Portman Ridge(US:PTMN)2019-11-08 18:52Financial Data and Key Metrics Changes - Net investment income for Q3 2019 was approximately $2.2 million or $0.06 per basic share, compared to $0.9 million or $0.02 per basic share in Q2 2019 and $3 million or $0.08 per basic share in Q3 2018 [12] - Total investment income for Q3 2019 was approximately $7.1 million, remaining relatively flat compared to Q2 2019 and Q3 2018 [13] - Total expenses for Q3 2019 were approximately $4.8 million or $0.13 per share, down from approximately $6 million or $0.16 per share in Q2 2019 [15] Business Line Data and Key Metrics Changes - Investment income from debt securities in Q3 2019 was approximately $4.2 million or $0.11 per basic share, compared to $3.9 million or $0.10 per share in Q2 2019 and $4.8 million or $0.13 per share in Q3 2018 [13] - Investment income on CLO fund securities was approximately $1.6 million or $0.04 per basic share in Q3 2019, down from $1.7 million or $0.05 per share in Q2 2019 [14] - Investment income from joint ventures was approximately $1.3 million or $0.03 per share, mostly unchanged from Q2 2019 and up from $800,000 or $0.02 per share in Q3 2018 [14] Market Data and Key Metrics Changes - The fair value of the portfolio was approximately $287 million as of September 30, 2019, with a net asset value of $3.55 per share [16] - The asset coverage ratio at quarter end was 204%, with approximately $125.4 million of par debt outstanding [17] Company Strategy and Development Direction - The company is focused on reducing CLO equity exposure and replacing it with investments in senior and unitranche joint ventures, which are believed to provide attractive risk-adjusted returns [10] - The company aims to continue pursuing junior capital solutions and high-quality economically resilient businesses with competitive advantages [7] - The merger with OHA Investment Corporation is expected to enhance scale and increase net investment income per share by spreading public company costs over a larger asset base [4][28] Management's Comments on Operating Environment and Future Outlook - Management has noted signs of credit deterioration in the broader market and is becoming more cautious, focusing on first lien securities for new investments [7] - The company expects to reposition the portfolio, including OHAI assets, with a long-term objective of net investment income growth and net asset value stability [29] - Management expressed confidence in the quality of earnings and sustainability of the dividend, citing higher spreads on booked assets and expected benefits from joint ventures [86] Other Important Information - The Board of Directors approved a cash distribution of $0.06 per share, payable on November 29, 2019 [18] - The company has entered into an agreement to terminate a lease for approximately its remaining carrying value, which will save about $100,000 per quarter going forward [16][62] Q&A Session Summary Question: Incentive fees paid to BC Partners - No incentive fees have been paid to the manager in the last two quarters [35] Question: Asset Manager Affiliates - The $17.8 million of Asset Manager Affiliates was sold at fair value, and the original cost remains listed as there is still an open holdco [38][39] Question: Percentage of assets from BC Partners - 58% of the current holdings have been sourced through the BC Partners platform [46][48] Question: OHAI portfolio transition - The OHAI portfolio is considered high-quality, with some repositioning expected over time, but no rush to do so [51] Question: Lease payment and charges - The $1.6 million payment reflects the remaining carrying value, with minimal noise expected in Q4 related to the lease [60] Question: Reducing structured products - The strategy to exit structured products remains unchanged, with natural paydowns expected to reduce the CLO portfolio over time [66] Question: Liability structure optimization - The company envisions a mix of fixed and revolving debt, with a potential shift towards more revolver financing [70] Question: New investments and industries - The company is focusing on recession-resilient industries, avoiding heavily cyclical sectors like energy and mining [95]