CPTA - Earnings call transcript Q1 2020 | 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 Ended March 31, 2020. 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 will be available for replay approximately 3 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. Corp of details quarterly Finance press May release XXXX Capitala financial and Company’s A available press the website. the copy release of on is

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

are uncertainties and no underlying disclosed in reasonable, differ materially report under could the titled and the believe or sections the statements. to on Although forward-looking Forward-Looking the results numerous Company forward-looking various to quarterly in actual these obligation and based These Statements subject are statements those assumptions statements projected risks, including on any are Company’s undertakes those Risk revise Factors Capitala from update Form XX-Q. statements. in

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

Joe Alala

and operator. Good morning you, Thank you everyone today. us for joining thank

your well-being to is safe work firm’s hope are and with and our enabled you I from Having home the The focus pandemic us. to the our portfolio and at on allow technology stay-in-home to without platform policies has healthy. us First, all comply team to ability impacting team to families utmost operations. our our investment of the important

loans. economy. Our of equity shutdown in on investments. share per this now value is by non-accrual the net quarter X to asset with status have on unrealized depreciation the We non-accrual declined during amount no XX.X% the We by the debt $X.XX driven XXXX related $X.XX investments or ended

a status daily the is on of basis. investments seasoned portfolio team Our professionals all managing management of

so have the difficult principal net suspend of future, This and flows second decided one ultimately, to we for a distributions Based on our can better uncertainty portfolio cash related the investments. interest related but right project from was investment to XXXX. payments the quarter our effective decision, income, to we

we'll And investment shareholders distributions status make to XXXX. to as retaining company. are a as our committed required the We registered during necessary

issued By We announce proceed green are which to light allowing pleased that for has of application Corp. to capital the will accessing Fund be income to subsidiary additional small another in the Capitala net SBIC through are SBIC VII, of business us a administration addition wholly-owned a capital of Capitala we the additional our process and Fund, Finance generate distribution future support cost lowering able investment payments. of

Capitala prepared opportunities we new across ahead, at the a good platform. by from and direct standpoint, investment Looking origination market our portfolio. position economy opportunities in to significant Finance evaluate a make investments and our be originated will are we liquidity entire middle When into Corp both reopens, lower

quarter point, ask to I'd to results. on color provide financial At like our some this Steve first

Steve Arnall

million first by, of $X.X non-accrual the the outstanding a decrease and of of driven Joe. during million of first in XXXX investments interest earned $X.X fee million first debt loans. importantly two, comparable by quarter during quarter income $X.X million morning, Interest Thanks, during the XXXX, was than Good first PIK quarter and XXXX. the Total $X.X to everyone. investment lower not most related periods declined collectively average

and XXXX. increased first mainly to other over periods. by administrative as of general million we in of quarter by debt declined of the $X.X timing XXXX. during expenses of related the during million the were first quarter and XXXX. Degree a legal finance And $X.X million assets earned Total by million $X.X by were not declined and dividend as declined for declined fees equity $X.X fees in total $X reduction the quarter million, expenses received Incentive management comparable in the for incentive million base as first Nth the our outstanding, of fees. professional Interest by Dividend $X.X income decreased to from million, first to compared related a expenses investment $X.X XXXX quarter million $X.X fees

million share per the per totaled the $X.XX related realized Net equity net $X.XX period the totaled depreciation the the of same depreciation or quarter a first for first quarter Approximately or $X.XX XXXX. losses compared $X in million the $X.X of share share XXXX gains net million unrealized of period investments. to of during for appreciation for $X.X XXXX. or to Net unrealized net of $XX.X unrealized for XXXX realized to million comparable period compared XX%

in compared share to $X.X Net to The compared or $X.XX a comparable $X.XX of March share share, resulting million $X.XX XXXX, a assets million per XXXX. from XXXX. or net at decrease for December XX, operations the at totaled totaled XX, per $XXX net quarter the net XXXX period decrease for of $XX.X first assets million

minimum minimum XXXX, its in and XX, facility, March XX, with covenant. $XX.X million we March the in was not compliance equivalents. cash net At covenant value debt company asset interest its at had cash and XXXX, covenants in credit Also including coverage our certain

is not was with by in and depreciation COVID-XX. in the increase results loans the in largely impacts company The as driven of these an unrealized compliance the non-accrual covenants increase of the

