Logan Ridge Finance (US:LRFC)2021-03-09 17:58Financial Data and Key Metrics Changes - Total investment income for Q4 2020 was $5.7 million, down from $9.6 million in Q4 2019, primarily due to a decrease in debt investments outstanding [12] - Total expenses decreased to $5.7 million in Q4 2020 from $7.7 million in Q4 2019, with interest and financing expenses declining by $1.4 million [13] - Net realized gains were $0.6 million or $0.23 per share in Q4 2020, compared to $1.2 million in Q4 2019 [14] - Net assets at December 31, 2020, totaled $108.9 million or $40.19 per share, up from $39.99 per share at September 30, 2020 [15] - The company's total debt-to-equity ratio improved to 1.98:1 at December 31, 2020, from 2.72:1 at March 31, 2020 [16] Business Line Data and Key Metrics Changes - The investment portfolio included 36 investments with a fair value of $274.7 million and a cost basis of $277.7 million at year-end 2020 [17] - First lien debt investments comprised 60.9% of the portfolio, second lien debt investments represented 14.3%, and equity warrant investments accounted for 24.8% [17] - Four debt investments were on nonaccrual status with a cost basis of $37.5 million and a fair market value of $20.8 million [18] Market Data and Key Metrics Changes - The company generated $51 million of liquidity through repayments and the wind down of Capitala Senior Loan Fund II, LLC during Q2 2020 [7] - The company is currently sitting on over $50 million in cash and has an undrawn senior secured credit facility [9] Company Strategy and Development Direction - The company is focused on portfolio liquidity, reducing leverage, and supporting small businesses impacted by the pandemic to stabilize NAV [6] - There is a plan to monetize several larger investments over the next few quarters, particularly equity positions [22] - The company aims to obtain a subsequent SBIC license to leverage low-cost, long-term capital for growth [25] Management's Comments on Operating Environment and Future Outlook - Management noted that the pandemic negatively impacted the portfolio, but there has been stabilization and appreciation in NAV since March 2020 [6] - The management expressed optimism about the performance of portfolio companies, with many seeking exit opportunities [32] - The market for small businesses is described as robust, with significant deployment activity in private funds [34] Other Important Information - The company has a green light from the SBA for the submission of an additional SBIC license to replace the existing license [10] - The company repaid $20 million of SBA guaranteed debentures after year-end, with a portion maturing in March 2021 [16] Q&A Session Summary Question: How much of the monetization of investments will be from equity investments? - Management indicated that several larger investments are being engaged for sale or refinancing, expecting to monetize a substantial portion of equity in 2021 [22] Question: Is the priority to pay down SBA debt or redeeming the 2022 notes? - Management stated that all debt repayment is a priority, with a focus on repaying SBA debt to facilitate obtaining a subsequent SBIC license [23][24] Question: Is monetizing the investment portfolio more of a priority than reinstating the dividend? - Management emphasized that dividends are important, but the focus is on addressing debt maturities and reestablishing the SBIC license to grow earnings [25]