Portman Ridge(US:PTMN)2019-08-07 14:47Financial Data and Key Metrics Changes - Net investment income for Q2 2019 was approximately $880,000 or $0.02 per basic share, compared to $2.5 million or $0.07 per share in Q2 2018 and a net investment loss of $2.2 million or negative $0.06 per basic share in Q1 2019 [6][8] - Net asset value (NAV) per share declined by $0.12 to $3.73 during Q2 2019, with approximately $0.08 of the decline attributable to a lease impairment and stockholder distribution exceeding net investment income [8][10] - Investment income from debt securities was approximately $3.8 million in Q2 2019, up from $2.9 million in Q1 2019 but down from $4.3 million in Q2 2018 [9] Business Line Data and Key Metrics Changes - Investment income from CLO fund securities was approximately $1.7 million in Q2 2019, compared to $1.8 million in Q1 2019 and $1.5 million in Q2 2018 [9] - Investment income from joint ventures increased to approximately $1.3 million in Q2 2019 from $1.1 million in Q1 2019 and $700,000 in Q2 2018 [9][12] - The company made investments into 12 borrowers during the quarter, totaling $46 million in face value, with 27% in first lien securities and 63% in second lien securities [12] Market Data and Key Metrics Changes - The market has seen increased competitiveness, leading the company to be selective in its investment approach, particularly in the unit tranche asset class [4][5] - The company is focusing on junior capital solutions only in attractive circumstances and companies with resilient business models [5] Company Strategy and Development Direction - The company is pursuing a merger with OHA Investment Corporation, expected to close in Q4 2019, which is anticipated to be accretive for both OHAI and Portman stockholders [2][16] - The strategy includes reducing CLO equity exposure and increasing investments in senior and unit tranche joint ventures to enhance risk-adjusted returns [5][18] - The company aims to stabilize NAV and improve earnings power by right-sizing the dividend to align with net investment income [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting a path towards earnings growth through portfolio repositioning and potential benefits from the OHAI merger [26][34] - The company is monitoring the impact of interest rate changes on earnings, noting that while rate cuts can be a headwind, the overall credit quality in the portfolio remains strong [38] Other Important Information - The company approved a cash distribution of $0.06 per share, payable on August 29, 2019, with a projected total distribution of $0.32 per share for the full year 2019 [10][11] - The company has committed to $21.7 million in face value loans post-quarter, all first lien securities, indicating a strong pipeline of opportunities [14] Q&A Session Summary Question: Higher G&A costs this quarter - Management indicated that higher G&A costs were primarily due to externalization-related expenses and not significantly related to the OHA merger [21][24] Question: Path for earnings to exceed dividends - Management sees a path for earnings growth through portfolio repositioning and the potential benefits from the OHAI transaction [26] Question: Target ROE for Portman Ridge - Management aims for a double-digit ROE over time, with current tracking in high single-digits [34] Question: Callable unsecured notes in September - Management is considering options for restructuring or calling the notes to gain flexibility [36] Question: Investment in cannabis companies - Management clarified that due to regulatory restrictions, the company will not pursue investments in the cannabis sector [42] Question: Impact of Blackstone's investment in BC Partners - Management expressed optimism that the investment would provide capital to expand the credit business, benefiting Portman Ridge shareholders [43]