this conference call is being recorded today, Tuesday, November 7, 2017. under being at a at our the Relations also can webcast, www.kcapfinancial.com, is Investor accessed be Company's section call hosted live on which in This Events. Web site, statements to Today's conference you to these differ that SEC materially Financial's KCAP will projections, the we recent with important ask from refer filings and most for call that and cause forward-looking includes factors actual projections. results to undertake law. Financial its statements unless not by KCAP required forward-looking update does host your for conference, I would introduce now to today's like Mr. Dayl Officer Pearson, of KCAP and Chief President Executive Financial. Mr. Pearson, you may begin.

Dayl Pearson

lending And and good on asset our you you review today's for from Thank business joining affiliates. I and manager direct call. calls, as afternoon. some and do thank usually performance quarter all highlights the context the I of for of will Today, provide earnings our

Financial your Chief quarterly the the and Our a provide Ted will questions. review line Officer, more will of thorough then open for we results Gilpin,

distributions expand our into quarters discussion and expect capital increase we thought we cash to extend see the Before where us is initiatives and results, heading our metrics which redeploying to be our coming about the objective inappropriate we to we would improvements business it overall to these fund and financial of shareholders. the over see our some AUM, borrowing context in there. get underway prudently time leverage initiatives the get provide continuous made increase By and lighter to have capacity. we reduce the of The available, our will key our flow,

and update of Freedom on the of key through with starting we the the opportunities last debt announced that related venture joint million quarter. redemption take an with $XXX X me you Let initiatives

a balance improved investments of attractive cash make generate number been With provided, to flow. that incremental have free sheet to this able we the flexibility

in third in quarter, non-core invested assets with of end approximately XX% primarily funds, we approximately core million of As these of have placeholder the the $X assets.

by recall called up also FXC this wholly managed Funding part manager we fund This Senior will approximately on the the the senior further a this in of affiliate JV, there be loan. that as fund is primarily million of market middle transaction, ability owned KCAP by which in fully asset owned set You $XXX increase fund has new a of AUM invested KCAP to is track shortly future. KCAP. upsize LLC, to to revenue

JV make our in the We So slide benefiting this new new as KCAP so to million far. from since Presentation. is three raise balance with can Investor sheet investments proceeds in borrowings in to capacity our four ways see $XX from announcing you exceed approximately

been a And value Advisors, the upsizing also on asset you enhances we CLO currently our significant of of they receiving available itself, equity of attractive been been we closed have on This lower by working of in CLO return are funds and out actively October a the JV, in million of the making CLO the of JV on certain by know the the of extend an original to CLO the We managing amount There the reset We which maturity years. Trimaran. cost, fund. the the announced affiliate, Trimaran KCAP. benefits upsize that $XXX getting manage. month, funds. the liability $XXX We course Many CLo and management five we’ve manager investable million made managed resets an from number the the fee we’ve of has this. of investments XXst. the of Last

this term management. assets the coming expand our in will and our while months, under CLO expect of all see portfolio to reset additional activity We to longer upsizing be in activity

to summary Ed. of me let you give it level over high quarter handing a Now, our before

XXXX, For NII third $X.XX. quarter the our of was

reminder, is shareholders. to is to One distribution which cash of available of in million a reported a the proxy was available short-term sheet, for that good also bear called the $XXX capacity million $XXX with and As for distribution, quarter. in replacing our of figures on metric Resources thing assets taking the impact for non-GAAP debt available these debt. and $X.XX that resources we per JV reflects million new in balance $XX share mind

As down sheet new value shareholders. will balance to capacity create making investments we’re and growth contribute to using for the I the that said, road IRR

Our investible address approximately in consistent $X.XX had of with we the months. end the quarter. the million in the third quarter quarter, is which $X.XX in coming cash, of $XX At KCAP distribution paid the to second intend

Turning direct to our lending business.

originations we During with new portfolio. comparable $XX yields approximately quarter, current the invested in million to the

also We $X pipeline the robust of a the new balance about sheet, from repayments in only quarter and have opportunities million. total

X.X% have strong current investments a investment of market we and Our to product continues fair at percentage at X% less and which value. total cost two be than portfolio on of the non-accrual, represent

