PTMN - Earnings call transcript Q2 2020 | Portman Ridge Finance Corporation

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Portman Ridge Finance Corporation Conference Call. An earnings press release was distributed Thursday morning, August 6.

If you did not receive a copy, the release is available on the Company’s website at www.portmanridge.com in the Investor Relations section.

As a reminder, this conference call is being recorded today Monday, August 10, 2020. This call is also being hosted on a live webcast, which can be accessed at the Company’s website at www.portmanridge.com in the Investor Relations section under Events. that forward-looking to projections filings the Portman SEC important includes that we with projections. call results for refer actual you Ridge’s factors conference statements materially and and ask the to Today’s differ cause from would most recent required Portman unless does forward-looking Corporation Finance undertake to law. Ridge its update not statements, by would like to conference, now introduce today’s I Mr. your host for Officer Chief Executive of Goldthorpe, Finance Portman Ted Corporation. Ridge sir. ahead, Please go

Ted Goldthorpe

results earnings call. you, healthy Good our investment joining Patrick respectively. several everyone. Gilpin consistent which share us families thank heir And and quarter's that past my results during is and quarters. Chief continue Schafer, and for hope portfolio the distribution the operator. to Last you We are pleased have Ted period its announced the we've and do challenging I'm XXXX income last with Thank afternoon, Net second Ridge pandemic specially level safe set results, and by the everyone discuss to of with joined for and so. very CFO, Officer time. for remained per during the Portman quarter quarter we Thursday, the and Overall, $X.XX, my Investment was a

as but per remarks, an management we XXXX. X% team from continue Ted stock Additionally, purchase share March a is repurchase net his of increase Portman’s to asset of XX, details and the Gilpin value $X.XX, of both Portman in program. approximately as will part shares provide

windows. by the quarter limited available volume purchase both restrictions during to and shares second ability Our was

program the macro putting stock lockdowns that options previously third in quarter. evaluate of the of second the levels for states place was perspective, various to more quarter the announced bulk continue a significantly repurchase challenging enacted program We persisted execute quarter. From and the anticipate during as XXbX to

levels, as believe and opening their reflects is companies better levers various on well portfolio for profitability within has have significant our valuations back the feel as we business. and economy we conservatism. grasp uncertainty the demand our a much own quarter begun the and While uncertainty up, There like our this still

As earnings industries been has hardest. those have quarter's hit from last portfolio during we call, insulated relatively and that been the sectors discussed the our

our diverse, XX debt and securities. borrowers Additionally, across unique portfolio very remains containing our equity

agreed portfolio one to but situations, continuing budget far to Our defer September its we have impact. average of ample exceeding position amendments - total of remaining have COVID has XX cash to instance, our debt quarter that And been aggregate, all to the covenants unique and investment the we are material of to lenders the of to In liquidity liquidity until portfolio the during of the pay its interest budget initial the date a initial XX size executed eight portfolio. are In is completing impacts referring are maturity equity the and COVID. across X.X% or has execution our By provide interest. thus temporary the meaningful, companies X% and financial of these amendments been executing the borrowers. due the portfolio or and boost companies

liquidation Additionally, in third April, receive realized of be company the early to a one should in of filed which significant through expect bankruptcy of with and principle portfolio recovery majority the quarter. for assets,

direct which exceptionally activity, the is loans middle quiet. source new the On investment market was traditional of front M&A

numerous pandemic, heading channels. making into reflects into position the of activity XX opportunities investments, as and flexibility strong our borrowers which our sourcing [ph] breadth of loss investment as credit well balance However, the sheet were platform, XX new through

benefits. par, spreading combination a loans to material future which and added we we at lower during recently quarter NAV the higher spreading is acquired issued Specifically, the assets mix should discounts of produce of loans

has of Additionally, portfolio that but yielding spread all-in a during relatively is a our return so we unchanged, quarter overall our significant assets comparable monetized amount increased. spread, were the

certainly Garrison Finally, not with but previously are least, last we announced excited about Capital. the merger

