PTMN - Earnings call transcript Q3 2021 | Portman Ridge Finance Corporation

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Operator

Good day and thank you for standing by. Welcome to the Portman Ridge Third Quarter 2021 Financial Results Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. now today, hand of Jeehae would to conference the I speaker your Linford, Instructions] like the to over company. [Operator a representative ahead. go Please

Jeehae Linford

Thank copy release was Finance yesterday, Portman November earnings you. company’s market welcome on press distributed call. third closed. release, after A conference section along with press quarter conjunction Form XXXX the Good Ridge earnings Investor at An X, and Relations of morning and Corporation’s www.portmanridge.com the be website filed SEC. with an earnings XX-Q the the presentation with yesterday in company’s is in to should available reviewed the

of future As Please or a involve of Portman go conference Goldthorpe, the a note statements Ted. call contain update those forward-looking results this number described by risks Ted a with statements conference turn number Actual result results forward-looking the and today’s from being as of call materially obligation I'd may like Officer reminder, a are the recorded unless may of to performance Finance Portman law. any purposes. of to assumes Ridge the over call that to such now in required Executive in which Please no differ filings company’s forward-looking that, and for replay statements, uncertainties. is Corporation guarantees With Chief factors, Ridge. including those SEC. ahead, not

Ted Goldthorpe

highlights our see third operating and our quarter, Yesterday financial Patrick joining Patrick in our results Jason Portman Good Officer, greater the its and investment earnings risk increased and adjusted distribution you. provide will Chief well XXXX activities portfolio Chief opportunities. August Roos; overall provide BC discussed we split results. will strength Thank Jason the our our our I announced a reported earnings, quarter platform this and reverse our I'll in quarter evidence strong quarter completed Officer, and value. and commentary split. Ridge company's robust stock of Origination our am quarter covered was net afternoon, Partners Schafer. conditions effective detail. and beginning discuss generated reflect on and and of will this for markets, which and performance everyone today more brief Financial the to thanks metrics call. third asset We joined solid by all that Of so morning we on X-for-XX a XX, note, Investment generating XXXX attractive we're

share, per quarter improvements in of $XX For in joint X.X% quarter, end NAV the we've was share per quarter XXXX, our reflecting broad and third prior $XX.XX, the of share a NII an as of ventures. compared $XX, per $X.XX increase portfolio of of generated or NAV debt to based $X.XX

notes the HCAP of that intent about time. X.XXX% we Last also as we've to proceeds in and growing of the previously quarter, unsecured asset notes, full front, $XX.XX X.XXX% our spoken On of the leverage corporate redeemed notes. quarter, senior cost million the million and in $XX.X were issued third In the million generate base X.XXX% redeem a used full we transaction. fixed HCAP's of the assumed costs part to deficiencies over $XXX

Partners’ by stable other operating a a level maintained at savings we the of we in interest higher yielding over average relatively As we quarter, of result, materialize quarter BC grow generated cost Furthermore, impact quarter to continue the these portfolio to continue third higher assets. will driven quality reposition weighted our savings debt. time and expenses believe lower to originated a to and and as

participating shares. the in related X.X total following our a to we've we to program million of share the last of repurchase during activity, a period quarter And quarter. news, M&A resume by quarter, our In of third We've buyback program. repurchased we're end addition to as ongoing a that the continued result, restrictions corporate indicated able second

to Our marketing continue factors. buybacks the and expectation remainder of is year conditions the to under other the conduct program based on throughout

summary, will on both report pleased yet to of $X.XX yesterday, general $X.XX a as consideration outlook related of the ongoing declared the consistent factors. distribution. investment quarterly quarterly board performance level into as performance earnings, basis per as continue prior solid assess well Finally, on a date. quarter performance company take activities. the another In This levels from to represents increase the directors of board reflects the company's we and share The and portfolio announced and to the economic distribution and quarter will a are

of good about overall half, portfolio very overall M&A terms in over last feel the leverage terms progress, a where activity and we competition. following our and In sit of we year

our to continue all but accomplished past I capacity long in investment opportunistic much being the We've to activity. our we lower couple that repositioning Furthermore, portfolio increase proactive our the target assets. have the approach said, of for Officer review we of refinanced will over have our result proportion we originated turn in savings Over Investment run. Patrick an will which call take the this that to Chief the this targeted, debt, Schafer, will grow of regard. in of quarters, long-term overall the leverage range, the interest at BC and end with With