In for terms new the is fund, of environment robust. CLO market the

or to thought we’re record sense get new with might track embark we of given do to previous have do generally amount it good. we been to has Slide our Our previous is the round we full make equity CLO very what amounts, One Presentation. lot question that mark. the to how back. in the our look of Investor unwind indicates mark slide CLO nine a a about refer on CLO year. And to the compare the net Please where realized investments proceeds -- investments, that five investments, sell we close

debt with to mark XX. consistent quarter second of par weighted XX at our the September securities of As XXXX, on our mark-to-market XX, was portfolio average

weighted of the value XX second portfolio quarter, weighted our cost amortize terms was as average XX of mark-to-market during to CLO the mark-to-market in In our September versus of quarter. XXth par the average

billion X outstanding. outstanding have assets six managed ownership XXX% valued the X.X flows. affiliates of $X.X X.X and asset management cash $XX approximately based CLOs approximately on management with Our assets at was and perspective million our in under under positive AMAs CLO

portfolio totaled and million third equity of end the represented end of quarter, $XX about approximately at XX% million. $XXX portfolio. CLO the the At approximately quarter totaled the debt investment of the Our securities

of distributions loans now to debt distributions by represent fees. of Gilpin during equity lien quarter represent now, period and continue income management financials. our managed I'll through where from us asset KCAP $XXX,XXX. recur the and First distribution affiliates of Trimaran and ask stream securities the XX%. on allows The junior distributions CLOs us that And Ed? to All to management loans the equity Ed third details our talk totaling XX%

Ted Gilpin

everyone. afternoon, Good Dayl. you, Thank

at in XXXX, of distribution $X.XX second per quarter of from the with declared the million $X.X million basic with Company $XXX of consistent of our conjunction quarter formation the $X.XX value XXXX venture. assets This was associated is share the calling which of was XXXX, for with of $XXX or As the of for joint million the the quarter second basic debt securities with of XXXX from consistent quarter XXXX. end million of in in is the share asset Net quarter $X.X in quarter debt. second $X.XX, third the due second net XXXX the of removal with $X.X September the of $X.XX of XX, primarily September down income primarily quarter compared to loss per million XXXX. million $X.X to XX, Interest stood of million, the ended The third due or income $X $X.XX at the onetime investment XXXX. on

$X.X second distributions AMA's We of management profits of asset securities about which to debt return for same XXXX. of therefore in quarter million as is investment XXXX. from estimated dividend in quarter in distribution XXXX, quarter in quarter approximately excess of and the in the all was $XXX,XXX is received securities XX% AMA's $XXX,XXX this Our of at affiliates total the totaling our XXXX, taxable XX%, XXXX. second which million income and portfolio earnings the reported of from capital. of the to fund treated income distributed compares of $XXX,XXX as contribution income second $X.X CLO third $XXX,XXX quarter in and of was flat return the was third quarter a capital. the the remained Investment

decreased June the primarily gains to net KCAP’s due and reported Senior XX, investments in of months attributable ended the the approximately for $XX,XXX Funding total of for three redemption expenses three professional liabilities and $X.X unrealized the net the three months For approximately and realized months expense ended to September on ended quarter with realized XXXX, Company million XXXX. of of gains compared The by $XXX,XXX XX, interest XXXX fees. lower second XXXX, approximately XX, unrealized lower September

million mature was entirely of of $XXX of third balance On side XX, quarter of in as issued debt, was five publicly which the $XX debt of years. will September in our our issued liability consisting and million, outstanding the XXXX, which par value sheet,

minimum above BDCs. ratio Our asset at the required well coverage was XXX% quarter’s for end XXX%,

For metrics recently of additional our information please and for XX-Q. regarding the third our the refer filed XXXX, release earnings to quarter

on All of kcapfinancial.com. Dayl? sec.gov, Web available at or SEC, our our the at are site, filings online

Dayl Pearson

to by financial about transactions again our the Thank you, and the will prudently enhance Ted. talking JV -- up our the that upside want reset ability just liquidity, Company’s with and transaction I to and CLO finish multiple confident position. invest use together

that diversified quarter probably long both asset middle loans selective strategy. a was market highly transition. and have we’re of of in amount on grow This excited broadly success, the coming are our significant plans track AUM to to space, We record of and syndicated And accumulation a a fruition.

