CPTA - Earnings call transcript Q3 2017 | Logan Ridge Finance Corporation

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Operator

At this time, I would like to welcome everyone to the Capitala Finance Corp’s Conference Call for the Quarter Ending September 30, 2017. All participations are in a listen-only mode. A question-and-answer session will follow the Company’s formal remarks. Today's call is being recorded, and a replay will be available approximately three hours after the conclusion of the call on the Company's Web site at www.capitalagroup.com under the Investor Relations section. The hosts for today's call are Capitala Finance Corp’s Chairman and Chief Executive Officer, Joe Alala; Chief Operating Officer, Treasurer and Secretary, Jack McGlinn; and Chief Financial Officer, Steve Arnall. a the on operating Company's issued with X, results. Corp of details quarterly Finance press November release XXXX Capitala financial and Company's A available press the Web the copy site. release of on is

and posted a XXXX Company's information, call flows. including than X, Web cash contains In addition, statements its operating beliefs, the prerecorded of strategies, provide results on that its note Please the historical that statements goals, podcast future site. forward-looking regarding November quarterly this results other Company information,

Forward-Looking on Quarterly Although, from and turn the are obligation like the the based differ the These the risks, and these statements. undertakes any actual no reasonable, and those would statements are over uncertainties Risk assumptions including Statements Company believes Form those Alala. update that Capitala disclosed this to are results sections Reports or could revise At numerous to subject meeting on statements to forward-looking materially forward-looking Factors various Company's XX-Q. underlying I in in to time, projected titled Joe statements. under

Joe Alala

during by unrealized On value progress the XXXX. XXXX as Net per everyone. like to these related per results Xnd, reduction declined was aforementioned unitranche per share. share. investment we from We we we earnings; generate Net distributions; second and per loans Kelly's our of our in of capture quarter strategy share rental non-performing rotate value quarter approximately announcement, yields distributions third equity two take announced through invest quarterly noted better moment low risk higher happens first you you secured improving asset quarter higher more a the In with Thank that goals. non-accrual on Board an unsecured our non-accrual I here. of We level the balances one to Yesterday, monetize shift that anticipate over mostly lien investment. income Good a with of released morning, $X.XX market in for reductions the quarters. October Hamilton net the a for the Jack income and Steve less for investment positions; returns. Germany, in investment case lower actually third earnings mezzanine our the outlined our Sierra The distribution and will non-performing and yield, but X%, quarter lower consistently from line fourth Thank to share; in you, and provide I've and to I'm for reduce joining of loans the opportunities to need our fourth understand adjusted exceed $X.XX towards reduced are; of investments; would risks, our risk. grow asset net investments; senior in additional accounts update to restructuring net in in our our are distribution, call, unitranche into our investment management with of We depreciation coming Services. Charlotte priorities loans quarter fully to dialing Directors. Operator. my Transport period in income. priorities something and in Those us. the cover and Berlin, yield the

Growers, distribution million. million During warrants generating $X.X our realized $X.X we from Quality received of the quarter, gain equity a in B&W

in the effort debt to equity an to BDC proceeds pursue thus exits increasing continue earnings. additional into securities, We rotate

first and the we $X.X million During debt of million the invested lien in $X Secure Computing the equity CIS in quarter, Inc.

market. in liquidity the lower have powder and be to investors We dry significant middle active

robust. remains pipeline Our

of out, may underwriting XXXX, this standpoint like a of credit second stages would being from be However, disciplined approaching point cycle. quarter I later an we open as to are we dollars all is the lien investment that, line validating of we in change And of the will questions. first of with the XX% the operator, invested firm. the debt focus up structures, in for the the

Operator

Instructions]. [Operator you Thank

Our Lynch KBW. Ryan line of first question of the is from

line is open. Your

Ryan Lynch

mentioned When liquidity to is really debt powder have your and in to growth, equity, invest a times. governs and continuing of dry regulatory X.XX at about X.XX one, guys First look what leverage middle the of I total you of kind to equity significant you a ratio, to debt your market. which times

you leverage you with guys for you So number significantly comfortable these wanted you know X.XX with forget debt comfortable to going? the higher? about total minute, but to I just regulatory of a do ratios taking equity total leverage see -- do Are guys guys where where taking Are -- times. this

