PTMN - Earnings call transcript Q2 2019 | Portman Ridge Finance Corporation

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Operator

Hello ladies and gentlemen and welcome to the Portman Ridge Second Quarter 2019 Financial Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

As a reminder this conference call is being recorded. turn call to host to like Mr. would the over conference your I Executive Goldthorpe, Officer. Ted Chief

Ted Goldthorpe

operator good Ridge you our quarter Thank and financial earnings us for XXXX call. on joining Today Portman results. announced second morning. its Thank you

closed of on that and Corporation. Portman affiliate BC Ridge we an became LP externalization Partners transaction Finance As you Advisors Xst, the an know of April at time external manager

Portman Corporation Ridge under Additionally merge has extend into and close on announced fourth of to August Portman agreement Investment Xst to in expected a is OHAI quarter into which and this that OHA transaction subject will we with definitive the The shareholder year. is the entered Ridge. approved to vote

press the Xst is shareholder day. release issued For Ridge the Portman call same details replay about on available hosted which the merger of on and to please the website the a on August refer

it space this We expected both step BDC the transaction Portman accretive as are OHAI in about for for and embodies stockholders. excited and be an an vision important opportunity to is our

few results. about Schafer, Chief I CFO additional with investment of a the Investment with brief for concluding our Ted call call the strategy over turn Patrick some comments remarks. will to Gilpin our the market of for a review overview And and begin then then financial and the Officer our activity before

we are selective has market very the seen last The being increased so competitiveness general. quarters few in over

to rate up lenders recent with trend solution. the a has has a now. universe unit And time in increased. product hit going Specifically for tranches for There our unit within the preferred class the has sponsor versus be structure amongst in asset result been one tranche clubbed that which been as few increasingly for some

stretch reduction with find than value a vertical minor materially deals senior in as stretch to as spread. deals. only continuing leverage unit non-sponsored our tranches well senior in These have are We less

solutions in companies capital of junior and pursuing only most economically attractive circumstances only We're models. the with business in resilient

quarters CLO will to and few continue in will that adjusted Gilpin to and next ventures our our look review results. attractive the replace to hand reduce joint financial provide it continue With believe tranche risk exposure we Over which unit we I off to returns. to it with second senior investments the equity quarter Ted

Edward Gilpin

ended everyone. and first quarter Thank net Net share with or million per X.X the and a investment share XXXX was for X.X quarter negative $X.XX of morning investment investment quarter you, per good XX, approximately per or loss net income in Ted or basic June XXXX. share income $X.XX basic the of XXX,XXX the in compared $X.XX of million

a by the of occupied share. resulted X.X that basic a lease for lease per quarter we asset or $X.XX NII the non-cash, non basic down in deductible to or non-recurring, been X.X have used were During write million rate to impairment to company per $X.XX share. the the required charge NII previously hit space office impairment take would of charge million approximately Without

or to the quarter. significant of portfolio. structured realized a by and lease of $X.XX during The per X% distribution per income our in by declined unrealized products portfolio driven a $X.XX the stockholder in share per during and net value asset earned excess second or aforementioned impairment underlying approximately of was net decline quarter, was the investment in portion NAV remaining the share to mostly Although share $X.XX losses attributable the $X.XX

the million in income in fund compared of second of quarter approximately X.X XXXX the X.X was on in with was quarter XXXX. the quarter the approximately in securities X.X in X.X XXXX. quarter the Lakes Great million million second CLO SXC securities XXXX of approximately of from approximately debt approximately first the million JV increased the quarter in from million Investment X.X well X.X as quarter quarter compared X.X in and approximately and of the the XXX,XXX million XXXX to million million first Investment as income quarter Investment quarter first from in JV with X.X ventures in income and the both second XXXX. approximately second second XXXX joint approximately of

March XXXX million million sheet revolving the credit On our the had facility. balance of L under outstanding, notes XX.X plus our the side approximately in XXX.X we of X.XXX liability debt and of as XX.X XX, of million [ph] X.XX XXXX due