XX, Portman believe reminder, the the Ridge the NII As the proposed we on Capital. XXXX, expenses on be overhead We of per basis, Garrison merger simply June and announced transaction accretive company. of immediately share reduction combined due a to brief an will of

shareholder of leveraging generate additional credit significantly comfortable fully Portman we we Although merger exposure CLO benefit are platform, The across to deal that flow reduce our first the expect plays that are ordinary equity. our course. rotation out assets to will and increase lien in the the both return BC percentage economic bases through while in an generated significantly to

Gilpin, Patrick we that Schafer, of combination that, Ted in lead to the review can liquidity financial per a income some market stable the the for Investment our CFO with overview investment before remarks. higher stock and quarter, share, then will activity over capitalization increased of larger Chief and the trading call the our performance believe concluding brief call ultimately of With NAV Finally, turn provide for results I our and to and levels. additional for the will scale Officer more a the

Ted Gilpin

And Thank you, afternoon, good everyone. Ted.

million X quarter June investment of in XX, and $X.XX per $X.X $X.X unrealized to increase share, venture. of securities The on was $XXX.X on X% diluted $XXX.X As million, attributable up joint portfolio, our Freedom our $X.XX from XXXX, or at share. million stood NAV debt including the KCAP million per gains, mainly last or our

August pressure pressure the in period. compared second showed of the unrealized especially losses - of million our - per share $X.XX to on current and in week pay week the at valuation, commitments with XXXX commitments, of respect reinvestment and liquidity line pandemic quarterly Our quarter. or COVID-XX XXXX. to compared due the equity Net markets declared that XX, ongoing CLO quarter stood our of million to their share, on will in XX. out was year, aggregate approximately $XX.X last distribution first for our positions cash per right The The put second income continued at June to the $X.XX and unfunded With the in quarter disruption million unfunded as XXXX, $X.X on are of $X.XX legacy investment company distribution. it's in $XXX,XXX per in $X.XX $X.X positions last has quarter last CLO in share equity to

However, proceeds only borrower $X.X must unilateral the use amount as and the to subject to be are such subject commitment. certain restrictions is a satisfied leverage draw million before of by base, that down can this borrower of or borrowing draw on the a remaining right commitments

relatively and have side flexibility the position relatively meaningful believe liability we the in and limited liquidity that investment sheet, of balance On a commitments. with we funding are strong

under debt As credit as of million regulatory – per million our facility $XXX this perspective of [ph] our notes XXXX program pending of shares shares is of requirement XX, for debt. total average of XXX%. repurchasing of June statutory XXX,XXX $X.XX asset share. and times. we XX, we in of and outstanding for at announced XXX%, Under From XXXX, XX, the June settlement an of coverage had as BDCs XXXX, $XX.X ratio March our Net cash trades X.X million was June stock was borrowings and continued to above quarter the of repurchased XXXX, in ratio price which of stock $XX and equity our X.XXX% repurchase

as into shareholders, to means a We continue back buy to entering including value XXbX program. to opportunities expect shares drive to for a evaluate

cost remarks In Capital approximate XXX% market receive per ongoing of shares cash with and addition in Crest. of cash, dislocation in its traded NAV we of in Garrison under purchases in repurchase a of share of million to a of Ted retired of an our the KCAPL, proposed his and at additional or the mentioned newly agreement, value Garrison take advantage at par open bonds, merger $XX.X stockholders terms combination payment publicly XXX,XXX of $X valued bonds million approximately from Portman XX,XXX. Goldthorpe average those Ridge the Sierra issued will

We close over our like turn XXXX. of the Patrick the this to Investment quarter transaction to that, Officer. expect call would to Chief in Schafer, I With fourth

