LRFC - Earnings call transcript Q2 2022 | Logan Ridge Finance Corporation

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Operator

Welcome to Logan Ridge Finance Corporation Second Quarter 2022 Earnings Conference Call. An earnings press release was distributed yesterday, August 9, after market close. A copy of the release, along with an earnings presentation is available on the company's website at www.loganridgefinance.com in the Investors Relations section and should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC.

As a reminder, this conference call is being recorded for replay purposes. Please note that today's call may contain forward-looking statements which are not guarantees of future performance or results and involve a number of risks and uncertainties. with materially of in including a in company's differ as forward-looking those may the result a number filings results from the those statements described Actual SEC. the of factors, statements Corporation Finance to such law. no Logan unless Ridge by assumes required update obligation any forward-looking Ted Finance With that, Corporation. to like Executive Officer the call to I Chief turn of would over now Goldthorpe, Logan Ridge

Ted Goldthorpe

our our joined Officer, Welcome to second Investment and today Jason my morning. earnings I'm quarter Schafer. Good call. Patrick Financial by Chief Roos; Chief Officer, XXXX

date Following additional my financials. opening detail on remarks, Jason Patrick will our provide investment will activity and the through walk to

The second that execution time, and we've serving shareholders and anniversary expect as fruits Ridge Ridge XXXX. quarter our through the transformed will of performance quickly see the company's the and half during Logan the this completely our in We're of to of really Logan successful say and was business company for investment second the our plan to we labor of year begin of transformational marks first adviser. XXXX proud the

will to Patrick of a additional While Logan for milestones of the game Ridge. the are I changers emphasize that believe few would I details our portfolio, transformation provide like on

derisked We delevered and have substantially company. the

of credit our fair platform as with under cash for company's value XX, ample Credit capacity the June BC available at Specifically, new credit Partners XXXX, unused future was portfolio BC investment of XX% -- originated by facility and deployment. borrowing

XXXX. Esport XX, provide to debt from XXXX, legacy the XXXX. at in at cost adviser. of December June XXXX. entire exposure represents refinancing became XXXX new and June valued of the nonaccruals took fair of no necessary a fair of The XX.X% value $X.X the of its borrowing debt legacy XX, and/or noninterest-earning just the June of XX, we with the the investment interest company's all materially flexibility maturities of of as Management over December million position liability largest lowered We've at Xx delevered company's capital realized inherited successful completed when June there from -- exit legacy to eliminated been million. which months XX.X% XXXX, XX, to of was This former fair the X.Xx company. the adviser. structure exited XX We most company has and Further, the monetized successfully as Ridge's as This company the This sheet. we ended the nonyielding inherited nonaccrual portfolio of company's as we equity has as the increased company's of equity has the during of we portfolio quarter. as under compares to XX, the investments will Credit to the stabilized Mount X.Xx for which zero with including grow XXXX, XX, the the Logan since We've of as investment near-term value XX% value June capacity legacy of reduced of successfully XX, June Xx of recent the successful and we've on During portfolio balance management approximately Logan we portfolio $XXX proceeds XXXX. of XX, the

the XX, ended XX, Partners XX-month million Management the administrator, $X.X XXXX, $X.X Corporation June fees, period for Capitala former the ended This reimbursed million. BC period XX-month compares June administrator administration Advisors totalled the XXXX. For to reimbursed to

to current now execute initiatives, on capitalize arising opportunities sheet With our the ample flexibility Logan the our these with completion successful of is positioned growth to milestones, Ridge material from portfolio and the balance of on current well strength our credit commitment environment.

focused Ridge largely on next on dividend. to to on profitability. NII returning is we've I Logan or begin last to a a levels believe Patrick the to quarterly we Chief any we'll rotation believe call on Officer. positive With I'll and From on mentioned out, that. ship. basis, writing generate accounting our here laser-focused heading that, collective turn and months, path track before year, Schafer, We Ridge to capital equity on over Logan do be the benchmark rates, During remaining successes the our exactly incremental the XX to refinanced rising of into structure leverage Investment normalized the for return reinstated portfolio With newly

