PTMN - Earnings call transcript Q1 2024 | Portman Ridge Finance Corporation

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Operator

Welcome to Portman Ridge Finance Corporation's First Quarter 2024 Earnings Conference Call. An earnings press release was distributed yesterday May 8 after market close. A copy of the release along with an earnings presentation is available on the Company's website at www.portmanridge.com in the Investor Relations section and should be reviewed in conjunction with the company's Form 10 Q filed yesterday with the SEC.

As a reminder, this conference call is being recorded for replay purposes.Please note that today's conference call may contain forward-looking statements which are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in forward-looking statements as a result of a number of factors including those described in the Company's filings with the SEC. Officer, assumes required to call Brandon by Ted Chief Corporation forward-looking any will Satoren, Finance of Officer. Goldthorpe, unless Director and statements law.Speaking Executive Chief Chief Ridge Financial no Finance Patrick update obligation such be Portman Officer; Portman Ridge and Schafer, Corporation; Investment President on todayâ€™s of the Ted Goldthorpe to that would Portman With Ridge over I now call like Executive to Officer turn Chief

Edward Goldthorpe

markets share average stable on X.X% of portfolio XXXX. a income average maintaining basis. of of or at end conditions, call. spread $X.X our morning and our while balance today in quality XX Brendan are will I'm operating and and fair Patrick net of XXXX market reported Yesterday, XX the well-diversified with $X.XX and asset Schafer. of provide a year. remained per share.We earnings entities, operating thanks portfolio continue $X.X under and the per balance greater million highlights industries detail. XXX results quarter entity our an Good discuss industries earnings performance $XXX XXX investments entities per Officer, $XX.XX across portfolio. solid million. financial Chief Despite and saw the for earnings XXXX, par net strong Ridge brief the in of investment with on trajectory we our with announced Patrick joined joining our first or nonaccrual Satoren first commentary results million Financial an Portman This for $X.X Officer, will per we on Chief I'll and to on we by million investments challenging -- million and portfolio and provide its compares the the value value investment of quarter activities company's with the representing par XXXX condition and everyone pleased seven Brandon Credit entity power Investment our $XXX.X to target following

Additionally is quarter, million. dividend representative and time repurchase of amounts on extremely remains and fourth earnings during the activity Further, capital. believe asset as accretive approved as were up commitment capital return to whole as markets.For dry shares new primary in sitting for LPs of under value the purchasing since of exists the in have at XXXX strong market, private firms XXXX, our space.Turning our repurchases value first highest to the on powder, aggregate the highest pushed a return during Portland's of $X quarter of in to had tailwinds the represented fundamental stock while volume of record the equity previewed to of to by same been net we quarter all conditions quarter activity program BDC being fourth market a new up our continued compared quarter XX,XXX annualized picked corresponding the an XX% of in we active quarter excluding repurchase per call, believe has our per $XX.X value. our billion, the effect loan XXXX Board of in we cost share, shares net These Net continue which was the to for net deal share, defined to repayments which and BSL deals And undervalued. $X.XX among the asset the from first the M&A markets second shareholder an we've our $X.XX amount primary represents Directors XX.X% is on as reinforcing quarter.

to economic outlook first of fuel towards fundamentals the new rate quarter, with beginning quarter activity should combined we the of end aforementioned future diminished the for believe course our the continue private expectations second over credit and space Although, deal positive of XXXX. the hikes have and in the sentiment

platform, belief always point mitigation. platform investments to into that on focusing find the on opportunities, continue above only Partners win at portfolio sponsor-backed generally BC and their across quarter, being during management can selective company. we borrowers' or continue our our new been we companies very for be a and strategy new more custom to the provider.Our focus to a investment non-sponsor our on and based and To and risk just attractive to Portman nontraditional our borrower value ability transaction opportunities, Ridge tailor, that add businesses and capital over on Specifically one credit to portfolio sponsor both relationships the solution made through capital has

Our be that portfolio have to high a for in by further goal companies of our provide to our shareholders. investing the potential continues returns diversification

that, Patrick As to while we call take we deployment the Chief XXXX, Investment of remaining pipeline our remains further of to activity. for investment Officer review we opportunities also strong believe over I'll in well-positioned Schafer, new turn With investment into proceed and a advantage our capital investment are process. our and our diligent

Patrick Schafer

Ted. Thanks

presentation of X now our Turning to interest sensitivity slide our and of the earnings to rates.