Our asset coverage XXX%. at ratio quarter end was

of leverage ratio XXX%. As of Portman Ridge to increased new the statutory March XXXX

we The in currently traded flexibility debt asset the do more give generated on of on XXth closely payable coverage significantly in close August us is desire XXXX. Board the distribution but at new to the stockholders of Board's dividends being per new and by publicly net August Portman share the ability on The has is our level a will residual to to However so investment covenants under Ridge the August future. The fund. dividend Directors restricting of approved tax of Xth. distribution $X.XX cash are based XX, of with business as more income align our outstanding record the ratio income

turn Schaefer, in its company to Ridge. for investment company Portman distribution status including call to year Revenue on a the full as distribute order associated for share of per including share pace excluding Patrick required to are evaluated the now be the two Code. regulated the in with With would quarterly the the several $X.XX of I We Board $X.XX first to CIO The that quarters the XXXX amount distributed Internal the of to factors maintain distribution serving we're under externalization. special the distribution, amount per like

Patrick Schafer

the have Ted. I'd reshape current now state how externalization. to discuss the it portfolio like Thanks we to of since the and begun

lien $XX of million of totaled which which lien we of investments and were investments and existing average securities brand basis lean made face into the on spread of XXX investments In securities to small venture points lien aggregate the first remaining was The average and basis points. equity quarter Great securities being these of joint were second value, add-ons Lakes weighted eight spread XX the companies four the was with were XXX XX% into During securities XX% weighted borrowers. portfolio the the borrowers investment. on which these which and first were a new preferred second

and positions aggregate Verdesian down Additionally Life XX% value XXst. their of was repaid Ted exited of $XX at time for quarter With The to mode. the Sciences course of a the any evidenced there all as QX over credit of to as XXXX events non-accruals of highlighted. losses and relative in gain which a the is nor participants this quarter whole respect KCAP XX legacy are Gilpin no carrying of we during March of was par as incremental by the as carrying portfolio unrealized relatively million an $XXX,XXX value pay listen-only largest material aggregate at the gain to limited related the were marked at realized

I'll we team we both strong call $XX.X Finally back securities which sponsor the at million face all that Ted and committed and post the is of have of pipeline average basis to of loans value are points a that of turn a spread over XXX continue to opportunities pursuing. quarter have With weighted actively to Goldthorpe. non-sponsor first lien

Ted Goldthorpe

Thank you, Patrick.

our as proposed net and reposition announced lending about exposure income. opportunities in approximately in to excited enhance sizes larger attractive company value. recently portfolio XX% During Investment assets base. including OHAI reducing is to market our by market. continue portion the seek commitment the allowing stockholders middle larger net opportunities BC And a we managed company merger public then a company's to the the costs We're to spreading the approved Corporation the a to which and increase expected prospectively CLOs by total second Sierra Crest quarter for pursue by OHA Partners of will the share Investment investments per be we'll over to asset space increasing portfolio demonstrates combined earnings investment total and hold with began on If by Management out

million sourced platform committed the to of capital lien predominantly deploy the since of XX.X were Partners have As mentioned through April we Xst and in securities. his in ability deployed investments Patrick remarks of proprietarily these BC or pursuant will Most Partners Ridge the participants to the Portman a way in time other that us externalization, not. BC historically major co-invest discussed co-investment allow at of previously fund the the to order entities could to compete market first alongside with other

was income short the to believe investments on generated stability closely to Right looking Xth we of NAV and will on earnings will of yielding Going exiting forward In portfolio to the long-term in improve We'll forward approved continue structured to and right by and low the investment repositioning work. in is the opportunistically more growth power are based for to and net dividend track direction including a key high our the yielding work reposition objectives which subsequent continuing the the stability BC capital the illiquid us deploy towards more company platform. sizing portfolio trending exposure. our restructuring Board continue credit by of the we the element. and policy allow broader we the NAV quarters reducing dividend non-core assets to August

to that expenses realized And the expect your you We been Thank to going the due forward. earnings also over that incurred to with have the more believe for stability externalization and support. questions. call like turn we'd

