CPTA - Earnings call transcript Q2 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 June 30th, 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 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. Corp of details quarterly Finance press August 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 underlying in the would reasonable, differ sections materially Capitala could and Company’s the believe undertake the and to statements. to and over meeting like At Although revise Alala. Statements forward-looking XX-Q. results numerous Company quarterly to obligation various in disclosed risks, in actual these based statements. These subject update are or including statements turn the those titled the assumptions Risk under statements Joe Factors no any projected on to are Form I report time, uncertainties on from forward-looking those Forward-Looking this

Joe Alala

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

XXXX. from result portfolio. XX, share, was per of March was million XXth, the clearly reducing modest During -- cash. and We we per to June balance of At increase up sensitive COVID $X.XX in in share XX, appreciation XXXX in [Tech investment cash exposure The currently Difficulty] a that asset companies. $X.XX to cash second our sheet [Tech $XX portfolio -- million Difficulty] had June we approximately quarter, $XX.X

COVID received consumer $XX.X repayment of Loan businesses. the quarter, sensitive repayments repayments we Senior number in Fund wind facing investment the During a Capitala held and of from and second million resulting the II down including

debt the leverage outstanding. quarter and debt and/or maturities of prior from the of end, five a As investments debt great a in SBA on company non-accrual result, down position repayment the eight quarter status, had other at to end. buyback we prepayment reduce At the through is

where portfolio and quarter for Now and companies, of to investments. understand income our suspended effort We to are on support end. reduce our the XXXX. of rebuild to and level with work sponsors future need management distributions that our third appropriate continue portfolio of in will teams nonperforming all remains focused the investment net management an Distribution team

reducing half non-accrual during XXXX in of this will progress closing new on investments and the loans the of Continued regard. second help

position ahead, a Looking entire across we our Corp liquidity both are Finance in at a good Capitala standpoint from platform. and

direct and market. opportunities is underwriting Our origination platform middle investment various team the stages review, lower in of in

income quarterly total Our regulatory leverage investment distributions. provide ultimately resumption commitment net should lower, of growth to and and and future

million As currently we to approximately a completed are pursuing the $XXX platform, weeks. few be of in new next investments

some a provide an opportunities. platform, investment pipeline to continue million like At of of to our comments small second quarter would ask we on active have results. Steve active this to business I $XXX point, over As

Steve Arnall

XXXX the impact Thanks Joe. and a the were by non-accrual the during share Fund due quarter investments, income Dividend per of the XXXX. which second to quarter the XXXX. approximated of down and Loan II Capitala decreased the $X.X $X.XX Total quarter. Senior current million of for wind expenses for million of everyone. quarter second million investment $X.X outstanding XXXX. was of Interest $X.X income $X morning, XXXX. than debt during decline income and second lower investments resulting average quarter Good of Total the by second in from $X million declined fee million

fair same falls million million generally of of compared the totaled financing during ratio to of company quarter $XX.X for our XXth, material share, of impact values. for previously realized the realized our in Net secured in due unrealized During a to cash senior cash period $X.X in related recorded had losses be net of XXXX, XXXX, compared for appreciation NAV its to amounts deferred termination XXXX, losses of our charges XX, the may Net quarter Net early $XX.X to XX, the decline share fair losses million economic XXX.X. XXXX million XXXX. to as credit realized including of period Also were the the we asset At $XXX.X If XXXX. impact compared second comparable reported unrealized ratio coverage Net $XX.X the of share for XXXX. XXXX, of as share, the million, depreciation portfolio, totaled did and the or at or net raise assets XXXX asset per second per ratio our June quarter below we $X.XX $X.XX of per COVID-XX, was line facility. XXst, equivalents. have limited in to in $XX.X ability December the million the coverage second second to value XXXX, realized debt. $X.XX quarter XXX% not totaled result with $XX.X in per million additional of June in June

the the quarter this During the It provide this second XXXX details company time. to is XXXX, line its senior of half it's replace credit though secured second during intent at terminated our to facility. of premature

July XX evaluating value debentures mature portion aggregate of of its SBA notes company due cost and that all prepayment million a outstanding will XXXX. which million. X.XX% $XXX of company's and our addition maturing the $XX XXXX. X% is XXXX, on the $XXX.X September XXXX program Board repurchase with XXXX, or XXth, $XX $XX in and/or convertible At of approved on to In million basis The portfolio under in June the of worth of XXth, company March bond repurchase notes of an due may repay our a Xst, in up the fair of the a XXXX Xst included million million investments investment