Patrick Schafer

Ted. Thanks,

over portfolio to $XXX.X interest operate high rising companies. In rates XX XX% due approximately almost and/or realized XXXX, peers, the to credit million impacted initial business of an portfolio in the with capital fair which has this, XX, value year our of was management, June portfolio uncertain our million at execution inflation monetized and broadly. Consistent markets of $XXX prudent spite which legacy in of and portfolio and of economic adviser we with fair successful our plan portfolio represents we last continue As we from environment successfully inherited value. the former in

end of As was company's fair XX, investments, a portfolio investment invested at in Partners XXXX. the platform assets of the by value as result, the Credit June BC quarter originated XX%

unused well XXXX. originated platform borrowing as Credit and the cash has $XX.X $XX.X June as available by million investments million capacity Partners BC for deployment Additionally, company of of the as in XX,

second generated the During redeploy capital quarter, continued from legacy judiciously the to portfolio. company exiting the

quarter. million transaction approximately $XX.X made exits, had the debt sales received a $XX for as LLC by includes that Esports company million completed [ph] approximately XX, in in security and $XX.X and resulting in $XX.X and million of previous the new equity cash closed its of all exchange of and $XX.X securities, XXXX, million debt Holdings gain [ph]. million in Logan June the on and approximately net generating whereby realized repayments and Ridge repayments recapitalization principal approximately investments This for a in Specifically, million refinancing of $XX.X

X June There and $XX.X portfolio portfolio the nonaccruals which portfolio, of the investments of with an investment As no we on during the added quarter. status new nonaccrual are million cost of debt of value fair and aggregate respectively. X.X% a XX, companies XXXX, to million represented in had $X.X X.X%

excluding June investment debt collateralized XXXX, XX.X% average obligations, a to represented a value and collateralized weighted of average yield which obligations. our This XXXX. investment total as and fair portfolio loan approximately excluding of at had debt XX% with of loan of represented weighted XX, and annualized nonaccruals the portfolio a portfolio March at As fair yield X.X%, portfolio our value nonaccruals of X.X%, annualized of XX, compares total approximately

prior over XX, $XX.X quarter equity and when million million and of $XX.X and This to and the we X-year over the value to June managing the turn fair million, $XX.X the cost ago million nonyielding of fair million XXXX, Finally, decreased million $XX.X Jason. portfolio cost $XX.X as and our now $XX.X respectively. the call of company. to of value took and as I’ll compares

Jason Roos

Thanks, Patrick.

Turning to our XX, quarter financial June results the ended XXXX. for

second and reported of decline declined investment million million and second million second million as XXXX. general XXXX. $XX.XX expenses asset $XXX.X or second Our Net $XXX.X per investment first incremental share of the investment quarter for driven the second second during have fees, in flat net quarter prior quarter of the the The fees financing was income interest or The primarily XXXX compared Accordingly, of the quarter XXXX and Total $XX.XX in the of quarter $X.X of to in $XXX,XXX costs. million $X.X items, for million compared due loss decrease -- XXXX. of $XXX.X nonrecurring which per was and of for of said, of lower million net as is adjusted included $X.X from portfolio. administrative fees. Total XXXX per quarter to quarter impact quarter December quarter as XXXX net $XX.XX excluding value compared quarter also the these approximately and a prior investment from we the $X.X million $X management quarter first the financing of primarily the professional reported loss to XX, million and delevering at the these to and share or expenses second $XXX,XXX end decreased That for the loss to share XXXX. would for by of $XXX,XXX. reported decline net to costs was $X other nonrecurring from excluding loss of investment

equivalents Cash as to increased the net realized net XX, income a of For compared reported in quarter quarter $XXX,XXX gain for prior XXXX, second XX, the a June realized of and million a closed $XXX,XXX $X.X than quarter second second net of result as quarter quarter in XXXX. during less the XXXX, of XXXX XX, June Holdings to a transaction compared realized $XXX,XXX recapitalization of was XXXX. and as compared on million of the Esports to that and March cash we of the $XX.X second million less million $XX.X net loss of LLC of of during quarter of investments loss XXXX, Net on than net loss investment primarily gain a the prior of investment as $X.X refinancing and $XX.X the million to investment XXXX.