Patrick Schafer

page slide Ted. Turn the of to Thanks presentation. five

these than and the Great Of two the net of and investments purchased is be existing these made the of During new of points, was on but which and but into which borrowers, four the The borrowers. borrowers, at Lakes companies, BC remaining $XX.X of X% XX value, in total significantly completed XX% investments higher securities, Lakes investments given were new XX the spread XX were a which small new balance OID into these as [ph] of to on sheet currently were remain In we of market aggregate, venture return two almost also joint of totaled joint prior XX% investments. million were which end equity Partners weighted higher were alongside the to that brand quarter, venture the basis bonds portfolio into were investments of number on face excluding first the entities. that investments, environment. our other typical, being average will unsecured Great ultimately add XXX quarter, were

in if relative during or a quarter, at quarter. which a their p gain it were All March cost carrying our above or the represented acquired and million of eight resulted of over OHAI fully the legacy course XX, value was $XXX,XXX. value $XX.X positions of three Additionally, exited either fully or were of sold carrying to the we KCAP exited positions. positions, aggregate, In positions

for we losses recognized represent that positions value. investments. than aggregate or with value realized million and remaining were a unrealized sold an value, four for adjusting $XX,XXX. at carrying position carrying sold of of its approximately four between and positions Three monetized approximate carrying movements partially less realized, on the we their these gain our of Additionally, $XXX,XXX $X.X of above X% After unrealized

approximately LIBOR and basis approximately partially basis compares the joint points acquired an at yielding management Legacy LIBOR gain a offset on legacy portfolio, With securities. with and XX.X% stated gain, debt BC $X.X Partners of XXX respect XX, accounted from as Ridge X.X% accruing increased assets of and marked by of our equity as accruing XXX securities, excluding price XX, by $X.X marked equity million originated accounted partially X.X% by basis ventures. Portman a increased declined loss, $XXX.X non-recurring debt of of of million portfolio Partners an debt of BC which stated assets XXX over blended XXXX. equivalent OHAI par to by basis, spread took while securities June two a securities April KCAP positions X, quarter-over-quarter. $XXX.X On XX.X% Ridge and million of Our unrealized points and has of OCI, Portman for March OHAI of our approximately $XXX.X to quarter-over-quarter. approximately offset on legacy asset the to at unrealized of debt by assets debt equity X.X%, securities for was million and XXXX, $XXX,XXX spread debt securities CLO a debt when This LIBOOR marked on at XX.X% to million par to of securities, spread points of yielding of par and realized stated

period. XXXX, represented to XX, on non-accruals portfolio. Turning we as X.X% no fair investment X.X% of slide new June of the during Non-accruals value six, had and of the cost

Finally, the moving to subsequent slide OHAI progress to in can portfolio we the see have you merger. seven, externalization made and rotating the

have by non-core back KCAP With OHAI our only to the portfolio. Goldthorpe. XX% turn and We the represent reduced now of legacy call assets portfolio that, current I'll approximately Ted over investment legacy XX% and

Ted Goldthorpe

Patrick. you, Thank

with Let pleased quarter. we’re me the our during say performance that again,

the expected quality through earnings, Our merger. from accretive Garrison - investment portfolio and accretion sits credit a

the thank the their front, for they continue all with With as of consolidation come three main Garrison, opportunities On now complete be as I our and over operator up. over though focus merger to pursue like possible, for corporate questions. will continued the will shareholders that, will call seamlessly to turn next to your further to months we the I as the support, activity our would

Operator

Instructions] question And line comes first Ryan from KBW. your of Okay. [Operator Lynch from the

Ryan Lynch

taking Good afternoon, Thanks guys. for questions. my

to has one the with first do The Garrison transaction.

the guess, Ridge’s the Ridge significant is Garrison’s the the that deleveraging know, amount Portman for you Portland expectation leverage coming over portfolio you take balance expectation? that months, on in a of will be balance compared I to as leverage? higher guys prepare with that to portfolio has sheet, that, sheet order Is You obviously

Ted Goldthorpe

great that's Yeah, question. a

through Garrison relatively merger one investments. Number agreement. limited new So our is on is

their balance being investment from our dramatically, and activity some very, levels balance potentially one, deleveraging side, we're are expect we activity. side, the we about we the combination as investment you now, down very well that our discerning as And number So from new know, sheet. environment can of right quite sheet hope be, deliver would a very, through but can organic

So in way it's of pro something paths think we bunch from you where going we're and leverage forma entity that have do expedited we very a pretty to focused to down a on. post-close, know, is, the we're want different It's something to time. of period get

feel prepare for to we've question, But we So the basically the activity about really bar it. to for new high your good set investment merger.