Patrick Schafer

Ted. Thanks,

Turning marketing first current conditions. to the quickly

Lower XXXX both continued activity average are and to current as well of driving and above growth contributing experience repayments. and Third as all origination elevated conditions. transaction factors these volume post-pandemic economic quarter interest activity sales rates to continued market and

with over invested which the In market and alongside We had second these other strength terms the XX securities half. Partners sector transactions two our and repayments have into year on We an in value With first all investments from total in a only quarter of originations debt originations of debt were during active the the and existing million As made repaid $XX.X entities. completed or borrowers of million. borrowers. the BC quarter respect with we half many XX caring of of the outpacing investments repayments. carried exited were to originations, into $XX has in materially noted, a total,

Excluding short-term end X% new average new and the investments XX% investments these was second the basis securities The points. of were spread were sold on of XXX lien quarter, weighted investments prior were first securities. to lien that

Additionally, we made net into venture. million our investments new joint of Lakes Great $X.X

XXXX, of positions or equity $XXX.X XX XX, quarter, of quarter. spread On net September In stated XXXX. gain. of for exits XX, million accruing par the loss, as active for non-accrual XX, of were the accruing at fair of X.X% September discuss as an XX, XX, In investments a par approximately repaid I'll gain securities X.X% repayment originated approximate less resulted million June on status of On XXXX, on of points the XX represented to the exited on now were value yielding the two value Ridge investments of and stated repayments. over and securities, joint to were as and our first gain positions, of further securities. to equivalent $XXX,XXX. or to Relative Jason on as to quarter. ventures points in and $XXX.X X.X% results the of cost total, compares if and investment aggregate, XXXX, quarter basis, fair $XX.X XXXX during last XX, of of was has and to as quarters respectively of million cost as This net two debt eight disposition turn on of September side, a CLO debt that debt equity XX.X% marked June these securities $XXX,XXX June compared call relative XX.X% to status $X.X portfolio XXX while $XXX,XXX financial Non-accruals net compared XXX on spread the yielding caring X.X% XXXX. accounted XXXX. as at our non-accrual LIBOR which of a marked and accounted our and Portman for of the basis to debt approximately million value we debt represented securities accounted basis a for LIBOR of Six of the to

Jason Roos

Patrick. Thanks,

Ted August XXXX. As XX-for-X we during reverse XX, noted, stock a third quarter, completed the split effective

per retroactively reflect split. all metrics to the common As and adjusted share result, a have been shares

and to million. and million strong fourth in $XX.X of of level income by prior Total million, of the in GAAP from higher income to investment $X.XX QX of quarter reflecting per quarter, or million income net to quarter, or quarter $X.XX results expenses was $XX.X QX decreased the to interest Turning increase expenses of received a was This income previous the higher investment X.X% in per capital quarter, in $XX.X million our Total share, the or million, the for QX compares investment an $XX during million from fees $X.X net million for quarter. share for driven which compares previous originations. $X.X the total $X.X structuring XXXX. $XX.X

we stable length, are which discussed has grown significantly asset year. expenses focused of very on the have a base, in maintaining level As we at against our operating past

assets costs our a operating grow base expect and portfolio. expenses the as of rates We average continue fixed driven across spreading by of further to seek our of weighted interest across larger leveraging borrowings lower we to our

in per per the quarter-end, Turning of million. excluding straight share, share. were share $XXX to sixth per $XXX total we at Net assets portfolio, $XX.XX quarter. previous derivatives increase $XX.XX This we per the of NAV or from increased had $X.XX have share quarter investments our million, that marks an

sheet. liability of side to Turning the the balance

of under As $XXX $XXX.X our of we X.XXX% notes in XX, of million of notes total comprised secured credit million outstanding, in a had and September XXXX, due $XX.X par of value facility, XXXX. due million borrowings $XXX.X million XXXX, borrowings

