Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Portman Ridge Finance Corp (PTMN, Financial) successfully refinanced its 2018-2 secured notes, resulting in net spread savings of approximately 28 basis points.
- The company extended the maturity of the JPM credit facility and reduced the spread by 30 basis points, leading to a reduction in interest expense.
- A stock repurchase program was executed, buying back 33,429 shares, which was accretive to NAV by 1 cent per share.
- The board approved a 69 cents per share distribution for Q4 2024, representing a 13.6% annualized return on net asset value.
- Portman Ridge Finance Corp (PTMN) maintains a highly diversified investment portfolio across 28 industries with 72 unique portfolio companies.
Negative Points
- The company's third-quarter earnings were impacted by cash and portfolio management initiatives, leading to a temporary dip in performance.
- Net investment income decreased to $5.8 million or 63 cents per share, down from $6.5 million or 70 cents per share in the prior quarter.
- Total investment income decreased due to lower interest income from net repayments and sales, as well as a loan being placed on non-accrual.
- Net asset value decreased by $8.4 million or 85 cents per share compared to the previous quarter.
- The company experienced net realized and unrealized losses on investments in debt totaling $7.3 million for the quarter.
Q & A Highlights
Q: What's the driver of the realized losses, please?
A: The primary driver of the realized loss was Qualtek. We had previously disclosed that we exited Qualtek at the mark we had in the prior quarter, so there was no impact on NAV as a result of that realized loss.
Q: There seems to be a discrepancy between the interest rate sensitivity figures in the deck and the 10-Q. Can you clarify?
A: The difference in the deck is between the 4.75% and 4.55% rates, not a full 1% reduction. The 10-Q reflects a full 1% decrease in interest rates.
Q: What is the strategy to grow earnings and NAV given the current leverage ratio and slow growth?
A: There is embedded NAV potential as loans mature at par. We expect upside in a subdued credit environment. Additionally, as rates decrease, NAV increases in certain situations. Our investment strategy remains focused on retaining spread and taking refis when necessary.
Q: Are we expecting net deployments in the fourth quarter?
A: Yes, we expect to be net deployers over the next two months, barring unforeseen exits or repayments.
Q: Can you discuss the activity in non-accruals and any expected restructurings?
A: Qualtek went out of non-accrual, and we had one new borrower, Navigo, enter non-accrual. We expect this to be temporary. As for restructurings, Robert Shaw is in the process of exiting bankruptcy, which should clear through our non-accruals soon.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
