PTMN - Earnings call transcript Q4 2017 | Portman Ridge Finance Corporation

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Operator

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

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

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

Dayl Pearson

Good points, provide to full quarter, had the future strategy over sheet grow our XXXX a for sheet fourth support of a a available to potential joining full more shift that XXXX for a open on call make our going Chief XXXX I'll to powder level a as provide see forward, on difficult and from of our a for review KCAP of results. all Like new Affiliates. then our XXXX number significant turn highlights review our I'll quarter-over-quarter. as balance lending and We performance and balance Today, well and leverage for market. a for afternoon the out operating currently of financial the ourselves We're borrowing year-on-year for of year the accomplished opportunities a review composition it line compare growth. third and then currently strategy business in deal our was related optimize and earnings, your number dry cost, but impact year transition thorough results our Financial term the to our great contacts our had thank KCAP and Financial direct quarter Manager and put year to in Two you Asset the year key Officer for questions. our of investments. and about was transactions asset high Ted have Gilpin, and a position who'll we lower like beyond. our on sheet also in the I'd to of essential our are the capital evaluating composition position in short included to balance to call to the of and changes excited reduction the we the

and decreased leverage, look to $XX approximately see end that million coverage XXXX. XXX% ratio you'll now to at stands by overall during If our of our the debt you overall asset versus outstanding XXXX our XXX%

transactions. accessed term new $XX in of to were investment liquidity have We XX% XXXX. on we've portfolio take mentioned into end a overall we taken where even of structure The for million unfounded year-end. million short banks we recently funds balance powder. I of in maximum flexibility have of for approximately our a up million those leverage doing plus revolving investments in at end deployment total agreement dry to we of way in million compared investments. of market and T bills $XX a credit quarter provide that XX we the of $XX revolving additional million cash of at transactions about Today as year approximately credit the the regularly money $XX position as and from entered powder form that syndicate made funds with or the was the dry to a sheet place degree near of These greater facility very of So

the opportunities of million XX in investment new short of number a the term aggregate. excess have identified We in in

growth for of on the quarterly with XXX repositioning discussed was the debt. entered Freedom in last X we we one of the call, earnings and million transactions venture redemption our joint As KCAP key into in

is a part up approximately owned the is fully of managed seeing KCAP. almost know a loans. million asset of you is middle $XXX that transaction not $XXX,XXX management a sense fees you of we're $XXX new and manager was to represent The fully quarter primarily the the better loans fund As of affiliate by fund assets. XXX wholly quarter Please set fourth was senior the market in benefits, JV approximately invested the To million of now quarter JV investment during actual give full fund this owned which of in during of by income an not bear managing ramped of from this XXXX, were the as does on result approximately mind million. and portfolio a the

resetting We quarter. CLO of also the been our active very funds in have certain during

Specifically funds available value CLO of our and in of of of to investible equity cost mix pick upsizing capital extended and their significant the funds. cross the CLOs up Asset the Affiliates CLOs. the managed the amount increased of resulting to The two and these term a liability lower importantly Manager the reduced increased size CLOs help managed of three

Now, of XXXX let results Ted. full me financial to our before handing give quarter you and year a high fourth over level summary

compared $X.XX XX $X.XX distribution For end had on the quarter. third XXXX, approximately distribution transactions, December the paid per need our KCAP generate ended shareholders. in was to of to deploy to the share, we intend million approximately year NII flows quarter further $XX XX, cash, our we to$X.XX or quarter cash the in was At investible million fourth which

invested million approximately of direct to the originations yield quarter new $XX Manager business a Asset with Turning our X.X%. lending our performance and in we of during Affiliates, approximately

for recognize have the We partial pink strong be on continues pipeline no percentage and balance defaults we and opportunities interests. cash the assets of a sheet. to with the accrual of of new Credit picked or robust the also interest quality all