LLC XXXX. in not was able undrawn line or until borrow that Should amendment and time the we facility. with the to credit will under or be that the be waiver comply of can be XX, covenants from its debt a the attained until ING such noted lender existing at March company Credit The Facility can Capital, group facility

including ability to of of We limited may ratio XXXX, was in ratio our the the future. value XXX.X%, be raise our to asset Also, in due coverage coverage economic below XXX% our if results COVID-XX. the fair the of falls in additional debt XX, asset the decline impact as March of portfolio

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

XX, investments fair debt the XX.X% a comprise First basis value March on of portfolio. lien at XXXX,

represented represents and and our investments Second Loan Capitala investment X.X% Equity XX%. Senior lien warrant XX%, represent in Fund

from compared the previous significant conditions investments had by status The COVID-XX. on fair end. debt eight resulting we to end, value million at on $XX.X change is in totaling quarter driven mainly zero non-accrual current year non-accrual loans At basis, economic a

is our actively As sponsors engaged to provide mentioned, assess group appropriate needs portfolio management teams and as previously appropriate. and assistance as with management

process, unprecedented a good in XX, Regarding information March million value from portfolio, and quarter the the or the forward-looking company’s valuation portfolio of in end, the including of $XXX.X knowable investment accordance fair with fair investment The an input firm Company's the faith Directors in investment value Board value that on materially Company's our data. portfolio Company's procedures. the trailing advisor fair approved third-party Board based impacted is with approved at of the XXXX. valuation The date, of the the known the COVID-XX circumstance of pandemic at and valuation valuation

questions. this operator, At we point will entertain

Operator

question Your Instructions] Joseph Jefferies. comes of from the [Operator with sir. line Kyle you, Thank first

Kyle Joseph

depreciation good to to tied just like post guys. just Thanks can for in -- it obviously XX? March a since the taking Hey, investments. unrealized my morning, a equity to of was you sounds recovered how Hope a wanted sense March us markets equity recovered have XX. for safe. first quarter lot NAV at questions. give want is broader I everyone And much the levels, has I of current

Steve Arnall

We'll [indiscernible] you're equity and continues, Board, Steve. quantify is to that for that that exercise our this understand but June quantify at go with Hey, would March a XX. would But, to I asking hope that that, those this what you be inappropriate try and at momentum to just time. think, be try what internally values us some Good through question, for to be to XX Kyle, subsequent full I inappropriate. would

Kyle Joseph

and That's process Congratulations the the out? us totally fair. on for give of new that rolling can SBIC, timing you the just a reminder

Joe Alala

received submitted Kyle, is Yes, the submit application. we letter, green Joe. this it's already a to which S invitation light which have application an we basically,

are SBA the with subsequent license on process we in the So a BDC. obtaining in

to quarter we So we legal uncontrollable a the the licensed. fund filed committed start would SBIC to. we event had which control review part of it's are fully of that, process, is And we've be preparing but now. already goes All we some -- SBA -- it all that that to and application the we done into and of already application the think have this and to and

low a subsidiary, capital. to we great think debt get long-term attractive, that'll be And new cost going that's

XX very low increases balance, cost our XX-year, capital. it's points of us for plus access their to the capital With around basis

the about license and excited new we're SBIC application So the submitted. has been already

Kyle Joseph

me. you looking? you anticipate flows of Thank deal the you. kind hopefully from question we a Obviously, for of on up given this, sense all last volatility. the other transactions emerge then how give us new And dried But, as side can

