Portman Ridge Finance Corporation Announces First Quarter 2022 Financial Results
Well Positioned to Further Improve Portfolio Performance and Increase Investment Income in 2022;
Refinances JPMorgan Chase Bank (“JPM”) Credit Facility and Reduces Cost of Capital
Declares Quarterly Distribution of
- Net asset value (“NAV”) for the first quarter of 2022 remained relatively flat at
$278.3 million ($28.76 per share1) as compared to$280.1 million ($28.88 per share) in the fourth quarter of 2021, despite pervasive market volatility and other macro-economic and political factors. - Total investment income the first quarter of 2022 was
$16.9 million , of which$13.0 million was attributable to interest income from the debt securities portfolio. - Excluding the impact of purchase price accounting, core investment income2 for the first quarter of 2022 was
$15.1 million . - Net investment income (“NII”) for the first quarter of 2022 was
$7.9 million ($0.82 per share). - Total investments at fair value as of
March 31, 2022 was$568.0 million ; when excluding CLO Funds, Joint Ventures and short-term investments, these investments are spread across 30 different industries and 116 entities with an average par balance per entity of approximately$3.3 million . - As of
March 31, 2022 , six of the Company’s debt investments were on non-accrual status compared to seven as ofDecember 31, 2021 . - As of
March 31, 2022 , par value of outstanding borrowings was$352.4 million with an asset coverage ratio of total assets to total borrowings of 180%. On a net basis, leverage as ofMarch 31, 2022 was 0.97x.3 - During the quarter, the Company restructured its stock buybacks and repurchased 22,990 of shares under its Renewed Stock Repurchase program at an aggregate cost of approximately
$545 thousand .
_____________________________
1 NAV per share as determined in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, was decreased
2 Core investment income represents reported total investment income as determined in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, less the impact of purchase price discount accounting in connection with the Garrison Capital Inc. (“GARS”) and Harvest Capital Credit Corporation (“HCAP”) mergers. Portman Ridge believes presenting core investment income and the related per share amount is useful and appropriate supplemental disclosure for analyzing its financial performance due to the unique circumstance giving rise to the purchase accounting adjustment. However, core investment income is a non-U.S. GAAP measure and should not be considered as a replacement for total investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, core investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial performance.
3 Net leverage is calculated as the ratio between (A) debt, excluding unamortized debt issuance costs, less available cash and cash equivalents, and restricted cash and (B) NAV. Portman Ridge believes presenting a net leverage ratio is useful and appropriate supplemental disclosure because it reflects the Company’s financial condition net of
Subsequent Events
- Declared a stockholder distribution of
$0.63 per share for the second quarter of 2022, payable onJune 7, 2022 to stockholders of record at the close of business onMay 24, 2022 . - On
April 29, 2022 , the Company refinanced its Revolving Credit Facility with JPMorgan Chase Bank as administrative agent. The amended agreement places three-month SOFR as the benchmark interest rate and reduces the applicable margin to 2.80% per annum from 2.85% per annum. Other amendments include the extension of the reinvestment period and scheduled termination date toApril 29, 2025 andApril 29, 2026 , respectively.
