Portman Ridge(US:PTMN)2025-08-07 20:06Filing Information This section details the registrant's quarterly report filing, stock information, and exchange listing - Portman Ridge Finance Corporation filed a Quarterly Report on Form 10-Q for the period ended June 30, 202512 - The registrant is a Non-accelerated filer with 13,191,929 shares of common stock outstanding as of August 1, 202545 | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, par value $0.01 per share | PTMN | The NASDAQ Global Select Market | Part I. Financial Information This part presents the company's unaudited consolidated financial statements, management's analysis, and market risk Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including assets, operations, cash flows, and investment notes Consolidated Statements of Assets and Liabilities This statement details the company's financial position, including assets, liabilities, and net assets | ASSETS (in thousands) | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------- | :------------------------ | :---------------- | | Investments at fair value | $395,109 | $405,021 | | Cash and cash equivalents | $11,222 | $17,532 | | Restricted cash | $13,357 | $22,421 | | Total Assets | $427,995 | $453,634 | | LIABILITIES (in thousands) | | | | 4.875% Notes Due 2026 | $107,356 | $106,983 | | Revolving Credit Facility | $146,306 | $158,157 | | Total Liabilities | $263,266 | $275,141 | | NET ASSETS (in thousands) | | | | Total Net Assets | $164,729 | $178,493 | | Net Asset Value Per Common Share | $17.89 | $19.41 | Consolidated Statements of Operations This statement outlines the company's financial performance, detailing income, expenses, and net changes in assets | (in thousands, except per share) | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Total investment income | $12,630 | $16,337 | $24,748 | $32,863 | | Total expenses | $8,073 | $9,860 | $15,851 | $20,161 | | NET INVESTMENT INCOME | $4,557 | $6,477 | $8,897 | $12,702 | | Net realized gain (loss) on investments | $(15,840) | $(6,922) | $(16,013) | $(8,979) | | Net change in unrealized appreciation (depreciation) on investments | $6,628 | $(5,966) | $2,725 | $(5,895) | | NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $(4,518) | $(6,372) | $(4,600) | $(1,887) | | Net Investment Income Per Common Share (Basic and Diluted) | $0.50 | $0.70 | $0.97 | $1.36 | Consolidated Statements of Changes in Net Assets This statement tracks changes in net assets, reflecting operations, distributions, and capital transactions | (in thousands, except per share) | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Net increase (decrease) in net assets resulting from operations | $(4,518) | $(6,372) | $(4,600) | $(1,887) | | Distributions declared | $(4,325) | $(6,411) | $(9,292) | $(12,854) | | Net increase (decrease) in net assets resulting from capital share transactions | $61 | $(1,395) | $128 | $(2,348) | | Net assets at beginning of period | $173,511 | $210,607 | $178,493 | $213,518 | | Net assets at end of period | $164,729 | $196,429 | $164,729 | $196,429 | | Net asset value per common share | $17.89 | $21.21 | $17.89 | $21.21 | Consolidated Statements of Cash Flows This statement summarizes cash flows from operating, investing, and financing activities over specific periods | (in thousands) | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :------------- | :------------------------------------- | :------------------------------------- | | Net cash provided by (used in) operating activities | $5,890 | $20,889 | | Net cash provided by (used in) financing activities | $(21,264) | $(55,814) | | CHANGE IN CASH AND RESTRICTED CASH | $(15,374) | $(34,925) | | CASH AND RESTRICTED CASH, BEGINNING OF PERIOD | $39,953 | $71,564 | | CASH AND RESTRICTED CASH, END OF PERIOD | $24,579 | $36,639 | Consolidated Schedules of Investments This section details the company's investment portfolio by type, fair value, and portfolio companies - As of June 30, 2025, the investment portfolio comprised 96 portfolio companies with a fair value of approximately $395.1 million, a decrease from 93 companies and $405.0 million at December 31, 202483 - The debt investment portfolio (excluding CLO Funds, equities, and Joint Ventures) was diversified across 25 industries and 69 companies with a fair value of approximately $323.1 million as of June 30, 202584 | Investment Type | Fair Value (June 30, 2025) | Fair Value (December 31, 