GECC - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Great Elm Capital Corp's Second Quarter 2018 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] And at this time, I would now like to introduce your host for today's conference, Ms. Meaghan Mahoney. begin. may you Ma'am,

Meaghan Mahoney

and for everyone. second Great call. earnings Sandra, for quarter you joining conference us Elm good you, Thank morning all XXXX Thank Capital Corp's

August webcast recorded As is reminder, this on a Friday, XX, XXXX. being

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

Peter Reed

Thank in Committee, by John you Yates, me, for of I'm everyone Ehlinger, and Investment Financial Investor Adam Head morning prepared by our Mahoney, joined Meaghan Chief is today. referenced, Relations. to remarks, as Good Meaghan. relevant that this which Meaghan as well Web comprised you of Kleinman, the John you, as Adam on point our available number webcast. our we site, joining as morning, Officer, well the in Where the Woods, throughout our corresponding will thank and and deck slide us our

Communications were Avanti restructuring release, selling capital and source As and in of of we fronts. to capital on existing highlight a Group portfolio the our like continued to pay significant very the the into PLC, companies. our noted down of restructuring deployment, I this quarter deployment press specifically would loan monetization, active the

the highlights activity. start this by morning's through portfolio quarterly of We by financials a investment review will and walking followed call

activity before structure the We capital concluding on will with update an provide call then our Q&A.

our since as would of I to of quarter Elm way Woods Corp John By Woods the been officially CFO, turn like organization broader I the welcome the but from team. Great Great early Chief John to the Capital member call results to joined team second Woods, over the XXXX. of Elm background, financial has the XXXX, Officer, Before John to discuss Financial recently a

Elm Capital company the John external CFO of Capital as as of parent Group, and CFO Great Management. addition GECC, this also to of Great serves manager, the our Elm Elm Capital role In Management, Great the

call the over results from financial discuss the turn quarter. to let's Now to John

John Woods

the of turn for quarter. five slide financial from Thanks, to snapshot a Peter. the Please highlights

XX, we in June paid in base ended the NII XXXX, that distributions excess quarter. per $X.XX $X.XX were quarter share during share, generated of of the per the significantly For

as share NAV, basis, flat our quarter-over-quarter. equated value XX, flat six, that's to slide which per to of also net Turning June quarter-over-quarter. asset was $XX.XX a million, On $XXX.X was

significantly impact distribution our for While in the Avanti The exceeded driven portfolio. in mark-to-market in NII depreciation Group by was our mark-to-market investments NAV this in quarter, Communications depreciation portfolio was the the PLC. by offset predominantly

six end modest the second portfolio the our investment of of XX, was our the approximately portfolio June growth and the fair ended X% approximately investment during at during million QX, XX% million, $XXX.X XXXX. end portfolio the growth $XXX.X of versus of of representing months value As in quarter, the quarter,

$X.X predominantly equivalents date. of We market million as same money in fund cash also had held the in mutual cash investments and

QX to slide to $X.XX million compares Avanti nearly in share quarter resulting million quarter. lien expenses and to for to as of quarter in million, in position. investment financial resulted per net the million XXXX. core was portfolio Avanti. NII fees for per million, of QX Again reversal per generated net of This $X.X total share. turn versus gains on investment was million, the and was in Net base income unrealized investment $X.XX approximately X.X% in XX the review. first of year-to-date through million, but third was unpaid depreciation the $X.XX accrued $X.X unpaid $X.XX $X.XX XXX% depreciation coverage Net net incentive was fee. incentive expenses compares from by million Total growth QX $X.XX realized the associated we in please Net quarterly the reversal approximately per $X.X investments aforementioned of driven with three-monthly to to gains investments primarily of approximately earned Now, of investment on distribution which were This which net per during seven previously And in form of $X.X $X.X $X.X income this this share quarter share $XXX,XXX. by the June equated share unrealized our solid on the $XXX,XXX investment coverage ended paid and income approximately the driven the income QX depreciation $X.X investment walk of of against mark-to-market Driving generated against was per $X.X our of of but $X.XX part of which share. previously accrued the million of the $X.XX $X.X per million for investments equated net share in NII net or the $X.X on or distributions. income in

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

Peter Reed

Thanks, John.

portfolio some Let's now Slide the of highlights. turn X discuss to to

weighted XX.X%. instruments yield entirely of portfolio We average current have almost secured comprised constructed a a credit of senior with

