CPTA - Earnings call transcript Q3 2019 | Logan Ridge Finance Corporation

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Operator

At this time, I would like to welcome everyone to Capitala Finance Corp Conference Call for the Quarter Ended September 30, 2019. All participants 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 website 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; and Chief Financial Officer and Chief Operating Officer, Steve Arnall. a the on operating company's issued with X, results. Corporation of details quarterly Finance press November release XXXX Capitala financial and company's A available press the website. the copy release of on is

information, forward-looking Please that provide than the operating strategies, the goals, contains results flows. including note statements and regarding statements cash call information that other beliefs, future company's historical

Although, projected in those differ materially company believes from these statements forward-looking are statements. reasonable, actual results could the

including quarterly numerous those various on underlying and uncertainties based or titled and forward-looking to Factors undertake in risks, Form revise under are Forward-Looking statements These statements. update Capitala Risk disclosed are assumptions obligation sections report the Statements subject to XX-Q. any no and the on company's

time, I like this the would Alala. meeting turn At Joe to over to

Joe Alala

thank and Steve over you offer of results. questions at the any quarter everyone, morning, the for and like us Discuss just and everyone. our Good it more you operator. few some then you, we a have. to address third today, insight will to end may then into to quarter related provide I'd comments to quarter developments joining recent Thank turn

investment Net per asset Net per $X.XX. $X.XX share. share value income

totaled IPO basis are basis X.X% or the Non million XXXX. at in As a three observations. risk our the look balances lowest total accrual our XX, a the fair portfolios. credits in on since of and of we a XXXX, risk couple total We value portfolio $XX.X two the X.X% level at on fair have The of currently September portfolio. with of rate value

which loan which $XXX focusing performing has credits. as XXXX, portfolio million the investment the approximately of debt watch of BDC expected. are structures, were continues Since and investments. in strategy Our to our portfolio lien all team manage reduction in entire first actively we invested XX% changed on

to debt investments. and continue mezzanine portfolio secured focusing senior investments our on and rebalance investment We reducing equity

at XX% September portfolio investments to XXXX, XX% XX, of compared March debt represent XX, the lien at XXXX. First

quarterly confident ultimately investment are superior long-term on strategy a return stable distributions and that produce more net will of a this We support in income equity.

XX% on fair represents Our end. and quarter value equity XX.X% the cost portfolio a investment basis and of at portfolio

continue of portfolio the equity our to end proceeds Part Platform anticipate debt in redeploy of investments. additional lower-middle need the and holdings active into allow to our including of a cash market. monetize CPTA significant the year. senior is by to platform the investors the equity the secured rebalancing the in liquidity will We investment be reduction

close prior of We have several we several to them to like to expect end the to year. I an quarter deals end, announcements Subsequent under address. and terms had that would have

Development us. additional excited First, we to Officer an hired have in Business Charlotte, Chris based join

the active the in we market. our in market additional platform for to investors are we as resources Second, be prepare across lower-middle

the professionals expect We the over platform next hire many to several months. across

substantial strategies, resources we is Lastly, they BDC. USA the the in milestone firm and Mitsui of will for benefit the announced the This significant the Finance including and with will with a platform company. Mitsui where interest for recently minority Corp. a have management Capitala partnership credit non-controlling a provide strategic equity our growth purchased

point, provide on to Steve color financial this like At results. additional to would some I ask

Steve Arnall

lower Senior and -II, for $X.X distribution the LLC. two portfolio, third well as XXXX. our Loan call of investment Precision, income quarter million from Interest as million included Thanks totaled investment as $XX.X new quarter and than XXXX from Fund Dividend decrease quarter declined participating the fee thank Joe. third you million Good the and for comparable was XXXX; of periods, non-accrual million as in the of morning Capitala our impact the $X.X for investments. million Micro income a of third in during income by today. resulting million for Total $X.X $X.X well $X.X

