CPTA - Earnings call transcript Q3 2018 | Logan Ridge Finance Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

At this time, I would like to welcome everyone to Capitala Finance Corp.’s conference call for quarter ended September 30, 2018. [Operator Instructions] 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 website at www.capitalagroup.com under the Investor Relations section. The host for today’s call are Capitala Finance Corp.’s Chairman and Chief Executive Officer Joe Alala; Chief Operating Officer Jack McGlinn; and Chief Financial Officer Steve Arnall. Capitala Finance Corp. issued a press release on November 5, 2018 with details of the company’s quarterly financial and operating results. press available the website. the of copy release on is company’s A company’s future note forward-looking information, than the contains this including beliefs, that regarding Please call other statements that cash results operating and provide information statements goals, flows. strategies, historical

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

Joe Alala

Berlin, room operator, and but we Charlotte investment investments. in of $XXX structures, In of our joining that and to those time, you included in new announced XX.X%. Investment approximately debt. third changed debt of we moving debt the the liens America. senior quarter Since Steve discuss early us All a secured add-on from have means investment focus secured of XXXX results invested one investments, today. the you, yesterday. interest XXXX, away subordinated we senior in structures senior rate of second and which secured and morning in down North XX% we debt. be having average are million to third weighted activity two good Thank quarter for for XXXX as that the will Germany, Jack Thank during

debt, debt well to is as rebalance equity. senior reducing of concentration subordinated goal as ultimate the portfolio Our to

represents the senior from our secured portfolio, As XX, March debt release, up noted XXXX. XX% earnings of now XX% at entire in

to down a a portfolio. the XX.X% we middle-market peak value portfolio basis, at June at originations, As to investments our on lower from Non-accrual fair the of portfolio new continue on credit existing XX, XXXX. work to were reposition we continue X.X% of

our non-accrual Investment, addition, an In do in Credit anticipate we investment debt to year-end Velum of Global exit prior LLC.

exited third $X.X During equity we million our Western quarter, investment. Windows the generating investment our gain a Systems, from in

In XXXX. XX, fourth LLC, announced definitive that debt of acquire and both our a City to equity monetizations to of agreement has October during quarter, company anticipate quarter for CPTA appropriately. it them for signed lower addition, portfolio the Hibbett active firm us market. in will the do other close consisting is to deal will we investors and equity. Liquidity Sports this allow the during on middle overall Gear, We the announce and scheduled The be

pipeline very robust. currently is Our

Capitala continue with senior million pending. focus $XXX structures, coinvesting be invest BDC. across between where The Corp., Specialty already, million several having closed the BDC Our Lending, secured on four deals is $XX our will and including can platform, with we to others

financial to on investing point, this to distributions. secured would into dry balances net quarter to Reducing enhance I third senior powder like income results. our At support nonaccrual on on portfolio our of NAV Officer. and as in underwriting we the progress the with rebalancing to continue been summary, as announced, previously In have with while are our processes, decline share, Chief Risk Peter disappointed portfolio. per Our we Sherman make our ask quality and of some and debt refined addition investment Steve color our investments provide

Steve Arnall

was from $X.X of quarter rising decreased compared are Thanks, variances We PIK rates exit the investment to rate loss Interest variable our fee slightly to million Total today. our to debt Western for providing offset compared $X.X $X.X the of our listen of our expenses income to comparable lower fully Joe. impact for was focused gain third XXXX. Transport opposed the meaningful as for by to Service, Net secured of senior resulting XXXX. basis. share. increased in to recently from LLC. by by Total third investment collect period continued coverage totaled million importance third on while on appreciation Kelle’s dividend quarter the a partially company such investment of call per in periods, due coverage LLC, Systems, to were million realized report. taking third in XXXX portfolio XXXX Windows onetime million from depreciation earn $XX $X.XX quarterly a income and from restructured or interest of of dividend to We flat million morning, time unrealized compared $X.X cash to Net $X.X share in our paid as and and XXXX income for realized XXXX totaled million with the comparable in PIK million compared loans. $X.X quarter Net $X.XX consistent million was our $X.XX. quarter investment no in for understand a equity income quarter XXXX. the to for you distributions the income third than Good the million lower to of distribution XXXX per XXXX efforts relatively thank XXXX less and $X.X gains related the of income, the on $X.X of