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

Our the a in had income. high potential credit current upside addition valuation overall average of weighted approximately portfolio the to highlighting on $X.XX dollar the

was portfolio legacy of we the capital are representative of to while of which XX% into going in full actively Lastly, new forward, on comprised have that opportunities, deploying as the circle way intend been continuing positions the monetizing positions. focus invest we to

equity million walk investments. through our fair XX XX June XX, market XX, companies and investments million turn to activity. all the five quarterly fair to representing represented value portfolio of debt across investments had X% in of $XX or as XX of slide to Please that value $XXX.X we Turning slide

existing deploying price draws. quarter of million weighted a weighted $X.XX second the XXXX, of investments we average during to dollar front, added investment $XX.X the XX.X% on and at current yield revolver On the of eight a average including

instruments. lien investments All or first were secured and of senior these

briefly where through we Let's walk deploying XX. have Slide Please capital. turn to been

value of in par value. First, loan we the a face acquired XXX% price Aptean million of second X.X market an at secondary additional lien of

value Baker's approximately lien the Next, XX% secondary market in a acquired price bond we of of additional at million an $X of value. par second Michael face

at loan also an secondary of We a SESAC the lien second par. face price XXX,XXX below value acquired in just market additional

we $X Sungard's of face par price at approximately million XX% the XXXX first in Next, of an of value. market additional lien a loan value secondary acquired of

first funded and par. million to Tallage we Davis term loans $X.XX Lastly, at originated lien

XX.X%. $XX.X XX XX our rotation noted quarters. at the across million trailing we and par a investments slides of quarter-by-quarter weighted As snapshot and weighted of five XX price average portfolio yield Slide on the monetized for of current a average provides XX,

into and breakdown appreciation. XX where of opportunities adjusted principles the investments this of with senior Here build Slides of how how first their rotated believe value terms and of lien provide over investments dollar respective in and at instruments has key our this out time, detail through versus on this trended to rate as portfolio structures, quarter. price or Elm are additional structurally are over senior opportunities higher located the accruals well both price of secured XX here instruments has encapsulates have return our that total Great while on deployed floating time attractive how potential what you high greater offer we breakdown. as an current industry can investing during in to XXX% risk the the trended supplying into of see achieve portfolio focus capital keen a capital a yield seeking issuers maintaining fixed the We for we

significantly For increased in held Avanti. previously exposure equity the with in debt quite portfolio's equitization third-lien quarter-over-quarter of clarity, connection investment the the

realizing with these managed monetize XX have conversation of of a of we Please since in is Lastly, of June turn was to date would at full on XX.XX% both rate to is we on XX.XX% XX% fixed with been the current next as viewed working exiting distribution of positions an the I to time, gain, are the of XX meaningful at and shareholders. monetizing XX across a at what rate Slide the the in In with and circle We've cover average and on portfolio monetization full The a excess legacy total closing the return challenge months spending on weighted portfolio. to out success circle. portfolio this $X.X have X.X% net XX. frequent yields of the instruments had the the slide XX, After positions. topic this companies approximately largely NAV. a million aggregate diligently as approximately XX of topic and floating focused well like merger respectively noted our portfolio rate the

basis realized of our have cost all on have the been at larger not all Although positive net a initial had provisions outcomes. based gain the positions exited

circle close significant LLC selling the to the legacy further full subsequent exposure a in investment of our pay to quarter, reducing we our the down Additionally on the portfolio. source received

Our January remaining rolled matures that exposure XXXX. first in out loan position a into up also would senior super

during the Technologies walk now to majority Communications full through monetize lien Post our RiceBran at equity. to for subsequent a the orbit Avanti noted a of restructuring close announced on second with $XX number recall support plan of X voted lien equitize Corporation with position brief sustainable more in restructuring the up X I contract In quarter, and Has quarter in restructuring. Viasat of a to owns XX. position. million Group, picked restructuring the in warrants portfolio the this proposed X.X% conclusion. and XXXX with company, testing Please the a circle of satellite, company terms in another on structure HYLAS its slide nearing turn XXXX the its the want for place. Avanti developments we to a gain. common notes. new from proposed now The legacy newly shareholders notes capital a launched to December GECC HYLAS in our largest close Additionally, the the we amend of the for small positive had Avanti closed update Avanti's late April, third of approximately April of announced in

more the see wins as largest it's newest its balance contract to fleet. as continue to expect satellite well of and for the newest We for

Ministry announced the Additionally, Avanti's contract of million will from of recover money to for Republic satellite. up the proceedings of against owed to Indonesia it to awarded Avanti automate be it $XX.XX a arbitration under Defense that

expect will Woods structure the recent With to that, John back capital We this be call discuss over turn to mid-August. activity. paid I will by