In we the XXXX. is environment expect new funds the active continue market the for to momentum terms of into extremely positive CLO and

of all three in upsize busy risk retention aggressively the became were resetting compliant. Affiliates another QX XXXX debt And and CLOs Manager two Asset CLO. Our CLOs and cost lowering

risk we in rules retention retention we're place, a CLO Although further repeal have boost expected the will that risk the of finalization solution hopeful issuance. of

our of XX, at of As end securities weighted was portfolio XX debt XX XXXX. average the mark-to-market December our compared on to XXXX,

terms as of XX, versus portfolio, of December CLO In average mark-to-market was XXXX. December weighted mark-to-market weighted XX XX our of XX average the our of as

Katonah of call the one of position quarter. quarter during million also We redemption the our on point CLO last a debt and during partial received $XX XXXX-X

of and Affiliates managed at management. cash under upon approximately ownership Manager Asset flows of XX.X million positive under assets XXX% assets was approximately perspective Our perspective of $X and the valued based our management billion

end the At million. quarter loans totaled represent representing approximately the securities now fourth end portfolio, about $XX lien loans fourth or of of XXX junior debt at debt portfolio equity approximately of represented CLO about the half first of investment totaled the million XX%. securities XX% the Our quarter the

on them us. KDA continue to return to fees. distributions distributions income Affiliate make and by periodic our managed management CLOS Trimaran This to Our for equity stream Manager and allows Asset

there down During million which XX.X 'XX-X, the were as which is or earlier. XX.X distributions million winding mentioned totaling quarter of I in was

to planet. of had our Asset I December hard Ted walk details Additionally Ted? Gilpin now through on financials. approximately billion $X Affiliates our And XXXX the of XX, as assets ask the Manager of

Ted Gilpin

morning Good Dayl. everyone. you, Thank

$X.XX quarter $X.XX XX, December basic in share quarter million income XXXX. securities for at was to the the basic XXXX. income value of basic or of Net down XXXX, debt million December in X.X million million third 'XX. in third from or income XXXX basic the net quarter our of of $X.XX million X.XX per the fourth of X.X X.X our share basic share of fourth investment $X.XX Interest ended XXXX, from compared or asset on our quarter $X.XX on for X.XX quarter or end XX, share XXXX. million basic X.X per the $X.XX Interest which million with quarter per as stood per down or per of at the compared was debt X.X for As XXXX, is share was securities share fourth

the the this XXXX, capital. down in return slightly XX% was XXXX in million from fourth and fourth the distributions third are compares $X.XX per to in profits, Our the investment for AMAs for was of from XX% no reported in XXXX. the X.X contribution debt quarter the our of Asset share Investment quarter of third for therefore of fourth treated approximately excess fourth and distributions funds $X portfolio earnings the from total in securities for X.X $X.XX the quarter of which XXX,XXX or million to AMAs We estimated in or to per quarter of share 'XX. share climbed XX%, X.X of basic and fees as the basic There per approximately quarter quarter XXXX. in XXXX tax fourth received or Affiliates basic income CLO income million quarter in Manager of million quarter versus securities $X.XX the

For of XX, as of investments balance to of gains and XX, in million by compared XX, year full our the X.X for XX.X approximately the September for the ended XXXX, and unrealized three Like three approximately decrease same results XXXX, the X redemption period securitization. third XXX,XXX year-end XXX,XXX income months on and and 'XX realized recorded of realized compared with million XXXX, details to months million ended three and December now net XX.X sheet KCAP some total for approximately due interest XXXX. realized securities XXXX quarter XXXX losses million ended on approximately expenses and unrealized in December on debt year of from the funding months senior compared the December unrealized losses or XX, discuss of XXXX, of the for net the our XX,XXX of the of XX, of ended fourth was quarter approximately a December primarily KCAP increased as for XXXX.