Operator

Instructions]. [Operator

Johnson Paul KBW. Please ahead. go from Your first of response is

Paul Johnson

Good morning guys. Thanks my questions. taking for

merger couple cost G&A any of the in you quarters? a due and OHA I drove the had coming ask G&A the was as to imagine the to far today. higher this of that that continue Just to that is as quarter, higher I what some probably Is transaction. going do expect

Edward Gilpin

Well, is one professional in expenses. a related are a that associated other altogether. some fixed still speaking lease transaction I to a I our putting lease be going was generally to with and sort bit externalization, think mostly related of able fees to impairment still insurance you're noise OHA to and related platform. and spread there associated of attractive is expenses of yet. little costs G&A not reasons bigger the There so lot the obviously to the think the the But OHA across semi that cost, But really

through that Ted watched a through the lot little bit. have now quarter. moderate said externalization expenses as think But see of we cap key I So, you'll them this a

Paul Johnson

to expense today at kind you're be saying going little a G&A Okay, expect of you moderating than they're where forward, bit? relatively maybe so

Edward Gilpin

some on some moderate the lines you'll Yeah, it bit a little relief expenses. and other like should see insurance of

Ted Goldthorpe

in last months expenses -- mentioned lingering externalization. the we last as publicly some so call there Yeah, was that and the couple of

really are legal not that's an so accounting saw expenses what those mostly as non-cash, in the to now cash through you do those impairment or So had nothing it. bills. OHA It system anything drove themselves The there's with obviously and nothing else. issue. to OHA which here manifest the and lease related is And

And out so it's a came last new in accounting the just that pronouncement quarter.

that to a the that of non-cash core So just is power issue, doesn't earnings the represent accounting vehicle. me

Paul Johnson

Okay, thanks for that color.

$X.XX cover of is that am do that I today, maybe Board obviously I know higher roughly look earnings while the to to impairment sets see I my quarter at of guys guys this here $X.XX just a earnings sort maybe your Secondly, going today dividend onetime I a as you comfortably earning obviously think from you than kind guys to forward curious, for made $X.XX, dividend come the path [ph] dividend. charge of there's run the lease get you rate

get to So some steps can the walk I mean there? you through of

Ted Goldthorpe

partners my why weigh and Yeah, I don't in. start can

we You know originating if just monetizing natural a where assets, see amount picking is, the we've number growth. spreads. up towards been just decent assets mean of we're I one earnings look reposition I have Number path portfolio the obviously you at where a the we of been and think one

you'll get some I expansion. So think NII

lot have We issue think have to that's reduction BCs. part don't we by our going and an a Obviously LIBOR be of the matched funding hurt fixed. funding, is I probably been for of

of So accretive basis. the transaction. on for we're earnings very OHAI that's NII an to been a shareholders headwind bit that's able close Clearly and extent to

covered really can felt actually dividend So off to think are were the we of level grow well set we by we today. we operating we a earnings earnings. where And we at where try

Paul Johnson

waiving to basically And to that about or XXXX, first still fees dividend XXXX, I $X.XX then level Okay. correct make correct? first you to that is is quarter quarter committed just sure guys are through think the

Ted Goldthorpe

Yes.

level that a take accruals the NII for NII explain just back me happened April that was let and The any at So before a guarantee. guarantee adjusted step Xst. gets set known

cents. the So, actual it. if we math you around it But that run committed doing are guarantee the and now through still $X.XX contractual. is to It's still doing

Paul Johnson

then the I'm and in BDC could that just you me as just familiar bit future? provide can hoping more Lakes what of Great for and kind I remind are lastly I quite plans Okay, think a was JV, with little color, what that don't is the exactly that you

Edward Gilpin

Yeah, goes other one into tranche with venture so similar unit BDCs have bank the between it very, this is unit a whereby bank a lot tranche ones a other that very the we do. to other a do of seen lot joint the and when we difference of you've has large most a of origination. this The SSLPs vehicle

can and to so any we approved six. last unit get think we their saw and So leverage year veto deal origination. tranches We off XXX I

about been vehicle. we've So the into pretty selective what goes

true joint of a where it's of big a this just just not leverage -- get banks off is we play originations. leverage to the So some like pure a partnership actually it's play seen you've ventures, not