with XX, As linked floating SOFR. XX.X% portfolio all of approximately debt our rate securities with rate these an such the being SOFR or to were as XXXX, of index substantially interest to Prime spread March

quarter remain and the of of first benchmark see the quarter rates levels, between market during resulting slide since the Originations LIBOR this the than hike to quarter last rate of from for can prevailing But year, SOFR to XX. repayment the originations earlier SOFR chart, XX, it year the pause million. lagged net market approximately the prior Skipping were from April the still narrowed and transition were and of cycle. rates underlying the to rates has first year XXXX. higher you our down below the from As Fed has above the the assets gap as in $X.X Fed been the onset tightest

borrowers, purchased value, different spread the SOFR entity to points XXX at quarter XX highly par.Our million. investment yield cost approximately par industries of Our spread with new and the at portfolio a remained maintaining XX.X% of are basis per $X.X of XX the end of approximately average were We first all quarter balance the different of a an ended on diversified. investments made while par investments the across during to year expected investment and

XX.X% to investments non-accrual and quarter where XX. investment compares of slide fair respectively.On fair investments, we status, which the non-accrual company's of X.X% an excluding cost, at par of is In value and aggregate, the blended Turning our price value, to comprised par at X.X% seven lien fair and investments aggregate status of representing non-accrual slide X.X% XX portfolio company's low a December investment first XX% respectively. representing on at first investment XX, and relatively X.X% have at on portfolio This debt at also seven loans there the of portfolio value. million value of of cost, were based investments represents the XXXX remain end and XXXX, $XXX on

recovery, the par reflect March $XX.X a a of non-accrual net fair XXXX potential million recovery value, excluding $X.XX incremental our a investments. values XX.X% any from of XX, per or Assuming share, increase

$X.XX or investments, time XX, three we slide three entire to of would share and of illustrative to portfolio, closing purchased have overlay were these XXXX.Finally, the approximately the acquired XX, of if million turning excluding combined mark of the last you non-accrual securities to a a an If the have XX% XX% positions X.X% be XXX% debt XX% portfolios per March realized incremental increase NAV per realized value and default $XXX.X rate at to the value share aggregate over NAV fair again recovery of further potential unrealized at mergers. years, you investments, respective as the combined of

As we period. acquired of financial initial a HCAP down to discuss KCAP portfolio $XX.X and had turn I'll Brandon call exited and fully of combined over are the QX million results for the further acquired our portfolio. XXXX, now to to the portfolio the the

Brandon Satoren

Thanks, Patrick.

Patrick our As to results for first mentioned, the XXXX quarter reflect strong performance. of continue previously company's Ted financial the and

driven the companies during investment investment well fourth million as as to $X.X per income interest to accrued income or was unpaid two Our income million the share of debt to income previously million, per $XX.X of of $X.XX was portfolio.The pay-down which the This the which placed compares total was $XX.X from quarter of the by of $XX.X income on share for portfolio quarter million of non-accrual million primarily million $X.X attributable XXXX, total portfolio. the quarter $X.XX for debt reversal investment lower $XX.X attributable was XXXX during on of decrease interest of from interest first investment the or quarter.

million our $X.X in impact was quarter. million for decrease investment accounting, income the investment the million, of to core compared of prior core price the $XX.X of a quarter Excluding $XX.X income purchase

prior share the of or $X.XX was million or quarter net compares first incremental quarter. investment XXXX, in of average income expenses XX, and XX.X% $XX.X from in interest-earning per interest investment portfolio share. adviser and million share for per result respectively. net the a investment approximately expense contractual onetime Our the to $X.X XXXX company's The XX.X%, $X.XX was the prior as income million March was $X.X investment or our and quarter.As well of as decrease rate $X.XX during the income the quarter reimbursement per investment December This lower the debt XX, on for weighted

as XXXX.Turning decrease for XXXX, to per to quarter.Our future generate the leverage the rate per to $X.XX were believe of by in sheet. net the million well Total compared The or continue asset expenses the XX, March million lower ended We current per due of the quarter during quarter to for net ended remains was fourth to incentive a share, as prior positioned value exceeding by compared environment. by of million the March XXXX, XX, our result $XX.X well total or quarter the of decrease was portfolio for incremental the $XXX.X side $XX.XX largely quarters of interest costs of decrease net a March quarter million value balance dividend the as financing The share XX, driven -- as fee $XXX.X lower $XX.XX asset and expenses liability a to lower XXXX. of $XX.X incentive as lower was income share. driven average largely revenue