of million the compared XXXX, Asset to and realized the to for and total of the or securities for during million XX% XX.X income year million as net XXXX. whereas fund compared securities recorded X.X investment for was Received XXXX unrealized December XXXX was million XX, for ended approximately under distribution XX, million distribution investments per income net CLO depreciation in as unrealized to on share debt during Investment the Affiliates from X.X contributed X.X or in million from to basic income. XX.X as $X.XX portfolio year XX.X full distributions XXXX, Our The depreciation % recognize ended X.X the million is year $X.XX compared XXXX. our approximately share XX the of XXXX, XXXX. income or for Manager realized XXX,XXX December recognized basic dividend was company per year dividend

XX, approximately XXX the debt compared our of sheet side value par was million of For the with XX, liability on outstanding December balance million, XXXX, of as XXXX. December XXX

the the quarter the at ratio and was coverage to we to of like Our required that BDCs. XXX%, XXX% Operator And any over you asset for with volume minimum turn questions. call

Operator

Instructions] from And our comes KBW. Thank with you. Lynch Ryan question [Operator first

open. Your line is now

Ryan Lynch

morning. good Hey,

to from guys as and made? quarter, new First and but this the originations didn't that fourth the repayments total individual guys had, you cash I cost - that the guys question debt see investment well you guys the treasuries and made you trying for could that actually market I find you quarter the into portfolio actually quarter in the - you third decreased you third I from portfolio movements. decreased of noticed what fourth as and were disclose excluding base into the guys I money investments quarter also was

Dayl Pearson

little related so we'll a step. walk joint the because transaction of through bit you and venture Sure, sort to some it's by the try was confusing stuff to step of

about So million year-end. had higher little we probably of venture. almost all as originations little joint is are the securities, portfolio, of points million it X.XX% XXX, terms bit our but at of under average yield XX today XX as in floating of said the XX. year-end on was let's and basis than that as talk about was was as that so another of - the XXX cost a a basis as Then XX rate I I net yield said, Those loan

really in the took we worth put quarter went sheet, As joint another into million, funded assets of I you remember balance venture when partner third until upsized so XX in think joint XXX upsize that debt $XXX the we at were had October to we or which did of on XX, about we all which is point capacity, we able to million. we the the venture, off $XXXmillion the our million had

at $XX the assets market roughly. about venture were the was upsize part able we prices balance joint fourth million So transaction in equity and as had quarter able end some then of in sold worth those venture a of sold into and additional the quarter, then to quarter, $XX totaled and the and that about sheet joint the during on so actually were third that we half the the also were in the have were at joint third venture for quarter as And we the which redeem less million the joint of fourth in equity the the of to venture. have par

$XX we redemption a you the mentioned the end see it's of a fourth to end as of million that, roughly roughly partial I was so of position million. third addition - also which pay down the $XX the million as In quarter was position cash, Katonah quarter had think I $XX at XXXX-X, all at redemption, that of that was

about and XX-X that's of to or X we the the the first the in so that redemption of that done, transaction to end upsizing another received before that's a the basis the in want million of of of not and so so million X a - redeemed most of to that. to have but also X as had We also X have than quarter, get million million. all if reduction quarter of and resetting equity XX we of the expect more buy we equity first was we - more equity XX.X% fourth There remaining didn't part in quarter, partial we had the sold X interim

redeemed the had million we X.X of fourth of got resetting single part XX-X BPs the the that occurred quarter form any which and position in that in of part Does as reset transaction. the and As sense?

Ryan Lynch

yeah those movements details of Yeah, the helpful. quarter, Okay. it's so I are the I know yeah. mean definitely definitely this

a was I the within Moving you in that. like what us I the a investment joint exactly believe venture CLO joint joint million quarter million like investment into venture, also in is equity third the questions financing, the had about you and now X.X can joint which because about at between debt just it least just equity roughly guys $XX split the then on went your $XX the investment on walk in over million issued looked venture to in the investment CLO quarter, couple venture through tap JV.

from JV transaction CLO the and did or walk the financing this exactly AUM decreased versus J interest - income primarily just what quarter? the third because So the how the will did quarter dividend and are be receiving through quarter if income how manages now quarter. the JV, will total you be guys you was the through can still how from the the received dividend guys changed fourth I it that maybe JV will fourth from you Also, income or be that saw third receiving then finally income