Paul Johnson

that Also leverage are you guys into vehicle? putting

Ted Goldthorpe

vehicle the a is to of out Antares the or well fund vehicle of out a in Aries again vehicle itself last tranche first [ph] dynamic. the structure kind kind before [ph] similar main Yes, it's unit

no It's out first big selling whole a portfolio. It's a first piece. a a piece different. basically tranche bunch. oftentimes against We one out it's unit unit So we'll sell tranche, do basically

So like times probably levered and than are the more of vehicle returns leverage it's CLO is pretty equities similar. this low, kind five

our think very actually we risk So shareholders. it's reward good for

Paul Johnson

my That Okay, thanks for that. questions. was all

Ted Goldthorpe

Okay, thanks.

Operator

you. Thank

is Ladenburg of Your next go ahead. from response Nolan Thalmann. Please Christopher

Christopher Nolan

a target Ridge for Either Ted, Portman now? Hi, Ladenburg Thalmann. there is ROE

Ted Goldthorpe

year you -- have adjust you listen, have which XX X.XX of [ph] right low is I time to over rates the overhang the obviously is think amazing. treasury think pretty below now, I

mean need to where think striving I I have that's we to be double ROE. should be. we a digit

the from if that. all a you through I there's path think that both I rise and to we talked our rates you at to when models initiatives about achieve look benefit interest extent that think projections these earnings and greatly

goal our So hit rise double-digit tracking a single-digits. a today in -- absent ROE. we're we're to And today rates should high be tracking like

Christopher Nolan

sounds according calculation, that able envelope a back of so it success the quarter so should new sort then X.X% a the be $X.XX pretty implies to And like you're single-digits assuming hit great. to dividend, my that roughly Okay, on of the current the dividend high ROE stable? that

Ted Goldthorpe

that we to set we dividend we at about policy place set don't talk level it hit. have guys to we mean I can to to a because where want know Yeah, want you we ever a

to again to create situation So we've want new we vis-à-vis that And again time. our And be comfortable we feel can the where quite power and distributing been stable. very stability. again in earnings income some a dividend policy NAV for is we be going then over earnings

but dividend and appreciation the stretch stabilize at NAV. actually achieves allowing high this nice not think stock we very for we to yield. pay Therefore yield, us time the us the have objectives to to dual a distribution shareholders, So upside of in potentially maintain forcing can a still same

go are just in because where to of a distributing we're continues down kind income? over We NAV situation

Christopher Nolan

Understood.

to turning that September. unsecured sheet your believe balance are around What's in Okay, the callable I the that? thinking notes

Edward Gilpin

they're the other through types of in baby and September we'll to mean not that we I flexibility. debt. to or the would them is could sure to or that the where to I ourselves bonds eventually X fixed restructure a be the in extent leverage above we Yeah, put more thinking through want situation issue try call flexibility that X have go we're either we new yet but Whether think those that callable structures

Christopher Nolan

revolver? towards issuance expand inclination the the another to debt or Is

Edward Gilpin

debt at whether we possibilities room doing is looking But or issuance constantly to revolver something but off it one I expanding there's I either looking at that think we're table. are mean Well, another think similar. I it's do both. don't the

Christopher Nolan

earnings? that the question, final -- do guys from how any the then Fed to guidance and might on you, recent much move, earnings as hit Got impact you the have from

Ted Goldthorpe

Yeah, see have you okay, don't [indiscernible] we the guys I I in XX-Q, our funded. yes, we reality -- out mean would is the a you'll -- see the not you'll match is, exact we're reality provide that information. laid that mean

affect So that's -- rates policy. term models definitely cuts and earnings dividend again into short but our earnings and interest factored we all

a why rates in or the So for see like you think short so the I environment the cutting are usually good question XX, in they is cuts where sector on they economy and are the page we're BDC term you can Again, it's rates. very then is is cut and Q in not good obviously news rates the BDC recession sector a an ask weak. always

economy the is middle U.S. very know market, still the You strong.