March of $XX outstanding March weighted borrowing interest million of rate had of finished our X.X%. $XXX of balance secured XXXX-X the turn full X prior million of in We from leverage the From senior ratios and As capacity on with XX, facility, was and $XX comprised secured in credit borrowings leverage X.X is as our of decrease million end $XX.X XXXX, of million under revolving net largely our Compared the times of XXXX, average under respectively. secured ratio times perspective, the is of coverage with driven gross quarter, regulatory XXXX-X X.X XXXX. a company XX, quarter XXXX times, and by revolving down paydown borrowings during asset notes credit X.X senior leverage The were the a as is notes due the quarter. facility.Accordingly, flat. gross notes XXX%. leverage to total net This million the quarter of $XXX.X available gross and was a

distribution May will XX. With on Board approved the share at Finally, back Ted. of stockholders XX, of call to record quarterly that, of May I payable the $X.XX on the XXXX, turn close over per to a business

Edward Goldthorpe

XXXX. shareholders our for Thank the to and questions. our returns like to current you, for first a take support.This strategy, the the prepared any of environment prudent strong market for believe Ahead investment the we I'd deliver in questions, you concludes remarks, well of our once ongoing will all rest Through shareholders call we to Brandon. again turn Thank I'll shown positioned we reemphasize to are as quarter. over believe of that your we able to be advantage

Operator

We Christopher begin Your comes will line first question-and-answer Nolan. Instructions] now the [Operator of question the session. from

Christopher Nolan

Can Hi, me? Guys. hear you

Edward Goldthorpe

are Yes. How you

Christopher Nolan

is simply slowdown the offset now the you make to investments to -- How of Good. new doing? growth in the portfolio prepay. The strategy the

in back prepays other to words, you the new quarter? of in of get in that how is out you So of money function investments put that terms amount much work a

Edward Goldthorpe

a of where mean, of think And I and kind the are Chris. in do think, a to net quarter of our low generally one sort we range. at I leverage I of basis we're right, I that's kind X.X think end times

not run-up repaid.We we given bit said you nine I'll market we is have one a where to the sure are of replacing in a is would and just lot assets having names in there but in kind to out, increase probably you just, making what we selectively have of "liquid" just exposure assets, one think eight room of our I think I'll that focus are reducing now which we're our our but it I book. look that liquid have little and are of BSL been it's call probably a call sit addition So in the some know or kind on we do more

So to rotate it kind that attractive we would look proceeds the have as private positions DSL of those transactions. does then and market prices into to in obviously new

a have grower guidelines, being mix of those definitely room a to be where couple of would the mindful of, say, of like we portfolio, feel but it's guidelines. to are relative So net I of leverage but things a we we Not our but guidance. kind

Christopher Nolan

increase? that down should slack the pick up notes, the secured we paying you're bank XXXX And revolver the then, given to expect to

Patrick Schafer

above an drawn very answer so. That's today, It right. Where million has beyond or that. the incremental the But revolver there's at total $XX is about million $XXX yes. short of sits and and capacity, we're

Christopher Nolan

I Ted, to that give you're terms of perspective? can then you from market in in a changed terms finally, has bought what out? Okay. BDCs, looking us And of your color seeing guess How little be

Edward Goldthorpe

given quality I out interest And things, would a say today, go for has these things logical other have lot obviously just credit happening. there us stable. sector who's whole higher partners earnings what's terms obviously been helped not there's waves. rates and in think in of of would given and I I and the tend say to

of a would term. So of I short I as in big say don't the now, foresee wave consolidation

Christopher Nolan

Thank Great. answering I'll queue. for back the my in you questions.

Operator

line comes Repertoire Sarpangal of question next from Partners. Our Instructions] the [Operator from Deepak

Deepak Sarpangal

paid fiduciary assets. I perspective that. different on given have the your grow just to commend wanted portfolio the other you you a managers do question to I get actually on received, not on guess some discipline first as simply you overall I since

it's great. think I So actually

that and and your it, to in extend recognizing doing You're it new you're undervalued. doesn't, is sense it pulling loans, stock you're lean When when makes back.

of was, actually the a the that's But being obviously I BC question investment a like, with little give which great.And fan. announced, you football little So Partners I us BC then the saw Riddell, you bit think had, I new broader I know talk that in context had the bit I investment that about Credit saw there? more you new Could partnership more and a that a just and platform. products,