success Further, a or capital will of For per grow during it to the provide operations the on position the X with assets flexibility sheet. its structure a XX, and months legacy net loss company second quarter, we resulting work successfully June in net decrease $X.XX. company the for completed our reported million the of which ended XXXX, the $X net balance from share

the interest convertible fixed of a second bear issued we XXXX interest X.XX%. during at due quarter million XX Specifically, April of and XXXX, notes rate

quarter, the rate amended credit XX, term feature This facility month forward-looking million. on the the LIBOR basis X.XX%. with the to additional subject $XX credit KeyBank point amended uncommitted million to Additionally, equal at bear X.X%, period a for interest increasing borrow amended XX up revolving KeyBank million minimum X.XX%, allows to to which points an agreement floating to during X plus from at X basis subject XX X.X%, and facility rate us month credit senior floor to bore mature accordion thereafter. facility under with X-year subject during plus will May of a will plus the compares SOFR $XX an over $XXX we X-month to existing a the revolving to The secured Borrowings XXXX. a that old KeyBank, SOFR SOFR interest commitment our also

on I With X% initial were will the over these million outstanding $XX.X matured turn to as million. Goldthorpe. off outstanding, $XX.X notes both remaining proceeds million was [ph] $XX.X notes convertible pay X.XX% Ted used of XXXX. XX, the of back the credit to that, Our call which May The on from of transactions as the draw facility well

Ted Goldthorpe

Jason. Thank you,

a in are where We position the now significant us proud returning milestones year profitability over accomplished a the has we've which of to on dividend. entirely company and the we last paying can regular put focus

be the prepared committed team half now to This and goal this expect fully Thank concludes to evident for any of the achieving turn questions. of the performance our Our is everyone, financial the the support. call expect this company -- operator for second you, year. we to during over this be we your I'll in and remarks to

Operator

Nolan [Operator Christopher Ladenburg of Instructions] first Your question comes Thalmann. the line from with

Christopher Nolan

that Patrick, a company what And to was the realized it on swap? debt-to-equity gain, again? related was

Patrick Schafer

Yes.

to that Esports. our $XX of restructuring a of company, -- million related we security is debt realized was it unrealized a to yes, is It So related -- exchanged whereby the to it's but swapping to for was amount some realized. equity the

the remaining NAV $XX gains. million. value over million previously fair was $X So impact unrealized that little The was of or a impact market

Christopher Nolan

So the you you incremental … impact, NAV say mean when

Patrick Schafer

is XX, it. Of the Of Yes. the X new. call X is benefit. I'll Positive new, XX,

Christopher Nolan

that then, on mostly depreciation the was a And Great. unrealized that. true-up

Patrick Schafer

Yes, Yes. yes.

Jason Roos

Yes.

right, process. was valuation good normal portion portfolio which flip . our to was then of mark a and unrealized due on realized So the incremental that, to from the there quarterly

Christopher Nolan

read to is You position by now, got comments then, that, the returning it it profitability seems half accounting. Ted, now? of BDC be the fair for it on the And in that or in company’s love the by from the close a your to perspective second your of outlook is than year-end terms to profitability year-end right better will towards trend like from to year,

Ted Goldthorpe

exactly. Yes,

the up. fixing now So getting again, was down. leverage getting really structure about And like the big income and really focus for us it's capital

to We And vehicle see be lot profitability mentioned. I So begin it's up return efficiently run we a start a costs. where now, -- more return the should can to as you position you to should of paying dividend. a and us cut

risk equity massively think only of it our because but exposure quarter away in Esports big terms size. clearly monetized I the also took milestone was our concentration equity outlier this pays reduced not which an

X%. So like equity now largest our is position

the we second And very very, this year. about good half of so feel yes,

Operator

Slater of the Martin from Capital. with line comes Steven question Next

Steven Martin

A flipping you some now? it unrealized -- be much talking recovered portfolio The couple that just around, million where might $XX of as given is were much how of how loss mark-to-market? And questions. of was, of was of about Esports the market that

Ted Goldthorpe

Yes, Good question.

Jason. Okay.

