GECC - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen and welcome to Great Elm Capital Corp.

Third Quarter 2017 Financial Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to introduce your host for this conference call, Ms. Mahoney. Meaghan

ma’am. begin, may You

Meaghan Mahoney

you, Kevin for third Thank all morning XXXX and us for good joining Corp’s conference everyone. Great earnings you call. Thank Elm quarter Capital

this Tuesday, reminder, As recorded is XXXX. on a November webcast X, being

of XX-Q. over President Capital Executive Corp’s morning the Elm Financial Peter. I law. includes cause securities. differ from Capital statements Great To unless Corp’s note webcast our Great Harbor presentation the you’d and does forward-looking Corp.’s Corp. information. under conference SEC’s Elm these update this can webcast Elm the today’s forward-looking obtain for under copies list, www.greatelmcc.com by the with conference accompanying website filings, to the now can website for Hosting this nothing Great to turn release offer Officer. to either Corp’s Reed, its call that If Great ask to is our our Elm the website. statement is on and regarding call forward-looking you you alerts or morning’s Great refer of to in statements or the distribution sell directly copy Quarterly Corp. SEC Chief added can attention investorrelations@greatelmcap.com to earnings required website. our Information, purchase Safe to we on Great like Results of call I’d be and will filings visit and projections, Elm can factors A link important sign-up by website. to as Filings solicitation that offers like call Elm Capital customary Capital please be Capital SEC to SEC actual found on e-mail that you Capital The Also results constitute Today’s Financial Information, could call Form and to call also Peter slide or visiting an projections. at please available your materially not to the a undertake

Peter Reed

Good morning our joining you, committee John I’m Adam for Thank thank by Kleinman. me, comprised morning Ehlinger, joined Adam of and Yates everyone investment you and today. Meaghan. us this

and our as Relations. well Michael Financial Sell, Head Officer; Investor Chief Mahoney, of our Meaghan As

calls, During update with our from last two examples investments our to started special the prior realized situations provide approach. an quarterly quarter investment we of on the tangible

As realizations no activity our monetization in have was by release, we as during capital noted press to quarter deployment full this characterized such quarterly call. discuss more this than

a and followed with and the activity. by will capital investment financials structure update provide on highlights call of our review quarterly our start portfolio activity Let’s then we an

referenced, conclude in you We point with from turn as is Meaghan our financial our QX. in the Officer to to Q&A. website remarks, discuss the we which number deck the call will the that the the on call prepared available our Financial will results Chief as to well Where will through slide I Mike corresponding Sell, then relevant webcast. over

Michael Sell

the from turn highlights of financial X, quarter. Please snapshot Peter. a and Slide to for the Thanks portfolio

by our per the of portfolio. September to equates asset basis investment in at NAV net driven net versus of NAV end mark-to-market $XX.XX As $XX.XX the in was was XX, versus QX. share share this a unrealized assets This $XXX.X our NAV million per depreciation $XXX.X of On value of at QX. decrease primarily million end

market and end funds. of of was of million QX the the the in third we at the million million investments fair $XXX.X predominantly end in cash As held $XX.X cash had versus of and $XXX.X value equivalents quarter, our money

$X.XX quarter. income $X.X per QX income income second $X.X review. financial was of which total $X.XX for net a million expenses of $X.X net share net million million, ended to X, million or $X.X against the investment of of September net walk for income the investment for resulted please investment compares XX, This quarterly million the million Now $X.X share. against through Slide of investment turn and of to resulting expenses $X.X to NII in per Total quarter

Our share on XXX% again gains Net were net and approximately QX monthly $X.XX of million. form share $X.XX to $X.XX $X.XX investment per approximately distribution per $X.X the share approximately coverage income gains equated $X.XXX approximately was of portfolio which in distributions. pay three QX the versus $XX,XXX, in per realized that’s of in

versus unrealized quarter the Peter As $X.XX on on by $XX.X this $X.XX million. largest net slower This share of mark-to-market was Communications our of unrealized the front. portfolio per investments share Group which in Net depreciation unrealized during earlier to our million, this realization was $X.X QX, investments call, by driven a in than QX depreciation per Plc, primarily noted quarter was Avanti depreciation equated on in position.

and highlights me the let back Now Peter activity. to to turn discuss portfolio call

Peter Reed

Thanks Mike.

have constructed the instruments average secured of yield as XX.X% the a to of discuss average highlights comprised yield and markets, of to credit XX.X%. is of we of That situations portfolio reflective return Let’s credit our despite a a Today end current weighted the current to of view debtor-friendly weighted senior portfolio X the we now almost state Slide some approach. with compares entirely of of special turn total what QX. investment

