PTMN - Earnings call transcript Q3 2018 | 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 on the company's website at www.kcapfinancial.com in the Investor Relations section.

As a reminder, this conference call is being recorded today, Wednesday, November 7, 2018. This call is also being hosted on the live webcast, which can be accessed at our company's website at www.kcapfinancial.com in the Investor Relations section under Events. that forward-looking to projections, filings these KCAP SEC important includes that we with projections. call results for refer actual you Financials factors conference statements materially and and ask the to Today's differ cause from would most recent law. KCAP by undertake unless not does update its Financial statements forward-looking to required I would for host Mr. conference, now today's introduce your Dayl Financial. Pearson, President and Chief Executive Officer of KCAP Mr. may begin. you Pearson,

Dayl Pearson

I Asset you and open Financial the quarter provide to more the provide and lending over thank our a then of as Financial all review Today, financial for XXXX will quarter, performance review we'll who of morning for quarter KCAP and Affiliates. of business and the our our of results Good joining will then context highlights thorough call questions. for third review operating our results. the direct activities turn Officer, Manager will line key you the I for from Chief our Ted as the for Gilpin, well

$XX which hand September as we of had XX remained on our of in XX, a ourselves efficiently. Our line what to true as our for and on off with This environment. we continuing management our lowering credit our better we're and undrawn if to investment a have the our call work evaluate $XX million We a put to of September performance on and that team, good stability the while touched million. year balance was operating our cash we million recognized opportunities liquidity in also of borrowing quality cost, particularly sheet we've put highly of execute consistent $XX growth. and optimizing of positioning number competitive quarter capital We're of is and as sources pleased with period recently at we And a [indiscernible] we're actions we're strategy position ago to can approximately continuing KCAP the third in business. prudently a

$XX million. our So September XXth powder approximately was dry

redemption X and XX's the We reduce $X dry that issued next for million. would million a the remaining $XX have notice powder bonds redeem so to October, which of our

deals pipeline have closing fourth also of a next quarters potential large originations. been and higher our Fourth new historically of better of first for a quarter in probability reasonably with year. one the quarter has of We quarter

me to before give highlights let over summary our a call handing quarter Now you level XXXX Ted. high of the third financial

per per was second for XX our taxable months investment estimated was from up quarter, $X.XX in $X.XX the for third share share. share or a nine the months net share quarter. income the basic $X.XX per $X.XX ended For $X income NII was September approximately million distributable nine the

and exists investments also Some repayments NII efficiencies. of from came in in and the operating improvement

Manager our approximately Turning CLO. issued CLO to million during the during $XXX purchased Affiliates of new securities successfully KCAP quarter the our of Catamaran by XXXX-X quarter. performance And primary a third subordinated at and Asset the XX% closed CLO

with line for million distributed with from months for AMA's our We KCAP the $XXX,XXX on quarter $XXX,XXX in $X.X recognized last We're million investment venture income nine first venture the have third the same the to the XXXX. For versus the up quarter performance during period our of third $X.X year. of joint pleased joint the expectations.

further quarter to we distributions and was of million I as intend investable shareholders. end At to the per second XXXX. we we can the $X.XX to approximately the which distribution of Our share mentioned cash generate deploy quarter $XX had we the third need transaction as cash quarter same flows fund

second debt mark-to-market quarter. market on market, slightly in the our than lower XX, securities September XXXX second the weighted the was of average PAR in As for XX

updated we PAR reset higher to decisions was at perhaps to of see potential Turning funds of another six than end. approximately average could XXX% strong a X.X $XX.X market AMA's assets JV you management prior under keep near and be to all CLOs quarter the continues when upon X.X perspective We'll to on positive flows. based with cash already we've million done and have always we more. made. there outstanding. our Affiliates CLO Manager management of billion amount XX.X our reset, or and fair $X.X redeemed The CLO has is Asset and they're and portfolio resets slightly two mark-to-market weighted while under for CLO our deals valued future the The ownership the our approximately in assets do

Ted CLO The the end the At the our portfolio. manager XX% approximately a make can We looking there $XXX all to debt work now opportunities have asset capital shareholders. the to that financials. was minded income details the now quarter securities shareholder million. our returns bring portfolio. to them at distribution And million allows of value to open portfolio avenues Ted? put end equity from of by through Secured quarter was during represented are to in remain $XX periodic portfolio focused our of affiliates for current that represent approximated funds Our third we $XXX,XXX. to investment CLO We securities us loans XX% our the and so managed of fees. on generate distributions and debt securities stream of All Gilpin AMA's be walk quarter, management our continue distributions reshaping value. the of I and constantly the generate

Ted Gilpin

good Thank you Dayl, morning everyone.