Steve Arnall

is this Steve. Ryan,

look just liquidity the million line would leverage SBIC and end the secured subs. paid equity and growing quarter. all available. you to And at point, be first standpoint. dollars $XX we've September, dry end of in of million picture anticipate of certainly powder, And noted, as think, the never certainly majority from of $XXX I at those as debt the at was us global that our The utilize to in that, expect to got to your being gives we investing active securities. the senior But zero the we

and standpoint. north an at up the would X.XX performance in X.X, leverage that pushing anywhere about As a we is want level we of talked look optimal be that somewhere so we've not quarters from at years X.Xx, to range ratio regulatory regulatory previous probably

above as ratio, takes yes, up the X.XX. regulatory we'd to total As point not that leverage little, but comfortable be would the a that moving where the far where ratio go

Ryan Lynch

have results capital you future, should the hopefully look But at create up you safer I up guys in give losses. had And I And less of to part then yield. that, some which yield, I have the structure, discussed slide of guys a it's deck, If moving portfolio, a six your at have page as look debt XX.X. about guys at your XX.X. year-to-date those originations your portfolio deck, page your on of yield XX current investment about yield, look slide if your you

about yield basically to XXXX, in lower XX-ish points portfolio merge however, your going lower continue and your originations XXX trend show. XX.X XX.X, basis yields we current Should of mark, than overall to forward? new that to expect So portfolio

Joe Alala

is this Joe. Ryan,

We of second have moving very job, since believe our strategy of quarter a done I good XXXX.

yield. we have credits. be of will yields, higher lose with some at and have also QX to We we'll yield lien of those need lot you unitranche. to much lowered of XXX points and But look but the were materially a do a probably basis I much controls in on better think the first in we'll structure those But They this of were than covenants strategy, XX%. better XXX 'XX,

sacrifice structure be XXXX. been we've that better to a will yield doing in we So and QX since

credit we've If the weaknesses look we're you deals in on since those not deals. having QX any XXXX, done

Steve Arnall

Very credits performing underlying very good structures, well.

Ryan Lynch

better definitely I I I it generates think credit. future. that credit always even mean, sacrificing in on term yes, And saving if better is to losses agree, stretch and it's yields ultimately, up results not give and long the yield today

there of some some is pure You to a your very mean is hope investments. ability actually strategy proactive these investments, that your exit portfolio basically. of mean, monetize wait you so equity along investments a are equity out of percentage in I to can that'll I and equity be you some exit large and to portfolio and your of equity co-investments. some you sold today basically your off? companies large allow warrants What guys having mentioned versus equity part that portion to Is actually you of these guys guys it actually have

Joe Alala

controlled positions. are global not comment, positions of these most a On

we're So around is constantly very to try it's those hard unilateral equity that. us base to for said searching ways to it's is a that for The positions. monetize cost good half on these Having XX%. think just about I that, The monetize -- decision. of news

company, make position are equity positions selling these selling monetize of not to But the at amongst just earnings decision So to really equity third actively our are positions. back those, are those them. strip deals. to all those, for will But sell with constantly at those party to going but enhance company's we for those to of forward. to we're exits that that consent, in seeking constantly because selling those, unilaterally a we a monetize either try looking appreciated maybe looking We're ways the

Operator

Thank you [Operator Instructions].

Our of Ladenburg Nolan Christopher from question Thalmann. is next

line is open. Your

Christopher Nolan

Management credit, and at that the issues end we matures? XXXX Velum should first Global at December, Credit of jump with Any PIK. in it's large XX% when expect it a balances cash

Joe Alala

we’ve trouble you. Chris, hearing was repeat it that, garbled? Can you

Christopher Nolan

year. investment when Credit the of Should it we a it's it matures XX% end balances, big matures? in take the because expect to cash jump Global Velum at PIK, at

Joe Alala

to I we conversations extend them mean, with actively we're that whether about need or not. in

we So that's playing as speak. out

Christopher Nolan

would extension be? the then And for reason the

Joe Alala

time. more and Just the the there, assets and need investment the underlying nature we of

Christopher Nolan

liability then tax Is that of generate book deferred share? impact And a of will second million. value through if to the million goes that it to question, say per correct $X.X $X.X be tax provision that reform tax

Joe Alala

think possibly. get -- premature make to that that's but conclusion, I to to

Operator

the Thank I'd to you. Joe at back no turn remarks. I'm And call further questions, to for showing this like over further Alala time. any

Joe Alala

everybody you participating for call. Thank in the

and Steve around, more and all to are have We day, are conversations. especially direct some Jack in you want if call Charlotte

you and to we thank call. earnings So forward look next the

Operator

does thank all for and have a participating disconnect. gentlemen, in you program and you Everyone today's may This day. Ladies conference. today's conclude great

Logan Ridge Finance (LRFC) 7 Nov 172017 Q3 Earnings call transcript