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

million equity on had at to $XX.X XX.X% XXst, totaling a June At five XX.X%. compared lien debt million XXXX, March established value represent warrant represents non-accrual on basis fair Second XXXX. investments status XXth, investments and $XX.X we

stages to for over in we're a on opportunities questions. various point, active. of mentioned, of our it review and is investment pipeline turn number we'd Joe At this As like

Operator

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

KyleJoseph

well good Hey, questions. guys. Hope everyone's doing for and thanks taking morning, my

great capital up on short it's to hone priorities. the in your allocation your wanted but you in really liquidity question, quarter, just First

talked to the a really debt those existing of You is then investments. as it well about pay priorities down, there new servicing rank adding or of more borrowers blend three? as any and Is those

SteveArnall

would then I the it's is portfolio evaluate to priority. want opportunities liquidity so. liquidity Steve. the would that blend And of has have delevering new way all love a our the you make high is available needs thirdly sheet certainly it Certainly cycle. we a this this existing Kyle, through it some make that sure certainly phrase three, say to investment do we to balance to as

So a blend of three. all

KyleJoseph

elevated Can Got guys Would repayments forward? outlook you maturities sense a up going give the repayments sorry, forward any expect it. coming have but or That to you there? quarter. out going looking done that yes makes for outlook us for more what's sense were your in your you quarter-to-date big and then the turn -- repay you're

JoeAlala

last Senior nothing, out Loan unwind part quarter of wanted materially. deleveraging is exposure this As we did Nothing and is think II ordinary. Kyle. of Hi, do to of We created I the facing far We repayments. managing wanted the Joe. Fund industries sort reduce to those consumer we liquidity. which as were our actively which repayments also

about good. And the right private lot very basis intentionally did to creating that easy $XXX weeks. active pipeline's mark few repayments active and think it very has -- NAV, to active it we of average it and was And think So was $XXX a begins once passive in management liquidity pipeline start The as a your we're repayments, your platform continue you're I was million we it's create funds of deals, on quarter, things was last an million. repayments. not those The but sought BDC to so improving of just We by we our reinvesting those below away. mentioned can mark NAV. when pipeline we sell next over that improving opportunities for getting an it the maintain that closing

have SBIC year do pursue that fund. to May this to a continue in down light of We we we wind SBIC received new legacy balance of a the green a fund;

we're managing all of sort liquidity So the too. with things in mind those

KyleJoseph

one me I moving parts then for yields. back queue. can But the and last in understood. the been And have hop portfolio of recently in in I some there terms

theoretically outlook for today. spreads wider the NAP for sense the market forward give Can us portfolio? your the rate in environment have overall of the and yield fluctuations We a going then some you

JoeAlala

I'm breaking were little ask a at you Kyle, again? Could up our you end. sorry. that bit

KyleJoseph

portfolio and the theoretically talking Oh your factors. all sure. LIBOR was rate of some the going balancing in and just then the spread on NAP, movements deals. about environment, how And for forward, outlook you new see on floors yield those wider I

JoeAlala

This Joe The are are values double the lower this on pre-COVID. digit credit Yes. side pending in is loan yields current to is -- [Tech deals materially nature the Difficulty] again. than

of it's So assets. a set nice

driving pursue into by in opportunities the a participate to we seven throughout we private funds closed. on-site But to in flying these a close ready to visiting We're something have diligence about and offices position when to in seven we're and those meetings. able country. these and industries to continue on We in We're opportunities. investments getting plug diligence have the unique unique versus our small good platform will and and deals providing to And we're it's our be right time companies them doing that completing it and participate, and right BDC visit that's primarily is that is origination companies businesses that offices. the

Operator

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

ChristopherNolan

can Hi, guys. the losses of please? me what the Steve, drivers were you realized tell

SteveArnall

to where party. structure. kind really investment you'll to sold an was one to debt position related in our equity, it's if to so in a we our [Silver two a change where really And the our ABS the in was top] related to in company Certainly, converted note of there related one items investment other the we third

ChristopherNolan

those one Neither non-accrual last of quarter? Okay. were

SteveArnall

Yes.

were. both think of I them

ChristopherNolan

the repayment maturities the on the if the of I Great SBIC day. priorities, has XXXX, the correct you debt priority early that'd so heard be in

SteveArnall

respectively Xst and priority. so or maturities; well. those September the March in this million and of some and We're $XX the two $XX clearly March year; are Xst the next repay of million going $XX one all of from got year, maturity is million one We've as to portion other

just we determined yes. amount yet So haven't but the

ChristopherNolan

see BBC I for or should we should holding good opportunities as repayments collects sort investment down. and test task hold we Okay and to increase guess balance expect [Tech that of Difficulty] waits go

SteveArnall

up time? that little broke ask more I'm bit. just You one you a sorry. Can

ChristopherNolan

or year new Sure. second plan on Joe to be guys your of hold it from like what says making off investments Is the Like the it in year. second in to seems to investments is make of the the going the half you half are investments?

