Portman Ridge(US:PTMN)2025-11-06 21:08Investment Strategy and Portfolio - The company has a Debt Securities Portfolio focused on generating current income and capital appreciation from investments in senior secured term loans, mezzanine debt, and selected equity investments in middle-market companies with EBITDA between $10 million and $50 million[317]. - The company primarily invests in first and second lien term loans, which are expected to have lower default rates and higher recovery rates in case of defaults[317]. - The company’s investment strategy includes investing in CLO Fund Securities managed by other asset managers, diversifying its investment portfolio[318]. - The company evaluates strategic opportunities, including mergers and joint ventures, to enhance its investment capabilities and market position[321]. - The company has made strategic acquisitions, including OHA Investment Corporation and Garrison Capital Inc., enhancing its portfolio and market presence[324][325]. Financial Performance - As of September 30, 2025, the total fair value of the investment portfolio was $539.70 million, compared to $405.02 million on December 31, 2024, representing a 33.2% increase[332]. - The weighted average annualized yield of the Debt Securities Portfolio increased to approximately 13.8% as of September 30, 2025, up from 11.3% as of December 31, 2024[336]. - Total investment income for the three months ended September 30, 2025, was approximately $18.9 million, compared to $15.2 million for the same period in 2024[354]. - For the nine months ended September 30, 2025, total investment income was approximately $43.7 million, down from $48.0 million for the same period in 2024[354]. - The company reported a net change in unrealized appreciation of $18.25 million for the nine months ended September 30, 2025[332]. Acquisitions and Investments - The company completed the acquisition of Logan Ridge Finance Corporation on July 15, 2025, with each share of LRFC common stock converted into 1.500 newly-issued shares of the company's common stock, plus a cash payment of $0.47 per share[329][330]. - The total cost of the LRFC Acquisition was approximately $52.8 million, resulting in a purchase discount of $20.9 million allocated to investment assets[330]. - The company made purchases/originations totaling $86.61 million during the nine months ended September 30, 2025[332]. - The company’s investment in subordinated debt increased from $1.74 million on December 31, 2024, to $24.83 million on September 30, 2025, marking a significant increase in this category[334]. Debt and Financing - The company had approximately $324.6 million of outstanding borrowings as of September 30, 2025, with an asset coverage ratio of 171%, exceeding the minimum requirement of 150%[384]. - The company issued $108.0 million of 4.875% Notes due 2026, with interest paid semi-annually, and was in compliance with all debt covenants as of September 30, 2025[386]. - The company assumed $50.0 million in 2026 Notes with a step-up interest rate to 6.00% due to a downgrade below Investment Grade[387]. - The Revolving Credit Facility has an initial principal amount of $115 million, with the potential to increase to $215 million, and was amended to reduce the applicable margin to 2.80% per annum[392]. - As of September 30, 2025, GLPRF LLC had approximately $130.8 million in borrowings outstanding under the Revolving Credit Facility, in compliance with all debt covenants[398]. Distributions and Share Repurchase - The company declared total distributions of $1.41 per share for 2025, with quarterly distributions of $0.47 per share in Q1, Q2, and Q3[407]. - The company repurchased 20,573 shares under the 2025 Stock Repurchase Program during the three months ended September 30, 2025[409]. - The company intends to continue making quarterly distributions to stockholders, aiming to distribute at least 98% of ordinary net taxable income and capital gains[401]. - The 2025 Stock Repurchase Program, approved on March 12, 2025, allows for up to $10 million in share repurchases, similar to previous programs[408]. Valuation and Risk Management - Fair value determinations for investments are primarily classified as Level III, indicating significant management judgment is involved due to the lack of observable market prices[419]. - The company recognizes unrealized appreciation or depreciation on investments as market conditions change, impacting the overall valuation of the portfolio[421]. - The company has engaged an independent valuation firm to provide third-party valuation consulting services for its material investments in illiquid securities[449]. - The level of excess spread from CLO Fund Securities can vary significantly due to fluctuations in benchmark interest rates and compliance with financial covenants[430]. Expenses and Income - Total expenses for the three months ended September 30, 2025, were approximately $10.28 million, up from $9.38 million in 2024, an increase of 9.5%[366]. - Management fees for the three months ended September 30, 2025, were approximately $1.81 million, compared to $1.61 million in 2024, an increase of 12.4%[370]. - Investment income attributable to CLO Fund Securities for the nine months ended September 30, 2025, was approximately $0.4 million, down from $1.3 million in 2024, a decrease of 69.2%[361]. - The net change in unrealized appreciation on investments for the three months ended September 30, 2025, was approximately $15.5 million, significantly higher than $4.5 million in 2024[379]. Market Conditions and Interest Rates - A 1% increase in interest rates would increase net investment income by approximately $2.2 million on an annualized basis, while a 1% decrease would decrease it by approximately $2.1 million[445][446]. - As of September 30, 2025, approximately 85.2% of the company's Debt Securities Portfolio were floating rate with a spread to an interest rate index such as SOFR or the prime rate[442]. - The company had $324.6 million in borrowings outstanding at a current weighted average interest rate of 6.1%, with $160.5 million at a fixed rate and $164.1 million at a floating rate[442].