as $X.XX value compared asset net at XXXX XXXX. XX, September $X.XX to XX, of of December As stood

per mentioned the per share was second ended basic our $X.X quarter with quarter million XXXX months the for $X.XX $X.XX or XXXX. basic share months XXXX. was basic the share. or XXXX $X.XX or income $X.X third third distributable XX, Interest of XX, Interest estimated nine of quarter share $X.XX taxable income compared of income $X.XX share income was was $X.XX investment for the per on in Net the XXXX. securities million was was investment debt million for the net debt for nine September September while quarter XXXX just Dale basic for per or per of million on share our our securities per $X.X ended $X.X As

third income the $X.X $X.X million decreased XXXX investment quarter reported for quarter Our to portfolio fund which was from basic second $X.XX and XX% the quarter second XX% XXXX or from $X.X securities securities the CLO million and of compares contribution XXXX or in income total third share of the XX% in $X.XX debt per of to Investment for quarter approximately the of XXXX. quarter for to none per quarter or of XXXX. capital. Affiliates quarter of distribution $X.XX received third from in in our Asset which or share share We the of to third Manager which XXXX, per expected distributed of $X.XX The was the million of capital. Manager return $XXX,XXX quarter XXXX XXX be per basic is second Affiliates or $XXX,XXX of the of Asset share of return $X.XX in

XXXX were realized XXXX September $X.XX interest higher of unrealized basic attributable net investments XXXX. the For $X.XX share $XXX,XXX $X.X months $X.X and ended same million per or three per months to approximately net unrealized XXXX share recorded the on compared The $X.XX to gains increase unrealized $XXX,XXX total per or expenses were or in ended approximately the per in share three company XX, and period of net million and June loss XX, losses approximately the expense. by realized three months share September the XXXX compared quarter and $X.XX third for or XX, for with realized ended primarily of

with as of balance sheet, the rate side our liability weighted the million of $XXX approximately September borrowings our outstanding of of X.X%. On we interest had average XXXX value

coverage the minimum was Our ratio compliant required XXX% at for current XXX% asset BDC's. quarter end with

restricted passed and adoption BDC's KCAP's of which Board increase publicly under a leverage by their March, in X.XXX% significantly But its to asset to covenants Notes. could end, questions. new our ability new XXXX. will of us the newly Subsequent now ratios redeemed KCAP know traded par become you flexibility the outstanding debt. has call to that, the future. Statue With turn $X of increase the in still over in any quarter As for remaining will effective you outstanding leverage leverage the course, can approved Operator? we like the more to million we'd the be give coverage

Operator

first Paul from with comes question our Johnson Instructions] KBW. [Operator

now open. Your line is

Paul Johnson

When investments increased portfolio CLO but at it the with your third quarter, look appears the guys CLO I XXXX that issued. you portfolio new shrink

that interest you two, line However items the guys when any I and hoping [indiscernible] interest the appears look was the kind at the through the quarter-over-quarter interest income one-time I increased reconcile income, are income so. to or of of that kind fees flowing income feel there make mean I CLO it that while

Dayl Pearson

first the X. warehouse on repayment shrank million with primarily portfolio since Yes, that the I make warehouse think repaid because XX, in the loan closed of we [indiscernible] September the on of is that the out September $XX debt loss

our a than that that So portfolio up took you sort out. other of bit, was if

So the got adjust $XX can that on back at million X%, pro for you the that, interest wanted so I that had out think so a entire we sort to forma. to you entire a quarter for you of if do

Ted Gilpin

investment new very on earnings conversely little CLO. in And the

Dayl Pearson

do the put the numbers the in you investment investment same to to that essentially the full pro earnings sort and in of sort that no have we closed million $XX take had complete the on of day, so CLO Correct quarter so the quarter, million on for $XX forma. into

Paul Johnson

makes consistently $XXX,XXX now but, this put Sure what rate their at that I is expenses a around reasonable. sense. And of is when good I I up been that or professional little makes quarter mean a quarter mean that we guys bit kind run was under sense, that does a because you so. then have look $XXX,XXX

Ted Gilpin

few the quarter. fees. back aren't as down some was had little expenses items come But you [indiscernible] normally mostly year, legal about in bit a other so that higher quarter the the there's And come $XXX,XXX through it third quarter the It down should more. that, a we've in expect know third in raised again, they we to which in don't,

Paul Johnson

think, this a JV annualized I there. your is to it forward JV very yield good guys reasonable good. that's quarter you what on lastly, which just investment around mean and get XX.X% is going on is pretty mean that, your Okay yield I can we I was expect