Patrick Schafer

has Yeah, don't about I we high very normally this specifically mean, been talk individual but investments, profile. one

what It right perfect a financing. at them speaking. quarter And, we end. is broadly do, provided have we So closed this example of

with the company. we So, board have seated a

are in them there's very active helping cycle number initiatives.And a We with recurring business. a very, embedded big different a it's in because of their great replacement business

big don't usually spending. much have but franchise, it's exposed the less business into consumer when So itself, dig discretionary we a consumer you to actually

get bigger advantages the deals the and to So, whole an part investment is yeah, is platform Portman platform, one as gets across it of of a it's this. access being like to

Deepak Sarpangal

sourced press did it like releases, and you round? it the Got bigger other -- BC that sounded mixed from it. I your the it the to than the about the point Partners sure way platform, better then tell And Or but get platform up? I almost couldn't for to brought

Edward Goldthorpe

I we obviously probably own captive mean, management been our fair. years we source close. and have we've inherent.So quite before lot a That's been working it frankly I we the for No. the team on have mean, for them. cultivating five We've source of

Deepak Sarpangal

related Holdings is to a what then, is investment? that separate are this? And the what EBSC great. -- That's Or

Patrick Schafer

It's No. the same.

so investment have and the combined technically technically was the you as Format as structured first-lien I weighting as between for preferred think was up the of think could an in then or investments numbers example, and the the XX% equity the from same loan, you investment I investment the equity Riddell. that Dell a the So structured Inc. Reagan company but round secured again XX% as borrowers of sort equity parent loan of the preferred EBSC, two, that is for that but to business.And just

Deepak Sarpangal

convertible common it. into Got must be equity suspect And that rate. preferred I

Patrick Schafer

convert to potential the certain have Yes. metrics? does It at

Deepak Sarpangal

No. Okay.

I think it does.

It's preferred then is pick. pay loan The XX% first-lien like first-lien great, and cash right? the looks XX%

figured conversion feature there must to So I me,â€¦ be a

Patrick Schafer

meaningfully that on be would there you than what some otherwise return on expectation XX%. until purposes Thatâ€™s that's we be reflecting instrument our overall for was But would accounting sort of catalyst. right. What that is higher know

Deepak Sarpangal

another secured more to Okay. keeping have same venture of the senior the generally so joint I accretive dividends, the the like buybacks seems that Great. you Well, stuff Mickey appreciate low look nice seemed loans while you. working more and check mix and the me solid leadership. paying this like in and and non-accruals, CLO going. higher execution forward to Thank quarter, an the off even And it stuff boxes deleveraging, good off declining of down debt

Operator

the [Operator comes of Instructions] from Our line next question Steven Martin.

Steven Martin

comment is of PIC could So interest like and It total percentage have Pat, of questions, couple PIC what recently? trends looks a higher been? on on you the income

Patrick Schafer

sorry. I I'm probably driven lower by that of Yes. we up significantly number is income. payment I Steve. the was just some pulling had think Look,

cash some my been look been is, a because bit.And and broad So say change flow cash sort folks kind little about deal some bit our a we and our a prevalent and broadly of XX think for the as how in in it to borrowers we I bit every like every, little brush don't construction. have are trying that our year as of competitors going been kind material higher the I'd once sort a months Xst we bit how a in PIC a win but little to a cash don't to first of percentage option willing is see seen of have you've like pick that's just again, there a we offer particularly there how a while.But speaking candidly, see comment out or to is XX of little partial PIC market that. we not has in portfolio flows market pick we our changes there like a don't but material

Steven Martin

Slide million. companies company All draws the XX, you portfolio made comment and rest terms? that On yet added you drawdowns purchases delayed was only new $XX the one and on were almost portfolio of that existing

Patrick Schafer

delayed-draw again It's borrowers and addition -- if that. don't have you all-in that the but from three we'll had comp know is see of existing or portfolio. is like we committed against all number, We'll and within new in security one the in have right. this correct term revolvers existing will you activity what previously had borrowers.So, is there wasn't We May, probably and that's that kind borrowers yes, I base. of existing just and -- some Yes, exact new DDTL, a activity I broadly my speaking existing April statement but yes, probably two cost our quarter loans

Steven Martin

you're And that you activity make of on you in quarter. expecting quarter? started to current Can any terms portfolio comments what size versus the comment about portfolio and your first the

Patrick Schafer

Yes. No, I appreciate it.