John Woods

Peter. Thanks,

capital to activity. brief We quarter update have this respect a with

turn of Let's the back we with morning distribution to month base we for NAV. per distributions QX for plan our Slide $X.X by With announced per per update, This reported Directors that me X.X% call Peter times. activity closing capital continue distribute May of share approximately to let in declared month. XXXX distribution first. policy declared X.X our approximately BOARD to over NII, our our and XX. discuss per covered Please $X.X Q&A. QX, to share XX schedule remarks per our In In of turn release, distributions or then June $X.XX generated earnings our the which that for share we

Peter Reed

us for all you this morning. Thank joining

the about well significant believe the one you our for have over will to other a as that and be created in call both again as shareholders alignment made investments. full the the us. the portfolio this. day you we we you continue that, with and with circle upside potential legacy with excited We it and We have displayed to that of we hope for confidence Thank open to interest With the in turn the to have operator placed questions. have we support progress

Operator

line Thank first Oppenheimer. Chris our Kotowski you. comes [Operator with And of Instructions] from the question

line now is Your open.

Chris Kotowski

Yes, good morning.

in there I your that down unusual like it's on full this that kind in the it's a had an circle and an guess public deployments bunch and XX, at time the and looking I are I $X.XX amount every when buying quarter thought at look churn it been but at a So exhibit quarter, interesting them winding XXX. the in of an at monetizations there to been page is seems portfolio, guess selling of $X.XX the you've positions you've you then shows legacy extraordinary been activity time that I

unusual mean, the least portfolio of isn't most is we that there what that lot upright at should to going of is really three-month level expect of and but this is forward - this or expect churn kind I period, So a that recent we of should a growth period? an kind

Peter Reed

Hey, Chris.

portfolio be that our misleading that the And of think you might the company facilities of on a could to actual does quarter, that it we one a potentially utilizing So, about I amount that less probably both churn credit that certain statistic the both be there companies. statistic a pay be could downs result, include is as things and draws of revolving of provide imagine is than that as might positions And of activity significant. sides within on portfolio implies. course of

all is on So to total that, example, and positions, new meaningfully of or of the for funding slide if funding at the revolver existing of that show I look we the more less you amount from positions, way think XX, additions portfolio, whether capital revolvers, deployed. position the than

Chris Kotowski

a is premium time I seen All Fair to you okay. there. kind page, name but I anything know enough. small the the on position, bought right, just Then out Aptean, that par, it's having of you one that's a - can first curious it's jumped rationale at recall I'm on the

Peter Reed

very so company by attractive par. this has Aptean has think Partners co-protection, a coupon, company wasn't high it's consider Vista time at by private dedicated Sure. a quality has we from to premier enterprise an space. be time particular firm the software equity necessarily had backed pretty that And to - that to Equity it callable we and who loan the

history with investment. coupled coupon and all XXX attractive of demonstrated we things - growing considered, pretty characteristics of plus to attractive LIBOR business the the the the flow, be a thought that's we what So, consider cash

Chris Kotowski

of say, then, amount a you of we going the or what have And should do it's have you XX are or expect we now forward? months I debt liquidity, Okay. XX, ideal level at of period, investments kind guess level targeted an that over, fair

Peter Reed

No.

that think portfolio. to growing we be I do intend the

not end, portfolio. And can grow had all that we the downs we or $X think liquidity. do of deployments at within a course quarter million of can that We level to equivalents is the and impact quarter of pay which cash intend the our I much. have

of Our our group. most less leverage peer is than

our capital far we that. might that and raise and expanding portfolio ability the time opportunity we over raising the do debt warrants, be where deploy that we'd to fund debt So, both as do incremental as capital expect as incremental we set that think to

do And so, expect portfolio continued I growth.

Chris Kotowski

build treasury You also have the million right? $XX portfolio,

Peter Reed

is there There offsetting exactly look, if matches asset is that that so… you almost number, - liability an

Chris Kotowski

All Okay. me. from you. right, That's it thank

Peter Reed

you. Thank

Operator

at no Mahoney Ms. this I'm the remarks. showing to Meaghan I And closing like questions for any to would call [Operator Instructions] further return time.

Meaghan Mahoney

and Thanks, let in forward do know great can day. thank We continued with look a us be please helpful dialog, if follow-up. to and us this all our Have joining Sandra, you anything for morning. we

Operator

conference. the thank day. Everyone conclude gentlemen, a for you does have may today's program, and This all and Ladies disconnect. great participating you in

Great Elm Capital (GECC) 10 Aug 182018 Q2 Earnings call transcript