the Total of quarter third of fees distributions share a base and the expenses quarter performance. the income of for XXXX. paid. decrease an million, be $X.XX $X.X of million. $X.X however, of will capital. a IPO, and paid financing of and Interest per million were declined Since XXXX third of million never cumulative by have investment coverage was from distribution important the $X.XX while regular for below of $X.X always of management measure million, third Net XXXX return expenses had Consistent our $X.X quarter we distributions decreased $XXX by

of from period resulting XXXX, $X.X depreciation of third million to million $X.XX $X.X XXXX. totaled $XX.X a unrealized comparable to for net or the depreciation compared $XX the quarter net quarter operations in The third compared of share in Net million or assets for per share for $X.XX in the of XXXX, comparable million the per period XXXX. totaled decrease net for increase

XXXX. XXth, totaled cash September compared at the in XXst, at per $XXX.X million to million At XXXX $XX.X had XXXX, XXth, cash assets September share Net we December or $XX.XX per and equivalents. $X.XX share,

minimum addition, is drawn compared points. plus available November XXXX XXXX, basis at covered at Regulatory change was least effective so X.XX November at be Xst, Xst, to effective. had December million to Directors and In $XXX.X XXX On now of XXXX, company as our that the facility approved be in of ratio Board secured subject leverage senior a XXX% we priced LIBOR X.XX credit that XXst, zero asset our XXth, XXXX. to on September of

portfolio of $XXX.X investments the $XXX.X a million secured of credit cost the amending included XXth, facility in million. basis process our We're complete. the announce senior the line once will and XX of our September with value amended stages publicly At is fair in final XXXX, investment

lien. four million two existing new were During companies, across invested quarter, first portfolio the which were XX% two third and investments companies we all companies, the of of $XX.X debt

was while yield The average weighted XXth, the %. yield XX.X%, average new the portfolio was XX.X the during investments debt quarter September weighted entire and at of debt the XXXX

fair basis value XX.X% portfolio. a at on September comprised investments XXXX debt lien XXth, First the

warrant collectively and and investment equity debt II Capitala XX%, our lien represented represented investments Loan XX.X%, and Senior X.X%. in represented Fund While second subordinated

our update, the our status Please companies for to end, At our quarter non and on strategy XXXX. information quarter portfolio the trends change basis $XX.X accrual value cost and we million refer since website additional $XX.X on early composition in third or four regarding have portfolio update of in with we fair investment back our investor basis investment respectively. million

first and were During [Biology] debt on LLC the the in Acquisition, quarter, the CableOrganizer debt for investment accrual. subordinated placed non Incorporated lien

the under Our prior terms direct to and year Corp close generating opportunities deals secured including platform platform quality profile expect on several to focused end. currently Finance to origination return the senior of Capitala Capitala is satisfy we

point, to At for up this open we'd like it questions.

Operator

[Operator Instructions]

Our from the line first of Nolan question will Christopher Thalmann. come Ladenburg with

is open. line ahead. Please Your go

ChristopherNolan

the leverage outlook have past next given the couple of the now Hey, quarters mark? one-year you guys. What's for

SteveArnall

hesitant Chris, announced, this we is give finalized line Steve. I'm to Until guidance. and get our

X.XX of end September. we're the think I at

a am to got announced. that thoughtful you bit fund room we've But to hesitant a that new be will deals. Now little guide there very use our I and we finalized until runway get of give line as we we

ChristopherNolan

But do will think you it increase?

SteveArnall

perspective. a from regulatory yes so Possibly

ChristopherNolan

structure capital thoughts the change? in fixed the changes, capital on Okay and rate in most curve. any then your capital given yield Any might change right is of the now terms structure, how

SteveArnall

no. term, short the In

the at we don't change may debentures. make looking of down But structure repaying think any in term, capital I up look in see those short potentially at at subsidiaries some SBIC the now. the as I look the road, we

ChristopherNolan

Finally, are for providing, on external growth the resources Mitsui, what's they manager?