2024) | | :--------------------------------------- | :--------------------------- | :----------------------------- | | Non-controlled/non-affiliated investments | $329,911 | $327,622 | | Non-controlled affiliated investments | $53,916 | $64,384 | | Controlled affiliated investments | $11,282 | $13,015 | | Total Investments at fair value | $395,109 | $405,021 | Consolidated Financial Highlights This section summarizes key financial metrics and ratios, providing an overview of performance and financial health | Per Share Data | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :--------------- | :------------------------------------- | :------------------------------------- | | Net asset value, at beginning of period | $19.41 | $22.76 | | Net investment income | $0.97 | $1.36 | | Net realized gain (loss) from investments | $(1.75) | $(0.96) | | Net change in unrealized appreciation (depreciation) on investments | $0.30 | $(0.63) | | Net increase (decrease) in net assets resulting from operations | $(0.50) | $(0.20) | | Net asset value, end of period | $17.89 | $21.21 | | Total net asset value return | (0.64)% | (0.11)% | | Total market return | (17.40)% | 15.61% | | Portfolio turnover rate | 7.09% | 11.08% | | Asset coverage ratio | 164.50% | 168.91% | | Ratio of net investment income to average net assets (annualized) | 10.42% | 12.35% | | Ratio of total expenses to average net assets (annualized) | 18.56% | 19.60% | Notes to Consolidated Financial Statements This section explains accounting policies, investment valuations, related party transactions, and borrowings - Portman Ridge Finance Corporation operates as an externally managed BDC and RIC, focusing on secured term loans, bonds, and mezzanine debt in middle market companies, with a 150% asset coverage requirement586061 - The company completed several acquisitions, including OHAI (December 2019), GARS (October 2020), and HCAP (June 2021), significantly impacting its portfolio and operations687173 - As of June 30, 2025, six debt investments were on non-accrual status, representing 4.8% of the investment portfolio by amortized cost and 2.1% by fair value112 - The company's Level III investments, a significant portfolio portion, are valued using unobservable inputs like required rate of return, EBITDA multiples, and discount rates, reflecting illiquid middle-market holdings155156166167 - Management fees for the six months ended June 30, 2025, were approximately $2.9 million, and incentive fees were approximately $1.9 million, both decreasing year-over-year190 - The company had $108.0 million in 4.875% Notes Due 2026 and $147.4 million outstanding under its Revolving Credit Facility as of June 30, 2025, with a 6.0% weighted average interest rate and 1.6 years weighted average maturity202207225 - The Board authorized a $10 million stock repurchase program effective March 12, 2025, with no shares repurchased during the three and six months ended June 30, 2025251253 - Subsequent to the period, the company acquired Logan Ridge Finance Corporation (LRFC) on July 15, 2025, and declared a regular quarterly base distribution of $0.47 per share and a supplemental cash distribution of $0.02 per share on August 7, 2025255257 Investment Portfolio by Security Type (Fair Value) | Security Type | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | First Lien Debt | 73.7% | 71.6% | | Second Lien Debt | 7.7% | 7.2% | | Subordinated Debt | 0.4% | 0.4% | | Collateralized Loan Obligations | 0.8% | 1.3% | | Joint Ventures | 11.3% | 13.4% | | Equity | 6.1% | 6.1% | | Derivatives | 0.0% | 0.0% | | Total | 100.0% | 100.0% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial performance, liquidity, capital resources, and investment strategy General This section provides an overview of the company's business model, investment objectives, and historical transactions - Portman Ridge Finance Corporation is an externally managed BDC, advised by Sierra Crest Investment Management LLC, aiming to generate current income and capital appreciation through secured term loans, bonds, and mezzanine debt in middle market companies260261262 - The company maintains RIC status for U.S. federal income tax purposes, aiming to distribute substantially all net ordinary taxable income and capital gains to stockholders265 - Significant past transactions include externalization to BC Partners (April 2019) and acquisitions of OHAI (December 2019), GARS (October 