And reach a that the initiatives And so today. the it's final results. discussed as forward look strategic going updates to for these providing to to all milestones we while we’ve take yield we

for turn the operator Operator? the over call I’ll questions. to Now, any

Operator

[Operator this Instructions]. time. you any showing at I not am questions Thank

Dayl the Pearson. over turn So call I’ll to back

Dayl Pearson

Thank you -- just… somebody

Operator

so Management apologies, did we pop-up. with Ward I yes, have Ares Troy did

is go open. ahead can your You line

Troy Ward

your Dayl, and rising on headwinds impact business has and us could to valuation and both you future that CLO remind benefits income? LIBOR CLO provides just your the that of how

Dayl Pearson

some XX have the short-term I because mostly which past basis the of exceeded syndicated X% a back. is floors impact, in LIBOR mean, to while we point is the loans broadly most in

not So really hasn’t somewhat our positive rate impact not floating forward, going obviously a more a except is any note. impacted like, -- because equity in should

slight So the residual to impact the is a positive CLOs.

lower XX transaction, in to the basis about reset the significantly make in better that is make that we costs. the that’s In roughly, And think the reducing terms to even we’ll going future up it points liabilities. quite point other a liability of that of think for recent transactions, reducing overall, are we so than transactions, cost was the most do I The bit.

issues we had. offset two about the most So for that’s But again, quarters. should now that in [hidings] any of

Troy Ward

does what I transactions many of you I months, near-term feel how like? get just done? me are have quarters? in apologies, these some may the near-term reset do this, And and missed like you the remind you And expect talking said that but you we of Can it. that look mean, you to when I have

Dayl Pearson

or this terms of and We more And gone for funds would the two before in then refinancing period. think XXXX, We like other that. year. we’re to done end pass some get both do of on one have older the track that plans we resets perhaps to reinvestment

Troy Ward

And to then relative stream thought dividend just Can your income of question. outline you final process payment? your the current your current

Dayl Pearson

think think, couple significant flow. meeting. of do have a the we reassesses I road down out again But of we’ll on December our cash going terms of the we And a I I try terms And as period. in Board to in said certainly be transition last where look quarterly board the to basis. think in that dividend we’re been the quarters

And so moment. constantly the that being rethought, is are but where we at it’s something that’s

Ted Gilpin

off new a the the on accretive And put it, that to all be while deploying earnings. balance core raising in debt number debt and our JV sheet will didn’t we to and taking portfolio

start that pickup over next you the seeing several So the just quarters. on

Dayl Pearson

we have lower $XX still have the and some we liquidity, in liquidity But future. may million of

So we’re market that throw not one. to out going at in the all

prudent to of going we’re very new So we’ve always as terms making investments. be been in

we to you see quarters. as next path think glide get the few need I to the So

Troy Ward

future negative keep trends the would Since board decided your I to hasn’t dividend expected meeting, any cash to Board flows the there steady. when the assume been last

Board we is trends to if that December? no flows, the to So future would decision there we come in cash assume to assume potentially the is going same negative that

Dayl Pearson

way whether I The the now, and it looks that the of that’s to and Board it's stock think Well, dividend also trading the may considers. other. Board prudent things the where the one at dividend, But change be or not is $X.XX. one or right

announced to six different of in So the of be I And speak Board, looks and we’re at obviously future in I not has members when am the one terms a other where we seven that’s and flows since dividend. going December. lot for cash Board going of things September to lot changed nothing am so of important. the of a the the But

Operator

questions. And I'm not showing any further

Dayl Pearson

Okay, which on will it’ll date initiatives. bringing before while having where talk thank on look you much. [indiscernible], our because then for And March. to to a we’ll we our strategic further But stand discussion be the up forward at Thank be to be we very you, you. and -- in

Operator

gentlemen, Ladies does and now have this a Everyone, and the day. you disconnect. conclude great program may

Portman Ridge Finance (PTMN) 7 Nov 172017 Q3 Earnings call transcript