HCAP now are we this of with of debt in our at transaction. legacy full approximately debt, the capital structure that X.XXX% pleased HCAP the as part refinanced composition million third we time. During $XX.XX we of quarter, Having the of notes had $XXX assumed redeemed million

X.XXx ratio September perspective, XXXX, at quarter ratio XX, a debt-to-equity was of regulatory our gross coverage end a asset on From basis a was As X.XXx on basis. and net our XXX%.

range objective opportunities. target believe that to Given stated X.Xx, remain we to leverage a positioned pursue has to our solidly growth X.XXx we been of to overall

we $XX.X of available an As borrowing cash under million credit $XX.X and additional facility. end, of of had quarter $XX.X unrestricted million million, of cash the capacity restricted

XX, $XX.X million aggregate Our commitments stood unfunded September of as XXXX. at

of declared of quarter distribution XXXX, Goldthorpe. increase quarterly I XX, prior of Ted call payable to a approved by share, on that, will per which record November the Board of an on yesterday, XXXX. over close represents levels, $X.XX back to was per $X.XX to With share the the XX, stockholders announced turn compared November business at As and

Ted Goldthorpe

saying repositioning, long-term in terms refinancing made close we've the Thank by active debt. we're you, Jason. our that of progress and pleased with I'll very deleveraging

on focusing basis. are Now of that we the consistent a lifting on to earnings and much generate steady heavy solid continuing complete, is results

We for questions. very of to for ongoing are to and distributions our now be our our once our shareholders. I'll the any to remarks, concludes also over pleased your for support. turn shareholders prepared This all Thank increasing you it again operator share per

Operator

Instructions] Christopher of Ladenburg first comes Nolan line Our the from from [Operator question Thalmann.

Your now is line open.

Christopher Nolan

nonaccruals, is Hey accruing? is guys. that it ATP now Oil correct On

Patrick Schafer

No, to It continues status ATP but is in so in no in not technically for there's accrual direction. position direction. it's position, receive in it either cash, accrual equity either

Christopher Nolan

And Entek Raven? how about and

Patrick Schafer

flipped out refinanced par to And quarter. essentially Raven is was at a trust. during liquidating actually Entek the

position amount that's equity very, now, that That accrual part technically status liquidating just there's So that be is no It's ongoing. over. small either. trust a very so a will a in of there's for left

Christopher Nolan

that, The what loss, Great. million for the please? was driver $X.X realized

Ted Goldthorpe

is would at above, exited or and were this say I carrying value flipping a was Yes. realized. handful that slightly to unrealized positions quarter of there the during

Christopher Nolan

structure provide guess question capital I higher you final color can then And that? revenues. you. fees is Any Got and on

Ted Goldthorpe

role I that's take had would it more growth BC a to arranging credit call a the positive the of this few function in deals and larger those a platform, trend upfront, quarter. in, Yes, of, fees of enabling the and we taking say, of a

Christopher Nolan

in get the will Thanks. back I queue. Great.

Operator

Our Ryan from question next the from [Operator you. Instructions] KBW. of line comes Thank Lynch

is line now open. Your

Ryan Lynch

like questions. my pieces moving makes, of the from Obviously what accretion really a Hey, earnings to is the lot the merger-related understand of good accretion accounting difficult kind creates afternoon. true think, earnings with power. taking for – Thanks merger-related where really, I that

so was quarter of of third the in accretion? statement the kind income the through can operating right have kind So the if could the now merger-related if us know ran tell is that out by you of I can and kind level but or skewed those true don't back, earnings versus dollar come can this help you provide amount we you you of – accretion that – what what

Jason Roos

Yes, yes, sure, question. Ryan. And thanks the for

So in out footnote we that try break the in Q. did investors tax to for our

accounting there accretion. a you'll to that's specific line item like see year-to-date So purchase

that through year-to-date basis. the So accretion will a on the number P&L. that's run That's

what was So last the have number. you just the quarter back year-to-date out to to get