cash per of the million depreciated the third $XX.X cash net Stability share gains, highest related Net $XX.XX remained of depreciated million of share million to or $XX.XX in from we at collectively comparable was quarter $XXX.X in resulting asset $XX.X $X.X quarter to $X.X reversed decrease appreciation The $XX.X Fuel Services, for the quarter. in totaled and period net by assets third priorities. per share million XXXX On-Site zero compared assets net – which XX, remainder previous of XX, XXXX. for per to totaled XXXX. $X.XX growth during the million of one operations $XX.X per September XX, net the in December ultimately XXXX, September net while to During XXXX compared million a decrease and portfolio the million, value share to company at related of our quarter or realized equivalents. At the had

subject quarter, During $X scheduled interest leverage undrawn end, contractual on repaid X.XX times of an secured September X.XX a to times facility X, with at At coverage XXX% prior date. mature Board ratio we to unless debentures board’s rate bearing approve shareholders had minimum X, credit XXXX, the at year-end. least XXXX, we million of XX, a XXXX, Regulatory senior be that company quarter million of SBA to X.XX%. of compared our the coverage On the ratio November asset to effective was the be XXXX of November company’s available. $XXX.X March to XXX% at approved as Directors effective asset the minimum X,

an on the for landscape. Jack to over it turn portfolio I’ll update and Now

Jack McGlinn

At million. basis includes portfolio September our with of XXXX, million XX a investments a cost XX, of $XXX.X fair investment value and $XXX.X

status debt at loans represent investments value June And mid-XXXX, of million, XXXX. of to equity XX, $XX.X basis non-accrual fair represent XX% represent cost XX, X.X% of portfolio, a at point debt with December quarter fair Joe’s three On XX.X%. fair XXXX. cost portfolio the basis, on XX.X% a strategy about compared represents compared and First-lien the XX.X% XX, at $XX.X to end, a respectively. X% fair At equity value lien warrant of basis Subordinated value to and XX% value XXXX loans second the and XX a XX, September million at on have portfolio we of shift On September further portfolio. secured the our while investments basis comprised XX.X% senior a as investments X.X%. non-accrual debt basis, portfolio represents at on companies comprised September

the On-Site Services. quarter, depreciated investment our During Fuel fully we in

you prohibit circumstances However, may from specific us addressing have. questions

our in prior anticipate to Velum Global mentioned, exit an Joe as year-end. LLC Credit investment of Lastly, we Management,

investment continues our as by Our strong. multioffice be pipeline generated to platform

of deals actively various are to we to At on We’re to the would prior questions. up we close most line point, like several for year-end. working this hope which in that open stages,

Operator

first question Christopher Nolan is Thalmann. Instructions] Ladenburg from Our with [Operator

open. is line Your

Christopher Nolan

Hi, guys.

plan a on get guys Is don’t a the to higher you vote for shareholder On leverage, proxy vote. this? I there – shareholder a see

Steve Arnall

is time, Steve. board we’ve got all this Chris, is At this approval.

we meeting to So as plans now. have a not today do of have special shareholder

Christopher Nolan

in comes leverage level is by or taking regulatory high? what terms thoughts XXXX approval the once up assuming Steve, to November or of X, the And

Steve Arnall

portfolio. rebalances just question. We the get in period. that will would guidance this Yes, powder to We you say Chris, handle the as a regard the that. that now, – focusing shape curve too a involved talked be into just senior approved play right great get factors about, that’s do it’s really that really the away since it. many we’ve any a now. give I dry and of yield how we’re on will We it’s and short in year term, premature is will just invested is to away to change, in premature there’s come the year lot investments got specific which debt is and trying things our to we’ll But a

Christopher Nolan

and be they a close exits Gear, the on fair And City question Great. your follow-up values? would are to for

Steve Arnall

say, would yes I

Christopher Nolan

Okay.

potential on City have I for and you Gear guess? here So a mutual gain on Velum,

Steve Arnall

Realized, yes.

Christopher Nolan

Okay thanks Stephen.

Steve Arnall

Thank you.