Management Commentary
Select Financial Highlights
For the Three Months Ended | ||||||||
2022 | 2021 | |||||||
Total Investment Income | 16,944 | 18,305 | ||||||
Total Expenses | 9,036 | 10,092 | ||||||
Net Investment Income | 7,908 | 8,213 | ||||||
Net realized gain (loss) on investments | (5,553 | ) | (5,086 | ) | ||||
Net unrealized gain (loss) on investments | 2,143 | 6,745 | ||||||
Tax (provision) benefit on realized and unrealized gains (losses) on investments | (440 | ) | - | |||||
Net realized and unrealized appreciation (depreciation) on investments, net of taxes | (3,850 | ) | 1,659 | |||||
Realized gains (losses) on extinguishments of debt | - | (1,835 | ) | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 4,058 | $ | 8,037 | ||||
Net Increase (Decrease) In Stockholders' Equity Resulting from Operations per Common Share (4): | ||||||||
Basic and Diluted: | $ | 0.42 | $ | 1.07 | ||||
Net Investment Income Per Common Share (4): | ||||||||
Basic and Diluted: | $ | 0.82 | $ | 1.09 | ||||
Weighted Average Shares of Common Stock Outstanding—Basic and Diluted (4) | 9,698,099 | 7,517,453 |
4 The Company completed a Reverse Stock Split of 10 to 1 effective
($ in thousands) | For the Three Months Ended | |||
Interest from investments in debt excluding accretion | $ | 9,812 | ||
Purchase discount accounting | 1,812 | |||
PIK Investment Income | 1,382 | |||
CLO Income | 1,634 | |||
JV Income | 2,108 | |||
Service Fees | 196 | |||
Total Investment Income | 16,944 | |||
Less: Purchase discount accounting | (1,812 | ) | ||
Core Investment Income | 15,132 |
Total investment income for the three months ended
At both
Investment Portfolio Activity
The composition of our investment portfolio as of
($ in thousands) | (unaudited) | |||||||||||||||||||||||
Security Type | Cost/Amortized Cost | Fair Value | %(5) | Cost/Amortized Cost | Fair Value | %(¹) | ||||||||||||||||||
Senior Secured Loan | $ | 394,552 | $ | 395,062 | 69 | $ | 361,556 | $ | 364,701 | 66 | ||||||||||||||
Junior Secured Loan | 69,795 | 60,976 | 11 | 82,996 | 70,549 | 13 | ||||||||||||||||||
Senior Unsecured Bond | 416 | 43 | 0 | 416 | 43 | 0 | ||||||||||||||||||
Equity Securities | 24,637 | 22,633 | 4 | 26,680 | 22,586 | 4 | ||||||||||||||||||
CLO Fund Securities | 51,163 | 29,057 | 5 | 51,561 | 31,632 | 6 | ||||||||||||||||||
Asset Manager Affiliates(6) | 17,791 | — | — | 17,791 | — | — | ||||||||||||||||||
Joint Ventures | 65,305 | 60,217 | 11 | 64,365 | 60,474 | 11 | ||||||||||||||||||
Derivatives | 31 | 23 | — | 31 | (2,412 | ) | — | |||||||||||||||||
Total | $ | 623,690 | $ | 568,011 | 100 | % | $ | 605,396 | $ | 547,573 | 100 | % |
5Represents percentage of total portfolio at fair value.
6Represents the equity investment in the Asset Manager Affiliates.
As of
Liquidity and Capital Resources
As of
As of
Total assets and shareholder’s equity as of
As of
($ in thousands) | ||||||||
Security Type | ||||||||
Cash and cash equivalents | $ | 20,524 | $ | 28,919 | ||||
Restricted Cash | 63,094 | 39,421 | ||||||
Senior Secured Loan | 395,062 | 364,701 | ||||||
Junior Secured Loan | 60,976 | 70,549 | ||||||
Senior Unsecured Bond | 43 | 43 | ||||||
Equity Securities | 22,633 | 22,586 | ||||||
CLO Fund Securities | 29,057 | 31,632 | ||||||
Joint Ventures | 60,217 | 60,474 | ||||||
Derivatives | 23 | (2,412 | ) | |||||
Total | $ | 651,629 | $ | 615,913 |
Interest Rate Volatility
The Company’s investment income is affected by fluctuations in various interest rates, including LIBOR and prime rates.
As of
In periods of rising or lowering interest rates, the cost of the portion of debt associated with the 4.875% Notes Due 2026 would remain the same, given that this debt is at a fixed rate, while the interest rate on borrowings under the Revolving Credit Facility would fluctuate with changes in interest rates.
Generally, an increase in the base rate index for floating rate investment assets would increase gross investment income and a decrease in the base rate index for such assets would decrease gross investment income (in either case, such increase/decrease may be limited by interest rate floors/minimums for certain investment assets).
Impact on net investment income from a change in interest rates at: | ||||||||||||
($ in thousands) | ||||||||||||
1% | 2% | 3% | ||||||||||
Increase in interest rate | $ | 1,523 | $ | 3,167 | $ | 4,814 | ||||||
Decrease in interest rate | $ | 746 | $ | 746 | $ | 746 |
Net investment income assuming a 1% increase in interest rates would increase by approximately
On an annualized basis, a decrease in interest rates of 1%, 2% or 3% would result in an increase in net investment income of approximately
Conference Call and Webcast
We will hold a conference call on
A replay of this conference call will be available from approximately
A live audio webcast of the conference call can be accessed via the Internet, on a listen-only basis on the Company’s website www.portmanridge.com in the Investor Relations section under Events and Presentations. The webcast can also be accessed by clicking the following link: Portman Ridge First Quarter 2022 Conference Call. The online archive of the webcast will be available on the Company’s website shortly after the call.