I million. think – it's think right around remember $X don't million, I I off-hand, $X

Ryan Lynch

two deal That's number Can helpful. million the post came assets, X? you that and those then – a sourced, about you background the with just those are assets And about talk – did JMP. Okay. how how two, what from come about? are purchased transaction $XX subsidiary quarter-end of were And how that two like how how guys on like

Ted Goldthorpe

Yes.

they sheet announced and I that to don't a have mean, there It I why start? really want is some assets well, with firm. we that Citizens very buying obviously were residual So up. that balance relationship on JMP, was we close knew their clean that Bank

cash stock. a did we instead in NAV it So of at transaction,

we And is what fair below true we think at we so market to the purchased, value. purchased assets

And very, and and our to think we of stock, transaction Portman think in done made were our stock obviously got given we So previously Harvest, quickly. the of they've Ridge good JMP, I transaction. the their very money was pretty we Harvest – bunch a we'd with And familiar given value. timing with able move the

So transaction. it of it very made synergistic kind a

obviously lines. assets assets those And our we off quickly. then leverage should put additional obviously on So just relatively roll can given

very a to it's earnings. So very, very, transaction accretive

Ryan Lynch

background. That's helpful Okay.

through there long-term your positions that core a going are you much of view came break level that kind has those. you there's looking mergers you as working Obviously, of The down Number the assets. core portfolios in kind kind proactively of kind of assets still and to are that monetize of was, off that in still investments and guys with to the BDCs two books? of guys and there in how kind in of Do of you Harvest other some bullet you kind Slide other those kind positions and time? the still assets that monetized. and remain view kind some that Obviously, had Garrison, of be are those or that question mentioned X, from I two over those OHAI looking are of course been run three monetize the will OHAI the at remaining of Or you Garrison any where still at long-term normal portfolio

Ted Goldthorpe

Yes.

of OHAI Garrison, obviously to doing monetized things prices. the monetize. are I we and happened So mentioned what's things And want well kind we've oil think earlier Chris which with like given ATP, phenomenally

in think about are. they feel those I where So portfolios we both pretty good

see we that roll naturally we've think largely there's additional HCAP refinanced in exit, here wanted you'll of names probably positions out get some the off. these love And But perfect to a that. kind really we to So would of. I world, done

valued because book. Harvest feel portfolio. of So good proportion we that spending very a names names time the and feel potentially the And these we there spending a it's the of just on chop not some we're probably again, are monetize. to we they of percentage names Portman book, of very, huge about the in amount working a But disproportionate of trying we're down. about But as couple a – good Ridge again, here are overall we're to where

Patrick Schafer

exit for Ryan, say, accelerated repayment other was as which refinancing only was positions and strategies optically to we we're valuations. a was. we different riskier of kind feel the it why particularly the Garrison, very show outside wanted thing didn't lien some I'd that those It And to as that both there OHAI there at good were able portfolio, But OHAI. of Yes. we second viewed intentionally to for reasons exit said, like the for to world

exits so significantly some there. Garrison immediately kind of, for a the again, Garrison. portfolio, was whole closing And was Portman there heightened as And post over-levered impetus of

more some expedited heightened over of for some of rationale process those So again, there kind a assets. was, exit

Ryan Lynch

understood. I Okay.

Ted Goldthorpe

say, – interesting one an I'd just other little it’s theme. A

of actually is assets environment, refinanced stuff higher-yielding really Right like the a two as related refinanced actually changed typical – to you now we're getting And your around call spread-compressed out I originating out not same like in impacts mean, question, obviously we're refinanced much it's we're Sorry, last, get what really hasn't that out years. of of over a COVID – the the we're the getting where is year. originating. your it but in absent environment. last

actually not our taken So out highest-yielding healthy. getting I is which are the of things think we're pretty necessarily positions, that