tariffs like that we a have much wars multinational than and things the trade moves companies bigger Chinese So impact and on service. currency company

-- companies pretty you credit the is So, well. portfolio are and in our very, good our continue very to quality hold still

Christopher Nolan

sorry, Great, you. Thank taking okay, you for thank I'm me. that's my -- it for

Operator

you. Thank

next Securities. Your York of is response Please go from ahead. JMP Chris

Chris York

Good and forgive I And asked of as have me managing if my been calls. morning a also taking am thanks they guys for questions. couple

I have the about morning. Ted strategic of So advisor questions a this couple

the how the for BDCs companies any debt specialty So Canada the or management the I'm Mount a the for are cannabis advisors picture about co-investment then given niche? in if capital the advisors a you growing and industry. industry curious funding investment of bigger Logan demand are this cannabis thinking exemption by evaluating and then potential and in

Ted Goldthorpe

question. Good

-- shareholders we're going for not a pursue. is it's it that Ridge vertical Portman think to I listen a

limited is I what in company think company pretty listed sector. can cannot related and being sector interesting. and are the we that do on actually we But Federal reward NASDAQ risk a

mean doesn't legal So as federally because you -- just is it's know its state there legal.

we'll it the around vehicle lend it an would us even if yielding love we mean doesn't allow do where And just to perspective reality first are be the have is Portman capital greatest that then have their allows sector we place And we hourly to thought low need us -- difficult Logan do we of some to I what out this so do, in just do that. and very restrictions Mount and we co-invest. from for circumstances us be the we was to -- Ridge. to limited it vis-à-vis of Logan we And there's hard. Mount cost lanes,

full able to we a to to a talking shareholders for to we're when that [indiscernible] family extent deal securities So and sponsor a that might doing Mount or our shareholders. them of are yielding for about Logan are our offer products a together work suite

is Logan vehicle. Mount So basically lower higher levered a yielding,

Chris York

Kind lot then of gears minority week makes confirmed of Blackstone switching which BC And investment positive announcement. a this sense. was quite a so by strategic Partners

So I the disclosed XXX terms but reported about Journal being weren't the Euros. it think million

So Partners some strategic expect to BDC? help investment should your that of how could credit and BC may investors receive credit grow this this business investment

Patrick Schafer

Another great question.

just a credit days was and couple a of expand What sheet us this So it is yeah balance announced to ago. business. provides our

obviously know our our invest scale This in scale. to us piece. alongside direct there to You business allows is benefits lending some and

Portman this for shareholders. good Ridge undoubtedly So is

BC the vehicles in We partnership. we better now are that Partners and And much of credit capitalized different a invest we've products. capital can got pool

business the be the I So the I head shareholders over transaction of the time will more Portman benefits of see transaction. excited our think as Ridge and about credit can't

Chris York

the terms in and you could may you could originators then be think remind team Got in reasonable of size it investment to investing maybe professionals? or is your us team that and be of then it

Ted Goldthorpe

Yes, of part so the mean I that's process. obviously

our and investment professional we've company for a operation size. of got professionals that's non-investment XX a and today large very So

can risk our And be we obviously that funnel shareholders the are bigger the create belief better the are build opportunities firmly to the and reward So to of grow we see. will built bigger. we

like strategically not and this mean transaction a transaction us to cashing elevate help meant is our I in, yes, business. a So, that this is is grow

Chris York

it, were my Got those questions.

So insight thanks for Ted. the time and

Operator

the Ted further back to this no Goldthorpe. showing am over to call the I like would queue I at time. turn questions in

Ted Goldthorpe

with thank very months. shareholders our very you to you we over thank next to continuing Thank you. Well, and for support forward in call Great. for continued engaging your of and the much couple much look dialing our

Operator

concludes wonderful have you Ladies conference. Thank and today's your and participation gentlemen this for day. a

You may all disconnect.

Portman Ridge Finance (PTMN) 7 Aug 192019 Q2 Earnings call transcript