Jason Roos

future credit flow spread on And Yes. realized. to fair company. right? a remainder I XX% unrealized between cash outlooks expect has was we of It's of underlying would and the a that rebound basically values on on performance the projections with say -- was flip looking back. pretty some in and true the indicates, about the then rates at And would come unrealized much

Steven Martin

quarter? talk Can the repayments about to the of you deployments and Okay. subsequent end

Patrick Schafer

on well, policy I our to quarter the had to similar end. we know subsequent were as activity deployment you say would I other Yes, increased some which

would think portfolio the been of static most place Logan do you the of in quarter, kind the the core the have of refinancing need of structure come for a part relatively I those liability things. the the the between facility and Ridge in X and to second be getting KeyBank folks the difference to has

was, to across of lot activity platform I we been investment say, would a transactions occurred still our some end the for July, things have that increase works subsequent work to do in have were while. there I'll So a to in it, that call because the quarter

timing loan a availability availability loan and kind in deploying of the mismatch there's rate of grade of terms of And terms out so in capital. putting little bit on

have Ridge in and some cash So to I'd of still terms investments. new work on we say do Logan deploying making

Steven Martin

private excess utilize you in Does obviously it which make the enough liquid credit put market to the now in you have sense, given market. the work to can’t spreads right if capacity credit the

Patrick Schafer

is metrics that base as answer borrowing we it's the metrics need than we that calculations within. answer complicated the -- yes. certain is more I mean short is The long everything that has certain facility fall to and

are purely are the answer also we for Logan markets so can economical attractive weigh And from against assets the is to that need that we eligible facility. utilize the yes, perspective. that But a

a of answer time there's to Diagram And markets things. Venn short absolutely Ridge. those -- We period of so to yes. of expect invest some the is the utilize liquid would out Logan to But for

Steven Martin

going or of there might expense have the in for And looked corollary Okay. the might that is, like us on look with Ridge the of an you idea given on, like expense capital give side debt recognizing was structure that’s to the QX, lot in a QX forma interest structure? the place what Logan the debt now what that current can pro interest

Jason Roos

within I expense the off say quarter, duplicative Yes. debt. of paying to interest it's would for XXX excess of portfolio the that's like the [ph] on for the debt presented there's due just the existing being about number mechanics

it. interest that on expense So call million about [ph] of, has onetime XXX it, $X.X

the closer using the XXX rate? would a anticipate that to run that, as be I million [ph], that just of rates quarterly place on number forward, Going $X.X were in

Steven Martin

was Got quarter third you. Anything realized material in so that far? the

Patrick Schafer

I'd Yes. is of some your I mean on respects, definition exits. the say, in yes. We've answer it depends realized some materiality.

think recently, of our them one the we've position disclosed I biology. entity in was very exited purchasing by

that So SOI. our on is

been had was our our as of will, you process. if value, exit valuation in with as we part expecting end valuation quarter process in that knew is line Our and quarterly

was that's think anything the So again, that's there's million, debt unusual would a asset an depends from but $X.X been that and -- any position that quarter. $X.X that to debt million [ph]; was you it realized this But then It on publicly say rise expect materiality. shouldn't impact wouldn't that of item an kind materiality else I disclosed position one threshold. [ph] I'd was

Steven Martin

debt [indiscernible] marked and was the [indiscernible] the to and on No. March had zero. down you XX, you preferred preferred

was that So so nonrecovery a to speak?

Patrick Schafer

correct. That's

Steven Martin

you. Got

been So be would part have of would the… that that of -- which part

Patrick Schafer

to for [ph], been that's the unrealized the to number of number. will be part of unrealized part theoretically XXX reversed but that's as and get QX reverse it that out, booked of QX unrealized the No, realize part of unrealized the because you'll realized hadn't

Steven Martin

$XX part of that’s that million? So

Patrick Schafer

Yes, correct. that's

Operator

queue no There in are at questions further time. this

Ted Goldthorpe

we good into we mid-November And we’ll and really everybody morning Again, forward call. to our talk summer. for in and wish -- weeks. in you speaking guys end look so And to you dialing of a to couple of Thank you a much.

Operator

this Ladies concludes and gentlemen, call. conference today's

You now disconnect. may

Logan Ridge Finance (LRFC) 10 Aug 222022 Q2 Earnings call transcript