Ryan Lynch

And guys pretty but do by maybe higher. talk of a bit or yield a Portman I muted in maybe if support a really important specifically, are and staying XX, BC you deals platform borrowers? a you and I direct stepping about existing from from that to the of the talk private the guys guys think back setting Okay. going bit right far billion Partners little the market borrowing strategies the to are But as broader $X.X not ton stepping partners. and on now, the BC market - a that know your slide you market again, is the you know, that really maybe still - little how to limiting, to Could Can is deleveraging. step there's you looking that bar bit that the and bit while have back activity the clients little you today. market, which equity topics Partners relevant lending markets of AUM on ability shows those as to one platform, little f focus Ridge,

Ted Goldthorpe

question, borrowers like, relationships. and think liquidity don't our [ph] to also our any are to there's best from intention I lifeblood cut Yeah, And off key I your our to mean, borrowers our really

firm we room else have do we've pockets our exactly best, other number everything our best one, a got capital to in of Ridge, to new activity. So use could - question, Portman and within we that ample But as bank our for have borrowers. your lines that support we

even So support necessarily our the raised though we can't it clients. bar, we've doesn't mean

Ryan Lynch

of you but know, kind four existing this, those Portman on sure I me I borrowers had Okay. Partners or all me, you I correct - mean, if four into went excuse Ridge XX got were except borrowers the said, heard the that wrong, BC portfolio. new think And platform, that borrowers if not I'm for new I point, I - across correct.

platform, BC about how in sourcing Partners across how policy sourcing me that. But across funds you can the So as allocation if the different is please wrong platform correct made I'm to deal can talk Portman and the platform? benefit well as fuel across Ridge from broader

Patrick Schafer

the to Portman. pass which during the of first to were Yeah. were borrowers what Portman. - BC four follow-ons trying of other we're alongside borrowers, of Hey, take new those and to to we at done for entities think new quarter, made can those new like within XX or of Ryan. just all part, was, And so Portman two the new then Ted it two borrowers, XX were as which But investing up get investments that for XX Ridge, with of then existing of and part. I'll add-ons to remaining I XX second were or the kind things but

to So eight get have time. examples BC in XX now done reasons of what same kind four, that Goldthorpe? on worked the XX was of of, of other at, which investments we're with alongside, entities trying investing other and Portman give alongside eight I at of were new the but various was we're the to the for connection there's

Ted Goldthorpe

think reason to Portman I to One hard is speak bigger so able getting question. successful candidates mean, deals And we've Ridge couple-fold. to bigger and why a can part people manager our listen, second part terms the you're in - in be capital. merger the of it's join without join subscale is, credit Yeah, I of your clients more to if to we to size, relevant of been be

transaction exemptive at Ridge NAV gets way we on look the only but relief, So things have a available Portman also and policy liquidity. every evaluate we basis, mean, standard. I works is our allocation not shown to very

access of flows it only Ridge. deal Portman all And the are Portman all flow, through relevant our has So that deals Ridge for to that. all not

Ryan Lynch

I Okay, afternoon. me. all sense. That's appreciate make for this time the

Ted Goldthorpe

Thanks.

Operator

the of next question Nolan Thalmann. line from from comes Christopher Your Ladenburg

Christopher Nolan

the quarter? release, there common Hey, that Reading second correct not in Or dividend did I am press misread a guys, the it? was declared I

Ted Goldthorpe

We did dividend a quarter. declare in the second

Christopher Nolan

Okay.

Ted Goldthorpe

So $X.XX per August was again, payable it XX. share on

I think to shareholders the of of record XXth August. of as

Christopher Nolan

Okay. reason The I only asked...