similar So, had what quarter. again, kind of said to we last

and when what to I alluded Nolan of the kind I Chris had asked think question. --

capital. overall the would we or sort be, $X $X have million two we days end under bit $X.X up receiver timing expect closed net like million things deployments, for transaction of, a little net of of as on this to were the deployer. a looked example quarter.And on of the an like so been margin of depends of we Riddell pushed the net kind again it million think little had that I of from would at kind both quarter, a But certain were

the and might falls or -- the a edge this flat I bit a it quarter here capital plus but around timing, kind a be be ourselves the it over as Steve, bit growing expect deployer of net year. whether So, of expect little the to or generally minus you kind would marginal be say would of depends let's on slightly or us little a some there, but margin, we course of a we of of year, think would on to

Steven Martin

whole value investments number the go changed? to didn't change. The the of had chance Slide change. didn't through haven't Q, XX, but portfolio the fair a from the I costs non-accruals,

Patrick Schafer

by being Yes, a one was security of down. probably lot this driven marked

at again we and But regardless reflection You That's Coltech of a a can was a of look the on just through now, the markdown USA it lien ultimately value even name a from again it's of kind security obviously accrual position it's or non-accrual. borrower. of perspective. is a through, second go whether is it on that's fair in [ph]

Steven Martin

recent And deals and deal second talking guess in -- where new out the the of you money what are the deal are for about quarter, one you most but where you're I putting you currently? or did pricing the only quarter, most at? new Like the you did well -- on some the most looking

Edward Goldthorpe

delta where been between cap No, there's change. real market and large big, done are where big I mean is. big, a sponsor our getting big deals

not and like really spread covenants, really if big but been LBOs us.There at you spreads, come in they've look really much some and if come they look much. has in you So, and that trends compression, trends for that dramatically at haven't pretty for

little really help deployment two type still there sponsor have in paid really out XX% bit big areas. It's number is core do are two which we franchise first-lien pricing a where then XX%, and a is, more -- And stuff get yields. the mostly we at non-sponsor finance is Our companies.

of traditional So not Riddell that kind because into fits like it's a bucket deal. [ph]

I our haven't the see of you lower. issued really muted. we compression the BSLs out if loans. at in to and a much portfolio, experienced can opening you has again, mean, our and there's it's trend of fee look like up more direct never So of been take been spread income, big impact But been stuff markets being

pick income fee do. paydowns the market, like MSL haven't that loans we up. again, experienced should these broad-based maturity, seen So you've the But as approach

Steven Martin

and interest point mark-to-market the don't Would my no You expect But rates if because, you it unrealized the balance one's increase, change would questions. for expect the where to sure of of decrease, this at line? the down. actually you expect much -- just to is? answered up to assuming rate they're one change year, where one sort would of it's you portfolio have on the stay or speculating What

Edward Goldthorpe

think question, depend Steve. this little It done, just to good obviously. I'm trying through. where getting deals on bit So would more a are

M&A like â€“ three movements which effects, we M&A have I And derivative pretty is whether how maybe we interest is a where so probably like today, bit environment. have there's picking or if of market. of of of a two downstream more there's we base. say bigger but obviously massive a would kind the is And of up, little the amount that rate the not But are off a low of like driver

quarters And three XXXX. lot so of activity for, low but -- incredibly the a more was three quarter, probably there this the last off base an of

And bit like and so a directly has not been of of even prices spreads led that which kind BSL also private the market, as which markets again, They're competitive correlated it's little -- kind again, like to, somewhat independent compressing, interest backdrop, our side, on in to interest of decreasing, is but declining, the rates. with private higher rates.

it's between a continued -- not the and at pricing spread our rates therefore the hikes exactly increases. interest it's declines and a compression it's not to lead and to tough direct M&A rates, line in that would we price the and because of but our muted So somewhat gains unrealized of year of because interest would I this would say margin, if remains say have answer, on But portfolio, sort portfolio. probably a least

Operator

you. Thank

We Please have continue. questions. no further

Edward Goldthorpe

take our losses. you Brandon, to do a about want that? realized have We did question

Brandon Satoren

Sure.

Hostway. primary was realized during the restructured. driver of that the realized one vast drove particular during majority or period. was name period in So That HDC the It was the of losses the the

Edward Goldthorpe

still that continue So just security hold. one to restructured it's really, we

attending So you our anyway, for all call. thank

with reach again conference We're you and questions. call. Thank look happy anyone for we second speaking any to always As please quarter per to very with always, in discuss August our much. out to forward you

Operator

all Thank joining. gentlemen, and concludes that Ladies todayâ€™s for you call.

now may You disconnect.

Portman Ridge Finance (PTMN) 9 May 242024 Q1 Earnings call transcript