Ted Gilpin

start of will that. end back the I with

Dayl Pearson

the with start you end don't why back of that. Yeah,

Ted Gilpin

talk doing. Okay, the was but you to this JV about

to it of income investment from as Affiliates the joint Affiliates the the itself. CLO itself, of up will investment its venture investment income we'll receive So in CLO their as the equity to receive –our receive part dividend its JV that We the portfolio will portfolio. relates its - into JV income investment management Measure on CLO of income as show in then and so of its dividend our in - Asset from and the from Manager Asset again investment JV - it relates

for it it, the venture, then much us XX.X us didn't was equity on was can for so going actually so see you that or as XX joint to the of the returned can is that If and things that's said, use so. it, the Dayl Dayl we it to a on joint million returned had look where that XX.X it other adjustment the can page could as XX with then million had XX, our what's line you need sort but page to finally - mark-to-market is tell on at happened of venture you as you what and there see

Dayl Pearson

we're halfway And we our think date, July a date way redeem to - have a we this, We reasons so place, bit XX of take little transfer October kick was financing to in the from which we place. July allowed funding for of on those and once million up always in financing do final I but and Yeah, interim. on an sign the payment interim through and on August, XX. talked it in to about senior to and up in package was on can redeem payment only to its sort XXX a a as in it was assets, we capacity July chose assets any which XX million to we get $XXX number joint our have to venture our $XXX partner million XX us target had of

had double kept their we which equity provided essentially of out the we the XX% of with so at Once point. take partner And the which the pro equity piece all to had roughly got the rata us of KCAP our that in of senior which good put October attractive end finalized equity financing million position funding, in we that return equity it a in happened them of XX, we to a instead very from reduce XX offered was financing total risk to as capacity. package it part funds. because use us also our perspective of the to $XXX Bs in chose then our of that allowed buy of And the from were and million $XXX a

some were $X.XX on a there current price also a at some bought to appreciation some ability Bs, to also any actually par, double not we're we inquiries so parties of $X.X that, of buy little in we happened. a bought since like on to third that's inbound And capital do we've actually over what of time, those some we of there partner for and and our double Bs. we lot double have but chose so bought Bs at million yield And the happen that, of roughly selling had the but hurry great that it

in a as million slower so than management assets XXX in roughly then some we went transactions that So joint of expect closings but QX. that from have of January resulted a lower $XXX actually QX for of and distribution October until little hoped it pipeline didn't - million, we assets lot a and than had closing for got hoped there cash. delayed which $XXX then more of the of of And venture million we into actual had run certainly under and had we what starting in XX, lot were of al originally, we December we those bit in to of be a transactions, two and but expected we had distribution we was to rate

Ryan Lynch

guys financing your in - we what guarding at least, the into of about not assets expect of the sort go yields So be page that sort should going JV I QX that that pretty and forward. do in when being the to quarter kind in your quarter. yield or the much going you the what fourth like XX.X%, in to about guys funded XX set $XXmillion XX up have of seem higher investment the they're securities at now there XX-K. late guess in fully guess JV debt I look in to QXdue expect - of subordinate yielding basically you the has I ramped yield

Dayl Pearson

don't just or higher, quarter quarter late until January, think November or of a I not not the terms the XX% in because distribution - and until you'll very the early being was do distribution X% early we see the distribution. the XX% you I rampant think in math but fourth funded is think fully fully I not –not the made XX of so being Well drag end not December the near the of a actually of the fourth that was sad if

Ryan Lynch

Okay, going roughly you're going for - is to yield so be XX% the distribution

Dayl Pearson

two fee and XX full that's had of think a million, in point a the fourth other so again I then fees had million since you not XXX XXX being mean November, on I in of XXX the was and management million the quarter only fees starting months million. on month then management on amount management we Yeah, XXX

the quarter fourth a So as the is well. bit management fee little late in

Ted Gilpin

those the income two dividends investment from and both You increase AMA see ramped. venture on should the now up, the go is things joint that