2020), and HCAP (June 2021)267269270272 Portfolio and Investment Activity This section details the company's investment portfolio composition, activity, and changes in fair value - As of June 30, 2025, the Debt Securities Portfolio had a weighted average annualized yield of approximately 10.7%, down from 11.3% at December 31, 2024, with six debt investments on non-accrual status280281 - The fair value of CLO Fund Securities decreased from $5.2 million at December 31, 2024, to $3.3 million at June 30, 2025, with Joint Ventures valued at $11.3 million and $33.4 million respectively283290294 Total Portfolio Investment Activity (Six Months Ended June 30, 2025) | (in thousands) | Fair Value at Dec 31, 2024 | Purchases / Originations / Draws | Pay-downs / Pay-offs / Sales | Net Accretion of Interest | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value at June 30, 2025 | | :--------------- | :------------------------- | :----------------------------- | :-------------------------- | :------------------------ | :----------------------- | :------------------------------------------------- | :-------------------------- | | First Lien Debt | $289,957 | $32,679 | $(24,990) | $1,281 | $(8,530) | $674 | $291,071 | | Second Lien Debt | $28,996 | $703 | $0 | $(46) | $26 | $597 | $30,276 | | Subordinated Debt | $1,740 | $0 | $(26) | $1 | $(1,931) | $1,966 | $1,750 | | Equity | $24,762 | $1,170 | $(108) | $0 | $(4,037) | $2,132 | $23,919 | | Collateralized Loan Obligations | $5,193 | $0 | $(1,545) | $292 | $(1,536) | $859 | $3,263 | | Joint Ventures | $54,153 | $0 | $(6,040) | $0 | $0 | $(3,479) | $44,634 | | Derivatives | $220 | $0 | $0 | $0 | $0 | $(24) | $196 | | Total Portfolio | $405,021 | $34,552 | $(32,709) | $1,600 | $(16,080) | $2,725 | $395,109 | Results of Operations This section analyzes financial results, including investment income, expenses, and net gains/losses - Net investment income for Q2 2025 was approximately $4.6 million ($0.50 per share), down from $6.5 million ($0.70 per share) in Q2 2024319 - The company recognized net realized losses of $15.8 million in Q2 2025 and $16.0 million YTD 2025, with net unrealized appreciation of $6.6 million in Q2 2025 and $2.7 million YTD 2025320321322 Investment Income Breakdown (in thousands) | Income Type | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Interest income (Non-controlled/non-affiliated) | $8,463 | $11,913 | $15,763 | $24,534 | | Interest income (Non-controlled affiliated) | $324 | $312 | $640 | $407 | | Payment-in-kind income | $2,449 | $2,201 | $5,510 | $4,207 | | Dividend income | $1,213 | $1,800 | $2,630 | $3,453 | | Fees and other income | $181 | $111 | $205 | $262 | | Total investment income | $12,630 | $16,337 | $24,748 | $32,863 | Total Expenses Breakdown (in thousands) | Expense Type | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Management fees | $1,445 | $1,680 | $2,911 | $3,409 | | Performance-based incentive fees | $967 | $1,374 | $1,887 | $2,608 | | Interest and amortization of debt issuance costs | $4,230 | $5,365 | $8,528 | $11,091 | | Professional fees | $403 | $469 | $855 | $1,074 | | Administrative services expense | $450 | $361 | $861 | $717 | | Directors' fees | $142 | $162 | $286 | $323 | | Other general and administrative expenses | $436 | $449 | $523 | $939 | | Total expenses | $8,073 | $9,860 | $15,851 | $20,161 | Financial Condition, Liquidity, and Capital Resources This section discusses the company's financial position, including assets, liabilities, borrowings, and distribution policy - As of June 30, 2025, outstanding borrowings totaled $255.4 million, with an asset coverage ratio of 165%, including $108.0 million in 4.875% Notes Due 2026 and $147.4 million under the Revolving Credit Facility326328337 - The Revolving Credit Facility was amended on July 23, 2024, increasing commitments to $200.0 million, reducing the applicable margin to 2.50%, and extending maturity to August 29, 2027333 - The company intends to make quarterly distributions, aiming to distribute at least 98% of ordinary net taxable income and 98.2% of capital gains to maintain RIC status338344 - As of June 30, 2025, unfunded commitments were approximately $32.7 million, an increase from $27.2 million at December 31, 2024348 Investments and Cash (in thousands) | Security Type | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Cash and Cash Equivalents | $11,222 | $17,532 | | Restricted Cash | $13,357 | $22,421 | | First Lien Debt | $291,071 | $289,957 | | Second Lien Debt | $30,276 | $28,996 | | Subordinated Debt | $1,750 | $1,740 | | Equity | $23,919 | $24,762 | | Collateralized Loan Obligations | $3,263 | $5,193 | | Joint Ventures | $44,634 | $54,153 | | Derivatives | $196 | $220 | | Total | $419,688 | $444,974 | Critical Accounting Policies and Estimates This section details critical accounting policies, particularly investment valuation, fair value hierarchy, and income recognition - The most significant estimate is the valuation of investments without readily available market prices, determined at fair value by the Adviser using discounted cash flow, market multiples, and third-party valuations352353358 - Investments are categorized into a three-level fair value hierarchy, with a majority classified as Level III due to reliance on unobservable inputs for private companies357360 - Interest income, including PIK interest, is recorded on an accrual basis, while CLO Fund Securities income is recognized using the effective interest method based on anticipated yields369371373 - The company completed the acquisition of Logan Ridge Finance Corporation on July 15, 2025, and declared a regular quarterly base distribution of $0.47 per share and a supplemental cash distribution of $0.02 per share on August 7, 2025377378 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, focusing on interest rate fluctuations and investment valuation - The company's principal market risks are interest rate fluctuations and investment portfolio valuations, with approximately 86.9% of the Debt Securities Portfolio in floating rate investments379381 - Portfolio investments are carried at fair value, determined by the Adviser under Board-approved procedures, with illiquid investments relying on management judgment387 Impact on Net Investment Income from Interest Rate Changes (Annualized, in thousands) | Change in Interest Rate | Impact on Net Investment Income | | :---------------------- | :------------------------------ | | +1% | $1,477 | | +2% | $2,955 | | +3% | $4,432 | | -1% | $(1,477) | | -2% | $(2,912) | | -3% | $(4,105) | Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control - The company's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025389 - There have been no material changes in internal control over financial reporting during the quarter ended June 30, 2025390 Part II. Other Information This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings This section states that the company is not currently involved in any material legal proceedings - The Company is not currently a party to any material legal proceedings393 Item 1A. Risk Factors This section indicates that there have been no material changes to the risk factors previously disclosed in the company's annual report - There have been no material changes to the risk factors included in the Annual Report on Form 10-K for the year ended December 31, 2024394 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details unregistered equity sales, primarily through the dividend reinvestment plan, and common stock repurchases - The company issued 4,981 shares (Q2 2025) and 9,676 shares (YTD 2025) of common stock under its dividend reinvestment plan, with an aggregate value of approximately $0.1 million for both periods395 - No shares were repurchased under the stock repurchase program during Q2 and YTD 2025, contrasting with 79,772 shares for $1.6 million in Q2 2024397 Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities398 Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable to the company399 Item 5. Other Information This section provides other relevant information, noting no directors or officers adopted or terminated Rule 10b5-1 trading arrangements - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025400 Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q report, including corporate governance documents and certifications - The exhibit list includes the Certificate of Incorporation, Bylaws, CEO and CFO certifications, Financial Statements of Logan Ridge Finance Corporation, and Inline XBRL documents401404 Signatures This section contains the official signatures of the company's principal executive and financial officers, certifying the report's submission - The report was signed by Edward Goldthorpe, President and Chief Executive Officer, and Brandon Satoren, Chief Financial Officer, on August 7, 2025406407408