XX.X% positions invested senior and/or of XX, top invested credit secured was classified September first capital are the of that of lien at structure instruments. As capital as the our in

That average high approximately had an figures portfolio on in of credit of as potential investments. current in the portfolio opportunities GECC mark-to-market that portfolio into highlighting dollar. total This $X.XXX dollar, more at compares deployment/monetization average overall valuation depreciation the Our the QX return as for on to to the decrease end appreciation rotating average of the on significant in price from price price income. weighted a a addition noted the $X.XX the the result and

merger the approximately positions XX% the of way going forward. which which in last invest Lastly, number a the opportunities Having in closed part to Full QX. of or of allocated comprised exited ago. significant we since quarter during intend of new whole in We significant are a of versus uptick position of representative year the mass a portfolio, end that to in contributed amount the newer a capital Circle a GECC

September representing had X, Turning of investments XX value as XX, across X.X% debt and that or in to market we million investments fair Slide XX invested $XXX.X of seven companies equity represented capital. $XXX,XXX

to through XX quarterly Slide walk to portfolio Turning activity. our

average third and monetizations. like $X.XX deploying three $XX.X on note the in We’d price yield to XX.X%. of a the average of of investment XXXX our price a come add-on again weighted dollar and capital at that average deployments during On new investments two weighted recent the front we quarter made investments each lower million at current a dollar

have capital this as protection, in three we $XX market into on quarter, be given in made cautious the noted As cautious of in will we to report three into pleased our powder of prior have rewarded deployed on investments. we and current view stance Despite long new state I’m deploy downside dislocations. the the we nearly dry to capital stance, new investments credit million believe we ample deployment quarters, keen focus that our the markets during will run the

of the lien following; an secondary we International Wire of in the Wire $X.XX Toys“R”Us bond first XX.XX% company of August Our during XXXX rate despite XX% also of transaction the quarter These Three, average secured and bear the of this April loans October. one, in the mature were at of face this August the of lastly XX% $XX These Group, in acquisition value In of face loans an the market and a new we from of also chemical TRU $XX of a of lien price par these representing Taj per Geo quarter of in approximately extended purchased investments value. XXXX senior the the carrying average a Specialty mature Group conjunction acquired of notes of of XX% seller note face of a a we we lenders million a other rate bank Taj, International at in interest second value value just interest. million of shy Two, in with approximately value. XXXX. TRU LLC price of acquired at approximately subsidiary $XX.X to approximately in approximately Chemicals, annum. price majority negotiated notes par in at million

monetize part investments current yield front, in weighted of at par six we the price weighted monetization a a average about On average and XX.X%.

investments and/or in Slide contributed have subsequent industry on – monetizing XX attractive While to terms quarter additional in the our portfolio of of as their year. the both with Similar this with the fixed-rate located well XX.X% are the pleased returns. secured instruments. the first our all in closing capital during we is top as invested detail monetizing issuer’s of portfolio portfolio senior a we of on structure respective breakdown of made versus the the progress past the Since of are the math of provide acquisitions at and legacy structures end of merger capital and was instruments full in floating where capital as QX, the nearly XX to number breakdown. full debt in positions respect the with a lien realizations slower

XX.X% instruments quarter, of end we at During at past rate to XX.X% to floating QX increased end from exposure our the the QX. have of the

significant margin Mike fixed-rate the portfolio I’ll over above the X% the discuss current of distribution instrument back on call a yield approximately average turn weighted the NAV. capital Sell the to September recent XX.XX% in activity. of is Lastly, With that XX rate to

Michael Sell

with a We’ve couple Thanks activity. respect Peter. that capital we discuss like would to to updates

to earnings our let’s declared for $X.XXX at our third with plan times. our XX Slide we QX In release our our amounts and distribution of policy, of distribution approximately XXXX, per share in which in September NII, to $X.XXX of X.XX quarter approximately QX level XX. month First respect from announced per of or generated we’re per covers per to continue share NAV. $X.XX X% XXXX Directors schedule we August declared the distribute Yesterday, distributions reporting month Board share our for per distribution by to we our that turn

quarterly As special distributions our excess from call distributions. distributions is in to monthly on supplement the our NII of with intend noted last declared our generated

in the completion and the subsequent our to special will course. distribution expect QX announce in We later market of to update the due analysis