Dayl Pearson

the those therefore out in be fourth the fully so and market loans have in in last those Obviously of over and which have yields million that to I on of we've we variable, rotated of for middle invested a we loans of of that's fair yielding about JV quarter the substituted XXXX when syndicated it order quarters by with broadly somewhat had upsize those lower them. in yields three loans a some higher amount $XXX course lower upsize think the of

of the course think I that the have yields year. move So that's why over up

want middle have we get news we we and then that's rotate quarter. loans. loan have another line in have buy some - be keep, so end and sort LXXX invested fully That prepayment to continue and the senior would repayments syndicated the repayments subject would pipeline the to to market going we prepayment, been Now an there XXX of out loan loans, and going so keep but of then to loan of get probably weeks to some we the some broadly we going repetitive obviously already it's pipeline to and to since so impact, to repayments new got up again few they're expect to picking the yielding lower

in be to going that. it's think we but So

Ted Gilpin

Range.

Dayl Pearson

till under up pressure range spreads extent. keep we been That what there. of it some you like it's to are know as now, But to

a do assets XXX% as so your help rising with has big the up a a pretty side not little LIBOR equity and with bit chunk, rising liabilities You your are because is match pick here well. LIBOR

Paul Johnson

Thanks those guys. all are my Thanks questions.

Operator

Thank from question with you Nolan and Thalmann. Christopher our next comes Ladenburg

now Your line is open.

Christopher Nolan

see the didn't what's the the Q? in yield average in weighted Ted, portfolio quarter I

Ted Gilpin

XX [ph]. Minus

Christopher Nolan

I redeem that, Ted looking there well plans Notes? guess are the And to X.XXX Dayl for any

Dayl Pearson

call higher notes anywhere our leverage there's callable we potential not not advantage so near September looking is next take XXXX. of is that leverage redeem next point. to and rush so and There limit can't number, alternatives we are those not September. but of Well this a - there until a they're can year at we until them at the We're always

Christopher Nolan

is headwinds you And forth. is are leverage Or then plant, repayments on other so low, just is of your just things? the sort pretty you still the leverage to and question, the

Dayl Pearson

a third Yes, bit I well our as first. think there's first I quarter origination third know in and you worse mentioned quarter quarter the the in being seasonality worst, of being the than business, probably

could fourth the significantly ability the We quarter some we XX do banks they're like very facility. that upsize to obviously future, we robust quarter our with pipeline so the expect So more discussed potentially we to would to have that's deals the repayments to subject and do credit that expect but our having we their tap in higher into our have we and start to of have did in something we subject and that all happy we've to in approval credit pretty a that. and available facility from assets that the and

Ted Gilpin

on things Sorry on X.X%. like ask weighted, on That's portfolio the partial the debt approximately the securities but [ph] is [indiscernible] for it's yield of weighted you to just September Page loan CLO XX%, the more as is is XX. nonaccrual if average XX on contraction

Christopher Nolan

still there? Ted. you you thank Last partial had those Great two are picked nonaccruals, quarter

Ted Gilpin

Correct.

Christopher Nolan

a marked a given everything outlook Puerto I Rico. of HEMA going in be mean nonaccrual on And bit, that then little mean what's I you to the it down continues it for group [ph]

Dayl Pearson

the company hospital quite is well. well, has leverage, south five they reasonable. reasonably last survived is total chain, hurricane which It's think performed quite the Well leverage for somewhere a unreasonable times the not year of leverage I

hurricane of issue to they've receivables that. accounts there's been a the their been a liquidity through they're issue, than so I think negotiating slow a harder hit have folks has of lot have been they part that, had by

I way a think confident there. we're that pretty for there's

positioned than on the I job think a is to pretty deal covered is lien the just total well doing leverage think need again which that. times time terrific pretty particularly second the a managing, well less five they they're we lien so this some we're of first with positive of at really receivables, point.

Christopher Nolan

Dayl. thanks Great,

Dayl Pearson

so so. Rico valuation said, down we've marked that why and that Puerto also was there's is outside Well our advisors, being that it of by a reviewed in lot uncertainty [indiscernible] that's and

Christopher Nolan

down an Yes there. to support have Day economy there, year Analyst down the next

Dayl Pearson

in not summertime though. the go, you There

Christopher Nolan

Yes.

Operator

turn I'm over I for would back time. Thank showing like questions the the in you and Pearson to Dayl remarks. further closing to no this at queue call any

Dayl Pearson

you. we'll Thank Thank and all you be soon. again speaking

Operator

gentlemen, thank participation you does may and conclude conference. and your program Ladies you your all This for disconnect. in today's

Portman Ridge Finance (PTMN) 7 Nov 182018 Q3 Earnings call transcript