JoeAlala

Yes, is Chris. Joe. This

of I to half as get think We investments. of into the many would the be new SBIC. these investments will year continues to second completing active a and of platform new new make we like investments. The new

leverage the could our leverage SBIC support we have we're of And program attractive companies. provides. of deleveraging, It's the substantial at long-term that. the So repurchase a portfolio and funding new do SBIC; balancing existing very of low-cost, a the liquidity we the and bonds that's

pipeline we're evaluating just the the is is begin on BDC it But participating soon basis. --it's rata ready weekly balance daily to to as a pro a as that needs basis. and active participate new it's in So deals, on

ChristopherNolan

when expect you license new active? be to Joe SBIC And it. Got

JoeAlala

very That could answer do hopefully enter investing May is in to better. early knew this the green We That's And sooner the licensing later. year. we that process of need sort stages to SBIC, if sooner but set a that we predict the received timeline, begin set. by timeline. timeline SBIC it's when the hard rather than later. hope it's than actively I But we that new -- of not light final the We I

Operator

We from the do Hillside with Capital. Robert question of have line Ding a

UnidentifiedAnalyst

SBIC Capital my your is you Hillside question. the subsidiary. that for guys. for SBA I thanks is have the is on This Hey, the debenture One from that the two questions. taking -- and Robert subsidiary obligor say presentation

asset you of clarify much the asset a also is the that cash you loan? that how subsidiary is disclosed much $XXX Could about of total Now out and million. how was

SteveArnall

Steve. Hello. is This

Sorry.

being of cash invested. number -- to We've As in you're would that's, rest SBIC the the it relates assets a fluid to. it's that XXX and sub million as make roughly with referring the we very got payments got there. in and $XX say We've cash of I

UnidentifiedAnalyst

X or say You XX.

SteveArnall

million. $XX

UnidentifiedAnalyst

Oh, XX, okay, great.

it from not Now debt that is early time than liabilities pay years my your early by you your the portfolio, by now second question -- for looking most less which enough at huge on time have two debt. and is in of XXXX to might that that XXXX balloon that concentrate you mature down a of seems

payments for mature? the XXXX when all and SBIC, any unplanned SBA the of the in So debt the remaining debenture notes early

JoeAlala

Yes. This is Joe.

you SBA there Regarding as million liabilities. assets that a just liabilities. the -- the going to debentures BDC in more approved with than At there's there's mentioned parent, $XX asset than We're we've bond repurchase. more

buy those or market and open redeem of some just the So retire on we can them them.

BDC There similar that that is a active know was the market several focused in weeks. the did refinance market raise again. middle also We bond a lower past

periods time they'll be We the again. open over open half. longer of a and at are markets those think So year next definitely

will repay do probably of a refinance. we So mixture and

UnidentifiedAnalyst

Okay.

Just a existing and and apparently your companies your down I debt on way believe to on this. the notes But XXXX. the down refinancing the to you little equity say the it's pay But that to on so rely convertible in portfolio that mature rely payments notes from think the and good the to debt? given of undervalued. do bit your a both both debt plan -- the still up will you refinancing idea pay you and mean to both I valuation that are notes, that the the of do the follow equity I your

JoeAlala

-- of cash part will and that's use the we think some. I monetize Well,

refinance can them. for markets The are You that. open

some the can the next of those. with than maturity we get options partial those. of facilities You are There date assets liabilities refinance since period also to can asset-based are refinance portions that several until those greater over assets

Operator

further no time. questions are this There at

Joe Alala

today. participating for I in Steve Kevin around Thank and day everyone call. you and the all

like forward to us, next we contact you If quarter's call. look would you to Thank

Operator

conference. This concludes today's

disconnect. now may You

Logan Ridge Finance (LRFC) 5 Aug 202020 Q2 Earnings call transcript