Joe Alala

I say healthy team and to we've is keeping together. Well, one will what team keeping focused two the the on that

back opportunities. to intact. we're team keep office, again So we've no turnover and When on flow does to deal in no come we're our new on visiting our and start origination team investing that going companies turnover able core investment had

have an SBA private liquidity in green a get and BDC funds fee private in got SBIC besides to a fund. we license light substantial another our actually We the in BDC, our addition and

we So middle we've the no more with. one that is platform compete team. the platforms in probably liquid market And of change lower investment

market we market investing same liquidity, and turn, when and companies team does So middle again. start lower quality the tremendous in are have to ready

Kyle Joseph

much very guys. answering Thanks, Okay. for questions. my Thanks

Joe Alala

Kyle. Thanks,

Operator

Your with Nolan Thalmann. next Ladenburg question Christopher of line comes on the

Christopher Nolan

Hey guys, well. hope is everyone

Joe Alala

are. you hope you, Thank

Christopher Nolan

how capitalized? the that Joe, can what fully lend it's of for up is the new much sub, once SBIC amount to

Joe Alala

this fund -- Then fund. new that $XXX the and apply per new family is of would funds to limit million this

Christopher Nolan

an then mean, is going your what you your you balance debt, down what depreciation investments sheet us strategy to is the issue ratios? cash, capital of forward, given ratios your unrealized that as build I pay And are of terms well. mean, Okay. increasing is it sheet you and are balance going idea the doing stop manage can is up, give thinking leverage I equity how in

Steve Arnall

Steve. is this Chris,

short-term, trying provide sure and to support I are companies. here the what our liquidity portfolio focusing the think on that is to in portfolio and we're to we make

the nearer term that's goal. So

on to early. bonds our maybe term, pushing that longer out, in of topics terms touched I of importance us, some refinancing SBA a of potentially those number to think timing additional determined some of maturities baby and be repaying are you debentures

in coming that's BDC, one probably at of with not Raising got certainly deals that we now. that those those and some we -- can have it’s platform only topic participate And in the the be up to right are but a the equity, middle at are fully discussion, but not We've those once expect the September. in active. active hopefully once BDC level, market. And the lower liquidity

BDC focus build the our to the term, reassess and portfolio, that continue we portfolio on level. short-term So in and try distribution to longer NII build

Christopher Nolan

also And looking to absence the the you're levels credit given Thanks, the Great. of keep sheet where on Steve. balance facility? cash

Steve Arnall

a number, that repayments good position. answer to now continue will in to we think cash the how sure, in not and flow, I'm normal through cash that have I of terms be a we

our have So of not come the due. all in only service debentures all that but obligations, repay

we internally, where So our and to we'll and I about some position, circumstances regard, going we the back in with think feel flow situation liquidity go see in economy pretty up deal get extent the opens it here. can the but that good

Christopher Nolan

dividend. question, Final Great.

it that stock from -- probably will just keep Joe's be that status. that sounds dividend? the to rig comments a Given dividend sufficient Would the be

Steve Arnall

Too to any what premature discuss distribution look like. might

distribution. it not distributed the suspended what's to We talk future talk but premature It’s to about we the for the going -- we've forward. for quarter determine and with Board over our would the be of NII looks But, what for think prepared thing an at to get again to. better until option We'll rest a second we're mix can that of something like QX. talk do look right any I year. the

Christopher Nolan

you. great. Okay, Thank

Operator

of Mr. At Private comes this sir, Your Strong, Investor. questions. next we Bob open. Strong, your question is line have line no time further to

Joe Alala

Thank you, everyone.

if participation. are We distant. Thank contact today you. for safe around you you us. and Thank Everyone keep to want socially your

Operator

This conclude conference. does today's

disconnect. now may You

Logan Ridge Finance (LRFC) 5 May 202020 Q1 Earnings call transcript