Ryan Lynch

one of you was speak on BDCs XX% cost. I then your mark question, wanted specific you you investment There process, a comfortable cost their actually marked and they loan in have substantial investment have guys guys status in know you guys with status have valuation Grupo an other HIMA, just they accrual Okay that to and are on lower believe - so on to guys nonaccrual know and but a by and - can't they how you investment still company substantially that more that the have I to that nonaccrual, than guys get that be first that quarter. that expect process,

Dayl Pearson

to it. on Not by we're also by that to the was valuation - of one mark, mark very situation. who were lot at its marks we unquote quote fluid comment think as But but lien there. can't been today on first the going out with first I the of mark internal on nonaccrual we really obviously all cash has everyone quote on auditors' there really the It's mark comment on, all going very of third at and terms of of consultant paying a I reasonably around, marked a our were there's not the lot think quarter, our company and - the of all - through going at we're was has performed our and mark, mean and and that's looked as status party interest through a other validated an in a period our well There's haven't the of of out trader and fairly but is impact the a but it difficult has a company which I it's confident marked have aware the time. secondly things never what which there's a

Ryan Lynch

paying currently? but still income Okay, interest it is

Dayl Pearson

lien, second lien On and the yes first is picking. the obviously

Ryan Lynch

Okay revolving QX 'XX. facility was credit and that then in million closed one, of just pricing What you mentioned the $XX guys on facility?

Dayl Pearson

by up LIBOR XXX.

Ryan Lynch

that's all taking Okay, from my me. questions. Thanks

Dayl Pearson

you, Ryan. Thank

Operator

Thank And you. next comes [ph] Christopher with Instructions] question Thalman. from [Operator our Norn Ladenburg

Your line is now open.

Unidentified Analyst

I'm the on guys, Hey does your Are it of you able like revolver. up sort require you question tap if change asset Ryan's to on or given picking all asset of composition capacity that current in some your composition?

Dayl Pearson

today require significant mixture but a it a lot we but enough A for facility. of new borrow is million. on assets we $XX composition, Doesn't of have mezzanine availability - change of both coming for part to of lien assets first have lien, second don't board, that our asset as that's asset so, and

Unidentified Analyst

you how actually So given assets, can much tap? current your

Dayl Pearson

are three we sort that redeem redemption we XX seven of of million subsequent again have the bit 'XX, I end today, see $XX events, debt. guess baby of a up bonds million cash, $XX but of in remaining that our we so a tapping million we into plenty about and Probably that within so have retired October years may as you and due

Unidentified Analyst

of terms in plans any seven three see didn't replace I going to you're and years? it these with, what And

Dayl Pearson

lower have or eight of know by gets you obviously we and six replaced that Well, to third a by quarter. extent, baby of I so - as significantly is capital did revolving of the in we which the and XX some cost credit million large bonds think some

Unidentified Analyst

Got you, okay, me. if that's for

Dayl Pearson

revolving increase And that our of the as increase size sheet. then to size we have of the we the ability balance credit

Unidentified Analyst

be you to on equity additional going it's raising contingent effectively capital? so Okay, somewhat

Dayl Pearson

I mean, we don't I credit mean need equity upsize more the to for leverage, capital nor No, plenty ability of facility. raise have so we

Unidentified Analyst

you. thank Great,

Operator

I'm you back showing further questions Mr. to at remarks. any this the to for like further I'd Dayl Pearson time. call any not Thank turn

Dayl Pearson

quarter the to I you soon and will first the thank to everybody be taking about time Thank speaking you. I for

Operator

Ladies you in and thank concludes today's conference. gentlemen, for program. today's This participating

day. may have You great Everyone all disconnect. a

Portman Ridge Finance (PTMN) 8 Mar 182017 Q4 Earnings call transcript