let’s program Slide respect turn to buyback Next, stock XX. our to with

During program. at the utilizing share tender paid approximately NAV of spending in approximately purchased million of through shares commencement XX.X% activity. million million of we’ve share over aggregate of weighted $XX.X price a approximately XXbX-X XXX,XXX of in program shares $X.X November XXXX million our September X.XX buyback XX.X% we shares an our cash stock our XXbX-X an $XX.X in at buyback $XX million shares through stock date purchased through average Including at the purchased offer, million November XX or XXXX QX, program and discount X, From cumulative we of XX of XXbX-X September average to X.X purchase resulting $XX.XX over tender of have NAV. per aggregate in to approximately the

has our activity nine share in first stock the and NAV. added months For to offer approximately tender our $X.XX buyback of XXXX, accretion per

due Lastly newly notes XX, that on GECCL X.XX% and call as investments update, of we in over XXXX These over merger full the closing turning our by the baby of was provided deal Slide a On issued we priced a back option filed coupon trade XXXX. Q&A. concurrent had remarks the we FULLL on make circle a We quarterly SEC the offering. July a settlement X.X% were cash XX, referenced savings investment size the XX, on notes the GECCL. with and offering million. activity of we call to fully turn our objectives. repay reduce to last $XX.X XXXX the September proceeds then XXX for for bond approximately new This notes, redeemed basis with approximately XX, resulting allotment let to the the to ticker notes to With Peter and to the new With use million that a on in me subscribed $XXX,XXX were our in allowed the total this September assumed of consistent issue for statement October intend capital noteholders a debt notes approximately to redemption points notice under us existing XXXX. $XX.X registration of annual with rate

Peter Reed

us joining for morning. all you Thank this

you hope the of to be significant We the made have alignment created investments have portfolio this and date it distribution to placed you you our for current to made progress the per We legacy new through and share. forward that for of the confidence that tender in we our share portfolio, repurchase out in and support Full interest with about the continue activity. excited rate Circle into We the to and a and and With over again the to both Thank look believe questions. we have we turn displayed stock we call that to investments. NAV us. growing open will have operator have rotating

Operator

first Instructions] from [Operator Our [indiscernible]. comes question

Unidentified Analyst

Hey, good morning hear you me? guys. Can

Peter Reed

We can. Thank Josh. you,

Unidentified Analyst

a to there’s little the sheets. in obviously the a bit but Avanti of lot lot a movement of or want from ask just because I bonds the cheat on quarter not news in

that walk during the So currently quarter? kind bonds some of maybe thinking investment CEO through us developments. guys developments all you’re What There some of of about have and been and that. could what cause the in you just how the kind kind positive to sell-off obviously of that kind

Peter Reed

Thanks Josh good and question.

lot useful of or is the by are think able about close moving loss lien Where about confident of timing significant and reduced publicly in to that what asset quarter and at least With of that investment underlying QX. on unrealized is Avanti back time portfolio. investment I pieces there was trading of The the as per further understanding going portfolio about the Avanti in that so end from on have position our of have closed things that the remain company. $X.XX extension from about and couple way, a this means that the end share $X.XX our asset quarter. at in our unrealized maybe to the of the a to Today of trading in make price, today’s But at have by the we call price we and out unfortunate the of the $X.XX take share. it at up $X.XXX for I been instrument and which third view us end walk the time rich there point of maybe share are million comments at $X.XXX Avanti. trading caused those we’ll $X.XXX, that the what to we’re down What quarter timing to we into a company. right, company. – that position would that a prices third unfortunate through our for was that can minute loss the serve we then Those for have share collateral You’re this a we to the collateral the very value would in

making the be As you we by turn a are to Alan’s turning we we encouraged team very interim new the is that progress has Avanti have CEO, believe that company. and ultimately appointment of Alan Harper the this point out and pointed the under will a leadership management meaningful in appointed out been history

Unidentified Analyst

Maybe follow-up. just that. Thanks for one

cooling tell can of process. have you can just you off you In us takeover UK or think terms I us now not think sort about period what through alternative strategic of walk that the strategic – alternatives, I the would so

Peter Reed

alternatives Sure. Avanti. at There’s no process formal going strategic on

are You the can the assets board the business imagine that in focused maximizing company they have. of and value very the on the

the So that I that that seriously. could should company something drive have Avanti anyone that for investor presume take value very would have proposal board a or another