About Portman Ridge Finance Corporation (PTMN)
Portman Ridge Finance Corporation (PTMN) is a publicly traded, externally managed investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940. Portman Ridge’s middle market investment business originates, structures, finances and manages a portfolio of term loans, mezzanine investments and selected equity securities in middle market companies. Portman Ridge’s investment activities are managed by its investment adviser, Sierra Crest Investment Management LLC, an affiliate of BC Partners Advisors, LP.
Portman Ridge’s filings with the Securities and Exchange Commission (the “SEC”), earnings releases, press releases and other financial, operational and governance information are available on the Company's website at www.portmanridge.com.
About BC Partners Advisors L.P. and BC Partners Credit
BC Partners is a leading international investment firm with over
BC Partners Credit was launched in
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements. The matters discussed in this press release, as well as in future oral and written statements by management of Portman Ridge Finance Corporation (PTMN), that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements.
Forward-looking statements relate to future events or our future financial performance and include, but are not limited to, projected financial performance, expected development of the business, plans and expectations about future investments and the future liquidity of the Company. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “outlook”, “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. Forward-looking statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove to be incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements.
Important assumptions include our ability to originate new investments, and achieve certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this press release should not be regarded as a representation that such plans, estimates, expectations or objectives will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, (1) uncertainty of the expected financial performance of the Company; (2) expected synergies and savings associated with merger transactions effectuated by the Company; (3) the ability of the Company and/or its adviser to implement its business strategy; (4) evolving legal, regulatory and tax regimes; (5) changes in general economic and/or industry specific conditions; (6) the impact of increased competition; (7) business prospects and the prospects of the Company’s portfolio companies; (8) contractual arrangements with third parties; (9) any future financings by the Company; (10) the ability of Sierra Crest Investment Management LLC to attract and retain highly talented professionals; (11) the Company’s ability to fund any unfunded commitments; (12) any future distributions by the Company; (13) changes in regional or national economic conditions, including but not limited to the impact of the COVID-19 pandemic, and their impact on the industries in which we invest; and (14) other changes in the conditions of the industries in which we invest and other factors enumerated in our filings with the SEC. The forward-looking statements should be read in conjunction with the risks and uncertainties discussed in the Company’s filings with the SEC, including the Company’s most recent Form 10-K and other SEC filings. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required to be reported under the rules and regulations of the SEC.
Contacts:
Portman Ridge Finance Corporation (PTMN)
info@portmanridge.com
Chief Financial Officer
Jason.Roos@bcpartners.com
(212) 891-2880
The Equity Group Inc.
lcati@equityny.com
(212) 836-9611
The Equity Group Inc.
sliegey@equityny.com
(212) 836-9630
PORTMAN RIDGE FINANCE CORPORATION (PTMN)
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
2021 | ||||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Investments at fair value: | ||||||||
Non-controlled/non-affiliated investments (amortized cost: 2022 - | $ | 464,754 | $ | 452,482 | ||||
Non-controlled affiliated investments (amortized cost: 2022 - | 75,129 | 74,142 | ||||||
Controlled affiliated investments (cost: 2022 - | 28,128 | 23,361 | ||||||
Total Investments at Fair Value (cost: 2022 - | 568,011 | 549,985 | ||||||
Cash and cash equivalents | 20,524 | 28,919 | ||||||
Restricted cash | 63,094 | 39,421 | ||||||
Interest receivable | 3,119 | 5,514 | ||||||