Ryan Lynch

I one queue. Got you. then and hop I'll back just can the one, if And in final

There's strong years. to been can mergers over prepayment. now, far right pretty things a this had the bodes lot it which well on active going deploy growth but goes obviously really a The as also several quarter. deployment, repayment is as guys capital last but obviously You of that's market pressure and

kind some beyond, have to assets, and and fourth the to your is that. grow time fourth into the on just same quarter guy’s what which some to and the you're could net So XXXX? guys At capital monetize confidence, pressure are What's as early going the also also as in your you growth. build quarter – deploy put outlook portfolio grow ability just far of and for looking to

Ted Goldthorpe

strong couple a Yes. in some pipeline or a to out sitting think I or all related. of bunch because be I'd a two transaction a Look, end I'd can of pushed weeks. here have come say pretty sit time today business lot reality points of of gotten out generally by a particular is, cash There – are timing quarter say it that we where we is year, for a pipeline Ryan, where the have particularly pretty strong had and our we

it of pretty repayments. the and little allow will feel when QX we continue deals, general down of – on say from and that a wasn't pedal on wasn't perspective I grow closing origination activity think repayments to originations grow just the kind repayments. half slowed I just originations the I'd like and to naturally good to portfolio timing net only us repayments of – to will were we're trying a saw basis. were intentionally be put our it able bit that has in So say We a absent to relative we we the or on about portfolio

Ryan Lynch

me. I Okay. for Understood. all the That's appreciate time.

Operator

you. Thank

Our Slater. of Steve the next line from Martin question from comes

now line open. Your is

Steve Martin

environment? I you the guys. portion securities I the was the flipped talk equity this current securities, equity have And what's of active lot. grown, the the become cetera. but negative? it's a of every portfolio, the is what some Thanks and I you I terms on almost timing what And ask sort nature a a them small to three, very now non-performings Question of of et do wondering to Hi of sale can the CLOs continues think elimination Because quarter. getting expecting workout and – are and and likelihood, that it's granted about it's Can of the big you comment in runoff? in think

Ted Goldthorpe

No.

say, on a CLO very very, equity, our I books. So down of percent got it would to we've small

negative, is it's this say a like think you when So quarter I massive X%.

of expected we not our so X% larger of than kind really business. to overall be And

think a spot. we pretty So it's good

of products in GMP come obviously some out, picked transaction, but pieces up of We part the that are structure transaction. are legacy as we this bit a – to actually of little we expecting

that over should I think And not migrate should core a part to I again, our increases massive CLO equity. said, business. have I see as our don't going It's – in think us that down. real time of So you're

any those buying seen color. I a overall expect can material the you've obviously his see the third this think I were quarter, our and side, quality non-performing credit is don't some portfolio change we real non-accruals in I our, surprise. by figures. obviously to pretty of of think stable down on I Patrick mean, think about add

what do don't expecting I it about us – he equity, because the see depends really now, about of think And talk you as in you then do the increase equity want to on to a So big portion? talk I want non-performers.

Steve Martin

just reality time mean, converted that Yes. the piece was of got a to of one promissory to on a one, note add cool I ago. non-accruals, some accruals And equity to the is our it

in capital a were note, the that So We it really into never moved interest into accrual. never been something any have just we in structure equity regardless. essentially but was expecting up – should from and it changed

never tag, the the So XXXX And a kind and liquidation a we impact. of judge had then payment XXXX. but for wind course partners, one we've another final on it get is to had just a on, negative and waiting any over been of the tank approve is down that happened reality

sitting to we waiting out to be in kind there trust sent – just of So a cash willing in to be waiting, us.

speaking, point naturally just time? some non-accruals, of should speaking couple again, generally over at a we lose So

Ted Goldthorpe

sorry, Steven? was, And what what question was third your

Steve Martin

Equity?

Ted Goldthorpe

Oh, depends over it We of positions, kind looking portfolio. Yes, at. take a the, you're again part timeline did on equity. as HCAP what the some as little bit on equity

our any actively added generally had that I in a on not the it's seeking quarter, – not during have side my that up position of of We but the off of speaking, think got the positions. head. top not can we're that, marked business we'd one There's out positions BC warrants that some equity kind new equity

that think – more increase is, opposed the operating driven by merger model. looking be at general to opposed be I as you'd is the HCAP as So you'd a to

Steve Martin

All you right. very Thank much.