Unidentified Analyst

you very Great. much. Thank

Operator

Brian from comes question Alexitch Investments. next The with Greenwich

Brian Alexitch

at to that be income. it equivalent Good the bankrupt but the just the But substantial portfolios what I question progress related They overly collecting little particularly confirm, paying on like you bonds if cash cash and those out portfolio on the trading substantial in morning one or be you’re Avanti comment of be just flow bit that match income. while you’re My level. as Avanti. cash the your is in Can you in portfolio the the that’s a to means is that on is look first a not more the problem uncomfortable – distribution? to paying to you generating understanding little mean encouraging amount a does it income Can not cash gentlemen. human case time bit also the would Avanti income the sound it looks pick a just thesis investment investment bit the if in same amount a It’s total to of with the through appears of of depreciating. and an can the a is

Michael Sell

Sure. Thanks for question. your

receiving that making elections so company think that the pick I interest been instruments has far – you have been to have that been pick the it. available but

cash income that than So different pick that’s you’re correct have we income. and

something While navigated. that presents a be to

our the that BDC balance balance of to least ability as current we’ve have that pick out cash fact any about and payments. not of a cash ample dividend, one had sheets you the is have sheet non-cash of peer income the the and chunk pointed on income. we between worried leveraged we’re income think from which of pay is But I we covered distribution group mismatch particularly a

Brian Alexitch

suppose that I out, still about other you out does And get like assuming portfolio. the paid the portion the not or on assets line mean we have look can it that these substantial been that. what down that to do point problem are where what provide understood. end Okay, bonds I how everything might has it the they are in potentially mature in paid of a a presents pick. for you the think

Michael Sell

these the collateral. investment. with you for take that of that of given I is or bonds were this We’re issue, Board our means rich a in point Directors relatively And but that aware and on for ultimately asset asset would what of company, positions value limited our to can what service the back publicly I we’re company’s guess, collateral confident those we

Brian Alexitch

for question. appreciate I the much. very you taking Thank Okay.

Operator

with Phillip question Bulldog. comes next from Our Goldstein

Phillip Goldstein

and I question itself. about indicated you’ve How scarce discussions, more the bonds pretty about obviously trading volatility the very is in that One folks. the Avanti, From high. Hi these is valuation forget today. fact past blind tick goes what and there substantially be that’s Or up you down these? the the turn indicated the the market to huge could – is market our price board – value you in a or or the you But else something just said as September that and well you then do value just to because any is adjust – that that account. the it’s going say the company what take and Do mix. whatever just we’re is? take does into on XX, you into price that Do you was way up

Michael Sell

is This Mike Sell.

that I given active there is here. an market trading think

Phillip Goldstein

said that active it’s right? But market, you active not

Michael Sell

is on couple the there somewhat daily this end basis training almost in on days. trading there Well, regular – was quarter the a running for particularly last issue

been of position by particular Part and default that a case the the based took is one that last in being if that at last pricing Our traded on share have hasn’t or adjusted provides on more price. dynamics. data there but the last price market volatility issues a there price, [indiscernible] to is this would in reevaluate like we traded than we issue the to service you’re issue, issues. traded still as going $X.XXX in so take a traded provider IDC see non-traded If

Phillip Goldstein

All right, okay.

a other two part it’s is question special the Well, question. for like dividend. The regarding prospect

us special that dividend number. year like be think of paid be you range Can idea you can’t us be? would this an where is, number two, to will give the a one give range dividend exact that you rough expected So and

Michael Sell

that one feel well. as Yeah I

would bit that’s for period think I a the depending though time in down a purposes analysis expect least the decision question for record tax the at it. board to our first data FX to current the have that level regards in year a we closing on of on

the range investment the I basis GAAP be sheet of of net our on of look place capital undistributed we income to the terms best at In think a going is section have $X.X $X.XXX. million balance to

to fourth going for reasonable a an to on where – But of stood tax decent proxy needed distribute probably want that’s in account we that take a over terms access one to differences. we at start finger probably $X.XXX. be avoid basis obviously quarter to to tax with. good excise the income the estimate There’s into put what that’s your in So what’s the from air

Phillip Goldstein

taxes. Okay. Thanks. pay don’t We want to any excess

Michael Sell

problem. No

Operator

to showing like at I’m further any I’d the to back host. call And our questions time. this over not turn

Meaghan Mahoney

buyback anything time Thanks Kevin. first for again call. we Thank great let we us want us look in to I point make forward with The morning. just misspoke activity do believe was earlier share, $X.XX for joining day. you I of And before if we clarification conclude. continued and know the helpful We dialogue. follow-up. to share one the year be tender Have to from can per this accretion our please in a the

Operator

and gentlemen today’s that conclude Ladies presentation.

disconnect. You And may have wonderful a now day.

Great Elm Capital (GECC) 7 Nov 172017 Q3 Earnings call transcript