PennantPark Investment (US:PNNT)2023-02-08 21:29Portfolio Overview - As of December 31, 2022, the company's portfolio totaled $1,196.0 million, consisting of $661.2 million in first lien secured debt, $130.8 million in second lien secured debt, $148.6 million in subordinated debt, and $255.4 million in preferred and common equity[207]. - The overall portfolio had a net unrealized depreciation of $167.5 million as of December 31, 2022, with an average investment size of $9.6 million across 125 companies[207]. - As of September 30, 2022, the portfolio totaled $1,226.3 million, with a weighted average yield on interest-bearing debt investments of 10.8%[208]. - As of December 31, 2022, the PennantPark Senior Loan Fund's portfolio totaled $734.7 million, consisting of 83 companies with a weighted average yield on debt investments of 10.6%[211]. - The investment portfolio of PSLF consisted of debt investments in 83 portfolio companies as of December 31, 2022, up from 80 companies as of September 30, 2022[268]. Investment Activity - For the three months ended December 31, 2022, the company invested $86.2 million in six new and 29 existing portfolio companies, achieving a weighted average yield on debt investments of 11.2%[209]. - For the three months ended December 31, 2021, the company invested $295.1 million in 15 new and 30 existing portfolio companies, with a weighted average yield on debt investments of 8.1%[210]. - The company aims to create a diversified portfolio by investing approximately $10 million to $50 million in middle-market companies, defined as those with annual revenues between $50 million and $1 billion[198]. Financial Performance - For the three months ended December 31, 2022, investment income was $30.0 million, an increase from $28.3 million in the same period of 2021, primarily due to higher cost yield of the debt portfolio[240]. - Net investment income for the three months ended December 31, 2022, was $10.3 million, or $0.16 per share, compared to $12.5 million, or $0.19 per share in the prior year[242]. - Total expenses for the three months ended December 31, 2022, were $19.6 million, up from $15.8 million in the same period of 2021, with debt-related interest and expenses increasing significantly[241]. - The company declared distributions of $0.17 per share for a total of $10.8 million during the three months ended December 31, 2022, up from $0.12 per share totaling $8.0 million in the prior year, indicating a 35% increase in total distributions[285]. Valuation and Risk Management - The fair value of investments is determined using a multi-step valuation process, with most investments classified as Level 3 due to lack of readily available market values[219]. - The company does not accrue PIK interest on loans and debt investments if it is deemed uncollectible based on portfolio company valuations[225]. - The company’s quarterly valuation process includes independent appraisals for investments where market quotations are not readily available[222]. - The board of directors periodically assesses material valuation risks and has complied with SEC Rule 2a-5 under the 1940 Act since before its compliance date[220]. Debt and Liabilities - As of December 31, 2022, the company had $380.9 million in outstanding borrowings under the Truist Credit Facility, with a weighted average interest rate of 6.6%[251]. - The company reported liabilities of $688.003 million as of December 31, 2022, compared to $696.825 million as of September 30, 2022, showing a decrease of 1.2%[282]. - The weighted average cost of debt for the three months ended December 31, 2022, was 5.6%, compared to 4.0% in the same period of 2021[250]. Cash and Equivalents - As of December 31, 2022, cash and cash equivalents amounted to $28.6 million, down from $52.7 million as of September 30, 2022[265]. - Total cash and cash equivalents held is $35.71 million[276]. Interest Rate Sensitivity - The debt portfolio consisted of 96.0% variable-rate investments and 4.0% fixed-rate investments as of December 31, 2022[292]. - A 1% decrease in interest rates results in a decrease of $5,378 in net interest income, equating to a $0.08 decrease in expense per share[294]. - A 1% increase in interest rates results in an increase of $5,378 in net interest income, equating to a $0.08 increase in expense per share[294]. - The company's net investment income is dependent on the difference between borrowing rates and investment rates, as well as the level of leverage[295]. Shareholder Equity - Members' equity stands at $88.94 million, reflecting a 100.0% increase[276]. - The net increase in members' equity resulting from operations for the three months ended December 31, 2022, was $1.608 million, down from $3.725 million in the same period of the previous year, a decrease of 56.9%[282].