Operator

you. Thank

to from comes Angelo of question the line next Investor. Private Our a Guarino

line is Your now open.

Angelo Guarino

plan and manageable. on know, looking really I I we the growing refinancing for the pudding that fixed on what enough that of came debt everybody high taking I at reverse proof split congratulate going that mean, us to post the, are, the out said, in are my performance. the and – scale I a thanks said say asset to wanted you so have KCAP so with and laid do all when just be costs into the post you base will question. that Hi we when town you're to wanted question. excellent not you lay really

congratulations. want you a Just you did, and that make you to note do, said

Ted Goldthorpe

Yes, Thank I feel – that. we you plan like feel very we a really really appreciate much, we of feel we've achieved like and layered we Angela. kind mean, it. we

will the continue think now, I really hack think you so And but quarter. we at is know, and think have the the, where I yields time? quarters, to So goal also dividend I we And got were And see be can. portfolio we basis, to momentum, next yeah… see you'll away underwriting. we've of the think, costs disciplined couple earnings obviously great we a go-forward over raise on this to increasing a able dividends pattern we maybe would hope Maintain

Angelo Guarino

some before, from someone you partners with who with off KCAP say, know, wasn't you I of was… BC showed familiar yes, the before questions

Ted Goldthorpe

know, flow. well, talking about deal Okay, you our we're

we're capital. proven. the to low to better partners give from a BC going access the partners us is those to you to going are, deals know, to been to is going a BC going stuff have cost a bring All be better Our table be things quality.

keep and keep keep So it the it ball? bleachers and just, pointing I up, in to the

Angelo Guarino

Well, thank much. you Great. so

Operator

you. Thank

the Our from Martin comes Slater. line Steve of next from question

now is line Your open.

Steve Martin

question. Hey done now You have that and guys, your what like? comment does on look Can I you XXXX probably spillover? forgot one

Jason Roos

Yes.

where to were income the fully distributable dividend with and it We're where we that's comes going in just up looking drive just for as, uptick uptick on a to – end where from the of we from a in of if get the little But And the obviously year-to-date QX any to kind at possible. depends of point. that ticked year. I we as kind where we – taxable bit the a distributable and that'll up think QX. the drive it dividend for So where – overall – land kind that special with will in quarter

would yet. and that not distributable income? that on baked looking that we're So the managing we're it fairly I cake But – at isn't say closely

Steve Martin

which which on you Can No me CLO where two also tax benefited a some did. sorry. this, bit I from these tax got idea the also a - we M&A Schafer from accounting deals you advantage, of advantage of way we a A we is a it get on. things focused in? is, Patrick bit work, we of give am a And we're

of you're income of the off. a going small said, now, the is M&A to to kind see begin of increase. CLO because As equity Jason our done, spillover are benefits And accretion part of because is the and rolling kind business such

Steve Martin

give you where stood Yes. estimate the A of at end it Schafer by Can idea - Patrick an core the your of order?

and kind we I fully income distributions when So said where up versus look just ticked can right that we at there at on you provides end tax were say, mark. right see a distributed of the QX year-to-date that, distributable we QX, and footnote were bit, you'll that is of where landed the versus the today.

figure. don't remember. the, recall dollar the So as But I QX, we are exact I don't distributed. under

Steve Martin

very you much. Thank right. All

Operator

this turn over to call for remarks. would like closing to management the you. I time, Thank At back

Ted Goldthorpe

our everyone next call. you speaking dialogue very the joining Very forward you today. on everybody you to Thank of to with the continue us much. for Great. look to look on shareholders. for call we forward and Thanksgiving to And we Thank happy all

Operator

today's participating. you concludes call. for conference This Thank

You now disconnect. may

Portman Ridge Finance (PTMN) 5 Nov 212021 Q3 Earnings call transcript