Receivable for unsettled trades | 2,153 | 20,193 | ||||||
Due from affiliates | 592 | 507 | ||||||
Other assets | 3,365 | 3,762 | ||||||
Total Assets | $ | 660,858 | $ | 648,301 | ||||
LIABILITIES | ||||||||
2018-2 Secured Notes (net of discount of: 2022 - | 162,504 | 162,460 | ||||||
4.875% Notes Due 2026 (net of discount of: 2022 - | 104,977 | 104,892 | ||||||
Great Lakes Portman Ridge Funding LLC Revolving Credit Facility (net of deferred financing costs of: 2022 - | 79,930 | 79,839 | ||||||
Derivative liabilities (cost: 2021 - | - | 2,412 | ||||||
Payable for unsettled trades | 21,622 | 5,397 | ||||||
Accounts payable, accrued expenses and other liabilities | 5,101 | 4,819 | ||||||
Accrued interest payable | 3,325 | 2,020 | ||||||
Due to affiliates | 1,286 | 1,799 | ||||||
Management and incentive fees payable | 3,812 | 4,541 | ||||||
Total Liabilities | 382,557 | 368,179 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
NET ASSETS | ||||||||
Common stock, par value | 97 | 97 | ||||||
Capital in excess of par value | 733,327 | 733,095 | ||||||
Total distributable (loss) earnings | (455,123 | ) | (453,070 | ) | ||||
Total Net Assets | 278,301 | 280,122 | ||||||
Total Liabilities and Stockholders' Equity | $ | 660,858 | $ | 648,301 | ||||
NET ASSET VALUE PER COMMON SHARE (4) | $ | 28.76 | $ | 28.88 |
(4) The Company completed a Reverse Stock Split of 10 to 1 effective
PORTMAN RIDGE FINANCE CORPORATION (PTMN)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
For the Three Months Ended | ||||||||
2022 | 2021 | |||||||
INVESTMENT INCOME | ||||||||
Interest income: | ||||||||
Non-controlled/non-affiliated investments | $ | 12,667 | $ | 14,470 | ||||
Non-controlled affiliated investments | 591 | 233 | ||||||
Total interest income | 13,258 | 14,703 | ||||||
Payment-in-kind income: | ||||||||
Non-controlled/non-affiliated investments | 1,126 | 1,132 | ||||||
Non-controlled affiliated investments | 256 | - | ||||||
Total payment-in-kind income | 1,382 | 1,132 | ||||||
Dividend income: | ||||||||
Non-controlled affiliated investments | 945 | 814 | ||||||
Controlled affiliated investments | 1,163 | 1,226 | ||||||
Total dividend income | 2,108 | 2,040 | ||||||
Fees and other income | 196 | 430 | ||||||
Total investment income | 16,944 | 18,305 | ||||||
EXPENSES | ||||||||
Management fees | 2,135 | 1,793 | ||||||
Performance-based incentive fees | 1,678 | 2,094 | ||||||
Interest and amortization of debt issuance costs | 3,344 | 3,380 | ||||||
Professional fees | 845 | 1,494 | ||||||
Administrative services expense | 847 | 613 | ||||||
Other general and administrative expenses | 187 | 718 | ||||||
Total expenses | 9,036 | 10,092 | ||||||
NET INVESTMENT INCOME | 7,908 | 8,213 | ||||||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS | ||||||||
Net realized gains (losses) from investment transactions: | ||||||||
Non-controlled/non-affiliated investments | (3,670 | ) | (5,195 | ) | ||||
Non-controlled affiliated investments | 212 | 109 | ||||||
Derivatives | (2,095 | ) | - | |||||
Net realized gain (loss) on investments | (5,553 | ) | (5,086 | ) | ||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Non-controlled/non-affiliated investments | 829 | 6,263 | ||||||
Non-controlled affiliated investments | 117 | 331 | ||||||
Controlled affiliated investments | (1,245 | ) | 625 | |||||
Derivatives | 2,442 | (474 | ) | |||||
Net unrealized gain (loss) on investments | 2,143 | 6,745 | ||||||
Tax (provision) benefit on realized and unrealized gains (losses) on investments | (440 | ) | - | |||||
Net realized and unrealized appreciation (depreciation) on investments, net of taxes | (3,850 | ) | 1,659 | |||||
Realized gains (losses) on extinguishments of debt | - | (1,835 | ) | |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 4,058 | $ | 8,037 | ||||
Net Increase (Decrease) In Stockholders' Equity Resulting from Operations per Common Share (4): | ||||||||
Basic and Diluted: | $ | 0.42 | $ | 1.07 | ||||
Net Investment Income Per Common Share (4): | ||||||||
Basic and Diluted: | $ | 0.82 | $ | 1.09 | ||||
Weighted Average Shares of Common Stock Outstanding—Basic and Diluted (1) | 9,698,099 | 7,517,453 |
(4) The Company completed a Reverse Stock Split of 10 to 1 effective
Image: https://ml.globenewswire.com/media/ZGRhYWI1YWEtNWQ5OC00ZWIzLThhMzQtMTg4NzRhNmI3MmY4LTEwMzIwNjk=/tiny/Portman-Ridge-Finance-Corporat.png
Image: Primary Logo
Source: Portman Ridge Finance Corporation (PTMN)