JoeAlala

in we're out now investment capital This professionals keep the basically for the talent person and a market next one few hiring of of Yes, working manager we've with this significant firm to ten own months the which acquisition level. investment. over of the is the month We already hired last development continued six resource Joe. to is the capital at working building team people business

Operator

Joseph Our next the of Kyle line question Jefferies. from with comes

ahead. is Your line go open. Please

KyleJoseph

guys. Thanks morning, for taking questions. my Good

yield your and the are are. but get wanted of of that focused where or not with you combine strategy sort new context seeing? Just your to set new anymore, pressures really-- in What or senior on not rates your sense

JoeAlala

yield the even where operate. definitely side, middle the lower it's Well, and say I in would we on market

You've enhance directly to have the unitranche over fund our our in lien this yield compression loan bifurcate senior sort last we've seen first What blend and sort quarters through of formed originated JV can done on loans own unitranche Kemper. have a and we we of the that up where sort that or with lending. of place

addressed compression over sponsor you how So market seen several know, the we've and quarters, last some activity. equity have sponsor non especially the that's we as sponsor in yield we activity. on do compression lower but both equity the definitely But some of middle yield

has there structures. we that on nice also The even compression And to the though has say still lending to yield been non get not able I bad that in. compression, we're would participate sponsor been the

there of the those been lowering structure lasting quarters yields. correlate sort the hasn't So of over with to

finding So to are good formed. been balance way but we've own the that able yields best we're still that is we And effect lower. our we're sheet the structures JV through --

KyleJoseph

good Joe. that's thanks, it, Got color,

broader sense is how the the investments me, get for ago months sense year three but performing of --it to your essentially are wanted --how on believe question portfolio or that sounds just to Next non to we back of saw where go doing? compares and ago I those two legacy your are stepping get things a how and and economy like investments, accrual, strategy

SteveArnall

Kyle. Steve, is This Yes.

you grade-three loans. public everybody reflects lowest, to have I XXXX. we investments and through with it risk the think board are this one the that works point at had the the watch lowest that's went one share since of where try are look it's -- had where our XXth, in upgraded investments is which if we graded we measure September to, we've at of kind to are in period we we three September And two key risk back just

a from that's like that feel we perspective So metric. good

got actively on I think of the we've four on While working those. non-accrual, groups all portfolio investments

some first it a the is that profile I better the quarters spot, worse million resolution certainly feels lien that's we'll And lien in that are debt be as just will several year-end been becomes the and investments risk but like to And generally made that you appropriate, really with we a strategy the there's changed and we've that $XXX much metric in from and performing think mentioned, of those prior first made share --there to what our perspective, portfolio over a expected. even nature years. of several investments past byproduct since our we've Joe

the just rest that through that's through as mentioned. work these positions portfolio. you probably And we'll So of trends the to legacy continue

just a than it's than in in we longer it taking much been feels like we're we've better spot previous thought, And but periods.

Operator

question looks up Thalmann. line Thank we follow Christopher from of like have you. And Ladenburg with the Nolan it

open. is ahead. line Your Please go

ChristopherNolan

What percentage portfolio currently? of debt the floating is

JoeAlala

XX%

ChristopherNolan

major mean a color before quarter, of in terms in had I position the goes equity an be of guys you mean fourth provide realization you any the anything there end that quarter? on comment I the can X-K can on out on you say that. And major Will that? the that

JoeAlala

it's know transaction that Good when clearly for Yes. X-K I we Chris. possibility takes place press announce follow on you'd sure. can't end a question, that, release, market but comment to will yes, that appreciate as we

Operator

and would I the I And further showing Joe further any you am Thank no questions over turn like time. this conference Alala to for back to remarks. at

Q&A of End

Joe Alala

for all day. Kevin everybody I here and time you Thank Steve are your today. and

If you we day. any to you. questions. hearing with forward follow from great Have And a up want to call look

Operator

all today's disconnect. Thank participating. gentlemen, may you and conference. this Ladies you concludes for And

Logan Ridge Finance (LRFC) 5 Nov 192019 Q3 Earnings call transcript