Ted Goldthorpe

unchanged. is policy dividend our Yeah,

Christopher Nolan

is August was only the second third is, reason that reading quarter. The I Okay. And I quarter? I didn't asked anything see the for

Ted Goldthorpe

have we - we've Yeah, a…

Patrick Schafer

March… did in We that

Ted Goldthorpe

it did March. we Yeah, in

early it their missed We because people did uncertainty of So with a to markets bit in we safe. wanted COVID. you dividend might that little have because it know the the was

four yeah, the and - following methodology. we’re payments So so in year

Christopher Nolan

it. Got

to sort expenses in related Okay. the Was there of deal non-recurring quarter? any GARS

Ted Goldthorpe

think there there I most there. think probably mean, in was, I for as part was the was, think But that not our there don't I I that - to I if professional think some don't fees. relates most it there's a that's lot.

I think great question. it's important to address, a

think important business. thing thing out do And BDCs. of this, drive focused headwind done, we're we're obviously on, the has and been that one to costs a LIBOR we've trying we our for really address, but I always it's all one of to very big

at every down really other we administrative business. it's And for incredibly every shareholders. something So through obviously the on. focused dollar way part spend drive on, that But our It's to easiest fees also M&A. expenses. we've trying to And us it deliver our done of that we're we're are looking legal and to benefits we

Christopher Nolan

to how third but quarter, Okay. getting down debt exactly in strategy just get the equity, on lower. might I I'm and I'm you you think curious comments, times – X.XX because are Ted, a as to touched ratio to the planning if there's at guys leverage that to And this take the in have

Ted Goldthorpe

looking you the number. that think for what to pro keep want we we're focused a Yeah, bunch on know, obviously - And between to number forma we're focused forward on conservative entity. the we're I what is of really relatively leverage combined is And whole reasons.

So it we And look question, Hill closed. restricting very, Ryan record, monetized do of also chunk previous soon focused did the assets. after big through you something transaction we the by very our asked when we're originations. that can it's obviously in the just do very at on. selling reiterate, if transaction, But a track obviously it We to we but the portfolio Oak can

a And I demonstrated to of some and able of merger situations. think we've so relatively track delever record being these quickly analogous

Christopher Nolan

Okay.

Finally question…

Ted Goldthorpe

yet if cash, [indiscernible] quickly, of our and you sitting settled. but restricted look as actually a of June we at but call that we credit had amount just were of really XX, it certain we in our decent a facility, balance sheet, hadn't it's cash, trades just executed, number

So sorry, It's look is on ratio when a like this kind it's X.XX, is equity that worth. am you still of it more more debt our – net like quarter’s X.X below I at basis, times X.X.

Christopher Nolan

final Okay. my that buying, at would times be on mean, be one-times that buy And Portland incentive NAV, - one new NAV or of fees I that $XX in would plan million worth presume? question, to guess the shares I then Ridge invest shares you that would you

Ted Goldthorpe

No, that's correct.

in the cash that So is newly then cash the well, issued Portman works [ph]. way then the pay at manager Portman NAV and manager be it fee and will mechanically, incentive takes the shares to technical buys

Christopher Nolan

balance in capitalizing so this juiced with sheet shares get, effect sort the you a of be now are would right, because equities? a the - trading of terms new All where

Ted Goldthorpe

we our obviously for earned the we - our like mark-to-market it's fees the a goes I think and great equity substantially actual below count amount feel basis And mean, about equity what but good we are incentive NAV, is, the earn up. on shareholders. a Yeah, obviously, message

Christopher Nolan

great. That's me. Thank it Okay, guys. for you,

Operator

further At this questions. are no time, there

Ted Goldthorpe

and one Well, on you your Ridge. Portman feel for be your free happy a have And forward Thank management. any please go Thank support. much very of about of basis, thanks great We'd you a of great again more out evening. for all to you tell all to to members reach questions.

Operator

conference. today's concludes This

You now disconnect. may

Portman Ridge Finance (PTMN) 10 Aug 202020 Q2 Earnings call transcript