Operator

KBW. with Our Ryan from question is next Lynch

Your line open. is

Ryan Lynch

Chris way. to with too was in little different the a ask want leverage it up what talking pick First, about maybe bit

leverage? is are total to increased to As actually on at protect far Or maybe looking guys you on just leverage this equity. or did on the this you about to leverage debt guys add that with just are levered want gets range, increasing are talk flexibility but Once planning you downside? passing didn’t you to the additional approved, know, the said the leverage to guys as flexibility? guys I primarily x you actually half increase you approved So X.XX GAAP

Steve Arnall

– and is Ryan. it’s a this us. industry thing I as think for we really I the latter, think whole for mean, the a good we

we’ll just of just don’t I think with flexibility. do going what of the us specific good and our to flexibility, management I that it have thing. to any figure in do that terms what right board terms got We most week. But that, makes it’s sense. this now. plans we’re out in And allows is have we closely to And of having work with last we’re with a think, approved to it, going what

Ryan Lynch

at with are strategy all? at kind to of Or Okay. approval shifting the last this, guys the your you run guys strategy it is of same be year? the And you then going with

Steve Arnall

that change Partially strategy. on

Ryan Lynch

leverage are your anything amended then And utilize the for additional on to your to have covenants guys credit actually there you Okay. would or facility bonds that not? be or or any

Steve Arnall

pretty I the don’t believe facility, so. bonds, believe I appropriate is work I’m with time. so. don’t sure credit the not we’ll there – on the them on at

Ryan Lynch

you mean you be so your you I said cost markdown in this comment, specifically, with X/XX On-Site guess, Services one, from to happened guys other you can last X. that investment, not just to then I you investments but I may kind Fuel happening guess, of to And just got know on comment I what steps the can’t guys, able did from from what I you And I learned prevent what mean, here? guess, future? take from

Steve Arnall

it. say Again, was has would answer that been nonaccrual investment. Yes. if for I longer. XXXX probably of It better years, difficult it four on it’s part to a not the

long company and So of gone through iterations. a for it had been different a couple a troubled had time

at So deals. the – looking And learned of we’re what today structure a be those the not of BDC are as the not and we that lessons type out it’s investment, is lot the discuss again, it of to doing was far there as first-lien investment internally.

So investment that’s we I forward. the go biggest think thing as our not style is

Ryan Lynch

for to appreciate time me today. That’s Okay, all

Operator

you. Thank

Our with Oppenheimer. question Chris Kotowski is next from

is open. line Your

Chris Kotowski

there just of Yes, worked Holdings? good morning. and Eastport that the I not of it you of – million the sale and this monetize I transaction. rest kind it? mean, value? of the a about talk I’m are does plans the wonder, exactly complicated – fair can a And Just part description. sure was a describe how of the of monetization $X-ish how to just was Or

Steve Arnall

cover the first I’ll least. part at Sure.

exercised purchaser quarter, of set option it call the written the because in was expire August. the during to option that So

$X.X received $X.X of From time option, of a really at we any cash that which for the on so the fair wasn’t impact value million accounting standpoint, And is what statement. happened had income there an million.

derivative the was $X.X saw the sheet. you equity effect decrease to being drop in same the went investment in due the our decreased our XX%. really to by by ownership from what sheet, from time, balance everyday of XX% down the liabilities at value fair And removed million the On balance

a was loss million received there net-net the of end day, the at So cash. $X.X of we

was company So now interest as we interest everything equity it worked lower in have supposed – that to. and

Chris Kotowski

of any any And remaining there other on Okay. are your holdings options there?

Steve Arnall

No.

Chris Kotowski

So do and free you own clear? that

Steve Arnall

We do.

Chris Kotowski

that’s from you. Okay, all it right then. Thank me

Operator

Thank you.

with Chris Our next York JMP from Securities. is question

is open. line Your

Tom Wenk

leverage. Tom you fee fee quick guys. Wenk of reductions to coverage. additional a with in expect question for We’ve structure to in A guys Chris in leverage? York. changes asset any Good make the on pursuit seen here association few in structure change BDCs morning Do your the

Joe Alala

is To that through This thought the we Joe. haven’t different answer with come more really that, along leverage. strategies

like existing senior less portfolio less rebalancing the would We’re more equity, of fees secured, the really, new mentioned, Steve with strategy address of align focusing much get the sort the mezzanine, on But we’re underlying risky assets. leverage. we less variable when we sort to

Tom Wenk

that’s right Understood. problem no okay. I it. Yes, thanks all guys sit here right

Operator

remarks. to back turn I’m Thank the to call Alala further for Joe you. And showing I’d any over questions. further no like

Joe Alala

day. of the earnings Steve participating for around most the is everyone, you, Thank call. in

call shoot your I’m in different this hearing few we have to we thank back a time great day. But If you you schedule. me, and an the over for look you e-mail on from call, a next need forward I’ll you Everyone, me you. hours, and participation

Operator

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

Logan Ridge Finance (LRFC) 6 Nov 182018 Q3 Earnings call transcript